Vanessa Warwick: Well, welcome along to lift off of another themed week here on Property Tribe, this week in association with Nova Financial and I’m joined by founder and MD Paul Mahoney and Paul, we’re calling this week buy-to-let blueprint. And I’m really excited about this week actually cause we’ve come up with some really, really good topics which we’re going to cover over the week. So thank you for joining me for this week and powering this week.
Vanessa Warwick: I guess a good place to start, Paul, is really buy-to-let blueprint. If we can think about that in the respect of when your clients come come to you here, your offices in London, that’s kind of what you’re doing for them, isn’t it?
Paul Mahoney: Yeah, absolutely. It’s really about helping clients have a strategy and a bit of direction in what they’re doing when it comes to achieving goals through property investment. So essentially taking them from the point of understanding what their goals are, putting in place a strategy for best achieving them, which also ties into their personal situation and their preferences so what they’re comfortable with because you know, we believe is that investing isn’t just about making money, you know, you need to be able to sleep at night.
Vanessa Warwick: Absolutely.
Paul Mahoney: So putting in place strategy that suits you, considering all of those things. Actually implementing that strategy because you know, until you actually take action, you don’t really achieve all that much, so doing that in the best way possible, making it all very easy.
Paul Mahoney: And then building a portfolio, working toward actually achieving the goals and then making sure that you actually transition into retirement and you know, either dispose of your portfolio or make it work for what the end goals are.
Vanessa Warwick: Yeah. I think in this day and age where there’s so much free information around on the internet, so much free information available, it can almost be overwhelming to really know where to start. And I think a lot of people kind of dive in and they don’t really have much structure to what they’re doing. And I think that can be a pitfall for a lot of people.
Paul Mahoney: Yeah, absolutely. You know, we meet with a lot of people that I’m there in paralysis by analysis. You said there’s lots of information out there. There is, and there’s lots of conflicting information as well. So you know, you can read one person’s opinion which would be completely different to the next and therefore it’s difficult to take action based upon that. And I suppose that’s why we’re very careful about making it about the person themselves, you know, the individuals as opposed to … You mentioned a blueprint, well, blueprints are great, but they need to be personalized. You know? There’s no one blueprint for everyone because everyone’s situation is different. So everyone needs a strategy that suits them and then implemented it in a way that they’re comfortable with.
Vanessa Warwick: No, I totally agree. And we are going to be basing a lot of this week’s content on Paul’s book, which is the Property Pension Plan. And we are going to provide a link underneath the video where you can actually go and purchase … well, actually get the book for free just for the price of the postage. So if you’re interested in Paul’s book, which will go into more depth on what we’re covering this week, then you can go along and get a copy of that.
Vanessa Warwick: So Paul, the landlord life cycle, we call it pre-acquisition, acquisition, management and ownership, which is obviously the longest phase of it, and then disposal. You have a kind of similar kind of a journey, don’t you? What do you call it?
Paul Mahoney: So we call it the RETIRE investment model, which is an acronym. It’s a, you know, slightly twisted acronym to make it work with the words but, but effectively it means, you know, ready to get started is the first one. So, somebody who who’s just starting out, they probably don’t know all that much about property, but they want to gain the information and the knowledge and the education. So, that’s kind of the first step of deciding this is something I want to look into further.
Paul Mahoney: The next step is education. So actually gaining an understanding of what might work for them, and that can be done through a mixture of, as you said, you know, the information might be online or getting some advice on what your options are and understanding that.
Paul Mahoney: So T is testing the waters. This is somebody who’s just getting started, so making their first investment, essentially. So this is part of the implementation phase. You know, they’ve done their research, they’ve gained some understanding, a lot of people get stuck there, so they actually need to take that leap of faith in and get started. I’d certainly recommend for this person, they start very simple. Start with something that’s low risk and is easy to understand. Another mistake a lot of people make is jumping into things that are much more complex than their level of understanding from day one. So start simple, start with low risk, start on a positive path.
Paul Mahoney: And then the next step is investing further. So this is where their understanding is probably building somewhat. They’ve probably gained an understanding of what might work for them. Perhaps they have one, two, maybe three properties by now and at that point they can get a little bit more creative, I would say.
Paul Mahoney: They can start to look at things like for example, renovations or developments or HMOs, the things that are a bit more hands on if that’s what they want to do. But a lot of people don’t, you know? They want to be hands off. So that’s a different type of investment that might work for them best. So, this phase is really about building out or filling out the portfolio and working toward those end goals. And I’d say the most common goal, or pretty well everyone’s goal is to generate a certain amount of income. you know, people have secondary goals like leaving a legacy or you’re not having to work, but generally not having to work is linked to having enough income from another source. So understanding what that is and then working toward that.
Paul Mahoney: And then the next phase is transitioning to retirement. So a lot of people, when they build a portfolio, they quite rightly focus on growing the portfolio, not really so much on the income that portfolio generates.
Paul Mahoney: Obviously it’s nice to have a balance, but you will usually be able to achieve growth in your portfolio quicker by focusing on exactly: that growth as opposed to just income. So at that point, a lot of people get to the point of having a portfolio of sufficient size, but it’s not generating the income the type of return they need most, which is income. So at that point, there needs to be a bit of a shift in the strategy.
Paul Mahoney: For example, we meet with a lot of people who have, you know, being based in central London, who have London-based properties with a lot of equity in them, but very little yield. And that person can do quite a lot of things to access that equity to shift more toward a high yielding type portfolio, which of course is more suitable for people who want to retire quite soon. So that this is about transitioning what they’ve built into what’s suitable for that stage of life. And then once that’s done, you know, retirement should be pretty simple and easy. And that’s about sort of living off the fruits of your labor to get you there.
Vanessa Warwick: Yeah. No, I really like what you said about you know, the blueprint. It’s kind of a formula but it’s not. In the case of property, it’s never one size fits all, because everybody’s got such a different starting point, haven’t they? They’ve got a different financial position, they’ve got a different attitude to risk, they’ve got a different amount of time that they can invest in doing this. And I think it’s really, really important that each individual comes up with their own strategy. And part of this whole week actually is trying to encourage people and guide them how to do that. But also clearly, at Nova Financial, that that’s what you do.
Paul Mahoney: Yeah, I think that’s where professional advice become so valuable. As you mentioned, there’s so much information out there you can gain so much of understanding on your own. But you know, we are all limited by our resources. As individuals, we’ve only got so much time, knowledge, experience, whereas a service that you might be able to utilize will have all of those resources in abundance compared to you as one person. So that’s where you can really use that as a resource to help you implement the right investments but go about things in a more confident way.
Vanessa Warwick: And Paul, can you help somebody who wants to go into property full time? Can you kind of guide them towards that? Because I think we both want to get the message across that property is not a get rich quick scheme. You’re not going to buy three or four buy-to-lets and then suddenly be able to go and relax on a beach in the Caribbean.
Paul Mahoney: Yeah, absolutely. So, I think there are two points there. I think firstly a lot of people assume that a service like ours is for people who are just starting out, that need to gain an initial understanding. But that’s not necessarily the case. You know, someone who might already have a few properties and is wanting to move into property investment full time can still very much benefit from the advice and the guidance, but also the support services that a business like ours can provide.
Paul Mahoney: So as I say, any individual, regardless of your experience, we are limited in some way. So there is gaps to plug, which is where we can help. But on the other point so far as wanting to move into it full time.
Paul Mahoney: As you say, unless you’re starting with a lot of capital, it’s a slow process and so it should be, you know, too many people … I’m sure you guys get the question all the time on the threads, you know, I’ve got 40 grand, how do I turn that into 40 grand a year in a year?
Paul Mahoney: And you can’t. Well, you probably can, but you’re going to have to take a lot of risk. So, we we generally work on the basis of being fairly conservative in what we expect to achieve. You know, for example, if you want £40,000 pounds per annum, well we would say that you’d need an investible asset base of about £800,000 pounds, which is a 5% net yield. And that’s pretty achievable, regardless of the state of the economy. And therefore you can be confident that in 10, 20 years, if that’s your end goal, you still should be able to get about that return. So, that’s I’d say, far beyond what a lot of people expect or think they might need. But that’s a realistic target in our view.
Vanessa Warwick: Fantastic. Well, there we go. We’ve reached the end of the first installment of buy-to-let blueprint and we’re carrying on all week and tomorrow, sorry, just checking my notes there. We’re going to be talking about buy-to-let strategies for when you are just starting out because we’ve kind of already said it can be very overwhelming. So join us tomorrow. We going to be talking about buy-to-let strategies for newbies as our buy-to-let blueprint week powered by Nova Financial continues.