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Edinburgh-based accidental landlord who's caught the bug...


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Hi all,

 

I bought a 2-bed flat in Edinburgh, lived in it for a few years then moved-in with the better half who I've now married; so we're living together at hers and I'm renting my place out.

 

Since doing this I've become slightly obsessed with the idea and am looking to build more capital and thus buy more properties. The end goal is to quit my dull accounting job and renovate & let-out property full-time across the UK (and possibly further afield if it really goes well).

 

What I'd love to know from anyone out there who has walked the walk, is how you built up the capital initially. I don't particularly want to have to sell my flat to finance a refurb project and then flip for a profit, but if that's the only reasonable way forward then so be it.

 

I've read the article on the website regarding start-up capital and don't have a bank of mum & dad (or anyone else for that matter) to fall back on. Has anyone tried and tested another route to build up funds?

 

All the best,

Rob

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Hi Rob,

 

I have a few similarities with you...

2 bed flat in Edin - check

Boring accounting job - check (putting off VAT return as we speak)

Quit job - check

Dream of property full time (well part time but giving a full time wage ;) ) - check

 

The best initial advice I can give is listen to these first of all B) 

 

http://thepropertyhub.net/?s=deposit&lang=en

 

Would be worthwhile going through your situation in a bit of detail but from your general description you would have a couple of options already.  Keep in mind the start of the 'snowball' is the hardest to build. Flipping is good but I have no experience, I am in this to buy and hold, that way capital should always grow in the long term (in line with 18 year property cycle) and my passive income should continue to increase.

 

You don't have to sell to get cash to work with. What I have done is re-mortgage to the max to release equity (It's not as risky as it sounds in my opinion as the banks won't allow you to re-mortgage to any risky levels (Increased coverage calcs, maximum LTV etc.)). Some people aren't comfortable doing this so find your comfort zone and re-mortgage to that, i.e. You could re-mortgage your rental apartment to a max of 80% LTV and your home you live in to 90% LTV! You need to weigh up increased interest charges for higher LTV products vs potential return from your next purchase. Also you'll need to consider where you are in your mortgage agreement and if there are fees to terminate.

 

Once you've got some capital, you can 'recycle your deposit' by re-mortgaging, easiest way to do this is to:

 

1. Buy below market value,

2. Add value,

3. Maximise leverage effect of mortgage assuming rise in house prices.

 

I managed to buy property 4 by applying 2 and 3 from the list above to my 3rd property in less than 3 years.

I plan to buy property 5 by applying 1 and 2 to property 4 in less than a year.

 

I hope from that you can see things can get quicker very fast so don't be discouraged by what looks like a long road ahead.

 

One under valued way of building up capital is to save! I've managed to turn my overspending lifestyle around this year and it's made a huge difference to how fast I'll be able to buy my next place. How I did it:

 

1. Analyse all your spending and income on a spreadsheet (sure you have that done already with your background).

2. Get a Monzo card! https://monzo.com/

3. Read Richest Man in Babylon, Rich Dad, Poor Dad etc.

 

Remember, the less you can live on = the less you need in passive income to retire!!

 

There's a lot in there, anything you want further info on, let me know :)


Cheers

Ollie

 

PS Get to the meet-up on Thursday, I'll be there! B) 

 

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Hi Ollie

 

Thanks for getting in touch!

 

It's great to know there's someone in my neck of the woods who's doing what I want to do, so if you're happy to chat at a meetup I'd be delighted to see how you've done it and get some hints and tips. I'm signed up for the one in September so hopefully I'll catch you at that one (my birthday this Thursday and my wife has organised something fringe-related).

 

Meantime...

 

Thanks very much indeed for the link to the podcasts. I've not managed to get to that part of the website yet, so thanks for the head-start here :)

Good shout re Rich Dad Poor Dad etc. That was actually the first book I read which 'planted the seed' and I've re-read at least 3 times since. Currently reading Think and Grow Rich which is more about the mindset but still handy.

 

I think my initial thoughts are to raise as much capital as I can first (through flipping mainly) before I can buy-&-hold multilets. I'm looking at how I can keep hold of my existing rental and raise enough to get stuck into a refurb project. If it's possible via the remortgaging method you've suggested then brilliant! Interest rates are still historically low even with a 0.5% increase on the cards...

 

Look forward to meeting up at September's event if you're heading along!

 

Cheers

Rob

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Awful putting birthday and wife before a meet-up Rob ;)

 

Next time you're paying for the meal take your wife to the meet-up, £5 all you can eat buffet, a real cheap date B) 

 

Sounds like a plan you've got.  See you in September but if you want to catch up before, happy to meet up over a coffee, just drop me a PM :) 

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Hi!

I have to point out the sad fact that the more you get into property, the more boring accountancy seems to come along with it!

 

It is slow at the start, but if you can manage to save ALL of the rental income from your first property (eg put it somewhere really difficult to access from cash machines) then it should build up pretty quickly into the deposit for the next one. Think carefully about the type of property you want to invest in initially- yes, you should get good capital growth in Edinburgh but its expensive, if what you want at this stage is high-yielding buy-to-lets that don't require a big deposit, look at flats in outlying areas. I like Falkirk, Grangemouth, Alloa, Cumbernauld etc.

 

I love the idea of the "adding value" strategy but in practise its hard- when you add on the cost of your time, void period, unforeseen disasters etc to to the costs of the refurb there may not be much difference than if you had just bought something in good nick and got rental income straight away. I think its possible to buy a bit below market value just by looking at a lot of properties- if you can find 20 properties that meet your criteria, chances are one of the sellers will be looking for a quick sale and be willing to settle for less than the going rate.

 

Good luck!

Clare

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Hi Clare,

Thanks for getting in touch!

Completely agree with your point about looking to outlying areas of Edinburgh. I'm also looking at places like Dalkeith on the south side what with the Borders railway, but looking further west is also on the radar too.  Have you looked at places like Kirkcaldy and Dunfermline? Interest to know your thoughts on these areas if you have an opinion.

Thanks also for your tips on property types and the benefits of saving all residual rental income. Lots and lots of things to think about in general, and every podcast I listen to adds a new dimension, so I'm looking forward to actually making a start now :)

Maybe see you at September's meetup - I'm looking forward to meeting everyone!

Cheers,

Rob

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Hi Rob,

As far as location goes, I'd say any town with good transport links that can get you to either Edinburgh or Glasgow city centre in half an hour is workable. I think more and more workers are going to be priced out of the cities in the future. Dalkeith sounds ideal, I don't know much about Kirkcaldy. Dunfermline certainly has good rental demand, there are a couple of nice 2 beds on just now for about 75k, but there are definitely cheaper areas. Properties in Dunfermline seem to come up for auction fairly often so you could keep an eye on the www.futurepropertyauctions.co.uk website if you're feeling brave!

 

Placebuzz website is one I've started using recently, it gives you a good idea of rents in any location so helpful when you're calculating potential yields. Probably see you at the meet up, hope your brain doesn't melt in the meantime!

Clare

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Hi there!

 

Great to see some local chat on the forum, I too am Edinburgh based - sunny Portobello!

 

Like yourself Rob I am working hard to realise my dream of replacing my income through BTL's (& also hopefully satisfy my obession with all things property related!) I am in the process of learning as much as I possibly can - the Property Hub & all it's contributers have been an invaluable tool.

 

Sadly, we have no secret stash of money either - but are lucky enough to have an accideontal BTL (inability to sell back in 2009) so I plan to release equity from this & purchase my initial 2 BTL's.  Although, we are having some problems refinancing as my husband works offshore for a Norweigen company & so is classed as having 'foreign inclome' & apparently there are very few lenders who will now accept this.

 

Anyway, I found it really interesting to read everyone's comments on this thread - I have been driving myself nuts 'running the numbers' to identify which areas will meet my rental yield needs (it was quite a realisation to see how tricky it will be to make the numbers add up!).  I too have looked at Dalkeith along with Falkirk & Dunfermline.  I am also seriously considering Glasgow on the advice of the Rob's & other forum contributers.  I met with a few management companies in Glasgow to try & build my knowledge of the rental market there & so far I like the look of the Shawlands/ Langside area.

 

Once I've build up a bit more knowledge (& courage!) I hope to pop along to one of the meet ups too.

 

Kim :-)

 

 

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Hi Kim :)

Ahh I do love Portobello, especially down the Esplanade when the sun's out - can't beat Luca's ice cream! I originally looked at a couple of places on the High St and Bath St before I bought my place in Gorgie - I just felt that Gorgie was more ripe for redevelopment, and therefore more of a dead cert for capital growth. That was back in 2011, and there's not been too much movement since, however it seems to be starting to creep forward with a couple of new cafes, a new student accommodation development and a 24 hr gym opening up recently. I'm hoping it gets a bit of money from the new £1bn city deal too as certain areas could really do with some development!

Glasgow also sounds like a good plan, and I do recall one of the Robs mentioning there on a recent podcast as one of the places to look at investing in this year. I've spoken with a number of Glasgow-based colleagues who have all said that it's a great city, with an awful lot of potential, as long as you pick a good area....so like every other big town/city in the UK then!  They also mentioned Pollokshields in the same breath as Shawlands, so you seem to be targeting the same areas my colleagues have mentioned.  One guy even suggested the Gorbals now that some of it has been regenerated and turned into new-build apartments. Not spent a lot of time in Glasgow though so I'd need some convincing to consider investing there at this stage!

Regarding refinancing, I wonder if you'd have better luck using an SPV if - like me - your goal is to 'do' property on a more permanent basis. It's probably an "it depends" situation but if you've not already pondered this, or got a tax adviser to mull it over, it could end up being useful especially with the mortgage interest changes being phased in between now and 2020/21. I spoke to an accountant on Thursday about SPVs/limited companies during a 30min free consultation and found him very knowledgeable and gave me a few things to think about. Cowan and Partners on Constitution St if you're interested.

Good luck with your plans, and maybe see you at the next meetup in Sept :)

All the best,

Rob

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Hey Rob,

 

Yeah Gorgie's certainly got plenty potential & I do think that the Haymarket redevelopment work will help investors gain some capital growth in surrounding areas such as Gorgie. Portobello is my favourite area in Edinburgh (obviously!) but sadly, prices are just too high here to capture any decent yields.

 

I've started looking at the whole limited company option, but so many variables to consider, funny.....my next goal was to seek professional advice on my specific circumstances.  So, I really appreciate you sharing your contact, I only just posted on the Forum a few days ago asking if anyone had any recommendations for tax advisors!

 

Hope all goes well for you & would be great to catch up at one of the meet ups.

 

Thanks again, Kim.

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Hi Rob,

Thought I would get in on the action here as this tread has some activity on it.

I myself am an ‘accidental landlord’, owning a property in the South West near Cornwall. I have moved to Dunfermline with the military and similar to yourself would love to quite the day job as my interest for property has grown. Just noticed the hype on Dunfermline and thought I would make myself know as I live here. I am looking to invest in the area as commuting into

Edinburgh from here is very easy in my experience. With the new bridge opening in September as well, well that is only going to improve the transport to the area.

I’m a complete newbie to investing so this is me just making myself know. If you have any questions on the area I would love to help and grow some communications with yourself and any other investors a like.

Cheers mate

Sean

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Hi Sean, 

Thanks for getting in touch! Yeah Dunfermline seems a bit of a no brainer given how easy it is to get on the M8 to either Edinburgh or Glasgow, and I imagine Stirling isn't difficult to get to from there either. 

I too am looking to grow a wee network, and am looking forward to my first meet up in September. If you are able to attend it sounds like a good place to meet like-minded folk. 

All the best, 

Rob 

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