Look after the pennies and the pounds will look after themselves

Out of the 18 years I have been a Landlord I have spent the vast majority of that time with a negative, self pity type of why does it always go wrong for me attitude.

If I am being honest, I was positive for the first year when I was a very naïve 19 year old and thought I was going to be a property millionaire within the year. Add to that the last 2 years (now I have finally realised I want to make a go of property) that is a pitiful 3/18 years being positive.

With this in mind, despite being a Landlord for around 18 years, I would say I am a fairly inexperienced Landlord. I basically have been interested and focused on my rentals for the last few years.

The lack of interest I have had in my rentals over the years has been a contributing factor to several mistakes over the years. Like the time a rental wasn’t insured for 3 years.

This leads me to another mistake relating to house insurance. Up until very recently, I had 5 house insurance policies with 5 different companies. All with different renewal dates and this makes it difficult to manage.

What has been happening is that any house insurance policy has been auto renewed and I haven’t bothered to look at the cost’s involved. You can almost guarantee that the premium will have increased each year on each of the policies.

This is the opposite of looking after your pennies as the pounds have slipped away from my hands into the hands of the insurance companies. This is not good enough if I am serious about making property investing my full time occupation.

Something I am good at is taking advice and this is exactly what I have done in recent weeks. A friend of mine who I would consider a very experienced and very successful landlord has recently given me some words of wisdom.

We were talking and my mistakes cropped up and I was telling him about how I am trying to get my act together. One of the things I had been avoiding was house insurance and getting the prices down.

This was a mistake that the experienced Landlord had made earlier in his property journey. He told me to get in touch with our mutual FA who would be able to put it all on one policy.

And after telling him the cost of my current insurance policies, he was almost certain I would get a decent saving. Not only that, the policies would start on the same day and would all be under one roof meaning it is much easier to manage.

Since receiving the much-needed advice, I have spoken to my FA and have made some changes to my house insurance. My existing policies were cancelled and my 4 rentals are now insured with the same company.

Making a few calls to sort out my house insurance is something I have avoided for years. In total, it took less than 30 minutes to cancel 4 policies and get 4 new policies with one company.

This tiny bit of effort will save me £500 per year. This little bit of admin could have saved me thousands of pounds if I had been looking after the pennies.

Over the last 10 years, I could have done this every year and that would have probably taken in and around 5 hours. Even in a poor savings account with less than 1% interest I would have saved just over £5000.

If I had been tracking the stock market with an investment of £500 going into an Index tracker fund each year, I could have saved even more.

With books I have read, you tube videos, blogs and podcasts I have tried to absorb over the last 2 years, I am convinced that 7-8% interest is achievable when you learn how to track the stock markets.

£500 a year is about £42 a month. If I had invested £42 a month (house insurance savings) over a 10-year period, this would have compounded to £6963. It isn’t a massive amount but it is a decent sum of money and it is almost £7000 that I have given to insurance companies because of my previous negative attitude to my rentals.

Let us say I am in my mid-30s and am going to transfer this sum of £6963 into a SIPP (Self Invested Personal Pension). I know I can’t touch it until I am 57 (the age you can access your SIPP in the UK) and am just going to forget about it. So with a 7% interest rate the value will compound over the next 20 years.

After the 20 years my £6963 becomes £26,944.61. This is a good example of the positive effect of compound interest over time. If I can manage to get 7% interest, I will receive £19,981.61 for doing nothing. Well apart from reading a few books and forcing myself to get my head around investing.

Obviously there are no guarantees in the stock market, but I refuse to settle for <1% interest in a savings account. Single shares can be much more profitable but I know I am far too emotional when it comes to money and would make too many mistakes (mistakes I have already made that have cost me about £10,000).

Admittedly, I have gone off on a tangent. I just wanted to emphasise the importance of looking after your pennies. It is clearly worth spending 30 minutes a year to get your house in order and looking after your pennies is a must.

Bad news for Leeds

Towards the end of 2019, I started going to Property Seminars. Well sort of. I went to a Property Network meeting in Ripon that didn’t happen (that was a 2 hour round trip due to road works), a free property event in a Hotel in Middlesbrough, a PIN (Property Investor Network) meeting in York and a 2-day Property Crash Course in London.

The Crash Course was in London was a little bit of an eye opener. Although I got some useful information (not much), I had to sit through a 2-day sales pitch. The aim was to get the near 1000 crowd (property wannabe’s) to sign up to expensive training….

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 skeptic 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.

It seems I’m not the only one who has experienced these aggressive sales pitches. Disgruntled property training course attendees are gearing up to bring a group action against ‘investment guru’ Samuel Leeds (Landlord Zone).

The article goes onto mention the tragic case of Danny Butcher. Danny was a former soldier who killed himself after trying to clear his debts by enrolling on a £13,000 course run by Property Investors (Samuel Leeds). Personally, I feel that it is harsh to blame some poor souls suicide on a training course.

What I will say is that for these very expensive courses, the course organisers seem to offer life-changing results and it is easy to get pulled in. The course organisers have to be monitored to ensure the information and training they are selling is being sold ethically and is above board.

Do not try and convince the course attendees that by paying over £10,000 for courses that you are practically guaranteed to make a fortune and never have to work again. Say that with some expert training and guidance you have a chance of making a career with property but the amount of money you make is very much down to you, the individual.

I am all for property seminars and courses but the organisers have to incorporate a bit more honesty into their sales pitch. There might be hundreds in the crowd who are desperate and will go to any lengths to get financial freedom (that same FI I am trying to get before I’m well into my 50s and 60s).

Personally, I don’t fancy any more property seminars because the last one I went to with Mr Leeds left a sour taste in my mouth. Not to mention that I am not too keen on jumping around the room and high fiving complete strangers.

Going forward, I will look to go to more PIN events local to where I live. This is to increase my property knowledge and get around like-minded people.

Get yourself to a property course by all means it might just make all the difference to you and your future. But definitely go with your guard up and don’t be bullied into expensive courses you really can’t afford.

A Bitter Pill to swallow

Grant me the serenity to accept the things I cannot change, the courage to change the things I can, and the wisdom to know the difference (Reinhold Niebuhr)

I have had a poor relationship with money for years and because of this I have had anxiety on and off. This is mainly down to my work situation as there is no anxiety when I am in work.

If I am ever out of work, this is when the anxiety kicks in as my mind overthinks what is going to happen in the future.

This week has been a bad week work wise as my current contracting role has been terminated. I thought I had at least 12 months ahead of me but it wasn’t to be. I never thought I would be in a position where I was finished for having asthma but that is my reality.

The Project was a Gas Plant in Oman and it is the Omani Government who has effectively ended my employment. They see over 60s and anyone with underlying lung conditions (i.e. asthma) as vulnerable and will not allow anyone who is vulnerable into their country during the current pandemic. End of project and along with most contractors I know, I’m now looking for work.

If I am being honest, it was a very bitter pill to swallow. A little dark cloud appeared, as I was told the news.

This is the type of situation that got me into self-development in 2018, as I was sick of being worried about money and my work situation.

Thankfully, I don’t get anxiety as often and am not worrying about when I will find work or what our money situation will be like in 6 months.

My new mantra is to focus on what I can do and not focus on things that are out of my hands. This is not always easy but there are things that help me to keep that dark cloud from making regular appearances.

New habits that have helped me

First of all, I get up and start the day with some meditation. There are various apps and I tend to do a mindful meditation for 5 days a week. This will normally be for around 15-20 minutes. What it has done has helped me to be calm in most situations at work and at home. The main benefit though is that it has helped to reduce my anxiety.

I am then looking to stretch. Being quite tall, I was suffering from back pain until a physiotherapist told me to stretch my hamstrings regularly for 30 seconds at a time. Touch wood my back pain has gone now I am doing regular stretching exercises. I will do 15 minutes of exercise like squats or press-ups then I will finish with some stretches.

The next thing to finish my morning routine is to have a cold shower. My body balance therapist (form of physiotherapy – Amatsu UK) put me onto Wim Hoff a few years ago and I have been doing it daily ever since. The main benefits of cold therapy are that it helps your nervous system and reduces inflammation. Mr Hoff also claims that it helps mental health as well. If I am training hard, I also have x1 Ice bath per week to help recovery.

Probably the biggest thing that helps me with anxiety and stress is exercise. I have been training 6 days a week for over 20 years and it helps me mentally and physically. If I don’t get to train because of injury or whatever else, my overall mood goes south very quickly.

It is difficult to be out of work at the best of times and being out of work now is especially hard. There are many contractors who have been out of work for several months and I have got everything crossed that the UK economy makes a speedy recovery and that work picks up.

The contractors who I work with are mostly very capable and are good at adapting to any situation they find themselves in. They will work Onshore, Offshore, anywhere in the UK and even abroad. That is why I am very confident that we will all be ok and find a way out of the current difficulties due to COVID-19.

Stay positive and get busy on Linkedin and any other platform for finding work. Speak to your network and make the most of any opportunities when they present themselves.

I would literally be nowhere without my network. After 2 days of being out of work, a friend of mine (who has helped me on a few occasions and is always trying to help in anyway he can) had put me onto a recruiter and I had an interview lined up for the end of the week.

My interview was with 4 senior members of a project team and the interview took place over Microsoft Team. Hopefully I get the job but if it doesn’t go well, I will be fine, as I know I tried my best.

MAKE SURE YOUR PROPERTIES ARE LEGAL

Being organized and keeping on top of your admin is an important part of being a landlord. If you can get systemized it will make you that much more efficient and will make your life a lot easier.

My humble portfolio of 4 rentals is easy to manage and I use a basic spreadsheet to keep all relevant information up to date and easy to access.

This wasn’t always the case and back when I had a negative attitude towards property and in particular my negative equity rentals, my admin was all over the place.

It was that bad that one of my rentals wasn’t insured for a short period. Without me realizing, it wasn’t insured for over 3 years. Luckily nothing bad happened like a fire or any other serious damage. If something expensive happened with it not being insured it might have put me off property for life.

As I mentioned last week, the UK Government don’t make things easy for us Landlords and the sustained regulatory squeeze is very frustrating.

The latest legal change is that Landlords and agents will need to ensure electrical installation inspections and testing are carried out for all new tenancies in England from 1 July 2020 or from 1 April 2021 for all existing tenancies.

What this means for Landlords is that they must ensure every fixed electrical installation is inspected and tested every 5 years by a qualified Electrician.

For any new tenants moving in after the 1 July 2020, us Landlords will have to provide an Electrical Safety Certificate.

Whilst reading ‘The Electrical Safety Standards in the Private Rented Sector (England) Regulations 2020’ something grabbed my attention under the ‘Enforcement’ section. Proven breaches of the Regulations can result in the local housing authority imposing a financial penalty of up to £30,000.

This means that I will personally be playing the game and getting my rentals up to date with regards to this latest regulation.

The old me would have had a good moan about this and it could have been another excuse not to continue to buy rentals going forward. The new me accepts the legal changes and will continue to be positive about the rental sector despite the UK Government.

Property Legal Obligations

  1. Ensure you have the correct tenancy agreement in-place (e.g. AST – Assured Shorthold Tenancy)
  2. House insurance – get a landlords policy and make sure all of your properties are insured – to save some money change your policy each year – I haven’t done this at all in almost two decades but it is on my radar as my OCD is starting to really kick in – an efficient way of doing this is to have one policy for multiple properties
  3. Gas safety – Gas safety check every 12 months
  4. Smoke and Carbon Monoxide Alarm Regulation – at least one smoke alarm on each storey / level – Carbon Monoxide Alarm in any room used as living accommodation where solid fuel appliances are contained
  5. Electrical Safety Certificate – ensure you are familiar with the latest Electrical Safety Standards introduced in 2020
  6. Ensure Minimum Energy Efficiency Rating (EPC) – since April 2018, the minimum rating is E
  7. Declare rental income – this is something to discuss with your accountant
  8. Tenancy Deposit Protection (TDP) – Place Tenants deposit in TDP within 30 days of new tenancy
  9. GDPR (General Data Protection Regulation) consideration – use tenancy agreements that take GDPR into consideration – it is important that Landlords process and control their tenants information in a transparent fashion
  10.  BE AWARE OF GOVERNMENT LEGISLATION – keep your eyes open for any recent changes and changes going forward

If you have rentals or are thinking about it, keep the legal side of things at the forefront of your mind. You might be ok and avoid any large penalties by staying under the radar or you might get a fine that will tear your financial world apart. The choice is completely up to the individual.

Risk it for a biscuit or be a good little Landlord.