The Property Voice Podcast - Series 2: Portfolio Development – Right Today, Not Right Tomorrow!
“What may be right today, may not be right tomorrow” is how today’s guest, Tony Gimple, describes how things can change, as we evolve and develop our property portfolios. The only constant is change and so we need to adapt to these changes, being flexible and agile as we do. Equally, we need a plan and to understand where we want to end up eventually. So, how do we pull this apparently moving target and shifting landscape together then? Well, we shall discuss how and why things change and what we can do about it as they do. Tony, also offers us some advice on how best to structure our affairs as we do.
Tony’s Investment Property Guide document can be obtained via Tony direct, quoting The Property Voice: firstname.lastname@example.org or drop me a line email@example.com and I will make sure you get your copy.
Today's must do's
Consider: How has your property journey changed and evolved over time and with your shifting priorities? Is now the time for you to seek out some professional advice and support to ensure the plan is both realised but equally is flexible enough to counter the changes that are happening right now and in the future?
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Transcription of the show
Hello and welcome to another edition of The Property Voice Podcast, my name is Richard Brown and as always it is a pleasure to have you join me again on the show today.
We continue our journey exploring the idea of property cycles and with a final look today at the development of our personal property portfolio.
“The only thing that is constant is change” is what Heraclitus, the ancient Greek philosopher, had to say around the year 500 B.C. However, if he was around today, I doubt very much whether he would have any reason to change his point of view. Today, more than ever, we are faced with change and so we really do need to be ready for that and respond accordingly.
Today’s show then is all about the changes that come about in our lives and in our environment (including from the delightful Chancellor), with a view to dealing with these in an effective way. I am joined on today’s show by Tony Gimple, a specialist estate planner and advisor, who takes us through some of the issues that we need to be aware of in terms of structuring our affairs correctly. You will notice that we reference the summer Budget in our conversation, but equally it could easily have been the Autumn Statement. It matters not, as we shall see from Tony’s insights that change is to be expected and so we need a flexible approach to our plans and a structure that can insulate us from some of the changes that we will inevitably face.
So, let’s get on with the show with, starting with my conversation with Tony.
Interview with Tony Gimple.
As we heard from that discussion, Tony understands that changes are not only inevitable, but also to be expected and so planned for. By this he means, considering what our longer term aims are at the outset, or soon after the outset, and then making plans to ensure we get there relatively unscathed. However, he also spoke of the need to be flexible as well.
It is this idea of flexibility that I wanted to spend a couple of minutes discussing now.
When we look to property investment we often have a general aim or specific purpose in mind. It could be to plug a hole in our pension for example, which is why I initially got started in property. It could be to supplement or replace our income, or to leave an inheritance or legacy for people or good causes that we care about. It could also be to lead a lifestyle of freedom of choice, location and the shackles of answering to someone else all the time.
Personally speaking, I have worked my way through all of these different reasons to invest in property as time has progressed. That is the key point really, as time has progressed.
Initially, I had a very specific aim – I was informed by a financial advisor around nine years ago that I would need to put aside the eye-watering sum of £800 per month into a pension scheme for a period of twenty years if I wanted to have a pension of around two thirds of what I was earning at the time! I didn’t have a spare £800 a month lying around even if I wanted to follow this route.
So, I did a bit of number-crunching and I determined that if I had a tenant in a property paying a rental of £800 a month, which could be used to repay the mortgage on that property over the next twenty years, that at the end of that time I would have an asset equivalent to a pension fund and an income stream from the rental income that was effectively paid for by other people…the tenant and the mortgage lender. Sure, I needed the starting funds to get the ball rolling, however, I figured that if I did save that £800 a month for a few years that it would at some stage grow into being enough to fund the deposit on that property.
That’s what I did then, and so pretty much with my very first investment property purchase bought a couple of years after that conversation with the financial adviser, I was able to plug that gap in my pension for good.
Now, there is a lot more to the story than this, but in the interests of time, that’s the radio edit. One property investment was capable of replacing twenty years of pension contributions by using the concept of leveraging other people’s money: specifically, my tenant and the lender.
Given that I had essentially met my initial goal, albeit that I would have to wait twenty years for it to be realised, now what should I do?
Well, I started to think, what else could I achieve through property investing? How about a secondary income source in case my main income were to reduce? How about replacing my income altogether, or even allow me to travel and operate from different places around the world? This became my next quest. It also meant that instead of looking at just long-term, single-let properties that I could potentially vary that a little.
So, I began to look at flipping the odd property, to generate lumps of cash that I could use either for reinvestment, or even to supplement my short-term income. I also began to look at other income strategies, such as HMOs and short-term lets as ways of making my investment capital work harder for me in the short-term with a higher return on investment.
Perhaps I could even replace the family income by doing this, given that I had already plugged the hole in my pension.
Once again though, I discovered that by going about things in a methodical and strategic way, this would also be achieved and so the attention then shifted once more to other aims and ambitions.
That lead onto the idea of leaving a legacy. Not just an inheritance for the children and perhaps their children, but to provide a fund that could support others less well off. That’s is part of where I am today, striving to build a legacy that could be used for good after I depart this world.
You will have your own reasons for investing in property. These may be different to mine perhaps, however, perhaps similarly to me, they could change and evolve over time. With the right approach, application, knowledge and guidance, it is possible to achieve quite a lot through property investment in a relatively short period of time. In which case, our attention and focus will naturally start to shift over time as well.
Similarly, those in their twenties and possibly thirties say, may be single, or in a relationship but with no children. Would there be any shame in seeking a better life for yourself, or a lifestyle of travel and freedom of being tied to any single location? It’s no different to getting an education and then following a career at the core is it? The difference is that by using leverage, we may be able to truncate a traditional working career of over 40 years into a fraction of that time.
Perhaps later in life, if children are on the scene, maybe schooling and stability could play a greater part in our thought process instead. Here, we may seek secure investments with little or limited time investment but with the potential to bridge some of the extra costs involved in bring up a child, which I read somewhere are estimated at £250,000 each and that’s for children going through state education. Is it wrong to want to provide a better way of life for our families? Of course not, however, it may mean a different emphasis at this stage in our life.
Yet later on, we may be faced with a lack of employment opportunities or even redundancy, forced retirement or an incapacity to work and so an alternative or supplemental income may come in very handy then.
Finally, in our golden years, a comfortable retirement and possibly thoughts of leaving behind something for the people or causes we care about may take a greater focus for us.
The point is, our focus will naturally change as we progress through our own cycle – the ‘circle of life’ to coin a phrase.
Equally, you may recall from a couple of weeks back, when I spoke with David Clouter, we explored the idea of risk. We talked about both our attitude to and appetite for risk in that episode. It could be said then, that our attitude to and appetite risk could change over time our due to our changing circumstances. We may be able to tolerate a lot more risk if we are young, free and single rather more than someone who is the sole bread-winner to a young dependent family, or even someone approaching retirement for example.
I have of course, only skimming the surface here today, but we get the idea I am sure.
Here is the conclusion though…
Where we start is not necessarily where we end up and that is perfectly OK.
However, whilst recognising that things will inevitably change along the way, we need to start somewhere. This is why I usually advise new investors to focus on one or at most two property strategies when they start. It is however, essential that these strategies are in alignment with our goals and purpose and are equally consistent with both our risk attitude and appetite. It is also helpful if we can structure our affairs and build in some flexibility to adapt to the changes that will inevitably happen along life’s course. The resulting plan can be different for each of us therefore…there is no one size fits all here.
This brings me full circle to the conversation I had with Tony Gimple earlier. It is possible to structure our affairs to plan, structure and adapt to change, whilst achieving our initial and changing aims and objectives. We may not need to invest in heavy professional advice to begin with, however, it would be wise to at least educate ourselves on some of the implications of how we are doing things and how these could impact us over time.
For example, if we are investing for a pension replacement, what are the tax implications, operational costs and time inputs in managing an investment property versus a pension fund say? There are just some among a range of factors that we need to consider depending on where we want to end up.
I can attest to the fact that things can change and evolve quite quickly as a professional property investor and so gaining this knowledge helps to protect us from the shocks that can crop up from time to time, such as our dear friend George Osborne. Equally, there will be times when we should definitely seek out professional advice, as many aspects of wealth, tax and estate planning are complex areas that draw together legal, tax, accounting and other specialist areas. If I am honest, I used to try and find out all of this information myself without always seeking professional advice. Sometimes this worked, other times not. Now I see the value in seeking out professional advice, although I retain the responsibility to understand what I am getting involved with and always undertake my own research and due diligence as I do. I guess this is something of a life lesson for me then being candid with you.
Before closing then, If you want to get hold of Investment Property Guide document that Tony referred to, then you can either contact Tony direct, mentioning The Property Voice, or alternatively drop me an email firstname.lastname@example.org and I will make sure you get a copy.
This brings the portfolio cycle aspect of this segment in the property cycle’s series to a close. Next time, we shall take a look at the third segment in the three we will cover in this series namely the individual investment property lifecycle. Let’s leave it there for this week then and pick up the next segment next time instead and given the inclusion of my discussion with Tony this week, we will not have Your Voice or the Shout Out this week. However, if you have anything you want to say or contribute to the show, then by all means get in touch. I would love to hear from you, drop me an email personally to email@example.com if today’s theme has peaked your interest. Meanwhile, the show notes will be over at the website www.thepropertyvoice.net
Meanwhile, thank you very much for listening again this week and until next time on The Property Voice Podcast…it’s ciao-ciao