Hi, this is Tom Soane, I want to try a different way of giving advice to anybody that’s looking to invest in property for the first time. Mainly for people that want to get into buying property to let. I’m going tell you the story of how I got into investing in property myself and, more specifically, how I started in buying investment properties and started my portfolio. I think I had the same problems as most…
I didn’t start out in property with very much money at all and it took me a long time to take the first step. Hopefully, if you’re reading this, you’ll see exactly what challenges I faced and how I overcame them. Because the challenges are actually not what you think they’re going to be in property investing for the first time. So let’s have a go…
Where it all started
First, I’m not from a wealthy background and I was never made of money myself. My family struggled financially when I was a kid but always worked their arses off to make sure we all didn’t miss out on life. I got into Estate Agency when I was about 20 and fell in love with property. I love the size of a property and the creativity of all the things you can do with a property. On the other hand, I love the logic of a property. As an investment, it’s always in demand. Everyone talks about property, it’s arguably the most popular topic along with sport and money. But I struggled to get into it and it was a scary journey! Here’s the story…
I thought I knew what to do already
I must admit I have a bit of an unfair advantage when it comes to investing in property, or so I thought. I’ve been an estate agent and letting agent for years. I’ve been an advisor to a property investors for years. I’ve been a property sourcer for years, so I know how to find a really good buy-to-let investment properties. I’ve found thousands of really good investments for people. I’ve helped them through the buying process. I’ve rented their properties out for them. I’ve done it all thousands of times. So a few years ago I decided that I was going to start investing what little money I had in property for myself.
My experience aside, I was in the same boat as most people. I must say, all your common sense and knowledge goes out the window when it’s your own money and you add fear and excitement into the mix.
I knew what to look for
So I started this new journey. It’s a bit of an adventure really, but of course I was excited about starting to do this for myself. I was also a bit nervous about buying the first property, but I thought “you’ve got this, Tom”. I told myself you know this industry inside and out. I know how to invest money in property. I know how to get really good rent returns and really good appreciation on properties. I know what properties to buy that are going to attract really good tenants and safe tenants that going to look after the property and pay the rent reliably. I knew how to do that inside and out because of all my experience in the industry.
So I started
So I started by doing what I expect everybody does who wants to start buying property as an investment. I started scrolling through Rightmove and Zoopla looking for really good properties, that were going to generate a good rent and were a good market price. I knew the areas that I wanted to buy in and, in my mind, my head was telling me over and over again “you’ve got this”. I was full of confidence.
The first property I saw
I remember it very clearly. It was in Copnor, and it was a three bedroom house. It needed a little bit of work, but nothing too bad. It was about 10 grand less than I thought it was probably worth. So I thought that sounds like a good deal if I could shave a bit more off the sale price. I knew what the rent roughly was going to be, so I was pretty happy. It was going to return about 10% per year, so I was pretty happy with that. So I booked a viewing, went round and saw it, but I didn’t buy it. I should’ve bought it. I didn’t buy it because all of a sudden my heart took over! Even though I have advised hundreds of property investors, experienced and first timers, I’ve bought properties as investments on my client’s behalf hundreds of times successfully. In fact, I’ve never had an investment property go wrong, ever.
This is the one that would go horribly wrong
But all of a sudden, my heart was telling me that this was going to be the one property that goes horribly wrong. This was going to be the one that I’d buy, which was a wreck, the roof is falling off, the walls are going to fall down, or I’m going to find a tenant that’s going to smash the place up, or not pay their rent. I’m going to miss all my mortgage payments, and then I’m to have to go through a whole legal process to evict them which is going to take nine months and loads of court appearances. All because I made a wrong choice in the property.
Head versus Heart
So that’s what my heart was telling me. My brain was telling me this property stacks up. It’s a good price, it’s a good rent return, it’s a good area, we’ll attract good capital growth or appreciation. But my heart was just stopping me from buying that. So I didn’t buy it. And I moved on. I thought do you know what? All right,
No, I can do better than this one
I thought I can do better. I can get a safer property to invest in. So the next one I found was literally the next day and it was another three bedroom house. Look, I quite like houses as investments. That’s my preference. I do have a flat, but I prefer houses. So this house was a three bedroom house in North End, and again, it needed a little bit of work which I kind of like because I can add some value to the property. I’ll talk about adding value in another piece. It was a big house. I think the rent return was excellent, and this one was again around 10%, something like that, and that’s 10% return on my investment. Again, it was about 7% rent return and about 3% annual appreciation, or capital growth. Brilliant.
Side note… Work out the TRUE YIELD
By the way, you should look up my bit about ‘true yield’. I see so many investors calculate yield wrong and they buy crap properties because they don’t calculate the true yield properly. Anyway, I went round and saw this place. My brain went through my checklist which I’ve done hundreds, and hundreds, and hundreds of times. I went through that same checklist. No problem. “This is a good investment,” my brain told me. Great. Then my heart then said NO! My heart said all the same things that I had from the first property, this one’s going to be terrible “oh no, maybe you shouldn’t invest in this one”. “Maybe you can find a better one”, yada, yada, yada. My brain didn’t let me buy it. So, forget it, I moved on!
Rent – Good. Growth – Good. Tenants – Good.
So once again, my brain was telling me yeah, this is a really good investment. It’s a good property, good house. It’s in a good area. It’s going to attract good tenants, and the rent return is good, the capital growth is good, and it’s a good return on my investment. But again, my heart was now saying, “Oh, maybe you should just hang on a minute and you can do better. You can get better investment.” And that was a killer because, again, I didn’t buy this house.
Fear kicked in, I missed out.
Now as it happens, that property ended up selling for a bit less than I thought it was going to sell for. So it would have been a really good investment. I actually worked out, I was going to get somewhere around 12% every year. So that would’ve been a good investment. But I didn’t buy it because obviously my heart took over. So yeah, I didn’t buy it.
Looked at loads, missed out on loads
Now I did that a few times, if I’m honest with you. I was looking at loads of houses over the next few months. Probably about six months, I’d say. Six months of looking at houses and the same story. Good investment in the head, terrible investment in the heart. Not buying it. What I realized after a while was that I had this money, sat in the bank now for six months doing nothing. So actually what’s happening now is, whatever property I buy, the yield is deteriorating because the money I was going to be spending on a property has just sat there not generating anything.
Side note… Make your money work for you
Oh, you should check out my guide on making your money work for you in property because that will show you a bit more insight into how you can really make your money work. But to carry this story on, you kind of get the idea now that I was bumbling from property to property, good investment to good investment, but missing it because I was scared.
Scared of getting it wrong.
I was scared that it was going to go wrong. Even though I knew it wasn’t going to go wrong, I thought it might. I was so scared I did not invest my money. And then six months down the line, I’ve still got exactly the same amount in my bank that I had when I made the decision to invest in property. Not good. So the way I saw it, six months of lost income, lost money, lost capital growth, and that really pissed me off. So that’s when I decided okay, you can’t carry on like this. You must invest your money. I decided that there is always going to be a ‘better deal’. There is always going to be the ‘next deal’. There is always going to be a better property, but if you never buy a property, then you’ll never have your money invested in a property.
Enough wasting time and losing money
So I decided that I’m going to buy the next property that achieves my objectives. And my objectives were really simple. I wanted to get 10% return on my investment, and I wanted to get a house that was in an area that I felt was a decent appreciation area. And how do you find what’s a good appreciation area? Well, that’s the million pound question, isn’t it? But I do it by looking at what areas have good properties in fairly built-up residential areas, where the houses are quite compact. My philosophy, whether it’s right or wrong, is that if there’s lots of buyers in a compact area, then the demand would always be high. So I’ll give you a prime example. If you take somewhere like Fratton is a really good market because the houses are all compacted together, which means there’s lots of residents, which means lots of people to buy those properties, lots of people moving in and out, which means it’s a good market. And I always feel that markets that have those types of properties are healthy.
How to spot a growth area
Now, I’m not saying that is 100% accurate in a calculation, but that’s how I work it out, and that’s what I am comfortable with. So I decided that the next property that ticks those boxes on my checklist, I’m going to buy it. And again, that was a 10% return on my investment. It was a good appreciation area, and I’ve got a list of those areas that I would only buy in. That list might change, there might be new appreciation areas and the list will change, but for the time being, yes. A house that I can add value to, that was my last thing. So I went and viewed a property, and I literally tried to remove my emotion from it, I ticked my boxes on my check list, and you’re imagining a physical checklist now with big boxes and big ticks. Well it wasn’t quite like that.
I found one!!
Anyway, I found this property, it was a two bedroom house in Southsea, ticked all my boxes, and I was so scared, but I swallowed that fear and I just went for it. And a phrase that I’ve taught myself now is “feel the fear and do it anyway”. And by that I mean just understand, accept what your fear is, write it down, acknowledge it, whatever it is. Because what your fear is, is the risk element of this property. So if your fear is oh, it’s a bit dodgy, it’s a crappy house, it’s in a bad area, then that is the risk. But just acknowledge it because if it ticks your boxes, then you’ve got to go for it. Otherwise, you’ll never buy a property.
Job done, property number one under my belt.
So anyway, so I went for the property, I bought it, and I’ve got it at a decent price. I gave it a refurbishment, and then once the refurbishment was finished, I put it on the rental market. It rented out within a week for a rental price I was happy with. And with a really good tenant. And the area that it’s in is a good appreciation area. It’s very popular. And the tenants that have moved in are a really lovely, no hassle couple, so I’m very happy. Secure income. So I’m very happy with that. But if I’d have followed my heart, I wouldn’t have bought it again, and I probably would have passed it by, and there you go. But now, actually I’ve got a bit more than 10%. This one’s actually about 12%. So I’m really happy with it.
Take action – Learn – Take action
So that’s how I go into it. So now I try and be as logical and mathematic as I can. I have a different objective now with properties, because I learned some lessons from that house that I bought, and I changed my checklist. I added some more boxes to tick so that I could really find properties I want to invest in. And for me, for an example, it’s two and three bedroom houses. I don’t mind if it’s terraced, detached, or end of terrace, or semi-detached. I think all of them are good. Obviously you pay a lot more, so the price has to work.
My investment target
Anyway, so two and three bedroom houses with either some scope to improve, or some scope to add some value, or just ready to rent out now. I want a minimum of 7% return on the rent investment … Sorry, rent return. And I want a minimum of 3% appreciation return. I want it in specific areas, which I won’t go through on this, but specific areas of Portsmouth, Southsea and Waterlooville, Fareham and Gosport, and a couple of other little caveats, like, for an example, the amount that I can take out as a mortgage, the approximate net rent return. i.e. what’s left after I’ve got my rent, paid my management fee, paid into a maintenance pot, and also the mortgage payments. Now remember, go to my true yield calculator. That is vital for calculating this bit. Or just watch my video on how you can work out a true yield.
I took the plunge
But anyways, so now I took that plunge. And now, do you know what? Now I’ve got four properties in my portfolio. They tick every single box that I have, and I now have confidence, which is brilliant, because now I’m treating myself like a client. I’m going to a property, and I’m working out my checklist, and I’m just buying it. If it ticks the box then I’m just buying it.
So what is my advice in all of this? I’m guessing that you, as somebody who wants to invest in property for the first time, you’re scrolling through Rightmove, you’re seeing good properties that you think yes, I could invest in that. But when it comes to actually pressing the button and buying a property, you’re so scared that you either end up not buying it, or you maybe buy the wrong place.
So my advice to you, first of all, is get the first one under your belt. As long as it ticks your boxes just buy it. It will be great. Now, it might not be the best investment that you’ve ever had, but if it ticks your boxes, it won’t be the worst.
So don’t worry about being nervous. That’s fine. It’s your money so of course you’ll be nervous. You want to get the best for yourself, and you don’t want to mess it up. That’s fine. But take my advice, learn from my experience, learn from my story. Don’t just let your money sit in the bank doing nothing. Get it into a property as quickly as you can, and as long as you can tick those boxes, then it’s a good investment. So I want to leave you with that.
Remember the phrase feel the fear and do it anyway. Good luck.