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Today’s show comes in two halves. We have a slightly philosophical reflection as a result of a walk around one of the seven wonders of the natural world, under the light of a full moon. Believe it or not, it reminded me of some natural & universal laws and how we can utilise some of this type of thinking within our property business. In the second half, I will share with you some of the outlines of my very first published article in Your Property Network or YPN magazine. I share my ‘new beginning’ and invite you to share your questions and concerns with your new beginning too.
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Resources mentioned
Foz do Iguacu – well worth a visit if you want to add it to your bucket list
New Beginnings Download - My first article for YPN Magazine (PDF Download)
Your Property Network Magazine (YPN Magazine) – how to subscribe and read my regular monthly column
Today’s must do’s
Subscribe to Your Property Network (YPN) magazine 😉
Please continue to send in your thoughts and ideas for content and themes that would fit into the 'New Beginnings' brief that I outlined for my upcoming YPN column: admin@thepropertyvoice.net
Subscribe to and review the show in iTunes…and while you are at it please help us to spread the word by telling all your friends too!
Send in your property stories, questions or moans to podcast@thepropertyvoice.net and we will try and feature YOU on the show too!
Property Investor Toolkit – here is the book link on amazon.co.uk & amazon.com in case you would like to get yourself a copy to accompany this series
Get talking!
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Transcription of the show
Hello and welcome to another edition of The Property Voice Podcast, my name is Richard Brown and as always it is a pleasure to have you join me again on the show today.
Today’s show comes in two halves. We have a slightly philosophical reflection as a result of a walk around one of the seven wonders of the natural world under the light of a full moon. It reminded me of some natural & universal laws and how we can utilise some of this type of thinking within our property business.
In the second half, I will share with you some of the outlines of my very first published article in Your Property Network or YPN magazine. Believe it or not…there is a natural law that links these two halves together…some of you may know some of the backstory, so I wonder if you have it already 😉
Here we go then…
Property Chatter
The First Half
Let us start today’s show by proving just how concentrated the mind of a property investor is at times, even when you may least expect it!
Picture the scene. It is night time in a warm, dry autumn evening on the border between Brazil and Argentina, there is a full moon that brings with it a soft yet eerie light. My good lady and I are in a group donning our flashlights as we walk through a national park toward a site rather ominously known as The Devil’s Throat.
We are slightly apprehensive and just a little bit jumpy, given that we are escorted by two armed guards and are warned not to venture away from the centre of the paths in case scorpions, snakes or even a wild jaguar lie in wait.
The headlights of a vehicle approach us from behind and slow as they near us. My natural reaction is to plan our most likely escape, which doesn’t go unnoticed as my lovely lady asks me, why I seem to be leading us off to the left all of a sudden. Any guys listening to this story will understand this natural yet largely unconscious protection instinct, but it did seem rather strange when I was asked to explain my off behaviour J
Needless to say, this is purely setting the scene for you.
We are inside the Brazilian national park known as Foz do Iguacu (originally Iguassu), which houses the Iguassu Falls, reputed to be one of the most popular, natural beauty spots both in Brazil and indeed the world. It is in fact, one of the seven new wonders of the natural world. The highest waterfall is almost 100m high and the water flow capacity of around three times that of Niagara Falls. It has hundreds of cascades, which make for a photographer’s paradise and a romantic setting in equal measure.
My almost spiritual moment came as I descended to the foot of the first level and proceeded across a narrow deck towards the centre of the river. On the one side was the sound of the Devil’s Throat waterfall crashing down and on the other was an apparent abyss as the water fell away almost silently to another level below. The light of the full moon, the sound of the falls and the river, along with the water spray on my face was quite a combination.
As I mentioned earlier, the natural laws, such as the law of energy and the law of gravity were very apparent at that precise moment. However, these also reminded me of some universal laws or principles if you like.
Some of the most relevant of these being:
- The law of control – that we have high self-esteem and feel good about ourselves to the exact degree that we feel we are in control of our lives
- The law of belief – that whatever we believe with feeling & conviction becomes our reality
- The law of attraction – that we attract into our lives that which we focus our thoughts upon
This brief list of universal laws came into my mind, as I was reflecting on the laws of nature that created this beautiful setting. The point being that, just as with nature’s laws, which over centuries and millennia has forged the landscapes and vistas that we now marvel out, so too can these universal laws shape our thoughts, words, actions and crucially, our results as well.
It is well worth spending a little more time investigating these universal laws and so I will and I might suggest you to do the same.
The Second Half
New beginnings: We all have to start, re-start or re-direct somewhere
If you are a subscriber to Your Property Network or YPN magazine, then any time now when that magazine next lands in your letterbox, you will see my very first article of what will become a regular monthly feature. I would like you to be involved…so prepare to send in your questions…under the theme of New Beginnings, which I shall outline for you a little more shortly.
However, I shall start by giving you a quick overview of what I said in this very much introductory piece. I won’t fully give the game away here, otherwise, it may spoil your read of the three-page spread should you wish to see it for yourself 😉
However, given that my brief is one of ‘new beginnings’, I thought it relevant to share my own personal story a little to kick the feature off.
We start with my very first property investment, which was purely as an accidental landlord, after my job was relocated hundreds of miles away.
Back in the mid-nineties, I had a hunch that keeping my home and renting it out would be a good idea and so it turned out to be, at least for a time.
My paper or notional return on cash investment was a whopping 27%, due largely to the fact that as a homeowner, I didn’t have to put in a very large cash deposit to buy the property in the first place. This opened my awareness to another type of laws: the financial laws of leverage and compound growth. However, as the story unfolds in the YPN article, you will see that it took another couple of decades for me to truly get it. Here’s why.
Despite the fact that my notional or paper returns were so high, my actual returns were a different story, as I had experienced an expensive repair bill and an unexpected void period, when I was a long way from the property to fully control the situation. What did I say about the law of control earlier – yes, well I was not feeling fully in control of the situation at that moment and so I took the decision to cash in my chips, being a handsome profit on disposal of some 24%.
To be perfectly frank, I can’t tell you exactly what I did with those proceeds of the sale, suffice to say that it has probably been my biggest (or even only) regret in property to have sold that property and not reinvested the proceeds elsewhere.
My Eureka Moment
Some 25 years or so later (yes, that long!), I was sat doodling on a napkin in a pub beer garden one warm summer's eve after work. Many people like to scribble their thoughts on paper to help make sense of them, but how many plot out 15 years of compound capital growth and reinvested rental profits into a property portfolio I wonder? It was, however, my Eureka moment as I like to call it.
You see, I worked in financial services and so understood a lot of financial principles. I could read a balance sheet inside out and could perform investment appraisals and cost / benefit analysis literally for fun.
I was doing this on behalf of my employer, a multi-national company working with other household name businesses. My role was to help them make asset purchase decisions using financial investment appraisal techniques, such as total cost of ownership (TCO), return on investment (ROI) and investment payback. I could talk through and indeed, present a great investment business case…at least professionally.
Sadly, I had failed to fully apply all of these principles into my personal financial life. Whilst, I had made money from some asset purchases over time and even operated a couple of businesses, as I sat there in August 2008 I had nothing to show for it.
In the show notes is a table that summarises the results and returns of this first 'accidental property investment'. Needless to say, my paper ROI of 27% netted down to an actual one of less than 7% when all costs were factored in. I shall return to the topic of the paper and actual returns later no doubt.
Case Study – Accidental Landlord, 2-bed starter home in Slough
| Purchase price | £58,000 |
| Deposit & fees | £7,400 |
| Monthly rent (gross yield) | £500 (8.3%) |
| Estimated monthly net profit (Excl. repairs) | £167 |
| Notional ROI | 27% |
| Actual ROI (after repair) | 6.8% |
| Sale price | £72,000 |
| Profit on sale £ (%) | £14,000 (24.1%) |
However, to precis the story a little, the main reason for my position in 2008, aside from a costly divorce, was that I had in fact made an error of judgement in wealth accumulation when I sold that first investment property. I had turned asset growth or capital appreciation into spending or consumption and it took me a long time to both recover and fully appreciate my mistake.
However, I have in fact learned from this mistake I am happy to report.
My ‘second first investment’ as I like to call it, demonstrated quite a number of financial and wealth creation laws or principles. It was perhaps a perfect example of leveraging other people's money, expertise, skills and contacts, to a near-extreme.
The summer of 2009 was my ‘new beginning’ if you like. There is more to this story, as I share in the YPN piece, however, the long and short of this second investment goes a little like this.
I managed to earn a bonus of £10k at work; which we all know is not a massive amount of money when it comes to property investment these days.
However, thanks to someone close to me, that also believed in me, I was able to raise an additional £50k of start-up funding. From that fund I bought a property that required a significant structural repair to make it mortgageable and so increase its value.
I used bridging finance to purchase the property and a further 'supplier loan' to cover the structural works to help cover all of the costs. Once again, there is a summary of this case study in the show notes for you to look over. In brief, the ROI on the conversion was a staggering 76% with an ongoing rental income ROI of 14%.
| Purchase price | £75,000 |
| Works | £25,000 |
| Financing costs | £14,175 |
| Non-financing costs | £6,200 |
| Total investment | £120,375 |
| Post-works value | £135,000 per valuer (£150,000 per sale comps!) |
| Net profit | £14,625 per valuation (£29,625 per sale comps!) |
| Cash left in the deal | £19,125 |
| Capital ROI (equity gain on cash invested) | 76% |
| Rental ROI (rent return on cash invested) | 14% |
In contrast to my first project, this one contained some of the most beautiful elements of property investment principles or laws, including:
- Leveraging other people's money, time, skills and contacts
- Adding value to property by undertaking genuine improvement works
- Recycling of funds to make the starting capital go further
- Return on investment both on the conversion project AND the longer-term rental income
- And crucially…retaining an asset for the long-term to add to the wealth fund, therefore correcting my first error!
The main reason for the difference between my first two property investment results was this: education.
I had by the time the second project came about invested quite a lot of time and energy in getting myself educated in property. This allowed me to better understand what was possible. However, even back then in the 4-5 years leading up to 2009, when I started to study property in earnest, the level of information around was a bit hotchpotch. Some information was good, some poor, some confusing or contradictory and some downright illegal too!
As with the Iguassu Falls, it was a tricky landscape to traverse. To some extent it still can be, although things have definitely improved, including such a great resource of the YPN magazine and of course The Property Voice; among others.
I have a passion for sharing my knowledge. This has lead to the creation of The Property Voice website and podcast and also my first book: Property Investor Toolkit. My objective therefore over the coming months through the YPN column is to share more property knowledge aimed at those seeking 'new beginnings' of their own.
You could be brand new to property, perhaps you identify with my story as an accidental landlord or have a few properties under your belt. Or maybe you have been in property for some time and you need or desire a new direction, such as through recent Government policy changes or a change of circumstance.
My first feature was very much an introduction piece - who am I and how did I get started, if you like. From here on in, expect a mixture of opinion, information and knowledge and also personal experience, as we elaborate the theme of 'new beginnings' over the months ahead to bring practical and sustainable insights together.
Here’s how you can get involved too…as a kind of YPN ‘Your Voice’. Just drop me an email: admin@thepropertyvoice.net with the subject line 'YPN' with your suggestions for suitable topics to cover under the heading of 'new beginnings in property' and I shall do my best to feature them.
Just as the laws of nature, with the law energy and the law of gravity, have helped to shape some of our most beautiful natural landscapes. So too, have the universal laws of control, belief and attraction and the financial laws of leverage and compound growth helped to shape a turnaround or ‘new beginning’ in my personal property investment journey. As for my Eureka moment, I do rather hope that Archimedes would be pleased!
How about you…what is your ‘new beginning’? What is on your mind, what is in your way, what is keeping you from moving forward & what don’t you fully understand yet?
I would be happy to tackle these questions and more in the months ahead in the YPN column, so drop me a line admin@thepropertyvoice.net with your questions why don’t you? In the meantime, the show notes, including my first two property case studies, can be found over at our website, www.thepropertyvoice.net
Right now, though, thank you very much for joining me on the show today and until next time on The Property Voice Podcast…it’s ciao ciao!