#42 - Stepping back and thinking longer term
What I’m Reading
Big Debt Crises is a book I like to revisit from time to time. Here, Ray Dalio delves into the mechanics behind major debt cycles, and the difference between inflationary and deflationary depression by looking at examples from economies around the world, including the 2008 financial crises.
It’s a heavy read, but the book provides so much insight into what our economy is doing, which helps me make decisions independent of the nonsense that is spouted on the media nowadays. It’s rare to have an author of Dalio’s calibre sharing his wisdom who is in a phase of his life where he is giving back, such that you can actually get a pdf of the book completely free here.
Resource of the week
I got back into journaling in the second half of last year and now I am hooked. I use it for a mix of things, mostly stream of consciousness, just jotting down anything that comes to mind, and writing out my favourite quotes and book highlights to remind myself. Another use is being able to jot down those fleeting ideas that come to mind. I feel like the act of writing something down is the first step in turning an abstract idea into something real.
If this is on your new year’s resolutions list I would recommend the Midori MD notebook. It’s a beautifully minimalist design notebook from Japan at a reasonable price and is what I use for my rough daily workhorse.
Most people focus on the pen then the ink. As someone who appreciates nice pens, I would argue that paper is more important than spending more on a fancy pen, which few think about.
It helps so your inks don’t feather and bleed through the page for a start, but the very best are able to show the vibrancy of the inks and do this thing call shading where it causes inks to pool so letters have different saturation and transitions which give handwriting a lot of character which is the mark of a fountain pen.
Quote
Any asset, however ugly, can be worth buying if the price is low enough. Indeed, Marks believes that "buying cheap" is the single most reliable route to investment riches-and that overpaying is the greatest risk. Thus, the essential question to ask about any potential investment should be "Is it cheap?"
William Green - Richer, Wiser, Happier
Thoughts
This week I had the pleasure of speaking to the team at InvestGrow Financial Services a company with headquarters in Birmingham. It was inspirational to hear about the journey and growth and what can be achieved when taking that long-term mindset.
I resonated with what the managing director said about letting your work speak for itself and ultimately providing value to your clients, which is the approach I have taken to my TikTok from the beginning. Also crucially that the first 1-2 years are the heaviest lift, which is something that I feel a lot of us need to hear.
Too often people start a new venture and expect immediate results, which unfortunately doesn’t work like that. It takes a lot of sustained effort at the beginning to make change; to build that momentum. I want to re-share this chart from Atomic Habits.
It shows that at the beginning, the results we get are far less than expected for the effort we put in, but eventually everything compounds. So the key is really to set yourself a target, a minimum amount of time.
You need to research, but just enough so you can take the next step. Don’t make the mistake of falling into the trap of analysis paralysis because it feels safe, it’s just procrastination.
Property plans
So what’s the deal with my property plans? Firstly, investors are still adjusting to the higher mortgage rates, where I feel that things are just starting to settle. From what I’m seeing the fixed rates for BTL limited companies are around the 6% mark, maybe a tad under for the most competitive products. What’s crazy is the aggressive ways I’m seeing banks using to claw profits back. I’ve seen some products with an arrangement fee of 5% of the entire loan amount! So for example, if you’re purchasing a £250k property on a 75% loan, that’s £9,375 just in fees which is more than the stamp duty, even factoring in the additional 3% which it’s only £7,500. I’ve not seen arrangement fees like this in the past, so something to be very careful of.
Variable rates are an option with the best products at a slightly lower rate at just below 5%, which is what I’m considering for the time being. However, it’s a close decision as it’s not a tonne of difference in terms of the rate. So whether I go for a variable or fixed rate mortgage product will depend on what’s available at the time I get an offer accepted as things are just changing that fast!
Swap rates, (the rate at which financial institutions borrow money) have actually come up very slightly so it remains to be seen where things settle.
What about the base rate? Most predictions have the base rate settling at around 4.5% this year, which is what I’m basing my variable rate decision on.
Of course, for the wider market, this means that yields are being squeezed harder and I think investors will be looking at alternative strategies like HMOs and short-term lets to meet yield requirements.
I plan to work with a Property Sourcer this year so will document the process behind that. So I’ll be showing my personal experience, what to look for and what to expect.
Stay tuned for that!
Hans