How to make 23 Million a year from property…

Ok… Clickbaity title! But stick around! It’ll be worth it…

Over the course of two mad days in November 2022 we made £126,000, albeit in equity.

Now every story needs a little context so if you want the full story, check out Seasons One (Episodes 1- 34) and Season 2 (Episodes 35-53).

In Season One of Expat Property Story we fired our financial adviser, cashed in our pension, re-mortgaged the family home and slowly built a portfolio of five student HMOs.

In Season Two (Episodes 35-53), we challenged ourselves to buy a UK property at auction from Hong Kong without setting foot in the UK and all within four months.

I joined the Auction Buyers Club and with two weeks to spare, we made a successful pre-auction offer on a block of four flats in a market town in Derbyshire to kick start our portfolio and our two-year draught was over.

Three weeks later, Lizz Truss and Kwasi Kwarteng (remember them?) revealed their ‘Growth Plan’ for Great Britain.

Their disastrous mini budget led to an immediate depreciation of the currency, an increase in interest rates and massive financial instability.

The UK property market was instantly transformed from one supporting sellers to one benefiting buyers.

The mainstream media was predictably full of doom and gloom, discouraging all but the wisest and bravest from taking advantage of the new opportunities on offer.

We followed Warren Buffet’s advice to be greedy when others were fearful.

So, this was how things were in mid-November 2022.

Browsing the unsold lots on EIG, the Right Move of the auction world, I came across a three-bed semi in Lancashire, just a seven-minute drive from an Amazon distribution centre.

The house was listed as available at £115,000.

The auction house selling the property has an irritating habit of advertising unsold lots in their catalogue at enticing prices to encourage post-auction offers.

When you call them, they tell you a different, and of course, higher price. In this case, £132,000. I offered 120K.

“They want more.”

“How much more?”

“I can persuade them to accept 125.”

I agreed. He said he’d send me the contract and call me back to go through the proof of ID etc.

I was in the middle of checking the Special Conditions for the fourth time when the auctioneer phoned, saying he was really embarrassed but the vendor now wanted 128K.

As a point of principle, I lowered my offer to 123K and went to bed.

The next day was Friday. When I came home from work after a hard day at the Expat Office, there was a message on the Auction Buyers Club group chat saying that the same vendor had withdrawn all their properties from the auctioneer and was offering them off market at huge discounts via an intermediary.

An online meeting of the club was set up for that same day to review the deals. There were some fifteen properties up for grabs and they would be uploaded to the group chat an hour before the meeting, which would take place at 2pm UK time, or 10pm Hong Kong time, which was only four hours away.

There would be just one hour to do preliminary due diligence, although this was effectively reduced given that it was first come first served. I.e., the first to register interest in a property was first in line for that property.

During my auction challenge, my auction analysis skills had been polished, enhanced, and sped up so that I was now able to skim through the list and quickly identify properties with potential.

And if you subscribe to our mailing list in the top right-hand corner of the website, you’ll receive a free copy of my 23-step guide to analysing an auction deal.

One of the properties was a 3-bed semi in Nottingham which is also a place where I have good support in terms of a build team and management, so I immediately registered my interest just before everyone else and was first in line. The property in question was available at £150,000.

Hometrack reports combine sales of all residential property types whether they’re flats, terraced houses, detached, semi-detached, or whatever, and work out an average £ per square foot value based on sales that have taken place within six months of the report.

They’re often used for providing Capital Gains Tax valuations for HMRC so they’re probably the most accurate valuation tool available.

According to Hometrack, the estimated capital value for the property was £210,000 so £60,000 below market value.

I ran the property past my broker. A good broker will look for problems to protect their clients from themselves.

My broker immediately raised some red flags. He questioned why it was so cheap, why there was pressure for an early exchange, and had my solicitor undertaken searches, especially a mining report as it was in an area of historical mining?

Now when you’re presented with an opportunity like this, there are bound to be risks.

Buyers had to be comfortable with going ahead with the purchase without a full legal pack, or without being able to visit the property or arrange searches via their solicitors or even have much in the way of photos.

But the associated risks attached to the purchase were factored into the price and I was happy to take the risk based on the credibility of the people in my network and the inside information provided by the person who alerted us to the deals.

Furthermore, the properties being sold needed nothing more than minor refurbs and all had an EPC rating of at least C.

I arranged a free mining report online through GOV.UK who have a page where you type in the address, and it tells you if there are mining issues.

The computer said yes, so I ordered three reports. One for Ground Stability, one for Coal Mining and an all-in-one environmental report. The whole lot cost £211 and came back indicating that there was nothing that would prevent me or anyone else from getting lending then or at any point in the future.

Having a good solicitor who is comfortable with this kind of purchase is also important.

But finding a good long-term solicitor had been a challenge for us.

When I’d first resolved to plug this gap in my power team, it was May 2022 which you’ll remember as a time when the market was somewhat overheated.

After interviewing Helen Godbold-Eade back in Episode Seven, the seed of an idea had been planted in my head. Helen runs a consultancy firm but unlike many in the property business, she believes in being paid by the hour rather than by commission. This is what she said:

“Sadly, the property investment sector is in this country is riddled with this whole commission structure.

“I charge my clients an hourly rate. So they're paying for my time and expertise. I don't get a referral fee. I'll recommend somebody based on merit.

“And that way, the client's certain that they're getting impartiality.”

I commissioned Helen to find a firm for me. She proposed four firms and I chose the one that responded first but there was nothing to do until I was ready to buy.

When we had bought our block of flats in Derbyshire, we had had to exchange the same day as a pre-auction purchase usually operates under the same terms and conditions as a live auction.

Unfortunately, my new solicitor was unable to look over the legal pack at short notice, which is completely understandable because at that stage we had no working relationship.

But by the time the Nottingham deal came around, we had a history of working together for one project.

Once two parties have proved to each other that they’re worthy of each other’s attention, you get quicker responses to emails and messages and calls.

This is how it was with my new solicitor in mid-November 2022.

It was now 4pm Friday afternoon, so we had to wait until the Monday to secure the deal which left us £60,000 better off.

The following day was Tuesday. After getting back from the Expat office, I got a message from our intermediary for these deals.

The three-bed semi in Lancashire that I’d agreed to buy at 125K the previous week before the auctioneer came back asking for 128K was back on.

Because it was now available off-market rather than at auction, the buyer’s premium and other costs that I would have had to pay at auction, would not apply. 

I ordered a Hometrack Report, which came back with an estimated capital value of £194,000, which represented a £66,000 discount.

However, completion needed to take place on the same day as the first property, so exchange had to take place that day.

We had six just hours.

The first thing I did was phone my solicitor with whom I now had a track record of two successful deals. When I got through, they told me that she was working from home that day. I explained that I had agreed to buy another property, and could they alert her to the fact that I would send her an email and could she respond as quickly as possible. She came back to me almost immediately saying that she had a couple of things to attend to but would try her best to get it done.

One of the many benefits of the Auction Buyers Club is that the founders, Jay and Piotr are there to lend their hands when they’re most needed to help get a deal over the line.

They had no skin in the game so to speak and Jay has a semi-legal background and has reviewed thousands of legal packs in his time, and he generously offered to set up a Zoom and together we reviewed the legal pack.

It takes two solicitors to tango. Exchange of contracts on a property purchase requires nifty footwork on both sides, which was how it transpired.

Both solicitors had worked on the Nottingham purchase twenty-four hours previously, so there was already history of working together and an element of trust which probably helped keep things moving.

The only thing that slowed things down and nearly scuppered the deal was caused by me… Two differently named files, once opened turned out to be the same so I had failed to send one essential document.

With 30 minutes till the deadline for exchange, I sent the missing document and after a nervous half hour watching my inbox, I finally received confirmation that contracts had been exchanged with seconds to spare.

The next day, I heard back from the intermediary, who showed me a message he’d received from the vendor:

“Who was that buyer? He was the quickest we’ve ever had and so easy to deal with! I want to do more business with him!”

The next day the vendor sent another message:

“Just a quick note to thank you for introducing your buyer to us. Our legal team have found his solicitor to be a delight: very efficient and easy to transact with. If there are any more properties he’s interested in, we’d be more than happy to continue working with him. Thanks.”

So what are the most valuable lessons from this experience? What enabled these deals?

Firstly, we had a ‘Power Team’, a history of working with a trusted tax adviser, accountant, mortgage broker, managing agent, build team and project manager and the final piece of the jigsaw in our case an efficient and reliable solicitor.

Secondly, being a part of a community such as the Auction Buyers Club undoubtedly played a part in being able to take advantage of the opportunities that came about through a unique set of circumstance over those two days in mid-November 2022.

And finally, we performed.

Rod Turner, host of the Rodcast podcast offered great advice in Episode 42 at a time when I thought we’d never find a property at auction and was beginning to have feelings of Impostor Syndrome despite the fact that we had a portfolio of 5 HMOs and a property podcast. Rod had this to say:

“It's about performing. My advice is do. Don't talk. Just do! And perform. You prove the concept to them that actually you're a decent buyer. And then people will start to think actually, this person is someone that does what he says he's going to do. I know he can perform, or she can perform, they're going to start to move up my list in the back book”.

These words of wisdom have been ringing in my ear ever since and I like to think that when it was time, we DID perform.

Now if we could just keep buying a property a day with an average paper profit of just over £60,000 each time, we’d be just under £23 million pounds better off within a year and our investors would be millionaires too.

Unfortunately, deals like these two don’t come along every day. But when they do… make sure you’re ready!