This article breaks down the income and lessons learned from managing 16 properties, ranging from small flat conversions to a large £1.5 million development. It covers purchase costs, renovations, refinancing strategies, rental income, cash flow, and the challenges faced, especially in larger projects. The key takeaway is that property investment can be forgiving if basics are done right, but bigger projects carry higher risks.
In this article, I will share detailed insights into how much money I make from 16 properties, including four flats in one building, five flats in another, and five flats scattered across London. I will walk you through the numbers from my smallest deal to my largest £1.5 million development, which also turned out to be my worst deal. This comprehensive breakdown will help you decide if property investment can still be a viable path to financial freedom.
My smallest deal was a one-bedroom flat in Battersea Park, London, which was in poor condition. I transformed it by moving the kitchen into the living room to create an open-plan living space and converted the original kitchen into a second bedroom. This effectively turned the flat from a one-bedroom into a two-bedroom.
After renovation, I refinanced the property with a new lender who valued it at £320,000. I secured a mortgage for 80% of this value (£256,000), which meant my actual money invested was only £31,799.
This resulted in a monthly cash flow of £634. After accounting for 20% corporation tax (since the property was held in a limited company), the net monthly profit was £507.
The annual profit is £507 x 12 = £6,084. Dividing this by the cash invested (£31,799) gives a ROCE of 19.1%, which is an excellent return.
I held this property for a few years and eventually sold it for £370,000. After deducting sales fees and refurbishment costs, the profit was approximately £78,020.
I repeated this strategy in several other London locations:
Running a property business with multiple units can get complicated due to various transactions such as rental income, management fees, maintenance costs, and service charges. To maintain clear visibility over finances, I recommend using accounting software like Xero, which helps track income, expenses, and cash flow efficiently.
I purchased a three-bedroom terraced house in dated condition for £265,000. After obtaining planning permission, I converted it into two flats.
My biggest project was a mixed-use building with a clinic downstairs and a three-bedroom flat upstairs. I secured planning permission for a double-story side extension, converting the building into five flats (two downstairs, three upstairs).
This project was my worst deal due to several factors:
This resulted in a monthly cash flow of £856, or £685 after 20% tax, which is a 1.9% return on cash employed.
If rents increase by 12% and mortgage rates drop to 3.7%, the monthly cash flow could rise to £3,280 (£2,624 after tax), improving the return to 7.2%. Additionally, a 10% increase in property value would add £150,000 in equity, representing a 30% return.
Property investment can be a powerful way to build wealth and achieve financial freedom. By understanding the numbers, managing cash flow carefully, and learning from both successes and setbacks, investors can navigate the complexities of the market. Whether starting with small flat conversions or scaling up to larger developments, the key is to maintain clear financial visibility and be prepared for challenges along the way.
If you want to learn more about converting one-bedroom flats into two-bedroom flats, I offer a free 11-hour course on YouTube. Also, to keep your property business organized, consider using accounting software like Xero, which offers significant discounts for new users.
Property investment is a journey of continuous learning and adaptation, but with the right approach, it can lead to substantial financial rewards.
