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.

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