14 Answers Every Property Investor Needs To Know
I started in property not even knowing how to buy a house and now I’ve got a property portfolio which makes me a gross, annual, passive income of about £65,000 per year and that’s before I even add on my Deal Packaging money which makes me another £320,000 per year.
I’m Katy Wilson, a property investor and I want to answer your burning property investing questions for you.
Question 1: I own a buy-to-let outright. I bought it in 2008 for £136K and it is now valued at between £300K-325K. Would you refinance it to buy more properties?
Answer: Yes, I absolutely would refinance that property. You could pull out £225K. In Nottingham (where I’m from) you could buy 9 buy-to-let properties with that money, each of those could bring £300 per month net, that’s £2,700 per month income. Plus, you’re going to have 9 properties increasing in value which you can then refinance in the future, and it’s going to compound over time and massively increase your wealth.
Question 2: When you refinance, doesn’t your cashflow become even less?
Answer: Yes, by refinancing for a higher value of the property, your mortgage payments are going to increase therefore your cashflow is going to decrease. But, you’re going to release more money to be able to reinvest into other properties that are therefore going to cashflow you more. And, again, the properties are going to increase in value, you can then refinance those in the future, pull even more money out and compound it, therefore constantly building your wealth.
When you understand property investing and you’re educated, you will make your money work for you. So by refinancing you’re pulling money out so that you can reinvest it and make your money work harder and stronger for you.
Question 3: Help me with the modern method of auction. I find it so complicated it gives me a headache.
Answer: I completely agree. I don’t get involved in modern method of auction. In my opinion, I feel that it gives estate agents the chance to charge more money, make bigger fees for selling the same house as they would on the open market. So you’re going to get loads of interest because the reserve price will be set low and get loads of people bidding on it, but in reality the property is going to go for market value or even higher. It’s not in your best interest to buy from the modern method of auction.
Question 4: Are all of your properties in your own name or under a limited company?
Answer: I’ve got 11 properties, of which 1 is in my personal name and interestingly, that was the one I bought before I got educated. Since being educated, now all of my properties are under limited companies (various different limited companies because I have Joint Venture partners).
For me personally, it works out more tax efficient to run my properties through a limited company. So the reason I hold most of my properties in a limited company is to offset the interest for tax purposes which allows me to make more profit.
Question 5: Shouldn’t you buy Bitcoin?
Answer: I prefer to invest in something I understand and I’m educated in. I know the history of property is always going up, even if we have a crash, I know it’s going to recover. For my long term investment strategy, I plan to hold these properties until I die, so I know they’re going to go up in value and I’m confident in that.
Question 6: I might be an old school property investor, but I’ve been taught to cash up, be mortgage free, my first 5 properties make more than your 11 and I never take money out.
Answer: Any educated property investor wants to make their money work for them. So they’re going to refinance their properties to release money and then reinvest it. There’s a limit and it’s different for everyone depending on what level of lending you want to take. But, for me personally, I want to reinvest my money and grow my portfolio.
Question 7: I’m 24 years old, I’m looking to work towards buying an investment property but doing some research I’m starting to think it’s not worth my while?
Answer: If you don’t understand it and you’re Googling it, then Google is free and free advice is worth every single penny. You don’t know whether the people who are writing these articles are actual property investors themselves. If you ask an amateur a question, they will give you an amateur answer.
My advice would be to get the answer from a trusted place and people you know are actively investing in a strategy that you want to invest in and learn more about it from them. It has been the best thing I ever did. You need to get educated.
Question 8: The problem is that it seems like there are 10 people interested in every house. We’re first time buyers and have missed out twice after offering £20K over the asking price.
Answer: The market is really hot right now. I’m a professional Deal Packager, which means I need to find good, below market value property deals for my investors to buy. The best way to do that is to find off market properties, in order to do that you need a little bit of knowledge and the right marketing strategy to find them and filter out the really motivated deals. When you find a motivated seller you will definitely do a deal. That is the key: off market and motivated.
Question 9: I have a council property that I’m able to get for £68K and it’s worth £130K. I have the plan to use the plot at the back to build another property, increase the value of the plot and make more profit.
Answer: Get that property bought now! Buy it for as it is now, then surround yourself with the right people and experts to make sure you carry out what you have planned correctly.
Question 10: Please share your mistakes.
Answer: I have a personal battle with this all the time. I’ve not made many mistakes, purely because I got educated before I started investing in property. I would say that with my first house I put that in my personal name and paid too much money for it. The house was £105K and I paid £105K for it. Nowadays I’d pay £70K-80K for the same property.
Property is like a bad haircut, if you sit on it for long enough it will grow out. So I have refinanced that property now and pulled all of my money out of it. So even though it was a mistake at the time it turned out to be a good thing.
Property is not cheap to get into but you need to know how to do it correctly to make BIG profits. That’s why I always say you need to get educated.
Question 11: How did you buy a house for £80K with £0?
Answer: There are many different ways you can acquire property with low or no money down. The strategy I used for that property was bridge-to-buy-to-let. I used bridging lending to buy a property below market value, I then added value, refinanced that property on the higher value and pulled all of the money out to then pay off the bridging lending.
To give context on that, if you take lending on property, standard lending is 75% loan to value based on the market value or the price that you pay (normally whatever is the lower of the two). But my bridging lender loads up to 90% of the property value, based on the market value, not the price I paid. Which meant I could buy it, refurbish it and refinance it with none of my own money.
This is just one of many ways to buy a property with none of your own money.
Question 12: You need 3 properties at London prices OR £1.2million. Instead buy dividend stocks at 4% yield and relax.
Answer: With dividend stocks, my understanding is that you don’t have any control. The CEO of that company could mess it up and then you’ve lost everything. For me, property is the safest place to put my money. They say “safe as houses” for a reason.
Also, sometimes dividend stocks don’t pay out, if the market crashes for example.
Question 13: Are the houses you are offering worth buying? If they are selling for cheaper in a hot market, will they be able to cashflow at all? Is the yield going to be below 5%? If so, is there a point?
Answer: I’m very specific with the criteria I have properties that I will invest in or allow my investors to invest in. I’m not buying the worst house on the street and I’m not buying in the really rough/cheap areas. I’m buying in areas where I know there’s a strong rental demand and they will also appreciate in value over time.
Question 14: Surely what a property is worth, is what someone is willing to pay for it?
Answer: I agree and disagree. In this market, properties are going for more than they’re worth. But, if you get a motivated seller you will have someone who is willing to sell their property below the market value, which is less than what it’s worth. It just depends on how you are marketing to find those deals.
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