Millionaire Challenge

Diggs.

Phew! I've been reading this thread on my commute all week, and have finally made it to the end. I can't believe the thread's been running so long!

Well, now I've committed so many hours to reading the thread, I figure it would be rude not to join!! So I'm in!

Like Tink, I'm 27 with a millionaire goal age of 40.

MY OH and I are both "professionals" on good salaries, but historically have been terrible at holding onto our wages long enough do to anything meaningful with them. We bought our first house late last year and decided that 2014 was going to be the year we started being more conscious of our finances and making better use of our money.

We calculated our "net worth" as at 1/1/14. Depressingly, it was -£11,923. This includes equity in the house, savings, current account balances, pensions (on the asset side) and my post-grad loan, student loan (OH has repaid his already), and money owed to the parents for their help in buying the house (on the liability side). As at 31/1/14 we'd improved this by 4%. Feb's looking better - we'll see where we're at come Friday!

Our plan is rather "slow and steady" tbh, and right now all we can really look to do is build up capital (and pay off debts!) in the most effective way. I'm (finally) saving and OH has agreed as of this month to start putting aside a substantial chunk of his earnings. I should have paid off my student loan by mid 2015 and have just moved my post-grad loan over to a better rate and shorter term. I'm hoping to overpay on this and have it cleared in 2 (ideally) or 3 (realistically) years.

The longer term plan is something like this (and, no surprises, involves property!):

Phase 1. We bought about 6 months ago and don't see this as our "forever home". However, it's in a good area and has a lot of potential. We had already planned to do various piece of work on it with a view to a) making it nicer to live in and b) increasing the value. We always planned 3-5 years here before moving on. I also intend to stay in my current job for about 5 years before moving out of the big city. So, the next 5ish years is Phase 1. We build capital: overpay on mortgage where we can; clear debts; and invest in sensible mid-term investments. I'm quite business/markets savvy, so intend to think about share portfolios once we have enough to make investment worthwhile. Basically, squirrel away money we can and reduce our debt/debt costs.

Phase 2. We move! We're hoping at this point we will have enough in liquid assets and equity in the house that we can release funds for a deposit on our future family home and remortgage our current place as a BTL. I think this would be a comfortable introduction as we will know the place so well, so no hidden money-pits etc. The rent should cover the mortgage, so we start building up this asset again with minimal expenditure on our part. Continue consolidation for another 2 years.

Phase 3. 2 years later the big change happens. We'll be 35 at this point, hopefully with a little one or two to think about. If I haven't given up the city lifestyle by this point then I move to a job nearer home. OH QUITS his job! We start the property thing in more earnest. OH has always wanted to do development and has a v close friend who does this full time. I'd carry on working to bring in a decent (hopefully by that point, considerably more than decent) wage and OH would commit full time to flipping properties and managing BTLs. He could also be around to look after the children so we don't have high child care costs (and I'm a massive believer in children being raised by their parents!).

And that's it. We'll obviously continue to pursue other forms of investment, but the plan is that by the ripe old age of 40 the combination of "slow and steady" investments, BTL equity and profit on development properties would bring us to the £1m mark.

Feel free to critique! It's a rather new plan and may well be tweaked in the future. It just sees to fit well with what both of us want from our futures, in terms of work, family etc. I love my job and am very ambitious - I don't want to be a SAHM but do want to have enough free time to be a "real" mum and see them grow up. My OH does not love his job, but it one of the hardest working, mots committed people I know. He would love to be a SAHD (and, frankly, would be much better at it than me) and I think he'd thrive with his own little empire to build.

But for now ... back to the daily money management. Just off to make packed lunches for tomorrow and I'm sure I spotted a 20p piece on the floor that should go i our savings jar! haha.

lessonlearned

Hi Diggs, and welcome to "The Gang"

Hopefully Tink will be back soon.

Sounds like a good plan and yes it's a good idea to review them every so often and tweak as necessary.

Those first baby steps are the hardest, dealing with debt and starting to get some savings under your belt do take a bit of doing.

You've made a cracking start buying your own home.

Had another successful day - made a start on the garden in Prop 2, planted a tree and some bushes.

Not sure how next week will pan out yet……tomorrow I have to wait in for delivery of a parcel. The time slot is between 07-30 and 21-00 so anybody's guess:rotfl: I will use the "waiting time" productively, a bit of a money sort out and then try and get to grips with matched betting. (again:o).

Karmacat

lessonlearned wrote: »

Hopefully Tink will be back soon.

That would be great - I've read her posts, but don't really know her yet

Had another successful day - made a start on the garden in Prop 2, planted a tree and some bushes.

Not sure how next week will pan out yet……tomorrow I have to wait in for delivery of a parcel. The time slot is between 07-30 and 21-00 so anybody's guess:rotfl: I will use the "waiting time" productively, a bit of a money sort out and then try and get to grips with matched betting. (again:o).

You've done loads, *and* you did Prop 1 garden - going well :T Hope you *can* get to grips with matched betting, but oh boy, that delivery schedule :eek:

Karmacat

Diggs. wrote: »

Phew! I've been reading this thread on my commute all week, and have finally made it to the end. I can't believe the thread's been running so long!

Well, now I've committed so many hours to reading the thread, I figure it would be rude not to join!! So I'm in!

Like Tink, I'm 27 with a millionaire goal age of 40.

Hello Diggs - I love it that there are people on here in their 20s with such clear sighted and *rounded* ambitions.

We calculated our "net worth" as at 1/1/14. Depressingly, it was -£11,923. ..... As at 31/1/14 we'd improved this by 4%. Feb's looking better - we'll see where we're at come Friday![/quote]
Thats one thing I really wanted to say to you - that even though the debt is so big, you have some wodges of cash to throw at it, and then you've got the *little* things as well - and they really add up, when you're doing most of them, which it sounds like you are.

And that's it. We'll obviously continue to pursue other forms of investment, but the plan is that by the ripe old age of 40 the combination of "slow and steady" investments, BTL equity and profit on development properties would bring us to the £1m mark.

I'm sure you'll get there by then, absolutely, if you focus on your plan, it sounds very do-able.

Feel free to critique! It's a rather new plan and may well be tweaked in the future. It just sees to fit well with what both of us want from our futures, in terms of work, family etc. I love my job and am very ambitious - I don't want to be a SAHM but do want to have enough free time to be a "real" mum and see them grow up. My OH does not love his job, but it one of the hardest working, mots committed people I know. He would love to be a SAHD (and, frankly, would be much better at it than me) and I think he'd thrive with his own little empire to build.

And thats one of the reasons your plan will work - its based on what the two of you like and want :T

But for now ... back to the daily money management. Just off to make packed lunches for tomorrow and I'm sure I spotted a 20p piece on the floor that should go i our savings jar! haha.

Yes! Go for it

droopsnoot

RayKay wrote: »

Droopsnoot, I hope you're reading this! It was Droopsnoot that gave me the info about that matched betting service, which then led me to a similar thing run by the same bloke, and that has made me around £4k since starting in October.

Great news, glad it worked out for you - I have been meaning to PM you and ask whether it was doing any good. Now all I need to do is get around to doing it for myself. With Cheltenham coming up, now seems a good time.

On the one hand I have been depressed (I hate to use that term for such a trivial matter, but can't think of a better one) because I found some problems with my car yesterday that will need to be fixed, on the other hand I have access to a solution that can pay for it, if I could only motivate myself to use it.

Kayalana99

RayKay wrote: »

Kayalana, I love reading about how your business is growing. How did you come to your £27k figure? Think your dad might be right, bless him. But I understand how you feel, if you have an idea you just want to get on and do it. I've always been like that. Not related to business or money-making...this kind of thinking is fairly new to me, probably purely as a result of having BabyKay to think about, rather than just myself, but once I get an idea in my head (usually in the past its been a new country to move to or a new course to study) then I really just want to do it the second I think of it. I've no doubt you'll get your £27k and how ever many more £27ks you want, you're so motivated with business ideas.

Thanks, I really appreciate that :-) 27k is a round about figure but its basicly 25k on a 100k house with a bit extra for ...well extras!!

My Dad was talking to a guy the other day and had a interesting story I thought was worth sharing.

What he basicly does is finds a 100k house and pays 80k (yes alot of effort to find it but hey ho) puts his 25% deposit down of 20k.

Roll on a year later he goes back to the bank and says the house is worth 100k so I want to re mortgage. Bank gives him back his 20k...he then takes his 20k and repeats process.

Sounds abit to easy but this guy is out their doing it! :cool:

My Dads mentioned me taking over his business as he's trying to sell it and no end of people keep saying what about your daughter but I said he missed his window really because I've been asking for him to teach me since forever but now having kids I can't...or wouldn't want to should I say as the learning curve would be massive and as he said it would require me following him round for months - so paying out full time childcare etc....(He may even of covered that but I don't want to be spending so much time away from the kids)

Anyway....best get back to work been away this weekend and got back to someone making a massive order that should really get out today....another £60 profit in the bank.

AwsomeKate

You can achieve anything as long as you dedicate yourself to it!

droopsnoot

Kayalana99 wrote: »

What he basicly does is finds a 100k house and pays 80k (yes alot of effort to find it but hey ho) puts his 25% deposit down of 20k.

Roll on a year later he goes back to the bank and says the house is worth 100k so I want to re mortgage. Bank gives him back his 20k...he then takes his 20k and repeats process.

Sounds abit to easy but this guy is out their doing it! :cool:

That's very reminiscent of the way that "Inside Track" used to recommend for property investors, and it's interesting that you know someone who can still manage it. I went to one of their free evening "seminars" and spoke to people about this, and that was basically it - buy somewhere, mortgage it, rent it out, then re-mortgage it and use the extra for the next one. To me it sounded too much like a 'house of cards', and I often wonder how many of the people I spoke to still have all their investments. Back then I think there was a big reliance on houses always going up in value quite quickly, less so than buying at a discount. It's just about having the bottle to take the risk.

Kayalana99

Diggs. wrote: »

Phew! I've been reading this thread on my commute all week, and have finally made it to the end. I can't believe the thread's been running so long!

Well, now I've committed so many hours to reading the thread, I figure it would be rude not to join!! So I'm in!

I love how you've mapped out so well your plan :-) I know what I want to achieve but havn't really sat down and put it to paper - although I'm terrible at changing goals constantly.... hum ho.

droopsnoot wrote: »

That's very reminiscent of the way that "Inside Track" used to recommend for property investors, and it's interesting that you know someone who can still manage it. I went to one of their free evening "seminars" and spoke to people about this, and that was basically it - buy somewhere, mortgage it, rent it out, then re-mortgage it and use the extra for the next one. To me it sounded too much like a 'house of cards', and I often wonder how many of the people I spoke to still have all their investments. Back then I think there was a big reliance on houses always going up in value quite quickly, less so than buying at a discount. It's just about having the bottle to take the risk.

Interesting. I suppose the way I said would work better because you start with a 100k house - but have done alot of looking around etc to get their... your way would be very risky - although I suppose you'd always still have the house if it didn't go up that quick!

Although having huge mortgages with practically no capital down is not exactly risk free either.. :-)

Finished my big order - not worth £60 really for the time it took but it's still extra...may need to raise prices with that one

lessonlearned

The trick that most developers try for is to buy the property at a min of 20% less than market value. The 20% rule applies whether developing to sell or BTL.

In short, you make the profit when you buy……..

We have managed this for Prop 2 so provided we don't exceed our renovation budget too much we should be ok.

BTL's take the long view so to a certain extent don't need to worry too much about the 20% rule, they are usually in it for the long haul so it's not such a catastrophe if capital growth takes a little longer.

However, if you are flipping then the 20% rule is crucial, because you must not rely on a rising market for your profit.

The only time when a developer can ignore the 20% rule and pay full market value for a property is when the property is rare or unusual or when the developer is experienced enough to know that he or she can definitely add value and turn the house into a showstopper whilst still sticking to a budget.

Prop 1 is such a project, although in this instance we are not looking to flip but rather to hold for about 5 years , we do aim to turn it into a showstopper.

We are paying contractors where necessary but my son aims to do as much of the work as possible himself - partly to save money but also to learn some skills.

Prop 1 is one of a kind. A Grade II listed building in a conservation area, built in 1758, smack bang in the city centre. It is one of the oldest private dwellings in our city and the local press have described it as an oasis of calm in the middle of a busy city - because of it's location in a quiet backwater and it's unusual extensive wrap around gardens.

It is classed as Georgian Vernacular and built of brick (as opposed to the more grand stone built Georgian country houses).

It was originally built as a residence for a frame worker in the textile industry, then it became part of a local china works and then it became a public house until 1911, since when it has been a private residence. The last but one owner was a swimming partner of Johnny Weismuller whilst the first owner died in his kitchen after bleeding to death after extracting his own tooth.:eek:

The house was in a sorry state of repair when we bought it (hence it's nickname the Money Pit) but because it was so unusual it attracted a lot of interest. We therefore snapped it up quickly and paid full asking price, rather than mess about haggling over the price and missing our chance to acquire it.

As our broker put it, "you have to be either very brave or just plain bonkers to buy a house like this, however, this house only comes onto the market once in a generation so if you really want it, now is your chance".

We paid £160K for it.

The one big drawback is it is very close to a major road, but that is why it was so cheap. It is solidly built and double glazed so once you are inside the noise from the road isn't an issue.

The garden can be a bit noisy but we are aiming to remove a bank of conifers which back onto brick wall, but which don't really help soften the noise. We will remove the conifers but retain the original brick wall. We will then put up special acoustic fence panels and then another barrier of trees and bushes. This should prove an effective sound barrier.

The same house a couple of miles down the road in a quiet conservation village would cost at least £500K and in some of the posher areas of our county it could be worth £1m.

Nothing has been made official yet but with HS2 in the pipeline, there is a chance that the major road will be re-routed. If this happens the house will soar in value.

If not then my son will have had the joy of living and working in such a beautiful and unusual building. When he does decide to sell house prices will have risen anyway, even if the road is not downgraded.

However, I have a feeling that he will not want to sell. He is toying with the idea of setting up one of those trendy micro breweries……I think this house will be a keeper, probably for another generation.:D in which case it's value is largely academic.

BTW I'm still toying with the cottage next door. Viewed it last week before the EA's value it. We have first refusal so it will be down to price. Again a bit of a money pit.

There is also a building which is a workshop which is attached but not part of the sale. The man who owns this is a cabinet maker and is contemplating retirement so this might come on the market too.

We would really love to own all 3 properties - we would have our own little private mews….

Going back to BTL's

When I worked on site selling new builds we had BTL's who were putting down 5% as a deposit, snapping them up before the houses were even at foundation level.

Some of them even funded the deposits on their credit cards. Yes they were playing the buy now and then revalue in a few months time game, take out equity for the next house etc.

Some of them grew their empires very quickly but a fair few of them did crash and burn.

I met someone who attended one of these seminars and was persuaded to invest £100K as deposits on a dozen or so houses in a deprived area up north. They managed to convince her she would make a killing. She lost a lot of money………

What's that old saying

"If it sounds too good to be true, then it probably is"…….

I guess it all depends on your attitude to risk.