We would like to share our new property venture with you. While work continues on renovations, sales, letting and management in London & the Home Counties we thought we’d do a little ‘Refurb & Buy to Let’ acquisition for ourselves. We’ve aided and observed lots of success for clients and friends over the years in helping with their investments (mainly in London) and think its time we had a little go ourselves. While London remains our home, with high property prices, low yields and an unclear picture of the property market through Brexit we have decided to invest in property up North. Using methods taught on various £5,000-£30,000 courses which shall remain nameless due to my light slandering below. They work on a few simple principals of which we’ll try and replicate. We’ll talk you through the good time and bad times of which there is likely to be both, we hope you enjoy going on this journey with us and get as excited as we are at the prospect of a growing a divers portfolio stretching nationally, but perhaps not internationally at this stage #Brexit.
The sales pitch of the courses mentioned above use tag lines like ‘be your own boss’ ‘work from anywhere in the world’ and the big one ‘you don’t need any of your own money’, all highly appealing. The two catch’s with these courses are the colossal price to participate, and their instruction on high levels of borrowing to get started, all throwing you into hole of debt, which only with their help can you be taught how to climb out of.
I (Edward) have been to three of these Introduction course which are usually free and a tool to make you enrol on further courses, however the last one I went on was £400 for a three days. I knew I was going to be up sold further education, but was only attending for a little insight and as a kick start to get cracking on trying to grow a portfolio. On the third day of this London course advertised by an unnamed property TV show presenter they tried to make me part with £20,000 to be tutored through my first acquisition and join their network, should I had the disposable income for not only their £20,000 course but also this sum for a down payment on a property I may have been tempted. They reassured me however that I could generate further funds by phoning my bank to extend my credit limits (they made the whole class go out and do this on our coffee break), applying for more credit cards, and asked if I could sell my car, had I been a parent I wouldn’t have put it passed them to request I enlist them into some sort of child labour, or default on school fees.
I have tried to sum up the teachings and the method, and it goes something like this. Find a property for sale that’s on the market undervalued (by at least 20%), buy the property with a mortgage (assume rate of about 3-6%), raise funds for down payment (usually 25% of value) via further borrowing. Acquire property and rent it out. Providing you have done your due diligence, the rent should cover, mortgage repayments, lettings and management fees, 10% contingency fund and your repayment of down payment loan. Leaving a little left over to pop into your pocket at the end of every month. Then 6 months later you would go back to your mortgage broker alerting them to the fact that the property is worth more then you borrowed for it in the first place, then re-financing(re-mortgage) the property to release a lump sum to put towards the down payment on another property. People have been doing this for decades, the idea here is that you churn them out, have lots all making you a passive income Then 25 years down the line, you will start to finish paying them all off.
AND THAT’S IT, thank you for reading, you owe me £20,000.
We know it’s not this simple we have been buying properties on behalf of clients & friends for years, while this may provide some insight every case is different, so with this one being In-House we have decided to share the story.
In my next entry I’ll talk about my acquisition in Newcastle (should it come through) and talk you though sourcing the right property and my budgeting. Hopefully all with the idea that in 6 to 7 months time it’s all worked out, remembering of course the high risks in the property game and the chance it may not.