Transcription
If I told you that you can make £15,000 using none of your own money, would you believe me? Possibly not. It kind of sounds too good to be true. It sounds rather similar to some of the claims that Lamborghini-driving gurus are making in the property industry right now, naming no names, but this example is absolutely true and, on screen in fact, is a screenshot of the completion statement from when I sold this property. Just to prove I'm not a bag of hot air, I do what I say I'm going to do, and in fact, in this video, I'm going to give you the three steps to follow in order to create the same results for yourself.
Now, prior to going any further, it's important to share some context with you around how I made £15,000 profit pre-tax, but without using any of my own money. This particular property transaction was in 2022. I purchased a property; it was off-market and direct from a vendor. The property was a three-bedroom terraced house on a long leasehold title—I think over 900 years or something along those lines. It had recently been vacated by the previous tenants and had now become a liability to the owner of the house, as it needed a refurbishment and was sitting empty, costing him money every single month in council tax, mortgage, and bills. In fact, this was one of many properties that this landlord had in a similar state, so safe to say he was very motivated to get selling some of these properties.
Being the hungry and motivated investor that I was, and I still am, I actually agreed to purchase three properties from this one particular landlord. My intention for this property was to utilize the buy, refurbish, refinance strategy. This is also known as BRR; this is also known as B R R. Which, in short, is the method of purchasing a property, ideally below market value, then adding some value through some kind of refurbishment or upgrades, and then refinancing the property at its new higher value in order to release your capital back into your bank account. The goal is to have acquired a cash-flowing asset, releasing as much money back to yourself as possible whilst tying up as little capital as possible. And in my eyes, a successful BRR combines the following things: it combines a good area, good location, a property that provides capital growth potential whilst being low in maintenance after you've done, obviously, the refurbs; cash flows fairly well after the refinance, even with higher interest rates at the moment; and then allows you to release as much money as possible from the refinance. And if you can combine all of those things and then repeat it, well, you're going to be a great investor; you're onto a winner.
Okay, so back to the story. I had initially intended to do the BRR strategy with this property, along with the other properties that I'd agreed to buy at the same time. Only opportunities were kind of coming at me from all angles, which which isn't a bad thing, but I felt as if it would be a good idea to sell at least one of these properties that I was buying in order to create some capital back into my business or bring some money back into the business. So my decision switched to now flipping the property. And here are the two options that I had in front of me: I could buy this house, purchase it for £65,000, refurbish it for £20 to £25,000, and sell it for around £120,000; or, option two, I could buy it, once again for £65,000, but not refurbish it, spend no money on it, and then sell it for £90,000, leaving enough money and profit left in it for the next investor that comes along.
Now, option one contains more risk; more money going into the deal increases the amount of time that it would take me to do this deal, 'cause I've got to buy it, refurbish it, then sell it; and it actually reduces the target market that I can sell it to at the end because it's no longer a big market where I could go to investors because investors might think the price is too high and the yield, that return on investment, might be too low. But also, now it might cut out some first-time buyers if the price is too high, and so on, so forth. Really, I'm I'm kind of narrowing down that market to first-time buyers with a higher budget or kind of second-time home movers, rather than being open to the full market. Option two would offer me a far quicker process, quicker entry and exit, less capital, and less risk. And my audience is now open to homeowners, like the other one, but also investors who would buy it because they wish to add value. And I think, as you can kind of tell by the way that I'm describing both of these options, well, I went for option two; it's a slightly better option for me at the time. And yes, option one would have made me more money and maybe would have made me in the region of about £5 to £10,000 more, depending what I spent on the refurb, but it would have also created a lot more risk.
So let's look over the final numbers: purchase price £65,000; stamp duty £1,950; legal costs £996; refurb, nothing; holding cost £450; legal cost to sell £1,000; and then a sale price of £90,000. Well, it was actually £89,900, but for ease in this video, I'll say £90,000 as it's only £1 difference. But the gross profit is around £12,604. But that's not where the story ends. You see, I didn't have the capital to purchase this property, as I was already purchasing several other properties at the time. So I raised £70,000 to cover the purchase price and the costs. I raised this privately off of an individual, and I offered them a fixed return on their money over a 12-month period. Due to financial regulations and for the sake of not sharing absolutely everything publicly online, I won't share the percentage amount; I won't share those finer details. But you'll be able to figure this out for yourself shortly when I share the amount of money I repaid. And after completing this deal and utilizing my investor funds over that fixed period of 12 months, I then returned their capital to them with an interest of £5,600 on top of that. And if we associate these costs directly just to this deal and none of the other deals I went on to do afterwards, but just this deal, then that leaves me with around £15,000 in profit before tax.
And I believe everyone should be utilizing these different means in order to grow their portfolios quicker or in order to do more deals that allow them to generate more capital for their business. And if you're sitting watching this video and think you'd like to learn it, well, here are the three areas that I encourage you to place your focus and attention on. Now, you'll have heard me say this before, but it could not be more true: we've got to find great deals. One of the main and most important parts of property investing is your ability to be able to regularly go out there and find properties that have money in them, have potential profit in them. And it's so simple, guys. If I have one investor here who can find three all-money-out deals after refinance, and one investor who can only find one in the same amount of time and it leaves £20,000 in after refinance, well, who is likely to go further and who is likely to get interest from outside investors, whether that's joint ventures or raising money? Obvious, right? Not this guy; it's this guy—okay, the one that can get three.
Now, there are tons of ways to find below-market-value deals, but I would suggest keeping your strategy simple. Okay, the first thing I would suggest that you do is a volume of viewings. So, volume of viewings, and I'm going to suggest that because you need to be out there; you need to be on the ground and have a good understanding of what's going on in the market; you need to be constantly be seeing properties. But you need to be aware that you aren't necessarily going to see the best deals by just viewing houses that are on the market, because, well, guess what—everyone else is seeing them too. So what we also need to do is build relationships with agents. So just build agent relationships, because we need agents to want to buy into us; we need them to bring us deals. Okay, right, "Justin, I've got this really good deal for you," or, "I've got this property; it's not selling; the owner's really motivated; I think if you come at it from this angle, you make this offer, there's a deal to be done," or, "This property is just about to fall through; I think, you know, if you're ready, you can take it; I think I could line you up to take this rather than it going back on the market." But we want to do a volume of viewings, 'cause naturally the more that we're out there, the more opportunities we're going to see, and then naturally, off the back of that, we're also going to be able to build better agent relationships.
Next would be, whilst out there on viewings and being active, I would encourage you to do direct-to-vendor marketing. Okay, this is effectively trying to meet owners direct without the use of agents; you're trying to get direct contact with them. And if you're out there on viewings already, well, you've got a great opportunity to see properties whilst out on viewings that are potentially empty, that are in need of work, where perhaps someone has an element of pain; they need to sell that property. So whether it's doing a certain type of letter strategy, whether it's doing paid adverts, whether it's simply going and knocking on the door, I encourage you to do a bit of direct-to-vendor marketing as well. Okay, don't put all your eggs in that basket because it's quite a time-ineffective way of finding properties. But by doing direct-to-vendor, you are putting yourself in a position to find properties off-market, where you're no longer competing against other buyers, other investors, like you would be with properties that are on-market with agents. So, volume viewings, build agent relationships, direct-to-vendor.
Last but not least, I would also look at auction properties. Okay, try to utilize the pre- and post-auction windows. Okay, obviously, find a property, and when it goes to hammer, place that bid before the hammer drops. But I would also really think about trying to put in offers pre- and post-, because again, that's when you can really secure a good deal. And I would just rely on these four things and just get really, really good at it and do volume, do volume. Because one thing that people really underestimate when it comes to trying to find good properties is they think they're going to do it from doing five viewings or doing 10 viewings over two weeks, and then they go, "Justin, no, I'm having no luck; the market's just too tough right now." I'm like, "You've done five viewings; you've done 10 viewings, and it's it's—you've only been looking for two weeks. Try 50 viewings over two or three months, then come back to me." And then the final thing I could obviously just add into all of this as just a a technique is to simply follow up. Okay, do these things and then make sure you're following them up. Some of the best deals I've had are purely from revisiting viewings, offers, letters that I've sent out, and going back to them a month after, two months after, three months after, and eventually you'll capture someone at the right moment when they're motivated.
Number two is to build your network. What you want to do is build your network of investors to potentially work with, not just in terms of buying properties off them, but also joint ventures and raising money. And networking doesn't necessarily mean going to stuffy property evenings in a hotel basement, which you don't really enjoy. You've got to make it what you enjoy. I personally like to spend time in environments, property-related and non-property-related. And in fact, I'm going to list out some of my favorite places to actually go and meet potentially successful people that might invest into me. First of all, it's just simply online. I'm always on the lookout for good property communities, whether it's well my own one or whether it's other ones; I'm looking for property communities and forums that I can access daily from my phone, and I don't have to go and put loads of time into by being there in person and only meeting 20 people. I want to find something online which allows me to meet 50 people in one go, 100 people in one go, share my thoughts, add value, meet people, and try and connect with them online. That's a property one. Another one that I like to do is I look out for, purposely look for, mastermind events. I just specifically look to get into rooms with other property people, ideally that have done more than me, for a room that I can bring value to in exchange for learning lessons off of other property people.
Now, outside of property—so online communities, mastermind events that are in person—what I like to do is try and look for a couple of things each month which are potentially outside of property, because sometimes when you go to a property event, well, everyone's got the same idea as you; you're you're there to try and find an investor so that you can raise £100,000 for a project. Guess what, John that you just met, he's also there to try and raise £100,000 for his project, so you're shaking hands with John; both of you are looking to raise money off of each other, and neither of you are going to give it because you've both got the same goal. So what I like to then do is think about, right, where can I find the person with £100,000 who has a business, has a full-time career, career and job, so they don't they don't want to be the one raising it; they want to be the one lending it. So then I look for potential places I can do that. For example, I'm a member of a leisure club. Okay, leisure club, kind of you could say country club; it is expensive; it is a monthly outgoing on top of having an office and all other business expenses. However, I go there; I spend time with people which have similar goals to me; they want to do well; they have businesses; they've got property. These are people that I want to surround myself with, not only because it will level me up as an investor, but also because then when I'm in the sauna, when I'm in the swimming pool, when I'm in the gym, I'm having conversations with people not in your typical environment with these people that are doing incredibly well; it's very inspiring, but also a really good chance to to sort of learn what they're doing. And then when they ask what you're doing, well, funny you should ask, I'm in property; in fact, got a really good site on the go at the moment, or really good project on the go at the moment, looking to raise money for it, and off you go. Okay, leisure clubs or country clubs. And then last but not least are business meetups. So going back to what I said about going to a property event where you're there shaking hands with John who's got exactly the same goal as you, why not get into a room where people have completely different goals? You're now at a business meetup where someone's trying to talk to you about their accountancy practice or their mortgage business or their waste removal business. Okay, people in that room are running businesses which are potentially doing well or have access to clients that are doing well who could then invest in your property, could become a future joint venture in your property sites. So this is what I like to do in terms of building up my network.
And then number three, point number three, is how to learn how to structure raising funds or finance. Okay, we need to learn how to structure raising funds alongside your property deals, and this is perhaps the more complex part because you can't simply take private finance funds from an individual, from someone, without some kind of pre-planning or having some kind of conversation with them about protecting their money. So we need to think about the following items: the first is, where does that money go? What bank account? Okay, is that into your personal account? Is that into your business? Are you doing it as a joint venture? If so, you need to open a new limited company and new business together. That's one thing to consider. We also have, you know, what agreements are in place? Again, if you're raising money, you're probably going to have some sort of loan agreements; if you're doing a joint venture, shareholder agreements, loan agreements, etc. We need to think and know about this, A, to even secure the money, to, but B, to actually make this happen. Talking about securing it, what security does the investor want? First charge? Second charge? Debentures? Whatever kind of security that lenders or or private individuals want, you need to understand them and obviously offer the right one. Then we need to think about, once we get this money, what can we use it with? A mortgage? The short answer is no—giving you the answer before I finish writing it—you can't use it with a mortgage; mortgage lenders will not be happy with that. So, can you use it with bridging? And the short, not very detailed answer to that is yes, the right lender. So some lenders will do that. But these are just a few of the things that you need to think about when you're planning to structure raising finance alongside your deals, let alone actually how do you take the money, how do you put it into the deal, obviously add value, and then sell the deal for money; how are you then going to repay the investor back? Need to think about all of these different things; you need to learn and understand this before you can even start to have that conversation with the investor, so you don't get caught short.
So there you have it. Those are the three areas that I would personally focus on if I was looking to create an opportunity that allowed me to purchase properties without the limitations of my own capital, which I've certainly come up against a few times during my property journey. What are your experiences of doing this? Have you ever raised money? Have you ever done a joint venture? Add it in the comments below; I want to hear what you've got to say. And of course, thank you for watching, and I'll see you in the next video.