My First Investment Property
A two up, two down terraced house, converted into a three Bed Mini HMO that cashflows £500-600PCM.
I remember when I first started to look into property, I spoke with my accountant and he informed me that I needed three years of accounts to get a mortgage. It can be a challenge for self-employed people. I want to bring this up to take away some of the misconceptions and fear around buying investment properties or your first house. I’ve learnt over the last few years is that if you’re creative there is a mortgage product for everything and everyone if you are willing to look hard enough for it.
For my first property I had to scale back and purchase a two up, two down terraced house for around £80k.
I raised the majority of my capital for my first investment property by selling my BMW M Sport and downgrading to a C1 (more on this story in the podcast). By this time I had already attended various property courses and invested in my education so I was ready to hunt down my first investment property.
It took me around six months to find my first three bed mini HMO, I remember tirelessly searching for the perfect deal using the knowledge from the courses I had attended. I was looking for a property where I could add value from day one, so my focus was to find a run down property that needed work doing to it. I put in lots of offers, all below market value and offended many home owners and probably frustrated agents along the way.
The day I found my first property I was travelling back home from a property course, I was searching on Rightmove (who can relate to spending hours on Rightmove searching for that perfect opportunity but never buying?) and a brand new listing came up. This is when the my learning curve started to get really steep, listen in to find out what happened when I finally go an offer accepted.
In this episode you will learn
Why I swapped my BMW M Sport for a C1.
The struggles I experienced finding my first property.
How I got in over my head with the refurb.
The final cashflow figures.
To learn more listen to my new podcast and subscribe! Available on iTunes, Google, Spotify and others or click “play” on the player below!
Podcast Transcript↓
[00:00:56] I'm Simon and welcome to another episode of the podcast where we talk about all things property, Creative Cashflow and how to become financially independent today. Not in 25 years. That's the motto. That's why we're here. That's why you're here. And we're just going to keep the content coming every single Monday. So please subscribe so, you know, when there's a new episode and spread the word. So, yeah, today's episode, guys, we're going to be talking about my first investment property.
[00:01:26] So I'm going to break it down from start to finish. And the main reason I want to do this is just to sort of take out all the preconceptions and the fear of buying an investment property or buying a first house. Because when I think back to when I wanted to get on the property ladder, I remember my accountant saying, oh, you need three years accounts, it's very hard for self-employed people. And I thought to myself, well, I've had one year and it was a really good year, but that's not enough, so I just won't do it. And what I've learned over the last couple of years is that you can get a mortgage product for everything and everyone. It doesn't matter if you've got the right broker and if you're willing to pay a slightly higher rate. So don't let nobody tell you, oh, you can't get a mortgage. Don't let them tell you. You will be able to get a mortgage. It's just gonna be the conditions and terms of the mortgage and the price of the property. Like, you know, you might have to scale back. But, you know, my first property cost eighty-odd grand and I'm going to go into that in detail. So that's what we're gonna cover, guys.
[00:02:39] So if you've if you've not listened to my first ever episode, which was how property changed my life, go check that out so you can get the context of where I was at and what prompted me to do it. But if you're brand new and you're just in the mix and you want to stick on this episode, in a nutshell, I was doing music. I love music. Music was life. And it still is my life. However, I wanted to create a recurring income and I wanted something more reliable and sustainable. And I wanted to stop being a fool with money. Okay, so I sold my car. It was painful, painful. This was my dream car. You know, a few years ago as doing all goal-board thing and, you know, The Secret. And I must have put this car on my wall and I managed to achieve it. The B.M M Sport Twin Turbo, cream interior. Sick car, convertible, wicked. But I just decided, you know, I'm going to sell this car and actually invest in my future and my family's future. I wasn't a million miles away from getting married and, you know, family, hopefully one day. So I thought, let me actually get serious.
[00:03:55] So I took my car down to We Buy Any Car Dot Com. It was in the Sainsbury's car park. And it was really weird, actually. I remember...I remember sort of giving the guy the keys, went in the little hut. You know, you always see them outside in the supermarkets. I give the guy the the key and he went to inspect the car. And as he was inspecting it, I'm not going to lie. I think there was a couple bits and bobs that might have been on the way out and...off the record, of course. And I remember giving him the key. He had a look and he was inspecting it and about five cars up, the car just set on fire literally out of nowhere. I don't know what happened. All I heard was a bang. Car was on fire.
[00:04:39] So the fire engines all pulled up and we had to actually move the car a few spaces all up and just create space. There was smoke everywhere, it was mental. Never, ever seen it before. And it kind of made him do the valuation a bit quickly. So I actually think I probably got a better valuation, but still lost like 20K. Stupid, stupid, stupid, stupid. So anyway, long story cut short. So I've got this little bit of money now and I'm getting educated, I'm going to property courses and I'm trying to find this deal. And you know what it's like, it's your first deal. You want it to be the best deal. You know, I naturally viewed hundreds of properties. I was always viewing properties. And I remember at the time people were saying, you know, like mate, are you going to buy a property or are you just looking? And I was like, Yeah, yeah, I'm looking, I am going to buy but I am going to buy the right one. I'd heard on some course you make your money when you buy. So I thought, do you know what, I'm not rushing this is. I'm gonna look, look, look, look like a tiger and just pounce on the right deal.
[00:05:47] And, you know, on the courses they said, you know, make sure you build rapport and make sure you, you know, the smelliest, horriblest, cruddiest property ever you want to buy and add the value from day one. So I thought, OK, cool. So I'm looking at these properties. I'm looking at loads. And at the time I reckon the average price in the area was around a hundred K you could get one that needed a bit of work for about a hundred K and at the top end they were about a hundred and fifteen, a hundred and twenty grand. So I'm looking and obviously I don't want to pay more than...obviously I got to do it the best because that's just my character. So I can't do anything by halves, so I'm like, okay, if the average price is about one hundred then I want like one at ninety five. And I seen some wicked properties and I put in a few offers because that's another thing they tell you on these courses, offer on everything, offer below market value.
[00:06:43] So I was going round making low offers and obviously everybody's like no, no, no, getting offended and that, and agents are probably getting paid off at me because I'm offering so low. But that's what they tell you.
[00:06:55] So I was offering low and everybody was saying no and I, you know, I remember there was there was one particular property which I regret not buying. But I only know with hindsight, and it was on for a hundred and five, I'd got the vendor down to, I think I'd said ninety-five. And the vendor said ninety-eight. And I wanted it ninety-seven. And then I let it go over like a grand. And I literally know that property is worth 125 grand now. And it didn't need much work. Didn't need much work at all but obviously that wasn't good enough.
[00:07:31] So I had to keep looking, keep looking. And I think people around me were just about at their sort of wit's end with me. And this property thing that I was talking about with money burning a hole in my pocket, waiting, driving a little C1. My Mrs must have had a spare car. Think she must have owned a car then got a lease car and still had the car she owned. It's a little C1, a little black thing. It weren't even a one litre. So I went from a twin turbo M Sport to just drive in this little nine nine nine C car, whatever they call them. And yeah. And I remember, I was getting some stick, and I think I went down south to a property course, and on the way back up I was on Rightmove. Who knows about them ones, always on Rightmove? Never buying a house, always on Rightmove, looking at every single property. Checking every 10 minutes, expecting there to, you know, some change, like the price has gone down by 50 grand. Anyway, so I'm on the way back from the course and I was feeling a little bit, I won't say down, but just feeling a little bit like I've been at this for six months, still not found a house, getting a lot of stick. And I went on Rightmove. And I saw this brand new property pop up. And it was in this area that's another thing they say on these courses: gold mine area. And there's going to be this area that's gonna be your gold mine, which, by the way, I actually like, I believe in that, but I just think it'd be a gold mine if you make it a gold mine.
[00:09:03] You could probably make most areas a gold mine area. But anyway, my gold mine area, it was like ten, fifteen roads and one property came up bang in the middle and it was like. Mm. And it was 90 K.
[00:09:19] So essentially, it was the same type of property that I was beating myself up about for not taking for 98. Was it for 98? Yes, I said 97. She said 98. I said no.
[00:09:32] And wow, that's funny listening back.
[00:09:36] That's funny. That's funny as hell. So anyway, 90 K, I was like, hang on a minute I'll have a look at it. It's the same type of property, same type of size. Like literally two roads up. And I'm thinking to myself, hmm, 90K. So there was only one thing about it.
[00:09:53] Now when you're turning two up, two downs, which I thought, you know, I probably would eventually, you know, I don't know if I'd do it immediately. I just wanted to get on the ladder at this point, you know, get on the ladder, maybe live there, maybe. I didn't know exactly what I was doing. I just wanted to get on the ladder because that's what everybody says. Get on the property ladder. That's what your mum and dad would say. Get on the property ladder. So when you turn two up, two down into a sort of three-bed, what you what you often do is you often turn the front room, imagine walking in a terraced house that's just goes straight onto the living room. You turn that into a bedroom. And then you'd get all the tenants to walk in the passageway, what's it called, where the bins go. Up and down, up and down in that corridor. You know, the entry. I think they're called, the entry into the garden and they had access to the house from the back. Okay. But the problem of this property, based on me looking on the chain on write me, was that the staircase was open and it was in that front room, whereas normally you would walk through the living room into the dining room and the staircase would be around to the right hand side.
[00:11:06] Out of that dining room. So I decided to drive past it on the way back from the train station in my little C1 nine nine nine C, like literally no gas, struggling up the hills with that one, literally. And I pulled up to the house and there was no blinds. It was empty. So I had a look. I put my hands up against the window. I had a look through there and I could see, damn, yeah. The staircase is in the living room. So it wouldn't have easy potential to become a three-bed because I couldn't turn that room into the bedroom, which is kind of like the done thing in the area. So I remember I had a look. I could see it was in good shape and I set up a view in for the very next day, and it was with one of these weird Internet agents. And I actually think they misvalued it, if I'm honest. So I'd waited and I'd waited and I'd waited but I knew the market, I knew that this property was worth one fifteen, one twenty maybe. So I went and viewed it the next day and I made an offer for eighty-five K.
[00:12:08] And the woman said eighty-eight K.
[00:12:11] And then I said eighty-seven K. I think something like that. And she said yes. So I purchased the house.
[00:12:21] Had to get a mortgage and as a self-employed person, getting a mortgage is tricky because, as a self-employed person, normally you're off the record. Normally you're trying to offset as much as you can to pay as little tax as possible. That's the reality of it. You know what I mean, you're trying to you're trying to put as much food. But then when you want to buy a house, you actually need to show as much profit as possible. So it's like a conflict of interest. I wanted to put as less costs in to try and have a higher income. I tried to make as much money as possible to be mortgageable and then, you know, had to jump through, jump through hoops, jump through hoops, managed to be able to purchase this property.
[00:13:04] And I got the property and I remember me and the wife, Lucy, I think we drove down from our...from where we was living at the time to the house on completion day.
[00:13:18] And we went in there, we looked round, we had a glass of Prosecco, and then we went for dinner. And it was a great day. And the maddest thing was, I completed on this property like two weeks before we got married. So the property was just naturally sat there whilst we got married, went on our honeymoon, come back.
[00:13:37] And then it was like, okay, time to do a bit of a refurb to this. Now, anybody that knows me, knows I hate DIY. I am not a DIY person.
[00:13:52] You know, I can't I can't even put, like, you know...IKEA stuff, I'll have a go but I really have to concentrate. You know, putting stuff up a wall. I don't want to put anything heavy on a wall in case it falls. Painting and decorating, never done it. Just not interested in it. Not even got a tool kit. So, my mate. You know what, my mate, I went to his HMO in the...you know, once again, if you missed the first episode, how property changed my life, check it out. But basically, the guy that introduced me to HMOs and acted as my mentor, so to speak, he had some tradies. So he had some of his tradies come and quote the work up for me. And, you know, one came, and said, oh, it's going to need a full rewire. And I was like, a full rewire? Damn. And then I had the plumber round and, oh, its gonna need a new boiler, you know. And if you're doing a new boiler, you're going to need new rads. Literally fast-forward on probably four weeks, I was back to brick. I don't even know how I got there, but I was fully, fully, fully, fully, fully back to brick. Way above my head. I remember.
[00:15:08] Who would have shown me? Yeah, the rip-out. That's right, Ash. Ashley, Ash, Ashley Karamucki. He must have come and helped me rip out the bathroom. And I was, not a clue. He was like, yeah, go down to Screwfix and get a couple of, you know, 10 mil caps so we can cap off the, you know, some of the hot and cold or whatever. And, you know, the taps, the toilet, you know, basically, when you rip it out and you take it out, you need to cap it so that I guess the water doesn't leak or whatever. And he come out and help me rip out his bath, rip this out. I say help. I just kind of pretended I was doing something. But really, I was just watching him and he helped me rip it out literally back to brick.
[00:15:50] He was, I think he showed me, how to basically cut up the carpets, said, oh, mate, come in here. Proper Derby boy. Come in, he said, mate you need to get rid of these carpets. You need to strip out. You're not stripped out. Learned the hard way there. First thing I always do now is I strip out whatever I'm not keeping so I can see what I'm working with. And that's when you uncover a lot of the nasties. So, yeah, we must have ripped out the carpets.
[00:16:17] I went down to Screwfix, got a Stanley knife and some gloves and a mask. And these horrible old carpets, I must have been running my knife through them and then rolling them up. And then I think I got, I think Ashley actually said, oh, I've got an old boy that accommodate your stuff, so I got an old boy, Rob, big up Rob.
[00:16:37] Old boy, he must be in his high 70s and he comes down in with, like, a trailer, takes out all your stuff and he'll burn it or take it to the tip. And he come in, I'll never forget. Made me laugh. Really, really old boy. But strong as hell. And I remember helping chuck the carpets out and he would get them.
[00:17:00] And I remember him saying to me, Oh, Simon, I wouldn't. I don't...better leave that kitchen in. Yeah, I wouldn't do that. Tenants, you know what they're gonna do it, only gonna ruin 'em. You know these tenants. And I remember thinking, oh gosh. So don't listen to him. As I said. But I didn't rip the kitchen out because the kitchen was...has happened to me a couple times. Now, the kitchen's not quite good enough to keep by. It's all right. It's all right. Bathroom to go. Kitchen. I didn't rip out. Absolutely fatal error. Fatal error, because when I eventually decided to replace the kitchen, we pulled the kitchen out, like, whilst the new kitchen was on site...schoolboy error...and we had so much stuff in the back garden because I just couldn't stay on top of it.
[00:17:51] Mental, and looking back, absolutely mental.
[00:17:55] And when we pulled the kitchen out, we basically established there was two water mains going into the property. There was one for our property. And next door's water mains, for some weird reason, was coming into our house.
[00:18:12] And because I had the kitchen on site and the plasterer on site, we just rushed and we just basically cut them both off and hope for the best. And fast-forward on, in the depths of winter, once the property was tenanted, at three am, I got a phone call. And basically what had happened was the pipe...what's the chances of this? The pipe of next door's water mains burst in our kitchen, brand new kitchen. And what had happened at the time, because everybody was on site and I was in a rush and I was in over my head...I'd spent, like, 20 K and I'd ran out of money. When I first bought a property, I was like, I'm going to spend like fifteen K. That did not happen. But what happened was somebody said to me, well, we can sort this out, Simon. But what we're going to have to do is, you see the garden out there, the tarmac, the concrete, we're gonna have to pull it up, I'm gonna have to get my drill, gonna have to dig it all up and I'm gonna have to find a pipe and then we're gonna have to cap it off.
[00:19:16] But we've also got to call Severn Trent and find out if that water mains is this water mains and that water mains will go there and this water mains will do that. And in the end I was just like, yo, forget it. Just just finish the kitchen and we'll take our chances. I ended up with this back to brick massive refurb. But we you know, we did alright. We got it sorted. It looked great. And then eventually decided, yep, you know what, we're gonna rent as a three-bed. So we did. And I remember the guys came over to have a look. They loved it because it was all brand new. It was all beautiful. I'd actually have to post pictures, you know, on my gram or something for you guys to see before and after. Because it'll really give you the vision of it. But, yeah, I rented it out and long story short...
[00:20:01] In terms of figures wise. We got five, six hundred pound net a month, six grand a year. Because I picked it up at like mid 80s, and then I'd done some work to it, I then refinanced it. And basically all that means is that you go to one lender and they lend you the money for the original purchase and then you add value. As I said earlier on in this in the podcast, I knew it could be worth about 115, 120. And the other lender said, we'll tell you what, you know, we'll give you 125 for this. So they ended up giving me...I had to keep 20 percent in, so I had125, I had to keep 25 grand in there as my deposit, which is equity that when I sell I'll get. And they give me a hundred thousand pounds. And then my other loan was probably around the 80, 70...70 mark say so I'll pay that off. And then I've got thirty left, or 20 left...I can't remember the exact figures off the top of my head. But I basically ended up pulling most or half of my money out. My initial investment. So I could start to recycle. And then I got six hundred quid. But in a nutshell, that's when I thought, yes this is sick. Everybody needs to do this. And obviously I ran out of money and that's when I decided to get creative and start finding ways of controlling the property whilst skipping the purchasing stage, which I'm going to cover in loads of detail on this podcast. But yeah, that's the story, guys. A bit longer than I'd hoped to be fair. But I hope you enjoyed it. My first ever investment property, I've done over 25 deals since soon to be 30. And yeah, from that little five hundred pound a month. It's now, it's over 10K, I think our biggest cash month's been thirteen thousand eight hundred pounds. And I say passive. We've got over 70 tenants now, so it's not always passive. But I outsource it.
[00:22:05] We've got a team, I've got staff and, you know, the wife retired from her profession to help.
[00:22:12] And even the mom's helping as well a bit now, which is amazing. So, guys. Yeah. Hope you found this cool. Hope you found this useful. As I said in the last episode, if this is prompting any questions or you've got any situations, I want to start featuring them on the shows. So hit me up, get in contact on on the gram or via the website, whatever, and hit me up. Let me know your questions. Let me know if you want me to cover anything. I'm going to start featuring them on the show. Please guys, give me a rating, subscribe, share on your walls. You know, spread the word if you think you know you know people that will find this useful. And, you know, remember, don't wait 25 years. Get creative. See you soon. Bye.
[00:23:09] Thanks for listening. For more information, check out Simon Smith online dot com. See you next time.