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.