Property Investing Success PDF

ISBN: *Insert here*
First published in 2018
Copyright © 2018 Peter Rowan
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Disclaimer
Every effort has been made to ensure that the information
contained within this guide is accurate at the time of publication.
We cannot accept any responsibility for any errors or omissions
within this guide, however caused. No responsibility for loss or
damage occasioned by any person acting, or refraining from action,
as a result of the material in this publication can be accepted by
Peter Rowan. The information within this guide does not represent
the views of any third-party service or organisation. Your level
of success in attaining the results claimed in the book depends
on the time you devote, your finances, knowledge and various
skills. We cannot guarantee your success or income level. In fact,
no guarantees are made that you will achieve any results from
our ideas and techniques. Nor are we responsible for any of your
actions.
Contents
My Story 7
Chapter 1: Why Property? 19
Chapter 2: How to Buy Property With None

of Your Own Money 39
Chapter 3: Maximise Your Cash Flow Using

HMOs 63
Chapter 4: The Best Kept Secret in Property

Investing! 81
Chapter 5: Finding The Right Property 93
Chapter 6: Making money from sourcing and

trading deals! 113
Chapter 7: Other Ways To Create Cash flow:

Rent-to-Rent & Serviced Accommodation 127
The Most Important Investment of All 155

Resources
To build on the learnings in this book:
• Head across to my YouTube channel (name to
be forwarded) for plenty of videos explaining all
aspects of property investment!
• Visit my Facebook page (name to be forwarded) to
keep up to date with all my latest posts!
• Go to my website (name to be forwarded) for
more free resources!
• In addition, as a reward for you being an action
taker and buying this book, I want to give you a
complimentary gift – my 99 Top Tips For Property
Investors eBook. To download this, just head
across to www.99propertytips.co.uk
Finally, I extend an invite to you and a guest, to come
along to one of my completely free live training
days. Here, I’ll go through everything you need
to know to set up and run a successful property
investing business, when you have little or no
money yourself! That’s right, you can have 2 free
tickets to kick start your property journey. Just go to
www.propertyinvestorsbootcamp.co.uk to claim your
free places.
To Mandy, my ever-patient wife
and Jess, Molly, Ted and Amy, my
four wonderful children.
Preface
Congratulations for making the decision to invest in yourself
and buy this book. Having read it, you will have the knowledge
to transform your life, by investing in property and having the
choices that financial freedom brings.
I am confident that the information within these pages,
which might only take you a couple of hours to read, can
have more of an impact on your life and your finances than
all the information you received throughout the whole of
your schooling! A bold claim, you may be thinking. However,
I don’t make it lightly, and you will understand why when you
have completed the book.
Here’s the good news. If you don’t have any funds yourself,
or your credit is poor – meaning you’ll struggle to get a
mortgage – you can still be a great success and generate an
income from property that gets you out of your day job! I was
in this position three years ago. It didn’t stop me building a
£4 million portfolio in 2 years, and it needn’t stop you either.
Three of the chapters in this book look specifically at how you
can succeed with none of your own money!
Property is the vehicle which can take you from where you
are to where you want to be. That said, understanding what
you need to do is only half the battle. You then need to take
action and implement what you have learned. If you do that,
there is no reason why you cannot be financially free in the
next 6-12 months.
If you wish to build on the knowledge in the book, feel
free to join me as my guest, at one of my property investor
bootcamps. Just go to www.propertyinvestorsbootcamp.
co.uk where you can book your place.
To your success,
Peter Rowan
My Story
8 Property Investing Success
It was December 2011. I was standing by the window of a

cedar wood conservatory, in my beautiful 18th century hotel
– high up on Exmoor. Through the glass I could see Dunkery
Beacon, and distant rolling hills. It was a crisp winter’s day,
with a clear blue sky and white frost on the ground.
Here, at 1200 feet, I had come to talk about my finances.
“Mr Rowan, I’m not very good at small talk, so I’ll get straight
to the point. The bank have been looking at your latest
management accounts. There seems to be trend – and that
trend is downwards.”
I looked at the man opposite me. He was in his early fifties,
wearing a pin-stripe suit. The moment he arrived, he had
thrown himself down into the leather armchair, almost in
disgust. It was minus three degrees outside, but beads of
sweat were running down his forehead.
“You know what happens in winter, Mr Goddard,” I said,
“there’s always a downturn in trade. We get a lift over
Christmas, but it’s not until the spring that things really take
off again. It’s been this way for the last eight years.”
Mr Goddard looked at me stiffly, “Maybe, Mr Rowan, but the
bank have become very nervous. Trade is down significantly
on this time last year, and I’m afraid they’ve taken the decision
to call in the loan.”
My mouth went dry. Ever since I’d received the email from
the bank two days previously, where they’d expressed an
urgent need to meet, I’d had a sickly feeling in my stomach.
Now it felt like I’d been punched.
“Call in the loan, Mr Goddard? Are you serious? What on
Property Investing Success 9
earth are you talking about?”

“I’m afraid things have changed since the financial crash. This
is the way they’re doing things now. Please don’t shoot the
messenger, Mr Rowan. And if you’re thinking about appealing
the decision then I’d save yourself the trouble. They’re within
their rights. It’s in the small print, you see.”
I was speechless.
“Seven days, Mr Rowan. Seven days. If the loan is not fully
repaid within that time, the bank will repossess.”
He heaved himself out of the armchair, stood up and shook
my hand. Then he was gone. I sat down opposite his now
empty chair.
We owed the bank over a million pounds.
The Good Days

Starting in 1997, we’d rode the property wave in Cambridge
for a few years. Accumulating a portfolio of buy-to-lets, and
selling these on, gave us the deposit for the hotel purchase –
in 2003. It had been extremely hard work in the first couple
of years. I’d naively thought, “Slept in an hotel, eaten in a
restaurant, drunk in a bar, can’t be that difficult.” Ha, not
quite…
Despite the steep learning curve, after 3 years we’d doubled
the turnover and increased the value to just short of £2
million. I’d had offers from two national pub chains, but life
was good and profits were excellent, so I saw no need to sell.
But neither did I see the storm clouds on the horizon…
The Perfect storm

In many ways, it was the perfect storm. We set out on a
building programme at the hotel in 2008, extending our
borrowing with the bank to fund it. Back then, the banks
were spraying money around like confetti – and I was the
grateful recipient!
The previous year, on the advice of one of the large investment
banks, we’d invested £350,000 in a large Australian
construction company. They were building top end homes in
green belt Bucharest, as Romania prepared for accession to
the EU. This money was the deposit on 8 new houses, which
were likely to double in value before they had even been
built. Such was the madness of the property market back in
the day…
We’d also bought a plot of land on a top end Portuguese golf
course, ready to build a 6- bedroom villa and a 2-bedroom
apartment in a 5-star ski complex in Bansko, Bulgaria. At that
point, everything seemed perfect.
In 2007, the first domino fell. Northern Rock became the
opening casualty of the financial crash. They were swiftly
followed by the much larger Lehman Brothers. In 2009, we
were hit by our own triple whammy. First the Australian
construction company that we had been using went bankrupt,
taking £350,000 of our cash with them. Then in August of
the same year, the same thing happened to the construction
company building our apartment in Bansko. Finally, we
discovered that the company to whom we’d paid the deposit
for our plot of land in Portugal had gone under.
In February 2010, we saw the heaviest snow fall in 18 years.
At 1200 feet, in the hills of Exmoor, we didn’t see the road

again for nearly 2 months. The entire time, trade stood still.
Although this was rough, we got through it. I remember
telling Mandy that we’d be fine, just as long as we avoided
another winter wipe out. Mother Nature, it seems, took this
to heart.
On December 1st 2010, it started to snow again. Thus began
the earliest heavy snowfall for 20 years, and the coldest
December since records began. We would usually have a
massive spike in trade for 3 weeks over the Christmas/New
Year period, as we had a 200-seater function room which
hosted 4 big party nights with live music. These, along with
a full hotel over the whole festive period, coupled with
Christmas Day lunch and a New Year’s Dinner Dance, would
bring in about £100,000 in extra business.
In the event, the snow was so bad that we had to shut up
shop on December 17th. We didn’t open again until February.
We continued paying the mortage though, and trade came
back in the summer, so I assumed that we had beaten the
weather. Thus, it was absolutely devastating to hear from Mr
Goddard that the bank were calling their loan in. I had built
up a false sense of security, inside the walls of my beautiful
West Country hotel, only for Mother Nature to tear them
down.
When I got home that night and broke the news to Mandy,
she was shocked. It was a couple of weeks before Christmas
and we had £2300 in the bank account. And that was it. No
idea where the next pound was coming from, or how we
were going to survive.
We held onto the house. Just.
The Hamster Wheel

Bankruptcy would have been the soft option, cancelling out
various loans I had in place, but I never seriously considered
it. I’d never been late with paying the credit card or the
mortgage before, never mind wiping out a complete debt.
My thinking was clear enough – I’d taken the loans out and
it had been lent in good faith. It was my duty to repay them.
Simple, right? Sure, I’d have to put them all on hold for a
while and pay a pound a month until things were straight
again, but one day they would be cleared. Needless to say,
my credit score was shredded. I wouldn’t be able to borrow
diddly squat for another 5 years.
My cousin was a carpet cleaner, and called me when he heard
the news, “Pete, if you need to pay the mortgage and put
food on the table, I suggest you give carpet cleaning a try.”
I wasn’t proud, and within a week of that phone call, I was
out cleaning the muck from Mrs Jones’s carpets. And so it
began – working 10-hour days, often 6 days a week, just to
get the income I needed to support the family (we had 4 kids
by this stage) and pay off loans to friends who had helped out
in the short-term.
One day in 2014, I was cleaning the carpets in an upmarket
house in Cheltenham. As I was down on my hands and knees,
working on a difficult stain, the lady of the house popped her
head round the door, “You must have a double. Our daughter
got married up on Exmoor five years ago and the hotel owner
looked exactly like you.”
Have you ever wished you had an identical twin? I fessed up.
I admitted that yes, it was me.
She looked at me, clearly confused. “But…but…” and she

waved her hands as if to say what on earth are you doing
getting the crud out of my carpets?
“The bank pulled in the loan, in 2011. Difficult time, but that’s
the way it was.”
“Oh, I see. I’m sorry to hear it. A real shame.” A chastening
experience, to say the least…
Luckily I was fit as a fiddle – as this cleaning lark was mighty
physical. I went to the USA to learn about marketing and
built up a successful business. But my heart just wasn’t in it.
It wasn’t my passion, and it was never going to be. At best, it
was just keeping my head above water.
In March 2015, I was driving home from a job. It was grim
weather. Horizontal rain – cold, wet and very miserable. I had
been cleaning carpets for over 3 years. I realised I was on the
hamster wheel: running flat out but getting nowhere! Have
you ever been in that position? Working really hard, chasing
your tail, but not seeming to make any progress?
In many ways, it reminded me of the scene in Lewis Carroll’s
Through The Looking Glass. Alice, having been running fast
for a while with the Red Queen, says:
“In our country, when you’ve been running fast, you tend to
end up somewhere else.”
“What a slow sort of country,” replies the red Queen. “Here,
you have to run very fast just to stay where you are.”
And that was it. Exactly. Running bloomin’ fast, just to stay
where I was…
Truth be told, I was pretty low. At 53, I couldn’t see how I

was going to turn things round. I thought about my father,
who had died 6 months earlier, and how worried he had
been when I told him I was leaving teaching to buy a hotel.
I thought about the pride he’d felt as the business took off
and flourished and how he had managed to hide his sadness
when it hit the rocks.
I had made a promise at his funeral that I would make a
success of things again. I just wasn’t sure how or when…
So, there I was, driving in the rain, trying to work out how
exactly I was going to make all this running pay off. I leant
forward and pressed “play” on my iPod. Desert Island Discs
started playing over the speaker – a Radio 4 programme
where famous people use their 10 favourite songs to discuss
their life story with the presenter.
It was to be the turning point in my life.
A kick up the backside

To see why, come back with me to January 1994, to a very
cold winter in Edinburgh. I was working as a supply teacher,
and only had to work 2 or 3 days a week. Living in a bedsit
which was expensive to heat, I regularly took myself off to a
very warm café in Haymarket with the fabulous name of The
Oasis. And it was, believe me, an oasis.
If you parted with the regal sum of £1.50 for the three-course
lunch, you qualified for endless top ups of tea and coffee. In
my case, this meant that I no longer had to brave the sub-zero
temperatures outside, or spend money on heating.
I could be found at my usual window seat. More often than

not, next to me would be a girl in her mid-twenties. She
had long, light brown hair, a dishevelled appearance and a
toddler in a buggy – usually asleep. She didn’t talk much, but
after a while her story came out. She had been a teacher and
travelled to Portugal to teach English as a foreign language.
She met a Portuguese guy, got married, had a kid. Things
didn’t go well. He started abusing her, so she headed back to
Edinburgh.
Now, her and the kid lived in a 1-bedroom flat, which was
damp, so she spent most of her time drinking coffee in the
cafes of Edinburgh – keeping warm and writing.
“C’mon Jo, what are you writing? Is it a book?”
She admitted it was. “Can I have a read?”
“Definitely not.”
“Will you read some of it to me? I’m interested. Really.”
“No.”
“What’s it about?”
“A boy wizard.”
“A boy wizard. D’you think it’ll sell?”
Fast forward 21 years to 2015, and I’m sat in my carpet
cleaning van, half-listening to the episode of Desert Island
Discs, my thoughts more centred on how I was going to get off
the crazy hamster wheel. Bit by bit, I hear the story. The work
in Portugal, the boyfriend, the baby, the domestic abuse. The
move back to Edinburgh. The damp flat. The cafe…
I felt the hairs on the back of my neck stand up, and I pulled
into a lay-by. I put my head in my hands.
“Jo…oh my God, Jo. JK bloody Rowling!”
It took a while to sink in.
Turns out, they were very tough years for her. As a single
mother, on welfare, she wasn’t just depressed, she was
suicidal. The baby kept her alive.
She was writing her first book, The Philosophers Stone, back
in 1994. Twelve different publishers turned her down, until
the daughter of one of the editor’s at Bloomsbury read the
first chapter…and demanded the second. The rest, as they
say, is history.
I listened to her commencement address at Harvard
University, and it was one of the most inspiring speeches I
have ever listened to. If you haven’t heard it, I suggest you
Google it…
JK had clearly felt like a massive failure at the time in her life
when I knew her, but her ability to rise above it, to totally
transform her circumstances through dogged persistence,
was mightily inspiring.
There are two major quotes from her which stand out for me:
“It is impossible to live without failing at something, unless
you live so cautiously that you might as well not have lived at
all – in which case, you fail by default.”
“Rock bottom became the solid foundation on which I built
my life.”
This proved to be a turning point for me. Realising what an

amazing transformation had taken place for Jo, how she had
dealt with “failure” and kept on keeping on – it was the kick
up the backside I needed. All this time, I had been wallowing
in self-pity, never taking complete responsibility for my
failure. I was seeing failure as a person, and not an event. I
had a supportive wife and four fabulous children. I was fit and
healthy. It was time to make a change.
“For things to change, you have to change.” Jim Rohn

Two days later, I was chatting to a friend, and told him I was
looking to get into property investment. He mentioned that a
group of property investors met monthly at a local hotel and
suggested I Google it and get myself along there.
That was in March 2015. I decided that it was time to get
myself educated in property. I used to be an accidental (and
fairly amateurish) landlord, but this time I would borrow the
money to get a mentor and fast track my education.
My problem was that I had next to no funds for deposits,
and assumed that I wouldn’t be able to buy any property.
However, I was wrong. Part of my education was to learn
completely new ways of building monthly cashflow, and
combining this with accumulating equity for the future, and
all without needing my own money.
This period in my life coincided with me deep diving into the
personal development space. I had heard about “personal
development” before, but always dismissed it as being
American “whoo whoo”. How wrong I was!
As ever, you don’t know what you don’t know, and ignorance
is no substitute for knowledge. Within 2 years, I had built

a £4 million portfolio, which continues to grow today. And
all I did was put into practice the knowledge I had acquired
during my year’s mentorship. This allowed me to give up the
carpet cleaning and concentrate on the property business. I
was back doing what I enjoyed – doing deals, adding value,
creating win/wins.
It was at this point that I truly started to understand the
concept of a “win/win” in business. Listening to the great Zig
Ziglar in 2016, his words made a lot of sense to me:
“It’s ok to have anything you want in this life, so long as you
help enough other people get what they want.”
He was talking about the fabulous balance between
self-interest and altruism. Creating “win/wins”. I got that!
And so, that’s why I have written this book. I want to share
the knowledge I’ve gained in property investing with as many
people as possible. I want to help people make massive
transformative changes in their lives. Most of all, I want
to show how it can be done when people have little or no
money to start with!
As I’ve already said, I love teaching, imparting knowledge. I
love making a difference. And I know this book will help you
to achieve this. I sincerely hope that you can use this book as
a catalyst, to bring change into your life.
Here’s to meeting you one day at one of my property investing
bootcamps.
Peter Rowan
Chapter 1:
Why Property?
“Whether you think you can, or you think you can’t, you’re
right.”
Henry Ford
When it came to my final year of school, I had the usual 15
minutes with the careers adviser. He asked what job I wanted
to do when I left, and whether I wanted to go to university.
Did I want to become a doctor, a lawyer, an architect, or a
teacher? Er, none of the above actually, which seemed to
confuse him. In the end, I studied Biology for 3 years, on
the basis that it was something that I was interested in and
reasonably good at – but also because I didn’t have a clue
what I actually wanted to do.
I had left school and still didn’t know what a mortgage was.
I thought the only way you could make money in this world
was either to win the lottery or get a highly paid job.
Had my education included financial literacy, the difference
between an asset and a liability, and the principles of
investment, then who knows? I may have decided that
starting a business was the way forward!
“The main reason people struggle financially is because

they have spent years in school but learned nothing about
money. The result is that people learn to work for money…
but never learn to have money work for them.” Robert
Kiyosaki
20 years later…schools haven’t changed all that much. The
assumption is that everybody is heading off for work, either
immediately or after a few years at university. The trouble is,
the old days of working for one company for 40 years, before
driving off into the sunset with a super-duper pension, are

well and truly over. Gone. Finito!
“Formal education will earn you a living. Self-education will

earn you a fortune.”
Jim Rohn
I was reading an article last week. The article predicted that
people born in 2018 would have a life expectancy of 120
years, and would be expected to work until they were 100
years old, such would be the speed of medical advances. Not
only that, but they would work (on average) for 40 different
companies over their 80 years of employment. Ouch!
Look, I’m not knocking schools or education in general.
Heck, I was a teacher for 18 years and loved the classroom
interaction. All I am saying is that the existing model of
40/40/40 – working 40 hours a week for 40 years, just to try
and survive as a pensioner on 40% of your previous income
– is broken. There is a better way. In this book, I want to help
you find it.
My Financial Education
It wasn’t until I read Rich Dad, Poor Dad by Robert Kiyosaki, in
2015, that my understanding of money, wealth, and financial
freedom totally changed.
Kiyosaki talks about the “Cashflow Quadrant”, with the
four parts of the quadrant made up of Employee (E), Small
business owner (S), Business Owner (B) and Investor (I).
Schools encourage their pupils to “get a job” and thus become
an employee, a member of the employed (E) sector. It’s as if
the other 3 sectors don’t exist. While I realise that schools do
this with the best intentions, as they want security for their
pupils, the problem with this approach is that employees
will always be exchanging time for money. In other words –
getting paid for a certain amount of hours spent working for
the company.
When people in the employed (E) sector move into the
self-employed (S) sector, it’s usually because they have
become disillusioned with the “job” they were doing. They
buy into the dream of running their own business, and the
idea of having more time, more freedom and more money.
Yeah, right!
The reality for most small business owners is that they
work every hour of every single day, because the buck
stops with them. They are the manager, the technician and
the entrepreneur, all rolled into one. Even if the business
is successful and they earn loads of cash, they often don’t
have the time to enjoy it. My point being, the small business
owner feels they need to be working in the business, as
“nobody else can do it better”. They haven’t learned the art
of successful delegation. Maybe some of you reading this are

running a small business, and can relate to this description?
Before you can start to talk about gaining financial freedom,
and time freedom, you need to shift your mental focus. You
need to make the shift to the other side of the quadrant – to
Business Owner (B) and Investor (I).
Property sits squarely on the right-hand side of the quadrant.
For most people, property is very much in the investor sector.
Here, money is exchanged for time. We invest money to free
up our time, and get that money working hard for us.
In a recent survey, 68% of people said that they were sick and
tired of their day job. They’d had enough and wanted out.
However, there was a problem. They needed the cash the job
gave them. Just “upping sticks” wasn’t an option. The result?
An awful lot of people spending a large chunk of time each
week, doing something they either hate or aren’t getting any
satisfaction from.
The vast majority of people would like to retire at some point
in their lives. By retire, I mean stop working and enjoy the
twilight years, hopefully in some degree of comfort. If, by the
time they reach retirement, they receive a state pension, they
will get the princely sum of £159.55 a week (if you’ve paid
in for 35 years!) Enough to just about survive on…maybe.
Enough to enjoy retirement? Dream on!
As for private pensions, this only makes things worse. Many
people don’t have a private pension in place, and are relying
on the state providing for them. The average private pension
“pot” is only £45,000. This may sound like a fair chunk of
cash, but remember that it’s the pot and not what is paid out
each year. If you’re lucky, the pot will pay out at about 5% a
year. With a pot of £45,000, this is £2250 a year, or £187.50 a

month. Again, hardly a king’s ransom!
Some of my friends, who are now in their 40s and 50s and in
corporate jobs, receive pension projections each year. They
are shocked as the number goes down year after year. These
are folk earning £70-£100,000+ each year. It’s clear that they
need to take drastic action soon if they are going to come
anywhere close to living a comfortable retirement. Given
that this is closer to the top end in terms of salaries, the time
bomb ticking at the lower end is potentially catastrophic!
Recently, we’ve seen pension fund after pension fund
collapse, leaving many thousands of people with next to
nothing when they retire – as the pension funds have been
raided by the owners to prop up a failing company. It is truly
shameful when folk on not much more than minimum wage,
some of whom have given loyal service to a company for
many years, are left on their uppers through corporate greed.
Don’t get me started!
The benefits of property investing

Hopefully we can agree that we need to take some action.
We need to move across to the right-hand side of Kiyosaki’s
quadrant and do some investing! When it comes to investing,
there is quite a choice – whether it’s the stock market, private
pension plans, gold and silver, art or wine…
Or, how about property?
The really good news is that you can invest in property even
if you don’t have the current funds to do so (more on this
later). The fact is, property outperforms all other investment
classes, over time, and is safe. There is a well-known saying:

“As safe as houses.” When it comes to investing, provided you
do it properly, there’s no safer venture than property.
Here’s the thing, people will always need somewhere to live.
Plus, we live on an island – one which has a population growth
of 250,000 each year. The government statistics show that
we are already one million houses short, and this situation is
only going to get worse. So, guess what? Demand will always
outstrip supply!
If demand outstrips supply for an asset, the price goes up, and
that’s exactly what’s happened with property. On average,
property prices have risen 10.3% per year since reliable
records began to be kept. Sure, there have been dips, but
with knowledge these dips are not a problem to the investor
who knows what they are doing.
What I like about property is that there is something physical
– bricks and mortar. You can touch and feel it. This is not
really the case with most other investment classes. Plus, with
property investing you get a double win. There is monthly
cash flow and there is the equity which comes over time, as
the price of the property increases.
Leverage!
Another massive benefit of property investing, is the ability
to invest using other people’s money. This is often the bank’s
money, but can also come from private investors who want
to get a better rate of return on their cash. So, essentially, it
comes down to how well you can use other people’s money
to get a good return on your cash.
If I asked my bank manager to lend me £100,000 to invest

in the stock market, he’d laugh me out of the office. Why?
Because it’s considered high-risk! If I didn’t know what I was
doing, I could incur heavy losses. And here’s the clincher:
if I did make heavy losses, the bank would have no way of
reclaiming their original money. And they’re rather keen on
being able to do this, understandably…
If I asked the bank manager for the same £100,000, but this
time to invest in property, he’d ask me to take a seat and
would be keen to hear more. Why the difference? Because if
I default on the loan, there is a solid asset which the bank can
take possession of, sell on and get their money back, which is
not the case in the stock market. Thus, they will be happy to
lend me up to 75-80% of the value of the property, meaning
they want me to have "skin in the game" (by putting in a
balance). On top of this, I also have a good track record, which
certainly helps my case – but this comes with experience.
Then, should it all go belly up, they stand a good chance of
getting their money back.
In the crazy “wild west” days of bank lending, in 2006 and
2007, it was quite common for mortgages of 100% or even
125% to be granted – presumably on the basis that property
prices would never fall again! It’s often said that if you want
to know what the future will bring, the best predictor is the
past! Property prices have always had periods where they
dip, before rising again. And guess what – this will continue
into the future! It’s called a cycle. It beggars belief that the
so-called experts of the time put their rose-tinted specs on
and started spraying the cash about, in the belief that a new
financial model had been born. When time was called, and
the party ended, the biggest collective hangover in history
kicked in…
To explain leverage in more detail, let’s assume you have
£100,000 and the house you want to buy is going to cost you
£100,000. You have two options. You can either buy it for
cash and have no debt on the property, or you can borrow
from the bank (let’s say 80% of the purchase price = £80,000)
and put in the balance yourself (20% = £20,000 from your pot
of cash).
Let’s assume that one year down the line, the property has
increased in value by 10%. It’s now worth £110,000. If you
put all the money in yourself, you would have made a (paper)
gain of £10,000. Your return on investment on the cash you
put in would be 10%.
ROI = increase in value / money put into the deal. 10/100 =
10%
However, if you had borrowed the £80,000 from the bank
and put the balance of £20,000 in yourself, you would have
made the same (paper) gain of £10,000, but because you
only put £20,000 of your own money into the deal, you will
have made a 50% return on your investment.
ROI = 10/20 = 50%
The simple act of leveraging your own cash, i.e. borrowing
from the bank, has allowed you to increase your ROI by a
factor of 5, from 10% to 50%.
To extend the example, you could use the £100,000 of your
money to pay five deposits of £20,000 on five houses costing
£100,000. In each instance, let’s assume that you borrow the
remaining £80,000 from the bank. A year down the line and
you would now have a paper profit of £50,000 (5 x £10,000)

with the same ROI on your original cash.
ROI = 50/100 = 50%
In this example, even though your ROI stays the same, the
amount of profit rises from £10,000 to £50,000. This is all
achieved by leveraging your initial cash amount.
If in 10 years’ time the property has doubled in value, and
is now worth £200,000, your original investment of £20,000
has gone up by 500%. The profit is now £100,000. Across the
five houses, the profit is now £500,000, compared to the
£100,000 that was originally invested.
This is the power of leverage in property investing, and it’s
the key reason why it outperforms every other asset class.
There’s just no contest!
I realise there will be added costs of legals, stamp duty etc
with each purchase. These will probably be approximately
£5000 per property. However, for the purposes of illustration,
I have kept the numbers simple and ignored these. When we
look at deals in later chapters, I will certainly be including
them.
At this point, you may be wondering about the interest that
we have to pay the bank on their 80% loan. There will of
course be interest to pay, but this is the beauty of investing
in property (as opposed to the house you live in yourself).
Because you will be renting the house out to tenants, and
they will be paying rent, you don’t have to pay for the cost of
the borrowing yourself – your tenant does!
If you are holding the property for the long term (which I
always recommend you do) as a form of pension, then having

tenants paying the rent is like having other people contribute
to your pension pot!
When I cover how to invest without using your own money,
you’ll see that there are many private investors out there who
will be delighted to lend you the cash – either to buy outright
or to put the deposit down for the purchase.
But isn’t property investing risky?

“Life is full of risk. Let’s face it, none of us get out alive!”
Anon
We all have a different attitude to risk. One of the first
questions that a financial advisor asks their client is, “What’s
your attitude to risk?” The reason for this is that they want
to establish what avenues would be the most suitable for
you. Whether your investment has absolutely no risks, or is
the equivalent of spinning the roulette wheel, it’s important
for the advisor to know what type of person they are dealing
with and what chances that person is willing to take.
I have a pal who has accumulated a decent sized pot of money
(over £500,000), but he is so risk averse that he would never
consider “investing” it in anything. He has a total lack of trust
in any investment scheme, and won’t even keep it in the
bank – as the government only guarantee the first £85,000 if
the bank goes under. He keeps it all in national savings with
the post office, where it’s guaranteed in full. He also takes a
screenshot every month of his account, to be able to prove
that his money is with them, just in case! I think we can all
agree that this is uber low-risk.
On the other hand, I have another pal who regularly invests

some of his money in film companies, always hoping that the
film he invests in will be the next blockbuster, and his ship will
then have come in! This is uber high-risk, as the chances of
getting your money back are low. The vast majority of films
struggle to break even!
For most of us, our risk profile is somewhere between both
of the above. However, pretty much everything has a degree
of risk, including property. Let me explain:
Back in 1995, I had a small portfolio of buy-to-lets in
Cambridge, where I was teaching at the time. I knew nothing
about property, but because the property market was rising
quickly and rental demand was high, it was next to impossible
to get it wrong.
Within a year of buying an investment property, the value
had gone up enough to allow me to re-mortgage and pull
money out for a deposit on another house.
However, my rents were only just covering my mortgages,
and there was very little monthly cash flow (profit) from the
properties. My mortgages were 1-year fixed rates. So, whilst
I knew where I was on monthly costs in the short-term, I was
leaving myself wide open to higher rates in the future. In the
end, I was lucky. Any one of a number of things could have
happened, and it would have been a problem:
1. Mortgage rates could have started rising, which would
have been a storm cloud on the near horizon.
2. Property values could have started to fall, meaning if I sold
then I probably wouldn’t be able to pay off the mortgage.
3. Rental demand could have slackened off, leaving me with

voids.
If rental demand had fallen and interest rates started to rise,
I would have found myself in a position where the rent didn’t
cover the outgoings. Plus, they were single lets (let out to one
family unit) so if one of the properties was empty, it meant
I had no income at all for that property. I would have had to
put my hand in my pocket for all that month’s outgoings.
For a schoolteacher, this could very quickly have become
catastrophic!
The next step might have been that I had to sell a property
which I was struggling to rent out. However, if the property
market had started to fall, then I would very quickly become
a motivated seller (something to avoid at all costs) who was
trying to sell his property in a falling market. Ouch!
Let’s be clear, I was lucky, as none of the above three things
happened. Quite the opposite in fact. But they could have. So,
when I started my second property journey in 2015, I did the
exact opposite of my first excursion in 1998. Why? Because, I
worked with a mentor and I learned exactly what to do, and
more importantly what not to do!
This time:
1. I didn’t buy any single lets, I only bought multi-lets, where
I let the property out room by room. The advantage? If
one room was empty, I still had rent coming in from the
other tenants. Also, the amount of rent coming in was
over twice the single let figure, and this meant that there
was a much bigger difference between the money coming
in and the bills going out. We will look at this in detail in

Chapter 4.
2. I fixed any mortgages I took out for a minimum of three
years. Some were five-year fixes. This gave me medium
term certainty on what my outgoings were.
3. I negotiated on the price and tried to buy “off market”
whenever I could, which meant I was always buying below
market price, giving me immediate equity.
4. I did the research on the areas I bought, and made sure
that rental demand was very high.
This leads me nicely onto my 5 Top Tips. Following these
will massively reduce the chances of any problems on your
property journey!
The Five Top Tips

Buy with your head and not your heart. When you’re
looking to buy your “forever home”, your emotions will play
a part in the process. After all, it’s going to be your home.
Whilst the numbers are important, they will not be the only
consideration. However, when you’re buying an investment
property, you need to remove all emotion and only buy with
your head. Forget the colour schemes, the views and whether
the garden will be big enough for tenants with green fingers!
Not relevant. Do the numbers stack? Is there the required
amount of cash flow?
Make sure there is huge rental demand. You might find the
deal of the century, negotiate a great price, and be giving
yourself a big pat on the back, only to find that having bought
the property you struggle to rent it out! And guess what,
you need the rent to pay the mortgage. You may be thinking
“How on earth could such a wonderful house not be in high
demand from tenants?” Well, the reasons could be many, but
it’s highly likely that it’s to do with the property’s location. If
it’s in a small rural village, 10 miles from the nearest town,
with no buses, then it’s going to really struggle to rent. If it’s
in a town but on the “wrong side of the tracks”, with high
crime rates or social disorder rife, it’s going to struggle to
rent. Alternatively, maybe it’s just not close enough to bars,
restaurants, bus or train routes.
To avoid this situation, you must do a lot of research before
you buy, to ensure that it will rent. If you don’t know the area,
make contact with half a dozen letting agents and pick their
brains. If it’s going to be a house share, also known as a House
In Multiple Occupation (HMO), check out spareroom.co.uk –
which gives you the number of rooms wanted compared to

the number available for any town in the UK. This will give
you the comfort to know that you’ve not picked a lemon!
Make sure the monthly profit is what you need. We all have
different criteria for what represents good monthly cash flow.
My minimum is usually £800 per month, although I will lower
this if it’s a lease option (see Chapter 6). I would recommend
having £500 a month as a minimum figure. In the next
chapter, when you work out your financial freedom figure,
you will be working out how many properties you need to
reach this figure. If you have £500 a month as the minimum
profit acceptable to you, you will only need half the number
of properties compared to somebody who will settle for £250
a month. A lot less work, believe me!
Try and build in some equity from day 1. If you can buy a
property for below the true market value, then you have
created equity from the get go. There are lots of ways to find
people who are willing to sell below market value (BMV),
which I deal with later in the book. That is not to say you
can never make a property work for you if you pay the full
market value, as you can add value in lots of different ways.
However, picking up a deal where you are buying 15% - 25%
BMV is a great way to start, and it will help you accelerate
your journey when it comes to getting you money back out.
Build up a war chest! There will always be the odd rainy
day in property investing, and the odd expense you weren’t
expecting. The investors who have problems are the ones who
don’t leave enough spare cash to cover off these expenses. I
have had to replace two boilers in the last 2 months, costing
me £3500. Thing is, the two properties in question cash
flow at £1700 per month between them, so paying the

plumbing bill, whilst unwelcome, wasn’t a problem. Imagine
the consequences of not being able to afford to replace the
boilers. They are both HMOs, where the requirement for hot
water sits just below oxygen and high-speed broadband!
As you move through this book, I will go into even more detail
on the above, to show you how to make property investing
extremely low-risk.
Even if prices fall, if you follow my advice then you will never
have to sell, which means you can ride out any storms.
I will show you how to create great cash flow every month,
helping you to leave your day job as soon as possible. Yippee!
I will also show you how to build in equity from day one, by
buying properties that are below market value.
Follow my advice and you will be following an ultra low-risk
strategy, which gives you fabulous returns!
Why don’t more people invest in property?

There are a whole bunch of reasons why people don’t invest
in property, and the main ones are as follows:
They’re worried/scared/fearful. I’ve discussed risk and how
some folk just don’t want any. Even those who aren’t averse
to risk have heard a horror story or two about people who’ve
hit the buffers, and this has put them off starting out on
the journey. This is a great shame, as the reality can be so
different, just as long as the correct checks and balances are
put in place and the correct strategy is followed.
They think it’s going to take up too much time. Do you have
to invest time into property investing? Absolutely. Can you
do it part-time whilst holding down a day job? For sure. The
irony with people who say they don’t have enough time is
that by taking action NOW, they are bringing forward the
day when they no longer have to go to work – thereby giving
them more than enough time to do exactly what they want!
They’re not sure how to start. Many people realise that
they ought to be getting “into property”, but they just don’t
know where to start. However, there is so much information
available today in the form of online courses, DVDs, seminars
and mentors, that there’s no excuse for not becoming
educated. As I already mentioned, I had to borrow the money
for my training, but I considered this an investment and not a
cost. It was an investment which has been repaid many times
over. It took me a while to understand the value of investing
in myself! Get yourself a mentor. The investment will pay for
itself over and over!
They don’t have much cash. This is the one I hear most, and I
understand it – because I thought the same way 3 years ago.
But what I failed to realise was how easy it is to use other
people’s money for deals, and also to follow strategies which
require minimal amounts of cash. A lack of cash need never
be a obstacle to becoming a successful property investor!
This is one of the main reasons I have written this book.
Do any of the above resonate with you? If so, you need to
understand that they are all barriers that you are putting in
the way of your success. They can be dismantled very quickly.
Throughout the rest of this book, I intend to show you just
how easily this can be done…
What sort of returns can you expect?

I’ve just had a look at what the average house price is in the
UK today, and a semi-detached house comes in at £215,000.
For those of you based in London, I realise that this probably
wouldn’t even buy you a 1-bedroom flat, whilst if you’re in
certain parts of Northern England then it would buy a sizeable
detached house!
Let’s look at what sort of return we can expect on this
“average” house, based on renting it out as a single let to a
family:
If we buy the house for £215,000, we will need to put down a
25% deposit of £53,750. Plus another £8,000 in buying costs
(legals and stamp duty). Total money in is now £61,750.
The balance of £161,250 would be lent by a bank in the form
of a buy-to-let mortgage. If we work on a 2-year fix, they are
available today at 1.78%. This means that we are paying an
interest rate of 1.78% per year on the sum borrowed, which
is £161,250.
£161,250 at £1.78% = £2870pa or £239pcm
I’ve also looked up the average property rental in the UK
(outside London) and it is £800 per month. This is the money
that the tenants will pay each month in rent. I need to make a
few deductions from this figure. I would always take off 10%
to allow for maintenance and voids (when it’s empty), which
is 10% of £800 = £80.
I also need to take off the mortgage interest, which is £239 a
month, and this leaves a profit of £481 a month or £5772 a
year. Pretty good.
Now I need to work out the return on investment. This is the

amount of profit compared to the amount of money that was
put in the deal. Remember, there was a deposit of £61,750.
I will add £8,000 to cover buying costs (legals, stamp duty).
£5772/£69,750 = 8.3%
Remember, this property hasn’t been cherry picked because
it offers great value, or because we can add value. It’s “Mr
average”. Simply by letting it out as a single let, we can get
nearly 10% return on our cash.
When you consider that the banks are giving about 1% a year
at the moment, you can start to see why property is a great
investment. And that’s before we start being creative and
following a high cash flowing strategy like HMOs, or factor in
the capital appreciation over time!
It really is a wonder why anybody has any savings in the bank
at all!
Exercise:
Before going any further, have a think about what your
financial freedom figure is. This is the figure which will allow
you to choose whether you go to work or not. It’s the figure
that will replace your existing salary, assuming this is enough
to live on.
Put a note of it somewhere. We will return to it later!
Chapter 2: How to Buy
Property With None of
Your Own Money
The main reason people don’t get into property investing is

because they don’t have much cash themselves. Given that
property is expensive, they naturally assume that they can’t
invest.
They couldn’t be more wrong!
If the above example applies to you, and you have very little
cash of your own, this chapter (and Chapter 4) will explain
why it needn’t be a barrier. In addition, Chapter 6 will show
you how to raise your own funds very quickly through deal
sourcing and packaging.
Even people who have been investing for a while and started
out with a fair lump of their own cash, eventually run dry!
They will have used their cash pile as deposits for property,
and when they have none left will assume (wrongly) that
they have to stop investing. As a result, they feel their only
option is to wait for prices to rise sufficiently for them to be
able to re-mortgage, take out more cash and start the buying
cycle again. This is fine, but the property expansion plans are
put on hold while they wait patiently for prices to rise. And if
the market starts to dip in the meantime, it could be a while
before they start investing again!
There are a number of ways round this problem.
1. Use the equity in your own house, or other people’s
houses!
2. Buy outright using other people’s money, possibly as a
joint venture arrangement.
3. Buy below market value, re-finance to the true value
which allows the initial deposit money to be regained.
Rinse and repeat!

4. Follow a different strategy, called Lease Purchase Options,
covered in Chapter 4.
The case study below is my first purchase. I had no cash myself
and my credit still hadn’t fully repaired, so getting a mortgage
was tricky. I needed to use OPM (other people’s money) and I
had been teeing the deal up with a couple of potential private
investors, one of whom had been introduced to me by my
accountant. He was keen to get involved by lending cash, and
it enabled me to get going in property again…
Case Study – My first purchase: December 2015

This was a terraced house in Lincoln, which had been
repossessed and was with an agent. It was on Rightmove
and was listed at £99,000. Its true value was approximately
£110,000. I had next to no cash myself and was using funds
from a private investor to buy the property outright. Being a
cash buyer can be a very powerful tool in property. It means
you can exchange and complete in a couple of days, should
you need to. On one of my purchases, we completed in 4
days! In reality, it will often be a few weeks. About one in
three house purchases fall through in the UK, for a whole
range of reasons. Often it’s because the buyer is in a chain
which ultimately collapses, meaning the buyer can’t sell
their house, which impacts on them making the purchase.
To be chain-free as a buyer is an attraction to a seller, but
sales still fall through because the buyer’s mortgage doesn’t
come through. So, to approach a seller with cash funds
sitting in the bank, without the need for a mortgage
application, and be ready to exchange and complete the

purchase in a couple of weeks, is a huge benefit. This is
where some great deals can be had, as sellers will often
accept a lower offer in the knowledge they can receive their
money much quicker.
I had an offer accepted on the house for £90,000, on the
basis that it would complete in 14 days. Because I was buying
for cash, this wasn’t a problem. I had a survey carried out,
which was mainly to establish the true market value of the
property at the point of purchase. This would be important
when it comes to mortgaging out the property further
down the line (see below).
The property was three storeys high, with 4 bedrooms,
two reception rooms and a separate kitchen. It had been
used as a HMO (a house in multiple occupation) by the
previous owner with 5 tenants (one of the reception rooms
had been turned into a bedroom). He had not been able to
keep up with the maintenance and the house had become
less and less attractive to tenants. The result? Sadly, rather
predictable. Tenants left and couldn’t be replaced, which
led to the owner defaulting on his mortgage, as he no
longer had the rental income. Eventually, the house was
repossessed and placed with a local agent.
This is not an uncommon situation, and it results from
breaking one, or possibly two of the golden rules: not having
a war chest to deal with maintenance issues and possibly
not having the cash flow to allow a war chest to be built up!
No structural works were needed apart from a new roof,
however a full internal refurbishment was required to
include new carpets, a full internal paint job and new

furniture.
Costs
Purchase Price: £90,000
Legals and Stamp Duty: £1400
Refurb costs: £14,600
Total Costs: £106,000
Because I had borrowed the money from a private individual
(not a bank), I also had to pay him the interest on the loan.
I borrowed £105,000 for 8 months, at an interest rate of 8%
p.a. which meant I paid £5,600 in interest. He agreed to the
interest being “rolled up”, meaning that I could pay it when
I returned the capital sum (which would be when I got a
mortgage on the property).
Revised Total Costs: £111,600
I had to wait 6 months before applying for a mortgage on the
property because that is the rule at present – even if you buy
for cash!
One of the reasons why I bought this property was due to
something called “Article 4” coming into Lincoln in March
2016. This is a planning restriction which has been brought in
by many councils in the last few years, to restrict the number
of houses which can be turned into HMOs. It tends to happen
where there has been a concentration of HMOs in one part of
the town or city, and a full planning application needs to be
made if you want to convert a house into a HMO in that area.
However, if you get in before the area has this restriction put
on it, the major benefit is that the value of existing HMOs go
up – as there are unlikely to be many more allowed in that
area. I got in 4 months before Lincoln imposed Article 4, and
benefited from an uplift in the value.
The surveyor for the mortgage company valued the property
at £150,000. I was given 75% mortgage, which meant that
the bank advanced £120,000. This was an excellent result,
as my total costs were £111,600 – meaning all of these were
covered and I received extra cash of £8400.
This is a good example of a deal where I didn’t have to use
any of my own money to make things work. Plus I was able to
pay back my investor, including all his interest, and still come
out with £8400 in cash.
The reason I had the survey carried out (at my expense) was
to be able to show the bank who advanced the mortgage that
even though I bought the property for £90,000, it was actually
worth £110,000. I also kept all details of all money spent on
the refurbishment, including lots of before and after photos.
I made a point of driving up to Lincoln, when the mortgaging
bank’s surveyor came out to value it in June 2016. I gave him
a copy of the original survey valuing the house at £110,000,
and a folder with all the refurb invoices and photos. This
was important information for him to have, as it guided him
towards a higher valuation. The Article 4 gave an added lift to
the valuation, taking it up to £150,000 .
This house gives me a net profit of £950 a month after all
outgoings are paid. This is £11,400 a year. And the return
on investment? Because no money was left in the deal, it is
infinite! With very little cash of my own, it was important to
be able to use other people’s money (OPM) to allow me to

buy property.
This is also an example of a great win/win. The investor was
only getting 1% a year on his funds with his bank, and was
delighted to get 8% by lending me the cash. It was a huge
win for me, as it allowed me to own a house, pay him all his
money back and still get cash out the back end! Needless to
say, he has lent me a lot of money over the last couple of
years…
As a result of buying below market value, adding value
through the refurb and with a little help from Article 4, I
was able to recycle all the cash in the deal. This is the key
to accelerating your property journey, as you then have the
deposit for the next purchase.
If you can’t get a mortgage because you have poor credit, or
have just come into the country, many investors will be happy
to leave their cash in the deal for 2 or 3 years. By this time
your credit score will have changed, and a mortgage may be
advanced to you.
A quick word on mortgages

When you buy a property which isn’t going to be your main
home, you will need a special type of mortgage called a
buy-to-let (BTL) mortgage. This lets the lender know that you
won’t be living there yourself, but that tenants will be paying
you a rent. Back in the day, before the credit crunch, lenders
were lending up to 90% of the value of the property. Now, the
maximum is likely to be 75%, as lenders are being a lot more
cautious.
Another difference between a BTL mortgage and a residential

mortgage (one you would take out on your own home) is
that there are lenders who lend irrespective of the level of
personal income. These lenders tend to look at the rental
income of the property you’ve bought, and they have a
formula for working out how much they will lend.
As I write this in April 2018, I have had a look at some rates
available on BTL mortgages. I see you can get a 1.78% rate –
which is fixed for 2 years with no tie in after the 2 years is up.
This will be lent at 70% of the property value. Money is still
very cheap out there…
How do I find the investors?

One way of finding the investors for your deal(s) is to start
networking. Property networking is an effective low-cost
marketing method for developing opportunities and contacts.
It should be a key component of all property investing toolkits!
There are many people out there who are in the same position
as the person who lent me the money, with large pots of cash
sitting in the bank earning next to nothing in interest. In fact,
these people are losing money. Since the inflation rate is
between 3% and 4%, if somebody is only getting 1% interest
then the value of their cash is being eroded every month.
They just need educating as to what you do and how they
can benefit!
It’s really important to get to meet some of these people,
so I would strongly recommend starting to network, either
formally or informally. The more network events you attend,
the more conversations you have and the greater the chance
of coming across somebody who would like to get a better
return on their cash.

I joined two networking groups, with one group meeting
weekly and the other fortnightly, as well as attending
monthly property networking events. This meant I had lots
of conversations and met many folk who were keen to know
more about what I was doing. All my initial funds came from
networking!
Top Tip: Whenever I have a conversation with somebody
about what I do, I always frame it as “inviting them to have a
share of the pot of gold” as opposed to “here’s my begging
bowl, can you help?”
This is essential, as there is nothing worse than being seen as
the desperate beggar looking for cash!
This leads me nicely on to my golden rules for networking:
1. Be interested rather than just interesting. I always make
a point of finding out what the other person in the
conversation does, before telling them about myself.
This is partly because I am genuinely interested in what
different folk do for a living, but also because I want the
chance to build a bit of rapport before telling them what
I do.
2. Try and get hold of an attendee list in advance, and
decide who you want to speak to, rather than wandering
aimlessly round the room…
3. Try to have the conversation (see below) with at least 12
people during the event.
4. Aim to arrange to meet at least three of those people on
a one-to-one basis over a coffee, sometime in the next

two weeks.
5. Follow up by email, confirming what has been arranged.
I guarantee that if you follow the above rules, you will have
the money coming to you so much faster!
So, what is the conversation that I recommend that you have?
Let’s look at an example:
“So Peter, what is it that you do for a living?”
“Well, essentially I help people to get a great return on their
cash.”
This instantly arouses curiosity, and leads to their next
question – “Really? Sounds fascinating. And how do you do
that?”
“I invest in a niche sector within the property market, where
the risk is low but the returns are high. I share these great
returns with private individuals, people who are getting very
poor returns on their savings at the moment.”
And that’s it. A ten second elevator pitch. One that leaves
most people desperate to know more! And that, surely, is
the whole point of an elevator pitch. Short, to the point, and
leaving people hungry for more info!
I’ve heard many people say that an elevator pitch should
be 30 seconds to a minute long. Hmm, not in a face to face
conversation. You can imagine their eyes glazing over as you
wax lyrical about what you do, how it will be a great benefit
to them, and why they should lend you money – preferably
now!
Ok, I’m being a tad unfair. In all seriousness though, if you’ve

just met somebody for the first time then your main role is
to find out more about what they do. Not only is this good
business practice, but it’s common courtesy too. At the end
of the exchange, there will always be the opportunity to
drop a 10 second verbal pebble into the pond and watch the
ripples spread.
People are interested to hear more about the process, and
it’s at that point that I say something along the lines of the
following:
“Now probably isn’t the time to go into too much detail, but
how about we meet for a coffee where you can give me more
details about your business and how I may be able to assist
you? I can explain a bit more about how I help folk get a much
better return on their money. I’m free Tuesday at 10am or
Thursday at 3pm. Which suits you best?”
The reason I approach it this way is twofold. Firstly, having
just met the person for the first time, it isn’t the time to start
out on a lengthy explanation of my business model, not least
as there is a good chance we will be joined (interrupted) very
shortly by somebody else introducing themselves. But also,
because I would like to meet as many people as possible
during the limited time available!
If they are keen to hear more, they will usually accept the
offer of a coffee. Notice how I have been very specific about
the times. I will have checked before the meeting and know
when I am available. Rather than suggesting a coffee “some
time” which is very open-ended, they now have the chance
to either accept one of the times, suggest their own, or make
their excuses and move on!
I try and come away with a minimum of three confirmed

coffee dates in the diary.
If you are at a network meeting where everybody has a turn
to speak to the room for 30 seconds or 60 seconds, then yes,
now there is a real need to craft a length of pitch which leaves
the room hungry for more info…
Check out my eBook How to Raise Private Finance For Your
Property Deals for more info on these pitches…
Case Study 2
Andrew, one of my mentees, followed my advice and started
to attend networking events in his home town of Sheffield.
He practised his chat-up lines on me, and we went through
the presentation that he would make once he arrived at the
coffee meet. After a couple of weeks, he had a successful
meet. Over to Andrew:
I had done some networking before, and it had never really
appealed to me. I’m not an extrovert and being “salesy”
made me feel uncomfortable. However, Pete made me look
at the whole thing differently. I wasn’t “selling” anything.
I went there with the mindset that I was looking to help
people. This made it so much easier…
Previously, I would try and work a 30 second pitch on
everybody I met, but was getting frustrated as nobody
seemed interested in investing with me.
Now, I was spending time listening to them talk, asking
questions about their business, and showing a genuine
interest in them. This gave me a few clues as to whether
they were likely to be able to assist me.
I then kept it very brief, just saying that I helped folk get
a much better return on their money, by working in a
niche sector within property. When pressed to say more, I
suggested getting together over a coffee to see how I could
assist them, and I would also expand more about how I
helped people.
Instantly this change in emphasis started getting results.
After a couple of weeks I met with a solicitor for a coffee. He
described himself as “asset rich and cash poor” as he was
paying for two sets of private school fees but had a large
house with a small mortgage.
I explained that there was a lot of equity in the house, which
wasn’t working for him at the moment. By releasing some
of this, and increasing his mortgage, he would get a good
return on his cash.
He had a mortgage of £180,000 on a property worth
£850,000. I went through Pete’s presentation almost word
for word, writing it down on paper, so it was clear for him to
see, After I finished, the solicitor looked at me and just said,
“Bloody hell, I’ve never seen that before. Amazing!”
We met for a second time with his financial advisor (who
initially didn’t really understand the HMO model but when
he did was equally enthusiastic) and six weeks later he had
released £140,000 of funds – which were lent to me for 9
months, allowing me to pay £88,000 cash for an auction
property. He had first charge on the property as security on
his cash, as well as a signed personal guarantee from me on
the loan.
The property was in a poor state, and needed £44,000

spending to get it into a lettable condition as a 5-bedroom
HMO. The legals and stamp duty were another £3500. All
the rooms let quickly, and I mortgaged it out on a valuation
of £174,000. I received 75% of this, which was £130,000.
My total expenses were:
Purchase costs: £3500
Refurb cost: £44,000
Interest on the loan of £140,000 for 9 months, at 9% p.a:
£9450
Total Costs: £144,950
I had to put £15,000 of my own money into this deal, as the
mortgage only returned £130,000. However, the HMO gives
me £930 a month net profit, or £11,160 a year. This equals
an ROI of 74% (11160 / 15000). So, I get all my money back
out of this deal within 17 months, which I am very pleased
about.
This guy has since lent me more cash, and I’m doing a joint
venture deal with an architect whom I met at the same
event.
Andrew’s example is a great way of explaining to people who

feel they have very little spare cash – that they often have
plenty; it’s just sitting in the bricks and mortar of their house!
Whilst I understand the reluctance that some people feel
about increasing the debt on their own home, it is cash that

can be heavily leveraged. For every £25,000 that is released,
the bank are happy to put in another £75,000. This is the
investor mindset!
Good debt and bad debt.
This is a good time to discuss the difference between good
debt and bad debt. Some things are worth going into debt for
whilst others can leave you in a big financial mess.
A good debt is one that is a sensible investment for your
financial future, should leave you better off in the long-term
and should not have a negative impact on your overall financial
position. Releasing equity from your house to leverage and
invest in property would be an excellent example of good
debt.
A bad debt is one which drains your wealth, is not affordable
and offers no real prospect of “paying for itself” in the future.
It will often be a debt which has no realistic payment plan,
one that is run up making impulse purchases, or borrowing
money to pay everyday bills.
For the most part, borrowing money to buy property will be
good debt, as long as you follow the 5 golden rules!
Very important example

Let’s work through an example. Understanding this is
important, as you can use it as an example when talking to
potential investors. It’s also a great way to explain the benefits
to friends or family members who have a decent chunk of
equity in their house, and who may be open to sweating it!!
In our example, we are using Andrew’s solicitor. He has a

house worth £850,000 with a mortgage of £150,000. If he’s
comfortable leveraging the money in his house to buy more
property, then he can borrow up to 75% of the value of his
house. This is an additional £457,000 on top of his £180,000
mortgage. This takes his mortgage on his own house up to
£637,000.
His residential mortgage interest rate could be as low as 1%
or as high as 4% (unlikely), but we’ll say it’s 2.5% for this
example.
By extending his borrowing by £457,000, it will cost him an
extra £11,425 a year, or £952 a month. Hold that thought and
we’ll return to this number later!
To keep the numbers straightforward, let’s assume that the
buy-to-let properties he wants are priced at £160,000. This
would buy you a decent 3 or 4 bedroom house in many
northern towns. The bank will lend 75% of the value, so each
house would require Andrew to put in 25% or £40,000. Allow
£5500 for the costs for each purchase.
Andrew’s solicitor could buy 10 BTLs at £160,000 each, and
would need to put in 10 x £40,000 or £400,000 in deposits,
plus another £55,000 (10 x 5.5K) in costs. The total comes to
£455,000. Fantastic – £2000 left over!
Let’s assume that each BTL makes a net profit of £400 a
month, which gives him a total of £4000 a month and £48,000
a year. This is not unreasonable, as his mortgage payments at
3% on £120,000 will be £300pcm. Plus, I allow 10% of the
gross rent for voids and maintenance which is £80. If the rent
is £800pcm, this brings the net profit in at just over £400pcm.
Remember, his increased mortgage cost on his own house

was £11,425 a year. Once this is taken off the total profit of
£48,000 this still gives him a net profit of £36,575 a year. Not
bad…
Now, he can sit and wait and watch the values of the houses
increase. If history is a guide to the future, and the value of
the houses double in 10 years, his portfolio of BTLs will now
be worth £3.2m, whilst his debt remains the same at £1.2m.
Over this time, he will have made a profit of monthly cash
flow of 10 x £36,575 or £365,750.
He now has equity of £2m in the portfolio (new value of
£3.2m minus the outstanding mortgage of £1.2m). He may
decide to sell off half the portfolio and completely clear his
own mortgage of £637,000 (after taxes) or he may decide
that having debt on his own home is fine because it’s “good”
debt. He’s getting used to his profits from the BTL portfolio,
so he’ll hang on to them, thanks very much.
Of course, he may also decide to extend his borrowing on
the portfolio, now that it has increased in value. If so, he’ll
re-mortgage to pull out more cash to act as deposits for
another half dozen houses….
I hope you can see that, from one house which had a fair lump
of equity in it, a sizeable portfolio has been created – one
which gives great cashflow and, over time, capital growth.
Even Better
How about this? Andrew’s solicitor is extremely busy.
He doesn’t have either the time or knowledge to source
and purchase these BTLs. But you do! You could put the
presentation together in a way that you do all the work,

and set everything up for him. In exchange, you could either
get a fee for doing so, or (preferably) take a share of the
cashflow each year and/or the equity growth. It could be a JV
arrangement allowing him to be completely hands off, with
all the property being put into a limited company, specifically
set up for this, and you each become 50% shareholders.
How many of those arrangements would you need in order
to bring in an excellent monthly cash flow, but also accrue
equity for the future?
Whenever I attend a networking meet, I am looking for 2
types of people. Firstly, those who might be interested in
either lending cash into a deal, or becoming a joint venture
partner of mine. The second group are the “facilitators”,
those who can make the introductions to the first group.
These will tend to be solicitors, accountants and financial
advisors, people who have clients who they feel could benefit
from what I am offering. You will have to have the coffee with
the facilitator initially, but it’s well worth it, as they can make
multiple introductions…
Private Lending or Joint Venture?

I can hear you asking, “What’s the difference between
somebody who lends cash and a joint venture partner?” The
key difference is that the person who lends cash is lending a
fixed amount for a fixed term, at a fixed rate of interest. They
will have no involvement in the property deal – although if
they are lending most or all of the money for the purchase
then they would usually have the security of a first charge on
the property.
In contrast, a joint venture (JV) arrangement is more on a “risk

and reward” basis. Here, the person will still be putting the
money into the deal but for a share of the profit (usually 50%)
as opposed to a fixed rate of return. They may or may not be
involved in the project. In return for giving away a share of
the profits, there won’t usually be an interest charged on the
funds which are being lent into the deal.
This has to work well for both parties in order for the
relationship to be a success. My partners don’t want to be
heavily involved in the business. They expect me to source
good deals, organise the purchase, oversee any work to
the property and find a good managing agent to look after
the property (usually a HMO). And last, but arguably most
importantly, they expect to get a good return on the money
they have invested.
My advice is to borrow the money in the first instance. Then, if
all goes well, you can continue down that path. Alternatively,
if the investor wants a share of the profits in future deals, you
will know them a lot better, and will be able to decide if it’s
somebody you are happy to JV with.
There are always three components to a successful property
deal: time, money and experience. Very few people have
all three. When I was setting out, I was looking for money
and was willing to put in the time and the experience (which
is gained very quickly!) The investors tend not to have the
time or the experience, and are happy to provide the third
requirement – the money.
As for the details of the presentation I make, you can either
find them on my YouTube channel, where I have filmed a
video to show this, or you can get a free copy of my eBook
How to Raise Private Finance For Your Property deals which

goes into this important area in considerably more detail.
I role-play the whole investor/networker scenario at my
Property Investors's Bootcamp so that everybody knows
exactly what to do and what to say!
What if I’ve Got No Experience And No Money!

There’s no doubt that this whole process of borrowing private
investor funds is easier when you have a bit of experience.
Approaching an investor with a model that’s working for you
at the moment, rather than a theoretical model which you
haven’t actually run with yet, will be far more compelling for
them.
The trouble is, how do you get experience when you don’t
have the money? Don’t worry, I know it seems like a bit of a
vicious circle, but there is a solution…
When I started, I was working two strategies side by side.
On the one hand, I was buying properties using investor
cash, as per my Lincoln example above. However, I was
keen to get deals (and cash flow) “under my belt, as well as
building up the all important experience, so I started using a
strategy called “Rent-to-Rent.” This will allow you to get up
and running very quickly, and generate cash flow. Best of all,
there’s no purchase involved!
Rent-To-Rent
This isn’t complicated. Rent-to-rent is where you agree with
a property owner to take the property off their hands for a
defined period (usually between 3-5 years) and pay them
a guaranteed monthly rent for it. However, only certain

property layouts will work for this. You need to be looking
for properties that can be let on a room by room basis, ideally
for a minimum of 5 people.
A 3-bedroom house with 2 separate reception rooms, a large
kitchen diner, and a separate entrance hall can work. Here,
the two reception rooms can be turned into bedrooms at
minimal cost (remove sofa, add bed!) giving a total of five
bedrooms.
Better still is a 4-bedroom house, where one of the reception
rooms can be used as a lounge for the tenants, and the other
one as a bedroom – again giving 5 rooms in total, but the
added lounge area will be more attractive to tenants.
The single let rent might be £750 a month, whereas if the
rooms are let out at £400 a month to separate tenants,
then the total rent received will be 5 x £200 = £2000 per
month. With rent-to-rent, the bills are paid by me and not
the tenants. This is the gas, electric, water, broadband and
council tax. The formula I use is £200 plus £40 per tenant. So,
for 5 tenants, this is £400pcm.
This needs to come off the total rent collected, lowering it
from £2000 to £1600. I also allow for any maintenance costs
and voids (where a room might be empty for a while) and
take off 10% of the gross revenue. That’s another £200 to
come off, which leaves me at £1400.
There is still one other amount to come off, and this is the
rent that I have agreed to pay to the owner of the house.
Important point: Remember that I have offered the owner
a guaranteed rent. They may well be getting a tenant to pay

£750 a month for a single let (family) but the tenant won’t be
paying for any maintenance. If the property is empty between
lets, the owner won’t be getting any rent at all! Often, the
owner will have been using an agent to manage the property,
and they will charge 10% of the gross rent, so this has to be
taken into consideration.
By the time the owner has his monthly cash in the bank from
a single let, where the tenant is paying £750, he’ll be lucky
to be coming away with £550 a month. Once I explain this
to him, and remind him that my payment will drop into his
account every single month (meaning it’s as close to passive
income as it’s going to get) my offer of £600 a month starts
to look attractive!
Remember, my running total was £1400, so removing
another £600 from this gives me a final profit figure of £800
a month, or £9600 a year. Not bad for a property that I don’t
own, haven’t needed a mortgage for, and haven’t had to find
a chunky deposit to buy.
Summary of Numbers
Gross Rent Collected: £2000
Deductions
Rent to Owner: £600
Voids/maintenance: £200
Bills: £400
Net Profit: £800pcm
We all have our own “financial freedom” figure. Now, I want

you to think back to when I asked the question in Chapter 1,
and remind yourself of yours. Then, divide it by £9600. This
will give you the number of rent-to-rent deals that you need
to have under your belt. Most people need between 3-6 to
allow them to walk away from their day job…
And here’s the thing:
• You will have sourced the property.
• You will have set it up as a HMO.
• You will be managing it yourself.
What does this give you? Experience! And what was the
potential investor looking for? Experience! Box ticked. The
fact that you don’t own the house is immaterial. You are able
to clearly demonstrate that you know what you’re doing. And
it’s cash flowing well, which proves the model. Now you just
need to persuade the investor to open his wallet and fund
your purchase.
I go into more detail on R2R as a strategy in Chapter 7.
Chapter 3: Maximise
Your Cash Flow Using
HMOs
HMO stands for House In Multiple Occupation. A HMO is

basically a property which is shared by a minimum of three
tenants. These tenants all come from different households,
but share a toilet, bathroom and kitchen facilities. In short,
a HMO is a house where a bunch of folk have their own
bedroom, share some facilities, and aren’t related to one
another.
Using HMOs is a great way of maximising your cash flow. This
is a very popular strategy, and for good reason. Cast your
mind back to the first chapter of this book. Do you remember
top tip number three? Make sure there is a healthy cash flow
in every property that you buy. In other words, make sure
that the amount of profit that comes into your bank account
every month is maximised.
The HMO route achieves this, with knobs on. Not only does
it provide excellent cash flow, but it also results in a much
higher return on investment. It means that your cash works
much harder for you, and you’ll reap the benefits of this.
“As I mentioned in Chapter 1, I invested in Cambridge property
20 years ago. The houses were single lets, and the difference
between the rent coming in and the mortgage going out was
minimal. This left me a hostage to increased interest rates, or
voids where I had nothing coming in, but still had to pay the
mortgage. It also meant that I couldn’t build a “war chest” for
the inevitable rainy day.
Most HMOs will cashflow at a minimum of £500-£600 a month
and upwards. The highest cash flow HMO in my portfolio is a
7 bedroom property, which gives me £1900 a month profit.
When there is this much “headroom” in a property, a rise in
interest rates is a minor inconvenience rather than a potential
catastrophe! Single lets, on the other hand, will average £300

a month profit after all costs. This leaves you more exposed
to the winds of change!
Back in 2015, I attended a “discovery” day put on by a lettings
agency in the East Midlands. The agency sourced single let
properties, and were keen to bring potential investors into the
fold to buy their properties, pay them a fee for refurbishing
it, and another fee for managing it. The selling point to the
investor was that they could quickly build a portfolio – which
gave them a passive income and an appreciating asset.
The trouble was, the average profit from each of these single
let houses was only about £200 after all costs. I was going to
need a lot of houses to reach my “financial freedom” figure!
The agency were sourcing the properties at a discount to
market value, usually because they were in a poor state and
needed work on them. This might have suited some folk’s
strategy, but not mine. Interestingly, this same agency now
concentrates on sourcing houses which would make great
HMOs.
The Two HMO Models

There are two ways of approaching the HMO model. The first
is to buy a house which you can convert into a HMO with very
little effort, save for turning a reception room or two into
bedrooms. The second route is to undertake a refurbishment
project, either minor or major, to add value to the house,
and maybe increase the number of bedrooms and/or add
en-suites. There are pros and cons to each route. For me,
the determining factor as to which route I take will be the
numbers. Which deal gives the best ROI?
Model No 1
Let’s take a closer look at the first route. This is where
there is no serious refurbishment involved. The house is
bought “good to go” as a HMO, and it just requires minor
reorganising to get it up and running. This model works very
well with Rent-to-Rent strategy, where you can take control
of a property from an owner and pay them a guaranteed rent
in return. You reconfigure the property into a HMO and the
profit is the difference between what you pay the owner and
the rent you receive from the tenants. I go into more detail
about this in Chapter 7.
To expand of this, I’ll use an example of a house I bought in
Gloucester. This is a standard, two storey, semi-detached, 4
bedroom house – with two separate reception rooms and a
reasonable sized kitchen. This was bought with none of my
own money, as I had joint ventured with a private investor
who was putting all the necessary funds into the deal.
Deposit needed: £44,000 (25%)
Legals/Stamp Duty: £6500
Furniture: £3800
Total Money In: £54,300
This house was quickly let out to 5 young professionals,
each having their own bedroom. The main bedroom had
an en-suite, and the remaining 4 tenants shared the family
bathroom. There was a separate downstairs loo (important
when 4 people are sharing only one bathroom!).
Now let’s look at the numbers…
Gross Rent: £2125 (3 rooms at £400, 1 at £475 and 1 at

£450)
Deductions (monthly) 10% to cover voids & maintenance:
£212
Bills (gas, electric, etc.): £400
Mortgage: £400 (we paid 4% on £132,000)
Total: £1012
Net Profit: £1013 pcm, or £12,156 per annum
Remember that the return on investment is the net profit
each year divided by the amount of money that went into a
deal x 100.
Here, this is 12156/54300 x 100 = 18.5%
This is about twice the ROI that you would get on a single let.
However, I haven’t mentioned what the market value of the
property was at the time of purchase. Remember, we paid
£176,000. This was an off-market deal which I had sourced
direct to vendor (no estate agent involved) and he needed a
quick sale – having been involved in two previous attempts
where chains broke at the last minute. Because my investor
had cash ready for the deposit, and we had nothing to sell,
a mortgage was arranged within 4 weeks. This allowed us to
exchange and complete in 30 days.
As a result of being able to move quickly, the seller was
willing to drop the asking price from £218,000 and accept
our £176,000. This represented a discount of 19%. The
asking price was a fair reflection of market value, so this was

a genuine 19% below market value.
Twelve months later, we re-mortgaged the house to 75%
of the value, which by then had risen to £246,000. This
released £184,500. The initial mortgage was £132,000, and
my investor put in £54,300, which made a total of £186,300.
The re-mortgage was giving us back £184,500, which means
that we only had £1800 left in the deal!
In other words, my investor got back all of his cash, bar £1800.
Now, the ROI was 12156/1800 x 100 = 675%.
Hopefully this demonstrates the power of buying BMV to
start with, and re-mortgaging further down the line to take
out your cash. And guess what we did with the cash? Yep, we
bought another house!
Model Number 2
The second model involves making substantial refurbishment
works to the property – which will add value, as well as
reconfiguring the layout to include en-suites to the bedrooms.
Usually, this would mean building an extension or converting
the loft area. Often, the intention is to work towards getting
a commercial valuation. This allows most of the original cash
to be pulled out of the deal at the time of mortgaging the
property. If the rooms are big enough to allow for en-suites,
putting them in will have three advantages: the rooms let
more quickly, there are less voids, and you can charge more
rent. However, the numbers have to stack…
To demonstrate, let’s look at another example of mine. This
was a house sourced direct to a vendor in Barnsley, West
Yorkshire. I used a deal sourcer for this, and paid a fee to him
for bringing the deal to me. It cost me £2500, but I was happy
to pay this, as it was a great deal.
The house was a 3 storey terrace, which had previously been
a family home. My plan was to turn it into a 5 bedroom, all
en-suite, HMO. Again, this was done with a joint venture
partner who had the cash to pay for the purchase and the
refurbishment. The plan was to mortgage the property out 6
months later. The house needed a lot of work on it – rewiring,
re-plastering, reconfiguring some of the internal walls etc.
The Numbers
Purchase Price: £95,000 (Market Value £110,000)
Legals, Stamp Duty: £4500
Refurbishment Works: £38,000
Total Money In: £137,500
It took 3 months to turn the house into a high-quality HMO,
with a cracking kitchen/dining/lounge area. Following
completion, the property was let out very quickly to 5 Eastern
European workers, who were in Barnsley on a long-term
contract.
Monthly Gross Rent: £2100 (3 x £400, 2 x £450)

Monthly Deductions
Voids/ Maintenance: £210
Bills: £400
Managing Agent Fee: £210
Total: £820
Net profit (before mortgage payment): £1280
We weren’t paying a mortgage on this property, as all the
money had been put in by the investor. However, once
the works were completed, we applied for a commercial
mortgage.
What’s a commercial mortgage?

Most single lets and HMOs will have a standard Buy-To-Let
(BTL) mortgage. This is where the house is valued on what’s
called a “bricks and mortar” valuation. It will generally be
very similar in value to the rest of the houses on the street.
A commercial mortgage is different. Here, the rent that
comes into the property is considered, as it is being treated
like a business. Most specialist HMO lenders will have a
commercial mortgage available, and will lend on a multiple of
the rent received. In Barnsley, the lender we used valued our
HMO by working off a multiple of 8 times the gross annual
rent, minus 20% to allow for bills, maintenance etc.
Our gross monthly rent was £2100, which is £25,200 per year.
Multiplying this by 8 gives £201,600. Finally, subtracting 20%
gives £161,280. This was the valuation that the surveyor came
up with. We were allowed to borrow 70% of this valuation,
which gave us £112,900.
The mortgage interest was 5% a year, which meant a monthly
payment of £470. This needed to be taken off the above net
profit figure of £1280, giving us a monthly net profit after all
costs of £810. This was £9720 a year.
My investor put in a total of £137,500, which meant that

once the mortgage funds of £122,900 were advanced, he was
leaving £24,600 in the deal. So, how does this look in terms
of ROI?
Net profit/money left in x 100 or 9720/24,600 x 100 = 40%

This compares very well with most HMOs, and extremely
well with single lets. Needless to say, my JV partner was very
pleased, and we moved straight onto the next deal!
A word of warning
A number of years ago, some investors were buying up large
house in northern towns. They were doing this relatively
cheaply (£150,000), and reconfiguring them to get as much
rent as possible. One chap I know was doing this in Blackpool,
and turning the houses into 10 or 12 room properties suitable
for nursing accommodation. When he had a commercial
valuation done, based on the multiple of gross rent, the
valuation was coming out at £350,000 plus.
While this allowed the investors to get all their money out,
and then some, it’s not a strategy I would advise. If you take
this approach, but then things go wrong and you need to sell
as a residential house, then there’s no way you could ever get
close to the amount that you borrowed from the bank. As a
result, there would be a big shortfall. Once a house reverts
to a bricks and mortar building, it can only be sold on as a
residential property.
Banks are now far more careful about how much they lend,
even on a commercial mortgage. As a general rule, they will
never lend more than the value of the property (on a bricks
and mortar basis) just in case they ever have to repossess and
sell on the open market.
Commercial mortgages will only be given on a standard
residential house when you have carried out substantial works
on the property, and when it no longer represents a “family
home” configuration. In the Barnsley example, I reconfigured
the house so there was no longer a family bathroom, and the
reception room downstairs had a large en-suite in the corner!
It also needed a full license from the council, which assisted
with the “commercial” nature of what we were doing.
Comparatively, in my first example all I did was to put a bed in
the reception room. There was no structural work involved.
In that example, there is no way a commercial mortgage
would be advanced. The valuation was a “bricks and mortar”
one. Simple.
Some deal sourcers will send their deal sheet out with a
commercial valuation attached to the property, when it
wouldn’t get one in a million years! They want the ROI to look
impressive, so they bump up the valuation, which means the
money advanced from the mortgage is shown as a higher
number. This means that less money will be left in the deal.
In reality, it will be impossible to get the commercial mortgage
on this, and the ROI will be a lot less attractive! So, beware…
When I consider the pros and cons of investing in property,
for me it normally comes down to ROI. A chap I know in Leeds
is buying 3 bedroom houses for £100,000, spending about
£10,000 in total to convert them to a 4 room HMO. After all
costs, he is coming away with £750 pcm profit. This is £9,000
a year. Since he put a total of £40,000 into the deal, it’s giving
him a return on investment of c.22%. So, it works for him.
Going up a level
You can take things to another level completely by turning
what was a commercial building into a large HMO. In 2017
I bought a large 4 storey period building in the centre of
Gloucester, which had retail units on the ground floor and
3 storeys of office space. The current plan is to convert the
existing building into 9 “pods” of 5 en-suite rooms, each
pod with its own entrance. There are a total of 45 rooms.
In addition, phase 2 will involve building a side extension on
the land which came with the purchase, and then putting up
another 4 storey building. This building will have 12 more
pods of 5, 3 pods per floor, giving a total of 60 en-suite rooms.
This is a big project to end up with – 105 rooms overall, but it
isn’t 21 times the effort to end up with 21 x 5 bed HMOs! The
project is in planning as I write, and we hope to start phase
1 in late summer of 2018. As with many of my deals, most of
the money for this purchase has come from private investors.
How Do You Find Tenants?

Susan, one of my mentees, had a small portfolio of 4 single
lets. Unfortunately, she was finding that after all costs, the
profit from each of them came to only about £200 a month.
This gave her £800 a month, which wasn’t enough to get her
out of her day job. To do this, she needed £3000 a month.
Susan had thought about HMOs, but decided against them.
She thought it would be much harder to find 4 or 5 tenants
for a house than the one tenant that she needed for her
single lets. It was a mental block, and we overcame it very
quickly. She was based in Leeds, where I was certain that the
demand for HMO rooms would be very high. So, with this in
mind, I looked up www.spareroom.co.uk.

Spareroom.co.uk is a website which people can use to find
an available room in the area. Naturally, the site is popular
with landlords, who use it to advertise. A couple of minutes
of looking showed Susan that there was huge demand for
rooms in Leeds, and that as long as she bought in the right
area of town, she would have no problem filling the rooms.
Within 6 months she had sold two of her single lets, and
bought two houses in Leeds – which needed very little
work in order to turn them into HMOs. These properties
cashflowed at £920pcm and £860pcm, and she filled both of
them within 2 weeks of putting the ads on the website! At
the time of writing, Susan has just had an offer accepted on
a third property in Leeds. If the profit on this is similar to the
other two, she will have hit her £3000 a month across all her
properties! So, you see, there is real magic in HMOs.
When I was young, there were only two options for
accommodation. You either lived with your parents, or you
rented a flat. HMOs didn’t exist at all. Nowadays, there’s
more options, but things are far more expensive. To be able
to move into a comfortable room, preferably with its own
en-suite, have a communal lounge and kitchen facilities, have
all bills included in the £400 a month rent, and only have to
buy their own food, is the dream of many young people. If
you are sharing with friends, then this is a lot easier. However,
if somebody rents their own flat, they don’t just pay the
monthly rent (which is probably going to be £100 a month
higher than a HMO room), but they also have council tax,
broadband and all utility bills to pay as well. This could easily
be another £250-£300 a month. The total outlay will be in the
region of £800 per month – double that of the HMO room.
It’s not difficult to see why HMOs are so popular with both
the young, and the not so young.
How To Make every HMO a Raving Success!

Location, location, location. This is so important! Demand
is always strong for a comfortable, spacious room in a well
looked after house, as long as it’s in the right location!
Tenants want to be a short walk away from the centre of town,
or at the very least a short bus/train ride away. Not everyone
has cars, and as a result anything too rural is a non-starter. If
you find a house which you think would make a great HMO,
the first thing to do is to go to Spareroom and click on the
“show in map” button. If there are no HMOs in your location,
the chances are there’s a good reason for this. If you are
buying in a town that you don’t know well, do some more
research. Is the location on the “wrong side of the tracks”?
If so, this might explain why you were getting what seemed
to be a great bargain! Remember, you only get paid when
somebody rents a room. You could have the best bargain in
the land, furnish it exquisitely and have superfast broadband
to boot, but if you have bought in a location where folk don’t
want to live, then it ain’t going to work…
Furnish all the rooms. It’s important that all the bedrooms are
furnished, the lounge has seating and a TV, and the kitchen is
ready to go with crockery, cutlery, white goods etc. You don’t
need to spend a fortune here, as you can pick up some great
stuff on eBay and Gumtree at low cost. However, there are a
number of specialist companies who furnish HMOs and offer
different price points. This is worth a look, as they will deliver
and assemble too! If you’re looking to kit out a 5 bedroom
house with one of these companies, I would allow £5000 to

do the lot. If you want top end, then you’re probably looking
at closer to £7000. Unfurnished is not an option!
Think about hiring an interior designer. I had a real problem
with one of my HMOs, which was 120 miles from where I
live. The managing agent told me that they could organise
the painting and decorating, as well as furnishing the rooms.
They convinced me they knew exactly what the local market
required, as they looked after 75 HMOs in the city. Ok, I said,
go ahead. Result? One of the blandest interiors I’ve ever
seen. Magnolia everywhere, no imagination and just not
appealing. The rooms weren’t letting, and I was becoming
more agitated.
I phoned an interior designer in the city, explaining that
I had a limited budget, and that I needed some assistance
with colour schemes. She charged me £200 to come up with
a scheme, which included feature walls in all the rooms, as
well as sourcing items from IKEA – which really worked in the
reception room. I hired a local painter, gave him the spec,
and he had it finished within 3 days at a cost of £560 – what
an incredible difference. Total spend: £1300. End result: full
house within a fortnight, new managing agent, and a very
happy landlord!
You may be thinking that £1300 is a great deal extra to spend.
However, if just 3 of the 5 rooms were empty for another
month because of the drab interior, this would have equated
to a £1200 loss, and that’s not even considering the ongoing
difficulty of keeping the rooms filled. I went on to use the
same colour scheme across other HMOs, so I got my money’s
worth! This was my second HMO, and I was still a bit green.
The key lesson I learned from this was in having better due
diligence on the managing agent!
Get the fastest possible broadband speed. High speed
broadband is situated just below oxygen on a tenant’s list
of requirements. I now assign managing agents to all of my
HMOs, so I don’t meet the tenants anymore, but in the past
I used to do this quite a lot. Often, the prospective tenant
would stand in the hallway and check the broadband speed
on their iPhone/iPad. I have had tenants turn round and
walk away, before they’ve even seen the room, because the
broadband was too slow. An extra £25 a month to go from
50mb to 100mb will be money well spent!
Hire a cleaner for the communal areas and a gardener in
the summer. This keeps the communal areas up to spec.
The cleaners do a deep clean of the kitchen and lounge once
a fortnight, and it stops things sliding too far! They are the
“eyes and ears” should there be maintenance issues which
the tenants haven’t bothered reporting. A fortnightly visit
by a gardener in the summer keeps photosynthesis under
control, and stops the garden turning into a jungle. The reality
is that the tenants won’t cut the grass even if the Flymo is
right under their nose. Hey ho…
Speak to the neighbours. If you’ve had an offer accepted on
a house that you intend to convert into a HMO, introduce
yourself to the neighbours. Explain what it is you are thinking
of doing. This can prevent a campaign of misinformation
spreading. I always tell them that I am renting to young
professionals, who will be at work all day and cause less
disturbance than a traditional family household (with dogs
and screaming kids!). Most people don’t know what a HMO
is, and those who think they do will have had their perception
shaped by TV programmes showing benefit tenants or
asylum seekers. Don’t misunderstand me – everybody needs
somewhere to live. Just because a house is being let to these
folk, doesn’t mean there will be problems. However, reality
TV being what it is, producers will inevitably find the houses
where there are problems, and from these form stereotypes.
If planning is required for the HMO (necessary if you are
letting to 7 people or more) the neighbours will be alerted and
have the opportunity to object. This is where you must gently
educate them. I once had a project in Nottingham, where
we were converting a 3 bedroom house into a 7 bedroom
en-suite HMO, and I made the mistake of not educating the
neighbours. They made the application process a nightmare,
which resulted in me having to speak to the councillors at a
public meeting defending my proposal. All of the neighbours
were in the public gallery giving me the daggers look. When
I won the councillors vote by 6 to 5, the neighbours started
booing and chucking their paperwork down into the main
chamber. Somebody had spread the word that the HMO was
going to be used for ex-prisoners!
Licensing
Some HMOs need to have a licence from the local council. If
the house is over 3 storeys high, and has five people from two
or more households, it currently needs a license.
Councils have the power to impose additional licensing, so it
is essential that you have a check on your council’s website
before going ahead. That said, I am writing this in April 2018,
and this is the month that mandatory licensing was due to
come in across all HMOs, irrespective of how many storeys or

people. So, watch this space...
Personally, I wouldn’t be too concerned about having to spend
extra to bring houses up to specification, as the legislation
will have the effect of removing landlords who are operating
sub-standard houses, and don’t have either the will or the
finances to bring them up to speed. This will present some
great buying opportunities in the future. However, there is a
cost implication, in that you will need to have a fire alarm, fire
doors and smoke alarms as a minimum – to tick the various
boxes. This will involve a few thousand pounds, which needs
budgeting for.
I have brought all my HMOs up to specification, irrespective of
size. Not only did I want to future proof them, as I suspected
this mandatory licensing would be implemented, but also
because I have a clear responsibility as a landlord to protect
my tenants.
Planning
At present, you will only need planning permission for a HMO
in two circumstances: if you intend to have 7 or more people
living in the HMO, or if you are planning to set one up in an
Article 4 area.
Let’s take the first circumstance – where you have 7 or more
people. This is a standard requirement, and you’ll need to
submit a full application. I’ve done a few larger HMOs and I’ve
always used a local planning consultant to put the case to the
council and prepare the application. It costs me about £500,
and is money well spent. Often, the planning consultant is an
ex-planning officer from the council, so they know the score.
Article 4 applies to towns and cities where there is a

concentration of HMOs, where the council want to limit their
spread. You may remember that my first deal was in Lincoln,
where Article 4 was introduced in March 2016. If you get in
before it’s introduced to your town, great. Otherwise, you’ll
have to show the council that there are either no other HMOs
on the street where you are building, or that the number
falls below whatever threshold they are working on. The
application can be hard work!
The best thing to do is pick up an existing HMO from a tired
landlord, as it will have “grandfather rights”, and will be
able to continue as an HMO under new ownership with no
problems from planning…
Chapter 4: The Best
Kept Secret in Property
Investing!
How would you like to live in a property that you don’t own,
paying a rent well below market value, and have the option
to buy the house anytime in the next seven years for today’s
market value? Alternatively, rent the house out and build
up a large monthly cash flow. Either way, you’ll also build up
a large equity pot for the future.. How would that sound?
Impossible, right? Wrong!
All of the things I have mentioned are truly possible, and all by
following one strategy. It’s the most creative, flexible strategy
available to property investors, and is perfect for people who
have very little money themselves. So, what exactly is this,
and how does it work?
Buckle up, because I’m about to give you some information
that has the potential to change your life!
You may of heard of something called a purchase option.
This is a legal agreement which gives somebody the right to
buy something, but not the obligation. It’s often used in land
deals, where somebody is keen to buy a plot of land to build
on, but they haven’t got planning permission yet. With this in
mind, they approach the land owner to see if they would be
interested in giving an option on the plot of land. This would
be the option to buy within a certain time-period, for a fixed
price.
If the land owner agrees, the purchaser can head off and
try to get planning permission. If successful, he can trigger
the option and buy the land. If not, there’s no obligation to
purchase, and he can walk away. Simple, right? Here’s where
the magic comes in:
If we extend this, and add an agreement where the “buyer”
can use the asset (land or house) in return for an agreed
monthly payment (a lease payment), this is called a Purchase
Lease Option (PLO). This takes me back to my opening
sentence, where a PLO can be signed with the owner of a
property for a fixed period of time, agreed by both parties (in
my example I gave 7 years), and the “buyer” has control of
the property during this period – meaning they can live in it
or they can rent it out.
To summarise, a Purchase Lease Option has 4 parts to it.
1. A defined time-period during which the option to buy
exists.
2. A fixed price which needs to be paid if the option to buy
is exercised.
3. The amount needing to be paid each month (the lease
fee).
4. The upfront fee (which can be as little as £1).
The beauty of this strategy is that you can control the house
and rent it out as a single let or a HMO without having to pay
a chunky deposit or get a mortgage. Even if you have poor
credit or have only recently arrived in the country, this won’t
impact on your ability to use the strategy. You can perhaps
understand why people are a little sceptical when they first
hear about PLOs, and cannot think of any reasons as to why

the seller would grant this option. However, there are many
reasons, and we will look at them a little later.
Case Study 1: My first lease option

I placed an advert targeting frustrated landlords in the local
freebie magazine. I was specifically looking for people who
were suffering one or more of the three landlord pains:
tenants who weren’t paying their rent, endless maintenance
bills, and the dreaded voids. The advert was aimed at me
picking up some more rent-to-rent property. A lease option
would be a bonus.
Within a few days, I had a lady on the phone who had a
3-storey property in Gloucester, which she was renting out
as a HMO. Although her work had taken her to Scotland, she
thought she would still be able to oversee the property, as
she had a pal who agreed to look after the tenant viewings,
plus a handyman in Gloucester who would sort out any
maintenance issues.
It turns out this was a tad optimistic. Almost as soon as she
moved, problems started. Two of the rooms were empty,
as the friend who had agreed to do tenant viewings had
changed her mind, and the maintenance man wasn’t keen
to add this job to his list…
In my advert, I mentioned the promise of guaranteed rent
each month, irrespective of voids or tenant issues. This was
aimed squarely at the pain point of landlords, and it had the
desired effect. The woman called from Scotland, and we
had a discussion in which it was made clear that she was at
the end of her tether.

Key Facts
• The house had 5 bedrooms, a lounge and a kitchen, and
was in excellent condition (modern townhouse).
• It was fully licensed with the local council as a HMO,
which meant it was kitted out with fire doors, smoke
alarms and a fire alarm.
• The rooms were let out for a monthly total of £2200
when full.
• Her mortgage on the property was £380.
• With two empty rooms, after paying all the bills the
owner was currently getting about £900 a month profit.
• It would let out for approximately £800, as a single let,
to a family.
The woman liked the idea of being able to “walk away”
from the problem, and was very interested in handing it
over to me.
She had a number of options. I discussed all of them with
her:
• She could try and soldier on, bringing in somebody local
to do the viewings – not attractive.
• She could put it with a local agency who looked after
HMOs. She’d tried this a year previously, but “they were
useless”, so she took it back to self-manage.
• She could let it out as a single let to a family. She was

actively considering doing this before she saw my
advert.
• She could sell. Because there wasn’t much equity in the
house (she’d bought at the top end of the market in
2007) she would rather have the monthly income as her
mortgage was quite low. The market value of the house
was £190,000.
I always exhaust all the options in this situation, as I don’t
want somebody to do something which they will later
regret. Also, this can be a stressful time for people, so giving
them time to make the correct decision is important.
I explained that I would not only like to take control of the
house, but that I would like to buy it from her. I understood
she wanted cashflow from it, and didn’t want to sell
immediately, but what about if I offered her the full market
value of the property today? Would she consider giving me
the option to buy some time in the next 7 years?
If this was acceptable, I would pay a guaranteed rent of
£800pcm, every month, come rain or shine. This was £9600
a year, or £67,200 over the 7 years! I don’t think she had
realised quite how much cash would come her way over
the terms of the option, and she was seriously interested. I
suggested she sleep on it, and we agreed to a chat the next
day.
Offer The Fully Repairing and Insuring (FRI) Lease

Whenever I negotiate a lease option, I am aware that the
real appeal to the owner is the ability to walk away with the
knowledge that they have a guaranteed amount of

passive income dropping into their account every month.
Consequently, I make the deal that much sweeter for them,
by suggesting a full repairing and insuring lease (FRI). This
means that I am liable for insuring the property, and any
maintenance that needs carrying out – fixing the roof,
the boiler, etc. Because I offer the FRI lease, the owner
understands that they really can walk away and forget
about the property. This can be quite liberating for many
tired landlords, and gives me more room for negotiation of
the monthly lease fee.
In the example above, I was happy to offer the owner the
full single let rent of £800. If she did let it out as a single
let, after all costs, she would probably bank £650 a month,
so my offer was fairly generous. Of course, my calculations
were based on the rent coming in as a HMO. She did the
maths, and agreed to a 7-year term.
I took over the property and within 3 weeks had let out the
remaining two rooms, giving a gross rent of £2200. After
taking off the owner’s lease fee of £800, bills at £400, and
£220 for voids and maintenance, it left me with a profit
of £780 per month, or £9360 a year. Over 7 years, this is
£65,520. And the best part of it? This was on a property
which I didn’t own, hadn’t had to get a mortgage on, and
wouldn’t have to buy if the market crashed!
In terms of equity growth, I don’t have a crystal ball. I can’t
tell you where the market will be in 7 years’ time. However,
the best way to predict the future is to look at the past.
Historically, prices have risen by 10% a year. There have
been peaks and troughs though, so I work on an average of

5% a year going forward.
Over 7 years, a 5% compounded annual growth is an
increase of 40%. The market value at the time of signing the
7-year lease option was £190,000, and this was the option
price agreed. If the value increases by 40% over the next 7
years, the new value will be £266,000. This is an increase
of £76,000 and represents my equity profit from the deal.
Total profit: Cashflow of £65,520 and Equity (projected) of
£76,000 = £141,520
Think about your own situation. How many of these deals
would you need to do each year, in order for you to either
leave the day job, or if you love the day job just increase your
monthly cash flow, and also provide a great nest egg for the
future?
Let’s say you only did 3 a year, every year, for the next 7 years.
In reality, you could do far more, but let’s be conservative. In
year 1, your cashflow would be £28,000. In year 2 it would be
£56,000, and by year 7 it would be £196,000.
In 7 years’ time, should you decide to sell the house on the
open market, pay back what is owed to the owner and pocket
the difference, you would benefit from a windfall of £228,000
a year for the following 7 years. Not a bad return!
Let’s not forget that the owner, in each case, will have entered
into this agreement once you’ve been through all the other
options with them. This is solving a real pain for them. The
guaranteed rent will almost certainly be greater than any
interest they would have received if they had sold the house
and banked the money!
Why geography can play a part

Property prices in the South of England have recovered since
the financial crash. In the vast majority of places, houses are
worth more now than they were in 2007. However, in many
parts of Northern England this is not the case. In the North,
many towns and cities have house values which are similar to
or even below where they were in 2007.
This means that there are a lot of property owners in the
North who have a mortgage which is very close to the market
value of the house. In some instances, the mortgage is greater
than the house value. If the owner doesn’t need to sell, and
they can keep up with the mortgage payments, there is no
problem. Eventually, the house will increase in value and they
will have some equity again. However, if they do need to sell,
a problem quickly arises.
As an example, let’s say that somebody in this position has
a house worth £120,000, but their mortgage is £117,000.
They can’t accept an offer below the full asking price, as they
won’t have enough to clear the mortgage. Even if they get
the full market value, by the time they have paid legals and
possibly an agent, they will only just have enough to clear the
mortgage. At which point, you might ask why they are selling.
The reasons are many and varied but will often be linked to the
mortgage payments. They may be struggling to keep up with
the mortgage due to a change in their circumstances, they
may be in arrears – with the bank threatening repossession,
or they may just wish to relocate to another part of the
country. The trouble is, unless they get the full asking price,
they are going to have to put their hand in their pocket to find
the difference. For some people, this may not be an option.

This is where you may be able to help them out. You could
offer the full asking price for the property (or possibly more)
but would need to have the option to pay this over the
next few years. During this period, you would cover all the
outgoings (mortgage, insurance etc.) allowing them to walk
away from their monthly debt commitments. You may even
strike a deal where you “babysit” the mortgage to the end
of the term, at which point you take over ownership of the
house.
Now, take a look at some thoughts from Gavin, one of my
mentees:
Case Study 2
I started some mentoring with Pete and copied one of the
strategies that was working for him. I put some fliers out
in Darlington, in the North East. One side of the flier was
aimed at people who were needing to sell quickly, and the
other side was for those who were looking for a guaranteed
rent on their property. I had a call from a guy who had been
trying to sell with an agent, but because his mortgage was
almost at the same value as his property, he couldn’t accept
low offers. Unfortunately, low offers were all he was getting.
It turned out that he had been made redundant 8 months
ago, and was now 6 months behind with his mortgage. The
bank were on the verge of repossessing. He knew that if
this happened he risked bankruptcy, and a major issue with
his credit file for years to come.
To begin with, I asked him what the best outcome for him
would be. He told me that he just wanted to walk away

from the house, move back to Newcastle and start again.
He owed the bank £2200, and he had other debts of £3250
– so a total of £5450.
I offered to pay off his debts of £5450, and take over the
mortgage payments. There were 11 years left to run on
an interest-only mortgage, which was costing him £324 a
month, plus £21 insurance, totalling £345. The property
was a 3-bedroom semi, and needed a new internal paint
job, but was otherwise ok and would fetch a single let rent
of £580. It had 3 decent sized bedrooms and 2 reception
rooms with a galley kitchen, so it would make a 4-bedroom
HMO, as it was very central. The cashflow would be greater,
and it needed very little work. All we really needed to do
was buy the furniture.
We signed a lease option agreement for 11 years. I paid all
his debts off, and he was over the moon. The HMO revenue
is £1290pcm. After all bills, this drops to £550pcm or £6600
a year. Over 11 years, this will be a profit of £72,600. Plus, I
should have some equity in the house.
This set of fliers have got me 3 deals so far, and I am speaking
to another landlord this week. I used the wording that Pete
gave me, and he also helped me set up my two websites –
one for motivated sellers and one for the guaranteed rent
option.
With all of my mentees, I constantly stress the importance of
trying to identify the pain point of the property owner, and
finding the best solution for them. If you can relieve their
pain, there’s a very good chance that they can benefit you
too.
In Gavin’s example, this was a classic win/win. The owner
was able to walk away from his problems (which were
debt-related), escaping repossession and a major impact on
his credit file. Gavin would take just over a year to recoup his
initial cost, and then have £65,000 profit over the term, with
the likelihood of a decent bit of equity in 11 years’ time.
Whilst the wording on the fliers is very important, the
relationship you build with the motivated seller is the key (see
chapter 6). There are other ways to find deals than putting
out fliers, and I look at some of these in the next chapter.
You’ve probably worked out by now that for a lease option
to work, the owner must not need the money from the sale.
The majority of people who sell a house need the cash to buy
another one. These people are not lease option candidates.
However, many landlords will be trying to sell a house which
is causing them pain, and they won’t necessarily be looking
to buy another with the cash received. If they were going to
put the money in the bank, it would make more sense for
them to get the guaranteed rent money, in the form of a
lease option.
Case Study 3
One of my early lease options was on a large, detached
house in Gloucester, which was on the market for £365,000.
It was an investment property and had been rented out for
the previous 5 years. However, the owner was working in
the Middle East and had put it with a local agent to manage.
Two successive families had caused headaches with the

rent – the second one had needed a court order to evict
them! Thus, the owner had reached the end of his tether
and put it up for sale. However, he also had it up for rent,
which is what grabbed my attention.
If a property is up for both sale and rent, this immediately
indicates that the owner probably won’t need the money
from a sale immediately. After all, they are happy to rent
if they can’t sell. These are great lease option candidates!
I made contact with the owner, having gone through the
agent (important not to cut them out) and negotiated
a 7-year option with him. The single let market rent was
£1200 a month, but he was seeing a net rent of about £900
after all costs…and this was when the rent was actually
being paid! As usual, I offered the FRI lease, allowing him to
walk away with no worries. We agreed a monthly lease fee
of £800 and a 7-year term.
The owner had a mortgage of £190,000. So, if he had sold
for the full asking price (£365,000) it would have given him
about £170,000 after sale costs. If he had put the money in
the bank, he might have received 1% interest on this, which
would have given him £1,700 a year or £142 a month.
Instead, the lease option was giving him £800 a month.
After his mortgage cost of £340 a month, it still left him
£460 a month profit. This is a difference of £318 a month,
or £3816 a year. Over the 7-year term, this is £26,712 – not
to be sniffed at!
When I make my full offer letter (a really important part of
the process), I highlight all these numbers, as I need to
stress the major benefit (for them) of entering into a lease

option. To do this properly, I need to have all the numbers,
including their monthly mortgage payment. It is often this
letter which leads to the agreement taking place – so it’s
extremely important to get it right. As with any service, you
need to sell your proposal to the buyer. Think of your offer
letter like a sales pitch.
The Numbers and the Result

The above project didn’t take a lot of work to convert into
a 6-bedroom HMO, not least because I’d negotiated as part
of the deal that the existing furniture should remain (he’d
let the house furnished). The master bedroom was en-suite,
there was a family bathroom, and downstairs there was a
separate shower room and a toilet – plenty of facilities for
6 people (5 beds, plus one reception converted to the 6th
bedroom).
Gross rent: £2600
Costs
Lease fee £800
Bills £450
Voids/maintenance £260
Total: £1510
Net Profit: £1090
This cashflowed at £1090 a month, or £13,080 a year. Over
the 7 years, this was £91,560.
Working on the 5% compounded increase in value, this made

40% over 7 years, so the property (which was worth £36,000
at the time of signing), could well be worth £510,000 in 7
years’ time. This represents an equity increase of £146,000.
You may remember me mentioning in Chapter 1 that the
average pension pot in the UK is £45,000. So, this one lease
option could well provide a “pot” three times as great in
seven years’ time. Truly a powerful investment strategy!
Rent To Own
There are many people in the UK today who would love to
be able to buy their own house. However, for a variety of
reasons, they can’t do this. They may not have the cash to
stump up a chunky deposit. Alternatively, their credit may be
poor, or they may be new to the country – both of which will
prove difficult when applying for a mortgage.
At the same time, there are many landlords in the UK who
would bite your hand off if you could offer a permanent
solution to the three landlord curses. For any landlord, the
dream is to find a solution which ensures that they’ve got
tenants who always pay the rent on time, who look after all
maintenance bills and never leave the property, so no voids.
Sounds like paradise, right?
Some of these landlords will be planning on selling up at
some point in the next few years, but just not yet. Or, maybe
they have a portfolio of properties and need to sell them off
one by one over a number of years, to minimise their Capital
Gains Tax bill. All they need is a willing tenant, who wants to
buy. Hmm, I think we may be able to help…
Here’s the thing: Lease options can be the perfect solution for
both of the above groups of people. The person who wants
to buy but can’t, can move into the property that the landlord
wants to sell (but just not yet). Perfect!
Once this person moves in, they become the tenant buyer.
They have the lease option attached to the house. The rent
would usually be below market rent, to reflect the fact that
they will look after maintenance, always pay the rent and
never cause a void…
In terms of the option price agreed, it’s usually market value
at the time of signing the option, with an annual increase of
4%. It’s about striking a balance between the landlord – who
wants to maximise the price, and the tenant buyer – who
wants to keep it low. I have found 4% to be about right.
I structure these deals so that it’s a fabulous triple win. My
win is that the tenant buyer pays me a fee for sourcing the
property for them. The landlord will also pay a fee for finding
them the perfect tenant. The tenant buyer’s win is that they
are in their “forever home” and are paying below market rent
for the property, safe in the knowledge that they have the
option – but not the obligation – to buy at any time during the
option period. In the meantime, they can repair their credit
or raise deposit funds in readiness for getting a mortgage.
As for the landlord, they finally have their dream tenant – one
who looks after all maintenance, pays the rent on time, and
there are no voids. Nirvana for the landlord! Not only does
the tenant buyer look after maintenance issues, but they also
start treating it like their own house. They redecorate, and
I’ve even known them to replace kitchens and bathrooms!
They have a homeowner’s mind set, even though it’s not
legally their home yet. Like I said, it’s a triple win.

I also help to set up a monthly payment from the tenant buyer
into a solicitor’s escrow account, usually £200 a month, which
builds up over the years and goes towards their deposit. On a
5-year option, this would be £12,000. If they decide not to go
ahead with the purchase, it is returned to them.
Finally, there is the letting agent – the person with the large
list of landlords, some of whom will fit the bill above. I work
with letting agents and split the fee with them. The big win
for them is that they get to manage a property which needs
next to no management, but still get their monthly fee from
the landlord.
Hopefully, you can see how flexible the PLO is, and how many
problems it can solve!
Overseas PLOs
From 1996-2007, a lot of people saw the value of their property
increase by 300-400%, which is a pretty mighty increase.
Suddenly, they had the opportunity to pull out equity from
the property, to act as the deposit for that Spanish villa they’d
had their eye on for a while.
A lot of overseas holiday homes were bought during these
years, at prices which have fallen a long way since then.
Many people who bought these villas would now like to sell.
The trouble is, the price they would get is well below what
they paid, which could mean they are in negative equity
(the mortgage is greater than the property value). This
would mean them putting their hand in their pocket for the
difference.
This is prime lease option territory, where the owner would

take a monthly lease on the property and hand over control
for the term, with an agreed price paid at the backend. The
owner gets a guaranteed monthly income, and the option
holder can combine the use of the property with renting it
out to bring in the required income. At the end of the agreed
option period, they would also have an asset which is likely to
have increased considerably in value.
There are many people in the UK who would love to have a
place in the sun, but couldn’t afford the 30% deposit which
Spanish banks are asking for at the time of writing. Having a
lease option on a property where the monthly payments are
often under £1000 would work brilliantly for them. Often, the
weekly high season rent would cover the monthly payment.
Many of the mortgages have still got 10-15 years to run, and
I’ve brokered a number of deals involving “owner finance”
– a situation where the agreed purchase price is divided
by the number of months agreed at the outset. Once the
last payment is made, the legal ownership of the property
transfers. With owner finance, the new owner has a property
with no debt attached to it – a fabulous result!
Case Study
Property: 3 Bedroom Villa in Malaga.
The owner had bought this property in 2006, on a capital and
interest mortgage, and had 8 years left to run. His monthly
outgoings, including service charges, were 1100 euros. He
hadn’t used the villa himself for two years – instead he had
been renting it out. He had used a local rental acency to
manage this, who proved pretty hopeless, and now he

was just looking for somebody to take over all the monthly
payments.
In return, the new “purchaser” would own the villa outright
in 8 years’ time. It had been purchased for 465,000 euros
in 2006, and was worth 180,000 euros at the time the deal
was negotiated. In 8 years’ time, the value was likely to have
increased substantially, as the Spanish market was starting
to move again.
If the owner sold at the market value of the time, he
would have sustained a loss, as the mortgage was higher.
Consequently, he was delighted to have somebody to take
over the monthly payments. I very quickly found a willing
“buyer” who paid a £10,000 fee to me for finding him the
deal.
There is a lot of money to be made brokering these deals,
and there are thousands of them out there!
What happens at the end of the option?

As I’ve already mentioned, it’s very important to use a
specialist solicitor for all lease option agreements. It’s equally
important to make sure the structure gives you flexibility. You
need to make sure the following are all possible throughout
the period of the option:
1. You have the option to purchase at the agreed price.
2. You have the option to hand the house back to them at
the end of the agreement.
3. You are able to assign the option to a third party.
4. You can sell the property on the open market, and pay
them the agreed price from the proceeds.
The only reason you would hand the property back would be
if the market had dived and the property was worth less than
the agreed option price. It’s important to be able to assign
the option to another person, as your circumstances may
change, and you may decide to sell the deal on to another
investor. This raises an interesting question on the deal that
I outlined above. How much do you think the fee should be
for a deal which brings in £91,000 over 7 years, and has a
likely equity increase of £146,000? I’ll re-visit this question in
Chapter 6.
You also need to be able to sell the property on the open
market, rather than just be restricted as the purchaser. You
may wish to purchase it, which is fine, or you may not be in a
position to do so at that point in time. If you don’t have this
in the contract, you may not be able to realise the equity that
has accrued. I hope you can now understand why I titled this
chapter “the best kept secret in property investing”.
Chapter 5: Finding The
Right Property
“Nothing in this world can take the place of persistence.”

Calvin Coolidge.
One of the biggest keys to your success as a property investor,
is being able to find the right property for your strategy.
There are many thousands of properties for sale each week,
but only a small percentage of these will fit with your strategy
based on price, area and internal layout. There are also many
properties where the owner wants to sell, but which aren’t
advertised on traditional online portals such as Rightmove.
In fact, they may not be advertised at all! With this in mind,
it’s often not so much about finding the property, but more
about finding a person who is motivated to sell. If you can
make contact with the seller directly, the chances of finding a
great deal are considerably higher.
If multi-let investing becomes your strategy, which is
something I would strongly recommend, then we have already
discussed the need for a minimum of four lettable rooms (five
is better) plus a communal room. Thus, the property must be
of a minimum size to tick this box. In addition, we also need
it to be fairly central within a town or city, or on a major bus,
tram or train route. These two factors will narrow our search
down.
Estate Agents and Letting Agents

I still hear people say that you never get any great deals from
estate agents, or that you have to go “off market” to find the
real gems. Whilst I recognise that there are some cracking
deals available by going direct to vendor (D2V), building
relationships with the agents is also vitally important. Agents
have a level of insider knowledge which can be really useful.
Estate agents will often know the reason behind the sale,
having built up a relationship with the seller. This includes
whether they need a fast sale, which means that they will
be likely to take a lower offer if the sale can be completed
speedily, or whether they would consider a long-term rent
(the first criteria of a lease option). Letting agents have
hundreds of landlords on their books. When they fully
understand the deals that I’m looking for (and I make sure
I spend time educating them) they can be of great help in
brokering the deal.
Here’s the thing – the agent’s main priority is to get paid!
Thirty-one per cent of sales fall through every year in the UK,
for a host of reasons. Usually, it’s because of chains breaking
down or mortgage applications failing. Even if a sale goes
through, the average time taken is 13 weeks. When I sit down
with agents and explain the key principles behind a lease
option, one of the first things I tell them is that they’ll usually
get paid within a fortnight, as the paperwork for options can
be completed very quickly. When the penny drops, they are
keen to know more! I sometimes hear people say that you
should cut the agents out of the deal, and go behind their
back. This is very short-term thinking. Why build barriers,
which will guarantee getting no deals from them, when you
could be nurturing the relationship and making it a win/win?

Most agents understand HMOs and the sort of property and
location that will be needed to fit that profile. However, lease
options are often a mystery to them, not least because they
can’t begin to understand why somebody would sell their
house anytime in the next 3/5/7 years, at today’s value.
To start off with, I normally arrange an initial appointment
with the agent, and explain that I have something to discuss
which will be to their advantage. This gets their interest. It
then takes me about 20 minutes to run through all the key
points with them, to make sure they know exactly what I am
looking for.
To illustrate how I negotiate lease options on properties with
agents, I will run through the details of a recent lease option
attempt:
I organised a meeting with the owner of an upmarket
independent agent, somebody who had been a director at
Savills for years, but had left to set up his own business at the
high end of the market. The aim of the conversation was to
discuss lease options and how these deals would result in a
great win for all three parties: him, the property owner, and
me. He admitted that he’d heard of them, but didn’t really
understand them. I went through my usual presentation, and
by the end of it he was sitting there nodding with a big smile
on his face. He fully understood that this could indeed be a
triple win!
Now, here’s some background on the project itself:
A house I had driven past many times in Cheltenham had
been up for sale for 10 months. The original asking price was
£1.2m, and it was a fabulous period building. It had 5 large
bedrooms, two big reception rooms, a large kitchen and a
separate three bedroom flat in the basement, with its own
entrance. It had been on sale with 2 agents previously. On
three occasions, the sale had progressed close to exchange,
but had fallen through each time. The price had been reduced
to £1.05m.
Eventually, I knocked on the door of the house. I explained
to the owner that I had noticed his house had been on
the market for a long time, and wondered whether he
would be interested in a long-term rental on the property,
preferably for a minimum of 5 years. He told me that they
had already thought about letting it out if they didn’t receive
an acceptable offer in the next month. This was encouraging
news. It turned out the reason for selling was that the whole
family were moving to the USA. However, his company were
going to provide rental accommodation, so he didn’t need
the money from the sale to buy another house.
These were perfect conditions for a lease option. I went on
to explain that I would like to buy the house, but couldn’t do
so at the moment. I could offer him the original asking price
of £1.2m, but would need to agree a minimum option term
of 5 years, preferably 7. In the meantime, I would pay him a
guaranteed monthly lease payment on a fully repairing and
insuring basis, which would free him up completely. This was
ideal, given he was going to be out of the country.
The owner told me that he was definitely interested, and
would give my proposal some thought. I explained that I
wasn’t trying to cut the agent out, and would go to them to
explain my proposal and put the offer in writing. Then, if he

wanted to take it forward, the contract could be drawn up on
a timescale to suit him.
As for my plans if I was successful, I thought that the house
would make an excellent HMO. It was very central, with
plenty of parking. The main house could take six tenants,
with three in the basement flat. They were very large rooms,
and I was confident they would fetch a rent of £550pcm.
Proposed numbers (monthly)

Gross rent of 9 x £550 = £4950
Minus
£495 (voids + maintenance)
£650 (bills)
£2500 lease payment
Profit: £1305
Because there were separate entrances, the main house and
the basement flat would be considered separate dwelling
houses, meaning no planning permission would be needed.
A full market rent for this property would be £3000 a month,
but I would offer £2500 as a guaranteed payment. If accepted,
the numbers above would give an annual profit of £15,660.
Ideally, I would want an option of a minimum of 5 years,
giving a total profit of £78,000.
The actual market value was about £1.1m, so an offer of
£1.2m was fair. If a 5-year option was agreed, working off a
5% annual increase, the new value would be approximately
£1.45m, and a 7-year option would give a new value of

£1.54m. This would give me between £250,000 and £350,000.
Either way, a decent equity increase.
I would pay the agent a fee of 1%, plus a promise of business
at the back end if I put the property on the open market.
This meant an upfront fee of £11,000, which is quite
chunky. However, going back to what I said about building
relationships with the agents, I hope you can see the power
of dropping a fee of £11,000 to the agent just a few weeks
after seeing the property. This is guaranteed to keep you “top
of the list” when potential lease options come along! The fee
only represented about 7 months’ profit, so it would be well
worth paying. Not only would it help to secure this deal, but
it would also help me gain access to other deals.
This deal went to the solicitors for the contracts to be drawn
up based on a monthly lease fee of £2600 and a 6-year term.
However, just before they were signed, I had a call from the
owner to say that his marriage had broken down and they were
separating! As a result, they would need to sell to allow the
profit to be split between them. So close to signing a cracking
deal…it sold three months later for £915,000. Suddenly, they
became very motivated sellers, and somebody picked up a
bargain! I was gutted.
Another reason I put this example in, is to show that expensive
houses work for lease options. It’s not about the house, it’s
about the circumstances of the seller. I have completed many
options on houses below the £500,000 mark, but am now
actively seeking options on high-end properties.
I recently had a long conversation with the owner of a £2.5m
detached regency house, who was moving to the South of
France. He had no mortgage on the house, and didn’t need

the money from a sale. He was thinking about offering me
an option, but sadly we couldn’t agree terms that worked for
both of us. Also, at the time of writing, I am in the process
of negotiating a 6-year lease option on a large, 7-bedroom
period house, worth £1.6m. This was brought to me by an
agent. Again, I don’t mention this to impress you, but rather
to impress upon you that lease options can work with top-end
houses.
Develop your relationship with agents, show them that you
are looking to work in a kind of joint venture capacity, and
the deals will come. I often entertain agents at Gloucester
Rugby Club, which includes lunch or dinner before a game,
and decent seats at the game. It’s a good opportunity to build
rapport in a relaxing environment!
Online Agents
If a property that you like the look of is being marketed by
an online agency, such as Purple Bricks, the owners will
almost certainly be doing the viewings themselves. This gives
you immediate contact with them, and allows you to start
building the relationship. You can find out whether there is
the flexibility for a rent-to-rent, or possibly a lease option.
Depending on their situation, it might be the case that they
are willing to take a lower offer for the sale. You may get
some of this information from the agent, but there is nothing
better than meeting the owners to drill down a bit further
into their circumstances.
Using The Property Portals

The two main property portals are Rightmove and Zoopla.
Rightmove is the biggest, with over 800,000 properties at

any one time! It has a map listing option for the area you are
searching, making it easier to see where the potential deals
are situated. You can also set up email alerts, by applying
filters. The site will alert you as soon as something matching
your criteria comes along. In addition, there is an option to
look up historical price data, which allows you to see the sold
prices for all property in the last 20 years or so. If you find an
off- market deal, and want to see what the likely market value
of the house is, then you can use the data on both portals to
bring up some reliable comparables.
You can also check to see which houses are for sale and/or
rent at the same time, which is perfect lease option territory.
Plus, there is a date listing option on Zoopla, which allows
you to see the houses that have been up for sale for the
longest time. Again, this could indicate a motivated seller or
somebody who is willing to look at a more creative solution
to their problem.
Going Directly To Property Owners

Whilst agents can be worth their weight in gold, there’s no
substitute for being able to go directly to the property owner.
The below is not an exhaustive list, but it will certainly get
you started!
HMO landlord letters. Every council within the UK keeps a
list of all licensed HMO properties and the licence holder for
these properties. You can contact the council and request
this list, who will then give you the information that you need
to write to the owners. Most owners will be happy with their
investment and have no intention of selling. However, there
will always be some frustrated landlords looking to sell, or
who would agree to either a rent-to-rent or a lease option,

to remove themselves from the management role. If they are
looking to sell, it may be possible to negotiate a good price,
particularly if you have funds yourself or through a private
investor and can proceed quickly. Because this list is only
for the licensed HMOs (3 storey with minimum of 5 people)
there will be many HMOs where the council don’t have
details. However, as universal licensing looks like coming in
this year for all HMOs, the council will soon have details for
all properties.
In my letters to landlords, I explain that I am a property
investor looking to add to my portfolio, and that I am in a
position to proceed quickly, as I’m not in a chain. I also open
the door to a R2R or a PLO, as I explain that I would be happy
to take over the property for a minimum term, during which
I pay them a guaranteed rent. These letters have to be sent
out regularly, as it can often take more than one letter before
the owner reacts!
Facebook Targeted Ads. You can set up geo targeted ads
on Facebook, where you can have your ad appear within a
certain radius of a city, town or even a postcode. You can also
target the interests of people who can see your ad, to include
property. The aim of the advert is to secure an email address
from a landlord, and some sort of “lead magnet” will be
required to get this. The ad has to be worded to entice them
to click, and then give their email information. It has to be
fairly irresistible. For example, “The 5 things every landlord
must know in 2018 to save you a small fortune.” As a landlord,
if I saw this then I would struggle not to click! Needless to say,
the information should be of a high standard, as this is meant
to be the beginning of a trusting relationship! Once you have
their email address, you can now begin to explain what you
do and how it may solve the pain that they are experiencing…
Newspaper Advertising. Placing a small ad in the property
section of the local paper can work wonders. I have benefitted
greatly from this approach. In my ad, I’ll state that I am
looking for property to rent for a minimum of three years,
for corporate clients. Any landlord who sees this might be
tempted to make contact, to offload their property to you.
At this point you can start to build the relationship, discover
what their current problem is, and try to provide a solution.
Connect with local tradesmen. Many local plumbers and
electricians will do work for landlords. As a result, they’ll
know whether these landlords are looking to sell or are
just having a difficult time with their properties. I would
suggest incentivising them to come to you with any relevant
information. I offer £500 for information which leads to a deal.
Don’t forget, a deal will only happen if the property owner is
getting a win, so the tradesman is assisting this process and
deserves to be rewarded for their efforts. Interestingly, once
they receive payment, the referrals start to flood in!
Join the local landlord association. Apart from being a useful
source of information about all things relevant to landlords,
joining the association will give you the opportunity to
meet other landlords and build relationships. Some of these
landlords will have problems that you may be able to solve.
Gumtree. Because this is a direct to vendor site, you will be
making contact with the owner. There are properties for sale
and properties for rent. Some of the sellers will be motivated,
and need the money, so may well be up for a lower offer – if
you can guarantee speed and certainty. Those looking to rent
their property may be open to a conversation which leads to

a rent-to-rent, or possibly a lease option.
Fliers. I often hear property investors moaning that “fliers
don’t work”. Hmm, interesting that I continue to receive these
through my letterbox every week. From Chinese takeaways
to tree surgeons, carpet cleaners to estate agents, fliers are
used by a wide range of business people. Like all strategies,
they will have a return on investment, so it’s foolish to turn
your nose up at this. The problem that most people have is
that they give up too quickly. You need to be consistent. Use
the fliers/leaflets as part of an ongoing strategy. Send them
out regularly.
When I started, I put out single-sided A5 fliers with a “name,
rank and serial number” layout. The fliers contained my
company name, a brief word about me buying “any house,
any condition”, and my contact number. At first, I had very
little response. No surprise there. I researched into different
strategies, and found a man in the USA who was having
great results. He was sending out a double-sided A4 flier on
different coloured paper.
It worked on the usual AIDA principle (attention, interest,
desire and action), but he had also included lots of useful
information concentrating on the potential pain points of
property owners, and the benefits that he could offer in
helping to solve them. This approach changed my return on
investment overnight!
Each of these different methods will have a different success
ratio. The key to getting lots of leads is to experiment with a
number of the above, until you have enough information to
decide which ones offer you the best results.
Chapter 6: Making
money from sourcing
and trading deals!
Two years ago, I put out my usual bunch of fliers looking for
BMV, R2R or lease options. I had a call back from a guy who
had a 2-bedroom terrace house, in a rough part of Gloucester.
He had been renting it out, but the previous tenants had
trashed it, and now he didn’t have the cash to bring it back to
a great lettable condition. As a result, he hadn’t been able to
let it, so he put it with a local estate agent to sell.
All of this had occurred roughly 6 months before he called
me, and in the meantime he had been messed about by 2
buyers. He’d accepted offers from both, only for them both
to pull out. One of them couldn’t raise the funds, and the
second had his mortgage refused. So, the owner had to pay
the monthly mortgage whilst getting no revenue. He was
frustrated and motivated!
I went to see the house and was shown round by the owner.
It was originally on for £125,000 with the agent, but I felt
this was optimistic. My due diligence prior to having the
viewing suggested a true market value of £115,000, in good
condition. Given that this property needed approximately
£10,000 spending, the value in its present condition was
closer to £105,000. In fairness to the owner, he appreciated
this, but also realised that if he wanted the cash as soon as
possible then he would need to be realistic in his expectation.
It’s all about the seller

It’s important to understand the priorities of the seller. By
the time I was speaking with this man, he had already been
royally messed about by two previous “purchasers” and was
now needing two things: speed and certainty. Putting the
house on with a local agent offered neither. As I mentioned
earlier, 31% of sales fall through in the UK. Even if successful,

a sale can take months to complete. The house didn’t fit my
strategy for HMOs, as it was always going to be a single let.
However, if I could negotiate a lower purchase price, I could
do one of three things:
• Buy myself.
• Refurb and flip (sell on).
• Pass on to an investor with a more suitable strategy, and
get a fee for brokering the deal.
In the end, I chose the third option. In these circumstances,
it’s vital that you can demonstrate to the seller that you are
able to proceed in the time frame that has been agreed. To
do this, I always bring a screenshot of “proof of funds” with
me, which shows that there is money in the bank account,
ready to be transferred.
I offered £75,000, based on a 21-day completion, knowing
that if I didn’t find an investor who could complete in that
time frame then my JV partner and I could do so. I was honest
with the owner, and said it would be bought for £75,000
within 21 days, and it would either be bought by an investor
whom I introduced or I would buy it myself. Either way, he
would get his money!
As I mentioned in Chapter 1, I feel strongly that sellers should
never be messed about. Make sure you are certain about
what you can and can’t do, as they are in a stressful position.
Empty promises will only make things worse for them, and
will destroy your credibility at the same time.
In this case, the owner accepted my offer. This is what
happened next:
• I emailed him a Heads of Terms document, and a copy
of a lockout “option’ for 21 days, which he signed and
returned.
• I then telephoned 3 estate agents, who had their “black
book” of cash buyers, and explained the deal to them. I
was explicit that I only wanted them to talk to investors
who could show proof of funds and who could complete
in 14 days. The first one to offer the asking price of
£75,000 had the deal.
• Three investors turned up to view, and one of them was
clearly serious, bringing proof of funds and his solicitor’s
details. He ended up buying the house for £75,000,
seventeen days after I had shaken hands with the seller
to confirm the price.
Everybody Wins
This worked out well for me, because the buyer paid me a
£5,000 sourcing fee. From this, I paid the estate agent £1,000
for introducing the investor – which left me with £4,000.
A decent return for brokering the deal. As part of my fee, I
progressed the deal through to completion, making contact
with both solicitors to explain the urgency and helping to
move to completion in the agreed time frame. What often
holds up a solicitor’s work is waiting for local searches to come
back. However, these can be indemnified (insured) against
for a small fee. As long as the property title is “clean”, the
purchase can be completed in a couple of days if necessary.
The seller was really pleased to get rid of the property and
have the cash in his bank account, just 17 days after calling
me. I had solved a long-standing problem for him, and he was
very grateful for this.
The buyer was chuffed, as he would spend £10,000 getting it
back to a good condition and then rent it out – another single
let added to his portfolio. After buying costs and my fee, he
had spent £86,500 which gave him about £18,000 equity
in the house from day 1. Even if he never took a mortgage
on the property and just left cash in the deal, he would still
get about a 7% yield on this single let. This was better than
keeping the money in the bank, and he would gain equity
over time…
The “buy to flip” option can be a great strategy when working
with a JV partner, as funds are only tied up for a short while.
The usual benefits of having cash come into play – namely
that the seller will accept a lower price, and completion can
be very quick. This allows work to be done on the property if
necessary, and the property can then be sold on for a profit.
Auction?
Another option is to buy for cash and immediately put the
property into auction. It sounds counter intuitive, but it’s
better to do no refurb work at all. Many people who attend
auctions are looking for a “project” to put their stamp on,
and properties in poor condition sell well! The advantage of
auctions is the 28-day completion period (can be 14 days if
you make this a condition) so you will get your funds back
quickly (assuming you have pitched your reserve price
correctly and it does actually sell).
There’s always a fee available

Once you start to invest in property, and start sourcing your
own deals, you will come across properties that don’t fit into
your strategy. However, if it’s a good deal, you will be able to
move the property on for a fee. It will always fit somebody’s
strategy! When looking for the signs that a property can be
moved on, always check to see whether it meets one of the
following four criteria:
1. Below market value. The larger the BMV %, the better
the deal.
2. Can value be added? This may mean turning it into a high
cashflowing HMO, or perhaps it has a large garden with a
side access road. Alternatively, maybe you’ve worked out
the price for work on a back, side or roof extension, and
the end value allows it to be sold on for a big chunk of
profit. There are so many ways to add value!
3. Does it have the size and internal layout to be a rent-to-rent
property, something for which you will always find a ready
buyer?
4. Is there a lease option available on it? This will work for
any property!
After you’ve received your first fee for a deal, you will probably
start thinking that you can do this as an additional cash flow
strategy to fund your purchasing! If so, you are totally right!
There will always be plenty of takers for a good deal.
The main steps involved in this process are as follows. I am
the sourcing agent in the points below.
1. I find the deal, either working towards matching an

existing investor’s strategy or putting the deal out to all
his investors. If he has no existing list, the deal will usually
be promoted on social media. Without doubt, the best
way forward here is to build a list of investors, all of whom
should complete a detailed questionnaire about their
investment criteria, to include geography, budget, type of
property required etc. Proof of funds should always be
requested to avoid time wasters. You can then source to
order.
2. I negotiate the price with the property owner. This process
should never be carried out by the investor.
3. Once an investor has agreed to run with the deal, I email
them a copy of the contract, which they sign if they wish
to proceed
4. They pay a reservation fee to me to reserve the deal.
5. They then have a period of time to do their own due
diligence on the deal, to make sure my numbers are
realistic, and that it stacks for them.
6. The deal is handed across to the solicitors, who progress
it to completion.
7. I would then receive the balance of my fee.
Point 5 is worth expanding upon, as it’s important for the
investor to be given a bit of time to do his own research and
make sure the deal is everything I have painted it to be. In
truth, once you’ve completed a couple of deals with the
same investor, trust is built up and they start to know what
to expect.
I’ve mentioned before that many deal sourcers overpromise

and underdeliver. Disappointing, but true. If you’re ever
buying from a sourcer, the numbers will always need checking
very carefully. In particular, you should pay close attention to
the level of BMV that they are claiming is built into the deal.
You will need to go onto Rightmove or Zoopla, and look at
comparables, as well as recent sales in that postcode. If I
don’t know the area, then I will also call three local agents
to get some local knowledge. Always speak to the valuer, and
not the first person who answers the phone, as there is a big
difference!
Be careful not to give the exact address, but instead I would say
something along the lines of, “I’m negotiating the purchase
of a 3-bed semi-detached in x street, and would be grateful
if you could give me a likely ballpark value. The condition is
poor/fair/good.” If they know their patch well, you will often
get 3 numbers close to each other. This will soon let you know
whether the sourcing agent is on the money!
Here’s an example to demonstrate the above point:
A couple of years ago, when I was looking for deals, I came
across an advert from a sourcing company in one of the
national property magazines. It was aimed at investors and
was offering a month’s free membership to receive their
various deals. If you liked the service, you could pay the
ongoing monthly subscription.
I ran with it, and duly received half a dozen deals in the first
week. There was enough information in the deal sheet to
assess the deal and decide if the level of BMV advertised did
stack up. They guaranteed 15% BMV, which wasn’t a great
starting point. They were generally houses in northern towns,

where 10% could be haggled off the price via the estate agent
without too much of an effort.
Two things then happened, which killed the “deal”. Firstly,
my own due diligence showed that the “market value” they
attached to the properties was inflated. Not by much, but
enough to adversely affect the final ROI. Secondly, there was a
double sourcing fee to be paid. A fee of £3000 was payable to
them, and another £3000 was payable to the sourcing agent
which they used! That’s right, they were buying in deals from
other sourcing agents and then passing on the cost. Another
£6000 of costs to be added to the spreadsheet. The result?
I was finding that the costs of the deals were similar to me
paying full market value! Needless to say, I cancelled my
subscription. Be careful out there!
Hire a Virtual Assistant

In the previous chapter, I mentioned a number of different
ways that you can find properties and motivated sellers,
which you will need to spend time on if you’re thinking of
packaging and selling deals yourself. And it does take time,
believe me. However, once you are familiar with the process,
I would seriously consider farming out this “data scraping”
to a virtual assistant. I currently use one in the Philippines,
and have previously used one in India. If you get the right
one, they can be worth their weight in gold. Virtual assistants
are responsible for filtering all the leads down to a shortlist,
which they present to you each day. This can save you many
hours of legwork!
There are a number of websites out there for finding
virtual assistants, including: www.peopleperhour.com,

www.upwork.com, www.fiverr.com and www.onlinejobs.ph
You will generally pay an average of £3-4 per hour, which is a
good wage in many of the countries where the VA is based.
My advice is to take out a month’s subscription on a site like
onlinejobs.ph. Once you plug in the fact that you are looking
for a VA, all the prospective candidate details are available for
you to inspect. This will allow you to draw up a shortlist, and
I would then set them a task to complete in a specific time,
involving a site like Rightmove. This will assist you in making
your final choice.
Once hired, I use screen capture software such as Camtasia
to make a video, where I go through the exact steps that
they need to follow for each task. They can watch this video,
copy the instructions and very quickly become proficient at
bringing you all the data that you need to find some great
deals!
How much should you charge the investor for the

deal?
This is a question my mentees ask all the time, and there is
no hard and fast answer. As a guide, packaging up a deal that
is available on the portals (Rightmove and Zoopla) would
be a fee of around £3,000. However, I’m not just sending an
investor to Rightmove! The following steps are important:
1. I will be working to specific criteria, and I will have my VA
searching the portals and applying these criteria.
2. Once a shortlist is formed, I will then take over and
make contact with the estate agent to start building the

relationship.
3. I am upfront with them. I explain that I have a cash
investor, and we are interested in property x, but that the
asking price is too high.
4. I will have done my DD and have a cash price in mind,
which I’ll use to test the water with the agent.
5. The agent will usually know the circumstances of the
seller quite well, and often give good feedback at this
stage. I am quite happy working with the agents, and it’s
only if they are un-cooperative that I will attempt to go
direct to the seller.
6. I do all the work to get the best price on the property.
7. If my investor wishes to proceed, I provide proof of funds
to the agent, and insist that the property is taken off the
market, as we will then instruct solicitors.
8. If I hand things over to my investor at this stage, the fee
will be around £3,000.
9. However, if I take things through to a successful
completion, liasing with the investor’s solicitor and
surveyor, the fee will be approximately £5,000. From the
investor’s viewpoint, they will be getting a great deal
– which will match all their criteria. The fee represents
excellent value for money.
If I am sourcing a lease option, the fee will be highly dependent
on the monthly net cashflow, and the likely equity increase
over the term. A lease option in the north of England, with
£250pcm cashflow from a single let, and low projected equity,

will be about £3,000. On the other hand, a southern lease
option HMO, cashflowing at £800pcm, and high backend
equity can realise a fee of £10,000 to £15,000. Bear in mind
some of the examples in the earlier chapter, where 7 years’
net profit could be £60,000-£70,000, along with £70,000-
£150,000 equity. Suddenly a fee of £10,000-15,000 doesn’t
seem too steep!
When can you leave your day job?

I asked this question in chapter 1, and it’s worth re-visiting, as
you can hopefully now see how sourcing and packaging deals
can bring in a decent income. I don’t know what your financial
freedom figure is – but let’s pretend it’s £50,000 a year. We’ll
also assume that each deal you source and package sells for
£5,000. This means that you need to do 10 deals a year to
hit your figure. Less than one a month! Suddenly, financial
freedom doesn’t seem so far away…
A number of my mentees have found this to be a great
strategy. It really helps to bring in the funds to build your
portfolio. If you can find a great deal, there will always be
investors prepared to pay a fee – guaranteed.
Compliance
Put simply, this means staying within the law! You will need
to do the following, as a minimum:
1. Register with one of the three property redress schemes:
the Property Ombudsman, the Property Redress Scheme
or the Ombudsman Services. There is a fee to be paid of
approximately £250 a year.
2. Because you will be collecting people’s data, you will

need to register with the Information Commissioner. This
costs £35.
3. Have a written anti-money laundering policy. Property is
one of the ways in which “dirty” money is recycled, and
the government are keen to ensure that all transactions
involve clean money. All investors need to provide proof
of identity, proof of address and proof of funds from a
bank account.
If you set all this up, as well as ticking the compliance box,
you are seen as a professional by investors. This adds to your
credibility, and makes it far more likely that people will want
to work with you.
A Word About Ethics

“Ethics and equity do not change with the calendar.”
D.H. Lawrence
Property can be a stressful business, particularly for the
seller. Deals fall through, people can act dishonourably, and
timelines always seem to slip. If you want to stand out from
the crowd and be somebody who is referred on to other
sellers, then my advice is simple: just do what you said you
were going to do, when you said you would do it, and always
have the other side’s objective in mind. It’s not complicated.
Property deals have to be a win/win. Both parties must come
away with something, otherwise it’s a poor deal. I’ve seen
investors take advantage of highly motivated sellers who
are in difficult situations, and it doesn’t make for pleasant
viewing. Act honourably and it will come back to you – maybe
not immediately, but eventually.

More specifically, I would suggest the following:
• Don’t give the seller false hope. Set a realistic timeline
and try your best to stick to it.
• Once a price is agreed, stick to it. Don’t be tempted into
brinkmanship at the 11th hour, by dropping your price in
the hope that you make more money.
• Keep the lines of communication open and update
regularly.
• At the initial fact-find meeting, once you have all the
information, try and understand exactly what it is that
the seller wants to achieve. By having empathy with their
situation, you are much more likely to be able to structure
a deal which is going to work for both of you.
• If there is a better option for the seller, which they may
not have thought about, explain it to them. It may lose
you a deal, but it is the right thing to do.
Chapter 7: Other
Ways To Create Cash
flow: Rent-to-Rent
& Serviced
Accommodation
“Own nothing and control everything.”

John D Rockerfeller
Rent-to-Rent
Rent-to-rent (R2R) is a creative strategy for developing cash
flow. If you don’t have much cash, but still want to get into
property, then this is a great option. Rent-to-rent can be used
to generate deposits for purchasing property. I know it well,
as I was running this alongside the “buy HMOs with investors’
cash” strategy!
I touched on R2R in Chapter 3, as it’s a strategy that sits well
alongside the HMO model. It could also be described as a
lease option, but without the option to buy at the end of the
agreed term. However, there are some differences, which I
will come to later.
It’s technically possible to operate this with a single let model,
but it will be much more difficult to get a return. If you have
a void with a single let, then there is NO money coming in –
which will be a huge drain on your finances. Secondly, the
difference between what you are paying the owner in rent
and the rent you receive from your tenant will be minimal,
thus generating little profit.
There is a national chain of estate agents working the
model on a single let basis, where they offer the landlord a
guaranteed rent. However, these agents rely on having a large
number of properties on the scheme at the same time, and
high management costs – to which they charge the owner.
One of the key principles of the R2R model is that the owner
of the property is presented with a seductive offer, which is
partly linked to them not having to constantly put their hand

in their pocket! So, only work this strategy on a multi-let basis.
If you are going to be managing the properties yourself,
rather than putting them with an agent, then R2R is – in its
simplest terms – a property management business. The rent
to renter is managing the property for the property owner,
whom they are renting the property from. They then put
their own tenants into the property, almost always on a room
by room basis.
Rent-to-rent is about controlling an asset, rather than
owning it. The money is made by paying the property owner
amount x, and renting it out for amount y, with the difference
representing the profit.
As I mentioned in Chapter 1, the UK has been experiencing
substantial immigration into its larger cities, which has
resulted in a huge shortage of housing. This is growing year
by year, and the banks are requiring larger deposits for
people to buy property, with ever more stringent criteria to
fulfil to pass the mortgage application. The result is a massive
increase in the demand for rental property, particularly for
rooms in shared houses.
This is why R2R can work extremely well as a strategy. It’s not
affected by any fluctuation in interest rates by the banks. As
long as you work your numbers carefully before committing
yourself to a deal, it can very quickly result in a decent sized
portfolio, large enough to replace the day job income.
Some people refer to this as a no money down (NMD)
strategy. Whilst there is no purchase taking place, and thus
no deposit is required, there will be some money needed, not
least for furniture if the property is unfurnished. This may be

your money, or it may be an investor’s money. So, it is more
realistic to call it a “some money down” strategy (SMD).
Why would a property owner let me manage their

property?
Hmm, good question. Why not use the local letting agent?
Of course, many owners will do exactly that. However, as you
can see from the table below, the actual amounts falling into
the owner’s bank account each month are often considerably
less than the headline rent.
Managing Agent Rent 2 Rent
By the time you take off agent fees, maintenance and void
periods, the number shrinks fast!
Many owners decide to self-manage their properties. They
might have heard about the multi-let model, and tried it
themselves, but are having a tough time managing all the
tenants. Unfortunately, often the usual landlord headaches

of maintenance bills, voids and problems with late rent prove
too much for them, and therefore they’re rather keen to
hand these issues across to somebody else! Most landlords
just want a hassle-free life, with passive income. It will be a
minority of owners who are happy to run with the proposition,
but that’s fine, because there are thousands out there to talk
to and persuade that this is a sensible route to take…
What are the criteria?

How do you start looking for properties which tick all the
boxes? The first thing to consider is location. Pretty much the
same criteria I applied in Chapter 3 to the HMO areas, applies
here too. Rent-to-rents are HMOs, and therefore need to be
central or close to transport links, and preferably close to
decent bars and restaurants.
A top tip here is to have a walk round the student rental parts
of town. These have the advantage of already being set up
as HMOs, which means there should be no requirement for
you to put in fire doors, alarms and smoke detectors. The
owners of these properties start to advertise in January for
tenants to take over in the September. If a house hasn’t been
let by Easter, there is one seriously worried owner, as the
consequences of having an empty house come September
could be catastrophic! Keep an eye on those houses still
looking for tenants, as this is prime R2R opportunity.
The properties must be able to house 5 tenants, unlike HMOs
which you own and have a mortgage on, where you can get
away with 4 tenants (because the mortgage repayments on
an owned HMO will be a lot lower than the rent required by
an owner on a R2R deal). In a R2R, if you only have 4 tenants,

this will rarely leave enough profit to make the whole exercise
worthwhile. Just as with HMOs, the bills are all paid by you,
and this includes council tax, water rates, gas, electric and
broadband.
The ideal tenant/bathroom ratio is 3 to 1, but 4 to 1 is
acceptable. There will often be an en-suite to the master
bedroom, and a separate bathroom, allowing 4 to 1 to work
just fine.
There’s no doubt in my mind that an en-suite will always
let quicker and get a higher rent. I have persuaded owners
to contribute to the cost of putting an en-suite into a large
bedroom, on the basis that it’s adding value to the house. A
typical en-suite can be put in for £2500. Nothing fancy – just
shower, loo and sink. If not an en-suite, then just an extra
shower room in the house, allowing you to keep to the ratio
of 1 to 4, can add lots of value.
This leads nicely into my next subject – the art of negotiation…
Negotiate Hard
The old saying “always ask for twice as much as you think you
will get” is worth bearing in mind. Remember, you don’t own
the property, and you don’t have an option to buy where you
can lock in equity for the future. Your only source of profit is
the monthly cash flow. It is therefore very important to reduce
the amount that you spend getting the property ready for the
tenants, as this is all coming off your bottom line. Negotiate
hard with the owner before you sign any paperwork!
Ordinarily, I would start by asking the owner to pay the full
costs of bringing the property up to specification. If they

moan, my first line of defence is to mention that no estate
agent in history has ever paid for a house to be brought up
to spec! Ok, I’m not an estate agent, but you get my drift.
The thing is, I fully realise that they are unlikely to pay for all
the work, and I’m prepared to go 50/50. However, if I make
this seem like a concession on my part, that builds a bit of
credit when we start discussing rent. C’mon, Mr Owner, I
gave ground on the refurb costs, your turn to give ground on
the rent! And guess what? This strategy works. Ultimately, it
is about give and take.
Some of the houses that you will be offered will be in a very
poor state of decorative repair – structurally sound, but in
need of quite a bit of TLC. Certainly, many of them will need
a full paint job and often new carpets. The chances are the
owner doesn’t have the money to do this work himself, which
is probably why you have been offered the property. This is
where you really do have to take a view, and work through
the numbers very carefully. As a rule of thumb, your total “in”
costs should never exceed the profit that you will make from
your first year, and this is where a 5-year term is agreed with
the owner. For example, if your net profit is going to be £650
a month, don’t go beyond £7500 in total spend. This means
that while year 1 will be spent recovering costs, you will then
have 4 years of profit.
In the scenario above, if the owner isn’t able to contribute to
the refurb, they need to be flexible on the rent, at least for
the first year or two. Most things can be negotiated. Let’s say
their contribution for the refurb would have been £3000. This
can be recouped by reducing the rent by £150pcm for the
first 20 months. If that works for the owner, job done.
Because compulsory licensing is coming in for all HMOs this

year (2018), there can be a fair old cost attached to bringing
the property up to speed. The sort of things that will need
to be included are interlinked smoke alarms, fire doors and
a fire alarm system – which can set you back £3000-£5000
depending on house size. This all needs to be brought into
the discussion with the owner. It’s unlikely that they will pay
for more than half the cost, but you never know. If the deal is
sweet enough, and the pain they’re currently experiencing is
acute enough, strange things can happen…
If you don’t have the funds yourself to allow for this level of
spend, go back to Chapter 4 and work on bringing private
investors into your business. A £20,000 loan paid back with
rolled up interest over 2 years at 10%, would give your investor
£24,000. This could give you the funds for 5 R2Rs. If these
give a net profit of £600 each, they’ll bring in £72,000 over 2
years, allowing for a good chunk of profit for you. Plus, if they
are 5-year deals, you then have £36,000 a year from these
three for the final 3 years, which makes a total of £108,000.
After all that, it’s fair to say that your investor will be keen to
re-lend you some funds. So, be creative!
Case Study
I had a call from a landlord in early 2016, who had received
my A4 flier advertising “guaranteed rent”. We arranged
to meet at his property. It was only a 5-minute walk from
my house in Cheltenham, welcome news and the first box
ticked!
The property was an impressive three storey semi-detached
Edwardian house, with 4 bedrooms on the first floor, two
more (en-suite) bedrooms on the second floor, two large

reception rooms and a big kitchen breakfast room on the
ground floor. I was trying hard not to show my excitement…
The owner had bought it 6 months earlier, and hadn’t
skimped on the refurbishment, spending £160,000 in total.
The market value of the property was £750,000. He had
originally decided to let it out via an agent as a single let
to a family, but having seen my ad, was keen to discuss the
concept of a “walk away” arrangement – where he had his
guaranteed rent coming in every month.
He had suffered voids before with other properties, and
having spent quite heavily on the refurb, was keen to avoid
a repeat. He was also in the process of getting rid of a
tenant on one of his other properties – via the courts, so
the thought of the “no hassle, have a passive income” route
had its appeal.
As a single let, the property would command £2300pcm.
The owner understood that after the agent’s fee, at 10%
plus vat, he would be down to approximately £2000, before
the impact of maintenance or voids.
The issue I had with the house’s layout was the tenant/
bathroom ratio. There was potential for 8 tenants in total.
There were already 6 bedrooms, and both reception rooms
could be turned into bedrooms. I would usually keep one of
them as a lounge for the tenants, but the kitchen was very
large – allowing for a large dining table, plus a TV/sofa area,
which in turn removed the need for a separate lounge. The
biggest problem was the lack of bathrooms. There was only
one main bathroom, and two en-suites in the attic rooms.
This would mean the remaining 6 tenants sharing one

bathroom, which was not an option.
I was really keen to take this house on, as I knew it would be
very profitable, but I had to find a solution to the bathroom
situation. What it needed was for en-suites to be added
to the two largest first floor bedrooms, and a separate loo
to be put in under the stairs on the ground floor. I had my
plumber price it up, and it came to £8000.
I discussed this with the owner, and pointed out that it
would add at least £8000 in value to the house, so would
he consider stumping up? Err no, he wouldn’t. Hmm, ok.
He had already spent a lot of money on the refurb, and was
happy to discuss the R2R option as long as it didn’t require
him to spend any more cash on the house! If the numbers
worked, I decided I would pay for the works myself.
My projected numbers
Money required to be spent prior to taking on tenants:
En-suites and WC: £8000
Fire doors, interlinked smoke alarms and emergency
lighting: £4500
Furniture (house was unfurnished) to include 2 fridges and
large TV: £7000
Total spend: £19,500
(He had already installed a decent fire alarm, so I was spared
this cost.)
Revenue projection: These were large rooms, and the house

was a 5-minute walk to the centre of town. It had a decent
garden and parking for 4 cars, so would be in great demand.
I was confident the rooms would get £550 a month for the
en-suites, and £500 for the rest.
Total revenue:
4 x £550, plus 4 x £500 = £4200
Outgoings:
Rent to owner: £1800
Bills: £600
Voids/maintenance: £420
Total: £2820
Potential profit: £1380pcm
I negotiated a guaranteed rent of £1800. The owner would
get this come rain or shine, and I felt this was a good deal for
him. He wanted a minimum of £2000, but when I pointed
out that I had picked up all the costs for the en-suites and
WC, adding value to his house, he relented and settled
on £1800. This left a profit of £1380 per month. In reality,
there would be little spend on maintenance on this recently
renovated property, and I would expect little or no voids, as
it was in such a prime area with great facilities. Thus, the
£420 figure allowed for V/M would probably be a lot lower.
Total profit per year came in at approximately £16,560 (in
reality closer to £20,000).
My total “in” spend was likely to be £19,500. This is a lot for

a R2R, but the profit was good. If I could sign a 5-year deal
on this property, the total profit would likely be 5 x £16,500
or £82,000. Taking off my initial spend of £19,500, this still
left me with £62,500.
Plus, if the arrangement worked well for the owner, there
was a good chance he would extend the term beyond
5 years, increasing my ROI. All things considered, I was
prepared to break my rule of not spending more on the
property than my first year profit.
The owner was a bachelor in his 50s, and was never likely
to want to live in the property. He made it clear that the
income would be a top-up on his pension. So, whilst he was
happy to sign the 5-year initial term, he confirmed that he
would be happy to extend if all was going well. The win for
him was the £1800 dropping into his account every month,
and not having to do anything himself.
We signed, and it’s a great house, which so far has had no
voids and minimal maintenance.
Important Point
At first, I tried to get the owner to agree to a lease option, but
he wasn’t interested. I wasn’t surprised at this, as he ticked
none of the boxes which I described in Chapter 4. He wanted
this house as a pension, and had no intention of selling.
Had it been a lease option, I would not have worried about
spending the extra on the en-suites, as it was an investment
in a property that I would either own myself one day or would
be selling and benefiting from the added value.
A word about planning: Once the number of tenants rises

above 6, you will need to get planning permission from
your local council. As I had 8 tenants in this house, planning
was required. It’s a full application, but as long as you can
demonstrate that there is adequate parking along with areas
for bin and bike storage, it shouldn’t be a major problem.
Maintenance and Insurance

With a lease option, you’ll remember that I offer the full
repairing and insuring lease (FRI), which means that I’m
responsible for all maintenance. With a R2R, I generally
have an agreement with the owner where I pick up the
maintenance bills to an agreed monthly limit, usually £100
a month. The owner will be responsible for anything over
this amount, such as a boiler failing or a cooker that needs
replacing. There have been very few occasions where I’ve
had to approach the owner to put their hand in their pocket
to pay for anything substantial. A top tip is to email the owner
every 3-6 months with a brief overview of how everything
is going, and always include photocopies of all maintenance
bills paid. Psychologically, this is very powerful, as it shows
you taking care of their property!
If I have a deal where the profit is over £800 a month, and
the owner is negotiating hard on the maintenance being
all-inclusive, I will consider accepting the responsibility. With
this amount of profit, you’ll build a mini-war chest in no time
at all, which is vital for those rainy days.
Building insurance should be the responsibility of the
property owner. They need to make sure the insurer knows
it will be used as a HMO. You may decide to take contents
insurance out, but this will only cover what you own within
the house. I tend not to, as it’s mainly furniture and kitchen
essentials (crockery, cutlery etc), and by the time I’ve paid
the first £100 of a claim and then had my premium raised as
a result of making the claim, it’s hardly worth the effort or the
expense. A kettle or a toaster only costs £20, so I’m happy to
run the risk!
You also need to think about Public Liability Insurance, as you
will be running a business. In theory, anybody could make
a claim against you (tenant tripping over an uneven carpet
in the house) and being insured will cover this scenario. Like
all things in this book, I can’t offer any professional or legal
advice, so you need to talk to an insurance broker who will
guide you. I take it out for my property business, and it’s not
expensive.
Running the numbers

As with all property deals, you have to “run the numbers” to
make sure that the deal stacks!
If you’re not completely honest with yourself at this point,
or you haven’t carried out the necessary research, the actual
profit on a deal can be a few hundred pounds lower than the
expected profit.
It can be tempting to massage the numbers to try and
convince yourself that you’ve got a cracking deal, when in
reality it’s plain average or worse still, a lemon! I’ve seen this
so many times, particularly with people who are early into
their investing journey. They are so keen to “get a deal under
their belts” that they can blind themselves to the numerical
reality!
The best way to avoid this trap is to use a deal sheet, where
the emotion is taken out of the deal, the numbers go in and
the ROI pops out! However, the deal sheet is only as good as
the criteria you include.
As an example, I’ve recently started mentoring somebody
who had been following a rent-to-rent strategy that has gone
seriously wrong. Their “deal sheet” was more like the back of
an envelope, and the numbers weren’t accurate – on three
counts:
Firstly, he had been optimistic regarding the rent he thought
the rooms would attract. A bit more research on the website
Spareroom.com would have given a reality check. He was
expecting £400 a room per month, and was getting £350.
Across 5 rooms, this is a chunky £250 less than expected.
Secondly, he had underestimated the bills that would need
paying. For 5 tenants in a HMO, he needed to be allowing
£450 a month, but was only allowing £350. Another hundred
pounds off the projected profit!
Finally, he wasn’t allowing for any maintenance or voids
(empty rooms). I would suggest allowing 10% of gross rent.
His gross rent was £1750, so he should have taken off £175
to cover this.
Had these all been in a spreadsheet, my mentee would have
seen that the net profit each month was closer to £225, rather
than the £750 he had projected! These errors were repeated
across his portfolio of five rent-to-rents. He was managing
these himself and was clearing between £800 and £1000 a
month before tax, instead of the £3000 he had anticipated.
Not only that, but he was locked into the deals for another
two years! Not catastrophic, but not great either.

All of this could have been avoided by checking the numbers
more carefully at the outset!
How to work out the rent to offer the landlord

This is a straightforward calculation, and involves knowing
four figures:
1. Gross rent from the tenants.
2. Monthly bills total.
3. Voids & maintenance allowance (10% of gross revenues).
4. The minimum monthly profit you want from the deal.
Add 2, 3 and 4 together, and then subtract from 1.
The number you are left with is the maximum rent you can
offer the landlord. Taking my case study above, I am looking
for a minimum profit of £800pcm on a R2R, (with no lease
option attached), so I would have been able to offer the
owner £2420 after running the numbers. It’s important to
remember that this is the maximum rent you can pay, not the
rent you have to pay! I negotiated a fair rent on the property,
taking into account market rent for a single let, but also taking
into account the large expense incurred by me up front.
A great way to become proficient at this is to practice! Head
across to Rightmove (properties for rent) and start searching
for properties in your area that would make great R2R
opportunities. Run the numbers on them, and you’ll soon get
an idea of the ones which are likely to work. The clue here is
when the rent you can offer the landlord isn’t a million miles
away from the rent that they’re looking for on Rightmove!
How To Work Out The Rent to Charge For Each

Room
I mentioned the website Spareroom.com in Chapter 3, when
discussing HMOs. Once you’ve put your town into the search
bar, you’ll see that you can search for “Rooms Wanted” and
“Rooms Available”, which will give you three insights:
1. What landlords are charging, and what people are willing
to pay.
2. The ratio of rooms available to rooms wanted.
3. The standard of accommodation. Most ads have photos,
so you can gauge room size, en-suites or not, quality of
décor, etc. This tells you a lot about your competition!
Easyroommate.com is also worth a look, although it doesn’t
have the number of properties that Spareroom has. You can
also have a look at Rightmove to see the rent being asked on
1-bedroom flats or studios. This will act as a marker, as you
don’t want to exceed this, even though people renting a flat
don’t have all their bills paid.
Top Tips
These are powerful platforms for finding tenants, and it’s
worth spending time getting to know how they work. For
example, on Easyroommate, once you’ve posted your first
advert, you can send out a mass email potentially contacting
hundreds of people to let them know about your room.
Be proactive, don’t just wait for tenants to stumble across
your ad! You can also download the app for both platforms,
making it easier to manage whilst on the move.

Consider paying a premium for having your ad appear in bold
on Spareroom, as it will then appear higher up the listing, and
your main photo will appear on the search results page. Bold
ads get twice the enquiries of a free ad. It’s only an extra £12
a week. If you’re advertising a room for £400, and it takes a
couple of weeks longer to fill because you aren’t generating
traffic, that’s a loss of £200! An extra £12 is small beer by
comparison.
Take a video of your room, and put this on Spareroom and
Easyroommate. This will make your advert stand out, because
so few people take the trouble to do it!
Secret Shopper
You can only see so much from a photo, so why not respond
to a few ads and book in a viewing? Depending on your age,
you will either be looking for yourself or on behalf of your
son/daughter! This will give you an excellent insight into what
your competition is offering, and will build on the perspective
that you gained by researching Spareroom. You will thus be
better informed about where you need to be pitching your
offer to all these prospective tenants.
Test The Demand

Before you commit yourself, why not put a dummy ad up in
Spareroom, just to monitor the response rate? A bit naughty
perhaps, but it will very quickly give you an indication of
demand in your chosen street! If you’re almost ready to go
with a property and this is your final testing ground, maybe
tell those enquiring that you will have another house on
the same street in a few weeks, and see if they would be

interested.
There is so much more detail which I could dive into with
R2R. However, hopefully the above should be enough to get
you started. Rent-to-rent is understandably very popular with
new property investors, who have limited funds.
Serviced Accommodation (SA)

This strategy has become very popular over the last few
years, and is worth considering if you are just coming into
property investing. It refers to fully furnished properties,
which are available for both short-term or long-term let.
The accommodation may also offer facilities similar to those
offered by hotels.
The most popular (and arguably most profitable) property
type for this strategy is a city centre apartment. You can buy
them and run with this strategy, or you can operate them on
a R2R model, similar in principle to that described for the
HMO model.
Most SA operators describe their properties as “units”. This
could range from an en-suite room in a shared house, more
likely to be aimed at blue collar contract workers, or possibly
overseas students in the country for a short period learning
English. The latter model works well when the property is
close to the college, as they probably won’t have the budget
to stay in a hotel for the weeks or months involved.
A friend of mine, who has a large portfolio of HMOs, has
turned some of them into SA units – where he now rents the
en-suite rooms out by the night, although most are taken for
a period of a week or a fortnight at a time. As a HMO he was

getting £90-£100 per week for the rooms. As a SA unit, he
gets £40-£50 a night. His occupancy level is less, but he only
needs to fill it 2 nights a week to equal the HMO income!
I am presently converting a large commercial building in
Gloucester into 110 en-suite rooms, in 22 pods of 5. This will
be part HMO, but almost certainly a section of it will be SA.
We will experiment with the different income streams and
adjust to suit.
A complete house could also be a SA unit, and people turn
large guest houses and hotels into SA unit. However, the
most popular unit is the 1 or 2-bedroom apartment. As you
can see, there is huge flexibility in terms of what constitutes
a SA unit!
Research Your Area & Your Market

As with all strategies, a thorough understanding of your
target area and your target market is essential before you
dive in! That being said, the first port of call before doing this
research, is to contact the local council’s planning department.
Different councils have varying requirements with regard to
SA units. Some won’t require any planning permission, while
others will see it as a “change of use” when a property starts
to be used as an SA, and may require prior permission. You
need to find out what the situation is before you get started.
Technically, a standard residential house or flat falls under
planning use C3, but many councils will deem a SA unit to
be planning class C1, which is for hotels, boarding and guest
houses.
Once you’ve clarified the planning, head across to Booking.
com and Airbnb to find out what’s already available in

your chosen area and what prices are being charged. This
will quickly give you an idea of whether there is enough
demand, and also allow you to do some projected cashflow
calculations.
If you’re planning on targeting the short-stay holiday/tourist
market, the weekends will be most popular with visitors.
Have a look and see what’s still available on a Thursday
for the coming weekend. If there are still lots of empty SA
apartments, this suggests that the market is close to being
saturated. The better route may be to look at short-term
corporate lets, which will mean building relationships with
local businesses.
Whether you’re buying the apartment yourself or operating
it on the R2R model, you must check to see whether the lease
allows short-stay accommodation on a commercial basis.
Many leases will only permit a standard tenancy agreement,
which allows you to rent the property out for a minimum of
6 months at a time.
The Numbers
If I owned a 2-bedroom apartment in a smart area in my home
town of Cheltenham, the monthly rent I could charge to a
tenant on a standard tenancy agreement would be between
£700-£1100 a month. My only outgoings would be mortgage,
insurance and possibly ground rent and service charge. The
tenant would be responsible for the payment of council tax
and all utility bills.
If I decided to put the same apartment in my SA portfolio, I
would be able to command between £90 and £140 per night,
depending on the time of year, and whether it’s midweek or

weekend. If I can achieve a 70% occupancy rate, which is the
average figure nationally for SA accommodation, this would
give a monthly gross income of £2310 based on a rate of
£110 per night.
From the £2310, there are a number of deductions each
month:
• Council tax, Wi-Fi and utilities.
• Cleaning and Laundry.
• Booking fees payable to Booking.com etc.
• Credit card commission fee.
For a one or two-bedroom apartment, council tax, Wi-Fi and
utilities will be approximately £200pcm. This is a fixed cost
(assuming gas and electric usage are approximately the same
each month). However, the big variable cost is the cleaning
and laundry. The amount will depend on how often the
unit has to be “turned around”. This is a crucial point with
SA. If you have 5 single people staying one night each in a
unit, compared to a group of 4 people staying for 5 nights,
the difference in cleaning and laundry costs will be huge! It
may only cost £30 for the group stay, but could be as high as
£90 for the five single people. This will impact heavily on the
bottom line. This is why you shouldn’t become too obsessed
with occupancy percentages. In the above example, the
occupancy rate is the same. However, you can charge more
for the group, as it’s wise to have an “additional person”
charge, and your overheads are less.
Regarding booking fees, there are many online travel agents
(OTA), with Booking.com being the biggest, and Airbnb is

also very popular. They have a different operating model,
with Booking.com charging the owner 15% of the booking
price, whereas Airbnb will charge the owner an admin fee
of 3%. However, Airbnb also charges the guest 12%, which
makes the booking more expensive for the guest compared
to Booking.com.
For example, a £100 room being booked through Booking.
com will cost the guest £100, as the guest pays no admin
fee. Through Airbnb, the guest pays an admin fee of 12%, so
the cost to them is £112. However, the owner only receives
£85 from Booking.com, due to their 15% commission charge,
compared to £97 with Airbnb, who only charge the owner 3%
commission.
In addition, Airbnb won’t release your money until the guest
has checked in, whereas Booking.com will allow you to collect
your money at the time of booking – once you build up a
“Trust Score” with them).
As a new SA provider, you will rely heavily on Booking.com.
As much as 85% of your business will likely come through this
OTA.
Stress Test
Going back to my original numbers, I would always stress test
the proposed SA unit using the worst-case scenario figures.
By this I mean that 50% occupancy for one night stays with
a single person. You need to be breaking even at this point!
Once you’ve computed all the numbers into your spreadsheet
with this test, you will be clearer as to whether it’s a runner.
Using my example above on a 2-bed in Cheltenham, this

would give the following approximate numbers:
Revenue for £90/night for 15 nights = £1350
Mortgage: £400
Utilities, Wi-Fi and council tax: £200
Cleaning/Laundry based on 14 changes : £280
OTA fees based on 15% of £1350: £202
Credit card fees @ 2% of £1350: £27
Total expenditure: £1109
Profit: £241
This unit passes the stress test. However, this is with a
mortgage costing £40pcm. If it is R2R, you may be paying a
higher guaranteed rent to the owner, so this would have to
be plugged in.
The next thing to do is to run the numbers again at 70%, but
assuming an average of 2 people per stay for a stay of two
nights. This is more realistic in terms of your likely results,
and for the above example will give a profit of approximately
£950 from a total revenue of £2100.
Using the R2R model, you could quickly acquire half a dozen
of these over a 12-month period, each giving an annual
profit of £10,000. Would this £60,000 reach your “financial
freedom” figure?
When you make a success of the first unit, and decide
to expand, try and keep your units as closely together as
possible. This will reduce your operating expenses. If you’re

trying to turn around several apartments on the same day,
it’s going to be a headache, especially if travelling distances
are significant. Eventually, when you get to 5 or 6 units which
are all close to each other, you will start to benefit from
economies of scale, and profit percentages will rise.
It’s another great “some money down” strategy!
A different model within SA

A friend of mine operates an interesting variant of the SA
model. He takes over apartments from owners in the same
way as one would with a R2R, except that he offers no
minimum rent. However, the owner gets all the revenue from
the SA unit, minus his 20% management fee.
This is a way of de-risking the R2R model, as he doesn’t have
to hit a monthly figure. However, in reality, he runs a very
slick business and the owners get great returns. Remember,
they have nothing to do with the apartment and all their
income is passive.
My friend even takes on completely new blocks of flats for
investors with deep pockets. The average unit in his managed
portfolio has a gross revenue of £2100 per month. His fee from
this is 20% or £420. He now has 75 units under management,
which gives his company £31,500pcm in revenue, and he only
employs 3 staff. I told you it was slick!
A Joint Venture model

With the above in mind, think about joint venturing with an
investor. Choose somebody who doesn’t want to be involved
in the running of any property, and just wants to get a decent

return on their cash.
When you explain the above model to them, you’ll need to
run some numbers as an example. We’ll assume the investor
has £200,000 to put into any deal.
Let’s say that 2-bedroom apartments in the right area of
town, within the SA model, are on the market for £160,000.
The investor’s £200,000 will allow 4 deposits of £40,000 to be
paid, plus purchase costs and furnishing of all 4 apartments.
The total loan with the bank is 4 x £120,000 = £480,000.
Mortgages are at 75% loan to value, with each loan being
£120,000. I’ll work off a 3% interest rate, although as I write,
there are 3-year fixes available at 2.24%! The monthly interest
payment would be £300 @ 3%.
I’ll use the numbers from my earlier example at 70%
occupancy rate on a 2-bedroom apartment. Here, the gross
income each month was £2100, and the profit £950. If you
agree to split the profit 50/50, there would be a total profit
of £950 x 4 = £3800 per month. Your share would be £1900.
A good return on your efforts, no?
Alternatively, you could set up a limited company together,
where the responsibilities are transparent. This is what I have
done with 2 of my investors, and it’s my responsibility to
source the property, negotiate the lowest purchase price, set
them up ready to rent and be responsible for managing them,
or bring in a competent management agent (I do the latter
as I don’t want to be a property manager). My JV partner’s
role was to provide the initial cash pot. All profit goes into
the company and will be used in due course to increase the
portfolio. We are each 50% shareholders in the company,

which means that I also have 50% of the equity. This model
will suit some people, but not all.
I hope this brief foray into R2R and SA has helped you to see
how these two strategies can be utilised to quickly accumulate
monthly cashflow, and move you closer to the day when you
wave your boss goodbye!
The Most Important
Investment of All
If you’ve made it this far, well done! I’ve tried to explain the
main strategies you can follow to make your property journey
a success, in as short a time as possible. Many of these
strategies don’t require a lot of cash, which opens things up
to pretty much anybody in the UK, regardless of background,
income, gender, race or nationality. Property investing used
to be seen as the preserve of people with surplus funds and
a high income. Not anymore!
Investing in yourself is, without doubt, the best investment
you will ever make. For the majority of the population, their
education ended the day they walked out of the school gates.
You’ll remember from Chapter 1 that formal education does
nothing to lift the curtain on financial understanding and
investments, not to mention personal development and goal
setting!
I had to borrow the money to pay for my property mentorship
in 2015, but I made this £18,000 back on my first deal. In
terms of return on investment, it has been repaid many
times! In fact, without this investment, I wouldn’t have had
the knowledge or indeed the support to build up my £4
million portfolio in such a short space of time.
The thing is, there’s nothing special about me. A schoolteacher
who had a business collapse in 2011, and went on to clean
carpets for 4 years before deciding it was time to make a
change, my own beginnings are no different to any other
person. I sought out a mentor because I didn’t want to learn
by trial and error, making mistakes which could have been
avoided. I wanted to work with somebody who had been
there and done it – somebody who had walked the walk!
I am still very much an active purchaser and trader of
property, and continue to build my portfolio. I also continue

to invest heavily in my own personal development and am a
current member of two mastermind groups, neither of which
is directly linked to property. One is in personal development
and the other is in business and digital marketing. But here’s
the thing: there is always an overlap into property, as the
skills needed are interchangeable and complimentary.
As I mentioned in Chapter 1, understanding the different
strategies in property is relatively straightforward. However,
you will need to be mentally tough on your journey, as
there will be speedbumps. If I was asked to name the most
important trait required to ensure success, it is persistence –
the ability to keep going in the face of adversity. Take comfort
in knowing that many have succeeded before you, and there’s
no reason why you can’t copy that success!
As well as the one-to-one property mentoring which I offer, I
now offer a completely free day with me. Here, I share tonnes
of information with people starting out on their property
investing journey, to try and help them make progress quickly.
I urge you to take action and book yourself on this course. All
you’ll need is an open mind, a notebook and a willingness to
build on the learnings from this book! It would be good to
hear about your circumstances. As an ex-teacher, I still get a
kick out of sharing stuff which enriches lives! Just go to www.
propertyinvestorsbootcamp.co.uk
You can also subscribe to my YouTube channel, where there
is lots of useful content about all aspects of property. Plus,
head across to my website for even more tips!
To your success,
Peter Rowan

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First published in 2018

Copyright © 2018 Peter Rowan

Chapter 1: Why Property? 19

Chapter 2: How to Buy Property With None

Chapter 3: Maximise Your Cash Flow Using

Chapter 4: The Best Kept Secret in Property

Chapter 5: Finding The Right Property 93

Chapter 6: Making money from sourcing and

Chapter 7: Other Ways To Create Cash flow:

The Most Important Investment of All 155

It was December 2011. I was standing by the window of a

earth are you talking about?”

The Good Days

The Perfect storm

At 1200 feet, in the hills of Exmoor, we didn’t see the road

The Hamster Wheel

She looked at me, clearly confused. “But…but…” and she

Truth be told, I was pretty low. At 53, I couldn’t see how I

A kick up the backside

I could be found at my usual window seat. More often than

This proved to be a turning point for me. Realising what an

“For things to change, you have to change.” Jim Rohn

is no substitute for knowledge. Within 2 years, I had built

“The main reason people struggle financially is because

driving off into the sunset with a super-duper pension, are

“Formal education will earn you a living. Self-education will

of successful delegation. Maybe some of you reading this are

year. With a pot of £45,000, this is £2250 a year, or £187.50 a

The benefits of property investing

classes, over time, and is safe. There is a well-known saying:

If I asked my bank manager to lend me £100,000 to invest

you would now have a paper profit of £50,000 (5 x £10,000)

always recommend you do) as a form of pension, then having

But isn’t property investing risky?

On the other hand, I have another pal who regularly invests

3. Rental demand could have slackened off, leaving me with

in and the bills going out. We will look at this in detail in

The Five Top Tips

which gives you the number of rooms wanted compared to

flow at £1700 per month between them, so paying the

Why don’t more people invest in property?

What sort of returns can you expect?

Now I need to work out the return on investment. This is the

The main reason people don’t get into property investing is

Rinse and repeat!

Case Study – My first purchase: December 2015

application, and be ready to exchange and complete the

include new carpets, a full internal paint job and new

be able to use other people’s money (OPM) to allow me to

A quick word on mortgages

Another difference between a BTL mortgage and a residential

How do I find the investors?

return on their cash.

a one-to-one basis over a coffee, sometime in the next

Ok, I’m being a tad unfair. In all seriousness though, if you’ve

I try and come away with a minimum of three confirmed

The property was in a poor state, and needed £44,000

Andrew’s example is a great way of explaining to people who

about increasing the debt on their own home, it is cash that

Very important example

In our example, we are using Andrew’s solicitor. He has a

Remember, his increased mortgage cost on his own house

ISBN: Insert here