My property investment career – please help me to make some choices

My property investment career – please help me to make some choices

8:31 AM, 3rd October 2013, About 11 years ago 49

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I have questions which I’m sure many people outside of property investment ask themselves before drawing a blank or getting confused or deciding they don’t have enough information to make a decision.

“How much money do I need to begin a viable property development business?”

And

“What’s the most sensible route as an entry point?”

I’m in a position right now to seriously consider this, having just been given notice of redundancy. I have savings, shares, redundancy money and the option to release equity in a flat I have which I currently let out. Altogether this would amount to around £250k. Below are the scenarios I’m considering as viable options. It may help to know I’m 45 and have a family of dependants:

1) All in – Devote all my energy into buying high yield properties in the north of England, circa £50-60k @ £400 to £450 per month rent. My property investment career - please help me to make some choices

Pro’s

• Lot’s of fun and what I would prefer – an adventure!
• Steep learning curve
• Large portfolio to spread risk

Cons

• I’ve no experience in managing a large portfolio
• Lower equity yield than most property
• I live near Watford
• Can I deal with the admin?

2) Eggs in one basket – Buy 1 or 2 flats in west London (where my current flat is), @ between £1,2oo to £1,700 permonth rent

Pro’s

• High equity yield from London Cross Rail benefits
• More local to maintain
• Easy to rent to professionals

Cons

• Low rental income means it could not be my “new profession”
• Lower relative rental yield than north England option
• Slow way to build portfolio

There’s a third option which would be to buy up to 8 houses in South Wales, where I originally hail from, which would give me a geographic advantage and I also have family and friends who are tradesmen and could possibly manage the properties, which falls in between the first two options.

As you can see from my options, I’m stuck between the pragmatic and the adventurous options and I may not get another opportunity to chase my dream again, but I’ve got a lot at stake if I fail.

One of the things I’ve been interested in pursuing is a mentor system where an old hand in the housing game could act as mentor, for free, or a small stake in the business. Maybe someone who works in a different location, is semi retired, or deals with much bigger fish, so as not to have any conflict of interest. Does such a thing exist? If not, is that something we can kick off in this forum?

What I’m seeking from you all is your opinion or advice, all of which will be gratefully received!

Regards

Matt


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Comments

Mark Alexander - Founder of Property118

18:25 PM, 3rd October 2013, About 11 years ago

Reply to the comment left by "Vanessa Warwick" at "03/10/2013 - 18:17":

Depends where I suppose, Ilya (my stepson) and his friend rent a 2 bed ex-local authority flat in London SE7 for £975 pcm and they are currently selling for around £150k. It is ideal for them for a short commute to Greenwich University.
.

Mark Alexander - Founder of Property118

18:34 PM, 3rd October 2013, About 11 years ago

Reply to the comment left by "LucyM " at "03/10/2013 - 18:22":

Hi Lucy

There are MASSIVE risks associated with not borrowing.

All eggs in one basket perhaps?

The biggest risk of all though is missed opportunity. If you own one property worth £250k and it increases in value by 10% you have made £25,000.

If you own 4 properties worth £250k each with 75% mortgages you still have the same £250k of your own money invested. If those properties increase by the same 10% then you've made £100,000. That's a 40% return on your money as opposed to a 10% return.

Personally, I would keep some of the money in the bank but to understand why you would need to read all 14 chapters of my property investment strategy, starting with the index >>> http://www.property118.com/landlords-buy-to-let-property-investment-strategy/

Happy reading 🙂
.

Lucy McKenna

19:07 PM, 3rd October 2013, About 11 years ago

Reply to the comment left by "Mark Alexander" at "03/10/2013 - 18:34":

thanks Mark, will do. Some money in the bank is such good advice, it can take the worry out of so many situations....

chris howells

21:47 PM, 3rd October 2013, About 11 years ago

Hi matt, I started out with K50 11 years ago so equates to same basically, Vanessa makes really good points especailly interest rates and voids.

If I was starting out again I would still go for HMOS , and approach agents who specialize i this area and ask them to find one already tenanted etc with all necc licensing in place, and with a potential to extend or do loft conversion to increase the tenant occupancy perhaps 2 to start with and see how it goes.
You could then look for a house for the student market that needs work and develop that.
Its quality that counts not quantity.I have mostly Hmos and flats Good luck

chris howells

22:22 PM, 3rd October 2013, About 11 years ago

Matt, just to let you know as a fellow welshman or woman in my case I live in Cardiff and my properties are mostly near the City (cathays) or within mile radius apart from one in treforest near pontypridd so would be happy to help in whatever you decide to do and introduce you to my contacts etc

0:33 AM, 4th October 2013, About 11 years ago

Reply to the comment left by "LucyM " at "03/10/2013 - 17:42":

Before you all get excited about what seems like a one way bet re the london market and implications for rising house prices....just take a look at what is happening across the pond in the states. Although the fed has not raised interest rates, the mere acknowledgment that they will be easing up on QE has sent interest rates up......and stalled a market that was showing signs or recovery. Back in London we have already seen up the very top end of the market seems to be reaching its peak (look at abromovichs on the properties he has recently offloaded)....its only a matter or months I believe before we start to see interests rise on the money markets in the UK....this could quickly scapper any hope of steep gains in the UK....

Matthew James

23:53 PM, 6th October 2013, About 11 years ago

Reply to the comment left by "Mark Alexander" at "03/10/2013 - 09:12":

Indeed, the lack of job will hinder my progress if I'm looking for multiple mortgages at 75% LTV, but if I get a job then the all in option of building a portfolio is not feasible anyways!

Thanks for the sage advice to start things off!

Matthew James

23:55 PM, 6th October 2013, About 11 years ago

Reply to the comment left by "David Carlisle" at "03/10/2013 - 09:15":

Yes, the options closer to home seem a bit more reasonable at this point. The properties up north idea is more of a pipe dream of escaping the 9-5!

Matthew James

23:55 PM, 6th October 2013, About 11 years ago

Reply to the comment left by "Adam Alexander" at "03/10/2013 - 09:16":

Thanks Adam, I'll certainly look your site up.

Matthew James

23:58 PM, 6th October 2013, About 11 years ago

Reply to the comment left by "Tony Atkins" at "03/10/2013 - 09:43":

No downers, all good advice!

As mentioned, it seems like I need to not jump ship right now and build slowly to a point where I could perhaps semi retire and live off a combination of consultancy/contract work and property dev/portfolio building. Staying closer to home also seems the obvious choice as well.

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