On top of this, on their moderate incomes, all the scrimping and saving to put every spare penny back into the mortgage meant that what should have been the prime years of their lives were being spent slogging away at setting themselves up for a not-so-bright future.
These people believed that there must be something more out there, a better way to do it. And they were right.
During my time in Australia, I learned how to buy property and renovate it, act as a landlord and listen to endless problems that would arise from tenants. It basically just felt like I had a second stressful job and I knew that I had to organise it in a quite different way.
Since then, in the UK, Spain and three other countries around the world, I have not used a single paintbrush, hammered a nail or knocked down a single wall. I haven’t dealt with sourcing tenants, or even worse, evicting them. I have bought only off plan and newly built property, each time with considerable discount and structured it in such a way as to require only minimal capital outlay.
Yes, I still have to pay my mortgages, ensure rents are received and pay the various charges, but, for the most part, my portfolio is in Set and Forget mode, explained fully in Chapter 2. I am free to live out my dreams and enjoy my life to the fullest, doing the things that I am passionate about.
I moved to London in 2002, initially to fulfil the typical Aussie tradition of backpacking around Europe for one or two years, while using London as a base - but I soon realised that there was a huge opportunity in property in the UK, an opportunity that still exists today.
In 2003, I published a letter to my investors explaining the current state of the property market in the UK and some of the tricks and sales tactics being used on people. This letter generated a huge amount of interest, and led me to the creation of my free Insiders Tips & Tricks weekly newsletter.
In 2004, interest had grown so much that I created my website, www.YourPropertyClub.com. Over 80,000 people now receive the newsletter and the contents of this book are the consolidated learning from all of those newsletters, combined with the practical experience of mentors, clients and my own experience.
In 2008, I married Arlene and we then bought a new home in Islington, London. In 2009, we had so many clients wanting to create their own property portfolios that I decided to begin expanding the business throughout Australia, Asia and a further five offices in the UK. I learned long ago that the time to develop your business was when others were panicking.
I also learned that a great time to build a property portfolio was when many people in the market were desperate to sell. By buying at depressed prices, you are sitting pretty when the good times return.
Welcome to the good times.
Important Note
HOW DOES THE 2008/2009 CREDIT CRUNCH AND RECESSION AFFECT THIS BOOK
I would be lying if I said I forecasted the full extent of the credit crunch and recession. In fact, I have yet to find a single economic commentator who predicted what actually happened. Whether anyone did or didn’t predict the eventual outcome, it actually doesn’t matter. As investors, we must roll with the punches as they come.
The main changes to the mortgage market for property investors during this time were:
•Loan to values dropped from 85% down to 65%, which meant you needed extra deposit to purchase a property.
•The interest rates on buy to let shot up from around 5% to as high as 6.5%-7.5% meaning that your monthly cash flow was affected, and they then dropped again to around 5.5%.
•Most banks offered fixed rates at this higher level which meant investors were locked into cash flow shortages for two or three years.
•Rent coverage which was as low as 100% coverage raced up to 125%. This wasn’t such a big deal because the loan to values had dropped sufficiently to off set this change.
•Finally, the Council for Mortgages Lenders (CML) made a number of changes, meaning that all incentives had to be declared to the lender. This limited cash backs, non-financial incentives and bridged deposit structures.
The most important thing about the lessons in this book is that some of the information may have changed by the time you read it. Interest rates may have changed, the market may have changed, loan to values may have changed, mortgage products may have changed, average prices may have gone up (or gone down). Regardless, the laws, principles, strategies and structures in the book will still apply: these won’t change.
For over fifteen years and in the three different countries that I have built property portfolios, the same lessons apply, despite the criteria having changed between countries and with the different market cycles in each country.
My advice is not to get too bogged down in the current property market. It will change. Focus on the lessons and learn to apply them in any market.
You will be holding your property through a number of different property cycles and each will present different criteria and different opportunities. Becoming educated is your best defence against these changes.
WHY THE 3+1 PLAN WILL WORK FOR YOU AND BECOME THE BASIS OF YOUR NEW RICHER LIFESTYLE
The 3+1 Plan is my answer for anyone who wants to plan their finances and achieve greater wealth. It is not complicated. As you will have read in the Introduction, I believe that with three extra properties, in addition to your home, you can face the future with confidence.
The 3+1 Plan was born out of a conversation in 1999 that I had with Peter James. We were discussing what it takes to ‘practically’ retire - not fully retire, necessarily, but to have the money to stop working quite as hard, take a look at your future and decide what you want to do for the next part of your life.
He argued that you only needed your own home and three other buy to let properties to get into a position to fund any retirement. At first, I thought that it seemed far too easy - only three buy to lets and your own home. So I ran the mathematics on some of my own properties and found that the numbers fitted! Actually, it worked out to be more money than if I had kept working.
I wrote about our conversation in my Financial Partners newsletter under the name ’The 3+1 Strategy’ and over the years developed it as I met with thousands of people who wanted exactly what The 3+1 plan offered.
Most people wanted to achieve a self-funded retirement and a supplemented lifestyle without having to spend a huge amount of their life creating this extra wealth.
I have always believed that a successful financial portfolio should be based on three things:
•You must know precisely why you are doing it.
•You must be clear about what you want and when you will want it.
•You should choose a strategy that gives you more time for living and less cause for worry.
Once you decide the first two - and only you can do those - then The 3+1 Plan can give you the third.
How does The 3+1 Plan work? There are two basic steps at the start.
STEP ONE
By the time you retire you should own your own home with no mortgage.
I was brought up to believe that ‘an Australian’s home is his castle’ - in fact, we even made a hilarious comedy about it. It was called The Castle and it was a very funny look at the lengths that Aussies will go to to save their home.
When