Having a property investing Power Team is something that makes sense if you intend to invest in properties. This post is a follow-up on the previous posts in this series on investing in properties abroad with a focus on the UK.
If you have not yet read the previous posts, you might want to start from the beginning with this post: Property as an investment? – It’s up to you!
A Power Team?
A Power Team is just a collection of people/experts you need (or want) to have around you to make sure your property investments (portfolio) work as well and smoothly as possible. Having a great team of people working with you means that you will have to spend less time on your portfolio which means more time to do what you want to do.
This is the reason why it’s so crucial to make sure one has a great team of people to work with in relation to every property. Otherwise it will mean more time, hassle and likely costs as well. Having a team of professionals is of course totally optional as some of you might want to manage your portfolio on your own whilst others want to be able to spend their time differently.
Another aspect of having a great Power Team to work with (or to outsource to) is that it gets professionally done and it becomes much easier to become an owner and not just an operator of a business. Again, this of course depends completely on the purpose of your investments and if you want to be operating or own. I for sure know what my plan is and as I have explained before, that’s also one of the reasons as to why we have decided to invest abroad and not only domestically. It forces us to outsource to others as we can’t (and won’t) be there physically all the time to manage the operational parts of our investments.
The Power Team you choose to put together will depend on your circumstances, what and how you intend to manage it and the type of property etc.
In this post I will just go through the most commonly used players in a Power Team, especially if one intends to own properties in a different location or even country. My point of reference will often be the UK as that’s where I’m active but there are similar players in most countries (if not, then maybe it’s a good business idea). By no means will this be a complete list but it will give you an idea of the key players you will have to find and partner up with when you decide to embark on your property investing journey.
An accountant is the person who can assist you with book keeping and manage your relationship with the Inland Revenue (HMRC in the UK).
This is the first person you want to make sure you get on your Power Team and ideally an accountant who also invests in properties. If they are an investor themselves, they will know exactly what you need and also understand you much better than just “any” accountant. You are also likely to have more interesting discussions and get along better as you have something in common.
One of the first things your accountant should be talking to you about is a Directors Loan (at least if you invest in the UK) meaning you lending money to your company in an tax efficient way. How you fund your company is crucial as you don’t want to end up in a situation where you can’t get your initial investment/funding back without your company having to pay lots of taxes first. You just want to use the most efficient way of funding your company so that you, at a later stage, can get those funds back without incurring taxes etc. on those funds. This is different in each jurisdiction so you will need to talk to an expert but it’s a very important point!
Prior to talking to an accountant you should make sure you have a clear strategy as to what types of investments you intend to do. Often there are different tax rules for different types of property investing strategies. As always, if you don’t have a clear picture of what you intend to do and why, the result is likely to be along those lines as well…
Another important aspect of the accounting side is of course taxes and ideally your accountant should understand your personal tax situation, else you might want to consider hiring a local tax specialist based on your tax jurisdiction. As we have spoken about before, people get rich by investing and understanding and minimizing their taxes!
You will of course need a bank for your company but you can’t (in the UK) open that account until your company has been registered with Companies House (UK). The UK is a bit old school so setting up an account without meeting with them physically can be a challenge and some won’t accept foreigners. It is possible but tricky. Personally I have a local bank but have actually never really used them for my business as I decided to use Revolut. For transactions and FX-transfers, they have been great and I also use them privately. If you have not come across them before, I recommend you to check them out here.
Most traditional high street banks will not lend to small property investing companies in my experience. That means that the only thing you really will use your bank for early on is for normal transactions, payments and transfers.
Keep it simple and use a platform you are comfortable with and where you expect the process of account opening to be easy.
In terms of who you decide to bank with, take references from others who have similar businesses as you intend to run. If you don’t know them personally, ask in social forums. People are often willing to share their experiences. Make sure you find someone who suits your needs and where you pay for what you actually use and not a lot of other things. The less you pay, the more money will stay in your pocket, right where it belongs!
Also known as “sourcers” are the people who can assist you in finding great deals. They will charge you a fee for finding you a property but that also means you don’t have to spend hours on the internet trying to find the deals. As a good sourcer should be able to do that for you. Whether or not they are worth their money is for you to decide (time vs money and what value they are adding).
They should know the local market and the pricing as well as hidden values and they should be working closely with local sellers and estate agents to find the best deals. The really good ones, know what you are after and are there to serve you in the long run. You use sourcers so that you don’t have to search for properties on your own! Good sourcers are for sure worth their fees in my opinion but one has to be careful as loads of less serious players are popping up by the day charging 3-6k “finders fee” and the market has been completely unregulated.
You want to find sourcers with a track-record and who can also handle the Project Management (PM) if the property you are intending to buy needs any kind of work done to it (also depends on your strategy which is a separate topic and post).
Sourcing agents are key as they can save you a lot of time and money and if they are good at what they do, your involvement really will be “minimal”!
If you are intending to do any work to the property you will need a Project Manager (PM) as I would not advise anyone trying to do that from a distance. As I mentioned before, you ideally want it to be your sourcer as that will give you an even closer relationship with them and they are on the journey with you from purchase to sale (if you are flipping)!
If your sourcer is unable to handle it, I’m sure they can recommend one but you have to make sure they have great references!
Don’t mistake Project Managers for builders, nor letting agents. More on those further down but if you are not doing any renovations, you will most likely not need a project manager. If it’s just a matter of ongoing things needing to be fixed, your letting agent is likely to handle that. Larger renovations or maintenance, you might be able to lead yourself or at that point you will have to find a Project Manager.
These hopefully fall under the previous heading of Project Manager as you will most likely not want to deal with builders yourself, especially at a distance. However if you insist on managing any renovation projects on your own, then you will have to deal with builders. That can be very tricky and especially from abroad so this is not an avenue I would recommend if you intend to build a portfolio in a foreign country. Still if you do choose to go down this route, there are plenty of builders in the UK.
Builders might actually be the player who can cause the most pain as if a renovation over-runs or is not done properly it can become very, very expensive and time consuming. What I’m saying is that you should really try to find great builders or project managers who have dealt with the same builders for some time before embarking on any larger renovation projects.
They are the ones dealing with your tenants and any concerns they might have. The fact that so many people in the UK rent their homes means that there are tons of letting agents in every village all across the country! It might not be easy to find a good one but it for sure is easy to find them. This is an absolute contrast to Sweden as here we don’t have them at all. Most properties are owned individually or they are owned by companies or councils.
For us as investors this is great as letting agents will be dealing with things like finding new tenants, making sure the rent gets paid on time, visiting the property and involving handymen when needed. If you find good ones, they will take care of “running” the property for you.
Once you own a property and if you intend to rent it out, you want a great letting agent. Over time, there will inevitably be things happening to your property and you might not want to take that call in the middle of the night when a tenant is calling you about a leaking toilet…
We all want to use leverage and in the UK this often happens via a mortgage broker and not via your traditional bank. There a large brokerage firms as well as small firms and they often work with a variety of lenders. The cool thing is that they should of course help you find the best deal which is suitable for you and your needs! Some specialize in commercial properties, others in developments and some just do traditional Buy To Let (BTL) mortgages and some can assist with a variety of different mortgages.
You often pay the broker a fee and they also make money from the lender. Sometimes there is full transparency but often it isn’t. What they of course do have to tell you is the fee they will be charging you and that can vary from around 500 pounds and upwards. These are fixed fees and most often, if not always, payable upon acceptance of a mortgage. Just make sure you understand how much you pay and under what circumstances you have to pay!
Using a broker can save you both time and money if they know what they are doing and have relationships with lenders that are suited to you and your personal circumstances. Unfortunately there is currently not (to my knowledge) any website for comparisons to be used as a foreigner investing in the UK via a company. I don’t even think that exists for private mortgages (something we have plentiful of here in Sweden).
Using corporate structures (Limited Companies) when investing in properties are becoming more and more common and so are the lenders entering that space. The same goes for those that lend to foreigners (with UK Limited Companies). This is of course great news for most of us who are not UK citizens!
At some point you will have to involve solicitors and they are always involved in property transaction both on the seller and the buyer side (again, this is in the UK). If you work with a sourcing agent they are very likely to be able to recommend one to you when you enter a transaction. Most solicitors can work across the entire UK but not all.
Another aspect to bear in mind is that local solicitors (by location of the property) should know the area well. So there might be advantages with hiring local solicitors and not using the same regardless of geographical location in the UK.
When dealing with solicitors you need a great deal of patience as often it’s a very slow process. A transaction (buyer and seller has agreed on a price) often take around 3 months to complete. The solicitors have to talk to each other, documents being sent back and forth etc… So patience is needed.
If you are entering into a Joint Venture (say you are to become two owners of your UK company), then you should also involve a solicitor to make sure you have an agreement for all eventualities. You are unlikely to be able to cover everything but you should do your best to do so prior to entering into a partnership like this. Lots of things can happen along your property investing journey.
As with letting agents, they can be found at every corner in most cities and villages. Properties are often sold via estate agents and your sourcing team is most likely working closely with several. So when it’s time so sell (in case you are flipping a property), your sourcing agent can most certainly recommend a good estate agent to you.
You want to find estate agents you can trust which means not only looking at the fees they charge for selling your property. Find out what is included in their offering. Have they been selling a lot in the same area so they know it really well? Are they valuing your property as you were expecting and in line with other agents?
Just because you get a great valuation it unfortunately doesn’t mean you will achieve that selling price. What happens if you have to drop your price? How will buyers react on that? Often not very good as they might think something is wrong with the property or that you have to sell for some reason. Some agents are estimating high prices just to get the transaction from you and then are quick to lower the price once it’s not getting sold.
You are very likely to have to work with estate agents at some point and if you find great ones, they will also be the ones selling at the highest prices!
If you are not living in the country you are investing in, you will have to transfer funds to that country and exchange your currency. That comes at a cost and you can use a variety of players to make the transfer. Often your local bank is the most expensive choice but they are often happy to do it.
In the UK, you can use FX-brokers. The key role they play is to hold your hand when transferring a significant amount to the UK. They tell you what to do and they will make the conversion to GBP on your behalf and then transfer your funds to your company’s bank account.
I personally am a bit reluctant to using FX-brokers because of the lack of transparency when it comes to pricing. If you are transferring a substantial amount, you want to pay as little fees as possible and there are transfer platforms where the costs are clearly stipulated, like Transferwise or Revolut.
FX-brokers can offer other services too, like locking in an exchange rate today but where you transfer your money in the future. Still, this is a service you pay for and the transparency in terms of fees is even worse if you enter these kinds of futures agreements.
Some like to use FX-brokers as they can guide you through the process or if they are doing something advanced and transferring funds back and forth between countries. Personally I prefer transparency and will exchange when I need to at the current rate as I don’t feel comfortable that I (nor an FX-broker) will know what the exchange rate will be in the future.
As with all our partners, we want to make sure we get value out of those relationships and pay for what we use/need. I am very happy to pay for the right services and what you and me might feel are “right services” could differ significantly. The key point is just that we should all understand what we are paying for and make wise choices that suit us. If you haven’t yet read my post called: Learners are Earners and Earners are Learners, check it out!
Joint Venture (JV) partners?
You might want to embark on this journey together with someone else. It could be your partner, a friend or a new acquaintance. Working with someone else has quite a few benefits as you can share the work and you have someone to plan and execute with. I honestly think it’s much more fun and rewarding working with others as it also helps keeping the momentum up. When finding partners for a JV, one should be very selective as poor choices in this regard can be both expensive and cause a lot of frustration.
Another couple of benefits of working with someone else is that if you intend to borrow money, it’s often easier if there are several partners in the firm. This is of course given that their credit score is “good enough” for the lender.
If you want to partner with someone just to improve your chances of getting finance via a mortgage, then partnering with a British national is probably the best idea. This is solely from the financial point of view and maybe that should not be the sole priority. Working closely with someone you know and trust is likely to make the journey much more fun and rewarding in the long run.
Still, a lot of things can happen when working with others so again I would recommend you to have a great JV agreement drawn up via your solicitors. Just so that you are all comfortable with knowing exactly what will happen during different scenarios if things don’t go as planned.
Perhaps they are not part of your Power Team or maybe they are but having great coaches can be worth their value in gold (saying). A great, knowledgeable coach who has time to guide you can really propel your journey (as within any space). The challenge is that everybody these days seems to call themselves a coach and the value they can add might differ significantly so be picky!
Don’t just sign up to anything and everything but be pragmatic about it and again, use references! Just because they are big on social media does not mean that what they are offering are of great value to you and loads of information can be found for free. In the UK, Propertyhub is a great source of educational material as well as an excellent post to keep you informed.
Personally I had experience from both living and investing in the UK but I still decided to find great coaches. You want to learn from someone who has already done what you are intending to do because that for sure will save you money along the way and speed up the process!
You decide if you want to work with one or not but if you do, just make sure you find a great one with actual experience who will be there for you when you need them. Also, make sure you understand what you pay and what you can expect and get references!
I’m sure I have! This post is to highlight the important players you probably want to have around you in your Power Team to minimize the time you have to spend on your portfolio. To what degree is completely up to you.
Depending on your circumstances, experience, knowledge etc. there might for sure be other players you want to involve. All of them might not be within your “Power Team” but rather other actors you have to interact with like: insurance companies, utility companies, local councils etc.
Now it’s up to you to decide if you want to become the Owner or the Operator of your property company and I hope this post has triggered some ideas as to how you can outsource most of the operational parts to others.
Just make sure your numbers make sense as all these people in your Power Team will of course need to be paid and the numbers have to stack up! This goes for all investments so probably no need to point out.
Actions to take:
- Decide if this is for you and if so, how you want to run your company
- Property as an investment – it’s up to you!
- Buying a property locally – part 1