03 Grow

High Time you Look into NMB3!

  • NMB3 is a property strategy combining three separate strategies
  • The money it can make is insane

Do you want to make a six figure salary in property starting with little or no money?

Perhaps you have thought about it and concluded it’s impossible.

You may even have tried to do it…and given up ingloriously. After all, it’s a pipe dream, isn’t it?

But the shocking truth is that many people have done it and are doing it right now!

They are doing so by using 3 no or low money down property strategies and combining them to devastating effect – creating a lean mean money making machine.

Let’s call them “the no money down Big 3” or “NMB3” for short.

The 3 strategies are:

  • Rent to rent
  • Serviced accommodation
  • Option to purchase

This blog reveals:

1. The main features of  NMB3

2. How NMB3 is packaged to rake in the pound notes

3. The amazing benefits of NMB3

4. The threats and dangers facing NMB3

5. The likely future for NMB3

6. How to protect your NMB3 business. 

1. The main features of NMB3

NMB3 is typically constructed using 3 low or no money down property strategies: rent to rent, serviced accommodation and option to purchase.

Rent to rent

This is where you rent a property from an owner for a rent significantly below the market rent, renting it on to others for a higher amount, making a profit as a result.

The agreement between you and the owner can be a commercial lease or tenancy or a management agreement.   

Serviced accommodation

This is where you provide short term accommodation with hotel-like services to guests at a premium charge much higher than you would get by letting the accommodation to a regular long term tenant.

Option to purchase

This is where you – in return for an agreed fee, which could be as little as £1 – get the right, but are not obliged, to buy a property for an agreed price within an agreed number of years.

You will only proceed to buy the property at a later date if it is in your financial interest to do so.

2. How NMB3 is packaged to rake in the pound notes

The basic picture is that you rent a property for below market rent and then rent it on for a much higher rent, negotiating at the same time (or later) the right to buy the property for an agreed price within an agreed number of years.

Owners interested in this sort of arrangement are likely to be “tired” or “hands off” landlords who want an easy life and are prepared to accept a lower rent in return for a long, trouble free agreement with another property professional. 

By way of illustration, this is how the conversation between you and an owner could go:

You: “I totally understand the rental market is not getting any easier, so much regulation and red tape…it can be a real headache.

Have you thought about letting out for say 6 or 7 years, to a fellow property professional? That would take the workload off you – giving you a hands-off situation.

No more having to deal with troublesome tenants or chasing late rents…or handling repairs, maintenance, gas safety certificates and all that never ending admin stuff.

You have just one agreement for say 7 years – no tenants moving every year – no having to do check-outs, refresh the property and pay the exorbitant fees of letting agents…”

Owner: “Sounds great, but what’s the catch?”

You: “There is none – not really. Of course there needs to be something in it for me. I am going to be taking over all that work from you…

I will be looking for a reduced rent…The market rent is £1,800 per month…I would be looking at paying £1,100 –

Owner: “As low as that?”

You: “I am going to have some serious overheads. I would be using the property as serviced accommodation – doing short term rentals and providing hotel-like services

We are talking a lot of work…furnishing, cleaning, laundry, check-ins, check-outs, repairs, maintenance…I need a reasonable margin…

Owner: “Still think it is a big reduction”

You: Remember I am going to be taking the property off you for 7 years. Think of the saving you are going to be making in that time… not just your precious time, but all the money you might have to pay for repairs, maintenance and management.

In the agreement, I will take responsibility for day to day repairs, maintenance and management…You will only pay for the big stuff, such as the need for a new boiler or the roof collapsing – and that of course is going to come under your building insurance.” 

Owner: “I can see what you are saying.”

You: “And don’t forget I will be freshening up the property before letting it out – a quick lick of paint, perhaps some new carpets and appliances.

Owner: “I hear you…How about £1,300?”

You: “I need to be realistic with my figures – I have done the maths already, very thoroughly … £1,200 is the absolute highest I could go to…

Owner: “We have a deal… £1,200 per month for 7 years”

You: “Brilliant! Thank you very much. One other thing…would you be willing to give me the option to buy the property at any time during the 7 year period?

We would agree the price now – perhaps 10% above the current market price.

I only mention it because you said earlier you were looking to retire in the next few years.”

Owner: “I have thought about selling. It is definitely something that I am interested in. Let me think about it and we can talk more some other time.”

The key point is that you want to achieve the biggest rent reduction possible and should negotiate on the basis of the numerous and tangible benefits for the owner.

You want to get across to the owner that it is a win-win deal for both sides.

After you have secured the property on a rent to rent deal, your next step is to prepare it for use as serviced accommodation. That may include modifying the property, decorating it and furnishing it.

3. The amazing benefits of NMB3

NMB3 is a composite strategy where you don’t need a large amount of money to get into.

With your first property you may be lucky enough to be able to negotiate that you pay the owner when your occupier pays you.

If you have the skills, you could freshen up the accommodation yourself before making it available for serviced accommodation guests, saving the expense of refurbishment.

The fee for securing an option to purchase could be just £1.   

Of course, if you have some money, a few thousand pounds, it will be easier to get into NMB3 and you should be able to grow faster.

The 3 strategies are extremely enticing. They are ideal if you don’t have the credit record or money to buy a property now, or if you do have the money but don’t want to use it!

You start with rent to rent and then super-boost your income by using the property as hotel-like serviced accommodation, recovering premium charges.   

If you also secure an option to purchase from the property owner, you can use your substantial rental profits as a deposit to purchase the property at a later date – at that point becoming a true property investor.

The 3 strategies therefore complement one another perfectly.

People are making serious money from NMB3 by ramping up the number of serviced accommodation units they manage.

Say you were making £450 net per month on your first property. If you scaled up to 10 properties you would be netting £4,500 per month or £54,000 per year.

Scale up to 20 properties to net £108,000 per year. Scale up to 40 units to net an astonishing £216,000 per year.

How far you go is up to you and how much time and effort you are prepared to put in. A huge attraction of the composite strategy is that it can be hands-off once you reach a certain size.

Whatever your time input, you can outsource it if you so wish – taking a modest reduction in your profit per property.

With just a few units, outsourcing is unlikely to be cost-effective, unless you can get into the very top end of the market.

Of course the negatives of the serviced accommodation part of NMB3, the large amount of time and effort involved, should be kept in mind.

Until you can earn enough to pay for help, you will have a formidable number of jobs to do – from booking rooms to giving access to guests, from cleaning rooms to dealing with the complaints of guests, from dealing with maintenance and repairs to dealing with problems such as damage to the property or complaints from neighbours.

You need to source properties conveniently near to where you live so as to minimise the burden of travelling to and from the property.

You will need a very wide range of skills – including the difficult skill of being able to deal with members of the public when they are not happy with something or the other.

4. The threats and dangers facing NMB3

Like all good things, NMB3 is not without its downsides.

The financial muscle of the composite strategy lies in the serviced accommodation part – that is the bit that brings in the large profitable income.

However there are clear dangers facing serviced accommodation (SA). The strategy is largely unregulated and is a big threat to regular hotels and guesthouses.

Several councils are concerned that SA may be reducing the accommodation available to regular long-term tenants paying standard rents.

SA operators typically rely on booking agencies like Airbnb and Booking.com to find guests for their accommodation.

In London, under the Deregulation Act 2015 a residential property cannot be let out on a short term basis for more than 90 days a year unless planning permission for short stays is obtained.

Airbnb has fallen in line with this legislation by imposing its own 90 day rule for London properties.

The danger is that other large councils, like Manchester, Birmingham and Liverpool, will follow London and impose a 90 day limit. That would be a problem for operators because the biggest and most profitable SA locations tend to be large cities.

From homeowner to investor (easily making the jump from homeowner to investor)
Scaling your home to the next level (the easy route to buy-to-let)
Average landlord to property millionaire entrepreneur (how you can do just that)

5. The likely future for NMB3

Given the growth of serviced accommodation (SA) and the level of profit that is possible, it seems inevitable that it will face greater regulation in the future.

That will reduce profit levels and will drive out less efficient operators.

There is also the strong possibility that a licensing regime could be brought in – with a licence being required for the property and perhaps for the operator also.

That would add to the costs of running SA. However, it could benefit professional operators as the amateurs and cowboys are driven out.

In a nutshell, NMB3 seems certain to become marginally less profitable in the future in some parts of the country, on account of greater regulation of SA.

However, the composite strategy seems likely to retain most of its advantages and is expected to continue as a very attractive and accessible opportunity.   

6. How to protect your NMB3 business. 

If you decide to take up NMB3, you need to be acutely aware of the risks, threats and dangers facing the serviced apartment part of the composite strategy.

Keep an eye open for them and continuously and quickly adapt your business model and practices to minimise their impact.

Don’t forget that the risks, threats and dangers will also present opportunities, as the market space becomes less crowded and competitive. 

You can position yourself to benefit by taking steps such as:

  • Maxing out on relevant property training, education and mentoring 
  • Operating to the highest levels of accommodation and service provision 
  • Focusing on developing a respected, trusted and highly rated brand
  • Teaming up or joint-venturing with others to get the benefit of scale and pooled resources.

Something very important is to make sure you do not squeeze your margins too tight when agreeing rents with owners at the rent to rent stage.

If you do not ensure there is enough meat on the bone, you are going to find yourself hungry if profit levels are significantly cut by higher operating costs brought about by greater regulation.   

Conclusion

NMB3 is likely to see many challenges in years to come. However its many strengths as a composite strategy makes it well equipped to ride out the storm.

Profit levels are likely to fall but there is every chance it will remain a super-earner.

Weak operators are likely to be squeezed out of the market, increasing opportunities for high quality skilled operators. 

Enjoyed this blog? Please share it with friends by clicking on the LinkedIn, Twitter, Facebook or Instagram icon on this page. 

Does NMB3 appeal to you?  What do you like about it, and what if anything causes you to be cautious?  Please leave your observations or comments below.

You may also find the following blogs useful:

Think like a property millionaire (the fundamentals of a millionaire mindset)
No money property investing (brief overview of no cost property investing)
Instant property entrepreneur (how to become a property entrepreneur today)

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Dalton Barrett
Rebel Property Coach

Please follow me on Twitter @Dalton1London
You can find me on FacebookInstagram and on YouTube
Please link up with me at LinkedIn

My website is: www.rebelpropertycoach.com

 

 


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