Be careful what properties you buy Pt.2

Following on from my last post. Here are a few other things to consider when making that all important investment.

3. Realtors (Estate Agents).
I have relationships with several property investors in the US, and they all tell me the same thing. ‘Realtors are mostly women who would scratch your eyes out to make a sale.’ I apologise if this sounds sexist. The point is, Realtors have a duty to the seller so every property is a good deal regardless of its condition or location. If you’re looking to invest use a professional property finder to source your properties. Make sure they know where to invest, and more importantly where to avoid.
Only a property investor knows the true mechanics of what makes a good investment and what doesn’t. Most Realtors don’t own investments properties themselves.

4. Condition of property.
Sounds obvious doesn't it. A few years ago a guy from here in the UK went to New York to invest. He was bullish in his approach. He asked his realtors to find him any property that was under x value and he bought them all. He then found all of them needed extensive repair (he was buying through Realtors remember!) If a property is not maintained and is perceived as being a hazard or unsightly, local
government can enforce that the owner brings the property up to ‘code.’ In this story this guy couldn’t afford to do the repairs. His properties were seized and a warrant put out for his arrest. He left the US empty-handed. Make sure you have a trusted Property Management company to manage your investment from the outset. When I buy properties I always run it by my property manager who will either tell me yes or no.

5. Section 8.
‘Section 8’ is our equivalent of housing benefits. Your tenant has a portion of their rent paid by the state based on their financial circumstances. Buying property that is ‘section 8 approved’ with or without a tenant is a good sign that the property is up to ‘code.’ Each year an assessment is made on the property and a section 8 is extended providing it is in good working order and meets the criteria as
set out by the state. If you’re buying a property that is section 8 approved make sure it is up to code. In the event that it isn’t then at the next annual assessment
benefits to the tenant will be held until the property is brought up to code and your rent will go unpaid.

6. Rental profits.
Like all out of town investors, you will be using a trusted Property Manager to manage your property day to day. Your agent will collect the rents and pay you your rental profits. A UK-US dual tax treaty makes this financially advantageous for us.
However, you must obtain an ITIN (International Tax ID) number before you can receive rental profits. Your Property Manager has a duty to hold onto all rental profits until this is in place. Make sure you apply for this as soon as you can.
First off you will need a foreign notary to certify your passport. You can use any notary in your home town. This will be sent to HAGUE for approval. Only then you can apply for an ITIN. The whole process takes approximately 8 weeks.

There you have it. Avoid these pitfalls and it'll make your investment run smooth as silk. Just remember, use a good property finder to source your investments, make sure you cover all these issues listed here and that they understand them.

Be careful what properties you buy

It's so easy to get carried away. I've been to visit properties where the price tag is £2k! So on paper this looks great, a lick of paint and some gardening and you've got a property that will rent for £220 a month. Thats over 100% yield - so good it's ridiculous. Problem is, these houses are in war zones, crack dens mostly. Buy in these areas and IF you're lucky enough to find a tenant, in fact you will find a tenant - or should I say they'll find you. You'll never get any rent from them because they've got no money and nobody is gonna manage the property for you either. Chances are you'll have people squatting in your investment before the end of the month and a once calculated 100% yield has just become the biggest liability you've ever owned! Stay away. Don't trust Realtors (Estate Agents) to find you good properties. A Realtor is working for the seller not for you, ask them what's a good deal and they'll tell you everything is!

Slightly off on a tangent but still on theme. Here are a few things to consider when making an assessment of what makes a good investment. These are the things I've seen a lot of investors fall foul of and there's just no need to.

1. Water Bills.
New York state says that the landlord is responsible for paying the water regardless of who is living in the property. They have the authority to reposses if you don't pay it. Dont leave this up to you tenant. Factor the extra cost into your rent and just pay it yourself - no exceptions, its not worth the hassle or worry.

2. City taxes.
Similar to our council taxes this is used to pay for emergency services, rubbish removal etc. Each property has a semi-regular assessment which indicates what the property is worth and what taxes are chargable. Often this assessment is totally incorrect. You see, if you want low taxes then you want it to be assessed low, but if you're selling you want it assessed high. Be careful, use good property finders (not Realtors!) who know the true market values and whether its been assessed in your favour.

Gotta go, more on this later.

How much does it cost to be financially free?

The other day some of my investors were asking me where I came from and what I'm doing now. It got me thinking about work and lifestyle and stuff.

How much does it take to be financially free? This is something I believe in - its my religion and way of life! The answer is of course personal to your own circumstances. Which of course change from year to year as your own circumstances change. Children, marriage, etc these will all affect your personal wealth and impact on your lifestyle. The great thing about working towards this goal is that you have total control over everything you do and your decisions are entirely yours to make. Imagine working 1 hour at home for yourself. It's the equivalent of working 8 hours for your boss! That's how it feels to me.

My own goals are pretty modest in the scheme of things. I want to be a property millionaire within 5 years. That is to say I want equity within my portfolio to exceed 1 million. As for monthly cash flow, I figured that for every property I buy I can cash in £150 per month profit from the rent. Now if I own 100 properties,
that's an income of £15,000 per month. Of course I will have to keep an eye on my investments and I may sell some from time to time, but I will have full control over all my investments. Is that really work??

I've always tried to do things like this: for every additional expense I have, whether a car loan or I move house I motivate myself to off set that extra debt with new investments. It helps me focus and keeps a consistent balance of cash flow and investments.

My advice to you is to ask yourself what you want personally. Maybe you want to build a portfolio, maybe you just want one or two properties to leave the kids. Whatever you want, write it down. Open up Excel and start by putting down all your outgoings. If that's the figure you need to live the lifestyle you want, then work out how many investments you need to get there. Last of all put a timescale on it.

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