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  • Property-a-holics

    The 5 BEST decisions I made in buy to let



    Following on from my thread about the 5 things I wish I had done differently in BTL, someone made the great suggestion that I should write about the 5 best things I did, so here we go:

    1.  Got started!

    I became an accidental landlord at the age of 27 when I could not sell my first London flat due to it having a defective lease. However, I did not see the value of being a landlord until much later in life when I met Nick, so I wasted a lot of time, but at least I eventually took action.

    People often ask if they should get started or wait.  My answer to that is very simple.  "NOW" is the only time any of us have to get started in property.  You cannot go back into the past to buy and you cannot go forward into the future either.  Now is what you have - with your current financial position, health, market conditions, mortgage products, etc.

    All of those things could change, putting investing in property out of your reach, so that is why you should buy and wait, not wait to buy.

    The famous quote by Warren Buffett springs to mind:



    Plant your tree TODAY!

    Very often you will find that one of the biggest regrets investors say they have is that they did not get started earlier.  The earlier you start, the longer you have to enjoy the fruits of your labours, not forgetting that property is a long term investment anyway.

    2.  Diversified into holiday lets

    We purchased two holiday lets towards the end of our portfolio building phase and they have served us very well.

    Holiday lets have the added bonus of not being subject to Section 24 tax regime, just one of the many benefits of owning one.

    See - Holiday let - every portfolio should have one

    Guide to sourcing & setting up a holiday let

    Coastal property rocks ... !

    Key trends in the holiday lets sector

    We purchased our "forever home" on the Dorset coast and are renting it out as a holiday let until our retirement.  It's nice knowing it is there waiting for us, accruing equity, and, if it is empty, we can use it ourselves and enrich our lifestyle.

    3.  Focussed on net cash flow month on month

    Cash flow is the lifeblood of any business and property is no different.

    There is the famous saying:



    Cash flow is actual spendable money in your bank account at the end of the month.  Capital growth is not guaranteed and therefore = speculation.

    Do not subscribe to the myth that property doubles in value every 10 years!  It just might, but that is pure speculation and you cannot spend speculation and its a high risk business strategy.  Some properties in the north are actually worth less than they were 10 years ago!

    See - When BTL goes wrong - no capital growth

    Property doubles in value every 6-10 years...

    Month on month cash flow allows you to remain in the game long enough to enjoy capital appreciation, which is the cherry on the top of property investment.  It also allows you to re-invest into your business and grow additional assets and also maintain and improve your existing assets.

    See - BTL income or capital growth? how to get a balance?

    4.  Treated tenants with respect and empathy

    This approach has paid dividends over the years - only two tenants have ever abused this approach.  Other tenants who have been struggling with life events such as redundancy or family crisis have been able to remain in their home and get back on track through my support and understanding of their situation.

    Being a landlord seems to be a very "kharmic" business to me, so treat tenants badly, and it will come back to bite!

    See - Do we get the tenants we deserve! 

    Treating tenants well and providing a high level of accommodation and service will also reduce the hassle and amount of time you spend managing tenancies imho.  Some people choose to operate in the lower end of the market and deal with more challenging tenants, and those that provide an ethical service are much needed - but they have thicker skin than me!

    5.  Bought good quality properties in good areas and had the personal benchmark of "would I live there myself?"

    Good quality family homes have been the best long-term performers in our portfolio, attracting families who put down roots and stay for many years, usually due to putting their kids through school.

    See - Why higher value properties are better

    When purchasing an investment property, I always have the benchmark:  "Would I live here myself?".

    If this answer is "no", then why should I expect anyone else to live there?!

    I ask myself "Would I feel safe walking home at night?".  If the answer is "no", then other potential female tenants might feel the same, and this property might only therefore appeal to male tenants, cutting down my potential market to rent to.

    I ask myself "Can I get a pint of milk within a five minute walk?".  If the answer is "no", then that could put people off.

    Is parking easy?

    Are there problems with noise?

    Does the property feel "safe"?  (I am not too keen on ground floor flats for this reason).

    Are other properties in the street well maintained?

    Is there a sense of pride in the neighbourhood?

    Are the streets clean of rubbish?

    I want my tenants to love living in my properties, and put down roots. 

    Bonus:  Over 15 years, we have faced many challenges and headwinds, but we have always kept the faith with property, sought out answers to problems, sought professional advice, and kept moving forwards.

    So "staying committed" - no matter what sideshows arise through market conditions or government meddling - would be another of the best things I did and that is not difficult to do if you understand the fundaments of why property is such a good investment. 

    What are the five best things you have done on your property journey?

    SEE ALSO  -          If you knew then what you know now, what might you have done differently?

    UP NEXT -              Growing a property portfolio - resources

    DON'T MISS -         How important is "gut instinct" in property & landlordism?

    NOW WATCH:

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    I became an accidental landlord at the age of 46 through inheritance. It took me 2 years to realise I was missing an opportunity and a further 2 years to understand that opportunity. I have now sold the inherited property (held in trust until I was 50). It has achieved a 25% gain and by reinvesting I am on course to achieve a further 50% gain by forced appreciation. Net yield has increased from around 2% to well over 10%.

    1. Take advice, ask questions, but don't act until you have a strategy - learn continuously.
    2. Learn from your mistakes and those of others - broaden this to government and history.
    3. Don't follow the trends or the hype of the moment and don't be distracted by fearmongering.
    4. Become an expert in your chosen strategy - legislation, tax and planning
    5. Trust and follow your gut feel and put facts before opinions - nurture your confidence.
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    6/ Sold some property and pumped the proceeds into a business with far greater returns than buy to let !

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    1) Chose to invest where I grew up rather than where I was living.

    I was investing for income and the yields were greater in the North where I grew up. Also a new tram line was due to open so I expected some growth from that. As it was Manchester started booming and after a little delay it has reach me. So I am getting good capital growth as a bonus on top of the good yields.

    2) Used letting agents

    I started with very little knowledge so I have paid experience agents to manage my properties.

    3) Been flexible with my plans.

    Initially I planned to by a couple of 2 bed terraces then pause to see how it went. As it was I bought three properties and only the first was a 2 bed terrace. The second was a 3 bed semi and has been very good for me. See the next point for the third.

    4) Bought a commercial property

    I bought a block of 2 shops with some offices above. At the time it was 2/3rds empty, but it seemed likely that the tram line would help boost it. The existing tenant wanted to expand and took over the offices. The other shop has gone through three tenants with increasing rents. It has been yielding 10+% a year for several years now.

    5) Bought better than the minimum properties

    Apart from my first purchase I have bought properties with some thing about them to justify a higher rent and encourage tenants to stay a long time. What it is varies. One is a 2 minute walk from a station. One is in a good area backing on to a good school. One has front and back gardens and is a five minute walk from a tram stop. and a 2 minute drive from a motorway.

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    1. Finding this site and learning from Vanessa and all the contributors, continuously.

    This has saved me at least £4,000 through using some of the switch products with my existing mortgage providers without fees. I discovered this was possible on a PT thread probably 2 years ago.

    2. Self managing my portfolio and not using agents.

    My first one was 9 years ago and over a few years I managed to build it up to 8 properties, which I am sticking to with my plan/strategy. If I assume that the agents would not have let to the couple of bad tenants I have had then I reckon I have saved well over £25,000.

    3. Having all mortgages on capital and repayment.

    Which means that the impact of section 24 will have a very small impact on me, probably £500 a year in extra tax, and this will reduce in future years.

    fab

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    Thanks for sharing Fab. Can you expand on your mortgage point?

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    Mr PAYE

    On capital and repayment mortgages the proportion of the mortgage payment made each month pays of part of the capital. So, as time goes by, even though the monthly payment amount stays the same if you are on a fix, you are paying less in interest because some of the capital has been paid off. The proportion of interest is high in the early years, but as time goes by this reduces substantially.

    If you are interested in capital and repayment mortgages as a strategy for some or all of your portfolio then there is a great spreadsheet to use:

    https://www.locostfireblade.co.uk/Downloa...rsion.xlsx

    This spreadsheet should have gone into my list of the best things I did. Because you can put in a small overpayment each month and it will calculate how much interest you will save and also the reduced term. I reckon that for me I have reduced my 20 year plan to be achievable in 15 years and will have saved over £35,000.

    fab

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    Thanks for sharing Fabio, how did you save fees?

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    I chose switch products with my existing lenders that did not include fees. Yes, there was a few base points higher in terms of rates with those options with fees but still well worth it.

    I could have found a different mortgage provider without fees. But I think they would have been a higher fix rate.

    Also, with switching using an existing provider in my experience is very easy and can be done online. No sorting the paperwork for another provider, with the delays and grief that this can be plus no broker fees.

    The switching is all based on not requiring further funds. Which I believe is a different process, but I have no experience of this.

    fab

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    Thanks for sharing Fab - it's great to see ides being shared and learnt from!

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    I started by buying a house with my dad. I promised him stress-free retirement income by letting 2 rooms and sharing the income. Whilst I look after vetting, voids, bills, maintenance etc

    It was a great set-up, but also meant I felt I couldn’t pull capital without increasing risk to him. Which I didn’t want to ask.

    The best 5 decisions?

    1 - keeping my costs low and saving as much as I could (I moved back into a shared house, when I was renting a flat to maximise my savings)

    2  - To invest in a flat purely for capital growth. Worst place  in the street, managed to get the vendor to extend the lease but not increase the price. Sold 3 years later with a great profit.

    3 - focusing on customer service: understating that treating people as I’d want to be made a difference to the quality of tenants and self managing so I know what’s going on, and in my house shares, letting the tenants have final say on who moves in.

    4 - being brave in acquisition but risk averse in financial management (using fixed rate mortgages, not spending income, holding cash reserves and most importantly not taking tenants I have any doubts about)

    5 - having a wife who supports my ambitions, emotionally, financially and practically

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