if you are serious about being a property investor, you should read some of these books to give you a foundation of knowledge, especially if you're completely new to the game. But, no matter what you've read in the past, you've never read a book like this before. Because there isn't one!
What you won't be reading in this book is how to manage your property as a landlord, a comparison of available mortgage products, specific tax laws or regulations about buying and selling property related to specific countries or time periods.
What you will be reading about in this book is:
1. How to make money from property in any market condition, i.e. regardless of how the economy isdoing.
2. How to get into the property business if you don't have the money for a traditional deposit or the credentials to qualify for a mortgage.
Again, I want to emphasize that, apart from a couple of exceptions that I clearly point out, I have direct experience of every single strategy I outline in this book. What I'm teaching you is not theory but practical solutions so that you can physically go and use these strategies. In most cases I would advise you to learn alongside someone practised in these methods, but there are no barriers to entry. The information is available to you; run with it!
I started my property business with next to nothing, and you can too. The secret to my success is that I've learnt to think outside of the box. That's what every successful entrepreneur has had to do!
Whoever you are, whatever background you are coming from, I hope you learn a great deal from this book. And remember, I want to hear from you and learn from you. I am still on my journey. I never stop learning. I sometimes feel my students teach me as much as I teach them in the long run. So, stay in touch and let me know how you're getting along. The property world is your oyster; don't let anyone else tell you otherwise!
PART I
THE OLD DEAL
CHAPTER 1
The History Of Property
Land ownership has always been a complex and complicated issue. The history of organized land ownership in England really started with the Domesday Book, established in 1086 during the reign of William the Conqueror. This publication was an extensive list of all landholders that outlined all the taxes they owed to the King, who technically owned all the land in England. Under the feudal system, lords controlled their allotted land and granted rights to vassals and serfs who could live on and work the land in exchange for allegiance to the lord (i.e. the promise that they would fight to defend their lord if he came under attack in any way, as well as the obligation to serve that lord in whichever way he pleased). Basically it was a form of slavery; those in service to the lord had few rights.
The English Civil War, that saw Charles I executed and the establishment of the Commonwealth under Oliver Cromwell, also brought about the formal end of feudal land tenure. Even after the restoration of the monarchy, it was established (and has been held ever since) that the English monarch could only govern with the consent of Parliament. And thus began common law and the democracy under which we live today.
So what did this mean for land law?
Basically, it led to the establishment of “freeholders” of land. The monarch became formally obliged to acknowledge your land rights, i.e. your right to live on the land you “own” as long as you paid your taxes due. From this point, as a freeholder, you were entitled to live on your land free from the obligation of “serving” your lord. Basically you owned the “estate” (which is where the term “real estate” comes from) as opposed to the land, and you were entitled to sell that real estate or pass it on to your heirs. By contrast, leaseholders were limited to “owning” the estate for a given lease term, paying a rent to the owner of the land. Typically lease lengths were extensive and these days are usually around 99 years. (In modern times leasehold properties have become increasingly common where multiple dwellings exist on the same piece of land; for example, purpose-built blocks of flats. If you have 50 flats within a building, it would be a logistical nightmare for all the “owners” to share the freehold, so one landlord usually owns the land and leases it to the owners. If you've ever bought a leasehold flat you'll know that you have to pay “ground rent” to the freeholder, even though you technically own your flat. At the end of a lease, the legal deeds to the property pass back to the freeholder, which is why you should always seriously consider the length of a lease before buying property!)
Common law aside, it was still a long time before ordinary people could buy and sell property because most land was still “owned” by the ruling classes. The working classes still lived in privately owned accommodation and then paid rent to their landlord.
Ownership and Control
The above is an extremely abbreviated account of how property works and scholarly historians would probably baulk at its simplicity, but my objective is to get you to understand what I call the MYTH OF OWNERSHIP. Whether we are talking about the land that you “own” – on which you still pay a tax to Her Majesty's Government for the right to live on – or the house you live in – which you probably have a sizeable mortgage on – you do not physically have total ownership of your land.
What you do have, to an extent, is CONTROL. But even then you are limited. If you want to add an extension to your property, or turn your front garden into a driveway, you must ask permission from the local government. If you live in a listed property, you may have further restrictions on what you can do inside. If there is a seventeenth-century oak staircase in your Grade II listed fourteenth-century manor house, chances are you can't just rip it out and replace it with a modern glass and steel version!
Many people who are in rented accommodation long for their own place specifically because they want more control. They imagine how good it will feel when they can paint the living room to their taste, or install a new power shower, without always having to go to their landlord to ask permission. And buying rather than renting your property does give you a huge increase in control. You can more or less decorate as you like, and as long as you keep paying your mortgage you can stay in your property for as long as you like without the threat of eviction … you basically have more rights. But it's all still relative.
Remember this concept of CONTROL rather than OWNERSHIP as it will really help you to understand some of the concepts and “buying” strategies in future chapters.
Modern Land Law
The big reforms in land law in England took place during the late nineteenth and early twentieth centuries. These reforms, both in terms of their fiscal and social implications, widened the scope of ownership and control of property. For example, the Naturalization Act of 1870 gave aliens the right to own and transfer land in England for the first time. The Housing Act of 1919 gave rise to the building of new homes. Many of these first dwellings were built under a scheme called “Homes fit for Heroes” after the First World War. This started a long tradition of building state-owned housing in England, which gave rise to the many council estates that still stand today.
As the demand for social housing grew after the Second World War left over 1.4 million people homeless in England's major cities, new initiatives were started, and eventually the first New Towns Act of 1946 led to the establishment of whole new communities. Entire towns, with all the necessary infrastructure and facilities, were planned. Places like Milton Keynes, Telford, Harlow and Basildon were planned from scratch to cope with the impact of the post-war population boom.
The strain of owning and managing such a large housing stock put huge pressure on local government. In general, the 1960s and 1970s in the UK were years of massive economic unrest and instability. The pound was devalued, economic decline led to trade union strikes and unemployment rose dramatically. The welfare state was stretched and local government coffers were running dry.
Margaret Thatcher's solution, when she became Prime Minister in 1979, was dramatic. She implemented widespread deregulation and privatization in order to boost the economy and undermine the powers of the unions. But by far the greatest impact