We used to have a chap in our office that was always on the borrow. Can I get an advance on my wages? I’ll pay you back in two weeks. Can someone buy me a pint? I’m skint but I’ll buy you two pints on payday. The poor guy was always on the back foot. The joke was he’d been born too early. If he had just made his initial appearance two weeks later, he’d be bang up to date on everything.
But as light-hearted as we took it, it was a serious issue. Have you ever asked yourself how long you could survive if you were unable to work? A week, a month, a year? What happens after the year is up? I know it’s a question that IFA’s feed off.
Believe me, I’m no IFA nor am I trying to sell you income protection. What I will do though, is get you to think about the question that for most people is too scary to even contemplate.
Many years ago, someone asked me the same question and it became an obsession for me over the years. The reason for this was because I was earning a lot of money and then the financial crisis saw to it that I wasn’t. I went from being financially bulletproof (or so I thought) to welcoming paying guests into my home for income. As it turned out, creating a luxury holiday let (thanks to my quick-thinking wife) was a very profitable venture, and it allowed me breathing space to rebuild my finance companies which had been decimated by the 2008 crash.
The trade-off was that while our beloved home was being used as a leisure park by well-heeled guests, my wife and I had to live in a rented bedsit with our disabled toddler, two large Dobermans, two cats and a sausage dog. If that wasn’t enough, to add insult to injury, my Bentley Continental had turned into a small white Peugeot van filled with dirty linen and toiletries. But I’m not one to cry into my soup when the going gets tough. Woe is me is not an acceptable excuse.
As extreme as my situation was and as close as I went to the edge of disaster, I survived it. But we all know that there are plenty of people who live on a month-by-month basis, dancing with the devil. Quite frankly for many, if their paycheck stopped next month their life as they know it would quickly crumble.
My wife and I had built everything we had using our own wits, without any parental help or other freebies, so when it came crashing down we survived using the same wits. The whole process was very humbling and made me rethink the format of my life. I made notes to stop buying everyone champagne and instead invest all my future spare income into buying more property. During those tough years, I sold almost everything of any value, apart from the four properties I owned. The cash flow that they produced was just enough to get us through an extremely tight period. In the preceding 6 years, I’d heartily spent over a million pounds on supercars. Had I shown the same amount of enthusiasm for buying rental properties as I did for buying Ferraris, I doubt I would have been living in a bedsit, albeit temporarily.
What I had learned was that we spend much of our lives buying things that we simply do not need. We purchase liabilities that cost lots of money and produce nothing for us except a little initial excitement. What we ought to be doing is using our excess income to purchase assets which generate income.
Right now, we are in a magical period where house prices are high, but due to the cost-of-living crisis and rising interest rates, we are likely to be heading into recession pretty soon. So what’s so magical about that, I hear you say? Well, I live next door to a large dairy farm and as I go for my morning run, I often watch as the cows get spooked and stampede from one end of the field to the other, always started by one cow and with the rest following.
Rarely does a cow hang around on its own. They find safety in numbers to protect themselves from potential predators. The cows remind me that when the herd is running in one direction, it makes sense to head in the opposite direction. For there are opportunities which are missed by the chaos of the herd.
If you believe the media and watch too much news, you’ll probably put a colander on your head, dig a hole in the ground and stay there. But then you’ll miss all the juicy cashflow opportunities which always exist in your local property market, no matter what the macroeconomic climate looks like. My advice is to get out there and keep discovering what is right in front of your very eyes. Golden property opportunities hidden in plain sight masked by the doom that we are forced through our smartphones.
Build your property portfolio slowly and methodically, learning from each project and improving the process for the next. With each property, you’ll reduce your costs and improve your cash flow and yields. It’ll take time, but with a laser focus, you’ll gradually create something incredible: a passive income and wealth for life that’ll see you through the bad times as well as the good.
Matt Cottle is available for property investment advice and can be reached at www.propertyinvestmentadvice.co.uk
