I was told to offer £155,000 for the property by the Mrs, which I personally thought was way too low and was actually embarrassed to make the offer thinking the agents will not take us seriously. Surprisingly the sellers accepted. This was my first practical lesson, you cannot go down from an initial offer, only up, so it’s always better to start low, and you never know they may just accept. Of course when they do you always wonder, perhaps I should have started even lower! Being embarrassed is an emotion, it isn't worth £20,000.
At the time I didn't have any money with which to purchase a property, just a lot of enthusiasm. I had a job where my salary comprised of a fixed salary plus bonuses. The funds to purchase the property would need to be entirely borrowed as well as the stamp duty and the legal fees.
At the time one bank was giving 95% loan to value mortgages, subject to a phone call to the employer to check you were in full time employment. When they say value they meant value. This mortgage could have been based on the value not the purchase price, meaning around the £175,000 level if structured in a certain manner, if it was done in this way I would have secured £166,250 as a mortgage, leaving me with enough cash back to cover all the expenses and some more. However at the time I wasn't privy to this knowledge and so took the conventional approach.
The other 5% for the deposit as well as expenses came from a credit card, not mine but someone else’s, so as not to disturb my credit report during the application process. I had a good broker at the time who guided me through the whole process.
Even before completion, I was scouting around to find who would offer me the highest rental on this property, ringing agents, councils and housing associations to get the highest rent possible. At the time I discovered it was the council who had a desperate need for two bedroom properties, so much so that they were offering cash incentives just for giving them the property. This type of property was highest on their list, I got them around to the property prior to completion to get their opinion. I wanted to ensure there was a tenant in place prior to the first month’s mortgage coming out.
They gave me a pretty simple list of their requirements: a gas and electric certificate, and some fire proof furniture and they were ready to offer me £850pm on this property, which net was more than the market level.
The gas certificate was given, but the electric certificate failed, the Jamaican chap who did it was a local and told me exactly what to do to ensure it passed. I basically had to run a wire from the attic so there would be some earthing. I did this myself in order to save money, it was a rubbish job as the wire was tied to the drain pipe on the outside of the building and was dangling off it, but it was safe and as promised it was passed.
The next item on the list was to get the furniture in, which I obtained from The Loot newspaper, where I tracked someone down who was offloading the insides of a house. The place was in Queensbury and the time of collection was in the evening. I managed to borrow a van for the evening for the removal. I cannot remember exactly how much I paid but I managed to furnish the whole flat for less than £100.
However it was during the next day in the daylight that I discovered the sofas had been kept outside and so had mould growing in between the cushions. There was no way I was going to buy more sofas, these then had to be scrubbed and washed, in time for the tenant.
When the council came to inspect the property, because I had done all the ground work I got the go ahead and they approved the property for their scheme and now they were ready to introduce tenants to the property.
Surprisingly the first tenant who came to see it said she liked it, and wanted to take the property! Just because I had complied with the council’s guidelines doesn't mean it wasn't a dump, it was. Unsurprisingly she called me a couple of days later and asked if she could get rid of the sofas and replace with her own. Of course I acted like as I was doing her a favour and reluctantly agreed.
The property did well for me, at the time I took a fixed rate mortgage of 5.09% for 7 years, this meant my mortgage was fixed at £625pm and my income was £850pm. So I was making over £225pm which came to £2,700 p.a. I was very impressed with my return, especially as I had put none of my own money into the deal. My deposit was only £7,750. The tenant being a council tenant stayed there for nearly ten years straight, so there was no expense in refurbishing the property and it required very little maintenance apart from the annual gas certificate.
The property was sold in 2014 for £191,000 this meant on average it increased in value about £3.5k per annum; if you include the income I was making this worked out to £6,200 per annum.
Looking back there are a few things I would have done differently. The major one being how I financed the deal, I could have not only bought the property with no money but I would have got a cash back too, but hindsight is a wonderful thing.
This was my first dose of doing a property deal, and thereafter it gets into your blood, and you become an addict, it’s not necessarily the money but the high you get doing it. I have spoken with others who suffer the same illness and the symptoms are much the same.