How big can you grow?
How I started my property portfolio
How do landlords start to build their residential investment portfoIio? I started my residential investment portfolio back in the early 90’s. We had just had the 80’s housing boom and the economy had slumped into a depression which lead to rising unemployment and falling house prices. Sounds familiar?
I began by buying and investing in a three bedroom terraced house and renting out a couple of rooms to lodgers. This enable me to build up a little savings ‘pot’ to help fund my next acquisition. Then, thanks to the introduction of BTL mortgages it was a case of remortaging and riding the house price boom during the 1990’s.
The thrills and excitement of building a buy-to-let portfolio
Building up my property investment portfolio was an exciting and thrilling experience. I was thrown in at the deep end. Suddenly I had to deal with contractors, wheel and deal with suppliers whilst all the time juggling budgets and deadlines as well as tenants. For the first time in my life I was the boss! This was a fantastic contrast to my mundane 9 to 5 job with the council. How many newbie landlords feel the same way?
How big to grow your portfolio?
Looking back on the experience; I can honestly say as a landlord I never had a target of the number of buy-to-let properties I wanted to own. Was this a mistake?
I know that some investment gurus put great store on ‘envisaging’ your ‘buy-to-let objectives’ and visualising your portfolio growing. A kind of ‘Gareth Cheeseman’ of the Landlord World “I’m a Tiger!” You can envisage all those Property Gurus standing in front of the mirror exhaulting themselves to do more with lots of fist pumping, chest beating and a good old chanting session.
I’ve never been like that! Of course I had dreams. I used to fantasise about acquiring property in my local neighbourhood and constantly visualised and ran financial simulations to work out how I could make my property dream a reality. The reality though is that believing in your property dream won’t change the figures or reduce the hard work involved to build up your property portfolio.
Having a property portfolio was a means to an end
To me being a landlord was very much a means to an end. Ultimately, giving me the opportunity to have a ‘reasonable’ amount of financial freedom so that I could pay the bills and step aside from the mundanity of the 9 to 5.
I remember the early years of this decade when buy-to-let clubs were all the rage. Newbie and probably now broke landlords would out compete each other on how many properties they were buying and ultimately how big there portfolio was now and how big it was going to be in 2, 3, 5 years time. To be honest this all put me off. Flash isn’t me and flash and broke really doesn’t appeal.
By the middle of the decade the appeal of property had lost it’s lustre and prices and returns for me just didn’t stack up. I therefore stuck with a portfolio of just under double figures. I’m sure I made it into double figures once; but the odd disposal here and there has kept it down in the single figures. At this level managing my property investment portfolio is very much a part time distraction and definitely not my main occupation. I prefer it like that. The thought of being a 9 to 5 landlord dealing with blocked drains, tens if not hundreds of grumbling tenants and a score of leaky roofs fills me with dread.
How big should you grow?
Many of Property Hawk’s landlords are happy to have the odd one or two properties. At this level it gives them a useful supplement to their income and then a potential capital pot for a pension. Management and time spent letting a property with this number is minimal.
For landlords that want their portfolio to help sustain a reasonable independent lifestyle you will probably need a portfolio approaching or in double figures depending on the part of the country and size of properties, etc. By this stage you will be approaching a semi- professional landlord level.
It is still perfectly possible to manage the portfolio yourself and still have time to do other things; whether this be setting up and running another business, as in my case; or simply playing more golf. As you grow your residential portfolio into the 20s & 30s the sheer number of tenants, tenancies, toilets….mean that you will become a professional or career landlord. At this stage it becomes pretty much your full time job.
Now I have to say, the prospect of dealing with blocked drains, winging tenants, truculent plumbers, absent decorators all day every day really doesn’t appeal to me. Hence my decision to ‘stick’ for the moment. The reality though for aspiring landlords is providing they can get BTL finance the skies the limit. You can as get as big as you want with a little bit of hard work, application and luck. I’m happy to stick with being slightly bigger than average. As we all know, sometimes size isn’t everything.
To bring my portfolio story up to date
It’s now several years on and the credit crunch has delivered me a steady portfolio of long-term tenants and very low mortgage charges leading to record rental profits. This I have been very grateful allowing me the financial headroom to go on and establish several new businesses. As I’ve said size isn’t everything however there is no doubt that property investment continues to be the cornerstone of a healthy and well performing investment portfolio. In recent times I have decided to take my residential property holdings up market and away from the ubiquitous buy-to-let. For me it means the acquisition of a penthouse apartment and the installation of marble floors, wall hung toilets and top of the range floorings and fittings. In addition, I am also in the process of buying a holiday home and let which again is a completely new challenge and a new letting market. The advantage of a furnished holiday let is that it is not subject to the limitations in mortgage interest rate relief for higher rate tax payers which has capped the expansion plans of some landlords. What next? Well maybe a place in the sun…who knows where the road may take me next on my property journey!
More useful stuff about property investing:
I have 35 tenancies now. I find for the most part the tenancies are pretty stable. About 10-12 tenancies end and new ones start during the course of the year some of which are tenants moving around within the portfolio.
I find now that I can do most of the general paperwork in a couple of hours a week, with a new tenancy probably taking about 3 hours a time to process and interview etc.
All my maintenance is done by a couple of well trusted local general builders that sub in electricians plumbers etc. Most of the time I don’t even bother getting a quote as they know I know the acceptable price of most things.
I have found running this amount of tenancies is no extra work that running a few would produce if the turnover was higher.
What often happens of course is that all of a sudden you have a few tenancies changing all at once and then it seems like a lot of work.