The LHA Expert

The LHA expert is Managing Director of the Castledene Group, John Paul, whose knowledge of the Local Housing Allowance system is sought by Landlords and letting agents from around the country.

After a tenant received Housing Benefit direct and didn’t pay their rent, John decided to gain an insight into the workings of the Housing Benefit system and studied the appropriate housing legislation and guidance.

Within months John was getting paid direct on all his properties, putting into practice all what he had previously learnt.

Now running a successful lettings company and getting paid direct on over 98% of all Housing benefit cases, the Castledene staff have put in practice the knowledge and systems John is well known for in the property industry, with unrivalled results.

“LHA used to be an unknown quantity. If some councils do not know how it works then how are letting agents or landlords. The rules are out there, its just a matter of sifting through the legal jargon and systemising it”

John has written a very comprehensive e-book entitled, “LHA and how to make it work for you”. In it he discusses:-

• How low a claimants income can be
• Getting paid housing benefit on two homes
• Getting paid direct
• How to beat overpayments
• Getting paid direct after 4 weeks NOT 8 weeks
• Backdating
• How to get paid in 14 days

Updated to include the changes in April 2011, this e-book has saved landlords literally thousands of pounds

As a regular speaker at networking events, John openly shares his secrets for success, not only on LHA but also on his property investing strategy. John walks the walk and as a successful property investor and businessman you can rest assured the advice that he gives actually works.

You can contact John at johnpaul@thecastledenegroup.com or 0191 5274000

When I started property investing 5 years ago I did the old fashioned way, released money from my home, bought a couple of terraced properties, waited for them to increase in value and then remortgage. Then around 2 ½ years ago I stumbled on No Money Down or NMD. I thought all my Christmas’s had come at once. I couldn’t believe that you could buy property this way. There had to be a catch! But there wasn’t, I just kept buying and before you knew it id bought 35 houses within a year.

Then the unthinkable happened, the credit crunch and the demise of Mortgage Express, I was devastated. What I thought was my god given right to buy properties in this way, was snatched away from me, just as I was planning my early retirement (I was only 29 at the time)

Saint

There’s a saying up North, “Owt for Nowt” and not a truer word can be said of NMD. Its only human nature that if we can gain a lot, by not putting much in, we’ll take it.

Myself and my family have done pretty well from NMD so I have to support the idea. Although most of my NMD were done through Mortgage Express and not through creative financing that may or not be ethical.

Sinner

For me NMD has caused a lot of problems for investors. I feel that it has brainwashed investors into thinking this is the only way to purchase investment property and that putting partial or full deposits into a deal is a sin. However for new investors, this is all they know.

My concern is that investors are missing out on great deals because of the mentality that is forced upon us by the property media.

I recently had an investor turn down a deal that produced £305 positive cash flow per month because he had to put 5k into the deal (including ALL fees).

He was a wealthy investor and cash rich, he was just of the opinion that if NMD exist then he’s not going to buy properties any other way.

Now 3 or 4 years ago before NMD if you were offered a 14.7% yielding property at 15 – 20 % Below Market Value, you would have snapped their hand off and paid the full deposit. Now investors have the mindset that if in order to purchase property all they are prepared to spend is a few hundred pounds or even want cash back.

Don’t get me wrong, if you haven’t got the money you simply haven’t got it, and NMD is the only option you have to purchase properties. However if you haven’t got any cash, should you really be in property investing?

What happens if major repairs are needed or if the tenant decides not to pay? How will you cash flow the situation if you have no savings, you can’t just say “ill cross that bridge when I come to it” that’s not responsible investing

Is it Ethical?

This really is a grey area and I can’t reach a definitive conclusion on this topic in only a few short paragraphs, but ill certainly try my best.

Ethics is defined as “being in accordance with the accepted principles of right and wrong that govern the conduct of a profession”

Now your solicitor or conveyancer might agree with what your doing, your accountant say its ok and you obviously think its fine, but does your mortgages company? Of course not, hence having to use designated solicitors and all this cloak and dagger stuff. Has any one been totally upfront and honest with the mortgage companies and still been allowed to buy properties in this way? I doubt it. Therefore how can we claim we are being completely ethical if we’re not being honest?

Now before you all start calling me Judas or traitor, I must re-iterate i’m a fan of NMD and as long as it’s legal, ill continue to purchase properties in this way. I’m just open minded and not blinded by the media.

I am of the opinion that NMD was good while it lasted and have certainly served its purpose over the last few years, but like all good things it must come to an end. Over the next few years we will see a clamp down, in various forms on the NMD and the return to deposit purchasing. We just need to be more open to the concept that our cash might not go as far as it once did.

“The secret of success in life is for a man to be ready for his opportunity when it comes.”
Benjamin Disraeli

What Investment Strategy should I choose?

With so many investment strategies out there how do I know which one is the best, should I go for Lease options, HMOs, LHA properties, SARB, flipping properties, RMDs?

You will have undoubtedly been to all the seminars, spoken to all the experts selling their unique workshops, spoken to countless fellow investors and some of you will still be confused as to which way to invest.

I’m going to give you my opinions as to the pros and cons regarding the most common investments strategies that are being promoted as the next best thing. Some you will agree with, some you wont, the point is to at least have an opinion about them which will help you choose investment strategy.

I want to get you out of being a seminar junkie!!!! I don’t want you to be one of those people that spend literally tens of thousand of pounds going on courses, learning about everything to do with property and yet have never bought a house. This year I’ve made a real effort of networking around the country (doing at least one a week) and it has amazed me as to the amount of investors who fall into this category. Theory is great but without putting it into practice its useless and your property investor dream is over before it has began.

I must stress that I have used each strategy below and have found the niche that I feel most comfortable with but you do not have to stick to one strategy, there is no hard and fast rule that says “I cant use lease options because I buy HMO’s” each strategy has its good AND bad points and where you are in that time of your life will also affect you.

Lease Options

Pros – Great if you have little money and want to secure a property

Cons – Not every vendor understands them and many sales fall through because of this.

You never really own the property

HMO’s

Pros – Great cash flow if managed right

Cons – Can be huge capital outlay

Sale and Rent Backs

Pros – Great discounts

Cons – Legislative nightmare

LHA

Pros – Great cash flow and yields

Cons – Can be very difficult if not managed right

RMD

Pros – Very little work for investor to do

Cons – Too many poor sourcers and finders ripping off investors

Flipping properties

Pros – Great potential profits in short space of time

Cons – Mortgage problems, Hard to finance, 6 month rule, CGT

You can use each and any strategy you wish, ive chronicled my investment life cycle into three stages and have just started my fourth

2004 – 2006

When I started in property investment 5 ½ years ago I wanted 3 bedroom houses in the middle of my town because I thought they would rent out easy, id have no trouble, and capital appreciation would be great. I was working another 2 jobs, my daughter had just been born, so I didn’t want the hassle that I thought would come with different types of properties.

2006-2008

Then when I packed in my job and became a “professional investor” I needed cash flow, so using Mex I bought very cheap, high yielding LHA style properties in less desirable parts of the town and local villages. As I was hands on I could control the properties better. The results were astounding. I was financially free within a year

2008-2009

When I decided to set up my other business’s I didn’t have to time to look after my properties myself, so my staff looked after them (better than I ever did) but it allowed me to sit back and look at what I wanted from my portfolio. Although there is nothing wrong with the strategy had used, I wanted to diversify and try something else. So I tried lease options and HMO’s. They both have their good and bad points, HMO’s are great cash producers but capital intensive whilst lease options are very inexpensive but the rewards are not as great.

2009-Present

I’ve bought an old building and have turned it into a mini business centre for our business and for other start up business’s. It has certainly been a learning curve, but the advantage of this commercial venture is that once we have let out the remaining rooms (75% pre let) we will be not only rent free but also making profit. The remortgage or exit strategy of commercial is easier than residential also, with lenders not being as controlling or apprehensive about lending.

So what’s the answer?

There is no defined answer, that’s the point. No one strategy is better than the others. We will all come across investors who have had good and bad experiences with some or all of the strategies. The way forward is to actually pick on that suits your needs and circumstances, but actually go for it. Don’t be a spectator, get in the game.