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

by Readers Question

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

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

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

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

Comments

Matthew James

0:34 AM, 7th October 2013
About 8 years ago

Reply to the comment left by "chris howells" at "03/10/2013 - 22:22":

Many thanks Chris, us Taffs need to stick together, eh?

I have a good friend in Barry (my hometown) who I may well share some of the investment load with and buy a property in south Wales and also do something in west London.

I'll drop you a line if I do the Wales thing to get some pointers from you!

Matthew James

0:39 AM, 7th October 2013
About 8 years ago

Reply to the comment left by "James Tallis" at "04/10/2013 - 00:33":

Interest rates are something to fill many investors with a dread fear, no doubt, but, I think the new governor of the BoE is a wise chap who has stated that they won't consider upping rates until employment falls below 7%. Even then, I am confident that the rates will not rise exponentially, as this would send the fragile recovery we are enjoying, into the abyss!

Fingers crossed, things will turn out OK, and a spread of medium yield Welsh properties plus some low yield, but high equity on value, purchases in west London will give me a decent foundation to base my portfolio on in the next 10 years.

Scott Scott

11:44 AM, 7th October 2013
About 8 years ago

Reply to the comment left by "Matthew James" at "07/10/2013 - 00:07":

Hi Matthew,

It's good of you to reply to each person individually.

Have you spoken with a IMA (Independant mortgage advisor)? They will be able to advise you on what is feasible in terms of mortgages and total amount you can borrow.

With regards to driving up and down the country, for the first 6 years of being a landlord I was serving in Germany and Iraq. Whenever there was an issue the tenants got in touch with either myself or my wife and we simply called a contractor out to solve any issues. As a homeowner you know that your boiler doesn't break every month or any other appliance. But when it does you simply fix it and carry on.

I visit my properties every 3 months. First to sort out the AST and all move in administration. 3 months later for an inspection and simply repeat the process.

I hope this is food for thought.

Have you looked at PPP (Platinum Property Partners). Check out their website. It's something I would consider if I had £250k.

Good luck in whatever you decide.

Matthew James

22:24 PM, 7th October 2013
About 8 years ago

PPP Look interesting. I'll have a good read of the site tomorrow. Has anyone else had any dealings with PPP?

Thanks!

Mark Alexander

22:38 PM, 7th October 2013
About 8 years ago

Reply to the comment left by "Matthew James" at "07/10/2013 - 22:24":

I met one of their franchisees once and he seemed very complimentary. Vanessa from Property Tribes has also met with them and speaks very highly of them.

I think they are very expensive but they are one of a few who seem to get positive feedback so if the people who have worked with them believe they provide value for money that can't be a bad thing.

Personally, I like to learn through free research but if others want a plan of action and a template which is proven and are prepared to pay for it then so be it.
.
.

Richard Knight

9:04 AM, 8th October 2013
About 8 years ago

Matt - by way of providing a different tack on things my wife and I have gone down the route of investing in the North West. Our situation is different to most perhaps in that we have lived abroad for 10 years now and have a young family of three children. It's not possible for us to manage the properties ourselves.

We view the North West as a test after having only been landlords in the SE for the last 10 years. We're 18 months in now and so far so good. Properties are in the £45k to £55k range and return between £425 to £535 pcm, which after full management charges have been deducted return an average yield of 9.46%. We haven't yet had to go through a change in tenants and costs have been minimal so far - but then we're still only 18 months in. Costs in general are far less than we were used to down south - e.g. £35 for a Gas Safety certificate, and £1,700 for a new central heating installation in a modern'ish 2 bed semi.

As we're expats, getting a mortgage is extremely difficult and hence for the moment all properties are mortgage free. We'll possibly reconsider this as / when / if the mortgage market gets a little better for us.

We're gone down the route of focusing on rental yields. If you look at the Halifax Price Index which has been running since 1985 I think and play around with figures relating to price growth by region over say, 10, 15 and 20 years and then factor in yields (after agents fees but before others costs for us c. 9.5% up north, and c. 5% if we're lucky down south) then there's minimal difference over the term in total money earnt.

Good luck with whatever route you follow.

Richard

Matthew James

18:51 PM, 8th October 2013
About 8 years ago

Reply to the comment left by "Richard Knight" at "08/10/2013 - 09:04":

Hi Richard,

Your advice is sound and so are the figures. I've been experimenting with Excel and came to a very similar conclusion that the lack of income from southern properties is evened out by the higher equity gain in the medium to long term. The less properties idea is better from an admin perspective, but means I need to keep (or in my case, find!) the 9-5 to augment income and put on hold the dream of being a property developer.

I think that if I were totally immersed in the 'property scene', I would be more exposed to opportunities to expand the portfolio than if I just but a couple more houses now and dabble in my spare time. Right now, I'm leaning towards the latter as I can't see a low risk option to go full time, but I'm always open to ideas!

Geezer Butler

19:53 PM, 8th October 2013
About 8 years ago

Reply to the comment left by "Matthew James" at "08/10/2013 - 18:51":

Hi Matthew.
I live and invest in Barry. I have only been buying for around a year so a relative newbie like yourself. I am adopting a combination of BTS and BTL. The deals are out there, but it takes a fair bit of legwork to find them. I think only owning one BTL is pretty risky as mentioned above, one 6 month void or dodgy Tenants = no income. 7 or 8 low LTV Houses cashflowing at £400 a month with a couple of sales a year @ 15k profit each, happy days. If you need any advice re local market, give me a shout.

Matthew James

0:12 AM, 9th October 2013
About 8 years ago

Reply to the comment left by "Geezer Butler" at "08/10/2013 - 19:53":

Hi Geezer,

If you hail from sunny Bazra, there's a chance we have at least been to the same pubs etc! I grew up in Barry so know it, and the area very well. Would be good to chat about this next time I'm back home. I have a good mate who is also interested in the local market there. What part of Barry are you based?

I agree with what you are saying, but given that my big purchases are in popular areas of London, the voids are relatively very low. I had about 20 people come to see the flat in Acton last time it was free, all in a position to rent it. Dodgy tenants is a bigger risk, but I've vetted them myself and ever since I had some nightmare ones back along, I've been fortunate to have very good ones in the last 5 years.

1 4 5

Leave Comments

Please Log-In OR Become a member to reply to comments or subscribe to new comment notifications.

Forgotten your password?

BECOME A MEMBER

How to triple your rental profit with HMOs