1. Never buy a house
I wouldn’t live in myself
A nice simple
self-explanatory rule to start with!
With all my houses,
even the ones in the less popular areas of the city, I would still be content
to live in them myself if I had to. Because if I’m not prepared to live in the
homes I’ve created, why should I expect anybody else to?
If the street or
area is rough and ropy or unsafe, or the house is not refurbished well enough,
then it’s not suitable for customers / tenants / people. And if I think it’s
not good enough for me, it’s not good enough for others either.
2. Only buy houses
within 20 minutes from my front door
I’m Leeds born and
bred, and have lived here all my life. Whilst I can understand the appeal that
some other investors have about buying property in different areas all over the
country, that’s just not for me.
My goal was always
to provide local homes for local people in my home town.
And because my
houses are relatively close, I can visit them easily, or get there quickly if
there’s an emergency to deal with.
3. Ensure the
property cashflows a minimum £250 net profit from the rent per month
From a monetary
business aspect, each house must create positive cashflow every month after the
mortgage has been paid.
It astounds me to
hear of landlords where the rental income only just covers the property’s
buy-to-let mortgage.
Or even worse - the
mortgage is more than the rent, so the landlord is effectively paying for a
tenant to live there!
Make sure you make
money from each property, or you may end up in debt, stress, and trouble.
Another key property
business mistake to avoid is this: don’t get too emotionally attached to the
houses either - it’s a business, so they are effectively just boxes that you
make money from. As long as you maintain and look after your boxes and their contents
(people included!) all should be well.
4. Have the
potential to add at least £25k to the end value
Buying houses below
market value is not always easy. But that’s the way my business model works.
I’ve got to be able to uplift the value via refurbishment to be able to pull
out mine and my investors’ money when the property is revalued, after all the
work is complete. So you need to be realistic when checking end values and
ceiling prices of the rest of the comparable houses nearby.
Be cautious when
researching likely end property values, so take your cheerful rose-tinted
glasses off!
Here’s one of the
very few places in life where it’s better to be cautiously pessimistic /
realistic in the financial figures rather than overly optimistic.
5. Don’t deal with
dickheads
There’s no other way
to phrase this nicely.
Some people will
just cause you chaos, stress, anxiety, and cost you time, money, effect and
energy.
There’s lots of
lovely people, tenants, contractors, and professionals around…So we don’t need
to waste our time with unscrupulous and unsuitable people who just do not
respect us.
They may be rude or
disrespectful or patronising to you, not do as good a job as they promised,
trash your house, lie to you, and generally cause you a headache. The key is
being able to spot these types of people before you engage with them.
Which leads us to…
6. Use your gut
instinct when working with other people
Spotting genuinely
good people from those who just pretend to be, is difficult.
I’ve had a plasterer
that promised me he was awesome - then walked off the job because he couldn’t
get his plaster to stick to the ceiling.
I’ve had a HMO
tenant be such a charming manipulative liar that he lied to my face with ease -
only to then stop paying rent, and become an avoidant problematic bullshitter.
I’ve had a tenant
wanting a fresh start of stability from her chaotic past and provide a secure
home for her children - only to repeat her same mistakes, get involved with
drugs and violent boyfriends and utterly trash my house and abscond leaving a
horrendous and expensive mess for me to deal with.
The common factor in
these, and every case I’ve had which has turned out badly, is that every time,
I had a niggling feeling in my gut that something wasn’t right about these
people.
But I chose to
ignore that uncertainty I felt and gave them a chance anyway, because I try to
be nice like that, and trust that they won’t let me down with their chance.
I don’t do that
anymore.
If my gut instinct
tells me something isn’t right about something or someone - I believe it.
7. A void is better
than a headache
Following on from my
last point, if your gut instinct tells you someone will not make a suitable
tenant in your property, wait until you find one that is.
There’s plenty of
people around needing housing, so we shouldn’t be so desperate to grasp rental
money that we end up putting someone unsuitable in our properties.
Not only because if
/ when it all goes wrong, it’s then very difficult to get rid of them,
especially if you have to go down the costly eviction route.
Do stringent checks
on your potential tenants, and if someone’s not right or you just don’t get a
good feeling about them, say no.
It really is better
to have a void than a headache.
I’ve left rooms and
properties empty for weeks and weeks sometimes, because I haven’t been totally
happy about potential tenants that have viewed them.
The right tenant is
worth waiting for.
You’re looking for
long term stability and reliability in your tenants, not just filling your
wallet with short term cash.
8. Avoid false
economy during refurbishments
It may seem like a
good idea at the time, not doing certain things during refurbishments to save
time or money - but it is false economy in the long run.
Examples I have made
like this which taught me this lesson include:
⁃
Not putting radiators in kitchens. Only to then later have to retrofit electric
heaters.
⁃
Not replacing the old gutters at the same time as having a new roof done. Only
to then have to replace them a few years later - and the majority of the cost
was having to put scaffolding up again.
⁃
Buying cheap poor quality boilers - only to then have to replace them way
before the usual boiler lifespan because they went kaput.
Better to do big
jobs all at once during the refurb, rather than kicking the can down the road
to have to deal with at a later time - and likely with more expensive
retrofitting or replacement costs.
9. Be a good person
Unfortunately there
are a lot of wretches in this industry.
They talk a good
game, give a nice winning smile, extort money from people… only to then do them
wrong or rip them off for vast amounts of money. Eventually though, all these
wretches get found out, and rightly so.
Because it’s not
enough to just PRETEND to be a good person - you’ve got to actually BE a good
person.
And that means
caring about other people, rather than taking advantage of them for your own
selfish needs.
So be understanding
when your tenant is genuinely struggling.
Pay your
contractors’ invoice swiftly when they have already completed the work for you.
Repay your investors
in full and on time - and if there’s a problem, be open and honest about it,
and work hard to get it resolved.
Things do sometimes
go wrong - in projects and in life - but radio silence and lack of
communication just causes mistrust and makes things worse.
My final thought on
this topic is one personal life rule I live by:
Don’t ever say
anything or do anything or behave in a way that would make your favourite
grandma ashamed of you.
Your Nanna and your
conscience are watching - so don’t let them down, and do yourself proud.
10. Have great
integrity and do what you say you will do
Last one, which is a
nice follow on from the previous rule.
It surprises and
appals me how many people in life don’t actually do what they say they will do.
I think if you do have great integrity, you really are in the minority of
people.
You wouldn’t believe
the amount of people I book tenancy viewings or meetings for, who don’t even
turn up.
They don’t appear,
they don’t call, they don’t do the thing they agreed to. It tells me a lot
about that person.
And an unreliable,
untrustworthy, flaky person of poor integrity is not the sort of reputation you
want other people to have about you.
Having great
integrity is always doing the right thing - even when no one is watching.
So those are my own personal ten rules of property investing - and as you’ve seen, it’s not just about the tangible bricks and mortar aspect of it!
Best of luck with
building your own property portfolio, because it’s not easy.
Because if it was,
everyone would do it…
Wouldn’t they…?!?
