I mentioned recently that I would tell you about my experience with investing in property (real estate) and how I quit everything only to get involved again recently in a much, much smarter way.
When I first got on the property ladder I bought a lovely flat that was converted from a Grade 2 listed nunnery in Deptford, London. I started a family and eventually needed somewhere bigger and so went on to buy a house. At the time it seemed like a good idea to keep the flat and rent it out as I figured the capital gain on a prime London property would be excellent over time.
The problem was that I re-mortgaged that property to get the deposit for the house I’d moved to, and it was easy to do then before the financial crash and tighter lending regulations. This meant that even though it was rented out pretty much all the time, the rental income barely covered the mortgage expense and once the costs of maintenance, service charges etc were deducted, it pretty much broke even. I stuck with it though figuring that in ten years it’ll probably be worth double and I could cash in.
Roll on a few years and I’d had enough. Tenant issues in the London flat started to become a real problem. I was getting phone calls from strangers telling me they had bed bugs, complaints from neighbours about noise, massive bills from the freeholder for building maintenance, and bigger bills for damage to the property itself. It turns out the tenants had sub-letted the property and there were a lot of people living in a two bed flat, none of them on the tenancy agreement.
As a landlord it was my responsibility to make sure everything was legally compliant and this certainly wasn’t so I then had the enormous headache, and unfortunate task, of removing these tenants, some of whom had no idea that I was the actual landlord. Once they were gone I had to spend thousands repairing the damage including a completely new bathroom (the toilet was like something from the Evil Dead), new doors, repairs to the beautiful wooden floor and redecorating the entire flat.
I did the sums and worked out that I had actually lost money on the property since I had let it out and decided enough was enough, I would sell up and walk away. Then the property crash happened and it ended up selling for an awful lot less than it would have done had I sold it six months earlier! In fact it sold for roughly around the same value that I would have got had I just sold it when I moved out.
But there was another problem… had I just sold it when I moved there would have been no tax to pay on the capital gain as it was a residential property, but since I had rented it out, it was now deemed to be a buy to let property and, despite the fact that it sold for the same price as it was when I started to let it, I still had to pay capital gains tax on the sale of the property. So not only did I have an enormous amount of hassle, stress and time wasted for making zero return, after paying the tax it transpired that I lost a packet.
If you wanted to write a book on how NOT to invest in property, then this surely should be a case study.
Although I was unlucky and perhaps a bit naive, I came to realise that investing in real estate in the traditional way is generally poor anyway as the net effective yield is just terrible.
I know of professional investors in London that are receiving less than 1% net per year!
But as I mentioned, I’ve recently got back into real estate in a totally different way.
Real Estate has to be part of your portfolio, it’s responsible for the majority of wealth passed on in this world. If you have any dream of a legacy with your wealth, you need Real Estate.
But you, and certainly I, don’t need the headaches.
So what do you think about this?
– Buying a fully diversified PRIME real estate portfolio in major cities and not little towns that’ll crash at the first sniff of a economic downturn.
– Generating a guaranteed 4% net yield every year with zero management headaches.
– Receiving an additional income of 12% to 26.4% per year on that portfolio.
– And.. doing this from your phone, with no more tenants, mortgage brokers, lawyers or anything, from anywhere in the world!
If you’re interested in Real Estate, or even just interested in having a financial legacy to pass on, then you need to watch this webinar: