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Edinburgh Intro - I'm new but want to get into property


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Hi there,

 

I am a Civil Engineer working and living in Edinburgh where I have lived my whole life. I graduated and have been working for a couple of years now whilst saving some money. I have now reached a point where I could buy a property to live in although the preferable areas are quite expensive especially for a first time buyer in Edinburgh. I have looked at other methods of investing but property is a sensible long term plan, seeing as I am only 25. The aim would be to have a property that could be let out whilst I rent somewhere else and save to reinvest. This may also be beneficial as I might move abroad for a year or so in the future.

 

As you can tell I have no experience in property but would like to invest somewhere nearby (to begin with at least). I have been making my way through the pod casts although still have a few more to go but so far they have helped me to gain a better understanding of what is involved and whether or not I should pursue it. As some of my questions get answered others arise but hopefully these will be answered in coming episodes. My current barrier is ‘building a team’ as this is a little daunting with no experience. I have more questions regarding mortgages (85-90% LTV - £140K loan) and options in terms of living in a property and being able to convert that to a BTL (max 75% LTV - £100K loan) but can post any questions in the forum section.

 

My plans for the future... Well as is said in one of the podcasts, dream big so that’s what I’m doing especially as I still have time on my hands. In the short term I hope to start in the coming months otherwise I feel as though I am wasting time doing nothing.

 

If anyone has any words of wisdom or encouragement or general pointers and tips then that would be great.

 

Cheers

Mikey

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Hi Mikey, welcome to the hub. 

 

I might talk like I'm somewhat experienced but I have literally just started my own journey too. My wife and I have *just* started our journey buying our first last Friday. I'm 31 and my wife is approaching 30 so you have plenty of time.

 

If you're going through the podcasts then you're starting on a very good footing, the ones I would thoroughly recommend are the ability to know what you're wanting, also start thinking of outwith Edinburgh (you'll get massively better yields) and don't think of it as investing in somewhere that you would live.

 

We bought a two bedroom property in a slightly run-down area in Kilmarnock. However, there is lots of new building going on around it, they are also investing in a new College nearby too which should help the regeneration of the entire area. The property is in great condition inside, newly skimmed walls, perfect wallpapering, nice kitchen and bathroom and a relatively new gas central heating system.

 

All in all, our property purchase cost us £35k (£42k home report). Add in solicitors (and all they do) £600, financial adviser £200, and a few bits and bobs to give the place some TLC, another £100 it's in perfect order ready to go. Luckily, the seller also left blinds, oven/hob, fridge/freezer, washing machine and a couch - making it easier to rent, but the first guy we're going to let to has all of this anyway (making it a nuisance that we now have to remove it!!).

 

However, our aim was to invest for income, we're not going to spend it now but the plan is that if we can build this portfolio on a similar basis then firstly my wife could give up work (and perhaps look after our family) then eventually we both can give up work. We don't care if our empire is 10 homes or 100 homes as long as it hits our income levels, we also don't care if it is worth £400k or £4m, as long as it hits our income levels.

 

The first thing you need to think of is "what am I doing this for"? i.e what is you exit plan, or is there one? Then you need to start thinking about how you're going to do it - assuming that you're working, sounds like a decent job, are you then going to save up each deposit (and use the additional income from each to pay towards it) - this can take a while (especially if you're in a regular paying job, try to control your spending helps - I didn't!). Look for places you can add value to, or be able to buy them below market value (as we did). Remember higher yields throw off more money that can be saved and reinvested.

 

What you do need to watch out for is taking on too much, remember if you are renting and paying a mortgage, if your tenant moves out you may be a month or two without a tenant (your bills etc), if you have two/three properties and bad luck this could be three mortgages and no bills - all of it has to come out of your salary/savings and it makes a dent.

 

I'd be happy to meet up and talk if you are around, I'm in Edinburgh semi-often and I am based in Glasgow for work (live in Ayrshire). Let me tell you a bit about our first deal to give you an idea of where I want to head:

 

Financing:

Market value £42k,

Purchase price £35k (we cut a deal with the buyer to "buy" at £40k - minimum BTL mortgage and get £5k back)

Other costs £1,000 roughly (solicitor, IFA, fixing up the flat & extras)

We also got £500 cashback from the mortgage (but remember its false money, it's just extra on the mortgage!)

 

Therefore we've only used about £5,500 of our own money and mortgaged £30k.

 

Operational:

Outgoings: monthly mortgage £111 (rising to £125 after 2 years) on interest only mortgage, monthly landlord insurance (buildings and contents) £18 (working tenants), £29 (DSS).

Income (minimum DSS rate is £103 per week, paid fortnightly) works out at £5,356 per year (c£450 per month)

 

Yearly - total income £5,356, total outgoings £1,680 - profit £3,676.

 

At the moment (since this is our first one) we're managing this ourselves, two reasons, we want to get our hands dirty and find out the inside track of letting to people (problems, difficulties etc) plus, its only one - hopefully it shouldn't be too hard? (famous last words). Secondly, we thought that by the time we got to 5/6/7 properties we might be able to negotiate with agents better.

 

Apologies that this has all been me-me-me but thought it would be nice to hear someone elses story at the start of their journey.

 

For the podcast my full recommendations are, in no particular order:

TPP65 The financial lessons you should have been taught at school

TPP62 Property investment books you should have read

TPP47 Should you invest for yield or growth

TPP30 Property tax

TPP27 Rich dad poor dad guide...

TPP25 Dreamline (and do the extracirricular things from Tim Ferris

TPP20 Yields explained

TPP18 Leverage explained

TPP16 How to solve any problem (this doesn't only apply to property though!)

TPP15 Goal setting, and finally

TPP3 5 books that you must read.

 

Also have a listen to TPP51-55 about other entrepreneurs doing business, just because they're great opportunities to wider worlds.

 

Worry about your dream-team when you are ready to take on a project - you need a good solicitor that you can trust (but they all do similar work for you, and are regulated) so you may not have the "pull" on your first deal to get in with them on a better basis until you start doing more deals.

Speak to agents around where you want to buy, to get to know the area, I'd only do this once you have identified a few potential investments.

Also, you need a great IFA (worth their weight in gold), firstly because they'll be able to help you access the best deals (some may only be available through an intermediary), also, you'll get some great tips and chat from them, and finally, if something does go wrong you might have someone to blame ;) (I can help introduce you to mine, I went to school with him so I know he's trustworthy!)

 

Good luck!

 

 

 

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Great post Kris.

 

I've never considered anywhere outside of Edinburgh in the central-belt. I've heard good things about Livingston though.

 

For me I would choose Edinburgh as the tenant demand is greater (ROI of around 15% is easy to achieve) but there is greater potential for capital growth. Though, I'll probably spend the night on Rightmove looking at Kilmarnock after reading your post!

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Hi all

I'm Edinburgh based and all my propert investing so far (two rental, one that I live in and one that I'm currently renovating) has been in Edinburgh. I realise that it's an expensive city but for the reasons elaborated by Dale above, I chose to buy in the city.

I am thinking about looking further afield for the next purchase. I've been to a few property auctions and although I haven't seen anything I "like" enough yet to buy, I think that will be where I make my next purchase. Most auction stuff is out of the city, ergo the next purchase looks like it'll be out of the city.

Does anyone have any particular experience of buying a Scottish property at auction? Would be keen to hear your views.

Mike - one comment - sometimes lenders are a bit wary if you don't own your own residential property before you become a landlord - get a decent broker to assist you.

Kris - very detailed comment and glad to hear you've pruchased. Can I ask - how did you find/are you going to find your tenant? What's the Killie rental market like at the moment?

Cheers

Richard

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Thanks for the comments guys, when I had posted I didn't actually think that I would get a response or that there would be anyone in Scotland but to hear back from you all is definitely encouraging!

 

I will work my way through the comments that you've left:

 

Kris, thanks for taking the time to write about your first adventure. It’s good to hear someone’s story who is in a not to different place to me and shows a clear route to making a start. The reasons for me doing this is to one day (hopefully) give me the opportunity to retire early from the ‘day job’ but continue to have an income that allows me to live a comfortable lifestyle (I have my own definition for comfortable lifestyle J). I don’t have a portfolio value of £X million or a specific number of properties in mind, just a comfortable lifestyle. In the shorter term it would be to save and reinvest any profits that I do make. I am a good saver so don’t see that as much of an issue although I understand that it’s not going to be a quick process.

 

I know that I have to do a fair bit more research before I would feel confident to go ahead (but don’t want to get the analysis paralysis stage ha). Thanks for sharing your numbers too; it would be interesting to see how things are going in a month or so and how dirty your hands get. Grabbing a coffee could be an option also.

 

Dale, seeing as I am from Edinburgh I have been looking in this area just to get a rough idea. Can I ask if you have any properties and what they are like in Edinburgh?

 

Richard, are you able to expand on your comment about lenders being wary about first time buyers becoming a landlord before owning their own property? I guessed that this was case anyways as it’s not the ‘usual’ option for most people but just wondered if you have had this problem? Are you able to give any more details on the projects that you are working on at the moment?

 

Again guys thanks for the comments, really useful and encouraging as I said above!!!

 

Cheers,

Mikey

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Hi Mikey,

 

I just have the one property in Edinburgh (Portobello) which I bought last year to refurbish. I initially intended to buy so that my monthly outgoings would be much cheaper than renting, which would allow me to save for developing a portfolio. However, I secured a job working alongside Rob B in London last summer so I've decided to sell.

 

I thoroughly enjoyed the refurb process so I've decided to do another 2 this year in Edinburgh. Can't wait to get stuck in!

 

Edinburgh is great for rental, I would say anywhere central (city, newington, leith, tolcross) and not too far west is solid. There are a lot of cheap flats in Gorgie/Dalry but the returns won't be the strongest.

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Where are you thinking of refurbishing next Dale and do/ did you own a property before taking on your first refurbishment? I'm just curious as to how people at a similar stage to me started out and got things going. Did you work in property already? Some of the people that I have spoken to seem to have gotten into it by accident after not being able to sell a flat or break ups etc. and are now "accidental landlords". Kris's post earlier in this topic was really useful from the point of view of an intentional landlord and the level of detail was great to see! Will hopefully keep up with his progress and how things work out.

 

Congrats on the job down in London too, who better to work for than RMP!! 

 

Mikey

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Hi Mikey,

 

I started with very little, just a small deposit but I really wanted to refurb a property and put my own stamp on it. It was my first property, so a steep learning curve. I was working in Property Management so I knew the areas in Edinburgh which were best and I just kept my eye on Rightmove.

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  • 1 month later...

Michael, I'm the same - I used to think that I wanted to be "worth" a million (my actual number was £4m), however, when I really thought about it (guided by some of these podcasts) what I am actually looking for was a way to retire early, have more time to myself to spend with my family, reading/writing and pursuing things that I want to pursue. I realise that my retirement 'number' is much less when I can leverage with property - Ideally I would like to hit around £60k-£80k as at that point I think I would be happy that both my wife and I could give up our day job and look at options for us - of course that could be a long way off if I had a portfolio worth £4m that's losing money!

 

If I look at our plan to earn £60k per year (minimum) - looking at following the purchase low priced, high yield as I have already then if I make £250 per month per property (net), then I need 20 properties (22 really, for tax!). My plan is to do this slowly and methodically over the next 8-10 years which would give me a nice retirement age of 40. I'm sure in absolutely sticking to my plan of being able to negotiate under market value though and will walk away if a deal does not fit my figures. My wife and I are not touching any of the money that comes in from property just now so we are allowing that to build up to a nice stack on the side.

 

Richard, The Killie rental market is ok just now, it's a great commuter town for Glasgow and its surrounding areas as well as Kilmarnock itself and Ayr (both large towns) and Prestwick brings in some money to the area too. There is a lot of house building going on though, whether this turns out to be private or public housing is yet to be found out but I will be trying to speak to developers to see if they are open to 'deals'.

 

With the first purchase I got I have actually rented it to a housing benefit tenant. The tenant is young, but meek in personality (i'm not worried about a party animal). She has one young daughter who is just about to enter school (hopefully she stays for a while after that). I advertised it on Gumtree before we completed and had a list of about 6 people viewing the first weekend we owned it (ironically she was the first through the door!).

 

Dale, I would love to purchase in Edinburgh - one of the draw backs of lower value purchases is capital growth however I feel that if I can get in at the right price (below market value) then I do have 'wiggle room' and I can still do all of this relatively cheap (i.e. much easier to save a £15k deposit for a £60k flat, buy it at £45k - and get £500 per month - than save £30k for a better flat in a slightly better area and still only get £500pm, then I can recycle my £15k using the same method, get another £60k flat for £45k and another £500 per month).

 

I have had a recent turn of fortune (particularly apt word to use) and would welcome you checking out my latest question here, if you have any ideas please contribute - http://thepropertyhub.net/forum/topic/1488-a-good-problem-to-have/ 

^This may help finance larger purchases in the near future.

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