After a few years in property, I have discovered a couple of secrets about the Buy-To-Let property industry… I wish I’d known about them sooner!
For some reason, nobody ever tells you about these things at the start of your property career… which would make life much easier for you if you knew them!
Luckily for any property newcomers, I’m going to share these secrets… 🤫
Secret Number 1 that nobody tells you about being in property: The £25,000 salary affordability issue.
Sometimes people new to property investing get a bit keen, quit their job, leave themselves with no salary with the intention of making it big in property.
This is a bad idea!
The reason for this is that a lot of mortgage lenders don’t like to provide mortgages for people who have an income of less than £25,000.
Some lenders do; some have no minimum income requirements… but your chances of getting a decent mortgage are much better if you have a salary to begin with.
So rather than suddenly jacking your job in and plunging your salary to zero immediately, a better way to get into property would be this:
Gradually build up your income from property over a couple of years, and gradually decrease in the amount of days you work in your normal job, so your property income and your job income eventually balance out together into a decent overall salary.
Then one day, your income will solely come from property, as it will surpass your job salary, and you will no longer be exchanging your time working for somebody else!
Secret Number 2 that nobody tells you about being in property: help by utilising credit cards and building up lines of credit.
Property is expensive. Most projects cost more than you anticipate, and the cost of refurbishment is what puts a lot of people off doing them.
However, you can get some help to pay for them by utilising credit cards.
Use a low cost credit card to purchase materials: boilers, kitchens, bathrooms and so on. Yes, they might end up costing you a little more over the long run, but it’s better than never doing a project.
Obviously pay down the credit cards as soon as you are able, usually out of the property rental income once it’s up and running.
Build up a couple of lines of credit, with various suppliers too, and this will also help spread the cost.
I always chuckle about this next bit, but how good would it be if you could pay your contractors using a credit card too?!
Most of them want cold hard cash transferring!
But remember: all materials can be bought using credit. 👍
Secret Number 3 that nobody tells you about being in property: looking after your credit score.
This is something I’d never even thought about before being in property – but luckily, because I’m of that organised OCD do-things-correctly mindset, I’ve never done things like miss payments or default on bills.
And here’s another fallacy: why should your personal credit record matter if you’re buying property in a limited company? 🤔
Because it does, and that’s all there is to it!
Mortgage lenders want personal guarantees that they’re going to get paid, and as limited company directors, that guarantee falls to you – so keep your nose (and credit record!) clean!
Makes sure you pay at least minimum pay amounts every month for bills and credit card payments, in full if you can – and here’s the crucial bit: pay them on time; late payments have a detrimental effect on your credit score.
And we want to keep that perfect payment record and score as high as possible – because if lenders think your credit record looks dodgy and you look unreliable, they simply won’t lend you money for mortgages!
I check my credit files a couple of times a month just to ensure all is well – beware other people taking out credit in your name… 😱
I use all three of the Equifax, Experian and Credit Karma credit scoring systems, so get yourselves signed up to one or more of these. The added benefit is they also tell you how to repair and improve your rating.
And everybody loves a high rating – especially mortgage lenders! 😁🙌
Secret Number 4 that nobody tells you about being in property: investor difficulties!
A lot of people in property, myself included, leverage funds from private investors to purchase property.
Investors get a great return on their loan investment, and you get help building your portfolio.
Now here’s the secret: raising finance is hard. And what makes it harder is that the majority of people who reckon they want to invest funds… simply don’t.
Sadly, there’s a lot of talkers not walkers, when it comes to investors. I’ve found people who clearly stated they wanted to lend money out, and then when it came to the crunch… they didn’t.
This is for a myriad of reasons, genuine or otherwise:
🤷🏻♀️ they’ve already lent their money out elsewhere
🤷🏻♀️ they’ve changed their mind
🤷🏻♀️ they’re nervous and scared of the investment process
🤷🏻♀️ they’ve bought property themselves with their funds.
Or it could be that they simply don’t like you and don’t want to work with you, or they don’t trust you or the deal! 😫
Sometimes, perhaps even they never had the money to begin with and were simply time-wasting tyre kickers. 😤
Asking for proof of funds here helps weed out the hot-air braggers full of bluster!
The point is this: some people are all talk and no action – so don’t just rely on one investor, in case they back out or let you down.
Have a list of “potential investors” lined up who are ready to invest.
Because people only become “investors” if they actually lend you money!
So build those relationships with genuine investors who genuinely want to work with you!
👦🏻 💷 🏚 👩🏻 💷 🏚 👦🏼 💷 🏚
So there you have it… a few inside secrets shared, which hopefully will make your property career much easier for knowing them!
Best wishes, and happy, safe investing,
Kellyann x x x