Can you lose money in property?
If you want to know if you can lose money in property, Jan Chapman owned a rental property portfolio that was losing £4,000 per month. That’s £48,000 per year! However, along with her partner Neil, they discovered the education they needed to turn their portfolio into a profitable property investing business. In the following extracts from Jan’s Asset Academy interview, you can learn where the portfolio went wrong, but most importantly how it was transformed into a success.
Building a property portfolio
For anyone who has attended Asset Academy’s online webinars, Super Symposiums or any of our other virtual resources, you may be familiar with Jan Chapman, who plays a fundamental role in bringing these events to you. Jan and her partner Neil began investing in buy-to-let properties before even buy-to-let mortgages existed.
“We actually sold a business, so we had some money and we decided to start buying property. It was something that Neil had always wanted to do because he thought that property was a good long-term investment. Because we had some money we didn’t pay any attention to how we were buying and what we were doing. We were buying in Brighton, down on the South Coast, and they were a mixture of converted houses and established blocks of flats.”
Jan and Neil began buying properties with cash, and refurbishing them before letting them out. The rental properties were becoming tenanted easily and without any property investing education behind them, they did not keep a close eye on the actual profits from each property.
“We didn’t really pay attention to the cash flow side of it when we did them up. The properties were refurbished very nicely and we spent more money than we should have for the spec that was needed for a one bed flat. We hadn’t done a good enough projection of how much everything was going to cost. We hadn’t accounted for maintenance charges for example, so the strategy was using our own money but not paying attention to the best use of it.”
How does a property portfolio start making a loss?
With each property renting easily and mortgages being readily granted at the time, Jan and Neil did not feel the need to monitor their cashflows. They continued with the same strategy before they realised that they were actually beginning to lose money rather than making a profit.
“They were renting out nicely and the money was coming in… fantastic! But by the time we actually really started looking and added this all up, the money coming in and the money going out didn’t equate. In fact, it was going the wrong way now. We thought we could manage by buying another one, but the same thing happened so we would buy yet another because we could at the time and we had the money to do so.”
With the property market rising quickly, Jan and Neil were able to take advantage of advance mortgages at the time, which allowed them to borrow the difference between the property’s purchase price and its new higher value. So they continued to borrow more and more money against the portfolio to cover the losses that the portfolio was incurring.
“We realised that we needed to really look at the figures. It is crazy when you come to the point where everything is mortgaged to the hilt. What could we do? We were losing four thousand a month from our properties, we had nowhere else to go and that’s the point when we realised that we needed help. We thought there must be some people somewhere… some knowledge… some help… someone that could tell us what to do?”
A bit of knowledge can go a long way
Jan and Neil could have simply sold their portfolio. However, property prices were continuing to rise, and if they could only find a way to keep hold of their assets, they would. At the time there were not as many people offering education in property investing, but after searching, Jan and Neil found what they were looking for.
“We needed to have a support team of people who have done property. People who are walking the talk, people who have done the training and have got their own portfolios. They would know what to do. They would know how to get around the pitfalls. That’s what we did. We went ahead and started training with the people who would become the Asset Academy team.”
Within their first year of property investing education, Jan and Neil embraced everything that they were being taught. They had people with the right experience around them, but most importantly they began to implement the knowledge that they were acquiring.
“When we went into the three day training, we knew they were genuine people. They had come from all different walks of life, some with money, some without money, some with bad credit… all sorts of things but they had made it work. We then did a lot of training quite quickly, and alongside that we put the theory into action, tightening up the portfolio and getting rid of costs. We knew how to work smarter because of the training. We didn’t sell the other properties but instead we bought more cash producing properties.”
Can you lose money in property?
In property investing, there definitely is a right way and a wrong way of investing. Losing £48,000 per year is not the right way, however, it does demonstrate how even with a portfolio that is leeching money fast, with good knowledge, a sound education and an experienced mentor, it is possible to completely turn things around.
You can hear the full interview on our podcast page or you can watch it on our Youtube channel here. There are plenty of other great takeaways that can help you on your journey. If you want to learn more about property investing, why not join a Discovery Webinar here. It’s free and will help to get you started with your own investing.