For a while now I have been struggling to make a decision.
I will warn you now, this is not a very exciting decision, or struggle, but if it helps you, then I am pleased.
If you will bear with me for a moment, let me take you back a few years.
For the first 25 years of my working life, I worked for various corporations. The usual stuff in IT, computer support, then middle management. Working my way slowly, slowly, slooooooowwwwwwly up the corporate ladder so that I could retire and have loads of time on my hands and no money to spend. Not very exciting, but hey, that’s what you do isn’t it?
Then, in 2006 my Mum had a stroke, and I spent a week at hers, waiting for hospital visiting times, watching daytime TV.
Now Daytime TV was full of those property programs – you know, Sarah Beeney stuff, where a couple would buy a run-down house, make a complete hash of refurbishing it, ignore all of Sarah’s advice, go way over budget, and STILL make £50,000 profit.
So I thought – “I can do that”….
….and that’s what I did. I had paid off my mortgage, and I had enough savings to last about 6 months, so I resigned from my job, and became a Property Investor. Well that’s what I called myself.
So for a couple of years I was a Property Investor. My aim was to buy properties, rent them out, and live off the profits.
I tried various techniques – buying off-plan, buying new build, buying distressed properties that needed work…. I gradually worked out what was working well, and did more of that. One of the big things that helped was that mortgages were so easy to come by…
“I’ve found a cardboard box that I’d like to buy. Can I borrow £100,000?”
“Can you afford the repayments?”
“OK, here you are…”
Just a minute, maybe that is why we had a property price boom, followed by a bust!
So when the banks said – “Ooops, maybe we shouldn’t lend money so easily” I decided to stop that line of business, and look for other things (e.g. Kleeneze, but that is another story).
However, having stopped buying property, I still had the ones that I had bought, and tenants in them that paid rent, or sometimes didn’t, and boilers that broke, and so on. The joys of property investment.
…..and so to my decision.
Over the last couple of years I have been making a bit more each month in rent than I have been spending on mortgages, repairs etc. So what to do with the profit? Not a bad problem to have, I know.
The options I considered were…
- Pay a little off the mortgages each month.
- Save up for a rainy day.
Now I have always been a cautious person, and these both seemed cautious approaches. It feels like paying off the mortgages would be a good thing to do in the long run, as smaller mortgages would mean lower costs, and increased profits. However, I know that the low interest rates we have now will not last forever, and when they start to rise, the savings would provide a good buffer should my mortgage costs rise to more than the rental income. (Very Plausible!)
So that was my dilemma, and the decision I could not take. I decided to save the money, because if I ever changed my mind, I could simply pay a lump sum off the mortgages. Kind of having my cake and eating it.
Now that decision seems to have been the right one, but not for the reason I anticipated.
One of my houses was in a bit of a mess. However the tenants were happy with it, they paid their rent on time, so I did not mind. However, the tenants have now left, and there is no way I can let the house out in it’s current state. Have a quick look at the outside to give you an idea…
I won’t show you the inside, but I’ll give you a hint. They had 20 cats!
So I now have to spend most of my savings getting this property in a fit state to rent out again.
So I guess keeping the money was a good idea. If I had paid off some of my mortgages, I would have found it very difficult to get funding for this project, as banks are not lending at the moment, and the value of the property has gone down, so difficult to get a second mortgage.
…and that’s where I am. Hopefully when the work is finished and the house looks beautiful, and I get the perfect tenants paying their rent every month, I will be pleased with the decision I made.
Come back in 6 months and I’ll let you know.
Anyway, enough of my pointless waffling. As I said at the beginning, I didn’t know what to do, but I think I made the right decision, albeit by accident.
Bye for now.