I am hugely lucky to be able to work with award winning property entrepreneurs helping them raise their profile online at Oversubscribed (my marketing company). When helping them create content (like this), we get a huge insight into their property and life strategies that has inspired me to make certain decisions. Before jumping into the numbers and photos on property number 4, I wanted to share a concept a number of them have in common. I also want to thank the team at Oversubscribed for helping me pull these blogs together and support with my social content creation. If you are interested in raising your profile online, head over to Oversubscribed.
Replacing earned income with investment income
This concept is really easy to understand and forms the basis for my Wealth Creation Strategy I wrote about here. Most people earn money, spend it and repeat - it's what most of us are taught to do. However what I am suggesting is we earn money, spend some, invest some and repeat. This way over time our investment income could exceed our earned income, giving us the freedom of choice. Hopefully my diagram below explains what I mean.
Whether you make £10K per year or £1 million, this is the game I believe everyone should be playing. How quickly can you make this process happen depends on two factors: 1. Your ability to earn money (by adding more value.) 2. Your ability not to spend it all. The bigger the gap between what you make and what you spend, the quicker this process will happen.
I am not saying don't enjoy life and live for 20 years' time, but do the maths for your situation and make a plan that allows you to enjoy the journey while becoming financially independent (investment income exceeding living costs).
Basic example for someone earning £25,000 per year after tax. £2,083 earned income, spend £1,583 on life, invest £500 per month. If you invested £500 at a 10% return, this is what it would look like over 20 years. 20 years is going to pass, so you may as well plan to have some investment income.
Roughly year 17, you'd have more investment income than earned income. I appreciate there are variables these numbers don't take into account (e.g pay rises, increase cost of living etc). However the basic concept stands. The game I think we should all play (unless you want to work forever), is reducing the time this takes. If you worked really hard for 10 years, earned more money, invested more money, could you replace earned income with investment income? Maybe it's possible in just 5 years.
“If you don't find a way to make money while you sleep, you will work until you die.” - Warren Buffett.
Property investment No.4
If you hadn't guessed, the way in which I plan to replace my earned income with investment income is through stocks and property. One of the main things I want to make sure is that the investments I make aren't just creating another job, as this would be another form of earned income. I'm happy if there's work upfront, but want to remove swapping time for money once the initial work is done. For me it isn't about wanting to stop working (I enjoy the work we do at The Oversubscribed Marketing Company), it's simply about having the choice.
Our next project is a 2 bed terraced house that we plan to fully refurbish before renting out and refinancing. The refurb will include a full rewire, new kitchen and bathroom, fully re-plastered throughout, new UPVC back door, full decoration and flooring throughout. The boiler is reasonably new and we plan to keep it. The timeline on this work is 8-10 weeks.
The numbers in theory
Similar to this previous property, it was purchased at auction and that comes with some extra costs.
Purchase condition photos
Rip out photos:
Head over to our property Instagram to see what is being carried out next.
During the rip out two issues were discovered.
Issue 1. Leak in the bathroom 😲. Since viewing the property and during the refurb some heavy rain uncovered a leak coming from the vent that comes into the bathroom.
Cost - This meant an extra £500 to repair heavy damage to the opening.
Issue 2. Heavily damaged ceiling in the lounge needed pulling down and re-boarding. This had been hidden well with filler and paint that wasn't spotted during the time of viewing.
Cost - £250 to remove and re-board.
Issue 3. Increase in costs. From the time the team estimated the costs, to the work starting, the raw material and labour costs increased. This seems an issue for everyone currently doing any building work.
Cost - This pushed the expected total cost to £16,928 (originally £16,500).
While we hope and aim for spotting these issues before we start, it seems like it's really difficult (even for the experienced team we use). This is why it's always worth building in a contingency into your margins.
Refurb complete!
To be continued...follow on our Moss Developments Insta Page here.
I hope these transparent blog posts are useful and welcome any feedback. To learn more about me, check out my about page here. To keep up to date on our latest project follow me on my social channels Instagram, LinkedIn, Facebook.
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