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RAGS TO RICHES
I was on minimum wage with £10k debt, but now I’ve bought FOUR houses – here’s how YOU can too
There is a fifth house purchase on the way
POLISHING glasses as he worked as a bartender on minimum wage in Newcastle, 57-year-old Perry Wilson started daydreaming about becoming wealthy.
He had no savings and £10,000 worth of credit card debt - but just five years later the now 62-year-old had bought four houses.
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“I got to 57 and avoided becoming wealthy by being normal. I spent all my money with little thought about saving for the future; branded clothes, BMWs, nice holidays, socialising, and generally keeping up with the herd,” he said.
With 10 years to go to retirement, Perry thought he’d be further ahead than he was in terms of financial security.
He suddenly realised he only had a few years left to cram in decades worth of saving. He set himself a target of making a million pounds by the time he turned 67.
“I wasn’t scared, I was desperate. “Desperate enough to do whatever it would take to rescue myself and my family.” says Perry, who has been married to Sue for 37 years and with her has two grown up daughters.
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One thing was clear - Perry needed more money.
His minimum wage job was paying the bills but there was nothing left to save. So he got a second job – on top of the full time bar work he became a cab driver.
Perry drove around the streets of Gateshead looking for fares from 7am to 4pm. Then he went to work in the bar from 5.30pm to 12.30am.
Working two full time jobs, he was clocking up a total of 80 hours a week.
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After three weeks he gave up the bar work and focused his 80 hours a week on driving his taxi. He was out in his cab every day except Christmas Day and Boxing Day, racking up savings of £1,000 per month.
Within two years he’d saved £20,000, and bought his first buy-to-let (BTL) property.
Landlord Responsibilities
“I chose property over stocks and shares because I didn’t have the luxury of time to wait until the stock market worked its magic,” Perry says.
This first property was a two bed semi in Norton, Teesside, which Perry bought for £63,000 by putting his hard-saved £20,000 down as a deposit.
The mortgage was £87 a month and he charged monthly rent of £550.
The rental profit from this increased his savings rate and he was soon able to buy a second property, coincidentally also for £63,000, a three bed terraced in Shildon, Durham, which he rented out for £500 per month.
Two years after buying his first property, Perry remortgaged it, drawing out £20,000 and using it to buy his third property, a three bed terraced in Stockton, for £72,000, renting it out for £476 a month.
“My savings rate at this time was £1,000 from cabbing plus £1,250 from rents. The rental profit was now more than my household bills so I had achieved financial independence in just under four years,” Perry said.
Buy-to-let investing can be a lucrative venture for those willing to put in the time and effort, says Holly Tomlinson, financial planner at wealth manager Quilter, “although the tax landscape has made it much harder for people to make the same kind of profits as they previously did”.
Higher interest rates are also biting. More than a quarter of landlords (29%) have had to increase rents as a result, 25% have cancelled plans to purchase more properties and 15% sold a property to cut their mortgage costs, according to a survey by specialist mortgage lender Foundation Home Loans.
Some landlords find short-term holiday lets more lucrative. Perry’s latest buy was a three bed terraced house in Hartlepool for £105,000, which he rents out as an Airbnb generating an income of more than £2,000 a month.
This property has also jumped in value to around £350,000, Perry estimates.
“Anyone can do what I do provided they are willing to work an extra four hours a day,” he says.
“Look at it this way, if you are paid minimum wage, and you work for an extra four hours Monday to Friday, you’ll get a 50 per cent rise in income, which you should save, eight hours sleep and every weekend off. What’s hard about that?” Perry says.
He set himself a target of making a million in 10 years on minimum wage. Almost six years in and Perry is well on his way and is now in a position to buy his fifth property.
“I’m secure, but I’m not done yet,” he says. “I would say to anyone, if you’re able to work you can become wealthy and retire. If you’re willing to work very hard, anyone can retire in 10 years.”
If property is the path you go down to chase your retirement dreams, Quilter’s Tomlinson says choosing the right property is key: “You must consider both location and type.
"Property in high demand areas such as near universities, transport links and amenities tend to attract tenants more easily and command higher rents,” she said.
Beside just your deposit, you must factor in initial costs such as legal fees, stamp duty, property surveys and potential renovation costs.
Ongoing costs include maintenance, insurance property management fees if you use an agent and the cost of periods when the property might be vacant.
“There are also tax implications including income tax on rental income and capital gains tax when selling the property. Recent changes in tax relief for mortgage interest can also affect profitability,” Tomlinson said.
Perry admits higher interest rates have forced him to change strategy. He’s now working with 'angel Investors' and using their cash – by offering a very competitive interest rate – to buy future properties.
“We'll add value to these properties by refurbishing and repurposing, returning investor's money to them plus interest when refinancing the traditional way,” he said.
But Perry says the real challenges to building up wealth from nothing are the daily sacrifices you have to make. “No holidays, little social life, no buying new clothes. The cost of your new life is your old life,” he says.
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Perry admits he is “old and tired”. But he believes you don’t stop when you’re tired, you stop when you’re done. He has four more years to go to hit his million pound retirement target – and he is still driving his cab.
From daydreaming behind the bar about getting rich quick, he has found out becoming wealthy is a process. “It’s a series of steps, which when taken over time, produces wealth,” he said, “and anyone can do it”.
BTL - the facts
Here are some key facts worth knowing about BTL
- BTL mortgages typically have higher interest rates.
- They are often interest-only so you need a plan to pay off the remaining debt or sell up at some point.
- Lenders usually require a larger deposit, often around 25% of the property’s value.
- Mortgage affordability criteria is strict and based on property’s expected rental income.
- There are risks – higher interest rates can hurt your ability to cover mortgage payments, market fluctuations can lower a property’s value, and tenant issues, such as non-payment of rent, property damage or legal issues can eat into profits and be a headache to manage.
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