Property investor Inspired by first buy-to-let purchase

Property investor Inspired by first buy-to-let purchase



From one property in East London to a portfolio of more than 100 properties, the bridging market has facilitated the rapid growth of Inspired Holdings London Ltd –.

From one property in East London to a portfolio of more than 100 properties, the bridging market has facilitated the rapid growth of Inspired Holdings London Ltd – a full service London residential property investment platform – providing the flexibility and speed of funding they have needed to grow in today’s challenging environment.

Alexandra Jones sat down with the once amateur landlord, with a small personal portfolio, and now Director of the Inspired property empire to find out a little more about how the company works and how it interacts with bridging lenders…

Model

Martin Skinner started off buying one house to rent out room-by-room to young professionals working in Canary Wharf.  He then began offering high spec branded refurbishment and letting services to his friends and family, taking a management fee for re-developing and tenanting properties.

This took a lot of time, however, achieving little financial reward relative to the operational risks involved. The model was subsequently adapted to give Inspired a profit share in properties bought at auction which, after refurbishment, could then be rented out utilising the firm’s operational expertise.

Inspired now comprises:

Inspired Asset Management – Investing in auction and receivership properties in need of renovation or development. The company negotiates the deals and matches equity investors and lenders with the appropriate investment opportunity in return for a share of the profits.

Inspired by Construction – Providing high spec construction and refurbishment services exclusively to its investor (profit share/Joint Venture) clients. Typical strategies for adding extra value include extending existing properties and adding extra bedrooms. Securing permission for and ultimately building additional flats or converting commercial elements to residential, which has provided the icing on top for many of their schemes.

Inspired by London – Offering lettings, management and maintenance services exclusively to its Joint Venture clients ensuring standards are consistently high for tenants. It is constantly developing innovative products and pricing to accommodate London’s mobile workforce and drive higher returns for investors.

Inspired typically offers a 10 per cent priority return and 50-75 per cent of the remaining profits to its investors.  As a result, Inspired is highly motivated to outperform; its investors have benefitted from very high returns in the last couple of years in particular. In some cases margins on cost have exceeded 100 per cent and returns on capital have been even higher as a result of using bridging finance which is replaced by traditional residential or commercial facilities once the properties have been upgraded and tenanted.

Background

After a career in IT, Martin built his own buy-to-let portfolio together with a small property services business. He then developed them into a substantial property empire under the Nice Group umbrella, pioneering the development of the young professional houseshare market in inner London. Nice Group was once valued at £30 million and accommodated more than 1,500 tenants in more than £200 million worth of properties before being forced to retreat into administration during the credit crunch.

Martin lost everything trying to save his business and is candid about the bankruptcy process he endured. The experience only made him more determined to continue investing and developing properties, while the portfolios he built have performed very well despite the current financial crisis.

He went on to establish Inspired and its proven business model soon gained an excellent reputation.

Martin and his fiancé and business partner Magdalena Stepnowska (who leads both the Construction and the Management businesses) then bought back a small portfolio of Martin’s old multi-let properties from his trustee and the model proved perfect for the current market. By working their socks off and beautifully refurbishing the properties they benefitted from dramatically higher room rents and many tenants now pay upfront for three, six or twelve months – in return for a discount and an excellent new shared home. 

Cheaper mortgages also helped them and they quickly generated the funds they needed to acquire more bargain properties.

Bridging

To quickly purchase a BMV auction property, the help of bridging lenders is vital. One particular lender, Montello Private Finance (introduced to them by their broker Charles Smith MD of Capital Money Solutions), offers this support to Inspired on an on-going basis, typically providing up to 75 per cent of the purchase price. The remaining sum is financed by Inspired’s private investors who supply the additional 25 per cent deposit, along with the sums necessary to cover the purchasing and development costs. Refinance is the most common exit for the bridging loan, with the ultimate sale of the property typically occurring a couple of years later.

Inspired will effectively manage the assets of private investors, providing the bridging lenders with additional security in the form of its end to end experience of the entire property development and investment cycle. This on-going relationship enables Inspired to enjoy security in the continual funding from the likes of Montello.

Investment

With more investors attracted to the returns achieved by investing in this way, Inspired was able to apply one private source of funding and one bridging loan to each property purchase. The company has been regularly buying at least two properties a month, using its unique expertise to find the ‘needle in the haystack’ every time: Martin estimates they review around 1,000 properties for every one bought.

Investors typically receive returns on their investments based on the risk they are prepared to take. This is largely dependent upon the stage of development the property is at, with desired risk adjusted returns as follows:

25 per cent margin on cost for basic refurbishment risk. This typically involves redesigning and repositioning properties that only investors would buy for sale to owner occupiers who will pay a premium for an attractive new home. 

35 per cent margin on cost for construction risk. For example knocking down an existing building and constructing a recently consented one from scratch.

45 per cent margin on cost for full development risk. This requires Inspired to secure new planning consent(s) and often involves re-developing redundant commercial properties into desirable residential accommodation.

The future

Inspired is moving progressively upmarket with a number of developments underway in South West London, in addition to its core Inner East London locations.  The company is considering a number of offers from existing and new investors to undertake larger (£10 million plus) refurbishment and development opportunities procured from receivers and highly motivated sellers.


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