In my view it is important that clients understand that I am, myself, a long-term property investor. Combining this practical understanding and experience with my professional property tax expertise allows me to offer a unique service to property investors.
I began investing in property in 1999, having qualified as a Chartered Accountant with one of the big firms. As a reward for 3 years of hard work, I bought myself a beautiful black new Audi A3 Turbo! I then started to feel concerned that I was paying interest on borrowed money to buy a depreciating asset … and the interest wasn’t even tax-deductible! My ‘sensible accountant’ hat was back on (although, I still love cars!).
Having seen my salary double overnight, decided that I should invest the extra into something solid. I understood the concept of leverage, that the income should at least cover the costs, and hoped that over time property would continue to increase in price! Not sophisticated analysis, admittedly, but not wide of the mark either, as it turned out.
My first investment property was bought using good old-fashioned savings. At this point I had not heard of ‘BMV’, or ‘NMD’ or any of the property internet forums. I just decided that I would buy a nice 3-bedroom house (these seemed to be most in-demand) in my home town in an area that I knew pretty well. I financed 85% from Bank of Ireland, and bought my first investment property. I remember vividly thinking that I had better get promoted quickly as I had just gone £66k further in debt (even the postcode ended in 0WE! An omen?).
The first property was in good condition, and was rented out for £100 per month more than the valuation rent. I gave it six months, to get used to dealing with the tenants, managing the rents, mortgage payments and other costs. I learned all about renting property, from ASTs, to Section 21 and 8 notices, gas regulations … the works. Next up was another 3-bedroom house that needed a bit of TLC, but otherwise was a solid property. This property was again bought with an 85% LTV mortgage and cash deposit, and rented quite easily. Property #3 soon followed, by taking a Further Advance off the first property. This property game was a piece of cake!
I began to think that there must be a better way to buy property cheaply. This seemed the key to expansion, as lenders were quite happy to revalue property based on an independent valuation. If I could buy cheaply, I could have the property revalued, re-finance and get my deposit back. Although I was in a well-paid job, I would run out of cash for deposits soon, and then where would my plan for world domination be?!
So, I began a direct mail campaign to write to every property that was for sale in ‘my areas’. I rented an 0800 number and waited for the calls to come in … and waited! In truth, I did receive a few calls, but nothing came of them. Having read a few marketing books, I knew that I had to be persistent and patient. So, I kept sending the letters, and eventually bought two small houses around 15% BMV direct from the vendors. After a mini-refurb, both houses were rented, revalued and refinanced.
By this point, we had accumulated a few properties, so I sat down with my wife and we talked about how many properties we wanted, what the purchase criteria should be, and how we should finance these. We then developed a financial plan that stretched out over the following few years, and also set about acquiring as much investment capital as I could find. Personal loans, drawdown from my home, long-term cheap credit cards, my spare income … and used that to finance the expansion. We also used gifted deposit products, and the MX instant remortgage approach.
We also added a leafleting campaign to the acquisition process, and this proved very useful. I even leafleted our area myself for the first couple of runs, to really understand my area. We then set about purchasing between 3-6 properties each year for several years, until in 2009 we decided that we had hit our target.
After all the excitement of the years of acquisition, we are now in the ‘management’ phase. This is the everyday process of managing tenants, maintaining our properties, paying down the mortgages, and ensuring maximum occupancy. We do still buy 1 or 2 properties per year now, but we also sell off 1 or 2 to maintain the portfolio, realise some profits and pay down debt, and to use up our husband and wife CGT annual allowances (over a 25 year investment career than could amount to £500-600k of untaxed capital gains).
Hopefully, this story will give you a sense of our experience as property investors. We are ‘hands on’ investors, and now manage a substantial and profitable portfolio, with some smaller buying and selling each year. This practical experience ensures that we understand the aims, challenges and realities of property investors, and ensures we are able to align your property tax strategy with your own personal property investment plan.