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Why I Spent A Quarter Of A Million Trying To Reach The Holy Grail Of Property Investment

property investment holy grail

I own cheap property.  I own expensive property.

I have DSS tenants.  I have mega-earning professionals.

If I had my time again with the benefit of 10 years experience, what would I do?

That was also the other question in my mind when I asked the ultimate question: Is there any such thing as an “easy” buy to let?

And I can tell you from experience, cheap property (and I’m talking c. £50k) may have whopping rental returns – but it ain’t easy to run.

And I can tell you expensive properties (and I’m talking flats in London) may have eye-popping capital appreciation –  but it ain’t easy to stump up the deposit to buy.

So this time around, I decided to split it down the middle: I opted for a property which I hoped would get me to the holy grail of property investment – otherwise known as: a good rental return AND a good potential for capital appreciation.

May sound easy – far, far harder that what anybody ever realises.

It’s Rule 62: You can’t have it all.  Properties that achieve the highest rental yields have the least chance of capital growth returns and vice versa.  It is possible to earn an income from an asset and the underlying value of the asset to appreciate over time – however there is usually an inverse correlation between the rental yield and the capital yield.  Capital growth yields and rental yields are completely different animals with very different outcomes.

Before now I have opted for a “blended” approach – that is, my high rental yields support the properties bought for capital growth.  Trying to get the two in one property is an incredibly difficult feat.

I know of properties in areas where I could’ve pulled this off – but that’s because we’re now 10 years down the line and the benefit of hindsight is 20/20 vision.  To go for the ‘holy grail’ requires you to polish your crystal ball and take a leap of faith NOW!

Property investment is a long term game.  If I had my time again (and I’d had copious amounts of money in the bank) I would have bought in central London.  Period.

The capital appreciation on London stock has out-stripped any eye-watering rental yields you care to mention.  That’s why people invest in London.  There’s not many places in the world where you can buy an asset and see it appreciate by tens or hundreds of thousands of pounds per year.  It kinda makes having a job look lame.

But, to get access to that money – you have to sell – or re-mortgage.

Cash-flow wise, owning property in London is a killer.  It may be a mega asset you can cash-in, but that’s the issue – you have to cash-in if you’re going to get your hands on that lovely lolly.

And then what?

Invest in cheap property?

Cheap property may bring you rental yields.  It may put money into your bank account every month.  But, and it’s a big BUT, cheap property will take another precious resource from you: time.

Cheap property and the sort of tenants it attracts takes a lot more time to manage.  Multi-lets are the worse.  They may offer fabulous returns – but the time involved with managing these types of properties is a headache.

People will often wax lyrical about the amount of money they make and the returns they get – but often they gloss over the time properties take.

And I’m telling you now: cheap properties take more time.  Tenants paying lower rent take more time.  You may earn more money – but you’re going to spend more time trying to get that money.

That is why this time around I did things differently.

I looked across at my portfolio and said to myself: What have I learned?  

What could I do now that would bring me better than average returns for my time, money and effort levels.  And it had to be freehold – don’t even get me started on the issues with leaseholds and Freeholders!

That’s the whole principle behind the “easy” buy to let.

I don’t give a shit what anyone says – buy to let can be hard work.  You may find the odd lucky person who has an easy ride – but scale it up, make this your full-time business and the probability for stuff going wrong increases dramatically.  The more property you own, the more people you have to deal with – the more problems you’re going to face.

And that’s why I tried to distil my learnings and look to buy again with a different criteria.  That’s why I spent a quarter of a million on this buy to let property.

Will it be “easy”?

Have I found the ‘holy grail’?

Only time will tell.

  1. Christopher Browne

    Sam, that is all sound logic & oh how hindsight is a pain how it’s always late. My comment would be that even though cheap property / expensive property can be difficult / easy and give low / high rental returns – and you can do your best to set all the correct conditions for things to thrive (such as the “easy” BTL property) but life, more specifically tenants can be the biggest deciding factor. It does not always work that an expensive property always gives you a tenant who will look after the property & who will pay the rent; and vice versa. Likewise, the property can be fully kitted out but things can go wrong with it – despite best efforts. And then of course there is the local area, where there will be a price ceiling; this can go up or down, without you having any control. Leaseholds have their own complications which is an extension of the above.

    All in all, try as we may, and certainly for me personally, I need Lady Luck to shine down on me most of the time!

    1. Sam

      I agree there is only so much we can control, however I think if we start from the point of view “who do I want my customers to be?” (as opposed to what property should I buy) I think you end up in a different place – literally – and buy different property investments. Yes, stuff still goes wrong, but I think you can plan better for it. “Luck” always needs a helping hand 🙂

  2. Sara

    Sam I don’t think there is a Holy Grail when it comes to anything in life. You are right, the first question to ask is “who is your target market” then you can go from there. I have had great tenants and tenants from hell, and it really has nothing to do with the property, but more about the individual and their issues and how I choose to deal with it. I choose to see each problem as a challenge so I quite enjoy it, but my husband thinks I’m crazy and we should just throw in the towel and sell everything, “who needs this hassle”. 🙂 But I REALLY ENJOY IT!!!
    I tend to find though, that renting to males are easier than females. 🙂

    1. Sam

      Thanks for your comments. I was interested you say “it really has nothing to do with the property” I believe properties attract a particular type of person. What do you think?

      1. Chris

        I kind of agree.

        My lower end property has attracted a type that………….maybe suits the area more than the middle of the road property. They have also been more work with late payments and the occasional ‘accidental damage’ that required sorting. But they’re still with me.

        I would still buy lower end property but not bargain basement types, if you know what I mean?!?!

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