Contracting is not for me!

Absolutely 100% contracting is not for me, and I am going to push hard so that this means to an end career of mine changes for the better. My aim is to get into management over the next few years and earn some good money. Then get further into property and hopefully achieve my FI earlier than expected.

I have read enough success stories to believe that I can become a successful property investor. I feel like I finally know what to do with money. I just need continue to keep my house in order, so I have no issues with cash flow. Then it is about self-education and making better decisions with any spare money I get.

Easier said than done and I can tell you that from experience. The difference is that I am now obsessed with self-development and in that is self-education. This is a change of tactic from me as over the last 10 years I have focused only on my career. I have done every course possible and pushed myself hard but there are no guarantees in contracting. It is very much up and down. I have had good years and bad years. Shit happens and every other contractor goes though the same ups and downs. I suppose it comes down to what you are willing to put up with.

I am no longer willing to put up with contracting as I know it’s not for me. That is why I read a book a week and absorb as much info as possible through various podcasts and blogs. I am all over self-education and am investing heavily in my personal development. It is just a waiting game as I know there are opportunities around the corner.

If opportunities don’t come, I will work harder. I will keep pushing myself to become better at my job and continue to pursue my break into management. My addiction with reading and learning in general will just get stronger.

This may sound like bullshit to other people reading and it certainly will to some of my friends and family. They don’t understand my obsession with learning about money and self-development. Fuck it, I want to be happy and learning and progressing make me happy.

I want to know what it is like to go to work and be happy about it. To wake up on a Monday and be genuinely happy to be going to work. Not sick as fuck because I am due on site at 0600 to get to the means to an end job.

I also want to know what it feels like to work at home and work 4-5 days a week and maybe 5-6 hours a day. Again, this has nothing to do with being lazy I just want to make the most of my time. Spending decades working 50-60 hour weeks, on sites all over the country and even the world is not my first choice career at all!

If I can get enough property and other investments behind me, I know I can get a permanent job at home and work 4.5 days a week and leave contracting behind for good. This will mean I will have much more time with the family and get to do the hobbies I love. With passive income coming in, we will be able to go on holidays abroad and weekends away when we want (within reason of course).

Contracting might change over the next few years and I might be in constant work and earn good money, but it still won’t give me the quality time I crave with friends and family. Time is our most valuable asset, and I intend to make the most of mine. Even if I have a few shitty years of working away for long periods I know it will be worthwhile in the bigger picture.

Overdraft costs

After almost a year of reading books on money and trying to educate myself, I am still making school boy mistakes.

I have had an overdraft since I was 18 and have spent around 95% of my time in it up to my mid-30s. Must be the fact that I have always felt like it was free money. The truth is that it 100% is not free money.

This was maybe ok when I had a £1500 overdraft attached to my current account. Not that I have ever checked percentages and exact figures but I’m almost sure that I used to get charged around £20 pcm in fees for having the overdraft and being in the overdraft (Charges for the facility and interest on the amount I was in there).

Being out of work earlier in 2019 and having a renovation to do (rental 4) left me in a shitty financial situation so I had to extend my business overdraft to give me some breathing space. The Overdraft was extended to £25,000.

Although I never quite reached £25,000 (in the red), I have been at or around £15,000. The charges and interest didn’t even enter my head. All this year I have been watching my current account like a Hawk in the hope that I can trim my budget down. I haven’t been watching my business account. Mainly because I’ve been in Tunisia and not getting paid into my Ltd Company.

Anyway, I was using my Business account the other day to pay my accountant fees for the year and come across some hefty direct debits that I was unaware of.

2 direct debits totaling approximately £200 pcm had been coming out for most of the year. Although I had a feeling, I knew what they were, I called the bank to confirm. Yes, they were a combination of charges and interest for my overdraft.

I was pissed off with the money I had spent without realizing but it didn’t surprise me going on how poor I have been with money. Fuck paying £200 pcm in overdraft charges and interest.

To get rid of my overdraft I got a £15,000 loan so I wouldn’t have to pay the £200 pcm. I would have to pay some money in interest but nothing like the £200. With an interest rate of 6.6% I will pay a total of £17,570. This means that I will pay £2570 in interest and this works out at around £42 a month.

I might be still paying £42 in interest for a loan that only cleared my overdraft, but it is still better than £200. Plus, I am taking money out of my existing house and rental number 4 so I have the option of wiping the loan out and not paying any interest.

The lesson from another one of my financial mistakes is to get your head around your finances. Spend less than you earn and invest the difference. If like me you see your job as a means to an end, push towards your FI (financial independence) and get some FU-money (Fuck you money). With FU-money you might be able to work in a less paid job that you enjoy and in general will give you more freedom to do the things you love (me personally its rolling round trying to choke people and trying not to get choked – BJJ).

Patience is a virtue

This is a saying I was taught from my gorgeous Mam. I never really understood it as a young lad, but I am fully aware these days.

Patience is currently being forced upon me while I wait for money to come through from my existing house and my 4th rental. If I had any hair left, it would be getting ripped from my scalp!

I am dealing with the same mortgage company for both applications and the process has been dragging on since mid-August. The additional borrowing application (taking money out of my family home for my 5th rental) is killing me.

Every week they ask for something else. The last 3 weeks for example they have asked for a reference from my accountant. I calmly respond and send the reference. Then when I speak to them, they say the application is with the underwriters. Fuck the underwriters.

Out of the blue I received a call this week from a lady who works for said mortgage company. Finally, I was speaking to someone who knew what she was talking about. After apologizing, she informed me that the underwriters wanted my latest accounts that had been filed a few weeks earlier. Fuck the underwriters.

Now I have sent the latest accounts, I am confident that I will get the additional borrowing. If I get the money in the next few weeks, I am hoping to get rental no. 5 before Christmas. With everyone’s focus on Santa Claus and generally enjoying the festivities, I am looking to get a good deal from the houses I have been viewing over the last few months.

This delay in releasing the funds has cost me on 2 potential deals. 2 houses were up for auction last week and I would have potentially bought one of them.

One of the houses was up for £75,000 and sold for £73,000. This was up for £95,000 in the summer and I had been keeping a close eye on developments. £73,000 is a good deal and there are similar properties in the same street up for £110,000. Fuck the underwriters.

The other house was up for £35,000 and sold for £32,000. If I had the funds released, I could have bought it outright. After my research, I was confident I could have mortgaged the property for around £45,000. This means I could have bought the house and would have made £13,000 profit straight away leaving me with more than enough money for another rental. Fuck the underwriters.

I know I must put my emotions to the side and that these deals were simply not meant to be. With these delays, I am learning to be very patient.

The good thing during this period is that I have remained calm and relaxed which wasn’t always the case in previous years.

Looking at self-development over the last 12 months, the most important thing for me is to learn to manage my emotions. Although my inner chimp (Chimp Paradox – Steve Peters) is always going to be there, I now know that by learning to manage it, my life will improve in all areas.

I was disappointed last week when I couldn’t get involved in the auction, but shit happens. I didn’t dwell on it and know that when I do get my hands on the money, rental no.5 won’t be too far away. Remember – patience is a virtue.

Property Crash Course

The crash course was due to start on Thursday the 24th of October and I arrived in London on Wednesday evening. I arrived late on and crashed in my digs at around 2230.

The B+B was a shit hole and not the 4* that I was expecting. But I wasn’t here for luxuries I was here to learn and determine what my next move in property was.

I woke up on Thursday feeling a bit shitty as a little bit of man flu was starting to kick in. According to the website, day 1 was from 0900 to 2300 so this 1st day was going to be long. Day 2 was a little less and was due to finish by 1700.

Day 1

First things first we were straight into mindset.

“How you do anything is how you do everything.”

“Environment is stronger than willpower.”

“Use formulas not feelings.”

“The definition of greed is having a gift and not sharing it.”

“Own nothing control everything.”

“Play to win.”

“Success leaves clues.”

Nothing I hadn’t heard before from the books I had read and the videos I had watched. The bonus this time on this day was that I got to jump around, clap, dance and high five with 600 strangers. Not to mention go around and meet total strangers and discuss our backgrounds in property. Not my cup of tea at all.

Part of the reason I was here was to get outside of my comfort zone and I was 100% outside of my little comfort zone. I was also hoping for a big kick up the ass and that these 2 days would give me that kick and help me to push on in property. One way or the other, I would know what direction I would be going with property.

Although I was now aware of all the calculations needed when buying properties, I was happy to go over them again. We basically focused on ROI (Return on investment) as this is the most important calculation as it looks at the total money you invest into a property.

The 2 figures you need for this calculation are total investment and yearly profit. Total investment is your deposit (normally 25%) + Tax and legal (normally 4% of purchase price). Profit pcm is rent – (Mortgage + Management + Maintenance). Profit per year is profit pcm x 12. Let’s look at an example to illustrate:

£200,000 HOUSE

  • Total investment = 50k + 8k (deposit + 4% for tax and legal) = 58k
  • Rent = £800pcm
  • Mortgage = 3% of £150k = £4500 for year, therefore 4500/12= £375pcm
  • Mortgage + Management + Maintenance = 375 + 80 + 80 = £535
  • Therefore profit = 800 – 535 = £265pcm
  • Profit for the year = 265 x 12 = £3180
  • ROI = 3180 / 58,000 = 0.054 X 100 = 5.4% ROI

This isn’t a brilliant ROI, but it is still better than the less than 1% you would be getting in high street bank.

When we started to work in teams in the afternoon, I enjoyed it. The aim of the game was to use the calculations we had learned and find a suitable property with a high ROI and the course hosts were saying 20% were achievable figures. We were to work in teams of 3 and go on rightmove, do our due diligence and find a property at or around 20% ROI.

Due diligence was getting rammed down our throats and was worthwhile to be honest as it enables you to de-risk when purchasing a house. Basically, are you getting the house for a reasonable price and what is the realistic rent that can be achieved.

Due diligence

We were told that the first thing we needed to know was the full address including the postcode. There are a few sneaky ways of getting this and looking for the house number from the pictures is one of them. Another is to compare broadband for the property you are looking at and it will give you the post code – very sneaky.

Look at the value of the property on Mouseprice.com (I can only do this with the property’s post code) and this will give you an accurate value based on properties currently for sale and properties sold on same street or similar. You can also go on rightmove and see what’s selling on same street or similar properties within ¼ of a mile. Then carry out same search but select sold and see what similar houses have been selling for. This was useful for me and I will use these techniques for rental no.5.

To enable me to get an accurate ROI calculation, I also needed to know the rent on any prospective property, and we were taught a few techniques to do so.

Firstly, you call the estate agent, explain that you are an investor and one of your questions would be to ask for the achievable rent. At this stage, we were only looking at traditional buy-to-let’s. We now have a good idea of the rent we can expect to receive.

Next, we were told to go on rightmove and look for what is up for rent within ¼ of a mile and focus on similar properties. Finally, look at what has already been rented in this area. Again, look for a similar size property close to the address. For this search, look at openrent.co.uk and you should have a very accurate rental figure.

Let us look at what our team managed to find using our new skills (due diligence and ROI calculations):

2 Bed terraced house in Oldham – £64,950

  • We found the exact post code and were able to clarify that it was worth around 62k and the rent would be £450pcm
  • Total investment = £15.5k (25% of 62k) + 2.5k (tax and legal) = £18k
  • Profit pcm = £450 – (Mortgage + Management + Maintenance) = 450 – 206 = £244, Therefore profit per year = 244 x 12 = £2928
  • ROI = £2928 (Yearly profit) / £18,000 (Total investment) = 16%

At this point I have added to my buy-to-let knowledge, but I am mainly at this mad crash course (full of lunatics jumping up and down and high fiving each other) to learn creative strategies and determine whether they are for me or not. For me this is the point when the course goes South.

The sole purpose of the rest of the course is to (aggressively) sell the 600 strong crowd on the £18,000 (+VAT) advanced training. Wait, no, they go over all the benefits of the training (we will all become financially free etc etc), then at the end of the pitch they hit us with a big discount of £6,000. So, if we go to the back of the room (NOW!) we can get the training for an absolute bargain of £12,000. Thanks, but no thanks. That is almost half of the deposit for rental no.5.

Not only that, they have their successful students trying to sell us additional courses. As soon as they started aggressively selling the training courses my inner skeptic (rightly or wrongly) kicked right in. Then they had their multi-multi-multi-multi millionaire guest speaker back on stage for more jumping around, high fiving and talking about mindset / brain washing (the 600 strong crowd into paying for the training). Fuck me, what even is a multi-multi-multi-multi millionaire ????

This goes on until 1930 then we have an hour break for food. That’s when my night really goes South. I find a local pub as I can’t face anymore property talk with loads of strangers (I know my dark cloud is starting to kick in, but I was tired and had severe man flu).

I order a burger and pint and start watching the Europa league game. The game was ok and I’m able to switch off for a while. My burger comes and I devour it as it’s been hours without food. Towards the end of the burger I realise it is bloody and barely cooked. I don’t even complain. Not only that, the greed kicks in and I even finish it – bad move!

At 2030 I am back in the conference room for the final push of the day. It is hard work staying focused for the last few hours, but I stay until the end. Despite feeling a bit shitty and being irritated by the aggressive sales pitch, I have mainly enjoyed day 1. Hard graft because of the amount to take in but I feel it has been worthwhile.

Just after 2300 I am back in the digs and straight on the toilet as I am not feeling too clever. I manage to fall asleep, but I am back up at 0200 tossing and turning and feeling horrendous. By 0300 I am throwing the burger up and it is coming out of my nose and mouth. This lasts about half an hour.

My plan is to get up and get home as I don’t want to be spewing in front of 600 strangers.

By 0700 I have had few hours sleep and my stomach as settled so I’m going in for day 2. I might have severe man flu, but I need to man up.

Day 2

Day 2 is all about no money down deals. I find it interesting and the way they use rightmove and various other sites is impressive.

They touch on the best areas to invest in. They go into rent to rent, HMO’s, lease option agreement’s and serviced accommodation. They even contact a landlord and start the process of securing a deal. The deal is an apartment in Northern Ireland and my inner sceptic thinks it’s just for show and that the deal won’t happen.

HMO’s are were you rent out each room and this is normally around £400pcm. This is lucrative and you can get up to £1600pcm in rent for the 4 rooms (£800 profit after all costs are considered). Lease option agreement is basically where you rent a property from a landlord for a long period (3-5 years normally) and have the option of purchase at the end of the agreement.

Serviced accommodation is like a mini hotel where you rent your apartment or rooms out per night. It is all meant to be automated through certain sites and you arrange regular cleaners. My inner sceptic can’t see how this strategy is automated and thinks it would be very hands on. Although I am not quite ready for this strategy, it is something I may re-visit further down the line. This sounds lucrative but the whole renting an apartment to rent out as serviced accommodation is screaming complications (with leases and mortgage companies).

Every type of no deal down requires compliance to ensure it is legal. Let us look at the example below to demonstrate R2R (rent to rent) which is a popular no money down strategy:

R2R Case study

  • Search for 2 bed-apartment in popular city like York
  • The idea is to offer the landlord 3-5 years guaranteed rent
  • If it is up for £900 pcm you offer them £800 pcm and in theory, they are happy because they are getting guaranteed rent for a long period – the inner sceptic is not convinced
  • Once you have secured the deal (this is subject to having all the correct legal documentation in-place) you then rent it out as serviced accommodation and make up to £3000 pcm in profit after all costs – the inner sceptic is not convinced
  • The plan is to get to the viewing, build rapport with the landlord, then explain about exactly what your plans are regarding serviced accommodation
  • They even go through what to say to the landlord in the initial conversation, “I’m not going to be renting it out myself, it will be a corporate let… I can do Friday or Saturday when is best for you? This alternative close (averting attention away from the fact your not renting it out) is a sneaky way of getting to the viewing and fully explaining the serviced accommodation plans

With what I am getting taught, the no money down (HMO, Serviced accommodation etc) strategies don’t really appeal to me at this stage. I can only see issues and complications with mortgage companies and other key stakeholders (e.g. the leaseholder of a block of apartments would need to sign off on your serviced accommodation).

Wait for it, there is another sales pitch coming. To get fully trained up on HMO’s I can enroll onto the HMO bootcamp for £2995 + VAT. Not only that, I can get myself on the Serviced Accommodation University for the fuck all price of £3995 +VAT. I haven’t got it written down, but another course thrown in is the legalities (as they call it) including all the templates and agreements for the no money down deals. I would like to have a little look at this out of interest, but it is another £2,000 I haven’t got.

That is a grand total of £10,388 for 3 days of training. But wait. If you go to the back of the room (Now!) you can get all that training for just £2,000. Again, I am going to resist as my inner sceptic is warning me against these courses. Not only that but they are getting aggressive with the sales pitch now and it is getting right on my tits. It is time to vacate.

At 1330 there is a break for lunch, and this is my time to exit the building. I leave and make my way to the train station.

Looking back on the 2-day seminar / property crash course, I am glad I went. Doing a seminar had been on my radar for a while and I had finally been to one. I did learn a lot of useful information that will help me going forward with property. I now know that my current strategy of buying one house per year is what suits me for the time being.

Although I met some nice people on the course, I didn’t meet any contacts who I will stay in contact with and that was part of the reason I went. It might have been the man flu, it might have been the fact the course was relentless – I just couldn’t bring myself to mingle at the intervals. I needed a break from the property talk if anything.

What I will do is continue to learn about property. If I see a book that looks up my street, I will read it and I will continue to read property blogs, so I am up to date with the UK property market.

The PIN (Property Investors Network) meetings also interest me. There are a few local to me in Middlesbrough and Darlington and this will be ideal in comparison to getting to London. I think I could manage once a month, and this will only add to my property knowledge.

This 2-day course didn’t quite turn out as I’d hoped. I was hoping that the creative strategies would inspire me to reach my FI (Financial Independence) early and would really push me on. Shit happens and I will push on with my self-development. If anything, it has given me some clarity and helped me to fully realise what works for me with property.