And we're off!

My bag is nearly packed, my suitcase is just about closed. No, I haven't decided that Andy's geekery is too much for me to take. I'm actually off for a bit of investing indulgence as I leave tomorrow morning for a three day intensive course about property investment.  I must admit to feeling a mixture of excitement, nervousness, and wonderment - who will be there? What will we discuss? Will I feel totally out of my depth and wish I had concentrated more on maths at school? Particularly when the training moves on to an analysis of interest rate percentage points, calculations of Return on Investment (ROI - I know that one!), or mortgage amortisation comparisons?

Hm. Calculator where are you when I need you?  

I'm optimistic though that this three-day residential Property Investors Network 'Property Mastermind Accelerator' programme down in Birmingham will help me learn something more about property. It all looks amazing - although I expect it to be very tiring too. There are so many ins and outs to investing in property and it seems that you need to be able to use a number of different strategies to be successful. I think I have learnt some new things in the last couple of years but need to stretch myself again. I am anticipating something good meeting other property investors and finding out about their stories and backgrounds. 

In the meantime while I'm gone, would you like a sneaky peak at how the house is coming along? I was amazed today to show two people round who dropped in on spec, tiptoeing over the rubbish piled in the front yard, wiping their feet from the dust and debris, to let me know they would like to rent a room!

Here you go ...

Attic room (blinds not in situ yet)

Stairs to attic

Landing

Ensuite

Other view of ensuite

Upstairs front bedroom

Upstairs middle bedroom

Upstairs middle bedroom with view of ensuite door!

Shower room

Downstairs front room 

Kitchen

Downstairs middle room

Downstairs middle room (the red room)!

Hallway into property

There are lots of little jobs still to do - pictures and mirrors need putting up, the built in wardrobes need shelves adding to them, there is a lock on the bathroom door that needs fitting, the blinds need putting up in the attic, kitchen and shower room etc etc.

But we are certainly making progress. Can't wait to show you when it's all totally finished!

Hitting 'the wall'

Long distance runners sometimes talk about the time in a race when their legs suddenly just seem to stop working. The muscles clench and tense as their legs turn in equal amounts to wood and jelly. Nothing makes them go anymore. The spring has finally unwound and there is no more energy or capacity to do any more. The brain has disconnected from the body and it is as if there is absolutely NOTHING left to give. This is not a brick wall that is 'theoretically' difficult, it is one that is literally and physically difficult.

But amazingly about an hour later, those same marathon runners pass the finish line. Running, walking or stumbling (as I would be), that white line is passed. Someone thrusts an energy drink into a weak and limping hand and hugs a space blanket round those tense and tired shoulders. Then slowly the euphoria of the achievement dawns on the runner. They made it! They did it! And in what time!

Perhaps in every long race in life we hit that wall. And I did last week. I was totally at my wits' end. A property we had viewed in January, which we subsequently made an offer on, and worked on really hard to buy (there were many issues that we had to overcome to get this far) fell through on Wednesday. Not only had we put in a lot of hard work, there was also the solicitors' time (which we paid for), the structural reports, the mortgage company's time - which all amounted to nothing.

After weeks of oscillation, the mortgage company pulled the plug on the offer and decided that they needed to instate a full retainer in order to ensure that basic upgrades were completed. However, their requirements were so totally unrealistic that after much consideration I decided we had to withdraw. We had explained from the start that this house needed a LOT of work. It was a project! It was a development that needed re-wiring, some plumbing, redecoration, a new bathroom and kitchen. Lots of re-plastering, quite a bit of building work, and yes something that your usual house buyer would not even pick up the bargepole of let alone use the bargepole to touch it. I had not left any detail undisclosed. I was constantly told that the mortgage would not be a problem. That is until three days before completion! A phonecall in the middle of my unremarkable and plaster-dusted morning announced the decision. Final. Decided. Certain. That was it - no mortgage, no property purchase. Four months of completely wasted effort, time and expense.

 After talking to the estate agent, she told me this wasn't the only time recently that a similar situation had occurred to another developer, where initially the bank were all hearts and flowers 'yes sir, how much sir, three bags full sir'. And as the time neared for completion and the hand-over of the said mortgage monies became a reality, the tone changed to 'how much sir? really sir? for THAT property sir?'. It seems that still the power lies well and truly in the hands of the financiers.

And at that point I just felt totally deflated. I began to question my plans, my hopes, my dreams. What's the point of all this property development? Why do it? It's painful, tiring, stressful, nerve-wracking, expensive, worrying, and demanding. I began to ask myself whether I had the skills, the ability, the knowledge to do this stuff well. Maybe I am not cut out to be a property developer and I need to lower my expectations. Perhaps I have too much to learn. And even when you have bought a property that seems to offer potential (as we have in Crewe) what you previously believed to be a gold mine, is actually a money pit. No progress apart from a total drain on finances seems to be occurring. It is so slow and unseen. It is dirty, dusty and raw. Every which way you turn there is mess, chaos and cost.

Yup, I hit the wall you might say.

But I still carry on.

I haven't quite crossed my own white line yet - the finishing one I mean. But when that day appears I can tell you that I am well and truly going to enjoy the hug of congratulations (even if only from my hubbie) and the warmth of the euphoria of completing such a housing marathon this year. And the energy drink? Well I have to admit that I suspect it will be SLIGHTLY stronger than a Lucozade Sport.

Bank of Mum and Dad

I was fascinated and a little perturbed to read an article in today's Daily Telegraph about the number of 18 - 30 year olds who rely heavily on their parents for financial help and also for simple decision-making [Recession has turned ‘Blair’s children’ into a ‘Peter Pan generation’(Daily Telegraph, 6th May 2013)]. Although it can't be surprising that Generation X need financial support to get on the housing ladder, or help to put down a deposit on a rental property, not having the ability to take responsibility for other areas of their life is actually quite worrying.

In their book The Millionaire Next Door: The Surprising Secrets of America's Wealthy (1996) Thomas J. Stanley and William D. Danko expose the truth about the way that self-made millionaires run their lives. Far from having lavish lifestyles and buying expensive cars, or indulging in goods of ostentation (always wanted to put that word in my blog), these PAWs (prodigious accumulators of wealth) save regularly, invest consistently and never spend more than they earn. This allows them to make the most of the spare cash they do have in building something for the future (something more than bricks and mortar perhaps)! Amongst the many traits of the individuals studied was the willingness to suffer hardship, discomfort and poverty in order to remain fully independent adults and NOT rely on the bank of mum and dad for handouts - EVER. This built a determination in these self-made millionaires to be economically independent, come what may, and to be enterprising and frugal. Over time, their approach paid off and they ended up being very rich indeed.

The authors discuss the growing tendency of parents in America to fund their adult children almost continually even after they have left home, calling it  'Economic Outpatient Care', by giving gifts of money and offering financial support. The authors' research clearly demonstrates how this affects those on the receiving end of EOC. The authors discuss the impact of this ongoing 'drip, drip, drip' effect of monetary gifts, and expose the problems that it is storing up for America's future economy.

Before I tell you the results, which of these statements do you think most closely describes the most common effect of EOC on the adult children who receive these monetary gifts?

1. As a result of the financial assistance, the offspring become completely financially independent, thus taking responsibility for their lives and demonstrating much greater enterprise so they are not reliant upon anyone for further help.

2. As a result of the financial assistance, the offspring become slowly more and more accustomed to 'hand-outs' (willingly or begrudgingly given by parents) and less likely to ever take full responsibility for managing their finances - indeed eventually seeing it as a necessity.

3. As a result of financial assistance, the offspring themselves become generous with others, and utilise the financial support from their parents to enable them to become philanthropic and charitable for the good of the wider community.

So - which one do you think MOST closely describes the MOST common effect of economic outpatient care? 

The answer is number 2. In fact over time, offspring who receive EOC seem to be unable to function without it. They become dependent on the extra financial help from their parents, and never take responsibility for their own finances! [It would be great if the answer was number 3, however this is the least likely outcome as these offspring actually become more profligate over time and completely unable to stick to a budget. Therefore giving to someone else is usually out of the question].

The article in The Telegraph would seem to bear this out - that parents are unable to raise their children to be independent (perhaps they secretly don't want them to be) and to take responsibility for their lives (a much more worrying trend).  Clearly this situation has massive implications for families across the country. And of course, in part it all depends what kind of society and families we want to have. I however, want to raise children who are proud of their own achievements, determined to be responsible and independent. I don't want them to be reliant on us as parents to prop them up when they experience hard times, and in so doing I am hopeful that they will be more successful than us! You have probably heard the wise saying 'necessity is the mother of invention' and surely your own life bears testimony to great results borne out of testing times.

We need to trust that we have raised our children to be resourceful, intelligent and able - what we must NOT do is remove from them the other key ingredient that will fuel their success - motivation!

HMO update

Things are getting increasingly close to lift off in our large HMO!

Here are the latest pictures of all the work that's been done - I can't wait til it's all finished now!

The new kitchen tiling and lighting

Downstairs back bedroom (just love those curtains!)

The new corridor downstairs (fire safe and acoustically sound -haha) 

Completed plastering in downstairs front bedroom (nice matress eh?)

Upstairs middle bedroom

New towel rail in main shower room

En-suite to upstairs middle bedroom

Floor in ensuite and towel rail

Upstairs front bedroom, plastered and ready for decoration and carpets

Shower in upstairs front ensuite

Toilet and towel rail in upstairs front ensuite. 

Carpets are ordered, curtains on their way, furniture needs to be arranged! Painting taking place as I write... not long to go before the 'To Rent' adverts are out!

Fringe benefits

Today I had a great chat with my hairdresser .. let's just call her B for short. She is a wonderful young woman, with two kids, a great hubby to whom she is happily married, and they have a lovely house. BUT we got talking a while ago and she opened up to me about the fact that all their income goes on servicing their debt. Mortgage debt, credit card debt, car loan debt etc etc.

Now I'm not saying that this is in any way unusual in the UK today. Many of my friends as I have discovered are on interest-only mortgages. In order to afford a home suitable for bringing up a family, sometimes that's the route you have to take.

But as B said to me, they have absolutely NO capital in anything. They have no money in the house as it has depreciated in value since they bought it five years ago. Their cars are a constant source of financial pain; their credit cards are maxed out; and they have no savings.

As we got talking I realised that she was a bright woman who understood the long-term implications of their situation, and recognised that as she got older she and her husband would not be having the kind of retirement they dreamed about - UNLESS they did something to change course NOW.

The first thing I suggested was that she read Robert Kiyosaki's 'Rich Dad, Poor Dad'. A GREAT book for anyone wanting to change their financial course in life. A few days later she texted me to say she had bought the Kindle version and was avidly chomping her way through it (not literally I hasten to add -  it's digestible but not edible)!

So when we met today I was interested to know just how she'd been getting on. Clearly the messages within the book had struck a chord and many changes had taken place in their lives since I last saw her.

1. They have changed their cars to pay off the loans completely and bought two much smaller, more economical cars. They no longer have car loans, AND they are saving money on fuel.

2. B has taken on some extra work (just a day a week). Although she has to pay for one day's extra childcare, the income she gets is going directly to paying off the credit card loan, which she thinks will in the long term be much better for her children and she makes enough to cover the childcare and make a profit.  (In September her son will qualify for 15 hours free childcare a week so that will also reduce their outgoings).

3. They have created a monthly budget which they stick to come hell or high water. As she said to me 'I used to think frugal people were so irritating - now I understand how exciting it is to find a bargain'!

4. They are looking around at better mortgage deals and looking to swap round their credit cards so that they can pay off more of the capital and pay less interest. (A great website to get started is http://www.moneysavingexpert.com/)

I was SO proud of her! She has

• believed in herself and the ability to change
• created a plan
• taken action
• been disciplined and stuck to it

Soon - she will start to see results!

I was so impressed with B - not only is she a great hairdresser, but she is starting to prove that no matter how much or little you have, you can CUT out excess, SNIP away at debt, SHAVE out unnecessary expenditure and ensure FRINGE benefits for life. There's no doubt that GROWTH will follow!

[Groans all round : ) ]

Immigration, communication and realisation!

One of our smaller - might I say 'bijou' - properties, is currently rented by a lovely Polish family. They are clean, considerate and polite. They always pay their rent on time and they have been extremely easy to deal with over the three years that they have lived there. That is, except for one embarrassing problem -we just can't understand what they say!

Over time, I have managed to work out the reason for the odd phonecall or other, when a word like 'boiler' or 'carpet' or 'garden' has appeared in their stilted English conversation. The rest of the chat has been pure guess work, but obviously we haven't been far off, as whatever the problem was seems to have been addressed, and all is quiet again.

It must have been just as difficult and frustrating for them as for us, dealing with an inept landlady who cannot speak a word of Polish. But over time we have muddled along and all has been good.

A couple of weeks ago they gave us their notice to leave the property so I advertised the house and within hours had a stream of messages from people wanting to look round. One call I had was from a lady who had an unusual accent (perhaps Eastern European) and we arranged a viewing for the following day. As soon as we met and she started to talk, I knew she was Polish (although she did have a much greater command of English than our other tenant) and I guessed she would immediately like the property (which she did).

What I wasn't expecting though, was that on entering the house she recognised the current tenant and a string of animated conversation flowed forth between them, complete with excited gesticulations and facial expressions. The communication between them was highly entertaining, especially so as I had absolutely no idea what they were talking about! Suddenly I realised how it must feel to be on the other side. Not knowing the language, not understanding the subtle cultural differences, not being able to pick up on the nuances of meaning conveyed through spoken language. It was both interesting and worrying at the same time.

I thought to myself : 'what is the current tenant saying to this prospective new tenant'? Hoping desperately she wasn't saying something awful about us as landlords! Actually, my fears were quickly allayed as I was told in no uncertain terms 'You have been excellent landlords'! As I stood there, glowing somewhat in praise, I was suddenly struck by her own confidence in speaking English that had clearly improved over the few years living here in the UK.

It must have felt very strange when she first came to the UK to make for her and her family a brand new life here. I bet there were times when she felt lonely, homesick and nervous. I could of course go on here about how important it is at a time like that to have quality housing etc etc. But actually I really want to make the point that it took her a great deal of courage and faith to immigrate here and yet I baulk at the slightest project hiccup!

I have the benefit of a wide network, good contacts, a reasonable command of English (less so the local dialect admittedly!), strong links with the community and a knowledge of where to go should I need information or advice. She had none of these, and yet bravely made the move. It's true, communication takes many forms and in this instance I can say that I definitely heard a great lesson about courage in the face of nerves that no words could convey.

Networking

This last month has been exceptionally busy for me in many ways. As well as developing a large property locally, which we bought in December, we are buying another large Victorian property not too far away to develop as an HMO as well. We sold  the other property (mentioned in my 'Selling houses' blog post ) and are awaiting the proceeds from that sale!

Getting into the HMO (house of multiple occupation) territory has been, well, I'll call it interesting! We have encountered shocked building regulators, stunned planners, taken aback developers and perturbed builders. Many trying to dissuade us from our intended course of action. Admittedly, they have reacted this way because we have literally stumbled upon problem after problem, and our ignorance in this field has been evident! However, what I have learnt from the process so far has been much greater than if I'd just read about it in a book.

Kitchen into extension

Extension - in its raw state!

Original kitchen

Newly built stairs to loft extension

One of the new en-suite shower rooms

New door frame for fire doors - it will be attached to a wall eventually!

First look at the Velux windows

Looking down from the loft

I can quote the acoustic tolerances in decibels needed for a registered HMO; list the fire safety requirements and necessary wall linings; tell you the various laws and policies that govern HMO development; and give you the low down on information repositories. What I can't tell you is where to get the mettle to do it.

Because believe you me, you need mettle in this business. Although I had quite a bit of experience as a 'landlady' I had little as a developer. I had dipped my toe in the HMO water and found it to be tantalising, so we decided to take the plunge! But the development of a seven bedroom HMO is a project on another level!! Having support from others around you who do believe in you and will encourage you is absolutely vital, as is networking with others who have trodden the path before.

We recently attended a PIN meeting in Stoke which was highly valuable and I would thoroughly recommend it. Check out Property Tribes forum too - a lot of worthwhile contacts and experienced landlords and investors post there.

Developing your network takes some time and effort, although I can't complain about the oft-used venues for such rendezvous (delightful coffee shops, tea rooms and charming hotels being my faves)! You will find that far from creating competitors you will develop friendships, and in hard times it's these folk who will be your most valued supporters.