I know I’ve said it before, but if a deal is good enough, you will find a way to finance it. Often this is construed as my meaning that if the deal is good enough, there will always be someone who is willing to fund it. That is one possible interpretation but we can also look at it from the other end and see that if you truly believe that a deal is good enough, you will do whatever it takes to find the finance.
If you participated in my course, ‘The Property Millionaire’s Fast Track 100”, you may remember the inspirational story of ‘Oliver’, who decided he was going to be a property investor. Having made the decision, he then did everything in his power to make sure it happened.
Because he had a “need” to succeed and was determined to succeed, the idea that he might fail didn’t even occur to him.
Oliver is still a young man, he’s only just turned 27 and I have known him for about 7 years. I was impressed when I heard that he already owned multiple buy to let properties, but I was even more impressed when he explained to me how he had acquired them.
When he was 18, Oliver was still living with his parents. It seemed he had no choice. You see, he was an apprentice motor mechanic and although the cars he worked on were top of the market, his wages weren’t. He won’t mind me telling you that at that time he earned less than £10,000 a year. So the prospects of him buying a property of his own seemed remote.
However, Oliver has a passion for cars and motorbikes and he wanted a place of his own, preferably with a garage, where he could “tinker” in his spare time without getting in the way of his parents (or vice versa). But there was no way he was going to rent. He realised that was “dead money”.
On his salary he knew he couldn’t afford to be choosy and he knew that if he were to buy it would have to be a property in one of the least desirable suburbs of the city, an area notorious for crime and drugs.
Even there properties were more than he could afford. By his calculations, assuming he could get a residential mortgage of 3 times his salary, he would still be around £4,000 short.
I admire this young man because he had determined that if he needed something he would find a way to get it. And that is how he approached his £4,000 shortfall. He committed himself to finding and saving that money within 12 months. To achieve his goal he took on a second job. He worked 40 hours a week as an apprentice motor mechanic, and then he worked a further 36 hours each week delivering pizza.
He met his goal and shortly before the 12 months were up he had saved £4,000.
At around the same time a gentleman came into the car showroom and asked if it would be possible to do a part-exchange of his motorbike for a car. He really needed a new car for his wife, but only had limited funds. The garage politely declined saying that they didn’t deal in motorbikes and would not be able to help him.
Oliver got to hear about this and after work he telephoned the man. He told him he only had £4,000 but he really wanted the bike. The man agreed. Oliver was thrilled because the bike was only a year old and looked brand new. He knew the asking price of a brand new bike in the showroom would be £8,500 and second hand, in pristine condition, it should be worth about £6,500. Before he even got around to advertising it Oliver’s dad fell in love with it and offered him £5,000 in cash. How could he disappoint his father? Still, Oliver had grown his savings by 25% in one quick and easy deal and was ready to buy his house.
He looked in the best part of a somewhat dubious suburb, and found that the cheapest house on the market at that time was on at an asking price of £33,000. Because the market was “hot” he offered the full asking price and the offer was accepted.
Oliver commissioned a Homebuyers Report which wasn’t pleasant reading. He knew there would be a fair amount of work to do because the property was boarded up and had previously been rented out, but the surveyor had found rising damp in the kitchen, suggested he needed new windows, and he thought the roof might need renewing.
Once he’d paid his legal and other fees Oliver knew he would have no money leftover for repairs and so he tried to haggle and re-agree the price at £32,000. Eventually, the vendor agreed to reduce the price to £32,500. Not quite what Oliver had hoped for but better than nothing.
Needless to say Oliver did a lot of the work himself after work and at weekends, apart from the damp treatment. To cut the cost he hired a jack-hammer and removed the affected plaster himself, so the damp company only had to do the injecting.
Without ever having heard the term “Other People’s Resources” Oliver bartered with a plasterer who lived over the road. He replastered Oliver’s house where the new damp proof course had been injected, and in return Oliver serviced his car.
After about a year and a half, Oliver decided he wanted to move again. Although the area he lived in was better than its reputation would suggest, it was a bit noisy and he still didn’t have his own garage. So he decided to move.
Oliver could have put his house on the market, sold it and moved on but he realised there was an opportunity to do better than that. His house was now worth considerably more than when he had bought, possibly close to £80,000 and he knew someone who was looking to rent. Looking at the figures he could see that if he took out a buy to let mortgage he could borrow an additional £26,000, over and above his existing mortgage, and the rent of £460 per calendar month would cover the mortgage.
Even then, things were not straightforward. Most buy to let lenders were not prepared to lend to him because he was “too young”. But Oliver isn’t one for being put off and eventually obtained a loan from The Skipton Building Society – the only lender he found who would offer a buy to let mortgage to an under 21 year old.
He started looking for another house in a better area. Of three he viewed his preference was for a property with an asking price of £88,000. He knew he could borrow £60,000 in his own right as his apprenticeship had finished and he was now on a higher salary. So with the additional £26,000 released on his other property through the buy to let mortgage he could afford to pay £86,000. Ironically this property didn’t have a garage either but Oliver was determined to move up the property ladder. So he made an offer and terms were agreed for a purchase at £86,000.
This property wasn’t in such bad condition as the first but it did have hideous decorations and fittings, it only had solid fuel heating and the “bathroom” was actually a shower room. The only way around this was to install a corner bath unit but at the local builders merchants and DIY stores the price of these were well over Oliver’s budget. Still, being as resourceful as ever, Oliver found a suitable bathroom suite at a bargain price, with delivery thrown in free, on ebay.
Around this time Oliver suddenly realised how far he’d come in a relatively short time for a young man, and he began to get nervous. He decided that he would sell the property in it’s refurbished condition and call it a day. But to his good fortune, as he now admits, the property market had slowed and he couldn’t find a buyer.
At the same time he enjoyed an extraordinary stroke of good fortune. One lunch time at work, he was eating his sandwiches in the car park when one of his colleagues came outside to make a private call on his mobile phone. Oliver couldn’t help overhearing that he was cancelling a washing machine and a television. When he had finished on the phone Oliver casually inquired whether his colleague was alright. “Oh yes” he answered, “it’s not for me, it’s for my granny. She’s had to move into a home and I’m sorting things out for her”.
“What’s going to happen to her house”, inquired Oliver. “We’ll probably have to sell it” came the reply. “Well, let me know when you do I might be interested”.
“Oh no, you won’t be interested” his colleague explained “it’s knackered”.
“Does it have a garage” asked Oliver.
“Then I’d be interested. How much do you want for it ?”.
“We’re not sure”, answered his colleague.
Oliver asked to go and have a look and he really liked the house. But even at that stage he felt that his colleague wasn’t taking him very seriously. He did a bit of digging around and could see that the property was probably worth around £110,000.
He went to see his mortgage advisor and, taking account of his other loans, they came to the conclusion that, if his boss would write a letter confirming he was able to undertake regular overtime, he should be able to afford to pay £95,000.
Sadly, the granny died shortly after moving into the old peoples home and Oliver’s work colleague’s uncle was appointed executor. Oliver told his colleague he could only afford £95,000 but he was very keen to buy. Then to his astonishment a message came back from the uncle “We’ll take £93,000; we don’t want you to over-stretch yourself”.
Now, I have to say that Oliver is a very decent and honest guy, so what happened next doesn’t surprise me. Rather than biting the uncles hand off and accepting, Oliver made a point of explaining that the property was worth more than that, possibly as much as £110,000 and that if they took time to market the property they could get a lot more.
But his advice fell on deaf ears. “I can’t be @rs*d” with all the agro, I’d rather sell it to you” replied the uncle.
That was just a few months ago and Oliver now owns the house and is in the process of doing it up. A similar property which is in also in need of substantial refurbishment and renovation recently sold in the adjoining street for £132,000. Even being conservative, Oliver thinks his property is now worth £120,000 and will be worth £150,000 when he’s finished doing it up.
In the meantime Oliver has moved out of the second house (he’s young and, for the moment, single and so he doesn’t mind “camping” in the third house whilst he does it up). Even there he has shown his resourcefulness and ability in spotting an opportunity. Here’s how it happened.
He tells me he was talking to his next-door neighbours one day, around the time that he had kicked off negotiations for the third property. They are an old couple who had lived there for years but they explained to Oliver that they would soon be moving, although they were looking for property in the same area. They had been so concerned that their grown-up daughter would not be able to get her feet on the property ladder they had sold her their house. But they wanted to be close by to see her and the grandchildren.
“Why not rent my house off me and then you can live next door?” suggested Oliver.
And so they did.
And Oliver was able to remortgage this property (again through The Skipton Building Society) as a buy to let to help fund the purchase of the latest property.
At the time of writing Oliver has emigrated to Australia but still owns his 3 UK buy to let properties which are worth around £350,000 in total. His outstanding mortgages total £191,000, meaning he has equity of around £159,000.
That’s not bad at all for someone who started out with all the odds stacked against him: he was young (too young for many lenders to be interested in); he had a low salary; and he had no funds for a deposit.
But what Oliver did have was drive, persistence, resourcefulness, a vision of what he wanted and the determination to never give in.