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  • Entrepreneurs

    Leaving the day Job - Becoming a fulltime landlord

    Hello fellow PT,

    This is my first post - would love to get your opinion/views on becoming a full time landlord.

    I have been investing in property for 15 years (since being 21) and have been trying to leave the full time day job since the first house I purchased, naively thinking that one or two more properties will bring me vast riches. Having come back to some kind of reallity I have now 22 properties 50% LTV reducing my debt by approx 50k a year and still working in the same job. The only thing thats keeping there are the moment is im earning about 60k and I keep thinking my daily living expenses will be taken from the properties if I leave work reducing the amount I can put back into the business which will ulitimately keep me from growing my portfolio.

    I would love to hear your thoughts on leaving the full time job how/when did you do it? Did you want to reach a certain amount of positive cash flow in the properties before you left? Did you want to purchase a certain amount of properties before you left the fulltime job?

    Thanks

    Sam
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    Hi Sam,

    Welcome to Property Tribes.

    We have quite a few discussions along these lines which you may find helpful, you or may wish to add to:

    Converting to full time professional landlord

    Day job vs. property investor

    Can I give up my day job?

    Don't give up the day job!

    We recommend that you plan this carefully, get a professional team around you to support you, and create a property business plan as if you were starting a new business.

    Happy reading! Smile
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    [Image: 4995468760_6be86655d4_t.jpg]
    general operations director, site owner and moderator - propertytribes.com


    Hi Nick,

    Thanks mate just trying to find my way around.

    Sam
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    Hi Sam,

    Adding my welcome to Property Tribes.

    22 properties at 50% LTV - great achievement!

    I am actually surprised that this is not generating enough cash for you to leave the day job, although I can appreciate that its hard to give up £60K per year. Smile

    Have you thought about resigning from your job and becoming a consultant? You could then work as and when you please, still bringing in money, but also having more time to focus on your property business.

    I guess a lot of it is the kind of lifestyle you want to lead. If you are willing to be quite frugal in your living, then you could give up a lot sooner than if you wanted a more luxury lifestyle.

    Rather than paying down debt, I would be inclined to leverage up to around 65% - 70% LTV.

    Releasing some equity would allow you to buy more properties and generate more cash flow and capital growth.

    Have you thought about diversifying a bit? Holiday lets in the right location can be very lucrative, for example.

    It seems you have a lot of options open to you, which is a nice place to be, but I think that sitting down and creating a business plan - Nick gave the link - would help clarify your thoughts and direction.

    Another possible option would be to immerse yourself fully in the property sector by starting a property-related business that you could build alongside your portfolio.

    Hope that is some food for thought?
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    Hi Sam,

    You're in fortunate position and to echo Vanessa's advice I imagine the first two steps are firstly deciding how much you need to maintain your lifestyle in your 'early retirement, and secondly making sure your investments are inflation proofed to make sure your lifestyle doesn't have to change over time with inflation slowly eroding your income. If your income is mainly property-based then this shouldn't be a problem as rents will continue to increase, even at a modest level in areas outside of the traditional hotspots.

    A professional advisor, which I'm not, would probably advise you to spread your risks across a number of investments which is basically what you've already been doing by keeping an income from your day job. If you do want to quit your job as it's restrictive and it's no longer inspiring you, many landlords I know have a small interest, or a significant role, in a property-related business which can provide an income and a daytime role if you choose. By doing this, you could maintain an income without the constraints of a day job and grow your portfolio at the same as your property profits won't be gobbled up by living expenses.

    An 'average" letting or sales agent with their own small business should earn close to your existing salary. A committed and successful one considerably more. At the same time you would be growing an asset with a value which can easily be sold in the future. An existing business (a resale) is a very safe option and usually comes with key staff in situ. Some of these can be run on a hands-off basis. A new start is more risky. It's far less risky and easier with a franchise.

    At 36 you have a lot of time (and energy!) to build a second saleable business which will complement your existing property business and provide cash to fund new properties. Either way, my advice is to have two income streams, a business and a portfolio. Both will grow over time and provide a stable platform for a job-free lifestyle. Your risks will be spread and it can be a rewarding journey. I'm sure others will have different views on how to gear up your portfolio for more aggressive growth if you choose to live on your property income alone.

    Good luck and I hope the next 15 years brings you as much success as the last.
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    Hi Sam

    You have done very well but strategically maybe i would have done things differently.

    You have 22 units. Lets say they are 100K a piece. Thats 2.2 mil portfolio and @ 50% LTV you have 1.1 million equity.

    You therefore are a millionaire but you still cannot give up your job!
    Leverage to 80% and stop paying down debt.
    Do that later in life if you must.
    80% LTV gives you 660K to spend on 30 more 80% LTV properties
    Mortgage debt is good debt

    Lets say you are getting £250 net pcm per property for your existing 22 ( If not why not?)
    Thats 66K pa

    With the 660K released buy 30 more 100K properties @ 80% LTV
    660K mortgage cost = say £2200 pcm @ 4% . At 250 per property thats 7500 pcm minus your 2200 extra mortgage costs leaves 5.3K pcm or 63K pa

    63K + your original 66K =

    124K pa income

    On a 5 million portfolio going up by 5% pa
    = 250K gain pa

    = Hey Give up work! :-)
    .
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    Jonathan Clarke. http://www.buytoletmk.com


    Thank you guys for the time you have taken out to write your views.

    Dorian - I have been looking into possibly opening a letting agency for the last 5 years! The few things that have put me off is the headache involved in chasing rent ( its hard enough sometimes getting it out of my own tenants) and then comparing the amount of time I currently spend at work with virtually zero headache but not very flexible in regards to timings.

    Jonathan - Your workings are very inspiring but I have always been in the mind set that I should be in a position that if rates go up and tenants leave I still wont be effected much in the short term. But what I do find interesting is Where do you get 80% LTV loans at 4% ? At the moment im getting max 75% LTV.

    Furthermore I forgot to mention in my initial post - If I do leave work I feel that my portfolio expansion will suffer as I will be using the income from the properties for my own personal expenses/costs.

    Thanks again for your time.
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    Wow - you are doing really well!

    If I was in your position I would be somewhere in the middle of where you are and where Johnathon suggests. I would leverage up to 70% and buy more properties, how much income do you need to retire?

    80% LTV - I have a couple with TMW - 3.99% 2 year fixed, a great product I use for purchasing run down northern properties, refurbing with a view to refinancing after the 2 year fix.
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    Hi Sam,

    Not very technical, but I left the day job when:

    1. My NET income from property was larger than my day-job salary (around 150%);
    2. I had a nice cash cushion for eventualities (around 10% of my debt);
    3. My day job was interfering with the running of the property business and vice versa;
    4. I was unexcited about my job and felt it was my time to go alone;
    5. I was comfortable with my mortgage payments if interest rates go up to 6% (every one has different risk profiles, you may want to do it up to 10%);
    6. My LTV is around 65% (again, different risk profiles, and the cash cushion could pay a chunk of that if required)


    A couple of things to consider:
    • When you don't have a salary, there are less finance products available to you, so consult a good mortgage adviser (like Lisa Orme). I.e. you can get finance, but in different ways and with different parameters that you must conform to

    • When you leave you may have more time to make your portfolio more efficient, to develop systems, to think, to learn new strategies, to find better opportunities, to start a new business outside property, to live ;-)


    This was just my situation. One aspect is the figures, and another is the stage of your life, and your personal circumstances. To be honest, an important part of my decision was emotional. I really WANTED to leave my job, the commute, the stress, the inflexibility, etc.

    Hope that gives you a different insight.

    Good luck

    Francisco
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    Thanks Sam. There are lots of ways to chase rents without too much hassle. Most LA's are inundated with tenants and once someone fits their initial criteria they have a minimum referencing standard which isn't simply a credit check. The higher benchmark isn't infallible but it means is that rent arrears should, in theory, affect less than 2 or 3% of your properties under management. Private LL's who don't reference and make a 'judgement call' normally have higher rent arrears and I say this anecdotally as we manage maybe 35k properties fully, and tenant find for around the same number of self-managing LL's. I've had the same problem myself with some of my own properties over the years. Private LL's do find it a little harder to chase arrears as they tend to have less of an understanding of what they can and can't do. LA's don't have this problem as they're know their way around the 100+ bits of legislation, or they should do if they're any good.

    If you do decide to become an LA, with or without a franchise, I'd personally also consider property sales at the same time. Running a business to me is less about finding a "safe path" it's more about avoiding the endless obstacles and landmines that stop us doing what we started out to do which is make money. Franchising provides a well trodden path but you do, of course, pay a franchisor for their knowledge and support. Property sales will spread your risk and there's cross-pollination between sales and lettings. Lettings is the safe, reliable and predictable backbone of any solid property business. Sales is faster and more lucrative but but it's way more subject to the vagaries of the market.

    Any way, if you need a hand with any part of this, feel free to PM. Business isn't for the feint-hearted but as you've seen with JC's and others advice - there's no reward without risk, and hard work. It's a great industry whatever you decide to do. Property being dangerously addictive and it sounds like you've been well and truly bitten by the bug. Good luck with it.
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    Hi
    I have recently converted to full time landlord. I was nervous about giving up a fairly well paid job but was finding it quite stressful. I have found that I can get mortgages still, finding these two mortgage brokers really good, I recently remortgaged 8 of my properties and over the 2 year fixed terms will save myself £35k.

    (Moderator note: Content removed*).

    I found a couple of things helped me take the plunge. Firstly I was using a letting agent who, I believe, kept my rents low to make it easier for them to rent. So I dropped them and manage the properties myself, putting the rents up a bit.

    I set up a property management company of my own to manage my properties to keep my taxes efficient, ie leveraging corporation tax at 20% rather then personal tax at 40%.

    I also tweaked a couple of houses creating an extra bedroom, enabling me to charge more rent.

    I also save a fortune on commuting!

    Along the way I have also picked up some property management from old colleagues and friends who wanted to invest in property but did not have the nerve to do it on their own. This is modest but brings in about £1500 per month.


    I now have a similar amount of money coming in as I did before but without the stress of the London job and I love the flexibility I have now. I can walk the dogs, have lunch with a friend and do a bit of gardening when I want!
    Hope my comments are useful.
    Joanna
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