The author interviewed nine successful property investors in the UK to learn how they did it.
Notes
Mark Alexander
- “It started becoming very clear to me that it was the people and businesses without cash that were going under: those who had cash were taking advantage of the lower prices to quickly build very big property portfolios. I desperately wanted to emulate the successful people, and having cash in the bank has been a core part of my strategy ever since.”
- Mark wants his tenants to stay as long as possible to minimise voids, and has started demonstrating this using a document called a Deed of Assurance. The Deed states that if the tenants have done nothing wrong and Mark asks them to leave within five years, he’ll pay them money to compensate them. This gives good tenants peace of mind, while still allowing Mark to legally evict them if they don’t pay their rent.
- An unusual element of Mark’s investing strategy is his practice of taking on maximum leverage, but keeping an amount equivalent to 20% of his total borrowings as cash in his bank account. For example, if he had mortgages totalling £5 million, he would keep £1 million as cash in the bank.
- In most cases someone would only borrow the amount they needed, and hope to see their loan-to-value percentage fall over time as property prices go up. Mark, though, would use the opportunity to borrow more to take him back up to the maximum—but leave a healthy amount of it in the bank.
- “Developers don’t like building bungalows because they can’t fit as many onto a given plot of land, yet at the same time there are baby boomers reaching retirement and wanting to downsize. High demand and low supply is always a recipe for making money.”
Jonathan Clarke
- The other defining characteristic of Jonathan’s success has been his willingness to take on large amounts of debt to magnify his returns—he estimates that he has £5 million worth of mortgages in total.
- “I remember someone saying once that if you’ve got £10,000 of debt that’s your problem, but if you’ve got £10 million in debt that’s the bank’s problem!“
- People need property to live in. England is relatively small and crowded. Your property will rent out. They’re not building nearly enough housing to meet demand. If treated with respect, property is indeed as safe as houses.”
Lisa Orme
- This model of remortgaging to pull out the deposit but not going any further has been part of Lisa’s strategy from the start. It effectively allowed her to buy a monthly rental cashflow for free, without taking it too far and being over-leveraged when the boom ended.
- “The people in the best financial position now and in the future are the ones who’ve used the simplest strategies: they buy and hold, they rent it out, and they sit and wait for time to take its course.
Gavin Barry
- Gavin is only interested in big HMOs with five bedrooms or more, because those are the properties that generate the returns he’s looking for—typically a ROI of more than 25%, and a net profit of at least £1,000 per month.
- He’s also got a strict set of criteria when he’s buying. “I’m always looking for two social spaces—a decent living room, and a kitchen that’s big enough for a table and chairs. That way, if one group wants to watch TV while others are drinking and getting ready to go out and party, they’re not going to be in conflict with each other. And a lack of conflict means they’re more likely to stay on for another year, reducing our workload.”
Mat Smith
- “I want to buy properties that won’t need excessive maintenance, in areas with strong tenant demand, and achieve a yield of 12%. In other words, if a property was being advertised for sale at £120,000, Mat would need to see it commanding a monthly rent of £1,200 to justify taking a closer look. £1,200 multiplied by 12 is £14,400, and £14,400 divided by £120,000 gives a gross yield of 12%.”