Getting Rental No. 4 Valued

Currently sat in my hotel room in London ready for day 2 of a 2-day property crash course with Samuel Leeds. This will be discussed in detail next week.

This week’s topic is going to be around my 4th rental that was purchased at the end of February 2019. My strategy was to buy it BMV (Below Market Value) and then recycle the deposit money or at least some of it.

My Financial advisor (FA) has been dealing with the application to re-mortgage the property and because of the Mortgage company it has been a painful process that has been going on the best part of 8 weeks. I know it’s the mortgage company because I am already dealing with them in trying to get additional borrowing out of my family home.

If successful, I will pull £28,500 out of the family home and if I can get my deposit money out of rental no. 4 (£22,500), I will have approximately £50,000 to secure rental no.5 and possibly rental no.6. More on how I will spend the money next week after I have learned about different property strategies.

The likelihood is that I will resist the sales pitch of getting me to pay £10,000 for 12 months training.  If this happens, I will probably end up sticking to the current plan of buying at least one rental per year. 

Thankfully, the remortgage is finally progressing in the right direction and the valuation was carried out early last week. The house was purchased for £90,000 so my deposit was £22,500 (25%). To get that money back I would need the valuation to be around £120,000.

Due to the refurbishment work that was carried out in March and April, I was quietly confident of pulling most of my initial deposit money back out.

2 days after the valuation was carried out my FA informed me that the valuation was £122,500. This would allow £25,000 to be pulled put as the new mortgage would be £92,500.

Although I have made mistake after mistake with investments in the past, I feel this is a little turning point.

I know the general theme of this blog to date has been financial mistakes, but my hope is that I will learn from my mistakes (finally) and start heading in the right direction. What I can guarantee is honesty and I will let you know everything I am doing when it comes to money.  

The main thing is to raise your awareness. If I make a mistake learn from it. I something goes right then also learn from it.

My Little Dabble with Crypto

With Brexit dominating the British media, I could write a blog of what Brexit will mean financially to the British contractor from my perspective. But fuck Brexit and fuck the British media. It has gone on too long, it is important but fuck me it is boring.

A subject that was in the spotlight was Crypto currencies. Although it is not in the forefront of peoples minds at the moment, I will discuss it briefly as it is yet another one of my investments that haven’t quite worked out.

Everyone who I have spoken to about BTC (Bitcoin) has got a story about someone they know or how they could have made a fortune. And I am no different. Unfortunately when I finally got into it, I had missed the opportunity of making a small fortune by making a lucky punt. When it comes to any type of investment, I fall on the unlucky side of the coin. Get the violins out.

The very first time I heard about BTC was on December the 25th, 2015. The price for 1 BTC at the time was $453.42. I would have had a spare £5000 to have little dabble if I had understood and believed in the asset class at the time. If I had bought at the time and then sold at around the peak of December 2017, I would have made a small fortune. It would have been roughly £150,000 UP if I had done that strategy but I didn’t have any BTC knowledge and I didn’t have a fucking crystal ball.

Being a man of routine, I would always go out before Christmas dinner and have a few pints in one of the locals. The women of my family would stay at home with the kids and cook the dinner and it was a routine everyone was happy with.

Back to Christmas 2015 and I was having a few pints with my Step Dad Col and brother Jason and we were catching up with friends and family. One of the family members we were catching up with was my cousin Liam. Liam and I were close in our younger years but at this stage we hardly ever saw each other.

When talking to him in December 2015 I remember him telling me about BTC and how he was involved. I listened and was genuinely happy as he seemed to be doing well. But I wasn’t really listening. Why didn’t I fucking listen that day? It just wasn’t meant to be. It was partly because my shitty financial brain couldn’t comprehend what he was saying. I was also fed up of my failed investments. I was destined to work to 70 and only have my 3 shitty rentals that would probably still have negative equity in 2053.

The next time I was to speak to Liam he had been involved in an accident. I’d heard he had fell down some stairs and fractured his skull over in the UAE. I messaged him as I was concerned. He was on the mend and we started exchanging messages. After a few messages he started telling me how I had to get into BTC and other Crypto coins as it was the future. At this stage I had heard a lot of people talking about Bitcoin and the asset class was becoming very popular around the world. At the time (June, 2017) it was sitting at or around $3000 for one coin.

Speaking to Liam I decided to make a small investment of £2000. Liam was doing very well in the Crypto world and I was excited as I felt as though I knew someone who could direct me and help me to make educated, informed decisions. He even had his own company ‘Alphabit’ and I got the impression the money was rolling in. Looking on his FB account he was travelling all over the world and looked to be living the high life.

Liam was excited as well and was firing message after message about BTC and finance in general. He was clearly against centralized banks and governments and he believed in this new exciting asset class with everything he had.

I was brand new and couldn’t take it all in to be honest. The messages were flying into me as I was bobbing up and down on a small boat on my way to a wind farm. I didn’t know exactly what I was getting into, but I was open-minded and was willing to have a little dabble.

Initially all I had to do was send Liam the money and he would do the rest. I just had to set up a crypto-to-crypto exchange to receive the tokens. I had to set up an exchange called ‘BITTREX’ and it was relatively simple.  The token I was going to invest in was MTL. Me being the wise investor, didn’t do any research at all and just simply went with it on Liam’s recommendations.

As I didn’t have a clue about this new technology and new type of money, I needed to do a little bit of research with regards to the basics so I could at least receive the coins and hold them securely. I also had to look at how secure it was, so I bought an easy to understand guide “Bitcoin for dummies”.

After a few weeks I received my MTL coins and had £2000 pounds worth. I later sold this coin for BTC and bought another coin on Liam’s recommendations. I actually made a couple of hundred dollars so I had made money for a change.

In November 2017, Liam recommended a coin called ‘Unikorn Gold’ and I was willing to put another £2000 in to the coin. With Liam’s connections I was able to purchase the coins at 20 cense before the ICO (Initial coin offering). When the ICO had been and passed Liam was to send me the tokens for me to do as I pleased.

If memory serves me correct, the UKG (Unikorn) ICO happened in early January, 2018. I was watching the price like a hawk. The price rocketed to over $2 and my investment of £2000 was now worth over £20,000. The problem was I didn’t have the tokens. I messaged Liam about my tokens, and he didn’t get back to me for another 10 days.

He sent the tokens but at this stage the price had dropped, and my investment was sitting around $10,000. I should have cashed in then, but I held on Liam’s advice (long term buy and hold strategy) and my UKG investment is now worth $200. Another failed investment.

Similarly, this happened in early 2018 with another coin called DTA. Again, I put another £2,000 in. After I received my coins the price rose and my DTA was worth $10,000. Again, I was advised to hold and again the price dropped. The DTA coins I have are worth approximately £100. Another failed investment.

At or around the same time I also invested in AELF. This time I only invested $800 worth, but Liam was adamant about this one. Again, my investment rose to $8000 but I didn’t sell. Yes, you guessed it, Liam had advised me to buy and hold and the price fell again. Another failed investment.

If I had sold at the right time, my little dabble with Crypto would have been worth well over £30,000. But again, I haven’t got a crystal ball. Another factor was that I was clueless and was just following what my cousin was advising, without doing the necessary research. I am a big boy and I am certainly not moaning about Liam’s advice. Always do your own research.

My understanding of money

Money is a useful tool that can be used to get you where you want to go. I understand it when people say it isn’t everything and it really isn’t. Nevertheless if I don’t find a way of generating more money and improving my cashflow, I won’t be able to do the things I love and the byproduct of this is me reverting back to the old dark cloud who has negative emotions surrounding money and work.

What I love above all else is spending quality time with my family. If I continue my down my current career path (focusing only on work) I will end up working 6-7 days at home or working away for long periods. This is something a lot of us contractors face but I have had my fill.

I don’t mind work that much, but I have got to a point in my life where work must be on my terms. Not a loose hope or thinking it might happen one day if I get a big win on the lottery or the football bets (chasing the pot at the end of the rainbow).

My mindset is to work anywhere in the world and chase money but not to buy more expensive possessions or go on loads of holidays (that will come later once my family is set up). I will use the money wisely and invest it in my stocks and shares ISA and property.

My improved understanding of money has led me to focus in on our own house and sorting our budget out. Cashflow always seems to be an issue and I have had to trim down the budget. As my current job is not the money I have been earning in recent years, I have had to stop overpaying the 3 mortgages on my 1st 3 rentals.

This has saved me £1000 (mortgage overpayments) and our cashflow is now ok. The mortgage overpayments were due to stop anyway as I am about to flip them from interest only to repayment.

This goes against my new mentality of getting cashflow from my rentals, but it is psychological. My 1st 3 rentals were in negative equity for a long time and it brought with it a lot of negativity. I want them to be paid off. The good thing is now that after 3 years of intensive overpayment they all have 25% equity in them.

Going forward, any properties I have in DUFF Properties (new property business) will be interest only. This will mean I have some rentals repayment and some interest only. The repayment will mean the houses get paid off by the tenants and the interest only means I will benefit from cashflow and any capital appreciation. This sort of diversification is what my accountant and FA have advised me to do and it suits me personally.

My idea of being set up financially has changed. I used to think paying the mortgage off early was the key but now I think it is all about cashflow. My new mentality is that I want my passive income (from property and other investments) to exceed my expenses. If I can get to this level of passive income in the next few years, my mortgage can be overpaid and will be paid off early anyway.

Get my house in order. Earn good money. Invest wisely. Any profits from investments and from excessive wages (when I get on good jobs) is again re-invested. This sort of cycle will get us our FI quickly, I am convinced of it.

Despite my income not being what it was, I am still pushing for rental number 5. Once I get money from my existing house I live in and rental no.4 it will happen. I have started going to property seminars and meetings to be around like-minded people and people who know a lot more than me. This will help me decide on my next move (rental no.5) and will motivate me further towards FI.

In my opinion it is about having an abundant mentality and not a scarcity mentality. This opinion has come from reading books like ‘The 7 habits of highly effective people’ (Stephen R. Covey).

The 7 habits states that when looking at an abundance of wealth, it is important to know the difference between abundance mentality and scarcity mentality. Scarcity mindset is when you think there is only so much out there (in my case money) and if someone has a large piece of the pie, it means less for everyone else. This can lead to negative feelings towards people who are successful in any area of life.

Scarcity mindset can lead to competing (negatively) and comparing to others (a definite negative trait). This is like pretentious people who like to keep up with the Jones family. An example is buying the latest Range Rover you can’t really afford just to keep up. Fuck that! I am more than happy with my Passat and tend to focus on miles to the gallon.

On the other hand, the abundance mentality adopts the attitude that there is enough for everyone. After all the books I have read, I have gradually moved over to the abundant side of the fence. I believe there is enough money out there so I can get my FI before my 60s and 70s. Fuck it, before my 50s so I can live life on my terms.

Mr Covey goes on to state that the abundance mentality is about sharing of prestige, of recognition, of profits, of decision making. It opens possibilities, options, alternatives and creativity. Although I started writing this book to enable me to get more money (get my house in order and attain more wealth) it has also become about helping other people. I am happy to highlight my financial fuck ups just so other people can learn from them and make informed decisions that will help them acquire money and become financially literate.

Single shares – High risk and little or no reward

From my experience, as a rule, I would try to avoid single shares. Although there can be significant rewards, they can also go the other way and you can lose all or most of your hard-earned money. I am not a financial advisor so do your own research and speak to a professional FA. This is just the way I see it.

Look at what happened a few years ago when I lost approximately £8,000 on shares. I put a significant amount of money (money I didn’t really have to lose) on the strength of what my colleagues told me when I first started offshore. This was without any research. Do not invest without doing your own research.

Single shares can get very emotional and this is not the way to invest in my humble opinion. If you have a high-risk tolerance and have a bit of the gambling blood inside you (like me), maybe dedicate a small portion of your investments (e.g. 5% of your monthly total). So, if you invest £1000 per calendar month, use £50 on single shares.

If you do invest in single shares be prepared to lose it. This is not half empty mentality it is just common sense and a bit of self-preservation. Expect the worst and hope for the best. Do not invest thousands of pounds (your hard-earned money) on the strength of a tip you got down the local pub.

My sincere hope is that you invest for your future by investing in funds. If you live in the UK, I would recommend a tracker fund. Check it once a year and this way you keep your emotions out of it. The stock market is very cyclical, and it will have ups and downs. When you look at history, you realise that for well over 100 years, this cycle has reverted to the mean (average). This mean has gone up in a gentle slope and if you had tracked the markets (more on this another time) during this time you would have achieved 7-8% interest.

The key is to keep your inner chimp (emotions) away from you funds and not to listen to the negative stories that will inevitably appear in the British and world press. From the books I have read, a common theme is that many investors sell during bear markets and buy during bull markets.

Do your research. Learn from my mistakes. Pick a fund through your ISA (you can invest £20,000 per year tax free in the UK) and automate your investment. Decide how much you can afford each month and set a direct debit, so it comes out each month automatically. Then check in on the fund once a year.

I invest £800 into my ISA and £200 into my SIPP. My aim is to max out my ISA (£1666 per month) and start hunting down my Financial Independence (FI). My cashflow isn’t where I want it to be yet so I will have to put my ‘max-out’ ISA plans on-hold. Put in what you can afford.

A worry of mine is that there are a lot of people in my local town who do not invest this way. Many people I speak to have little or no knowledge on investing. If anything, too many people prefer the hot tip in the local pub. This is certainly happening with a company that is currently constructing a large Mine along the North East coast – Sirius Minerals.

Before we go any further, I have a confession to make. At the start of July 2019, I invested £500 into Sirius. I am well-aware of the project currently on-going and the share price was low at 15p a share. After looking into it, I decided it was a risk, but the price was very low and I was willing to take the risk. The project is at least 2-3 years from completion so it is hard to judge where the share price will go.

This is a little gamble and I am well-aware of the risks involved. I know of people putting £10,000, £20,000 and I even have a friend who invested £50,000 at the price of 20p a share. At the start of July, the price was 15p so that £50,000 had lost 25% (£12,500) of its value.

As I am sat writing, the current share price of Sirius is roughly 4p. That £50,000 has now turned to £10,000. Even though my £500 has turned into roughly £130, I am comfortable with the loss and again, I was well-aware of the risks when I decided to invest.

Let me re-cap on my experience of single shares. I lost £8,000 as a young contractor when I first started offshore. After a few more years of life experience and after educating myself on money, I have again lost out on single shares. When will I ever learn?

My advice is to stay clear of single shares unless you are comfortable with losing some or all, of the initial investment. Don’t take advice from your taxi driver or the lads down the local pub. Do your own research when it comes to deciding where to put your hard-earned money.