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To celebrate 4 years of the Inside Property Investing podcast, we’re returning to the beginning and addressing the issue of getting started in property investment. Last week, we outlined a five year plan to get you up to a £5,000 per month income from property. This week, seven of our most popular past guests have returned to answer the same question: ‘how would you get started with property investing in today’s market?’
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Build partnerships, but don’t become dependant
Midlands based property investor Adam Lawrence spoke to us in episode 257 about using Buy Refurbish Refinance to grow a portfolio of 160 units in less than 10 years.
‘I would want to have a core strategy nailed down. I would be selecting that strategy based on the balance I’ve got between the time I’m going to put in and the capital that I can access from elsewhere, such as loans from private investors.
‘If I was particularly time-rich I might be looking at higher effort strategies, which would include things like HMOs and serviced accommodation. If I had less time to put in but more capital, I would be looking at good old single-lets.
‘I would also be thinking a lot about the balance between debt and equity. Maybe you’re the child who never shared their toys with others and you’re not interested in having business partners at all. That doesn’t leave you with any flexibility: you need to be using your own capital or you need to be borrowing it from someone or somewhere.
“this is a great time to be investing in property”
‘If you’re open to partnering with people, I’d say put as much time and effort into that as you can in terms of networking, meeting people. Make sure you’ve done extensive due diligence on them before you even contemplate going into partnership with them or anything like that. Sharing the workload, sharing some of the risk can be a good thing, especially in what today is an uncertain environment.
‘From the start I would try and not build-up too many dependencies. Ultimately, you’ve got to take responsibility for what you’ve got. If your skills need beefing up, there’s so much free content on the internet that can let you do that.
‘But most of all, I would remember that this is a great time to be in investing in property. Property returns are better than almost any other asset class. Even basic buy-to-let has kicked the head out of stocks out of everything that’s out there available to the general public. You’re on the right lines. You’re in the right arena.’
Overestimate time, hold back cash and go slower
Founder of East Eight and London Central Developments, Nicole Bremner is a property investor and personal branding superstar.
‘I’m often asked how I would do things differently or what I would do if I was starting my property career from scratch today. It’s a very interesting question because the market is also very different to when I started 9 years ago.
‘Luckily for me back then everything I touched really did turn to gold. Now things are much more challenging and people have to take that into account. There are three key things that I would do differently if I were to start today:
Overestimate time and costs by 25%
‘Firstly, I would always overestimate the time and costs by 25%. Every single project seems to be going over time and budget at the moment. The time is due to the increased time it’s taking to process financing. Then there’s the increase in material and labour issues. There’s also planning, which is taking us a really long time at the moment. One particular site in Hackney has been in planning for three years.
‘If you’re holding things for longer because of planning or sales, or whatever the reason, you are then going to need additional funds to pay for your interest costs or just to budget out your time.
Hold back cash
‘Number two is in the same vein: hold back cash. As property developers we’re very optimistic. We tend to take our need and base case scenarios, but not think we’re ever going to get to the base case. Sadly, lately people are. Right now is a perfect example. We’ve had to buy back investors in one of our projects just for goodwill purposes. If we’d not had enough cash held back, we would not [have been] able to do that.
‘Number three is go slower. As property developers we’re always chasing that next project. If we go a bit slower and try to enjoy the process it won’t be so stressful, we’ll enjoy the process a bit more. Really enjoy the process and enjoy the lifestyle that comes with being a property developer. No two days are ever the same and I think that’s one of the wonderful things about what we do.’
Educate yourself, set targets and buy that first property
Self-starter Daniel Gibson bought his first house with his student loan. Today, he is a developer, has a buy-to-let portfolio stretching across the north-east and runs a letting agency.
‘There are so many avenues that you can go down in property, but most people fail because they don’t make that first purchase.
‘Yes, educate yourself about the different opportunities, make a decision as to which type of property to invest the money in, but ultimately a list of goals that you’re aiming to achieve and a plan with a timescale of how to get there are more important than the first purchase itself.
‘I’ve been investing in property for a long time now. At the beginning, I took a long time to make any decisions about investments. In my first year, I only made one investment. In my second year, I only made one investment. But this year, in the first week of 2019, I’d already had two offers accepted on houses.
“focus on developing a pot of money”
‘There’s always going to be a reason not to invest. Ultimately, the people who make it in property and the ones who are willing to take that risk and if you’re not then I’d say that property investment is not for you.
‘If we don’t have those funds, it’s harder for us to make that first purchase. There are schemes out there like rent-to-rent that can look very attractive. Starting out from scratch, it’s a big risk. I would focus on developing a pot of money – ideally through property sourcing – continuing education and teaming up with other people in the industry.
‘My first property was a two-bedroom cottage and it didn’t change my life. You have to start somewhere and I wouldn’t hesitate in buying one of a dozen properties that are on the market today as my first property.’
Play to your strengths and share what you’re doing
Former retail store designer Jade Bailey transforms neglected houses into high-end HMOs with stunning design. She also has her own design agency @____beespace
‘When you first get into the industry it can be a little overwhelming. You look around and there are so many people doing so well. It’s hard to go, this is what I’m going to do. This is what I’m about.
‘There are a lot of smoke and mirrors in the industry about what’s possible. My personal experience [tells me] it’s about hard graft, commitment, learning and actually doing it. Doing it and making mistakes.
“Playing to your strengths is important”
‘The thing I wish I’d done sooner is share what we were working on. For six years before [I started sharing] we’d been living in flips, doing them up and selling them. It was only until I began to speak to a couple of family members about what I was doing, why I was doing it, the self-education, that we got our first joint venture partner. That ultimately helped us to build momentum in what we’re doing now. Sharing what you’re up to, whether that’s in your networking circle, on social media and engaging with people is so important.
‘Also playing to your strengths is important. In the podcast I did with Mike last year, I made a comment that I might not have a brain like a calculator, but I’m quite into design and I enjoy that, so I’m going to focus that on what I do in property. Out of loving design, BEESPACE has become a thing. Now I do a lot of design for other property investors and I’m really enjoying it.’
Start with single-lets, bag a HMO then diversify
Nottingham-based investor Jonathan Ioannou is director of JMI holdings and has built a huge portfolio of HMO rooms, whilst working full-time.
‘The first thing I’d do is tell all my family and friends my plans to become part of the industry. I’d get my name out there as much as possible.
‘I would think: where do I want to be in three years’ time? I would also think about where I need to be in 3 years’ time. Need and want are two different things. I would work out how much money I’d need to be breaking even at the end of year one. I would break that down into quarterly chunks and attack it like that.
‘I’d start with a single-let. The economic climate is different to what it was when I started, but the opportunity is still there to do it the same way. I’d rinse and repeat. The main target would be to get as much money out as possible.
“iT’S A VERY CROWDED MARKET NOW”
‘Single-lets teach you so much. They’re simple. They’re reliable. They’re relatively easy to look after. It’s one of the ways in. They’re not the shiny HMO that many people aspire to do, but they’re such an important stepping stone in property.
‘After I’d done a couple of those kind of things, I’d take all the money I could out of that. I would use the money to go towards some of the riskier strategies like HMOs. Exactly the same strategy as i did when I started.
‘Once I’d done one HMO project, I’d use that as proof of capabilities and competencies and start looking for joint venture investments. I would definitely think about diversifying quicker. It’s a very crowded market now. I would use the HMO model up to a point and that would be that.
‘Moving forwards, I’d start thinking about serviced accommodation and small commercial properties. I think there’s a massive opportunity with high-street properties where there’s a retail unit on the ground floor and two or three flats above.’
Keep it simple and enlist support
Jackie Tomes has built a £6 million pounds portfolio in Kent that allows her to go on holiday every six weeks
‘Keep it simple is my motto. It’s all about creating a property business with as few uncontrollable external variables as possible. This is about creating a portfolio of single-lets. I would be focusing on lowering risk. I would not be doing large building works: I would be doing refurbishments only. And I would be avoiding things like planning because its an uncontrollable third party.
“get some strategic guidance”
‘I’d want to be buying freehold properties with between two and three bedrooms where I can get yields of between 7-8%, in an area with good capital appreciation.
‘I would like to make my primary focus taking large two bedroom houses and making them into three bedroom houses, not by doing extensions or loft conversions, but by internally reconfiguring the space.
‘I would also enlist the support of a property expert to guide me, particularly somebody who enjoys the nitty-gritty, nuts and bolts of doing joint venture. I would also get some strategic guidance. I would want someone to help me build that business plan so that I’ve got a clear vision in my mind of what I’m heading towards.’
Start sooner and update your goals
A five-year plan success story, Nic Scudamore walked away from his 9-5, five years after his first investment.
‘I would look to start sooner, as soon as I had that inkling for property: it might have knocked 5 or 10 years from my journey.
‘Wherever you are in your journey, you need to keep reviewing and updating your goals. Keep them fluid. It needs to be a working document. Start off by reviewing them each Christmas and New Year time and then review them multiple times a year.
“…INVEST FOR YOUR GOALS AND DREAMS”
‘In terms of starting sooner and what I would have done to start sooner, I’d have started networking sooner and asking people about their journeys in property. I would have started reading more books and listening to more podcasts. You don’t know what you don’t know.
‘I would then have looked to do a rent-to-rent model with refurbs to build a pot of money as a property business that I could then use to invest into property, that would give me return and growth.
‘Whatever you’re doing, make sure you invest for you and your goals and your dreams. Make sure it’s about what you want to achieve.’