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How NOT to be a property investor

This is definitely something I know about. I’m really good at not being a good property investor.

Actually, saying that, I do have a property rented out so I guess I’m not entirely qualified at not being a property investor. However, getting it to the stage of renting it out was – in the nicest possible way – a diabolical nightmare. I did SO much wrong.

It was monumentally painful, and an experience I wouldn’t wish it upon my worst enemy – let alone my friends – but, seeing as I don’t have any enemies (that I’m aware of), it seems only right to help my non-enemies avoid similar pain:

As with any business venture, there is a price to pay with the plan of a return. These were the costs and rewards:


The Costs 💰:

  1. Finance. It took more money than I thought. I worked full-time and basically spent my entire year’s salary on renovating the flat as I was earning it.
  2. Time. I thought it would take a month or two to renovate the place after the original tenant had moved out – a couple of coats of paint and some new carpets – but as we peeled away the layers of nicotine stains and cat’s piss, the dreadful lack of structural workmanship became apparent. My brother once remarked on the 70’s conversion work: “It’s like whoever did this was on acid”. Well, I hope at least they had a jolly good time of it. It ended up taking us two years to complete the renovations (in “spare” time before and after the working day). I write “spare” in quotation marks because really there is no such thing as spare time.
  3. Relationship(s). Well, I started the project whilst with one girlfriend, and it didn’t end well (although the flat can’t be blamed). After four months of focussed singleness, I chose (for some reason – probably my second brain) to embark upon a new relationship. I thought it would be a good idea, and I guess it was (I managed to rope her in to helping a bit), but let’s just say that the prospect of going to work on a damp flat on a cold Saturday morning – rather than spending it in bed with a new girlfriend – was less than compelling. That may have contributed to the two year timescale.
  4. Family. I wouldn’t have been able to finish (or even start) had it not been for my most excellent brothers, Tobin and Robert. However, it certainly wasn’t all roses. Here is what would be an excerpt from my book (had I written one). WARNING….this bit isn’t pleasant 😷:

    “I heard an unearthly, bloodcurdling cry and a clattering crash. I knew what that meant. I walked in and saw a thick smear of blood down the wall and my brother slowly turning a shade of blue on the floor – eyes rolled back, foaming at the mouth with a pool of dark blood steadily spreading from the back of his head. Bite back the panic. Rob and I tried to calm him down by soothing him and rubbing his chest. I rang 999 and tried to stay calm as I watched the life seemingly ebb from my older brother. By the time the ambulance had turned up, we had masking-taped a wad of tissue onto Tobin’s head to stem the bleeding. He had regained a semblance of consciousness, but was mouthing incoherent gibberish. As we guided him tentatively to the medical vehicle, I turned to Rob: “Shit”, I said, “That wallpaper’s going to HAVE to come off now”.” – Darling, W. H. G. Esq. (2016) “How Not to be a Property Investor”. London, Made-up-books.
  5. Friends. “Can you come out to play?”. The mother in my head replies: “No, William has homework to finish”. For 2 years.
  6. Health. Cycling 4 miles to the gym in the morning, going to work, then 5 miles from work to the flat, renovating on my feet, then 4 miles back to my girlfriend’s place kept me pretty fit, but a building-site diet of Snickers, Crusty Croc crisps and Pot Noodles takes it’s toll.
  7. Stress. When you’ve spent months completely renovating a room, only to come in and find a giant hole in the ceiling disgorging water, or pay hundreds of pounds for plastering, only to (several months later) see the heart-stopping tell-tale signs of the rising damp you’d paid thousands to fix, the stress can mount. I’m a pretty calm guy most of the time, but this would have tested the patience of the f*****g Dalai Lama.

However, as with anything, there were many benefits that came from the experience too!


The Returns 👍:

  1. It was character building. I’m not being trite…I mean it. Working such long days and dealing with the stresses, responsibilities, finances and people required some personal growth.
  2. It was a good trial-by-fire learning experience. I now know more of what to avoid in future.
  3. It brought me closer to people. I bonded with my brothers, girlfriend and Toby (friend) though combined effort and challenges.
  4. Rental income. I now receive a good rent from excellent tenants as we made the place as nice as we could for them.
  5. Chunk of dough. I’ve now remortgaged it at it’s increased value so at least have made SOME of the money back.
  6. I know myself a bit better. I’ve learnt I don’t like doing property renovations.
  7. Skills. I’m more comfortable negotiating with people.
  8. Appreciation and empathy. It could have been far, far worse, and I now have more empathy for people who struggle with property nightmares.

property investor nightmare renovations
This is where dreams (and badgers) come to die..

Here is an appraisal of what I did right, and what I’d do differently in the future:

Things I did right 👑:

  1. Looked at a LOT of properties before choosing one that was in a good location and a good size.
  2. Negotiated the price down.
  3. Made sure I could get a monthly rental yield cashflow immediately, and not just hope for an increase in value.

And now, for the important bit…

Knowing what I now know, would I do it in the future, and if so, how?

(I’ll start by saying I probably wouldn’t do it again in the future. Here’s why: THE CHANGES TO THE UK BUDGET IN APRIL 2016 have made making a rental profit for most landlords nigh-on impossible (you now have to pay tax on the rental income BEFORE taking off the mortgage payments), so it would have to be a pretty special deal. I guess at some point landlords will have to start selling their rental properties so first-time buyers have somewhere to purchase, but even then, how many potential first time buyers will have £30k sitting in the bank for a deposit? Not many, unless Mummy and Daddy can help, and I suspect wealthier landlords will just swoop in and buy anyway. Until that point landlords will have to increase rents or risk the banks taking back their properties (you can’t run a business at a loss) – bad for the tenants and bad for the landlords. Good for the banks. Funny how it always seems to be good for the banks, non? Personally I think starting your own business and investing in your eduction would be a better use of time and money.)

With that said, if I were to buy another rental property, here is what would be done differently:

  1. More Due Diligence. I would conduct much more in-depth due diligence, and willingly annoy the vendors with the amount of snooping around I’d do before considering buying. Checking behind cupboards, using a damp meter, etc. etc. and negotiating big, fat discounts if any problems discovered. Also, I’d buy in the winter as any damp issues would be easier to spot.
  2. More money available. I would make sure I had enough money in the bank – or access to cheap finance (like a 24 month no interest credit card) – to pay a team to do any renovations needed. I’d find out roughly how much it would cost before buying.
  3. Rental yield. It would have to yield at least 10% profit, even with the new tax rules, as you can get 5% from the bank at the moment with a lot less hassle and risk. I know there’s the whole “increase the value” and capital gains, but in my opinion that should be a bonus…it has to have a profitable monthly cashflow as the most important factor.
  4. Delegation. I’d spend my time earning money doing what I’m really good at, then pay people who are really good at what they do, rather than battling with something I neither enjoy nor am good at.
  5. Agility. I’d buy a motor vehicle (like a van) for zipping to the shops for materials if required. SO much time was wasted trying to borrow or rent vehicles, or cycling to and from the shops with a huge military back-pack only to realise something was forgotten.
  6. Team selection. I wouldn’t hire family members (or anyone), unless they were professional tradesmen.
  7. Share the risk. I would, however, gladly share the risk and buy somewhere with a family member again (my first flat was bought with my sister). This was extra incentive to get things finished and meant less money down from each of us, and as a family member (rather than a business partner) things are less likely to turn sour.

Conclusion:

Personally, I’m going to invest my time and money in creating value for people in non-property businesses, then maybe just invest any money made into decent properties. It’s certainly not a way to get wealthy on this low-end of the market.

There you are then…How not to be a property investor. Take heed, brothers and sisters!

For anyone with experience in property investment, have you got any tips on things to avoid or do? Please let me know in the comments! If you want to subscribe for more bloggy goodness, you know what to do…

Much love, Will



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Will

Graphic designer, music producer and entrepreneur. I like travelling, learning new things, roast dinner and tea.

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