Property Seminar No 1

I went to a property event this week where people bothered to turn up. It was at the Jury’s Inn Hotel, in Middlesrough and was a ‘Legacy Education’ seminar. The event was 2-hours long and was held by Robert Tuck (a property investor from London).

It was a free event and I was aloud to bring along a guest. I rocked up with Mr Hardy who is a friend from work (rare to be honest as most people at work are colleagues). Mr Hardy has been reading some of the self-development books I have and like me, is open minded and not overly happy with what he is getting out of work.

To be honest the e-mail’s I had received about the event illustrated Robert Kiyosaki with a picture of his book so I was expecting to meet Mr Kiyosaki. Just a case of me (again) not doing my research. This wasn’t an issue as Mr Tuck was like a stand-up comedian and we got a lot out of the seminar.

Although I have been a landlord for around 17 years, I have been clueless and this has been highlighted this year after reading several books on property. This realization was compounded last night as I learned some more useful information.

From earning £6.14 an hour at his local golf course in 2010, Mr Tuck is now a full-time property investor and is now able to play on golf courses all over the world. This was all from an interest in self-development and reading a copy of ‘Rich Dad Poor Dad’ (Robert Kiyosaki). It is from self-education not the education system that this Cockney Geezer has achieved his financial freedom (passive income exceeds personal expenses).

Old way: school, college, University, Job, House, Pension, retire. Or as Mr Tuck said, “work 40 hours per week, for 40 years of your life, then retire and get 40% of your income.” Personally, if I am out of work for 3 months or more, I am fucked.

New way: self-education, books, podcasts, youtube, seminars, strategy, action, multiple streams of income. This way if I lose my primary source of income (my job) I am not fucked.

Let us look at how many people as a percentage own 1 or more properties in the UK:

  • 1-3 properties – 91%
  • 4-5 properties – 6% (Me)
  • 6-10 properties – 2%
  • 10+ properties – 1%

Mr Tuck then talked about what the 1% (of property investors) do. They don’t even use their own money. They use other people’s money. They focus on a strategy. They get very good at one strategy (e.g. Buy-to-let) and then move on to another strategy.

Some of the strategies he briefly talked about:

  1. Joint venture partners
  2. Angel investors
  3. Equity release from the house you live in
  4. Bridging loans
  5. Credit card
  6. Buy-to-let
  7. Buy to sell – flips
  8. Houses of multiple occupancy (HMOs)

There were more strategies and he gave us some case studies of his properties that he bought using these strategies. I am currently doing strategy 3) as I look to buy my 5th rental.

The 1% ers do their research (something I can improve on) and invest in the right area. They get BMV (Below Market Value) discount when buying. They have a strong power team in that area (Accountant, Solicitor, Financial advisor, Estate agents, Builders etc). This power team means the houses work for them and not the other way around. If for example there is renovation work to be done, they delegate it.

The 2 hours flew in and I was happy I decided to get myself to my first ever seminar. The only part I wasn’t overly comfortable with was when I had to find someone I didn’t know and introduce myself and tell them why I was at the seminar. This is just because I am a shy person. But fuck it, even if I go bright red and come across as awkward, I’m up for anything as I attempt to get my own financial freedom.

I come away with some useful knowledge and am very motivated to know more. I am now very excited to get to my next seminar in London. This is a Property Investors Crash Course over 2 days with Samuel Leeds at the end of October.

My current strategy is Buy one rental per year (Buy-to-let). I am open-minded though and I have a feeling that with a bit more knowledge, I will be able to buy more properties per year through my new property business ‘DUFF PROPERTIES LTD’.

Educating the family

Over the last few years the only thing I have done in terms of money and my family is moan about the fact that our money is running out. Up until recently, I haven’t really let anyone know about the process of educating myself on money and how I am going to work towards financial independence (not having to work).

In the past, I have tried to explain our money situation with a poorly put together spreadsheet and this didn’t work. My wife would say “I like to leave it to you, as I don’t have a clue about our money.” That made two of us! If I can convince her to start learning about money, I feel it would accelerate how fast we get the money to get our financial independence. After all, two minds are better than one.

I would like to stress that I am no expert when it comes to money (far from it), but I am learning fast simply due to the volume of information I have absorbed over the last few months. I have identified a lot of my previous mistakes and am actively incorporating new habits that are hopefully moving us in the right direction.

I don’t have to get Mrs Duffy to reduce her spending. In many ways, she is tighter than me and is certainly not frivolous. If anything, I am the one who wastes the money without even realizing it. What I need to do is get her to look at the bigger picture and encourage her to understand money.

We then need to make joint decisions on what to do with it to make it grow (this is the type of language used in the books I now read so bare with me). If I can convince her that buying some more rentals will benefit us more than money spent in our existing house, I feel we can push on. We can get our heads together and get our FI (its not that I don’t want to work I want the choice and don’t want to spend my working life in shit hole b+b’s up and down the country).

I have recommended a book for her to read earlier in the summer (Rich Dad Poor Dad) and she has fucked me clean off. The spare time she got to herself was spent watching ‘Love Island’ so she ignored my recommendation. Mrs Duffy is going to be hard to educate so I might have to be patient with that one.

What Mrs Duffy has done has given me the green light to invest any spare money we get into assets. Although the subject of money doesn’t interest her she is willing to have a bit of faith.

Mrs Duffy’s reluctance to think too much about money is probably because of all my moaning so I cant really blame her. But I am persistent and hopefully I can eventually get her to understand my obsession with learning about money.

With my recently acquired money know how (well very limited knowledge but a lot more than before) I have also tried getting it into my daughter’s heads. If they grow up having a good understanding of money from an early age, it will have a massive impact on their financial future. It is frightening to think what I would have if I had invested 10% of my earnings from 18 onwards. But I am not one to dwell: “Like the Murphy’s I am not bitter.”

Stealing one of the ideas from Rich Dad (Robert Kiyosaki) I have started to play Monopoly with my kids. As we have started playing more and more Monopoly with the kids, I am constantly telling them to buy and invest. They still think they are winning by having cash and don’t understand that getting more assets will lead to more cash.

Another way of getting it into my daughter’s heads has been to educate them on compound interest. To illustrate I wrote the following example down for them:

A 10-year old girl starts her very own ISA with £100 a month. She knows about how compound interest can make you very rich when you invest for a long period. With this in mind, she decides to invest for 35 years. Over time her average interest rate she receives is 7% (stocks and shares ISA). When she gets to 45 years old she checks her ISA and is very happy to find she now has £182,306.69 (£140,206.69 from interest earned). She can’t believe that the majority of the money she has made has come from the interest she received. Dad was right all those years ago when he tortured me about compound interest.

In reality both my girls were barely listening as I tried to tell them about compound interest but again I am persistent and am hoping I can improve my teaching skills in the future…

Although they were not overly keen on the lesson they like the figures. I am going to get them a kid’s stocks and shares ISA set up and show them what it will be worth when they are 21. Hopefully this will spark a bit of interest but at this stage I am not holding my breath.

Shit with money and definitely shit at teaching my family about money. I am nothing if not a work in progress!!

P.s. Rich Dad Poor Dad (Robert Kiyosaki) is on tour in the UK and I am going to a seminar of his in Middlesbrough on Wednesday the 25th of Septmeber – I asked Mrs Duffy to come but she still has no interest in learning what to do with her money. His books are well worth a read and it will be interesting to see what he has to say in the seminar…

Property networking

My first ever network event was on the 10th of September and was to be held in a hotel in Ripon. This is lovely little town in North Yorkshire and I was quite familiar with the town as I had been on days out to Ripon Races.

I am currently looking for my 5th rental house and am currently deciding on my preferred strategy. Stick with my current strategy of one rental a year going forward or up my game and start thinking about multi-lets (similar to HMOs) or other creative strategies. It is time to start networking so I can speak to investors with more experience than me.

Although I was apprehensive about going and meeting a load of strangers, I was also excited and felt that meeting successful property investors was going to have a positive influence on my life. On my life and most importantly my family’s life.

The drive their didn’t really go to plan as I got flashed by a speed camera. Shit, it was the first time I had been caught speeding since I was 18. This wasn’t going to put me in a bad mood as I wanted to create a good impression.

I got myself there for 1900 and spoke to the lady at the reception and she had no idea what I was talking about. Not the best start to the night. “The network event must be in a conference room in the hotel,” I said. “Mate, have a look, it is a fucking Wetherspoons with a few shitty rooms upstairs,” she said. Brilliant!

After checking my e-mail and free ticket for the free network, I read that you were to wear green and go to the end of the bar to the right (between 1900 and 1930). So I found the main bar and waited until 1945. No one turned up. Not good!

On the miserable drive home I got diverted because of road works that added 30 minutes to a 40-minute journey. This summed my night up. I wasn’t pissed off I just saw it as an inconvenience. The old me what have saw this as an embarrassment but things have changed and I was able to see the funny side.

I am going to a property crash course in London at the end of October and this little bump in the road won’t stop me. The course is to be hosted by Samuel Leeds. His book ‘Buy Low Rent High’ is one of the first property books I have read and I love his Youtube videos. Every Wednesday he has a success story from one of his students and it is inspiring and gets me thinking about the possibilities of being a successful property investor.

This is another case of me not quite doing my research. I should have spoke to the event organizer before heading to Ripon. You live and you learn or in your case learn from my mistakes. Do your due diligence with everything you do.

Rental No. 4

I bought rental number 4 in late 2018. Not bad having 4 rentals I suppose. What is bad is that I had 3 rentals 13 years earlier. That is 13 years of procrastination.

Deciding exactly what I wanted as a 35 year old in late 2018 was exactly what I needed. I was sick of getting by and paying the bills and maybe going on the occasional holiday. With a change of mentality I was ready to get back into property.

I was willing to get my 4th rental on the strength of a 3-month contract. Get the right deal, get the right house and pour the rest of my savings into it.

Old safe Pete would have waited until he had £100,000 in the bank before attempting such a bold move. This was a really bad strategy and I didn’t get anywhere near £100,000. I have been fortunate and had very good contract jobs since 2012 and was able to save around £70,000.

Even with very good savings I still didn’t act. I used excuse after excuse and didn’t act. Being poor at money management that £70,000 soon reduced to £30,000. This is the point when I have decided to act. I knew I needed different sources of income so I decided to turn my focus back to property. This was November 2018.

The offers I was putting in were pretty ludicrous to be honest. But I didn’t care as I had 3 rentals in negative equity and I wanted some positive equity in my latest rental. One of the houses I bid on was up for £125,000. It was in a nice area but needed a good £20,000 spent on it. Getting it for £100,000 and spending £20,000 you would have £120,000 invested and it would probably be worth £140,000 so you would have had a good deal (I knew this estate really well as I lived there previously and I had also done my research). Getting it for £100,000 would have been a fair price.

I bid £80,000 and it was rejected straight away. I simply asked the estate agent to keep me updated on any further bids and told her that I may increase my offer further down the line.

At the time, I was speaking to a couple of local estate agents and letting them know my intentions. I asked them to put me on their mailing list and I was getting inundated with properties on a daily basis. I was giving them the quick once over as they come through via e-mail but the majority of them didn’t get my juices flowing. In the 4 weeks I had been looking I had three offers rejected outright and hadn’t had any further feedback. I wasn’t in a rush and felt I had the experience to get a suitable BMV (Below market value) property.

It was December 2018 and there was one house on my shortlist I hadn’t got around to viewing. It was a terraced house on a main road very close to my local village. It had been reduced to £120,000 for a quick sale. It was out of my price range but I still went and had a little look to see what it was like.

I viewed it in early December and had a good look around. It needed quite a bit of work doing to it but I could definitely see the potential. I estimated that it would need £5000 spending on it. A new bathroom and some decorating would make it very appealing to prospective tenants. It was time to do some research.

Through resources on-line and talking to friends and family who knew the previous owners I was able to get all the information I needed. It had been sold to a big builder as part of an exchange a year earlier for £140,000 (similar to my exchange) and had plenty of interest. A few offers had gone in but none high enough and a local property investor had pulled out 2 months earlier because of a lack of funds. I was starting to get excited. I liked the idea of dealing with a big builder again (I had dealt with a big building company back in 2013 when buying the house I live in) and was eager to get the ball rolling. Not only that, with it being December I knew there wouldn’t be much competition as everyone would be too concerned about Santa. I had time to strike a deal.

My opening bid was pretty out there I must admit but nevertheless, I opened with a cheeky £80,000 offer. The offer was rejected within the hour, by the company dealing with the sale, on behalf of the large builder.

I was patient and was ready to play. Although I had a maximum bid in my mind of £95,000, I wasn’t prepared to let them know just yet. They called a week later and told me they would accept a reduced offer of £110,000. I said I was willing to go up to £85,000 but I wasn’t in any rush as I had a few alternative options. They rejected as expected.

A few days later they called back and said they would be willing to drop to £100,000 for a fast sale but would go no lower. At this stage, I was fairly confident that I wouldn’t even have to go to my maximum bid of 95k and was acutely aware they were trying to get the agreed sale before Christmas. “The absolute maximum I can go is £90,000”. To be fair with all the fees involved (if the sale went through), like stamp duty, solicitors, deposit etc my £25,000 savings would be used up with a purchase of £90,000 so I wasn’t even playing games. I was willing to stretch to £95,000 because I knew it was a good opportunity.

They accepted my final offer on December 14th, 2018. Rental 4 was actually happening and this co-incided with me starting my new job. Was this a sign of things to come? I had gone from being very down in the dumps with no job and another potential excuse to not get back into property, to getting my 4th rental and securing a fairly lucrative short-term contract.

Although I am confident I got a good deal through experience and intuition, I didn’t even work out basic figures like net yield or ROI (Return on investment). To be honest, at the time I didn’t know how to work these figures out. What had I been doing as a Landlord for the last 16 years…

If you want to buy a rental do your research as I did. But make sure you can work out the basic calculations so you know exactly how much profit you will make per calendar month.

Investing Basics from a novice

My aim is to learn as much about money as I possibly can. The reason I set out to do this was to improve my financial situation.

The financial journey I have been on so far is a bumpy one. My intention is to learn about all things finance and pass the information on to other people. Money is very important and I want to achieve Financial Independence before my 50s and certainly before my 60s.

How I am going to pass the information on initially is to go over some of my mistakes. I want as many people as possible to learn from my mistakes as possible.

Before I delve too deep into investing, I am going to highlight some of the basics:

Basic terms worth knowing

  • Asset allocation – this is an investment strategy that looks to balance risk and reward. The portfolio is chosen according to your goals and risk tolerance
  • Bonds – this is where you make a payment (Loan) to a large organisation (e.g. Government). If you get UK Government Bonds you are giving the British Government a Loan and they pay you interest (% depends on what bond you invest in)
  • Compound interest – is basically interest on top of interest. It is interest calculated on the initial principle, which also takes into account all of the accumulated interest of previous periods of a deposit or loan
  • Financial Independence – when you have enough money so that you and the family can live off the income from your assets and never HAVE to work again
  • Fund – is a type of collective investment scheme under which all fund participants invest money together. Popular funds will have thousands or regular people like me and you all investing our money together
  • Index Investing – made famous by John Bogle (founder of Vanguard). This is where you track the stock market. You have a small slice of several companies within your fund
  • ISA – Individual Savings Account. This is tax free and in the UK, each individual can invest up to £20,000
  • Mutual funds – again you have a small slice of several companies within your fund. Your fund is managed by a fund manager who TRIES to beat the market
  • Net worth – this is where your focus should be (not on your daily rate or yearly salary). It is the value of all your investments (minus liabilities)
  • Rebalancing – this should be done every 12 months (possibly every 6 months depending on your funds performance or if you put additional money into your funds). Let us use a simple example: your portfolio is split into 70% shares and 30% Bonds. In your 1st year your shares perform better and your allocation is now 80% shares and 20% bonds. At the end of year 1 you will adjust your fund so it reverts back to your desired weighting (70 / 30 split). If you are not sure how to do this, seek advice from your accountant or financial advisor
  • Shares – the stock of the company is sold in units called shares. A share is a unit of ownership, or equity, in a company or a corporation. Stocks, shares and equities are basically the same thing
  • SIPP – Self Invested Personal Pension. A UK pension plan that enables the holder to choose and manage the investments made. Until 2019 (36 years of age) I had never heard of a SIPP. FRIGHTENING
  • Transaction cost (TC) – I have had costs in the forefront of my mind since my 1st ever finance book (T Robbins – ‘Money Master The Game’). These are normally hidden charges that we all need to be aware of. READ THE SMALLPRINT. These costs are buried but if you are aware they exist, you have a fighting chance of discovering exactly what you are getting charged

Investing is a very important topic and is essential if you want to become Financially Independent (FI). I used to dream about paying the mortgage off and retiring early. Now I have changed my goals and now dream of FI so I have the choice of working or not working. I am convinced that the more knowledge I acquire about money will get me closer to my FI. Hopefully this will also be the case for you as we learn together.