Is 80k enough??!

[jimmy-a]

Hi.

I'm completely new to this! I've listened to your investment books many times over the past few years and have now decided that I should make a start. As I should be, I'm scared and excited, but now I feel I have an overall strategy in mind. I'd like to leave my job and I'd need to replace roughly 2.5k monthly to be able to. I'd be leaving behind a good pension as well so would like to see some capital growth long-term. Is this possible to do if I have 80k behind me to start? I knkw it won't happen overnight, I suppose I'm just looking for some reassuring advice from people who have achieved more with a similar amount. 

 

Many thanks

[Darren McNeill]

On 1/23/2023 at 9:12 PM, jimmy-a said:

and have now decided that I should make a start.

This is the hardest step to take, actually getting on with it, so well done for making this positive move.

 

On 1/23/2023 at 9:12 PM, jimmy-a said:

I'd like to leave my job and I'd need to replace roughly 2.5k monthly to be able to. I'd be leaving behind a good pension as well so would like to see some capital growth long-term.

What is the time frame that you are thinking of leaving your job.  With £80k I think it would be quite challenging to do so straight away.  What area do you live in?

 

On 1/23/2023 at 9:12 PM, jimmy-a said:

Is this possible to do if I have 80k behind me to start? I know it won't happen overnight

It is possible but of course it may take a number of years to do this.

 

With £80k you could easily go out and buy 2 rental properties where I operate which would bring you in roughly £598 after mortgages and fees.  This would mean say an initial property purchase at say £75k, £10k renovation to add future value and lets say a 2 year revaluation at £95k.  Rough figures would give you £598PCM after costs for the first 2 years (at 5.5% APR) and then at the 2 year revaluation point you would release approx £13k back out for each property and then have a monthly return of £320PCM after costs (At an APR of 4%).

This would mean after refinancing at the 2 year point you would in theory received a total of £26k from refinancing and have £13,754 from rental income (23 months rent), so a pot of just short of £40k.

 

If you used the above as a base and bought another similar property (for simplicity) you would have a net monthly income of £918 per month for the following 2 years, and then would release £13k once you  remortgaged property 3.  This would then give you a potential cash pot of £13k from refinancing and £21,114 from 23 months of rent from 3 properties, so a potential cash fund of £34,114 at YEAR 4.  You could then potentially refinance the 2 previous properties to release more equity if the markets have been favourable or simply but 1 more additional property and repeat.

Of course all of the above is all good on paper (doesn't include any tax, voids, maintenance etc) but it's more to show you a rough idea of what could be achieved with minimal effort if you buy well at the start and in the right areas.  The trick is to NOT SPEND THE RENTAL INCOME as this will allow you to gradually save up for your next property purchase, which in turn then allows you to increase the monthly amount, which in turn allows you to save quicker for the next rental property.

Obviously if you are able to contribute money from elsewhere in your life to adding properties this would all become even faster, and this is how you get the snowball effect.

Darren

 

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[matt_hd]

I'm in a similar position in that I have around £50-60k cash to invest and could potentially draw on more by releasing equity in my own home. Unlike Jimmy I don't need to hit a particular income target, but I am looking to start investment with a slant towards income generation.

The example Darren gives is quite striking and encouraging. However is it still realistic to find properties with those sorts of yields - 10% - with the low purchase prices you describe these days, with scope for capital growth too? 

I had initially only been looking in my local region (in the south -east) mainly because I know the good and bad areas, but also because I know a good letting agent in the area who would manage the property, doesn't charge the earth and who I trust. I am finding it difficult to find properties with a yield of 5%. With 5% or more interest on a 75% mortgage,  a 5% yield doesn't give much wriggle room!

Are there still areas where a 10% yield is still achievable? I've not yet found any!

In summary, I am wondering is this still a viable strategy in today's market conditions?

[Darren McNeill]

On 2/1/2023 at 11:27 AM, matt_hd said:

I'm in a similar position in that I have around £50-60k cash to invest and could potentially draw on more by releasing equity in my own home. Unlike Jimmy I don't need to hit a particular income target, but I am looking to start investment with a slant towards income generation.

The example Darren gives is quite striking and encouraging. However is it still realistic to find properties with those sorts of yields - 10% - with the low purchase prices you describe these days, with scope for capital growth too? 

I had initially only been looking in my local region (in the south -east) mainly because I know the good and bad areas, but also because I know a good letting agent in the area who would manage the property, doesn't charge the earth and who I trust. I am finding it difficult to find properties with a yield of 5%. With 5% or more interest on a 75% mortgage,  a 5% yield doesn't give much wriggle room!

Are there still areas where a 10% yield is still achievable? I've not yet found any!

In summary, I am wondering is this still a viable strategy in today's market conditions?

In a word… yup!

not all areas are created equal when it comes to yield. I met some London clients yesterday who we’ve had an offer accepted for locally so they could see some other example projects. They couldn’t believe how you can get £525PCM on a 70k house, or £650PCM on a £90k house. Completely opened their eyes for them.

Darren

 

                   www.fmp.group   

       Whatsapp Direct By Clicking Here                     

                       01706 507202