I’m really pleased to welcome back to the podcast Amy Rowlinson who we interviewed in series 2 about how to invest in property. In this interview we’re also welcoming Amy’s business partner Dan Hulbert to talk with us about how and where to start if you’re thinking of buying investment property.
I know that some of you listening may already be investing in property, and some may not. This is an area that I am currently investigating for myself and my own family, because historically as a financial adviser property was never really one of those areas that I had a huge amount of knowledge in. This year having completed Rob Moore’s mastermind last year, I’m really keen to explore using property to build long term wealth, and get started buying investment property.
For those of you who are not current property investors, whether it’s because you haven’t been quite ready for it, or you needed to understand more about property investing, this is going to be the interview for you.
Dan and Amy run an awesome property podcast called the Property Vault, and if you aren’t already following that I highly recommend it. Dan is a property professional and strategic build partner to property investors with 17 years of practitioner experience having stated on the tools and then built his own property portfolio. With builders knowledge combined with an investors mindset, Dan currently works with clients who are seek professional advice within the areas of property and construction as a building consultant and mentor. Amy has 14 years experience as a residential landlord, and for those of you in The Money Circle we’ll be welcoming Amy in March as a guest expert. Amy has personal experience in building a portfolio of what are called HMO’s. As well as building her portfolio she’s also a coach and mentor, working with clients empowering them to discover the life they dream of by assisting them to make it their reality through their action taking.
Together Amy and Dan Amy and Dan deliver training courses called Practical Property Training. They host the Property Vault network event, which is held in the local areas around Graves End and Kent on the third Monday of every month, in addition to their podcast the Property Vault podcast.
We’ve had lots of questions come in from the community, so I’d like to start with this one for you Amy. What is the criteria for buy to let investing, and some of the things you need to consider before buying to let?
Amy: There’s two sides to this – one from the property investing side which I’ll get onto in a moment, and one from the financial side. I would definitely make sure that you’ve looked at your credit score so that you know your starting position. To get a buy to let mortgage you’re going to be asked for at least 3 months bank statements, so make sure that those are clean and tidy and there’s nothing untoward on there. Lenders are much stricter these days, some will require at least £25,000 salary. Others perhaps won’t, but you’ll be paying higher interest rates. So I would start by putting all your financial details in order, and if you have debt don’t try to hide it. If you’re upfront, your mortgage broker will be able to help you find products that match your situation.
On the buy to let criteria side of things, this is about understanding how a particular deal is going to stack, and for this you do need to go out and get some education. This doesn’t need to be formal or high cost education, and we’ve actually done a whole podcast episode on this ourselves. If you’re starting out in buying investment property, you want to start at the bottom with a basic buy to let. If you’re going to make mistakes, you want to make them in lower investments.
Dan: We always say out our network events and on the podcast that two people who are fundamental to your journey is a really good mortgage broker who knows investments and ideally invests themselves, and a really good property tax adviser. Not an accountant, but someone who actually knows how to structure it depending on your individual situation.
Amy: And also what your long term goal is. If you’re only going to be investing in a couple of properties then that’s very different to building an entire portfolio.
Dan: Certainly when Amy and I started, going to limited company route wasn’t really a thing, you just bought personally. I’ve done it using none of my own money, and invested with partners.
Is this what’s called the no money down process?
Dan: I don’t really believe in no money down, you need money to get into property. Whether you’re doing a rent to rent strategy – which isn’t investing it’s management – even if that’s the sort of thing you want to get into you still need money. It’s low money down rather than no money down. It’s a quirky marketing term.
Amy: It used to be the case before the crash.
Dan: Without going too technical you could do what’s called an option on it, you refinance straight away and use that money to refurb and sell it on right away for a profit. So you could do it with no money down but it’s very hard to do a lot of that stuff in today’s market.
To get started, that’s not really the place to be starting out is it?
Dan: No its technical and requires experience. However, in property like business, if you want a successful business you’ve got to have good people around you. So if you can build good people in your team who are very specific in their roles, and you’ve got the right people around you who are willing to invest as well then you could look into some kind of partnership. But buy to let is just getting straight into it.
From a tax perspective, would you buy under a limited company structure and what are some of those tax changes?
Amy: It really depends on the individual circumstances because person to person it will change. Each person is going to need a different set up depending on the other assets they’ve got, their earnings, their tax band, and also long term what they’re intending to do. It’s not a straightforward limited company or not. It’s a case by case scenario, so as Dan said definitely speak to your tax adviser.
Dan: There’s really 3 people core to property investing; a tax adviser, mortgage broker, and a really good solicitor. When you know your strategy and where your area is, then a really good build team are the fourth.
I think that’s important with anything financial, isn’t it? Having a team around you who can give you the advice based on your individual circumstances. One of our next questions was how do you go about raising a deposit, and do you even need one?
Amy: There’s various ways of raising a deposit, and it really depends on the particular property you’re going to be investing in, and what you’re going to be doing with that property. A lot of people start with low income or no money, but what they’re desperate to do is replace their income and get out of the rat race. There are lots of ways – it’s probably a whole podcast episode in itself – and also you’re not going to get away from it, you will need a deposit.
Dan: Start with yourself first. What assets have you already got that you could Leverage. Your own property, family property, other investments that you potentially have, savings. There are more advanced strategies where you can work with other investors and venture partners, and then there’s also things like crowd funding.
How does crowd funding work?
Dan: One of the companies out there that’s really is good is Crowd Property. The way it works is you find a deal, then you have to raise a 30% deposit and they will give 70% of the purchase price. Then they will give you 100% of the redevelopment costs. There are obviously criteria to fulfil, and this is mostly for bigger developments rather than buy to lets, but there are smaller companies out there that may do that.
Amy: That’s if you want to borrow from them, but if you want to you can also go onto the platform and they will have investments available where you can invest in a deal. So you get a return on your investment but you don’t actually have to have any bricks and mortar involvement.
Dan: We’ve interviewed Mike Bristow, one of the co-founders of Crowd Property on our podcast so that’s a good listen if anyone’s interested in crowd funding.
Were there any other questions you saw come in that you wanted to pick up on, Amy?
Amy: Someone mentioned that they hadn’t even got their own home yet so they needed to save, save, save. If we think about that – you don’t need to own your own home to buy investment property. You’re spending a huge amount of time saving for your own property whereas if you bought an investment property then someone else could basically give you the money to pay the mortgage, and then on top of that you already have an asset that’s growing and with the excess money you could be using that to put towards buying your own home. So don’t necessarily concern yourself with having to save save save, and think about if you put yourself in a scenario where you’re buying an asset then you’ve got the capital growth from that as well as the income.
Dan: That’s what some of the big multi-millionaire investors do, they don’t actually own their own properties. They’ll own, for example, a block and they’ll rent from their own company a penthouse. I personally still see your own home as an asset because if anything went wrong you have an asset. There’s also nothing stopping you from buying a property, doing it up, then selling it on to raise the deposit for your own property.
What about the legal side of things? We had a question around who do you register with, do you have to think about contracts, leases, deposits etc.
Dan: We really can’t give legal advice, again it really depends on the context.
I think it’s about protecting yourself as a landlord and how you go about doing that?
Dan: Sure, and there are insurances you can put in place. If you’re part of a company you can get directors and officers insurance. So you need a good insurance broker too. There are insurances where you can have it if you pass away the mortgage is paid off, or others where some of it is paid off and it’s then passed to the executor. You just need good advisers around you.
Amy: I think that’s really important and people don’t always take into account that buying investment property is a business. And you have to treat it like any other business and make sure that you have all of your end solutions sorted. If something happened to you, could someone else come in and unravel all the things in your business that they needed to? If you got hit by a bus tomorrow, is all your paperwork in order and your will sorted? If you own property with other people, do you have all the necessary legal paperwork in place? It’s a business to be taken seriously.
Dan: It’s a bit morbid but start with the end in mind. Protect yourself, mitigate against the risks.
Actually one of the questions that came in was around inheritance tax and ownership of property, for example buying in your children’s name.
Amy: A lot of people are now looking to build a legacy for their children. Again that is something that is very individual and you would need to speak to someone like a wealth adviser or tax adviser, because the structure of that could be complicated or it could be quite straightforward. You’ll need to think about inheritance and how that’s going to be passed on. As Dan said earlier, start with the end in mind and have it all sorted.
Absolutely. When it comes to all the very specific questions we’ve had, it really is about having the right team around you. When we put all the very specific questions aside, we know that there just is no generic answer.
Dan: We always try to get the best people on our podcast, but if you can’t find what you need in the podcast another great way to build your team is to go and look in peoples eyes at face to face networking events. We run one, and there’s loads around the country, and they can be very low cost. You can subscribe to something like YPN (Your Property Network) magazine or the Property Investors magazine. There’s lots of low cost ways that people can learn about property. Networks are good because a lot of the time they’ll have a mortgage broker there, a solicitor, and there might be a tax adviser there. And if not you’ll meet someone in your network who will know someone.
Who would be the first of those experts that you would recommend to go and speak to?
Dan: It’s kind of in tandem really. The mortgage broker and tax adviser because you need to understand your position and also what you can borrow. So if you can get those two talking to each other, then that’s great.
Some steps to take for our listeners – small steps, big wins.
- Listen to last year’s interview with Amy
- Go to networking events
- Check your credit score – Credit Club from Martin Lewis is a great free way to do this.
- Contact a mortgage broker, ideally independent, and ideally someone who also invests. We do have someone on The Money Panel who fits this bill, so do reach out via email if you’d like to be connected.
Dan: This is where working in tandem with a tax adviser comes into play, as well. A mortgage broker won’t be able to give you rates until they know if you’re investing as a limited company or an individual.
And my most important step of those would be going to networking events. People in property are so open in sharing their experience, so don’t be afraid to go and network.
Amy: That’s true. It’s a bit strange when you go to your first property network because you come out thinking oh that’s really odd… Everyone was so nice. But that’s just the environment. And go and have a look at some of our earlier podcast episodes, because we’ve gone through these steps of networking, educating, and collaborating with other people.
Dan: And go with a plan. Go knowing that you want to find a mortgage broker, a tax adviser, and a solicitor. Go with that plan. Then anyone you talk to just ask the question – is there a solicitor in the group, and so on. Go and grab the hosts and tell them you’re new to property and this is what you’re looking for. If you put yourself out there you’ll get the information.
That’s such a great point about networking, to go with an intention that you want to get out of the event. What a great tip to end on.
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