At Last !

Breytenbachs contacted me to say that the developers had served notice to complete and they needed the completion money. I transferred from the saving account and CHAPS’ed it to them. Completion date now set for 5th January 07.

They also asked for the mortgage deed which I sent them a few weeks ago, this is the second document that I have had to send them twice because they couldn’t find the original. I sulked for a bit, sent them a moaning email then thought for the sake of signing a document and finding a couple of witness again it just isn’t worth delaying the deal so I strong armed a couple of guys at work to be witnesses!

Breytenbachs called back to say that they had miscalculated the funds by £40 so I needed to pay up by debit card to proceed, not happy about it but its too close now to get into an argument.

Bit unsure of what exactly to do now, do I need to go and get the keys on the 5th? Do I need to put the furniture together, do I do anything? I emailed Serliana and they said leave it to us and the letting agent so currently staying put.

Man of "Letters"

My Birmingham Park Central apartment is to be let by a company called Arkade Properties. I checked out their website and they seem to have a good coverage of the central Birmingham area which bodes well and the typical rent they are charging is above what Serliana originally forecast in their spreadsheet. The only negative I noticed was that they appeared to be charging more for property management than was forecast.

My feeling was that as Serliana advertised themselves as being able to negotiate discounts from letting agencies then I shouldn’t be paying the full whack. I contacted Serliana and after a few email exchanges I established that I was indeed getting a discount which brought us under what they had suggest we provision in their cost spreadsheet which is more good news.

I’ve still heard nothing from Breytenbachs regarding Park Central, I can only suppose that it is now the original date of 10 January for completion (I could ring them but I’m beginning to feel like an expectant father ringing the hospital every 5 minutes to ask for updates!). Got a call from Jamie at Serliana who said that they were coming to Birmingham to inspect the Park Central properties that they had brought themselves and would I like them to check mine out. I guess it’s a good sign that the property investment company are buying the same properties themselves.

To Furnish or not to Furnish

Serliana have been in touch about furnishing for Park Central. Bit confused as at our initial meeting Danny Kitchener from Serliana said that the majority of their lettings were unfurnished. I’m going to have to look into this as I remember reading that there are certain tax implications.

They said that they had been in touch with a Birmingham letting agency and they had advised that to get a quick let the property should be furnished. They suggest at a minimum we would need : Double bed, Wardrobe, Bedside table, 2 Seater sofa and armchair, Coffee table, Lamp (it comes carpeted, with a freezer and washer dryer) at a cost of £ £827.13 from a company called David Phillips and Co who specialise in supplying furniture for buy to let properties, plus blinds at a cost of and blinds £295 from a company called Downerblinds

More from Serliana about a new property launch, but we’re not going to look at anymore until we’ve at least got Park Central underway.

Confusion Reigns on Park Central Property –Whats Going On?

Has a series of emails from Serliana who have been contacted by the developer who wants to complete by December 11th this is about a month earlier than we originally said. Wendy from Serliana has said get the money ready to go via CHAPS or next day transfer, make sure all documents are sent next day delivery, all systems go. For us this means getting the additional re-mortgage money out of our high interest account at Birmingham Midshires which requires 4 days notice so need to move fast in order to have the funds ready.

I thought I’d just check with Breytenbachs (our solicitor) but when I rang them they seemed pretty laid back about it. The developer had mentioned the earlier completion date to them but had not officially notified them so completion remained the same, early Jan 07. They advised that there was no need to panic and they would contact me when I needed to do something.

So who’s correct, do we need to kick into action or not? I asked Breytenbachs to contact the developer and see what the score was, they said that they would and advised me not to do anything until they contacted me.

Its one of those things, I’m sure that once you’ve got a bit of experience it doesn’t faze you but this is the first one and we don’t want to be the ones to bugger it up. We set up the highest interest, instant access savings account at our clearing bank (LloydsTSB) and requested the required amount from the Birmingham Midshires so at least it will be quick when we do need transfer and we will lose the minimum amount of interest while its sitting there waiting.

Property 2

After much Soul Searching we have decided to get the Adelaide Wharf place in Hackney as well. It isn’t complete until August 07 so we should have time to get used to being a buy to let landlords by then.

Kicked it off with Serliana again, paid them their reservation fee (£1500) and they have contacted Breytenbachs and Savills Private Finance for us again. This is a lot more than Park Central but is under £250k which is the current level that stamp duty moves up from 1% to 3%. Still mulling it over but any UK portfolio should probably include London, it always has a lively property market and especially with the 2012 Olympics it should be a winner whatever happens to the property market in the short term.

Another thank you note from Jay Parmer Serliana’s MD. Hopefully no hitches with this one!

Another client care letter from Breytenbachs asking for our identity details again, this can’t be right as we have only just got them back from them after our Park Central purchase? I rang them to query and they said if they have seen the id docs in last 3 months then they don’t need to see them again. I feel the need for a bit of a whinge, why is it me, the customer, having to query this with them? Shouldn’t they know this before they contact me? End of Whinge.

Mortgage Mayhem

Obviously need to sort a mortgage out and Serliana put me in touch with their mortgage provider Savills Private Finance. As with the Solicitor I’m not sure if they offer the best deal on the block but they are mentioned in a lot of the property pages that I have researched and, again, the point of using the investment company is that they get me the best deal.

Craig from Savills rang and asked me what sort of mortgage I was looking for, …er didn’t want to be seen having a “blond moment” but what sort can you have? I said I’d get back and rang my sister in law, Jenny, who works in finance mainly arranging wills etc but I assume it’s the same sort of thing. She suggested that the interest rate is likely to go up in the short term, so get a fixed rate, and that we would probably need to refinance after 2 years to prevent us being trapped in a high interest mortgage so make sure that there are no lock in penalties after 2 years. Sounded good to me so I called Craig and he said good choice (so why didn’t he suggest it?).

I had to fill out a mortgage application form and go through the 2 pieces of primary and secondary id routine again (another piece of advice, keep your recent payslips and utility bills close to hand!). Savills seem an efficient type of organisation, I suppose that my only criticisms was that they didn’t keep me up to date with what was going on (not that I could do anything but I wasn’t sure what they were doing) and I could have really done with a bit more help and advice on completing the mortgage application form. Actually I screwed it up and they had to make some corrections and resend it to me.

They have come back with a GMAC RFC mortgage which I have seen referred to on the Singing Pig property forums so I assume that is pretty standard for a buy to let property.

3 in 1 Strategy, not that happy

Got a note from Serliana about launch of a new property at a place called Denholm court in Essex. Its quite attractive because using the deal structure its possible to get ownership of it at quite a low cost. I discussed with them and they sent me a proposal to buy Park Central, Adelaide Wharf and Denholm Court. I had a read through but figures didn’t add up to me (also it was on a spreadsheet that had been used for something else because it had another property on it that had been zeroised).

I spoke to them and they sent me a note apologising and suggesting that in order to afford it I would need to either borrow some more money or use some of the cash I’d put aside for the extension to my current house. I wasn’t too happy about either of these suggestions, in their literature they always emphasise the lifestyle elements of property investment and the need to “cashflow” ie ensure that you have enough money put aside to cover the investment and the additional costs that accompany it. Yet here they are suggesting that I impact my lifestyle by stopping the extension or borrow more money which is going to put my cashflow at risk! It’s not like I’m even been offered a special rate for buying 3 in one go.

Important lesson if you don’t think you can afford it and/or you feel uncomfortable with it then don’t do it.

Document City 2 and a Nasty surprise!

Got another email from the solicitors Breytenbach’s with a shed load of Park Central documents to read and sign including

1. The Agreement.
2. Authority for Breytenbach & Co to sign the contract on your behalf
3. The Contract and Lease Summary
4. Draft Lease
5. Plan
6. Draft Management Scheme7. Mortgage Indemnity Letter

I read them as best I could but a lot of it was pretty meaningless to me, the odd vitally important clause camouflaged beneath paragraphs of indecipherable legalise!

It also contained Breytenbach’s comments on the contract which was very useful as it brought out the bits that needed thinking about. The nasty surprise was that to take on new tenants requires me to notify the Landlord (a company set up by Crest Nicholson to manage the property) and pay them £70.50 for each new tenancy which seems to be a bit unfair and wasn’t included in any of Serliana’s forecast of fees.

Also needed to pay them 5% exchange deposit of £7,697.50 and part pay Breytenbachs fees of £475 so all in all quite an expensive month! Got a note from them confirming that exchange on Park Central had taken place just need to get a mortgage now!

A Second Buy to Let Property??

Got details on another place called Adelaide Wharf from Serliana. Its in London Borough of Hackney which is quoted as a major growth area (I’ve heard it called the “new Islington” although admittedly by estate agents!) about a mile form the City and 3 or 4 miles from the Olympic Village in 2012.

Not sure whether to wait until Park Central is put to bed before jumping into a new place although it is off plan and not due to be finished until August 07 so that would give me time to get used to the feeling of owning a buy to let before the second one was ready.

Discussed with Anne and we have decided that our strategy should basically be to buy new properties close to city centres, amenities and transportation, There was an interesting article in one of the newspapers that quotes a leading estate agent as saying the ideal buy-to let property proposition is : “A flat in a large metropolitan area, close to public transport. Views are much less important than security. You could pay several thousand pounds to attend a buy-to-let seminar that gave not much more information than this.”

Received invoices from Serliana for their fee, which is 2.5% of the original value of the property (not the discounted value that they actually achieve). One of the little things that pisses me of with them is that they constantly misspell my name. For chissakes “Gary” has only got 4 letters in it, I don’t mind the occasional “Garry” but this one called me “Steve” and has misspelt my address! Yo, Serliana, small hint, if you are going to get one communication right, make it the one where you are asking the customer for money! It’s “GARY” for &*%$ sake

Document City 1

Got the client care document via email from Breytenbachs which listed their charges for land registry, search fees, money transfer etc plus an offer to fill in the SDLT1 form for £35 (which I think I’ll do myself). They all seem reasonable but its been a while since I brought a house so I don’t really have that much to compare it to, guess if I was really unhappy I could simply have a scan on the Singing pig forum but one of the points of using a property investment company is that they negotiate lower rates for you.

The identification section requires you to send two forms of id, one primary (passport, drivers licence etc) and one secondary (Gas/Electric bill or credit card statement), struggled a bit with the secondary id as most of our bills are paid over the internet so I don’t get hard copies anymore! Eventually found a water bill which is a couple of months old but I suppose will have to do!

Buying Process First Step, First Hurdle!

It was quite surprisingly simply although I’m not quite sure what I expected. I rang Jamie Small at Serliana (property investment company) and said “Ok, I’d like to buy the apartment at Park Central in Birmingham”. I gave him my credit card details for the reservation fee (£500) and that was the process started. I got a “thank you” note from Jay Parmar the MD and an invitation to call him direct if there were any issues which I thought was a nice touch and we were off!

Had a bit of a problem almost immediately! The developer (Crest Nicholson) said that Serliana had not sold the apartments that had been allocated to them within the timeframe agreed so they were being withdrawn from them! Obviously as I had already just paid the deposit I was alarmed! I took Jay up on his offer and spoke to him directly, he called the developer and few hours later I got a call from him telling me it was sorted out and an email from their office as confirmation. I also called the developer to confirm this as well, bit untrusting maybe but better safe than sorry!

Got a number of documents from Serliana via email, floor plan and email answers to some additional questions we posed. As a part of their deal they insist that you use their solicitors Breytenbachs and I got an introduction from Lenza Breytenbachs with a description of their services. They said that their charges are discounted as much as they could but I didn’t really have anyway of confirming that.

Going For it

Picking the first property for Buy to Let is easy but actually signing on the dotted line and committing yourself is the hard bit. At the back of your mind no matter how much research you've done, is the thought "What the *&)% am I doing!"

We reviewed a number of properties and deal structures from Serliana and picked this one at a place called Park Central in Birmingham.

Its a one bedroom apartment in a new development near the city centre. There were a number of reasons that persuaded us to buy this property first:

Its not that far away from where we live. I know that everyone says look on it as an investment and it doesn’t matter where it is but there is just something reassuring about being able to jump into the car and quickly be on site if there are any issues.

It is in a redevelopment area where millions of pounds are being spent demolishing an old rundown council estate and creating a brand new housing development.

It is 5-10 minutes walking distance to Broad Street, a main City centre entertainment area with restaurants, bars, nightclubs and shops.

It is 10 minutes walk to Birmingham New Street main line train station (also being considered for massive redevelopment) and regional rail hub for the midlands. It is also 3 minutes walk to Five ways train station station giving quick access to Birmingham University, Queen Elizabeth Hospital, Selly Oak Hospital, and Cadburys factory at Bournville.

Its on the first floor and it has an entry phone which should hopefully provide reassurement about safety.

The price from Serliana was considerably discounted from the price the developer was publicly quoting.

We went on site to view it (hard hats, the works), was really impressed its not complete until Jan 07 but it was 80-90% done. So looks like its green on!

Q&A meeting with Serliana

The most important part of using a property club is being able to place a reasonable amount of trust in them. Neither Anne or I are used to dealing with the sort of money (or at least not our own!) that property investment involves. I spoke to Serliana and sent them various emails but I needed to meet them before taking this further. To this end Anne and I travelled to their London Offices and met with the portfolio manager Danny Kitchen we asked them as many questions as we could think of. Summary of the session below (note I have removed some of the specific finance questions)

Q1. Is our money held in an escrow account until completion?
A1. It is held in trust with the developer and is obtainable should the developer default.
Reservation Fees are non refundable Serliana Fee’s are refundable (or kept on account) should we or the developer default

Q2. You mentioned a 2 week void, what is the average void period across these type of properties (ie 1 or 2 bed apartments)
A2. . Allow 4 weeks per year. Tenantable property should never exceed this

Q3. You also mentioned that Serliana would look after the properties after they had been purchased but then you said it would be by an estate agent. Please can you clarify
A3. We will look after everything up until the first let, then the agreement is between you and the agent.

Q4. Have Serliana already purchased the properties in order to obtain the discount? So do we buy them off you or the developer?
A4. You will buy directly from the developer. On the odd occasion we might exchange on a small number of contracts to comply with the developers wishes, only to have the contract rescind once we have found a buyer.

Q5. Once we have purchased the property do we have ownership ie deeds etc
A5. Yes 100%

Q6. Are the properties freeholds or lease hold?
A6. Majority leasehold

Q7. Do the properties come with NHBC certificates?
A7. Yes all new builds. Refurbishments have a similar 10year Architectural Certificate

Q8. Can you confirm that you complete the snags list as a part of the Serliana service ie we are not charged extra for it.
A8. We don’t do snagging. You have 3 options.

1. Pay a snagging firm. 2. Do it yourself. 3. Get the tenant to do it and the agent will note it.

This last option is preferred as the tenant is liable for any future damages so they will do a thorough job and we can take that to the developer.

Q9. What percentage of your properties are let unfurnished? Are there any tax or legal implications of letting unfurnished?
A9. 90% are let unfurnished. We advise you speak to your accountant re Tax advice. Speak to http://www.rla.org.uk/ and http://www.nla.org.uk/ regarding your obligations.

Q10. Do you recommend short assured tenancies or another form?
Q10. Letting Agents and Serliana recommend an ‘Assured Shorthold Tenancy’ agreement.

Q11. We had an interesting discussion regarding Capital Gains Tax. Do you recommend getting an accountant?
Q11. At the start it is not necessary although initial advice could be beneficial. But certainly seek advice when you get 4-5 properties

Q12. What is your prediction for the rental market, do you see the increased number of Buy2let property depressing it further?
A12. Yes- in a macro economy, but with population growth demand will always be there, and capital growth will also prevail.

Q13. Based on your research what is you view of the UK property market over the next 3 to 5 years
A13. Without a crystal ball we cannot tell but we’re confident of growth in the next 3-5 years

Q14. What criteria do you use to select developers and letting agents
A14. Developers we look for NHBC certification and reputation past relationships, Lettings agents we base them on performance

Q15. We didn’t discuss overall strategy much, after reading the FAQ on the website I thought that there would be more emphasis on tailoring a strategy to our individual circumstances. Is this part of the service?
A15. Yes – once you are ready to go, we can look at deal structures and timelines that suits your situation, immediately and ongoing

Q16. As a further note to the last question we are concerned about becoming too highly geared, obviously this is dependant on the individuals attitude to risk, which presumably should form part of my personal strategy? We could do with some advice on this.
A16 We would only look at 85% loan to value on your home and investment properties, this is safe gearing for us. The 2 year cash flow will give you added security – you could cash flow for your properties for 3-5 years if you wanted to be extra cautious. Also our 89 point checklist will cover due diligence on all our property’s

Q17. Would it be possible to talk to or email questions to someone who has already invested through Serliana?
A17. Yes

Q18 Next steps?
A18 Keep the questions coming, Scrutinize our due diligence report on line, Go through cash flow with Jamie

Investigating the Property Clubs

After reading a number of investment books and browsing the web sites we have decided to investigate buying a property through a property investment club. There are a lot of reasons NOT to do it this way, but our thinking is that if we do our due diligence on the property club then hopefully we will have to do less research in the properties they recommend

The property clubs main selling point is that they offer to do the research and due diligence to identify properties for you, that their ability to sell multiple properties allows them to negotiate a bigger discounts from developers/Solicitors/mortgage brokers/letting agents than the individual could by themselves.

The first time I was aware of the “property clubs” was a year or so ago when when I received a mailshot advert for "Inside Track" a property club advertising free seminars around the country. I booked a day off work and both Anne and I attended. It was very professionally run, very informative, in a nice hotel in Solihull and I even won a free set of Inside Track seminars on DVD! The main point of the presentation was to sign you up for their property investor course/s, The downsides for us was that there was a certain amount of pressure to sign up straight away, (which immediately puts me on the defensive), plus we thought it was quite expensive.

I did a certain amount of investigation into other property clubs myself and found a number of websites offering free advice and offering similar benefits to Inside Track without the need for the expensive upfront courses.

In the end I decided to go with my initial purchases with a company called Serliana. I read their literature on their website, I had a meeting with them at their London Offices, I went to look at some of their properties and got them to put me in touch with one of their existing clients, who I had a detailed conversation with.

I wouldn't rule out looking at other clubs, another one that has a lot of free "Investor Education" is called Your property club (see links) and when we become more use to the acquisition process then we would do it yourselves. Guess its just nice to have your hand held for the first few if it doesn't cost too much

Advice from the Pig

I found a great Entrepreneur's website called the Singing Pig that has a number of property investment based forums. I found it a very friendly site, probably like all forums it sometimes suffers from a bit of group think however there are often lively debates on contentious subjects.

It’s an excellent site if you keep in mind that a lot of the people posting there either do this as their main job or want to do so, therefore their strategies are different from the amateur investor as they have more time for the large amount of research they suggest is needed. For a full time investor the main profitable properties seem to be by buying up the bottom end “social” housing especially from people who are in danger of being repossessed. These types of places are just to high maintenance for me, I don’t want to be up all night worrying if someone is turning my new property that I've just had renovated into a crack den (really, read some of the posts!). I want to be firmly aimed at long term rents by city based professionals and if that means that the rent is low in comparison to what could be achieved through buying up a cheap ex council house and/or renting through HMO( House in multiple occupancy) deal then so be it.

The site attracts posting from a number or property professionals including solicitors, estate agents, mortgage advisors etc. You could well save your self any number of expensive training courses by spending several days search the various forums threads and copy and pasting into a word documents.

Starting Out

Ok everyone and his/her dog has heard of buy to let, the television is full of programmes of how even complete divits have made money on property development and the newspapers are full of stories about the UK property market can only go up in 2007.

So we've decided to give it a go. Neither Anne or myself have any background in property development or have the time to devote solely to property investment so we are true amateurs. The purpose of this blog is to trace our steps along the way discussing things that go right or wrong.