‘You just need one mistake to skew the numbers and it de-positions you with your investor, you must get the numbers right’

David explains the numbers that are key and how to ensure the calculations are correct when you are putting together a deal for an investor.

He shares a detailed example of when a deal isn’t a deal worth having because the numbers don’t stack up and how each number can be calculated accurately.

If you want to understand exactly how to make the calculations that make a deal package listen in now.

 

KEY TAKEAWAYS

• It’s about getting your numbers right, valuing the property that you are proposing to send to the investor.
• There are 2 numbers required for valuing a property to let; the gross yield and the return on capital employed.
• Gross yield is a gross number, it is the total rent you are going to achieve in the first year divided by the total cost of acquisition, including everything (kitchen sink, deal packaging fees, stamp duty, legal fees)
• Gross rent divided by the gross cost of acquisition equals gross yield –  the property industry understands this figure
• Return on capital employed is the net number, It’s the money the investor is going to get returned on their money.
• To get the net income you subtract all the costs of ownership (letting fees, voids, repairs) giving you a net rent.
• You divide this net income by the money you leave in the deal.
• As the deal sourcer it is incumbent on you to work out what that property is worth.
• To know what the house may be worth look at comparable properties. Using comparable properties provides evidence for the valuation.
• What every experienced investor wants is a return on the cash left in the deal and how you work that out is going to make the difference on whether you sell the deal or not.

 

BEST MOMENTS

‘If you are sending this minestrone of numbers to your investors they are not going to buy the deal’

‘If I was the investor and the numbers were sent to me there is no way I would buy that deal’

‘Gross yield is important, it’s a common language in the property industry, people know exactly what it is’

 

VALUABLE RESOURCES

Property Sourcing Profits Podcast

https://www.progressiveproperty.co.uk/

https://unlimited-success.co.uk/

https://www.facebook.com/groups/progressivepropertycommunity/

 

ABOUT THE HOST

David is a property expert with over 25 years’ experience and his own portfolio of 26 units. His current rent roll is in excess of £10k per month. He is also a partner in a Deal Sourcing and Packaging business in the North West of England and has sourced over 250 properties for investors since 2004.

In recent years he has, by necessity, had to develop an expertise in LHA strategies. This area is increasingly becoming a niche for him, and he enjoys empowering other landlords by sharing the knowledge he has gained.

The ultimate purpose when sourcing properties in this sector for investors is to minimise risk while maximising profit. He has had to find answers to the challenges of Tenant Find, Management, ensuring rents are paid and the transition to Universal Credit. These are strategies he uses in his own business and also on behalf of investors. His investor clients regularly achieve annual gross yields of over 20% with high occupancy rates and voids resolved, sometimes within hours.

 

CONTACT METHOD

https://www.linkedin.com/in/david-siegler-7b126316/

https://www.facebook.com/DavidSieglerInvestments/