My first intentional property investment – part 1

by Mark Alexander

13:33 PM, 11th June 2012
About 7 years ago

My first intentional property investment – part 1

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My first intentional property investment – part 1

The story began in 1989 when I purchased a property which I soon realised I couldn’t afford to live in. I suppose that was my first property investment and many landlords get started that way. I rented that property out when interest rates shot up and property values crashed leaving me in negative equity. I muddled through and I still have that property now. With that baptism of fire into property investment I’d probably have been forgiven for never wanting to buy another one but that’s not how life worked out. Mark Alexander

If only I had waited a few years I thought, I could have purchased the same property for 40% less than I paid for it. Then it dawned on me, properties would go back up in value at some point, that was one of the reasons I didn’t want to sell. I wished I could have purchased some more property at that time but I had no money so there was only one choice.

Step one – saving up the deposit

I had to work smart and save hard so that I could buy another property before they started going up in value again. I remember watching my bank balance grow, my target was to save £10,000. It seemed like a fortune at the time, when I set the goal I could barely make ends meet, never mind save any money. Nevertheless, I took an hour out every Saturday morning to document my goals and my progress. In April 1996 I had the magic £10,000. Having saved all that money I can tell you it still took a lot of courage to take it out of the safe hands of the building society and invest it into a property, despite the fact that’s exactly what I’d been planning for several years. Remember, properties didn’t really start to recover from the late 80’s / early 90’s crash until the middle of 1996. I only had a gut feeling at the time that they would go back up in value, I just didn’t know when and to be honest I didn’t really know why either. I just thought it was likely that history would repeat itself.

Step two – overcoming my fears

My biggest worry was that, in the short term, interest rates could go back up again and property values could go down even further. There was no way that I could afford to pay two big mortgages if everything went wrong. It wasn’t just interest rates that were worrying me either, what if I couldn’t rent the property, what if my tenants didn’t pay, what if I got an unexpected maintenance bill? I realised that I just couldn’t take the risk of investing 100% of my savings, I needed to keep some money aside for the unexpected, but how much?

Step three – what to buy and how to stay safe

The cheapest properties at the time were around £15,000 in my area. They were in grotty locations though and the letting agents I spoke to said they would be hard to let and even if I did I wouldn’t be dealing with a particularly friendly demographic of people. I realised that I couldn’t really afford a house, not a modern one anyway, and not being much of a handyman the thought on ongoing maintenance of an old terraced property was very off-putting. Therefore, flat’s were my target. Would I go for an upstairs flat or a downstairs flat though? There were advantages to both. Old people would be more likely to rent a downstairs flat, so too would people with babies. Flat’s with lifts were not common place back in 1996 and any that had them were way outside my budget. However, when I started looking at ground floor flats and talking to other landlords I realised that damp was often an issue, so was security. The reason for this was that people don’t leave windows open in ground floor flats. Therefore, I decided to go for a first floor flat.

Step four – location and price

Having decided to go for a first floor flat I realised that I was probably targeting a young working couple as my tenants. I’d also worked out that my budget was around £20,000 based on the fact that I needed a 25% deposit (£5,000) and could borrow the other 75% (£15,000). That left me with £5,000 of which I budgeted £1,500 to decorate and to pay all the fees associated with buying. I knew that I needed to buy on a decent bus route into the city and the industrial estates and having visited every estate agent in town (there was no Rightmove to check in those days) I narrowed it down to three properties. All of them were above my budget but only by a few thousand. I put in an offer on all three for £19,000 and they were all refused. I was gutted and resigned myself to search again in a few months time when hopefully I’d saved a bit more. I could have gone ahead and left myself with a smaller liquidity fund but I didn’t dare. Then, after a few days one of the estate agents called me back. Their vendors had had a re-think, they would accept an offer of £19,500. I was so tempted but I stuck to my guns and I’m glad I did. I was a property investor, no chain, I could move as quickly or as slowly as they wanted. I got lucky, they accepted, I was in business! I was well on my way to owning my first intentional property investment.

Please leave me a comment below if you’ve enjoyed reading this.

OTHERS ARTICLES IN THIS SERIES

YOU ARE HERE >>> Part one – My first intentional buy to let property investment

Part two – Tips on becoming a buy to let property investor

Part three – Lessons learned whilst building my buy to let portfolio

Part four – My first property management checklist

Part five – Buy to Let Maintenance Budgets

Part six – Do landlords have to provide lawnmowers?

Part seven – Landlord, Tenants, Dogs, Pets

Part eight – Vintage 2003

BONUS ARTICLE >>> My relationship with Leathes Prior Solicitors and Property118

Part nine – Perfect tenant of 6 years turns heroin addicted prostitute – EVICTED! 

Part ten – Online Letting Agents Review



Comments

19:46 PM, 11th June 2012
About 7 years ago

Very entertaining and educational, look forward to more.

20:04 PM, 11th June 2012
About 7 years ago

Sharing experiences is always interesting and it's great to know you planned ahead and did your research first. It goes to show buy to let is not a get rich quick scheme but hard if rewarding work. For any one with little or no business experience It's scary when you first take the plunge and you always have a nagging doubt whether you are doing the right thing. There are plenty of people out there who have horror stories based on other's and not their "experience". Looking forward to Part 2. I just hope that mortgage lenders are now getting the message that the majority of landlords are in it for the long term and are providing a much needed service. They must start to lend again at competitive rates with higher LTV's. Hopefully that would encourage others to expand or even follow your example and get involved for the first time!

20:14 PM, 11th June 2012
About 7 years ago

Looking forward to part two, great story. Former client of TMC

20:20 PM, 11th June 2012
About 7 years ago

interesting article, thanks

Mark Alexander

20:42 PM, 11th June 2012
About 7 years ago

Just finished writing part two, I've been a bit more daring in the stuff I've shared in the next instalment. It will be published and Tweeted at around 9:30 tomorrow morning and emailed to all News subscribers tomorrow evening. Thanks you for the kind comments so far 🙂

21:18 PM, 11th June 2012
About 7 years ago

That's a great story Mark. It is all a question of good timing and you seem to have got this right. You also seem to be a good guy also.

Toyin Bishi

13:55 PM, 12th June 2012
About 7 years ago

Very interesting story, thanks for sharing this & am looking forward for part 2. Lets hope the economy improves and BTL investors can get better mortgage deals. Some people have deposits but not sure where the economy is heading.

Mark Alexander

14:21 PM, 12th June 2012
About 7 years ago

Sounds familiar, that was the exact same position I was in back in 1996. One of my favourite Confucius saying is "best time to plant a tree is 20 years ago, second best time is today".

Louis Parker

18:24 PM, 12th June 2012
About 7 years ago

Interresting Mark, I got involved in property investment back in 1992 when I bought a one third share of two flats in a converted house which was in very poor condition my parteners were both retirerd and I was responsable for the refurbishment.
After doing another project with them I got my first sole property in 1995 it was hard work doing this for myself but it paid in the end.
I look forward to reading part two on Wednesday

20:16 PM, 12th June 2012
About 7 years ago

Admire your research skills in a time when there was little to guide you. Looking forward to the next instalment.

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