Building Passive Income

Building Passive Income

 

Many of us have heard about passive income but are guilty of not knowing exactly what it means, or how we can build passive income. This article aims to cover different types of income and dive a little deeper into passive income through property.

First of all, we need to address what passive income actually means. Passive income is income earned through an asset that requires minimal input. Think of the concept of earning money while you sleep. The asset will produce an income for you whether you spend time on it or not. Passive income can come from one asset or many assets, with wealthy individuals normally having multiple streams of passive income.

There are many different ways to create passive income. I have compiled a short list of examples of passive income-producing assets:

  • Network marketing – products sold through word of mouth
  • Stock investment or trading – short term or long term income-producing asset through the stock market
  • Software – creating software, for example, an app that produces you income when it is bought or used on-going
  • Education – creating income through publishing a book, producing online courses etc
  • Affiliate marketing – creating income through promoting other peoples products that are sold by you
  • Franchising – payment of royalties or passive income by allowing an individual or party to operate their own business using your branding, systems and proven business model
  • Drop-shipping – generating income through advertising and selling a product that you don’t stock. You act as a middle person between the manufacturer and the purchaser and do not hold any stock or complete the shipping. 

Last, but by no means least, is property. Property is one of the oldest methods to generate passive income. Income can be gained passively through property when the rental income from the property covers all the bills and costs associated with renting the property and leaves you with money left over.

An example of monthly income from a typical property deal would include:

(Property purchase price £130,000 – a mortgage of 25% loan to value and interest rate of 4%)

Rent £800

Less expenses: Mortgage payment £325, Letting agent fee £80, Insurance £30

NET RETURN: per calendar month £365 

We can see from this example property deal how passive income can be built through property. Per year, the example above would equate to £4,380 in passive income. We always encourage our clients to think about what passive income could do for them, to build towards a target passive income figure. Whether it’s for holidays, expensive hobbies, or to tuck away for a rainy day fund, property is an excellent investment vehicle.

Whether you have thought about getting into property but haven’t taken action, or have a couple of properties already but would like to continue to grow your portfolio, we would love to hear from you. We can take all the hassle away from property investing, managing the entire process on your behalf.

Click the button below to book a call with me, to see how we can help you build passive income through property.


Hands-Free Property Investing Explained

Hands-Free Property Investing Explained

 

Here at Nichol Smith Investments, we offer hands-free investing for our clients. But what do we mean by hands-free? This article will talk you through exactly what we do as a property investment company.

Firstly we’ll source a property for you that matches your investment criteria, for example, a two to three-bed property with an estimated value of £130,000 to £160,000. We aim to find you a property at below market value. This ensures our clients make money when they buy.

Next, we’ll carry out any necessary works to the property ensuring a high standard of finish and optimise the rental value of the property. We manage this process on your behalf meaning no hassle for you or time commitment required. This means we have added value to our client’s property. We often recommend refinancing the property after a set period of time, normally 6 months, to the higher valuation, allowing clients to pull out some of the money they initially invested in the property.

We then hand the property over to a trusted letting agent to manage the property thereafter. They will ensure a tenant is vetted before the tenancy starts and will take care of any maintenance issues with the property on an on-going basis.

We provide a first-class service to ensure our clients reinvest with us year after year. Although we offer a portfolio building service for our clients, we also offer another property service. If clients don’t want to own property themselves but do want to invest their money in property, we can offer a fixed return on their investment annually. 

If you’re interested in investing in property but would like to discuss your situation further, click the button below to book a call with me. 


Brexit and The Property Market

Brexit and The Property Market

 

With daily updates on Brexit and whether we are leaving the EU with or without a deal, many of our clients are asking what impact Brexit will have on the housing market.

I’m sure I’m not alone in feeling like we’ve heard about Brexit for a long time now, to the point where many of us have become desensitised to the impact on our lives. But with the deadline around the corner again, we thought it would be an opportune moment to discuss the impact on the property market.

Once schools are back in session after the summer break, the property market usually picks up before the festive season, with many families looking to settle into their new homes before Christmas. This year (2019) has been slightly different, with many areas noticing a very slow increase in the market following the summer school holidays. Brexit is definitely to blame for the dampened activity in the property market.

There’s a lot of speculation in the media and in the financial sector that property prices are going to fall following Brexit. Percentages making the headlines are anywhere from 5 to 15% fall in house prices in the UK. While this sounds extreme, these figures will vary widely across the country. We also need to remember that the drop in house prices only has an effect on our finances if we’re looking to move home. So if we don’t need to move home, then we don’t need to be overly concerned about a potential drop in house prices.

Brexit can’t be all doom and gloom, can it? Depending on the outcome of Brexit, we’re likely to see a review of stamp duty, which could positively impact the housing market. The number of individuals who have put off moving due to the uncertainty caused by Brexit will be more likely to take action and move if a deal is reached, which could again put some life back into the property market. There have even been a few articles published that rave about the property market taking off following Brexit. While this sounds positive, only time will tell what exactly will happen with the UK housing market following Brexit.

With interest rates low and homes struggling to sell, it’s definitely a buyers market. There are deals to be found everywhere, and if you are keen to grow your portfolio and benefit from investing your wealth in property long term, it’s time to take action.

Nichol Smith Investments offers a hands-free investing service for our clients, meaning we manage the whole process from finding a property for our clients; managing the renovation or refurbishment of the property; to handing the property over to a letting agent. All hands-free and no time commitment required from our investors.

If you’d like to arrange a call with us to hear how we could help you with your property journey, click the button below. 


Property Staging: Everything You Need to Know

Property Staging: Everything You Need to Know

 

Property Staging is a relatively new concept in the UK, but our counterparts over the pond have been staging homes for years. This article aims to highlight some of the benefits of staging your home for sale or let.

Home staging, also known as property styling or property presentation, is preparing a home to looks its best. Usually, the aim of making a property look top-notch is to help it sell fast and for the best possible price. Sometimes homes that look great on the outside can sit on the market for months on end with little interest, but staging can go a long way in getting a lot of bang for your buck.

According to UK property analysts, mouseprice.com, homes that have been staged before selling can fetch up to 10-15% more than the competition. That doesn’t always mean investing more money on your home before putting it on the market; it can be as simple as decluttering and being smart about your choice of decor – if you have the time and ability something is always better than nothing.

If you don’t have the budget, you can still spend some time and effort making your home look its best. Clearing any clutter will allow the buyer to easily envision themselves living there. Try and tidy all non-essential items away into storage, whether that be an attic, garage or storage unit. Ensure any minor DIY repairs take place before viewers come round, like fixing any leaky taps or repairing any dents/scuffs in walls. This limits the number of jobs a buyer will feel they need to do when they move in. Give your home a deep clean if you can to ensure buyers attention is not drawn away from your beautiful home. In terms of decor, do your best to lighten your home for viewings. A few strategic lamps can help make your home feel bright and homely. Last but by no means least the area outside your home. Tidy this as best as you can, and if possible, make sure windows are cleaned, freshen up or replace any potted plants, and grab yourself a new doormat. First impressions are vital!

If this sounds like too much work, call in the professionals. We have used professional property stagers in the past for properties we were putting on the market, and they are worth their weight in gold. Not only will they save you a massive amount of hassle, but they will also make your home look fantastic. Property staging companies will discuss your needs, for example, requirements for furniture, and will often visit your home before providing a quote for their service.

Property stagers will bring everything from beds to lamps, to throws, to pictures to make your home look dreamy. Stagers tend to be qualified interior design experts, but they also rent you furniture and home accessories perfect for your home. You’ll not own any of the items they bring to your home; you will just rent them for a specified period of time. Often stagers will leave their furnishings with you for as long as you need them, typically 8-12 weeks. Some can provide you with furnishings for your professional photos only; therefore a top tip is to check the rental period with them when discussing your quote. 

In terms of cost, this will vary hugely depending on your individual needs. The number of rooms, soft furnishings required, and pieces of furniture needed will all affect the cost of the service. Also, the timeframe may come in to play. Deciding how long you need to rent the furnishings for and how soon you require their services will also play a part in cost.

Do we think it’s value for money? We would always recommend thinking about the cost of staging your property versus the risk of not staging your home. If you know it will help your home sell quicker, it should be factored in as an essential cost of moving home. In terms of achieving a higher sale price, we personally do not think anyone could ever be certain exactly how much value it could add to your home during the sale process. You will definitely attract more buyers to come and view your home, and that’s always a good thing when you’re looking to sell. 

Click the button below to book a call and find out how we can help you on your property journey.


Investing in Property: Why is Now the Best Time?

Investing in Property: Why is Now the Best Time?

 

We get asked this question often. Why do we still invest in property? Why should we invest in property? 

We always answer these questions with the same answer. Look at some of the richest individuals in the world, and they’ll have made their money through property or invested in property as their investment vehicle of choice. And it’s the same reason we invest in property personally. We see property as a safe place to invest our wealth long term in comparison to other investment methods.

Many individuals ask why now? Why is now a good time to invest in property? We are going to summarise why we think now is an excellent time to get into property.

The population is growing. More people means more homes are required. Demand for property has never been higher.

We have seen a shift to renting long term. The younger generation favours renting; whether that’s to allow them the freedom to follow their career or to go travelling. Many young professionals cannot afford to buy a property.

Leverage. When you buy a property, you only need to put down a deposit; therefore for every £1 you put in, you can borrow 3 times this from the bank. This is important when we look at capital growth over time, as you benefit capital growth on the total property price rather than just growth of the equity you hold in the property.

Make money when you buy. If you can secure a property below market value, you are technically making money when you buy the property.

Timing: no matter what the market is doing, so long as you buy smart, you should get into property now. There will always be political issues, crashes in the market etc. So long as you are prepared to hold property long term, you will grow your wealth regardless of when you get into the market.

Tax changes (Section 24). The Government brought in a new law last year, that meant that anyone with rental properties would no longer be able to claim their mortgage payments as a tax-deductible expense. Many landlords are realising their rental properties are costing them money, and are keen to sell them quickly and for a low price.

Pensions. Many people are starting to realise their pensions are not going to allow them to live the life they’ve dreamed of, let alone cover their current costs of living. Property can be used to create passive income for retirement, and many of our clients are in property specifically for retirement income. If you are self-employed or have a limited company, you could use your pension fund (via a SSAS pension type) to build your property portfolio. We have a video on our youtube channel explaining the benefits of SSAS pensions in property and I’ll link to it at the end of this video.

Finally, savings accounts. We’ve had so many clients reaching out to us to start their property journey with £50K+ in their savings accounts. These savings accounts might make them 2% annually. Imagine if you could get a 4% net yield year on year, not to mention capital growth over time. It’s really a no-brainer – get your money to work harder for you!

We hope this article has been useful in highlighting why now is the best time to invest in property. The benefits are life-changing.

Click the link below to book a call and find out how we can help you on your property journey.


Repairs: What Can Make or Break a Deal?

Repairs: What Can Make or Break a Deal?

 

Knowing when to walk away from a potential investment property because of unforeseen problems can be a tough pill to swallow. A property may be in the perfect location to add to your portfolio, but if an expensive repair comes along, we need to decide whether it will make or break the deal. 

When looking for an investment property, crunching the numbers is vital to making a property profitable or not. Everything comes down to cost. If we make an offer on a property before costing up a specialist repair, we could end up out of pocket rather than cash flowing.

When looking to buy a property for our clients, we have to be very aware of certain repairs which may make or break a deal, for example, damp, asbestos, roof damage or structural issues. If we suspect any of the problems previously mentioned, we call in an expert for advice. Some specialist repairs can be surprisingly low on cost and inconvenience when compared to others. 

This can separate us from the average investor, who may run a mile when something like dry rot is mentioned. We always instruct a trusted professional to come in and quote for a job before making an offer on a property – that way; we have peace of mind that no stone has been left unturned.

Having a quote to rectify a specific problem can be used during the negotiation process. For example, if a property has dry rot, we would make an offer on the property minus the cost and time delay to complete the necessary work. That way the seller knows exactly why an offer has come in slightly lower than anticipated (or previously discussed) and we have a quote for the necessary work from a trusted professional. 

Sometimes the defect isn’t nearly as costly as first feared. According to figures from the Building Cost Information Service and the Royal Institution of Chartered Surveyors, the cost of eliminating damp from one wall of a terraced house can be as little as £204.

There is, however, a big difference between dampness in one wall of a house and rising damp that affects the whole house. This can cost tens of thousands of pounds. And dampness is often not the highest cost repair. Japanese knotweed can be extremely costly, and from our experience, would tend to be a deal-breaker as you cannot eliminate the infestation (you can only control it). 

Asbestos can be a costly house repair that many fear being found in their property. Asbestos presents a health hazard to all occupants, but only if it is disturbed. The safest course of action is to hire a licensed contractor to remove it. Asbestos can be found throughout the home and can be found in insulation, fire retardants, ceiling and floor tiles. 

Once a specialist repair has been quoted for, we can start the negotiation process. For many individuals, this process will involve speaking with the seller’s estate agent or solicitor. We always try and talk to the seller themselves, to allow for transparency with an offer on their property and reasoning behind the offer made. We find this is the best way to work, but it may not be possible. This is where we need to remove emotion from the property buying process. If the seller is not happy with an offer, and we cannot secure the property for a price that works with our budget, a deal is not made.

If you’re interested in investing in property but don’t have the time, knowledge or know-how, click the link below to book a call with me. 


Property Type: Which Property Type is the Best Investment?

Property Type: Which Property Type is the Best Investment?

 

Most investors will have different opinions on the ‘house vs flats’ debate.

Often the group that prefers to invest in houses believe this as they don’t want to pay service charges and they feel they don’t have control negotiating maintenance costs. Additionally, they may not like the proximity of the other tenants in the building. 

Then you have the other side of the argument, the group that assumes flats are superior investments as they often offer higher profit margins due to lower sale prices and they have less upkeep to organise as a factor takes care of all external works.

Having invested in both types of properties, we have created the lists below to outline some of the pros and cons of each as investment opportunities. As ever, you will have your requirements to consider in addition to these. We have created this as a guide to help you get started.

Pros when investing in flats:

  • Traditionally flats have lower sale prices than comparable houses
  • Different lifestyle trends may show that renting flats is a popular option for younger people or people without children
  • Often they deliver higher cash returns and yields
  • Maintenance fees are split between all the tenants, and usually, the managing agent or factor will undertake organising the works
  • Quality flats can sometimes be secured for around two-thirds of the price of a house
  • As flats are often cheaper, you can buy more of them, and it can be quicker to increase your property portfolio
  • It is possible to spread your risk across more properties which will reduce the effect of a property being untenanted (if the rent is not guaranteed through a letting agent)
  • Buy in bulk, and you may receive higher discounts, and avoid stamp duty in Scotland (6 or more properties bought at one time)
  • Demand in urban areas can increase prices
  • Can easily add an extra bedroom if the flat has a separate kitchen by combining the kitchen and living room

Cons when investing in flats:

  • They could have high service charges
  • Sometimes they can have cramped living spaces
  • Difficult to qualify for financing on certain types of apartments and LTVs can make leaders see flats as higher risk
  • Fewer renovation opportunities – reduced ability to extend, convert the loft or add an extension
  • Flats in large blocks are very similar, and therefore there is less wow factor
  • Frequent tenant changes
  • Some maintenance costs may not be obvious, and this can result in unexpected costs cutting into your profits
  • High-rise buildings are often slower to return capital, and high-rise council buildings can sometimes be unmortgageable
  • It might not be possible to change the property to an HMO (which will help you avoid empty properties and can increase cashflow)

Pros when investing in houses for buy-to-let:

  • There are more options for development, conversion or even extensions which can add value for reselling or remortgaging
  • No additional costs for maintaining common areas
  • Buyers and tenants get a greater feeling of space and privacy
  • Tenants more likely to stay on a long term basis as families tend to commit to properties and will often maintain them
  • The potential for capital growth is much higher
  • There’s scope to convert a more substantial house into multiple flats which can be leased, remortgaged or sold
  • Houses have a broader target market as they attract property investors, developers, first-time buyers and families

 Cons when investing in houses for buy-to-let:

  • Initial costs are normally higher
  • Could have a garden area to maintain
  • Interest and stamp duty rates will be greater
  • Families with children can result in more damage to the property
  • Maintenance can be pricey given the extra size of such properties
  • Cash flow is more of a potential risk with the yield of the property being lower
  • Vandalism and theft are more likely with houses if left empty

The pros and cons of purchasing flats or houses are clear to see.

Which type of investment is right for you?

No answer is correct in this scenario. The question that investors should ask themselves is “What return on investment am I trying to achieve and which property type will help me to do this?”. So long as they have a high yield, both flats and houses are reliable investment options, and neither should be ruled out when making the decision to invest.

If you would like to find out more about how Nichol Smith Investments could help you reach your property goals, click the button below to book a call with us.


Which Location Should I Invest in Property?

Which Location Should I Invest in Property?

Location, location, location: Which location should I invest in property?

When getting started in property investment, you may find yourself asking, ‘where should I invest?’ and we always recommend the best place to start is your local area. While I still advise you speak with local Estate Agents to find out about the property market in a specific area, we have to remember that estate agents will likely try and convince you their area is great, as you are looking to buy a property and they are trying to sell a property. We advise when starting out to stick with the area local to you that you know well. That way, you know how quickly homes are selling and the areas to potentially avoid.

We would advise you to buy a map of your local area and start looking online at homes for sale. You will find that similar properties come on the market regularly in specific areas, for roughly the same price and the same condition. You can then use the same mortgage provider, solicitors etc. to secure the properties. This creates a predictable and scalable system for you.

It is easy to get caught up in the hype of locations and be tempted into buying in a nicer area at a higher price because it seems like a sensible approach, but in practice, this is the opposite of what works when you are trying to create a sustainable and cash flowing investment portfolio. If you bought properties all around the UK, then you’d need more hours than are in a day to be able to make this work, not to mention your social life would be non-existent. We would recommend investing in a small area locally and grow this area slowly over time.

Apart from living in a rural sparsely populated area or an expensive city, the answer to “where should I invest?” should always be in your “local area” albeit in the slightly lower-end suburban area. This will increase your chances of success over time which will keep the cash flowing.

Every location has its advantages and disadvantages. So long as you understand the pro’s and con’s of an area and develop a level of knowledge other investors don’t have, you will make money where they haven’t been able to.


Finding Trustworthy Tradespeople

Finding Trustworthy Tradespeople

We all need to relay on tradespeople from time to time, but not all tradespeople provide the same level of service as others. Finding trustworthy tradespeople is possible, but spotting cowboy builders or plumbers can be tricky. Follow our top tips to find the best tradespeople and protect yourself from a costly mistake.

 

Word of mouth

A personal recommendation is always preferable to a written reference. Ideally, a tradesperson that has been recommended by a friend or a neighbour should be trustworthy, particularly if you can ask the individual about the work ethic of the tradesperson and satisfaction of the finished product. 

 

Quotations

We always recommend getting at least three quotes for works required, which should be detailed to ensure each tradesperson quoting knows precisely what the job entails and finish needed. Usually, we would not recommend going with the tradesperson who has quoted the lowest price, as this can occasionally indicate a lower quality job or finish. If the quotes seem very high, trust your gut feeling and get another quote. If you get a bad feeling about a tradesperson, chances are you should trust your instinct, even if the price seems competitive.

 

Traceability 

Ensure any quote received is written formally with a proper business address. Some cowboys like to hide their traces, whereas reputable tradespeople are open and above board.

 

Bigger projects

When it comes to choosing a company to carry out larger scale building works, companies with more than ten years of experience will tend to charge a premium. Bear in mind a younger company may need to outsource specific tasks to other professionals such as gas/electricity, which can sometimes impact the quality of work. 

 

Specialist works

Some homes require additional experience when it comes to renovations. Buildings that are listed or period homes, or homes in Conservation areas, will require a builder with more experience. Check that the company you are considering for your project have the necessary experience or examples of previous work on these types of properties if your home falls into one of these specialised areas. 

 

Local vs national

We always consider time when choosing a company to carry out work. If a tradesperson is local, this can be an advantage over another tradesperson who needs to travel miles to get to you. They will likely inflate your price to cover time and fuel required to get to you for the duration of the project. 

 

Requests for cash

Always be wary of tradespeople offering a discount if you pay in cash. Occasionally these individuals may cut corners with other vital things like guarantees and insurance. If the tradesperson asks for cash, count this as a warning flag. 

 

Contracts

For larger projects, it is very important to have a signed contract that includes full details of all work involved, but also a start and finish date. Unforeseen delays can occur at any point throughout the project, so having a start and finish date can help keep tradespeople on track and when necessary, be used to protect you from a never-ending project. Also, confirm with the tradespeople where they will dispose of builders waste and the standard you expect the property to be left once work is completed. 

 

Payment schedule

Always have a clear outline in your signed contract with your tradesperson detailing payment. We often advise a system of paying in thirds. Ideally, pay a third of the total cost upfront and agree on a date or mid-way point during the project to pay the second third of the total cost of the job. The final third of payment should only be paid once the job is completed, any snagging issues sorted, and the work has been carried out to your satisfaction. Put any changes to the payment plan in an email to the tradesperson detailing why a payment has not been made, to ensure there is a legal paper trail in case of disputes.

 

Insurance

Check both your home insurance and the insurance of the tradesperson chosen to complete the work to ensure you are covered in case of any unforeseen problems. 

 

We hope you have found this blog helpful when considering tradespeople for your next project. Here at Nichol Smith Investments, we offer hands-free investing in property. We oversee all work involved in property, from full refurbs, extensions to small renovations, on behalf of our clients. If you’re interested in investing in property but don’t have the time, knowledge or know-how, click the button below to book a call with us.


Sell or Let Your Home Fast: Our Top Tips

Sell or Let Your Home Fast: Our Top Tips

Anyone looking to sell or let their home knows it can be a lengthy process. From our experience in property, certain things can get you an offer on your house quickly.  

 

Selling or letting a property can seem like a daunting task, but it doesn’t have to be this way if thought is given to the simple things.

 

First impressions

First impressions are crucial and could potentially make or break getting an offer on your property. Take a step back and think about what you, as a buyer, would be looking for when viewing a property.  Viewers will look at everything, top to bottom, side to side. If possible, allow viewers to start in a welcome hallway or feature room, to make that all-important first impression. 

 

Tidy and declutter

It might seem a little obvious, but make sure you have thoroughly tidied your home before photos are taken and viewings commenced. Give it a deep clean and declutter where possible, as a neat and tidy room appears more spacious and therefore more appealing to viewers. A home that needs a good clean can often turn potential buyers away, as your home will not homely to the masses. Gardens, garages and communal hallways (where applicable) should not be overlooked when tidying. 

 

Small but important touches

Have you ever walked into a home and been hit with a wonderful aroma. Coffee brewing, bread baking, and fresh flowers are ideal. These can all appeal subliminally to potential buyers and make them feel at ease. It may seem obvious to mention that odours from pets or laundry will impact potential buyers, so ensure your home is well ventilated and any unwanted aromas dealt with before viewings. During winter months it’s always a great idea to keep your home warm, and even light a candle or two. Allow viewers to get a feel for the peaceful surroundings, keep background noise to a minimum.

 

Be as flexible as possible with viewings

While selling or letting your home can be a lengthy process, try to accommodate viewings where possible. Your property will only sell or let to individuals who have managed to view your property, therefore the more people who come to see your home, the more likely you are to receive offers. Some estate agents and letting agents can help with viewings if you are unavailable to show a viewer round your home, which is a huge benefit of using local agents rather than online agents.

You may be asked some difficult questions during the viewings, remember to be honest and polite no matter the question. You will know your home and local area better than anyone else, so don’t forget to drop in things you love about your home and neighbourhood, to help viewers in their decision making. 

‘For Sale’ or ‘To Let’ signs must always be displayed prominently and checked regularly, to ensure they are upright and facing the correct direction for maximum impact. 

 

Experience is invaluable

We always advise our clients to consider using an experienced local estate or letting agent. The years of experience they have with handling potential buyers is invaluable and can make this process far less stressful, particularly if you are struggling to organise viewings and dealing with a high level of interest. Using a local expert can make all the difference in achieving the successful sale/letting of your home.

 

If you would like assistance in selling your home, please get in touch with Nichol Smith Investments on 0131 322 1442. We have a team of experts who can guide you through the process of selling or letting your home.