Daisy Terrace | Edinburgh

Deal Figures


Purchase Price:
£200,000

Renovation Costs:
£45,000

RICS Valuation Post Refurb:
£325,000

Estimated Profit*:
£70,000

*Cost of finance not factored into profits at this stage, however legal fees and stamp duty deducted before profits estimated.

Daisy Terrace - Coming Soon

We’re delighted to show you our latest project at Daisy Terrace, in the conservation area of Shandon in Edinburgh. The property its-self is a one bedroom ground floor colony flat located in the Flower Colonies at Shandon, and it’s bursting with character. For anyone who doesn’t know about Colony properties, these rows of beautiful lower and upper apartments were built in the late 1800s for skilled workers. The Colonies were known to be bustling areas with a real sense of community, and this is still the case to this day.

Stage 1

The property had been owned and lived in by the same individual for many decades, and therefore required full renovation. While the exterior of the property had been maintained, the inside of the property hadn’t been touched in some time. The renovation will include a new heating system, a new kitchen, new shower room and cloakroom toilet.

Check back for updates, as we’re excited to get going with the renovations!


Lanark Road | Edinburgh

Deal Figures


Purchase Price:
£200,000

Renovation Costs:
£45,000

RICS Valuation Post Refurb:
£325,000

Estimated Profit*:
£70,000

*Cost of finance not factored into profits at this stage, however legal fees and stamp duty deducted before profits estimated.

Lanark Road - Under Offer

Our property at Lanark Road is located in the historic conservation village of Juniper Green, just on the outskirts of Edinburgh. The property is an old farmhouse style property, with the ground floor converted into a commercial property and the two upper floors as a maisonette. The property we purchased covers the first and second floor and is a large three-bedroom, three public room maisonette. 

Stage 1

While at first glance the property appeared relatively well maintained internally, unfortunately the previous owner had neglected many of the larger repairs required to the property. Firstly the property’s roof had been leaking for many years, causing damp and ultimately multiple areas of dry rot. The first job was to overhaul the roof to ensure the property was water tight. Following this we used a reputable rot specialist company to treat the dry rot throughout the property. 

Once these essential repairs were completed, it was time to start on the inside of the property.

Before
After

Stage 2

We involved our architect following the initial external works to see how we could maximise the usability of the space within the property. The property only had one bathroom located in the vestibule area, therefore we converted a dressing room off the master bedroom to a main bathroom. All bathrooms required replacement, as did the dated heating system. The electrics had been updated in places but to ensure the property met our standards for sale (and as a backup plan, for rent), we fully rewired the property. 

Once the bigger jobs of the property were completed, we were on to the more cosmetic renovations we all love to see the before and after pictures of! We replaced the kitchen with a modern shaker kitchen, and fully redecorated throughout in neutral tones. We also pulled out the slightly retro fireplace and replaced it with something more in line with current trends.

Before
After

Stage 3

We’re firm believers in staging properties for sale. Staging a property can turn it from a relatively blank canvas into something eye catching. We fancied trying something different for this project: virtual staging. You may, or may not, be able to tell but the property was staged virtually! We think the computer generated images of the furnishings in the property made an incredible difference to the feel of the property, and really opened our eyes to what the property could look like with the right finishing touches. The property was put on the open market but luckily didn’t stay for sale for long… we accepted a fantastic offer after one week on the market!

Before
After

Coillesdene Drive | Edinburgh

Deal Figures


Purchase Price:
£305,000

Renovation Costs:
£130,000

Estimated End Market Value:
£550,000

Profit:
£115,000

Coillesdene Drive

Our Coillesdene Drive project was a derelict bungalow located in the popular area of Joppa, in east Edinburgh. With views over the Firth of Forth and a stone’s throw from the beach, this property was a rough diamond. The property had been empty for five or more years, and it was evident that even when it was occupied, the owner had neglected many maintenance issues in their property. We could see the potential to turn this property into a show home, with endless possibilities for extensions and internally reconfigurations.

Before
After

Stage 1

Many works were required to bring this property back to liveable condition, but a high level of exterior works was required before we could make a start on the interiors. Firstly the removal of the crumbling garage and boundary wall was essential for safety purposes, followed by weeks of excavation of the back garden. A boundary wall had collapsed into the back garden, leaving mounds of rubble, concrete and a huge amount of overgrown vegetation to be removed. 20 skips or so later, we managed to see the full size of the back garden and get a list of exterior works required together. Some windows were replaced due to a previous break-in, and the roof and gutters required overhauling.

Previous neighbours kindly gave us background information into the property, highlighting drainage or plumbing issues. Due to the nature of the issues, we replaced all plumbing inside the property. After using the facilities for a few weeks, we realised the drainage outside also required investigating. Replacement pipes for all drainage were installed, which required deep excavations at the front of the property.

Before
After

Stage 2

We got to work on a plan for the inside of the property. The property had two bedrooms and three public rooms, therefore we discussed usage of these rooms with our architect and made plans to convert the bungalow to a three-bedroom two public room home. We opened up the living room with the kitchen, providing a large and bright west facing open plan living space. The existing lounge was changed into the master bedroom with built-in storage. The property required rewiring, which took place at the same time as the heating (and plumbing) overhaul. As the property had been empty for many years, the property felt damp and had many areas of mould. We investigated these potentially worrying damp areas and sorted any ongoing issues, which included historic burst pipes due to the cold. We installed a new kitchen, new bathroom and fully redecorated the bungalow (inside and out). 

The landscaping of the garden made an incredible difference to the feel of the property, turning it from a rather dated property into a modern space. The before and after pictures really show the huge transformation of this property, enjoy! 


Bonnington Grove | Edinburgh

Projected Figures


Purchase Price:
£180,000

Renovation Costs:
£39,000

RICS Valuation Post Refurb:

£275,000

Potential profit*

£43,407

Bonnington Grove

Bonnington Grove is a beautiful quiet street located next to Victoria Path, in North Edinburgh. The property has some wonderful original features, including high ceilings and intricate cornice. The property was a large one bedroom property, containing a lounge with a box room off it and a large dining kitchen. We felt the property could be rearranged to form a good-sized two-bedroom property. With a south-facing living room and small garden to the front, the property had a lot of potential for a range of buyers.

Before
After

Stage 1

The property had been neglected for many years, with the previous owner not carrying out any maintenance work for some time. When we purchased the property it had been partially rewired and had a very dated (and dangerous-looking) heating system. A full rewire and heating system upgrade was first on the list of renovation works. 

The box room off the lounge was not quite large enough to have a new kitchen fitted. Therefore we required architects and engineers input to move one of the walls (load-bearing) in the box room to create more space, by taking some space out of the previous large dining kitchen. This created a small but practical kitchen off the living room.

Before
After

Stage 2

By creating a new kitchen, we had two bedrooms to decorate. We relocated the boiler in the property from the existing kitchen into the new walk-in wardrobe in the newly formed bedroom. The property required a new bathroom, new kitchen and full redecoration throughout. We were very pleased with the end result, and hope you enjoy the before and after pictures.

Before
After

Western Terrace | Edinburgh

Deal Figures


Purchase Price:
£370,000

Renovation Costs:
£100,000

Sold Price:
£639,500

Profit:
£169,500

Western Terrace

Western Terrace was a large three bedroom terraced house. The property had some incredible original features, and this was one of the major factors that swayed us during our search for a property to renovate. Bringing this unloved property back to its former glory was our main objective our the renovation works.

Before
After

Stage 1

This property required some major works. The property had some of the worst dry rot seen by the rot specialists, which spanned the four terraced houses on the property. Unfortunately, the previous owner of this property had let the roof fall into disrepair over many years, and as a result, allowed water to ingress and cause extensive rot work. Treating the rot and replacing the roof was first on the list of must-do jobs. Many of the original sash and cash windows were cracked, and sills rotten. These were also replaced urgently once works got underway. Unsurprisingly, the property had extremely dated electrics and heating system, so both of these were replaced before moving on to the more cosmetic side of the renovation.

Before
After

Stage 2

Once the essential works were completed to make this property wind and watertight, we got to work making internal alterations to maximise the space. We opened up the dining room and kitchen to give a wonderful large open plan living space. Off of this room, we turned a dark unused pantry into a light and airy laundry room. A large hall cupboard was converted into a downstairs W/C, always a great addition for when you have guests round. Upstairs remained a similar floor plan, however, we used a large pantry cupboard in the hallway upstairs to convert a Ramsay ladder into the loft into a property staircase. Part of the loft was sectioned off and made into a home office. 

From here, we redecorated the full property including plastering every wall. A new kitchen and new bathroom were installed to add the finishing touches to the property.


The Property Rollercoaster

The Property Rollercoaster

 

Last week’s blog was a swift update on everything going on with Nichol Smith Investments. We’ve managed to catch up on ourselves and thought we’d take a moment to summarise what we like to call ‘The Property Rollercoaster”, which we feel has been going on for a few weeks.

 

The property market where we invest (Edinburgh), and I’m sure true to many UK cities, have been through many changes in recent months. The market got off to a flying start at the beginning of 2020. Properties were coming on the market and attracting a lot of interest. We saw many offers for every property, with practically every property on the market going to closing dates.

 

We’ve gone from a very strong property market to a very variable market. Some properties are still flying off the shelf, and some properties have had no interest whatsoever.

 

In the space of two weeks, we’ve seen dramatic changes.

 

We’ve even experienced properties gaining a lot of interest and notes of interest, and going to closing dates. At the closing date, there are no offers from the interested parties. This is unheard of!

 

We recently picked up a property as all the other interested parties pulled out. We were due to collect the keys tomorrow but the Registers of Scotland (where the title deeds are held and updated) are temporarily closed. Again, this is completely unheard of.

 

We also submitted a very low offer on a property at a closing date. We were notified on Friday that our offer was successful as the other eight parties interested dropped out. We’re delighted with our purchase and can’t wait to get working on it. It’s really a wild roller coaster ride at the moment.

 

As Warren Buffett rightly says “Be fearful when others are greedy, and be greedy when others are fearful”. It’s in times like this where we really leverage our buying power, as these are the times when wealth is created.

 

Many things in the property world can be out of our control. We like to plan out strategy A, B and C to cover all eventualities. I feel we may only be at the start of this new rollercoaster ride due to the difficulties facing the stock market and the global pandemic.

 

With every challenge comes an opportunity, and this current market is filled with opportunity.

 

Now is a great opportunity to create wealth for yourself through property. 

 

We’ll be holding investor days, or possibly webinars (depending on social distancing), in the near future. We’ll keep you updated.

 

We’re always delighted to hear from you if you’re interested in investing in property with Nichol Smith Investments. Click the button below to book a call with me, or drop me an email.

 

Until next week’s blog, stay safe and be kind where you can.


Joint Venture Contracts

Joint Venture Contracts

 

This week’s blog is going to take a closer look at the joint venture partnership and what exactly should be discussed before entering into a joint venture. This will ultimately shape the contract you make legally binding between joint venture partners.

 

In case you missed it, last week’s blog discussed some basic principles of joint ventures and their place in the property world. It’s a good starting point if you’re completely new to joint ventures, so head back to the blog on the website and give it a quick read.

 

A joint venture contract doesn’t need to be a large, complicated, lengthy document, but it’s essential to take the time to get it right before you get going. It protects all the individuals in the joint venture to ensure all possible eventualities are covered, including profit split, responsibilities in the project, the exit strategy, and the backup plan.

 

First things first, you need to consider who will be involved in the partnership. Usually, the partners are the property professional who will bring their time, skills and knowledge of the industry, and the other partner will provide the funding and oversee payments throughout the project.

 

Have you considered who will own the property during the renovation?

 

Typically it will be the individual who provides the finance for the joint venture who will legally own the property. The individual who is not part of funding the property purchase may take out a legal charge on the property (for example an RX1 form) or a legal contract (deed of trust) to ensure the property cannot be sold or transferred without their permission.

 

Another important point to consider about a joint venture partnership is sharing profits. Here at Nichol Smith Investments, we like to see it as two or more parties coming together as equals, bringing equivalent skill or monetary value to the table, and therefore profits split evenly. However, that’s how we feel about joint ventures, and not all property professionals are willing to split profits equally. 

 

We have discussed buying, renovating and selling properties in joint ventures. This is the traditional way individuals can work together in property to share profits. However, there are plenty of people out there who are keen to work on all different types of property projects. For example, joint venturing on HMOs; where one partner is responsible for project managing the renovation of the property to be suitable for HMO licensing and usage, and the other funds the purchase and renovation. The rent income (after all expenses) is split 50/50. This type of joint venture partnership is a longer-term commitment. Deciding an exit strategy is vital when considering a joint venture partnership.

 

What about when things don’t go to plan…

 

If you decide on an exit strategy, for example, buy to sell, but you can’t sell the property or don’t receive an offer that you (or your joint venture partner) see as acceptable, what do you do? It’s essential to document the plan for the ‘what ifs’ in your joint venture contract before starting out. Discussing these things early on will make decisions easier down the line if the worst is to happen, and you both have it written down in black and white. Say the market changes during a buy to sell project, consider what price you are happy to accept for the property to break even. Consider how long you’re comfortable leaving the property on the market, whether you’d consider an auction sale after a specified period of time, and what you would do if you made a loss.

 

It’s not always plane sailing. There is always an element of risk in the property market, just like any other investment method. One of our fond property friends comes to mind when we write up joint venture contracts, as they always say ‘cover the five D’s’. The five D’s are: departure, disaster, death, divorce, and disagreement. Discussing the five D’s and acknowledging what to do in worst-case scenarios will put you in good stead for a successful joint venture. 

 

If you’ve considered joint venturing on a property project, we hope you’ve found this blog useful in covering all aspects of a joint venture contract. Joint ventures can be a great way for individuals to work together to share profits, particularly for those who are looking to invest in property but would like to lean on the expertise of a property professional. If you’d like to find out more about joint venture partnerships with Nichol Smith Investments, please click the button below.


Joint Ventures: Basic Principles

Joint Ventures: Basic Principles

 

Joint ventures are well known in the business world, but many are a little unsure about what joint ventures involve when it comes to property investing. Today I am going to outline some basic principles of joint ventures in property, including what makes a joint venture successful and how to cover all eventualities.

In the property market, a joint venture is a temporary but formalised partnership of two or more individuals, which contract with each other for a particular development project, such as a buy-to-sell project, often through the creation of a temporary subsidiary company called a Special Purpose Vehicle (SPV).

Creating a joint venture partnership for a specific property project can be a great way to work with other professionals or investors in the industry. Joint ventures, in our opinion, work best when two (or more) parties come together to work on a project where their skills complement each other. The way we like to think of it is: you don’t want two (or more) investors working on the same project with little experience of project managing, and likewise, you don’t want two hands-on individuals coming together with no way of funding the project.

A successful joint venture partnership works well in property when the individuals involved have skills that complement each other. This could be where one individual organises the funding for the project and oversees payments, while the other finds the project and manages the refurbishment from start to finish. Alternatively, it could be a partnership between an individual who can oversee the project and fund it, partnering with a builder or other tradesperson who will complete the refurbishment.

Not only can joint partnerships work well with two parties coming together with complementary skills to one another, but joint ventures can work well with more than two parties. We have met professionals in the industry that have multiple parties involved in a property project, where skills and expertise are brought from a wide range of professionals like architects, accountants, quantity surveyors and engineers.

You might be thinking “this all sounds great, but why would we consider joint venturing”. Let me explain some of the benefits.

For many individuals who want to invest in property, joint ventures can be a great way to get involved in a renovation project without going it alone. You can keep up to date with progress, be as hands-on or hands-off as you like depending on your workload and geographical location, and gain experience of what’s involved in a renovation project while working alongside someone with more expertise (and time) than yourself.

For property professionals, working in a joint venture partnership can be a way to expand their knowledge of different aspects of property, and allow working with new professionals in the industry. In certain circumstances, it can be a great way to work with an investor who can fully fund the renovation to get a project off the ground.

Depending on the joint venture partnership agreement, investors can often achieve higher returns on their investment than loaning money to a property company for a fixed return. At Nichol Smith Investments, we believe that joint venture partnerships are where each partner is equal. With this in mind, previous joint venture partnerships we have worked on with investors or other property professionals have resulted in a 50/50 split of profits. This allows us to work on more projects throughout the year while achieving great returns for our investors. And of course, having fun at the same time.

We hope this blog has helped explain the basic principles of what a joint venture partnership can involve in property, and why they can be a great way to gain experience in property and achieve good returns at the same time. Last week we touched on the recent changes the Financial Conduct Authority made to investors working in property. If you missed this article, it’s well worth a read if you’re considering joint ventures in property.

Next week we are continuing the theme of joint ventures, and we will take a more in-depth look into what a joint venture agreement should include. 

The property market is always changing, but we think there are lots of interesting and exciting things to come. If you’re interested in getting into property but don’t have the time, knowledge or know-how, click the button below to book a call with me.


FCA Regulation Changes & Property: What You Need to Know

FCA Regulation Changes & Property: What You Need to Know

We thought it would be important to highlight recent regulations changes made by the FCA to protect investors looking to get involved in property.

The FCA issued new guidance for investors and property professionals alike in November 2019 following a large seller of ‘mini-bonds’ in the property industry going into administration (London Capital and Finance), which caused investors to lose millions. 

The number of individuals investing in property-related companies for so-called guaranteed returns is on the rise, with many falling foul to the risks involved in this market.

For this reason, from 1st January until 31st December 2020, the FCA has placed restrictions on individuals looking to invest in speculative illiquid securities. Speculative illiquid securities include unlisted bonds and preference shares where the issuer uses the funds raised to lend to a third party; invest in other companies, or purchase or develop property.

Therefore any company you may consider working with for property-related financial returns will need to ensure they comply with the new FCA regulations. 

The FCA outline some of the areas where investors may potentially need to be wary:

  • The promise of high annual returns, often presented as ‘fixed’, often starting at 6- 8% – well above rates offered by traditional cash-savings products
  • Exposure to high-risk, speculative assets that are difficult for an investor to value or verify
  • Complex legal structure to a product, or between a promoter and issuer
  • High upfront or embedded costs and charges
  • Often misleading financial promotions that:
    • Focus on attractive headline returns
    • Imply capital protection or other features (diversification, asset-backed) as reducing risk, which may not be effective protections in practice
    • Do not disclose costs and charges to the investor or embed them in the arranging or structuring of the product, with fees of 20% or more of funds raised in some cases
    • Advertise that the investment is eligible to be held in a tax-incentivised ‘wrapper’ (e.g., an IF ISA or SIPP) when it does not meet the qualifying criteria
    • Use the role of HMRC in overseeing tax wrappers (e.g., IF ISAs or SIPPs) to imply oversight or endorsement by the government

If you have any concerns about investing in property for ‘fixed’ returns on your investment, or working in partnership with a property professional in a joint venture type profit share, please consult FCA guidance (see the link at the end of this article).

Individuals who wish to invest in property-related businesses may still be able to so in certain circumstances. The FCA will still allow property-related businesses to promote their products or services to a niche retail market for whom they are likely to be suitable but remove the ability to ‘mass market’ specific products to the public.

To comply with FCA regulations, any property-related business may work with investors so long as they fall into one of two categories:

  • Classed as a high net worth individual (simply put: either a salary of £100,000 per annum or more or £250,000 in assets – excluding family home or pension)
  • Classed as a sophisticated investor

If you would like to find out more about risks involved in property-related investments and whether you are suitable to invest in property-related businesses, please click the links below to be taken to the FCA regulations.

www.fca.org.uk/link1

www.fca.org.uk/link2

The property market is always changing, but we think there are lots of interesting and exciting things to come. If you’re interested in getting into property but don’t have the time, knowledge or know-how, click the button below to book a call with me.


HMOs: What Does the Future Hold?

HMOs: What Does the Future Hold?

 

Many of you will be thinking HMOs, what’s interesting about student accommodation? Today’s blog will take a look at why HMOs are becoming more popular in the market place, and why property investors maybe adding them to their portfolios.

 

For those of you who may not know, HMO stands for House of Multiple Occupancy (or Occupation) and is a term used to describe when three or more unrelated individuals live together in a home with shared facilities such as kitchen, living space and sometimes bathrooms. They’re most commonly used for students, and often get bad reputations for being lower quality accommodation and troublesome for neighbours due to student antics. Each local Council will have policies relating to the regulation of HMOs within neighbourhoods, and for your property to be used as an HMO, you will need to apply for a license from your local Council and ensure particular safety standards are met. Because of the specific requirements needed to set up an HMO, the setup cost can be far higher than a traditional single let.

 

So, why would you want to set up an HMO? 

 

Typically properties that are let out to multiple occupants tend to attract a higher rent than if the property was let out to a couple or a family (a single let). Here’s an example: a property may rent out for say £800 per month as a three-bedroom family home, but you might be able to charge say £500 per room (one tenant per room) totalling £1,500 per month. As you can see, you almost double the rent you collect each month. 

 

Another advantage of using a property as an HMO over a single-let is minimising risk. The risk to your income comes from void periods. With a standard single let property when a tenant moves out, you risk of the property sitting empty and therefore not bringing in any income. On the flip side, when you own a property with multiple occupants, even if one tenant moves out and you struggle to replace them, you’ll still receive rent from the remaining tenants. Risk also comes into play with non-payment of rent. If you rent your property to one tenant (whether it’s to an individual, a family or a couple) and they stop paying rent for whatever reason, you lose the full rental amount. On the flip side, if one of your HMO tenants stops paying rent, you only lose a smaller portion of your total rent. Both reducing void periods and risk of non-payment ultimately reduce the risk to your income as a landlord.

 

HMO’s are an attractive way for landlords to make profits from their properties, but is now a good time to look at setting up new HMOs?

 

The answer to this is yes. We’ve all read about the shortage of housing in the UK, and HMOs can help relieve a small amount of this burden. HMOs effectively maximise the living space in rental properties, therefore helping with some of the need for more housing, particularly in cities. HMOs are becoming more popular with demographics other than students, such as young professionals or individuals on lower incomes. In many cities, renting an apartment alone or as a flatshare with one other person is still way beyond what the average young professional can afford. With the average age of first-time buyers creeping up in the UK, HMOs can be an affordable place for professionals to live while saving for a deposit for their first home. 

 

If you decide to consider setting up an HMO for professionals, the best place to start is looking at competition in your local area. HMOs that cater to young professionals are usually of an excellent standard, often with higher spec kitchens and luxurious bathrooms (or possibly even all en-suite rooms). There’s definitely a market for this sort of living, so it’s perhaps a great time to look into HMOs in your local area. Please ensure you check with your local Council for restrictions and regulations in your specific neighbourhood before you get going.

 

There are some negatives to owning properties as HMOs. I won’t go into the full details, but some of the issues can include: higher turnover of occupants, larger management fees if you use a letting agent to manage the property, more wear and tear on the property, bigger initial set up costs and cost to furnish (and renew/replace furniture) the property. Obtaining a license for an HMO from your local Council also comes at a price.

 

The property market is always changing, but we think there are lots of interesting and exciting things to come. If you’re interested in getting into property but don’t have the time, knowledge or know-how, click the button below to book a call with me.