How I sourced a HMO R2R in Nottingham by cold calling!
The art of walking away.
Have you ever been on holiday and tried to buy one of those tacky souvenirs but had to negotiate within an inch of your life to get it for a reasonable price? Have you ever made a final offer and then walked away only to be chased down the street?
I consider myself to be a bit of a negotiator so I do enjoy that. A few of my friends have commented on it once or twice before. In fact when on holiday in Thailand I was the only person that would haggle so I ended up organising and buying pretty much everything for four people (that took its toll).
So, against what you think from the title this article isn’t about walking away from a deal. Its more about a negotiation tactics that I like to think I’ve mastered and you could because it’s the easiest one. Warning, this tactic only works if your genuinely prepared to walk away so don’t throw it out Willy Nilly.
During my mastermind year I had a lot on. It got to the point where I really didn’t want any more deals as I just didn’t have the capacity to fulfil them. Despite this, I was of course active and one day I decided to walk around the student area in Nottingham. It was mid-September so my initial plan was to look for dilapidated houses. Put them on my S**T list (a list of horrible houses that I Landreg monthly on my iphone notes). Then send the landlord letters asking them to sell their property to me. With it being September, if they didn’t have students moving in at the end of the month I imagined they would be pretty motivated. But whilst walking around the area I noticed that most of the front windows had A4 sheets of paper in with contact numbers on. Apparently in Nottingham, in the student areas, you’re not allowed to erect to-let boards so this is how landlords advertised. I scrapped the S**T list for that day and began taking the numbers and the addresses down on a new list. Once I got home I had around 20 numbers and addresses to call. I began calling them one after another building momentum as I went. I asked them if they had tenants for the next academic year. If they said yes, I asked what their future plans where with the properties. Most of them had solid plans so they were deleted, but a handful of them didn’t have tenants for next year so I suggested that I take a look around and see how I could help them. I think two agreed to that.
Fast forward to a viewing. I’m looking around this house surprisingly enough it was tenanted a month or so ago and it’s a complete state. 70’s furniture, painted bathroom tiles, kitchen units with more grease on than a full English made at a roadside café.
At this point I couldn’t see how I could string a deal together unless I brought the property at a serious discount. And I mean serious discount. So, I made a hilarious offer on an outright purchase which the landlady rejected as she didn’t want to sell the property. Instead she countered me asking for what seemed to be a R2R deal. I looked at the numbers then sent her an email saying “I’m sorry the houses just need too much work for the kind of deal you are suggesting". For this to work you would have to contribute significantly to the renovation”. And that was that. I walked away in metaphorical terms. The deal only worked for me if she contributed and she would have to be crazy to go for that.
But she did and not on one property but on two.
So, what I’m trying to put across in one golden nugget is be prepared to walk away by making the offer a good deal for you and no one else. Don’t be afraid to offer something that you just can’t imagine the other side agreeing to. Be selfish and make it a deal worth doing, or don’t do it at all.
£10,000 vendor contribution
£10,000 my contribution
£1050 PM rental for 5 years
£2400 PCM gross income
£600pcm management/ bills/ maintenance
£750PCM NET cashflow
90% ROI year 1
This was a victorian 4 bedroom property, we moved the bathroom from the back of the house to the front of the house by splitting the large front bedroom, we then squeezed shower room into the larger back bedroom using the old toilet for the drainage etc. We got the 6th room by splitting the huge bedroom on the top floor and fitting a velux window.
This house photographed great, what you can't see is that most of the walls are the original wood chip etc! we had a very strict budget and to get it done we had to be more than frugal. We didn't replace any woodwork or electrics etc most of the HMO infrastructure was there already as it was a licensed property.
This house looks to be around 1940s interestingly enough this property had a loft conversion when I looked at it but the stairs didn't comply with regs, I use the word stairs when in fact they were more like ladders. So we did a regularisation application on the loft conversion with the council meaning we could predate the regulations so that it would of passed at the time it was originally installed. That helped tremendously with the budget as we didn't have to do a conversion from scratch. Instead we just added a few supports and got cracking. We added a bathroom upstairs and a velux window because bedrooms need windows right! we then moved the middle floor around and fitted a bathroom at the front of the house. This house photographed great, what you can't see is that most of the walls are the original wood chip etc! we had a very strict budget and to get it done we had to be more than frugal. We didn't replace any woodwork or electrics etc most of the HMO infrastructure was there already as it was a licensed property.