Hello, and a warm welcome back to our Professional Investor series, where today we're going to be looking at, can I do property investment with little money?
Now, the short answer is yes, but the longer answer is, keep reading as I explain exactly why and how you can do this.
So my name is Matthew Moody, from The League of Extraordinary Investors, and it's my task to really pull out some of the intricacies of investing in property and make sure you understand exactly how to do them in a safe, ethical manner.
So without further ado, if you've not subscribed or liked the channel yet, please do, because it just helps us to, A, make sure that we get this out to more people, and, B, it also just helps us to understand are people watching this and is this information of use.
So give me a like, and subscribe to the channel, that would be great.
So, can I do property investing with little money?
Well, you can, if you do it in the right way, so I'm going to teach you four things today to think of in terms of investing in property, and considering how to do this in the right manner so that you can actually start investing, because you don't necessarily need as much as you think.
But, let me make this very clear, you do need some money.
So, you might have seen some of these adverts out there where they said, "Oh, we can buy property with no money", or, "You can get into property from as little as 1,000 pound", or whatever it may be, utter bunkum and nonsense.
It's just not true, it's just not true.
But I'm going to show you exactly how you could do that with some money, but you'll need a little bit more than that I'm afraid.
So let's kick off with the first of our four items I'm going to be covering today, and this one is about hidden cash.
Now, the first thing I always ask people, when I start working with them from a client perspective is, go away and complete, what I call, a hidden cash tracker to understand exactly what you already have access to that you've maybe forgotten about.
And these are things such as pensions, savings, stocks and shares, even premium bonds, assets that you actually own, so this could be say, a really great car, or maybe you live in a house that's got a lot of equity, you might even have access to things such as paintings, really expensive animals, collectibles, precious metals, all those types of things.
Because then you're able to then put together exactly what you have access to at this moment in time, and also, don't forget this, what's in your attic?
Because a lot of people have a lot of stuff stored up there they never use, or the garage, and you could easily get access to maybe 500, 1,000 pounds.
And I would say every little £1,000 pounds helps, it really, really does.
So, hidden cash, the first place to start, what have you already got access to that perhaps you could use in a better way to start investing in property?
So that's the first place to start.
And normally this works out pretty well for people because they found that they've got a lot more than they thought they had. And for those people that haven't got a lot, they can then start thinking about what the next steps in terms of how do I start investing?
Because the second piece then is, the location, because let's face it, if you're living in say London, in the Southeast, it's difficult to invest because house prices are astronomical, I'm sure you'll agree.
So you have to start thinking about investing in other areas. And there are plenty of areas in the UK, where for less than £80,000 pounds, you can pick up property.
And I'm talking about lots of property, lots of different areas.
So I'm going to give you a quick list right now, just to think about places such as Derby, Bradford, Blackpool, Stoke, Newcastle, all these kinds of areas.
You can pick up property for, £60, £70, £80,000 pounds!
Now, if you're going to buy those types of properties and we're talking about a standard one bed flat here, nothing interesting, nothing really sexy, but it will start to make some money from you.
You will need anywhere from probably £14 to £18,000 pounds, give or take; £14 to £18,000 pounds, to purchase one property. That's going to start and then bringing in cash to you and crank up cashflow and yield, and then looking at what you can then do there to purchase other properties.
So this is a slow burn strategy I'm talking about right now, this is not a quick strategy. I'm going to be talking about strategies on another article because this is the next piece as well is, you also have to determine your strategy.
And as I said, I'm going to go through this in another session, so I'm going to go through it right now, but depending on what strategy you decided to do in property will also depend on how much money you need.
Let's say, for instance, your strategy is very simple, buy one bed flats, do them up, extract a little bit of cash by refinancing them. That's it, very, very simple.
Then you're going to need a lot less money than say, for instance, buying a plot of land, getting planning permission on it, building a house and then selling it on, you'll need far less money, versus let's say buying a HMO, whether it's a ready-made HMO, or one you're going to convert yourself, make it into a HMO, refinancing it, and then pulling some money out.
You know, the difference in intensive amounts of money needed are significant. We're talking at the very low end, maybe £12 to £18,000 pounds, very high end, maybe talking £100,000, £200,000, in terms of actual money to put into the deal.
So, these things obviously add up and it's important for you as an investor to be aware of the different strategies and how much money you'll need for each one.
Now, the good thing is I wrote a book about this called, "Cracking the Property Code", and in this I detail 45 strategies, that's 45 strategies, that you can do in property investment.
And I also detail in each one of those, how much money you'll need, what your return investment will be, how much support you might need to do this, and it really breaks it down.
So you can look at, well, how much money do I have right now? And which of these 45 strategies could I get going and doing with? And some of the strategies you need millions to do, but some of them, you need very, very little money at all.
So the strategy's also highly important.
Now the fourth one, and this, again, it's important, is what is your end goal?
Because obviously if you are investing into property and you're starting to get going, you have to have an end goal in place. And it is important that you do that, why, why is it important?
Because property investment is always a mid to long-term strategy.
It's never really a quick strategy and it is also risky as well.
You know, it is risky.
So you have to be thinking about, well, do I want to, say, replace an income? Do want to build a pension pot? Do want to, say, leave a legacy to my kids? What is it that I want out of property investment? Why am I doing this?
But hopefully what I've shown you through this short session is you can actually get started in property for very little money, £12 to £18,000 pounds to get a bargain basement, little one bed flat, which you can then start renting out and making a couple hundred pounds per month, or whatever it may be.
So if you've had some value today, you've enjoyed what I've said, please do subscribe and like the channel, I really, really appreciate this.
This is Matthew Moody, from The League of Extraordinary Investors, and I'll see you again very soon on another Professional Investor series session.
When we consider the changes afoot for the property industry, one thing I’ve seen over the last 16 years owning and managing HMO’s (over 1,000+ rooms over this time period) is that in order to be ahead of the game, it’s important to embrace new changes and ensure that your HMO is fit-for-purpose in today’s world.
Here’s a few things for you to consider to improve your HMO.
1. Easier Transparent Contact
The way we contact each other is changing. As landlords we need to embrace newer methods of technology and offer tenants a multitude of different ways for them to contact us including:
Messenger apps – facebook/whatsapp
2. Live & Work Spaces
More and more people are living and working in different ways and its important that we recognize this. Tenants are no different to anybody else and we need to embrace this by offering
Additional facilities such as work-study desks
More access to local co-working spaces
3. Shorter / Longer Contracts
We live in a mobile society where jobs are often for months if not week rather than years. With this more transient society means that we may need to consider short-term contracts (something that does not really exist right now apart from the somewhat spurious licence agreements) so that tenants can move into a unit for a shorter period of time.
At the same time, tenants have been pressing for longer term contracts which is again something that may be considered in order to allow for more security of tenancy.
This could of course disrupt the internal dynamics of the housemates relations but should be considered as something that will happen and thus we should begin to make compensation for this.
4. Community Integration
One of the accusations made towards HMO tenants is that they do not integrate with communities. Given that we are under pressure to deliver 300,000 homes, I see no other way through which this could happen without the help of HMO’s.
We therefore need to encourage more community interaction and engagement with our HMO tenants including education, liason and getting involved with community projects.
5. Smaller or Large HMO’s
Council-driven regulations seem to be honing down on the ideal 4 and 5 bed HMO’s as standard. This is disappointing given that for me, the sweet spot has always been a 6 bed HMO but more and more councils seem to be preferring the smaller HMO’s as they have ‘less impact on the community’.
All anecdotal of course but then at the other end, we see more and more applications being approved for the monster HMO’s of 10, 15, 18 or 20 bed units which to be fair have to be run in a completely different way to a small HMO with more hotel-type facilities and a higher-level of management.
6. Larger/Smaller Rooms
Recent regulations have come out enforcing 6.51m2 as the smallest allowable room for a HMO tenant to live in. However, is this the smallest room that somebody may CHOOSE to live in?
We’ve had a few rooms in the past measuring 5-5.5m2 which have been eminently suitable for contractors only wishing to stay a few days of the week but under new regulations none of this rooms will be now available.
How many box rooms in the country will now be unavailable as a unit of accommodation? 10,000 – 30,000 – 50,000?
And how does this regulation impact the ‘Rent-a-Room’ scheme where a homeowner can rent out a room? Different rules, same accommodation?
At the same time, a tenant would generally prefer a larger room and this could be possible through new methods of build and technology but only if these are embraced by local planners and councils – modular homes anybody?
7. Home Automation
With the advent of technology being amongst us there are now more opportunities for both tenants and homeowners alike to take advantage of the wonders of home automation.
Imagine being able to ensure the hot water is on when you come home to have a shower or that your heating in your room is at your preferred temperature of 20° or even that you can put on your front porch lights before you get home.
It’s here, it’s here to stay; how can you utilise this to attract more tenants to your HMO?
8. Integrated Entertainment
More and more tenants are demanding the best possible entertainment.
Forget digital channels such as Sky or Virgin; today’s tenant is more likely to watch Netflix or Amazon Films so how do you utilise this growing trend to attract tenants? Group Netflix accounts are here so why not consider extra accounts for your tenants?
9. More Bathrooms / Ensuites
People don’t like sharing bathrooms. People don’t like sharing bathrooms.
Enough said but how do you facilitate letting people have their own ensuites when its possible the Valuation Office may revalue your ‘all ensuite’ HMO as individual units?
Simple; have a mixture of ensuites and shared bathrooms for up to three people.
Want More Tips or Ways To Improve Your HMO Business?
Why not consider grabbing my 'HMO Optimisation Toolkit'; this is a physical product mailed out to you with 50 tips that you can use in your HMO business.
Based on my experience of building a multi-million pound portfolio and managing thousands of units over the last 15 years, you can grab a copy (whilst stocks last) for FREE and pay only £3.95 postage and packaging.
The toolkit is a handy playing card sized product, easy to use and carry and if you implement one tip a week this will keep you busy all year round.
I want to spend some time talking about myths that are going on right now in the property industry, because there are a lot of them, and explain some of the things that are plainly, plainly wrong.
So, here goes.
Property Myth One
The first one that I want to cover is; there is a myth out there that is predicated, and positioned, and proposed by a lot of educators, and training companies, and so-called gurus that to invest in property, you don't need any money.
And in fact there's been books written about no money down property investing and I want to debunk the myth that that's actually not true.
You do need money to invest in property investment
As to how much money you need, that is a different question entirely.
So when we look at the amount of money that's required; let's say that you're not going to actually purchase a property, but you're going to do some kind of rent to rent or lease on a property.
If you did that, you would have to find the money to pay the first month's rent, and pay the deposit more often than not, potentially pay some admin fees. And you would then need to furnish the property.
Now this is because most properties that you're going to rent or lease in order to make a return on the difference between what you're renting it at and what you're renting it out for are going to be done through some kind of HMO or potentially even serviced accommodation combination.
So you'll have to get furniture.
Now, there are ways in which you could rent furniture for sure, but most people when they're getting started are probably going to buy the furniture outright.
And you may have to put in things like fire alarm systems. You may even have to get white goods and brown goods. So you're going to be looking at really four, five, six thousand pounds in terms of doing that to get into a rent-to-rent or a lease option.
So when people come on and say, "Oh, you don't need any money," that's not true. It's just not true.
Now, I'm not saying that you can't find people to help you with the money, and obviously there are investors out there that potentially would give you the money, providing that you position the deal and it is a good deal.
But if you're just getting started and it's your first deal, that's going to be pretty tough to do.
So the first myth is, no money down is not true.
You'll always need some money, always. And we haven't even talked about anything to do with legals, brokerage, surveys and all that jazz – if you're buying a property.
There are ways in which you can purchase a property and refinance it and pull a lot of money out.
But in terms of having the money in the deal and not having any money leave your bank account and go to the vendor's bank account, it's just not going to happen.
The second myth that I wanted to share with you is, there's a myth out there at the moment as well that you have to be in this whole property investment arena full time in order to make a success of it.
And again, you don't.
There is a myth out there that if you're not full time in property, and you've not given up your job, and you've not gone into it 100%, and you've not burnt all your bridges, and you not said goodbye to employers; you're not a real property investor.
That is not true.
You do not need to be full-time in property investment to be successful
It is perfectly reasonable, and in fact I have many clients that are still in a full time job or run a full time business that are building a property investment portfolio on the side as side income. And because they're doing that, that means that they're able to still benefit from the job that they have and the credit that comes along with that job; in the end, the potential ability to borrow that comes along with that job.
It also means that they're able to build this pot, this portfolio, which grows, and grows, and grows the more, and more that they develop it and effectively build more properties and refinance over, and over again.
So when people say, "Oh, you can only do this if you're full time," it's not strictly true.
And in fact, I firmly, firmly believe and am of the opinion that you can get involved in property investment in probably around five hours or so a week and make a success of it. Absolutely.
So it is a myth that's out there and I think it should be taken with a pinch of salt.
Obviously, if you are spending all of your time and energy on it, then you're potentially going to accelerate a lot quicker. However, at the same time, you are not necessarily going to be any better off than the person that is still employed or in the business and building a portfolio on the side.
So you don't have to be full time property to be an investor.
What you have to have is the right tools, the right power team, the right structure in place in order to make it successful.
The third myth that I want to get out there, and this is one I see time, and time, and time, and time, and time again, is people talk about, "I've got to get a deal," and it's all about the deal, and nothing else matters.
And I'm here to say that that is actually wrong.
What's really crucial when you are investing into property and you are effectively wanting to build a portfolio, it is not the deal to begin with.
It is not the deal, because I could show you a deal right now and say, "Hey, here's this deal. Here you go."
Let's say I have a deal and I say to you "Here's the deal. It's a great deal. It's 20% below the market value and you're going to make £1,000 a month, and it just needs a small refurb and you going to make all this money, and it's great, and you should buy it."
But you don't know anything about where it is.
You've just been told it's a deal.
A deal is not a deal if it’s in a location you don’t know
And the thing is, it's easy to present a deal if you don't know the area. It is really easy. It's almost, basically, it's a little bit like pick-a-mix to some degree.
You can go and you can pick something, but you're not really sure what you're getting, but you know you're getting a sweet.
And it's the same thing in chasing deals. You've got to stop chasing the deal. It's the wrong thing to do, and everybody is doing this. All you have to do is focus on chasing the location.
This is what people do wrong over, and over again. So chasing the deal is not the right way to go about it because unless you understand and know the area in intimate detail, it's just a potential deal.
Now, if one of our agents rang me today and said, "I've got a deal," and it's in our local target area where I buy all the time, I would know pretty much within seconds of him or her telling me what the deal is, is it actually a deal?
And the majority of times it is, it is a deal.
Sometimes it isn't, but you've just got to be aware of this that from the perspective of really focusing on what's out there and what's happening in terms of deals, it is very much, a deal in an area that you understand, and if you understand an area and you know it well, then it is a deal.
But I'm so, so frustrated with people, even clients calling me up and say, "Oh, I've got to deal. I've got a deal." "So, where is it?" And it's in an area that they're not researching. It's like it's not a deal. It looks like a deal, it ain't a deal.
The fourth myth. This is something that is very rarely mentioned by a lot of the big training companies, big gurus, the big people that run around the stage, jumping up and down, getting you excited and speaking really fast, then moving their hands around and getting you to invest in nonsensical 2 grand courses that deliver naff all; you know the kind.
Property investment is made and is at the same time killed through your tenants.
Now what do I mean by that?
Effectively, your tenants who pay your rent effectively pay your mortgage.
Anything that's left over from that, it's where you make some cash, which you can then reinvest into other properties, reinvest back into the property, take something to live off, build up your savings, whatever it is you're doing.
But it's tenants that do all that for you.
So if you're not looking after your tenants and you are not making sure that the property is safe, clean, it works, everything works, and you're addressing maintenance issues, and that they're happy. Then without having tenants being happy, then you run into problems and issues.
And this is when tenants stop paying the rent. It's when tenants basically start moving and getting into this whole issue around causing problems.
And this is when we run into issues regarding the eviction of tenants through Section 8 and Section 21, and they're not leaving, and then I have to get bailiffs involved.
A happy tenant pays on time and keeps the property in a good condition
So the fourth myth that no one talks about, but is actually the foundation of which property investment is made, or isn't made, are tenants, look after your tenants.
So if anything, if you're going to be a property investor, and even if you're going to be one that is say, having this as a side income and you either outsourced some of that to let's say an agent, you've got to make sure that they are looking after the tenant for you.
Because if you're not looking after the tenants and they're very much around this whole issue around not catering for the tenants' needs, looking after them, then you will run amok very, very quickly.
You could have the best deal ever in the world. But if you're not filling the property with good tenants, then the deal is not a deal, right? It's just not a deal.
So that's the kind of fourth myth that's kind of out there.
The fifth one, and it's the one I want to end on is really around this other myth that's out there at the moment that again is being positioned, and proposed, and talked about by a lot of big training companies, and a lot of these so-called gurus out there is that you can be a jack of all trades.
What do I mean by this? You’ve seen these sales pages and videos and they say, "Oh, you're going to come along to this event and we're going to teach you how to do buy-to-let, we're going to teach you how to do HMO, teach you how to do service accommodation. We'll teach you how to do flips, going to teach you how to do small developments, going to teach you how to do to big developments, we're going to teach you how to do this, this, and this."
And in the end it's like… you don't need any of that stuff.
You just do not need any of that stuff.
What you really need to get started is a thorough understanding of what it is you actually need from a revenue and income perspective, how much it is you need to live on, and then you need to look at what strategy allows you to do that the quickest.
The reason why this is so relevant is because when I first got started in property investment, and you can check out previous articles/videos in terms of how I got started and why I got started; I focused on DECIDING.
But when you're starting to get going in property investment, you really need to look at, where you're at the moment, and where you want to get to.
And what I quickly realized is, it will be impossible for me to go and buy standard buy-to-let properties and replace my income, which is what I wanted to do at that stage.
I was in a position where I had to leave my money, my job, my world, my career. It would just be impossible.
So this is why I specialized in HMOs, which became rent-to-rent, lease options and refurbishments, small developments, and so on, and so forth.
But going down a very similar route, which is, the whole thing around HMOs, whether it's boutique, or professional, or student, or whatever.
Now, it's really easy to get into the whole shiny penny syndrome and think, well, let's say that you're in an area and bread-and-butter buy-to-lets work really well for you. Let's say you're in the north and you're getting nine, 10% deals, and you think, "Right, well now I need to start doing something else."
So you start maybe doing some small developments, and then they don't work as effectively because you're not necessarily an expert in that area.
You don’t necessarily have a power team behind you and you've diverted your attention from where you were, to something else.
Being a generalist in the property investment world does not work.
All the people I know that are making really good money and are really crushing it are focused on probably one strategy, two maximum, but certainly one main strategy.
And the second one is a side strategy and it gives them some income, but on a periodic basis, not every single month.
So, if you are getting started in property investment and you're thinking that you've got to do this, this, this and this, you don't have to do all those things.
You don't have to run around doing four or five different strategies at once. It will be foolish for you to do that. You want to start, and you want to focus, and you want to go really deep into a strategy to make it work for you. And that way, you'll start to build up your income really, really nice.
So, just recapping where we are in terms of these myths then, because there's five myths that I explained.
The first myth is everyone says out there, you don't need any money to get started in property. I say that's bulls**t, you always need some money.
Now it may not be yours, it may be an investor's and if you can persuade an investor to give you their money and you don't have any experience, then well done, you've done really well.
But for the majority of people, that first deal that you do, you're going to have to put some money in. And the lowest amount of money you're going to be putting in is probably five to 8,000, probably around that figure.
The second myth is you don't have to be full time to do this.
Everyone tells you, you've got to dive in. There's this whole thing around ‘I want to become a property investor so I can leave my job’. It may not be the job that you hate, it may be the fact that you're reporting to someone that you don't like, and it could actually be that your industry is still really good for you, but don't leave too soon.
Start percolating, building it up in the background and really start focusing on having that income coming in, whilst you then build up your career at the same time. Maybe move company's get someone better, and keep building that portfolio up.
The third myth is that you shouldn't be chasing the deal.
What you should be chasing is the location, and then the deals will come to you in the location.
Don't get focused on, "I've got to find a deal. I've got to find a deal, I've got to find a deal." What you want to be focused on is, you've got to really focus on getting the right location right, and then when you've found the location, then the deals will come to you.
The fourth one is, in order for this property investment to work, you have to have tenants.
You have to look after your tenants, you have to respond quickly to tenants, and you have to make sure that they are happy.
Happy tenants pay your rent, and unhappy tenants do not pay your rent, but the best rule in the world, you will always have at some point issues with tenants and you will always have issues with them not paying money. This is going to happen. It will happen to you. So do not go into this with your eyes shut thinking this is not going to happen. It will.
The fifth one is the fact that you cannot be a generalist.
You can't be doing three, or four, or five strategies.
You've got to focus on one strategy. You've got to get really good at that one strategy. You've got to go deep into that strategy. You've got to master it in your chosen area.
Then when you've hit those target levels that you're aiming for in terms of perhaps you have all of your bills paid for so that you can then potentially leave your job and go and do some charity work or set up another business, or do something different, but have an income level in place that you're aiming for, and at that stage, maybe think about doing another strategy, but don't do it too quickly.
The focus needs to be on doing one strategy really, really well and really then leveraging off the back of that.