Attracting Outside Investment/ Joint Ventures – Me in Property so far… How I’ve Attracted my First ￡1mil in Investor Funding

Attracting Outside Investment/ Joint Ventures – Me in Property so far… How I’ve Attracted my First ￡1mil in Investor Funding

A new year, and a new start towards bettering our own financial security and being able to tell “The Man” to feck off so we can do what we want to. We read the books, listen to the podcasts, attend the courses, but does this fabled “OPM” (Other People’s Money) investing exist?? Well, it wasn’t so long ago that I started investing in property. 6 years ago now, so still a relative noob in this space. Standing at the front of a networking event spouting nonsense about property investment when I haven’t been through a full Boom/ Bust cycle yet. Hopefully I’ll survive that event when it happens (if the world doesn’t end at the same time), so I can feel like a proper investor for you all then!

Anyways… This is a story all about how my got flipped turned upside down, so I’d like to take a minute just sit right there and I’ll tell how I became… fortunate enough to be trusted with OPM.

I don’t think I’m anything special. I got okay grades at school. I did manage a degree, a 2.2 which I studied for as a part-time student in my mid-20’s. I live in an alright house, I have a small family with my Mrs, Claire – twin 11 year old girls and a 2 year old Beagle. I’m 40 years old now too, so no longer that spring chicken I used to be. I haven’t even got that many followers on Insta or LinkedIn either, I don’t think. Pretty normal by the usual standards, but what I have achieved is a total of just over ￡1mil of borrowing from private investors and JV partners over the past few years. This has either been borrowed and paid back, or I am currently deploying it within the various projects I’m involved with. I’m pretty sure I'll more than double that very soon!.

First though, a little about me and how I got started.

I hope this doesn’t turn anyone off from the post, from me, or you just think “oh, well it’s okay for him because…”?I haven’t really gone into the specifics too much with too many friends. Some who I did tell did get on their high horse… “Ahhh, it’s okay for you because you’ve got money” etc etc. That’s not the case at all, it’s been a proper slog to get to this point I am at right now, with many highs and lows which I know haven’t finished quite yet. I don’t think I’m a success quite yet, so I will keep knuckling down while I build what I set out to achieve. That’s one thing you will need to succeed in this property thing. The ability to just carry on!

I was very fortunate to start off my property investment journey with a little pot of money that I'd been given through some inheritance. My nan, when she was still alive, told me that when she departed to the other side that I would inherit a third of her assets with my dad and sister. Not the best of circumstances to receive a windfall, but the opportunity of a lifetime, and one that I didn’t want to squander. She was ill with COPD and seemed to be in and out of hospital as she got more and more poorly, but still sat there smoking tabs in her kitchen sticking her oxygen back onto her nostrils. I think I’ve also inherited a bit of that stubbornness. Contrarianism at its finest, even when being told that those little sticks she smoked were killing her at an increasing rate.

It’s a weird situation to be in, that one. Being told that when someone dies, you’ll inherit a chunk of money, and being told that by the person who is dying (and that you love). It starts awkward conversations with family members, some who seem to change character too. One benefit of my nan doing this though was that it gave me the time I needed to learn and prepare myself to do the best I could with this opportunity.

Ever since leaving school I’ve been in debt. It’s mad that you don’t get taught about money and personal finance when growing up. Even at home it wasn’t really a topic that was discussed, probably like most families in the UK. We didn’t have a much cash when I was growing up, until I was teenager anyway, when my dad was doing quite well as a salesman. My parents had me when they were very young. 17 & 18 years old. My dad was a squaddie, my mum a trainee nurse at the time. He loved spending money and going out, and my mum wanted to save it and stay in. Unfortunately, I preferred the look of spending the cash, so when I left home at 17, most of my money was spent on getting wasted every weekend (or night) and buying things that I really couldn’t afford. I got loans for nothing much at all, credit cards just because they were offered, and very quickly got myself into silly amounts of debt for no reason at all. Living beyond my means basically. Continually spending more than I earned. Even when I was earning a decent wage of ￡40k+ when I started considering how best to invest and educating myself to do something with this money, I was still probably ￡25k-30k in debt with store cards, credit cards, loans and overdrafts. It would take a lot of learning to undo the mistakes I’d made up until that point.

So I dove balls deep into learning at this point. It all started with “Rich Dad Poor Dad”. That lit the spark in me that I had to do something with this money that would provide for my future. I don’t know what others would have done with it. I think we each received around ￡70k in all. I know friends that have received money and they have just “done the house up”. Others would have done what my dad would have done and just pissed it up the wall. Nice holidays, a nice car, living it up, then have nothing to show for it. My sister (who is more like my mum with money – safe) used hers to buy my nan’s bungalow, did it up and has now moved into a nicer family home. Good on her, I’m proud of her. She’s happy and lives within her means. I’m still playing catch up with my own house! I’m still in the same house me and Claire moved into 12 years ago. It still needs work doing to it, but it will do for now. I paid down a little debt and decided to invest my way out of my situation, and one day I hope I will be able to look back and see I made the right decision. There have been a lot of sacrifices along the way, both by me and my little family at home. One day I’ll be able to treat them to anything they could ever want.

Anyway, if you’re still with me, this is how, I believe, I have got to where I am today and am now privileged enough to have people invest their own money into my projects via loans or joint ventures (JVs).

Proof of Concept

You need to show others that you are here to stay, you know what you are doing and that you will pay back their money! You will likely need a minimum of 2 projects to show this and build trust.

Like I said, I was lucky to start with a little set aside. I’d been speaking to a friend who I’d known since college, and we both decided we’d do this property investing lark. We both had around ￡50k each now, and both decided initially that we’d split everything down the middle.

Our first property investment was a very low & easy entry into investing. It was a ￡50k house in Darlington. Simple 2 up 2 down, not the best area of town (would I buy it again????). I think we both put in maybe ￡7.5-8k each, it needed a very light refurb, and I hate to say it but I painted it Magnolia, left the brown carpets in, the lot..

The previous owner, who was a landlord themselves, have been stitched up by the tenant who was a friend or friend of a friend (there's a little learn for you - never rent to friends. That's what they say anyway, I'm sure sometimes it's all fine, but there are a lot horror stories out there) but yeah, basically they vendor had left the place as a shit tip for me.

It must have been 3 or 4 months in conveyancing and getting it through the purchase process, and in that time the landlord simply tipped out all the food onto the worktops and left it there. When I got the keys there were flies everywhere, maggots, maggot casings, all that lovely stuff to tidy out. Welcome to property investing!!!

But you know, when I look back, it was a very easy refurb - bathroom was great, kitchen was good, no flooring to do. Just literally painting and a good tidy up. That was it. A boring, vanilla buy to let (BTL) property, leaving money in the deal, cash flowing something like ￡200-250 a month, but we’d got started. That’s the bit that everyone struggles with when setting out - Taking action. Avoid analysis paralysis and do something. Was it the best deal? Probably not. Was it the best area? Probably not. Would I buy it again? Probably not. But we’d bought an investment property, managed a small refurb, gone through legals and now had tenants. We were on our way to proving we could do this. That was our first joint venture anyway and although it didn't feel like it at the time because you are both putting in equal amounts of money, I had still convinced someone that I was investable, and they believed in me.

The next house we did was a more in-depth refurb. We’d done an easy refurb, time to up the ante. It was kind of a half-finished refurb that the owner had started but had run out of money on. Chimney breast removed, but a hole left in the floors and ceiling. Damp to the party walls, crappy kitchen, you know, the usual stuff!

We got the guy who’d helped with the last project in to help with this one, although he turned out to be a bit of a knob. He wasn’t the brightest spark but was cheap and keen to learn & work with us. While doing the work he asked if he could maybe move into the property himself with his girlfriend. “Great” I thought. He’s doing the place up and will be on tap for any future maintenance or other projects!

So, he moved in with his mrs, who was still there to this day actually, she's a lovely lass, but literally 2 days after they’d got there I got a call while at work from her saying “He’s smashed the place up!! I caught him cheating with my friend, he got pissed and kicked off when I told him to leave”. Great! Our nearly finished refurb is ruined. He’d promised to move in and finish it off for us.

Fortunately, it wasn’t that bad… A few smashed doors, some chipped flooring and some dents and blood & wine on the walls where he’d smashed his wine glass.

We became pretty much were social workers trying to get that one sorted. We had we had to try and get the property finished and repaired, which he promised to do, but she didn't want him in the house while she was there. She didn't want him in the house alone either, so, in order to get that one finished, we had to get her dad to sit there while the guy was finishing off the work off. I2n the end, of course, it didn't work. We ended up a little out pocket. Not too badly I guess, but we’d bought our second investment property. This one was our first Buy Refurbish & Refinance (BRR) attempt too. It got down valued, and we successfully appealed the mortgage valuer’s report, but again, we probably left another ￡5k each in that deal. Cash flowing ￡200-250 a month though.

This is what you need to go through though to show that Proof of Concept, just to show the naysayers that you can stay the course. This isn’t a phase, you mean business. You’d be surprised who doubts you too. Family. Friends. I think it’s a British thing. There are more people watching and wanting you to fail so they can say “I told you so” than those building you up to succeed. Now we had 2 properties though, I feel this is when those around us started paying attention.

But what of our ￡100k pot of money??? Already this was dwindling. We’d left ￡15k in the first deal, another ￡10k in this, we were down to ￡75k in theory…

The next house was another 2 up 2 down but in a nicer part of the town. I think it was a ￡72k purchase, which we planned to do via a mortgage to save some of our money, then do up and refinance at a higher level in 1-2 years’ time. On this one though, during the purchase process my business partner was campervanning around Europe. During the legal stages, the mortgage company found out that he hadn’t been at his home address to receive the mortgage paperwork. I’m not really sure why this was an issue TBH, but because we’d emailed them to him for him to scan and send back, the lender pulled the mortgage the day before completion. Yikes! As my mate wasn’t in the country and had spent a little of his pot enjoying himself, I had to scrape together as much cash as I could to complete on the deal a few days later. I think I’d managed to pull together ￡50k, so had taken the lion’s share on the cash purchase.

The refurb went okay on this one, although it was being funded by credit cards & bank loans, and as we progressed through the project, we decided to try out this new Serviced Accommodation (SA) strategy I’d been hearing about.

By the time we’d finished and furnished the place, we’d probably spent a good ￡35k on the gaff, all in with the furniture and trimmings for SA. It looked great though, and seemed to do well on the SA channels, but we only achieved a refinance figure of ￡105k on that one, so after paying back my loan and the credit cards, that pot of money was again disappearing quickly.

During the period between finishing that project and finding the next, thankfully, some of our families had become interested in what we were doing and were keen on investing in whatever we did. YES!!! We’d got our first investors!!! These were my in-laws and the business partner’s folks. They had both agreed to provide upto ￡40k each for the next venture – a back to brick HMO refurb in Darlington.

That was all great, the project, or how it panned out with the first workmen sadly wasn’t. This one really did go to tits up!

I think everyone goes through a least one stinker to earn their property stripes, a I think this was ours…. We had issues with the builders being a bit incompetent, problems with the relationship between them and me, and also they were travelling quite far every day, from Leeds, so money became an issue too.

I was acting as the project manager while working full-time on this one, which I have to say almost broke me. One day I had a call from a delivery driver at 14:30 saying that no one was on site to receive a delivery. About 60 plasterboards (fire, insulated, sound & standard) had arrived at site and the builders had clocked off early for no reason and when I called them was told it wasn’t their job to accept deliveries. Lol. I had to leave work to lift all the boards into the house on my own. Thankfully, after xmas that year, the builders said they couldn’t work on the job anymore. What a relief, but we had to redo a lot of the work that they had done. On the bright side though, I did meet Graeme Matthews who pulled us out of the shit and who hopefully is going to be setting up a construction company with me this coming year.

So, a silver lining and all that. I know Paul would say that “in every adversity lies the seed of greater benefit”

Remember we were using investor's money on this one! ?We obviously had to make sure that was safe and paid back, but having changed builders and re-done a lot of work, we’d gone over budget by quite a margin. It was also just after Xmas 2017. I was doing okay in crypto before Xmas, but if anyone remembers what happened early 2018, the market went a bit south a bit quickly.

We needed money to finish the project, so while my crypto portfolio was haemorrhaging cash, I just had to start selling in order to pay for wages and extra materials. Credit cards were maxed again too. I’d probably be a millionaire if I'd have kept what I originally had!!! What ifs… You’ll have a few moments like that when investing. Not to worry though, you live, and you learn. It’ll all come back to me one day.

At the end of the project though we realised we weren't going to be able to refinance all the money out of the deal to pay back our investors, and most certainly not to pay ourselves back. I think we were all in for around ￡115k on a property that valued up at something like ￡105k on the first mortgage! On a 80% LTV product we only released ￡83k, we’d borrowed ￡80k, plus had a year’s worth of interest payments to dish out! Yikes!?

Fortunately, a really attractive SA booking came in just as we were finishing the project, so we had what six people living in that house for a about six to eight months, making quite a lot of money for us while there! What we did is renegotiated with the investors to pay them quite a bit more for us keeping their money a bit longer. We hadn’t applied for that mortgage yet, and couldn’t while we had 6 people staying there within a 4-person HMO.

A bit longer than originally planned, but the income from that smoothed out some of the overspends and problems that we've had in refurbing that and allowed us to build up a little pot to pay everyone back, plus the investors got a better rate than we’d discussed. Everyone was happy (well, except our own bank balances!) and again it was just showing that we were true to our word. We were always going to pay back our investors even though we've had issues. We got creative when the chips were down and stayed the course.

That was it though. The original money we had to invest had gone really. We were on project No.4, and even though we were using BRR type strategies, we weren’t recouping enough from the remortgages to keep this pot topped up, and the last project had pretty much drank the last of its contents. At this point though, the cashflow kicks in from the little portfolio you’ve just created. It doesn’t sound a lot, but when the SA was good, and the HMO was ticking over, we’d probably make ￡1,200 - ￡1,700 a month off those 4 houses. That soon adds up if you’re not touching it. Added to that, we had two sets of investors (another on the way too, but I’ll talk about that later) who were happy to purchase the properties outright so that we just needed to fund the refurbs, and we were off on our way again pretty soon!

These family investors now invest with us each year, happily receiving their yearly dividend as a bonus. When we started out we had to provide first charges, loan agreements, updates, all sorts. Now though, they’re confident enough to just let us run with it. No first charges required, simple loan agreement, don’t even have to pay back their principle loan amount for them to reinvest it. They Know, Like and Trust us and what we do.

That little pot of ￡50k I started with will soon have grown into a portfolio with a value of ￡3-4mil. That isn’t all mine, by the way. I have various business partners and JV interests, so I’ll probably only have a 40% share of that (and it’s leveraged through mortgages too, so even that diminishes further). We’re still expanding too, so are probably geared more highly than seasoned investors would like. I’d say we’re hovering around the 70-72% LTV across the board. But that’s not the point. Portfolio value isn’t what I got into this for. I think at my peak earning during employment I earned ￡45k per year. I don’t know how that compares to other’s wages, but it wasn’t bad I don’t think. I have friends on half that up ere (north), and I know others down south would laugh at that as a piddly amount.

What I got into property for was to replace that wage though, and although I’m not quite there yet (expanding your portfolio does mean you can’t really touch all that property cashflow/ income!), I will have more than doubled it when the projects I have on now have been completed. They are all being funded (well mostly… There are always niggly costs – legals, professional fees, etc) by OPM too. I currently have a church to convert into 6 x apartments (SA), an old British Legion Club to convert into 2 x holiday lets and 2 x commercial units, a commercial conversion to convert into 4-5 x apartments (SA) and 2 x commercial units, a bank to convert into apartments, and a barn to convert into a high-end, accessible/ inclusive holiday let (as well as a few BTL refurbs to crack on with). I’m just about to (2022) start a JV on a construction company with Graeme Matthews too, the builder who pulled us out the shit on the HMO nightmare project, and who we’ve continued working with ever since.

“Most people overestimate what they can achieve in a year and underestimate what they can achieve in ten years.”

“Nana korobi, ya oki” which means “Fall down seven times, stand up eight.” – Japanese proverb.

Just. Crack. On

It turned into a bit of a beast when I dictated this while walking the dog then sat down to type it, so I will be adding to it in a mini-series or full length article when finished.

Hope it helps!

All the best, Anthony Boyce (Rocket)