And this off the back of a three-day week and a four-day bank holiday. As a nation, we are already a lot lazier than we were before Covid. Yes, we are. Have no doubt, this experiment will have private employers biting their fingernails with worry, and for good reason. The odds are stacked against small business owners and it’s getting worse.
Anyway, I want to bring in a new concept: If you think that a 4-day week is cool, then why not go a few steps further and go for a 4-hour working week? That’s where the smart money is. Imagine telling your buddies you work for 4 hours a week or less. They’ll go green with envy each time they fire up their PC at 8.30 am for another day in fluorescent paradise.
Yes, I know what you’re going to say: "But I enjoy my work, I’m never going to retire, I couldn’t sit around all day. Anyway, I do it for my clients", etc, etc. Sure you do. Listen, you do it for money and you know it. We all do. If you didn’t get paid for what you do, would you still do it? There’s your answer.
Reality check: life is short my friend, it’s not a dress rehearsal and far off retirement means aching bones and evaporated dreams funded by dwindling monthlies. If you honestly can’t think of anything better to do than work your butt off, then you lack imagination. Besides, you will get to a point where you no longer enjoy what you do as much as you do now if you actually do at all. Sorry to be harsh, but it gets you thinking.
I understand though. I used to love being holed up in a boardroom for 10 hours a day, strategising about this and that dressed in a made to measure Italian suit sitting in a thick leather chair sipping lattes. These days my boardroom is a Macbook and iPhone, my attire is a pair of Raybans and flip-flops. And my office is, well, anywhere I happen to be standing or sitting. It's a better way to live.
Rarely do I spend more than 4 hours a week on my property business, and sometimes, like this week, less than an hour. This leaves me free to be there for my family, go to the gym, write editorials, hop on a plane, and generally do whatever I please, within reason.
So, what’s the secret to working a 4-hour week without tempting bankruptcy and divorce? There are several ways to do it, but the one I know best is property investment. You buy a property, do it up, rent it out and save up the cash flow while you’re still working at your day job. Then, when it’s increased in value and gained enough equity, you can remortgage to draw down cash and start again. Sometimes this happens quickly and other times it takes a bit longer.
First, you will need a goal. For me, building a property portfolio wasn’t to become filthy rich beyond my wildest dreams. The goal was to create a security blanket and be able to meet all my monthly expenditures while having enough left over to live reasonably without working. It took me 20 years, but I wasn’t concentrating for 12 of them because I was busy running my finance companies. I’ve built most of my portfolio in the last 8 years if you need a yardstick.
So, how much income will you need to replace? Let’s say that you are two average UK earners. According to ONS, you’d be making £38,131 per annum each. Using my portfolio as an example, my average property generates £600 a month of cash flow. You would need to purchase and rent out about 6-8 properties to replace your income. If the maths doesn’t initially make sense, it’s because by the time you get to your goal the rents will have increased. Sounds like a mountain to climb? Yes, but you need to be patient and persistent. Nothing worthwhile was ever meant to be easy.
Next, you’ll need some cash, of course, to pay the deposit, disbursements and renovations. There are many ways to get it. You can earn it, marry it, borrow it, inherit it, crowdfund it, or steal it. You choose. I wouldn’t advise the latter though. You could find an investor to lend you the cash for a fixed return if you have really big balls. But be careful as there is no space for error doing it that way.
£65,000 of capital is a good starting point. You can buy a £200,000 property with a good kitchen and bathroom, pay a 25% deposit and lightly renovate it with the change. The mortgage will be a smidgen over £400 a month and the rent should fetch £1,100 a month. Take away a few quid for insurance and maintenance and Bob’s your uncle. That’s an 11% return on your capital and a gross yield of 6.6%.
Finally, now for the magic that’ll have you dreaming up your resignation letter and telling your boss exactly what you think of them. Don’t do it yet though. The property will normally increase in value. This is your future cash cow. I work on the assumption that capital growth is 5% a year. Why? Because I have 20 years' experience, that’s why.
In 5 years at 5% growth, the property will be worth £255,000. The mortgage will be £150,000. You’ll be able to remortgage up to £191,000 which will release £41,000 after you’ve cleared the existing mortgage. And if you’ve managed to keep your greasy mitts off the cash flow, there will be about £36,000 in the bank.
Your first property has delivered £77,000 of cash, enough to buy a new property and start the process again. 5 years after that, you’ll have enough to buy another 2 properties. 15 years after you first started you should have 8 properties. Each will be worth £400,000, so you’ll be the proud owner of a £3.2m portfolio, and you should be clearing well over £1,000 a month per property, so £8,000 a month of income. As I say, it can happen a lot quicker, but let’s not get over-excited.
The good news is this: you’ll be well ahead of the income you wanted to cover. And 8 properties would only need about an hour or two a week to manage. Say bye-bye to your work colleagues, the drinks are on you.
Now, where are those cigars?
