Ever wondered what lenders are really looking for when you’re pitching for a property loan? It’s not just about numbers and spreadsheets – it’s about presenting a compelling story that gives them confidence in you and your project. After years in the lending world, I’ve boiled it down to a simple mnemonic: PARSR. Get these five elements right, and you’re well on your way to that coveted, “Yes!”
Cashflow leasing introduces an innovative approach for property investors to reduce upfront costs on property purchases. This method is particularly relevant for investment strategies with strong cashflow, like houses in multiple occupation (HMO) or Serviced Accommodation (SA) properties.
In this article, I’ll explain cashflow leasing and how you can use it in your own business to save money on taxes, increase rental income and spread your capital across multiple property deals.
Cashflow leasing works similarly to a conventional lease arrangement. Instead of an upfront lump sum, expenses are distributed across several months, typically spanning up to three years. However, the distinction lies in its application – rather than financing a car or a new watch, it serves as a funding mechanism for furniture acquisition.
Furniture comes with a substantial price tag; a single sofa alone can range from £1,500 to £2,000. When combined with dining tables, beds, wardrobes, and other household essentials, the investment required to get a property photoshoot ready can easily exceed £10,000.
These costs rise even further when furnishing high-end holiday homes or an HMO with a large number of rooms. For many investors, venturing into Rent2SA (R2SA) or Rent2HMO (R2HMO) scenarios, limited capital poses a challenge. This means that the idea of investing in furniture has the potential to break what initially seemed like a lucrative deal.
It is no secret that both the HMO and SA strategies have become increasingly competitive. It seems that many more people are investing in this strategy every month, which makes it harder for established properties to stand out against the crowd and attract more guests or tenants.
One of the main ways to distinguish yourself, is to provide an experience rather than a property that looks like it’s been furnished on a budget. Higher-end furniture attracts higher-class tenants and guests. If you’re investing in HMOs, then a nicely refurbished room means you can demand more rent and lower your void periods. If the SA strategy is more your thing, then you can charge more for your property per night and long-term guests will be more attracted to staying with you.
But the problem with this is that it can be expensive. Nice furniture rarely comes cheap, unless it’s second-hand. Cashflow leasing allows you to buy the furniture your heart desires and split the cost over three years, meaning there is no upfront, blow to your bank balance and you can pay the finance off through the profits of your rental/nightly income.
An additional benefit to this strategy is that all payments are tax-deductible, offering further savings for your business.
Saving your capital also means that you can spread your money across multiple projects, rather than having one deal sap most of your savings.
Let’s say that you want to buy a brand-new sofa. You’re going high-end and the one you have your eye on costs £6,000. You’ve already paid a fortune in purchasing fees, renovation costs and bridging finance repayments. Spending another £6,000, that could instead be invested into another deal, just isn’t feasible.
If you were to lease this sofa, then the costs could look something like the below. However, it is worth noting that this price can vary and homeowners tend to get better rates than those who don’t own a property.
Value: £6,000 – Lease Value £5,000
Repayment Terms: 3 years
Monthly Premium: £201.02
Overall Cost: £7,236.90
Interest Paid: £2,236.90
Corporation Tax Relief: £1,375.01
Nett Cost of Finance: £861.89
Cost Per Year: £287.30
Supplier Gets Paid: £6,000 (£5000 + VAT)
As an added bonus that lies outside of furniture, you can lease materials for your refurbishments. This is another great way of lowering upfront costs and can also be used to protect large blows to your capital, if an unexpected problem arises when you commence work. The leased payments can then be paid off through your rental income or, can be paid off in one lump sum after sale or refinance.
I hope that you have found this article useful and that it has opened your eyes to other finance options available to you, when you’re faced with the daunting cost of furniture. I hope that, by lowering the barrier to entry, more people can begin to invest in property and create beautiful places for people to live, work and raise families.
If you want to explore how cashflow leasing can help you to grow your property portfolio, without needing to invest tens of thousands of pounds in furniture, then get in touch using the information below.
Website: https://cashflowleasing.co.uk/other-partners/
Email: sales@cashflowleasing.co.uk
Serviced accommodation is becoming a highly competitive strategy in the property sphere. More and more people are letting out properties to holiday-goers or contractors in exchange for nightly income.
While it is nice to see more people making money through property, it does mean that running a successful serviced accommodation business is becoming more difficult than ever due to a saturated market.
If you go to Airbnb and search for any popular town or city, you’ll see an abundance of properties available under short-term let, each one looking the same, or very similar. The key to succeeding in this competitive market is to stand out, and in this article, I’m going to show you how to do just that using the power of furniture.
Think of your SA property like a magnet. You want to attract the right guests. For you, the right guest might be a wealthy individual who’s looking for a high-end break that they’re happy to pay top price for. Alternatively, it could be a contractor who’s looking for a comfortable place to call home for a few months.
The point is, that if you fill your property with high-end furniture, you’ll attract high-end guests. Whereas if you fill your property with the first piece of furniture you find at IKEA, you’re unlikely to attract the demographic you are aiming for.
Think about the demographics that are likely to visit your investment area, and then think about which of them will be the most profitable guest for your business. Then, when you’re looking for furniture, you’ll have a clearer idea of what will be appealing to them.
The mistake that a lot of investors make is that they try to cut costs in the wrong areas. So, they get the cheapest furniture they can find. While there is nothing wrong with this, it does mean you’re negatively impacting your nightly value, and repelling long-stay guests.
The main thing to spend your money on is the main features, like your sofa and beds. These are the things that people will be sitting/sleeping on and being comfortable is vital if you want to keep someone in your property for a long time.
The next key is to be clever with your interior design. You can buy cost-effective items to go around your property that make it feel ‘homely’. For example, candles, bookshelves and stands. These will prevent your photos from looking empty on Booking.com and Airbnb, and they also allow you to style your property in a way that is more attractive to guests.
Companies like ours even offer furniture packs. These packs have been designed to include everything you need, all at a reduced price. Not only do furniture packs save you money, but they also save you time, as you don’t have to shop around for each individual item.
Our role is simple: we’re here to increase the value of your SAs and help you attract long-stay bookings. We do this with a variety of furniture packs fit for all budgets and guest demographics.
To discover more about how we help you, check out our website here. To speak with us directly for a free consultation, get in touch by clicking here.
Architecture is one of those black magic jobs. We know it’s important, and we know it’s impressive, but to many people, outside of ‘drawing pretty pictures’, it’s not very clear what architects actually do. Perhaps it’s my own ignorance, but I’ve always held this view. I could never fully wrap my head around what the practice entails and, more importantly, the role they play in property development, apart from drawings and CGIs.
So, rather than remaining in blissful ignorance, I decided to fill a gap in my knowledge and hopefully discover something that will benefit your property business.
A couple of weeks ago, I spent the day with MAC Architects in Harrogate. This included shadowing them on existing projects going through planning and even attending a site visit to a large and impressive private home.
Let’s put an end to this black magic once and for all and uncover what architects really do and why they’re more important than you might think.
Even for someone who struggles to sketch stick men, I was impressed by the effort that goes into an architect’s drawings. You see, every line (or wall) has to be drawn to scale. If that wall is a millimetre off on paper, it could be a metre off when the builder comes to create it in real life.
These drawings, which are basically floor plans, are then plugged into an incredible system that brings them to life. Small lines suddenly become rendered walls. Windows, doors, and furniture are added. You essentially get a 3D model of what the property will look like. You can even change the time of day to analyse how the sun and shadows will affect the property.
But what really surprised me was the knowledge that an architect must have. Certain minerals react differently with other stones or materials when exposed to moisture. So, if you build with stone or brick and use two types of stone that have this problem, then the property can become structurally unsafe when it rains.
It was at this point that it struck me that building a home isn’t as simple as four walls and a roof. You have to take into account sunlight, building materials, parking, and how the new property interacts with the environment. This knowledge, which architects have to train for seven years to acquire, is vital to the build process. Trying to build a property without it would be like performing surgery with your eyes closed.
Next up was a site visit to a lovely place referred to as ‘millionaire row’. It’s rightly earned this title since you won’t get much change from £3 million if you buy a house there. Mind you, you get a lot of property for your pound, with huge mansions that would take you half a day to walk around!
One of the properties on this row has recently been purchased and is undergoing refurbishment. It’s a dream home. The kind of property you put on your vision board. It has a garden so big that you could open a campsite and still have room to mow the lawn!
Now, this is a sticking point because many people pay architects for designs and then bid them farewell. But watching Kate, the lead architect, walk around a site full of builders pointing out snags and picking up on the occasional cut corner showed me why this was a bad idea. And it’s not just trades that architects manage. Many of them will also coordinate other professionals, like structural engineers and surveyors.
Managing trades is a skill, and most architects have it in abundance. They know how things SHOULD look, and they can point out things that would otherwise go unnoticed. In essence, architects are part designers, part planning consultants, and part project managers. If you hire the right firm, you really need very little involvement in your own project.
I am sure that, like me, you have heard the occasional negative grumbling about architects. Maybe you have had a bad experience with one. I suppose that it all comes down to the adage of ‘they’re not all bad’.
What I’m trying to say is that, after getting a peek behind the curtain, the way I view architecture has completely changed. I thought that architects were a “nice thing to have if you’ve got the budget”. Now, I think they’re a must-have. They’re seasoned professionals who will save you headaches and lost money by managing the project effectively and making sure the I’s are dotted and the t’s are crossed.
If you’re looking to save money, then don’t do it here. Maybe lay some cheaper carpets instead!
Finally, thank you to the team at MAC Architects for the opportunity to grow my knowledge. If anyone wants to speak with an architect you can trust, then you can contact the team using the details below.
Tel: 01423 528999
Email: info@macarchitects.co.uk
