Saturday, April 13, 2013

How to Supplement Your Retirement with Income from Other People's Properties

Property in Europe
Property in Europe (Photo credit: Images_of_Money)
Do you have fears about not having enough money for a comfortable retirement? Perhaps you are looking to invest in property, either to supplement your existing pension, or to become financially independent from the portfolio itself. What you may not have realised, however, is that you don’t necessarily need to “own” a portfolio in order to create cashflow from one. Read on and discover how my daughter Emily and I went from 0 to £5000 per month from properties we don’t actually own... 

Would Ownership Work for Us? 

We had heard a great deal about building a small portfolio of properties that we could buy cheap or finance, refurbish and sell or rent to up-and-coming young professionals. It sounded a good plan on the face of it but the problem was that we were quickly running out of cash. Since the credit crunch, lenders usually require a hefty 25% deposit. Even if a property could be obtained below market value, it was costing us around £21,000 per property. After all that investment, we were only making around £200 per month cashflow. At this rate, we realised that it was going to take a long, long time to become financially free, so it was back to the drawing board. We knew that there had to be another way. 

Single-Lets vs. Multi-Lets 

As I mentioned, renting the property out as a single-let property, namely when the entire property is let out on an AST, just wasn’t producing the cashflow we required. It was then, that we discovered how multi-letting a property, namely renting the property on a room by room basis, created substantially higher cashflow each month. It did not take us long to realize that multi-letting was the way forward. However, we still had the problem of stumping up the hefty deposits required by lenders. That’s when the light bulb moment hit... 

You Don’t Need To Own! 

We knew that multi-letting was the best was for us to maximise cashflow, but we still faced the same problem, namely raising the huge initial deposit. It then suddenly dawned on us. Why do we actually need to buy these properties? We knew that there must be struggling landlords out there who are looking for a guaranteed rent and for someone to manage the property for them. We decided to contact letting agents and make arrangements to rent the properties through what a corporate let. We would rent on a room-to-room basis to multiple renters who would be young professionals between the ages of 23 and 35. The agent would have a guaranteed rent, and we would take care of having minimal renovations performed that were necessary to make the house attractive to tenants. Initially we were met with scepticism and were even thrown out a couple of offices! But we persevered and within 6 months we had 9 multi-let houses in 5 months generating £5000 pcm net! 

Finding the Right Properties 

In our target area, we look to acquire properties that had a number of larger bedrooms, such as Victorian houses. Double bedrooms rent out much more easily than singles, especially if they have an en-suite. We normally look to pay the landlord around £200 pcm for each double bedroom in the house. So a property with 4 double rooms, we will rent off the landlord for £800. We then advertise the rooms for around £400 per room. After all cost, we aim to make £500 per month cashflow off each property. 

This system has been working out well for us and we plan on expanding our portfolio of rent to rent properties in the next year or so. We have created systems so that we only spend a few hours each week managing each property. It really has worked well for us and can work for you too. As Nike would say “Just Do It!” Francis Dolley is an expert on this unique rent to rent system and runs courses in the UK teaching students how they can successfully build a portfolio of properties that they don’t own, yet generate substantial cashflow profits each and every month.

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