Sam Collett isn't your stereotypical property magnate. She lives with her partner, an IT contractor, in a two-bedroom house in Baldock, Hertfordshire, drives an unremarkable car and claims to be "not much of a consumer".
But Ms Collett, at 37, is clearly an ambitious and focused businesswoman. Quitting a "bloody good marketing job" nine years ago with £15,000 in cash and a yen for a new challenge, she built a portfolio of 43 properties worth several million pounds — and it now pays her a six-figure annual income.
She bought her first property, a two-bedroom apartment in Cambridge, at auction in 2004 for £88,000 and renovated it. "I did a lot of unskilled work myself and then just called random tradespeople from the small ads to help with the skilled stuff. I was very lucky that they all turned out to be honest and reliable — it wasn't a good way to go about finding help."
"The plan was to sell the flat on, but when the first buyer failed to come good, she decided to rent it out. It was let to the first viewer, who stayed six years. The second tenant is still there. After that there was no looking back. However, as Ms Collett was not initially cash-rich, she focused on income generation. "I needed to replace my salary from my old job, so each property had to make a certain amount every month," she said.
"Capital growth is not my main motivation. If it had been I would have invested in different areas. But if your business fundamentals are based in income generation, it doesn't matter what the property market is doing in the short term."
Indeed, she estimates that around a third of her portfolio — much of which is in areas of the UK where prices have stagnated or declined over recent years — has not increased in value since she bought it.
She looks to make a gross yield of six to eight per cent within London, and nine to 12 per cent elsewhere. "I'll accept lower yields in London as there's more potential for capital growth," she said. Elsewhere she seeks long-term capital growth opportunities in undervalued areas with regeneration programmes planned. She has bought all over the country, from Poole to Liverpool to Whitby, though now focuses mainly on London and its commuter towns.
As well as planned local improvements, she looks at transport connections and current and future tenant demand. But, she added: "Any property has to have a good feeling initially, and to have attractions for the kind of tenant you're targeting." Buying at auction means doing your homework in advance. Potential bidders should always read the legal pack before going to view a property. They also need to research the local market thoroughly to establish how good a deal the property represents.
"It's crucial to ensure the numbers stack up," Ms Collett stressed. Successful bidders must put down 10 per cent deposit on the day, and pay the buyer's premium to the auction house, which could be a set fee of up to £750, or a percentage, typically one or two per cent, of the price paid. Budget also for legal fees, stamp duty, the cost of raising finance, survey charges and insurance.
What pitfalls should newcomers be aware of? "The key thing is that the investment should make money. Then it's a matter of assessing the time frame, the risk, and potential demand looking ahead. It's not an exact science." Then there are the tenants. If you can't manage people, you can't manage property.
Investment properties: how the costs add up
In 2010, Sam Collett bought a one-bedroom flat in Camberwell for £99,000. She did five days of work to upgrade it and sold it within 10 days for £145,000. Here's how it all added up:
* Bought: £99,000
* Legal fees (buying and selling): £1,200
* Finance (arrangement fee, loan interest): £3,500
* Survey costs: £500
* Contribution to vendors' selling costs: £3,000. This can happen at auction, particularly on local council sales. It can be up to three per cent of the sale price, so check for any "special conditions" applying to the property.
* Estate agent fees (sale): £3,523. Another often-overlooked major cost. Sam Collett says charges can be much reduced by using an agency asking a flat upfront fee, such as Hatched.
* Service charges and ground rent: £1,078 (always budget for these on leasehold properties).
* Light refurbishment: £1,593 (Ms Collett and two tradespeople did the work between them).
* Sold: £145,000
Net profit: £31,606
Follow Sam on Twitter: @whatsamsawtoday
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