Suggestions to help me reach my financial goals?
Okay, so this may be a long post but I just want to make my situation as clear as possible so it will be easier for you to help me.
Some stats about me:
- 27 years old about to finally graduate, based in the UK
- £350k flat owned outright (gift from my parents) from which I receive about £1k per month (£850 pm after PM fees) so I don't need to worry about mortgage for personal home. However, parents still own 2% of property so I cannot sell it or refinance my portion against it as far as I'm aware (and I'm not risk loving enough to want to do that anyway). Eventually I will be living there (within 2 years probably) so it will go down to £500 per month with a tenant.
- £33000 in a fund that's getting 7% per year. I'm very tempted to use this as part of a deposit but I'm open to other suggestions since I'm a little late on the pension train and may want to use this as emergency savings anyway.
- £4000 left from small inheritance that I ideally want to use towards holidays before I'm 30 but again, I'm open to other suggestions if it helps the cause.
My goal is to make at least £8000 per month in cash flow once all expenses are taken into account (including principal repayments) by the time I'm 40 on a part time basis while I hold down a full time job. Is this possible and even realistic? Has it been done before?
The market value of the flat that I own outright is £1200 per month but we decided to keep it at £1000 per month to try and stop tenants leaving (they've been very good and it's worked so far). Taking a (conservative, I think) estimate of £150 net monthly income per unit on a £200k 2 bed flat renting at £1000 per month, that means I would need 54 flats renting for the same amount (assuming no vacancies, which is a very big assumption and simply won't happen in practice) to reach my monthly cash flow goal.
Now to the strategy part:
My strategy is to aggressively save for 3-4 years until I have £40k. However, I would need to find another £40k for stamp duty (since this BTL wouldn't be my first home) and renovation costs for my next step. This could be where the £33k from the fund comes in but if I can save from the flat I own too then I might not need to use it. Once I place a 25% (£50k) deposit on a £200k flat and rent it for £1000 per month, I plan on adding £30k to the value over 3 or so months (with £10k renovation costs and assuming I purchased it at a discount) then refinance £80k of it (this is the part where I may be wrong here, can you refinance your equity that includes your deposit i.e. borrow £80k from a £230k valuation which leaves you owing the lender the entire amount of the house and having no money left in?). Then continue doing this every 2-3 months until I have 50+ properties within 10 years. Is this viable? Am I missing something? Would this be able to be done on a part-time basis outside of a 9-5 job?
Three questions:
1) It would be quicker to reach my goals with an interest only mortgage however I want this cash flow to be very long term and not take a sharp drop once IO period ends, so what type of loan would you recommend?
2) Is my 'forced appreciation' strategy correct? If not, is there one that works to help me reach my goals?
3) Would you recommend I start a business and pay myself out of that to protect my original flat that I own outright? How would I go about getting business credit for it?
Sorry about the very long post. It may (and probably even does) reveal my inability to be concise and get to the point and also may show my lack to RE knowledge. But if people here could help me I would be extremely grateful.