Month: May 2018

I’ve recently learned a new definition of ‘productive’ and I’d like to challenge your existing perspective with it.

For decades (and no doubt generations) we humans have scoured productivity books and resources looking in search of the silver silver bullet to magically help us get more of what we want done. I’m not sure how how many books have actually been written on the subject but a quick search for productivity books on amazon brought up over 30,000.

It was brought to my attention recently by one of my mentors in the US that we can typically sort productivity into 3 main categories, as follows:

#1 – Work harder – so in other words increasing the per minute output. For example this might be answering more emails, doing more billable hours, saying yes to more projects etc

#2 – Work smarter -this would include time saving productivity hacks. Think the 4 hour work week, batching tasks, hiring consultants, finding short cuts, implementing systems and best practices.

#3 – Be braver – maybe you are surprised to be reading this 3rd category, but have a think about what kind of action it includes – asking. Pitching. Partnering. Making art and taking risks. Being the first to do something. Making calculated bets.

The definition of productivity should be tilting towards no.3 because as my mentor put it, “Courage is the entrepreneurial force multiplier”. In being more productive we must optimise for courage. In many cases being courageous doesn’t take long.

Ask yourself, what is the most courageous action you can take this week?

For Chris and I it is putting ourselves out there on a webinar this Monday night to share our property strategy with those who are interested to join us. To learn more about our strategy for DE-RISKING PROPERTY DEALS AND BUYING WITH CONFIDENCE – FOR MULTIPLE EXITS,  HIGHEST RETURNS AND PEACE OF MIND, you can register for the webinar here.

CLICK HERE TO REGISTER

 

 

If you have been following all this series of posts, well done for sticking with us, and thank you for the interest and support. Chris and I really hope that the last 5 posts have helped bring some clarity and renewed confidence to your property investing.

Whether you are figuring out how to get started buying, already have some experience but are trying to overcome a stuck point, or are an existing SA operator looking to add periodic lump sums to your monthly cashflow then the approach we’ve been sharing over the last few weeks has something to help you.

Here’s a quick recap to summarise what we’ve covered the last 5 weeks, followed by a mini action plan at the end.

Post 1  – The context – how we moved past being stuck not buying for 2 years by effectively addressing 3 key areas of the process

Post 2 – In this post we covered off the main considerations we focus on in the buying phase, looking at:

• Area & sourcing
• Analysis & viewings
• Financing and buying entity
• Key people in the power team

In Post 3 – we looked into the refurb phase of a project and shared a walkround video of the current property project that we are transforming for the end use of serviced accommodation. Chris pointed out key aspects of the refurb that will result in ease of maintenance, longevity, energy performance, a decent uplift in value, marketing and usability. We also pointed out key components to organise the work flow in refurb phase:

• The budget plan
• The description of works
• The project plan
• The team

In Post 4 – we started to look at the ‘monetising’ phase with Cash Exit 1. In other words, once the transformation of the refurb is complete what can we do to quickly start making some money from the investment.

In Post 5 – we took a deeper look at what’s involved in our preferred Cash Exit 1 – running serviced accommodation. From here we transitioned into Cash Exit 2 and beyond, which essentially opens up multiple options for the investor depending on what’s important to them at the time. The key thing being, to have those options, whether by holding for cashflow or selling for lumpy profit.

 

Like Jim Rohn said, ‘what’s easy to do is also easy not to do’. But if you’re interested in taking a little action, here are some simple actions you can take right now to help you make incremental progress:

#1 Start with gaining some clarity. If you have been keen to invest in property for some time and been wondering which strategy to use in your area, ask yourself these questions:

-What has stopped me buying an investment property before?

-Why do I really want to invest in property?

-What does it really mean to me/will it mean to me?

-How much time each week do I/can I and will I allocate to achieving this?

-What’s one thing I can do tomorrow to take one step closer to my goal?

#2 If you are currently looking to buy an investment property, challenge yourself to start thinking with the end in mind – map out how you could set yourself up for max upside and create multiple exits. If you have recently been analysing properties and turned them down, look back over your analysis notes with a fresh multi-stage cash exit perspective. How different would the numbers look with a combination of cash flow and flip profit?

#3 If you are not already operating SA units, do a little research on your desired area – go to booking.com, enter your location, enter a weekend and a midweek 3-4nt visit date, hit search and then filter by apartments (to eliminate hotels, guest houses etc) to see how many self catering options there are currently available. You can use this search to get a feel for the nightly rates in your area too.

#4 Start connecting with a few builders in your area to pick out the ones you might want on your power team.

#5 Start building up a record of the research you collect on potential investment areas ie an excel sheet with tabs for each location. On each sheet look at 2 and 3 bedroom properties for sale, look up the rightmove sold prices for the same postcode, look at the floor plans where available and start to get a feel for sales price per SQM in your areas.

#6 Join us on our online training webinar, Property ATM MASTERCLASS: HOW TO GET STARTED DE-RISKING PROPERTY DEALS AND BUYING WITH CONFIDENCE – FOR MULTIPLE EXITS,  HIGHEST RETURNS AND PEACE OF MIND 

Click here to register for our free online training 

Chris and I hope that in reading these posts you have either learned something knew, or were reminded of something you knew, but will now go and use.

Picking up from where we left off in post 4, we were projecting ahead to once a property is refurbed and ready, advocating that it’s important to start monetising it asap. We have referred to working with the end in mind since post 1, so it goes without saying that this important stage will have been worked out before.

Cash Exit 1 is all about monetising the asset quickly and for this our strategy of choice is serviced accommodation. As the refurb approaches completion focus will need to transition to these key areas of setting up for business, to include:

• Furnishing for the end audience
• Capturing quality photos for marketing (ideally professional)
• Nightly pricing across the year
• Creating listings on OTAs (online travel agents)
• Setting up the operations for running the property end to end from booking, taking payment, to welcome packs, check ins, end of stay cleans, and then ready to go again
• Maintenance management
• Revenue management each month and the accounting

Because we start with the end in mind and de-risk the investment, the diligence at the front has informed what audience we are primarily serving and therefore many of the answers to the points above. [HINT – we have tried both avenues of setting up properties- ie on one hand throwing up an SA unit and reacting to who comes in through booking platforms, and on the other hand identifying the guest demand first and then serving that specifically with the properties we bring to market. We know which we’d rather have].

SA doesn’t have to be the only cashflow exit 1, it is just our preferred option. The whole point being that we want to have options. Other investors may wish to simply single let via an agent, or even do the SA thing using an SA managing agent. We like managing ourselves as it feeds into a later stage exit.

So this brings me neatly into Cash Exit 2 for the medium term and beyond. Here we need to look at the money making operations and future options.

Looking beyond the immediate term, some investors may be thinking, like us about developing their own in house expertise in running and managing serviced accommodation. Moving from one to many SA units may be on the cards and if so it will involve refining the operations, putting systems in place, potentially hiring part time, permanent or freelance team members.

An alternative medium to longer term option might be selling the refurbished property after a period of cashflow. By doing this, the synergy of your monthly net profit from cash exit 1, combined with the capital gain of selling the property (after your refurb uplift), would for sure make a case for ‘The Whole being Greater than the Sum of its Parts’.  The investor may not want to sell, in fact some people hate selling property, but you do need to know that if you needed to sell at a price with a satisfactory profit, any one of your properties could do that for you. It’s such an empowering mindshift – even if you aren’t planning to sell, only invest in properties that give multiple exits.

The lifeblood of any property business that wants to scale is positive cashflow and big chunks of cash. Now you might go down the route where you sell one property for every 3 you buy, and that in theory can work, but it’s a bit too rigid for us, because how do you know/control which one will sell for profit? Ideally you keep growing and retaining your property portfolio because it is all working for you nicely.

When do people really need to sell a property? When they need chunks of cash. An investor may have a deal opportunity come up with they don’t want to miss out on but simply don’t have enough cash to get involved. That is when they’d want to pick one/some of their properties, know they are going to sell for a profit, sell them and raise the capital to progress with bigger deals. So yes, the payoff is a nice cash lump sum, but really, the underlying benefit is the peace of mind knowing that one can release a cash lump sum if and when they need it. Creating cash to have options.

The point we are making is, you don’t have to sell them, you just have know that you could if you needed to or indeed wanted to.

So, what Chris and I are working on is only acquiring properties where we set ourselves up with the options – either selling because it’s a great deal for another investor/a homebuyer or we can cashflow it ourselves (or even both). And where this came from is that for months and months, even after we’d done lots of training, if we can be honest, we were just too scared to buy something because we weren’t sure whether it would sell for enough or not. So we then naturally started looking for properties that we could either be turned into SA or that we could flip for a massive amount- the latter is what we couldn’t find unless we added even more of a premium somewhere – and THAT’s our system. We force the value by how we fufurb the property AND how we cashflow it.

In the next post we’ll look to summarise the key points and put together a mini action plan.

CLICK HERE FOR SUMMARY AND ACTION PLAN

 

 

As the refurb on our current project got underway this week, starting with the rip out (some progress pics attached), we moved a step closer to the monetising stage. Whilst not there yet, it’s this end game where all the planning and reverse engineering began. This final phase in our refined approach is what has really injected a solid layer of confidence in our buying. The reason why we can have such peace of mind is because we start out with the end in mind – that end being to set ourselves up for maximum returns and for multiple possible exits. 

 

This 3rd phase in our approach is all about ‘Monetising’ the investment and we see this part as having 2 main steps – Cash Exit 1 and Cash Exit 2. Once the transformation of the refurb is complete we look at cash exit 1, in other words, what can we do to quickly start making some money from the investment. Selling straight away would likely return a nice little lump sum however the timeframe would be unpredictable. In the immediate term, cash flow could (and should be coming in) and this could come from either a standard single let or via serviced accommodation. We favour the latter for a multitude of reasons.

Over the last couple of years we have built up a decent SA business serving predominantly contractors but also some tourism stays. Our growing strength in this area has proven it to be the most profitable and attractive first stage exit for any property we would choose to acquire. The house we purchased a year ago has proven to be a phenomenal cash flowing asset operating as serviced accommodation. It has performed at over 82% average occupancy since we began operating it and the profit margin is over 40% of the monthly booking revenue.

If the reference to cash exit 1 is sounding confusing or cryptic, forgive me I’ll explain the rationale. If you have read Post 1 you may remember we made the admission that Chris and I are fairly risk averse and we were stuck not buying property for 2 years, not for lack of desire I might add. So, in order to de-risk our investments and pull the trigger on something we had to force ourselves to identify multiple potential exits.

The power of looking at an investment from this perspective is that it really takes the pressure off from one single exit having to go your way. Not only, that it can provide flexibility further down the line. As an example, an investor may be looking to simply cashflow a newly acquired and refurbed property for the foreseeable future. The investor may not have to sell the property, but if they did need to (or choose to) wouldn’t it be comforting to know they have created a premium uplift in the property that is waiting to be released at a future point?

Vice versa, if the objective was to sell, wouldn’t it be nice to know you can generate an income from the property until the sale actually happens?

Interestingly I sort of did this unknowingly with my first buy to sell. About 6 years ago, I was eager to try out a flip project and bought a 1 bed flat in Edinburgh with this intention. It needed a facelift, and having improved the layout (ie opening up the kitchen/living, moving the bathroom and decorating throughout) my plan was to flip it for a quick profit. With the sale taking a little longer than hoped I was able to secure a few short lets (not serviced) through a brilliant agent. Within the space of 9 months from start to finish I was able to achieve my desired result of selling for a profit (just over the personal CGT allowance), plus with the added bonus of some rental profit to cover some of the professional costs and selling fees.

The monetising phase definitely warrants a little more attention so we will follow up with a little more on Cash Exit 1 and 2 in the next post.

CLICK HERE FOR PART 5 ON MONETISING YOUR INVESTMENT