Before I jump into this blog - I want to thank the team at Oversubscribed for helping me pull these blogs together and support with my social content creation. Check out a recent blog where I explain how raising my profile helped purchase £1.25m worth of single lets. I appreciate the Facebook, Instagram and LinkedIn likes/comments - if you enjoy the blogs, like/comment on the post, so I know to keep producing them.
See investment No.1 here - our full strategy
See investment No.2 here - our plans to build a portfolio.
See investment No.3 here - what we look for.
See investment No.4 here - my plan to replace earned income.
See investment No.5 here - numbers explained in full.
Excited to share our latest property purchase - a 3 bed terrace house in the North East. This is the most expensive deal we have brought to date and as a result has the highest monthly cashflow. If you are interested in property, check out my wealth plan (something I recommend we all have and the reason I share such detail within my blogs).
Before I go into the numbers, I want to share:
3 big learnings I've had to date with property:
1. Annualised returns suck
This is a little more technical and I haven’t seen any property investor talk about this. But with stocks and shares, your money is put to work straight away and will make you a return. With property, your money could be tied up for 5-7 months before you start getting a return. Even if you use investors' money, the annualised returns still aren’t great and would have a number of years to level itself back out. That being said, property and the cashflow it can generate still has a place in my plan.
2. Small costs add up
Track everything! We very quickly realised that there are a lot of small costs. Having the experience of implementing finance systems helped this not turn into an issue, but I can see how it could catch most investors out. Using Xero we tracked everything that we payed for. It’s surprising how these small costs add up and effect your actual return. Keep this in mind when stacking a deal.
3. Finding investors and funding isn’t hard
By raising my profile online throughout the year (with the help of www.oversubscribed.co.uk), I found accessing short term private investors a lot easier than I thought. By about half way through the year, I had access to far more private investment than I needed. This was partly down to me building credibility online, but also because there’s a lot of people with a lot of money. (My investors get a far better annualised return than I will this year from property - see point 1).
Check out 21 other lessons learned in 2021 when buying properties.
Property investment No.6
This property will need:
A full re-wire
Replacement heating system
New bathroom
New kitchen
Plaster skims on walls where needed
New internal doors
New flooring throughout
New back external door
Decoration throughout
The numbers in theory - our most expensive house yet
Purchase condition photos
If you are interested in the exact numbers broken down, see this article. Follow the progress of this property by heading over to our property Instagram to see the work being carried out with weekly updates.
Rip out photos:
Head over to our property Instagram to see what is being carried out next.
Almost finished:
£4,220 Extra Cost... here's what went wrong
We encountered a couple of issues during the refurb on this. The first was an increase in material costs (£2,048 increase). From when we first get the cost of a potential refurb until it takes place can be months, leaving room for an increase (especially as inflation is rising currently). On this refurb that was the case. It could be avoided by getting a updated cost just before completion, but may not be practical.
The second cost was the need for a new boiler, adding an extra £2,172 that we hadn't predicted. When the build team initially went around, the consensus was it was good enough to keep. However during the refurb it became apartment that it wasn't. It's always worth double checking all the common big potential costs very carefully, bolier, windows, kitchen, bathroom and roof.
Both of these issues highlighted the importance to build into our numbers a contingency. Most people say a 10% contingency is good enough, however I think this is likely not enough if you are doing a full refurb.
"Expect the best, plan for the worse"
Once the final numbers come back on this, we are still expecting to get a 11%-12% return on the money we leave in once refinanced.
I hope these transparent blog posts are useful and welcome any feedback. The reason I spend time writing these blogs is in the hope that just one person invests in their future and has a better life because of it.
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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