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Counting The Pennies – Part 1

6th January 2018

Recently, I was asked by a client, who’s been with us for many years, to source a property for him to invest in.  His day job pays him close to the average wage of £36k, leaving not a lot left over for saving.  Investing in property is seen as a way out for him.  However, the amount of money he has saved up for a deposit is only £25k.

This is a small amount of money, and you cannot buy anything in London with these kind of funds.  Geared up, it allows one to purchase a property for £100k, not allowing for the ancillary expenses.  The conundrum is what can be done with a relatively small amount money, in this environment?

Back in the day you could purchase property with even no money in your pocket.  I purchased my first property with a 95% mortgage, and the other 5% was borrowed off a credit card.  The property was purchased for £155k, it was a two bedroom flat in Wembley, and the mortgage was £778pm.  However, I was getting £923 rent per month.

The property was a dive, and I managed to get all the furniture second hand from Gumtree.  I remember, we went in the evening to pick up the furniture, and the next day I discovered the sofas had grime on them.  So, I spent that morning scrubbing them clean with a Brillo pad!

The electric certificate failed due to some minor reasons.  However, the electrician was a very reasonable fellow and told me exactly what to do to reach the required standard.  It required some earthing, which I managed to do myself by running a wire through the attic and to the outside of the property, connecting it to a pipe which ran along the outside of the front wall.

True to his word the electrician, passed the work I had done, and issued the certificate to my relief!

It was all about counting and saving the pennies.  The property was to be rented to the council, as at the time they were the highest payers.  Rest assured, I had done my research well.  Two bedroom properties were the most in demand, due to the fact that they are best suited to accommodate one parent families.  The flat was promptly rented by the first tenant to view the property, much to my surprise.

Not surprisingly, she asked permission to throw the sofas out, I replied in the affirmative. Furnishing the apartment was more of a tick box exercise, as many tenants have their own pieces to bring in.

The great thing about council tenants is that they tend to stay.  This one stayed for a good six to seven years, primarily because there is such a shortage of housing stock and such a long waiting list for accommodation.  This means you can have a long steady flow of income, it reduces the need to refurbish every time a tenant leaves, and avoids void periods.

To be continued next week..

Suresh Vagjiani

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