It seems in the property world we’re all obsessed. We want to make a good return on our investment and that’s the be all and end all, right?
Well, er no, not exactly for many investors?
A lot of the time I hear from investors not focussed on the end result, but on the starting point. The magic words ‘below market value’, or BMV as it’s often shortened to.
There are dozens of facebook groups, ram packed full of investors looking for BMV deals. For every investor, there’s a couple of dozen deal sourcers and packagers selling BMV too. What’s not to like about BMV, after all, who doesn’t like a bargain? Even more so when the item you are buying has a high capital value.
But here’s the rub. Are we wrong to focus purely on buying below market value? I’ve heard the expression that your money is made on the way into a deal and clearly buying well is crucial, but surely we should be focussed on return on investment (ROI) as the key criteria when analysing a deal.
If a deal stacks up at market value, or asking price, then does it matter if it’s not BMV?
My investment goal is to find property delivering a 20-25% ROI and to deliver this we’re investing in HMOs. We also source deals for investors too – predominantly London based investors who want property outside the Capital, but close enough to home to reach out and touch it if they want to.
We source property that’s off market through direct to vendor marketing, but we also look at property being marketed by our local estate agents too. A great example is a 6 bed HMO conversion project in Bedford where the forecast ROI is 24%. I’ve spoken to a few of our investors and I was surprised when one told me he’s not interested because it’s only a few grand less than market value.
The forecast ROI is 24%. After refurbishing and refinancing, you’ll get half your money out the deal. In Bedford, that’s a pretty solid proposition.
But he wasn’t interested. No matter, as we have another couple of investors that are happy to look at ROI as the core measure of performance.
But it did make me think - is BMV more important than ROI? So long as the return is good then surely a deal stacks up. I could easily buy BMV property across the North, but that’s no guarantee of a good investment. The monthly cash flow is likely to be a lot lower and the capital appreciation, well that might just be non-existent.
If you’re interested in property deals offering a potentially high return on investment, get in touch. We specialise in Bedford and surrounding counties, so we’re close enough for London investors to keep an eye on their properties, but not so close you have to tie up all your capital in one deal.
And yes, we do find BMV deals, but we’ll also keep you up to date with anything that has a decent forecast ROI too.