Comments on: LHA Expert – John Davies http://www.justdoproperty.co.uk The No 1 portal for Property Investors Sat, 21 Jan 2012 13:43:16 +0000 hourly 1 http://wordpress.org/?v=3.1.3 By: John Davies http://www.justdoproperty.co.uk/just-ask-the-mentor/john-davies/comment-page-1#comment-834 John Davies Mon, 16 Aug 2010 13:42:40 +0000 http://www.justdoproperty.co.uk/?page_id=592#comment-834 Dear Ken Glad you enjoyed the programme. This is a question I get asked quite frequently, and without knowing your full personal financial position, this is the advice I give. Selling at the bottom of the market is never a good idea, and you have to balance out what the properties are actually costing you in rent versus your cost of borrowings. You also need to check your current cost of borrowings and do a stress test on what would happen if your personal mortgage rate increased. This would allow you to calculate exactly how much the properties are costing you each year. You can then easily work out, if you have to sell below cost, just how much you would lose either way. To improve cashflow means you could either reduce voids or increase rent, and this should always be the first course of action because it should be the cheapest course of action. You will have already incurred all of the buying costs, etc, so if you could make the properties break even at cashflow (don’t forget the interest rate stress test) then you should do this. As you know, there are many ways to increase rent, and it is a question of being creative, such as (if the properties are suitable) putting in Wi-Fi and additional furniture to obtain a higher paying tenant, or you may look at the local LHA rates to see if they could bring in a higher rent. I would be more inclined to spend the money on improving the desirability of the property to increase rental as if, for example, you were to add more furniture, you could elect to write off 10% of the value of that cost against your tax bill. If appropriate, you may wish to read my book on Capital Allowances which, if you let your property in a particular way, you could claim back as much as 20% of the purchase price of the property to set against Income Tax paid over previous years. I hope this helps, but by all means do ask further questions if it helps. Regards John Dear Ken
Glad you enjoyed the programme.
This is a question I get asked quite frequently, and without knowing your full personal financial position, this is the advice I give.
Selling at the bottom of the market is never a good idea, and you have to balance out what the properties are actually costing you in rent versus your cost of borrowings. You also need to check your current cost of borrowings and do a stress test on what would happen if your personal mortgage rate increased. This would allow you to calculate exactly how much the properties are costing you each year. You can then easily work out, if you have to sell below cost, just how much you would lose either way.
To improve cashflow means you could either reduce voids or increase rent, and this should always be the first course of action because it should be the cheapest course of action. You will have already incurred all of the buying costs, etc, so if you could make the properties break even at cashflow (don’t forget the interest rate stress test) then you should do this. As you know, there are many ways to increase rent, and it is a question of being creative, such as (if the properties are suitable) putting in Wi-Fi and additional furniture to obtain a higher paying tenant, or you may look at the local LHA rates to see if they could bring in a higher rent. I would be more inclined to spend the money on improving the desirability of the property to increase rental as if, for example, you were to add more furniture, you could elect to write off 10% of the value of that cost against your tax bill.
If appropriate, you may wish to read my book on Capital Allowances which, if you let your property in a particular way, you could claim back as much as 20% of the purchase price of the property to set against Income Tax paid over previous years.
I hope this helps, but by all means do ask further questions if it helps.
Regards
John

]]> By: Ken http://www.justdoproperty.co.uk/just-ask-the-mentor/john-davies/comment-page-1#comment-813 Ken Thu, 12 Aug 2010 20:01:35 +0000 http://www.justdoproperty.co.uk/?page_id=592#comment-813 Hi John, Just enjoyed watching your video with Just do Property and I am responding to the " just ask John a question" section. My question is - If props no longer cash flow ( Flats ! ) is the best course of action - 1. Sell below cost, if a sale is possible.? 2.Hold, if cash flow can be improved.? 3.Hold and reduce debt, if possible.? Would be grateful for any comment. Thank you and regards Ken Hi John,

Just enjoyed watching your video with Just do Property and I am responding to the " just ask John a question" section.

My question is –

If props no longer cash flow ( Flats ! ) is the best course of action –
1. Sell below cost, if a sale is possible.?
2.Hold, if cash flow can be improved.?
3.Hold and reduce debt, if possible.?

Would be grateful for any comment.

Thank you and regards

Ken

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