ASK491: How can I raise these funds? PLUS: Help, my freeholder is bankrupt!

0:02Hi, I'm Rob. And I'm Rob. And this is Ask Rob and Rob. Welcome to Ask Rob and Rob, the show where we enhance your knowledge of property, all thanks to some brilliant questions sent in by our listeners. We've got another two great ones coming up today, as we do every week. And it all works because you send in your questions and you do it like this. Yeah, you head over to propertyhub.net forward slash ask. There you'll be presented with a wonderful buffet of options. You can ring up and leave us an answer for a message, or you can leave a message on your computer. And if that was enough, you even have the option to try and get your question in the Sunday times by writing in.

0:41Whatever you prefer, it is all in that link, propertyhub.net forward slash ask. Okay, so let's listen to our first question in from David. Hi, Rob and Rob. My name is David and I've listened at your podcast for the last two years and you've kind of helped us a lot by listening at or your advice we've done a six bedroom HMO last year a year before and last year till this year we've done a 14 bedroom HMO both properties they told us we don't have the experience but we pushed through and we just got our mortgage. On the 14-bedroom HMO, we got a mortgage for 70 % because they say we're not experienced landlords because we don't have experience over six bedrooms.

1:32They also value our property hundreds or give us£100 ,000 or less for the 14-bedroom due to the fact that we not experienced bank loans now we're sitting with a little dilemma we only have a hundred thousand pounds which we want to do another six bedroom hmo but because we need a hundred to fifty thousand roughly for the breach finance with a hundred thousand pounds do you maybe have any advice how we can get just angel investors we are not experiencing it angel investors and we have a hundred thousand pounds but we need another fifty thousand pounds to do this how to mow up the property is 165 ,000 doing it up evaluation is around 500 ,000 so we will only leave 70 ,000 pounds in the deal which we have the money but it's 100 ,000 pounds so if If you can give us some advice on that, it will be great.

2:38Thank you very much for everything you advise us on the podcast. Love listening to you every week. David, thank you. So well done on your progress. That's a lot. You've made a lot of progress. I hope it's all still going very well for you. And congratulations on getting your first HMO up and running. First of all, I think it's just worth saying that it's not unusual for inexperienced landlord, HMO or otherwise, to have fewer mortgage options. So don't be too concerned about that. Often, it's the rate that you have to compromise on, but in your case, it sounds like the amount of leverage, the amount of money you're able to borrow, which may be the case for HMOs.

3:17In typical buy-to-lets, it's often the rate where it's slightly higher to compensate for the lack of your experience. Of course, though, it will depend on the lender, and more experienced landlords have more options available to them. But the great thing is with you and others listening is once you've got your first property and you've owned it for 12-24 months then you become an experienced landlord in the eyes of the lenders. So next time around on this first property that you've got you'll have more lending options which when it comes to how can you get your hands on more money is the option one is to wait for your product to be refinanced.

3:54You haven't said how long you're locked in for, so let's say two years, two years, release equity that way, and then go on to your second HMO at that point. I appreciate that this opportunity may have passed you by, but other opportunities will present themselves at that point. Another way you can potentially raise funds is looking at the rest of your portfolio or your own home. Now, I don't give this advice lightly, but you've asked the question about how you can get more money, but one of the ways some people get money into their portfolios is releasing equity from their own home. Not something you you do lightly but if you're comfortable with the numbers your confidence in your execution that is something that you could look at another option is speaking to your broker to see if there's some sort of bridging facility that would allow you to do this that there are products out there i'm not a hmo mortgage expert but go and speak to one and they'll be able to guide you through that and see what other options are out there so it won't be a traditional mortgage but it may be some bridging facility.

4:54Again, not something you do lightly because you'll pay a lot of money for that loan and you have to be really confident in your numbers to go and execute it. Or another option is go and get investors involved and you can give them some equity as a way of getting them involved. So split the equity up, but a cleaner way of doing it is just giving them a return on the money. So a greener rate. Now I would expect it to be a double digit return. So 10 plus. so somebody going into this type of opportunity with you would want to see a double digit return because it is risky and as you pointed out you don't have a lot of experience yet so you have started and you do have a little bit of a track record but you don't have an improved and established track record so getting your hands on that money if it's via a bridge or through other investors is going to be expensive but you need to put your numbers together your case studies together and then go networking to property events and anywhere you can find these type of investors once you've done all that and present the opportunity to them.

5:57But as I've said, don't worry if you can't do it this time. I know when a deal is sitting there, you just want to execute and you're desperate to push on. I get it, I really do. But I promise you, more deals will come round. That's how it works in property. There's always a deal to be done. Some markets are more favourable for deals like this one, but you might be ready in six months. and will the market be bouncing in six months time? Probably not. Might be a bit stronger than it is today, but it's not suddenly going to be a market where you won't be able to do a deal. So don't feel like it's a be all and end all.

6:30If this one works, amazing. But if you have to pass on it now, ready for the next one, which might be six, 12, 24 months down the line, it may feel frustrating today, but I promise you in the long term, it'll be absolutely fine. Whatever you do, best of luck. Okay, let's have our next question now from Tom. Hi, both. I've been listening for a couple of years now and just wanted to start out by saying thanks for all the guidance and information you put out there. It's greatly appreciated and really useful. My question today is regarding, so I've just made a purchase of two leasehold flats. They were at a good price because the leaseholder had them repossessed.

7:05The leaseholder was also the freeholder of the building, which has another flat to make up three flats. I'd like to now start the process of gaining control of the freehold, purchasing control. my understanding is that it sort of defaults to the crown and then there's a long drawn out process where they eventually put it to market at market rate i don't know if this is anything you guys have had any experience on or come shine a light on seems to me so far there's quite a complicated area thanks i look forward to hearing from you cheers bye tom i love asking rob and rob because even now. Topics coming up that we have never touched on before and this is one of them.

7:46It is an unusual situation so let's see what we can do to unpick it. The first thing is presumably this is something that you're aware of during the poachers process. It sounds like it's something that this isn't a new development, it's something that would have been the case while you were buying. So your solicitor I guess must have looked at this and been aware of it and perhaps flagged it up to you. So a starting point I think would be to get advice from them. But basically the first step is to figure out who controls the freehold today maybe it is still the person who you bought from maybe if there was a mortgage on it then it's been repossessed by the lender and lender now has the freehold or ultimately like you say it can end up being owned by the crown but you need to know which is the case so you can pull the freehold title from the land registry to see who's listed on there but because that's not always up to date you can also get your solicitor to run a search to see if there are any pending charges so yeah really the first step is to find out who owns the freehold.

8:41The good news is whoever it is they're probably going to want to get rid of it because none of those entities are really in the market of owning freeholds for the long term. They just want to get shot. So while there will be some kind of process around it and they will want to get the right price if they're approached by the owners of the leaseholds within that freehold then that is good news for them because that's going to be a very easy and appealing exit route for them. The other good news for you is it's only a small block so you need to get leaseholders on side but there are only three flats and you own two of them so there's only one other person to get on side you could probably if they're completely unresponsive just make all this happen on your own but if you can find out who that is and get them involved then that is definitely even better so i would say get some help from your solicitor in finding out who currently owns the freehold and then get some help from them in approaching them as well and figuring out the route forward from there the other thing i would flag up is that presumably if the freeholder isn't in control anymore or the freeholder has changed then it sounds like there's probably not a lot of building management going on which in a block of three i guess doesn't matter all that much but it's probably just being aware that presumably nothing much is happening there may not be insurance in place and that is the main thing to look at that's why i'm saying it's strange that you've only just bought it because presumably someone would have needed to be there to answer inquiries and all that kind of thing so basically unpick it speak to your solicitor again and make sure that there is buildings insurance in place.

10:07If there's not, then there will be a clause in your lease that gives you the right to insure. So you can arrange your own insurance in the meantime if you need to. So I know that's both at the same time quite a long answer, but also just not giving you everything you need at all. But that's because there are different routes depending on the situation. So start off by gathering information, speak to your solicitor and take it from there. but given the circumstances it sounds like pretty good news and it sounds like a situation you should eventually be able to resolve well that's just done for another week we'll be back next week answering more of your questions until then take care have fun bye-bye bye-bye