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I regularly watch homes under the hammer and hear of people who have many BTL properties but I always seem to have the same question that comes to mind, that is how do these people go so big in property so fast.For example on homes under the hammer today I seen a guy who had 35 properties and he had only been in the property business 10 years, so for arguments sake say he bought these properties for around £80k and they was immediately ready for renting therefore doesn't need any money spending in it, that would be 25% of 80k for a deposit which is £20k times 35 properties that would be £700,000 just on deposits.How do people do this? I understand that some people make their money in other business sectors and then invest in property or they could inherit a large amount of money, but are there people out there who can start with nothing, go into property full time and have 35 properties after 10 years?As I say this is only one example of one person on the tv.
I Would be interested to hear how many properties people on here have managed to accumulate over how ever long they've been in the property business.
Hi Conor,The answer is simpulz! An era of free and easy finance!From around 2000 to 2008, there were financial products and deal structures that enabled people to buy properties without putting down a deposit. Therefore all you had to fund were the acquisition costs.Many people built large, heavily leveraged portfolios using so called "no money down" techniques.Rapidly rising property prices combined with free n' easy equity release and remortgaging allowed people to scale up even more quickly.Many of these people subsequently went bankrupt during the credit crunch, some are hanging on by the skin of their teeth through low interest rates, and others have turned to offering training to subsidise their failing portfolios. The current crop of property gurus mostly came from this era of "no money down" property investment.This was a window of opportunity that was open for a brief period. That window has now been slammed firmly shut.Financing is a lot harder to come by, criteria for lending is a lot stricter, you have to put in much larger deposits (typically around 30% at the time of writing), plus the 3% stamp duty hikes and Section 24 tax changes.So, there will be no more stories of people scaling up quickly. These stories are from an era that died around 8 years ago.What may be possible in certain circumstances is to create a "no money left in deal", but you would need the acquisition costs and deposit in the first place and probably some funds to refurbish the property and force the appreciation. You would need to buy the property at a deep discount, add value via refurb, and then, in certain circumstances, you can then refinance up to the new value to pull out as much of your own money as possible. There are some who claim you can still buy property with no money, but they are really talking about strategies where you "control" an asset, now own it - strategies like lease options and Rent to Rent.In the current market conditions, the only way to "go big" in property would be to JV (joint venture) with other people with large funds available. But you have to ask the question why someone with a lot of money would invest in someone with little or no experience.So the people "going big" in JVs will be those with an existing track record of property development, partnering with other high net worth individuals to turbo-boost their growth. Hope that answers your question?
Vanessa Warwick Landlord and Co-Founder of PropertyTribes.com **If you have got value from Property Tribes, find out how you can support it in remaining a free to use community resource**
As usual, spot on.
I also agree with the contributors who say that the way forward is for professional business people.
Another way to make it big in property is to diversify, leveraging your hard-gained experience. So on top of 'vanilla' buy to let, you could use your knowledge to open a letting agency, JV, source, flip, new build etc.
Like most businesses, constant re-education and changing tack as the trading environment does, is the key to survivial. But, yes, with the right strategy, attitude and determination I think you can still make it big in property depending on how you define 'big.'
LETS MAKE HOMES by treating landlords as partners, tenants as customers & every property as our own."
A very insightful post! I'm just starting on my property invest journey. I have a lump sum of money to invest but no regular income and still looking to buy another residential property for myself after selling my previous one a couple of years back. So I have been told it'll be hard to get a mortgage with no regular income and no property. The best/only way to get around the problem is to buy my first BTL property in cash, wait for around 6 months to build up houseowner credibility, then ask for a mortgage/remortgage/financing on the property. The funds will then enable me to fund the deposits on my second/third properties and so on...
Does it make sense/seem feasible to you?
In addition to the easy finance there was also the growth in property prices which allowed you to keep remortgaging, taking money out to buy more properties.
As above, that's all ended now.
A blog and information source for buy to let landlords
And of course the rather large elephant in the room is if these properties have to be sold there will be a rather large CGT bill to pay.
Will there be sufficient from the sale proceeds to pay the CGT!?
Of course to pull out funds there must have been some remortgageable gains in the first place
There would need to be even more gains to cover the costs of paying a CGT bill.
This all presupposes that the property could be sold for sufficient value to cover all the CGT costs!
Yes and I am sure there are people out there who want to sell post tax changes but can't because of this CGT issue.
I wonder how many people have built up portfolios in this way and are unaware that a large chunk of their gains will go to the taxman and not covered by the proceeds net of mortgage.
Indeed these LL will be hostage LL until their properties they wish to sell have achieved sufficient value to pay CGT bils.
S 24 has the ability to reveal lots of LL aren't wearing any clothes!!
Those that have sucessfully remortgaged on increased asset prices to buy more will be trapped into remaining LL until the assets they intend to sell have sufficient equity in them to pay the CGT.
The only way they could cope with S 24 is to increase rents and if they can't do that they will have to subsidise their mortgages out of their other income; if they have any!!?
If they can't do either of these things they are well and truly stuffed!
Inability to pay CGT will result in HMRC bankrupting them.
Time to get the PPR in another name and any other assets; just incase bankruptcy occurs!!
It is not as though they could sell off properties to reduce debt on others
They would still need to pay any CGT on the properties sold leaving most probably nothing to pay off other debt.
It would seem that there is much debt entrained in the PRS which had it not been for S 24 would have remained in the PRS and CGT would have easily been payable in later years where the properties were kept; subject of course to asset prices increasing!?
S24 has shortened the investment timeline if rents can't be increased to cover the additional taxes
MX mortgage holders in particular have stored up a lot of remortgaging and I doubt many could survive if they don't increase rents.
Trouble is they can't sell cos they can't afford the CGT bills!!!
Not a very good position to be in!!!
What happens if a property is sold during a downturn as S 24 is unaffordable and there is insufficient sale proceeds to pay the CGT bill!!??
I think we may have a situation where many LL are in fact made of straw!!.
They can't even convert to Ltd companies due to CGT.
I seems many LL will have little choice than to soldier on suffering the effects of S 24.
They wil have NO choice!!!
A very worrying situtation for many LL especially those who aren't yet aware of what S24 will do to them!!
Exactly as Venessa said was how people used credit to build up their empires. Very frustrating that I got the hang of things at the back end. You can still do it now, just not so quickly, nor with such easy access to credit. But if you could save and stretch yourself now to buy a couple over the next few to five years, I think you'll have built yourself a very solid base built on good foundations over tougher times. I think that will bode well in proving your credibility as a borrower, and build up your experience - which is invaluable. Any business built now will be stress tested from the start.
I trust you have a job? I think you can only start in the game now with a job or inheritence, and no dellusional GRQ plans to give up work soon. I acquired my first BTL almost 4 years ago and did not plan to give up work for 10 years. However, I do only work 4 days a week, with as much from home as required by me, with a decent salary to "cashflow my property investment"! That position has come from 20 odd years investing in my "professional" experience and competence in my day job. That's been very important to enable my property journey as well as knowledge acquired on forums and through property experience.
You'll have to start small, and save to get your deposit, and invest in a high demand low value area, potentially up north, where you can afford a mortgage. Plenty of very experienced LLs on here, up there, to advise you.
You may have your own home where you can draw out some equity to boost your savings. You may have to take it slow and steady whilst Brexit sorts itself out, but I believe the coming year will be the best year to purchase for quite some time. I'm fully confident that since demand greatly exceeds housing supply by 100s of thousands and cost of borrowing will stay low for some years, the PRS is still a good place to be.
Forget the high leverage, buy for nothing, do nothing, let, re-mortgage, buy and repeat. Those days are over. We're back to the good old LL days. Slow and steady; carry on working in your other business, and build up your property side line, whether that's straight forward BTL; buy, add value and let at increased rent; or buy to refurb to sell; or a mixture. The financial/borrowing side of the game has changed, but property is still a safe bet.
P.S. absolutely do remember to factor in income tax without mortgage interest relief and stamp duty into your calcs. It's a different equation now, but if the calculations work, it works.
"Change is a prerequisite to longterm survival".
The establishment is rigged so that the rich stay very rich, and the poor get poorer.
As a newb (just started letting our flat and moved into a house), that's hoping to acquire a few properties in the future, I think this is a solid and realistic answer. The good times have gone but opportunity still exists, I believe.
I called 2000 to 2008 the Mortgage Express period when money was easy to get
I started in 1982 long before BTL started and built up a few properties until 2000 then I went mad Remortgageing and buying becuse it was easy
Then 2008 came along and I had to think hard on how to build the bussiness I started saving deposits from cash flow and it has worked a dream until S24 came along and put a stick in the wheel But the saveing grace is the Properties I saved Deposits for and Did Not Remortgage are the ones I can sell to my new Ltd Co
We are now in a very very differant time for Landlords its not as easy as it was so I dont think you will see a lot of Get Rich Landlords anymore
The landlords who will make it through the next period will be Bussiness Men & Women who run there BTL via a Ltd Co and do nothing else becuase it will be there Job ??
If there was ever a time to sort out the proffesioanl from the BTL investor who has a Couple of Properties on the side That time has now come
You can still make it Big in BTL but it will not be overnight growth It will take your own cash 25% deposits are now the norm and you will not be able to Remortgage Remortgage as the days of Motgagage Express
The days of Mortgage Express did make me a lot of money and with tracker rates Its still makeing me a lot of money but it was a fluke
Remmeber all that Gliters is not Gold but If you have the will and deep pockets you can make it
Im now heading for 60 and its time to stop building start enjoying cash and start takeing the rewards of BTL for which I will always be greatfull
Learn Change and Adapt ?????