My first ever property deals

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If you’re new to this blog you may be curious about my backstory and how I got started in property – it’s something I’ve talked a lot on the podcast before but I wanted to write about it here. Think of it as my origin story!

My first property was actually the home I bought at the ripe old age of 20, way back in May 1993. It was a tiny mews house: a two bedroom and one bathroom but effectively a stable! If you’re not familiar with mews houses, they’re small cottages that were built at the rear of the grand Georgian townhouses that line the streets of Dublin.

Back in the day it was most likely where the stable boy would have lived (and probably also the horses!) but it was my first home. I paid 85,000 Irish pounds for it (around 108,000 Euro in today’s money), and lived there for six years.

Man about town

I have to say I absolutely loved living in the middle of town, as a young guy you couldn’t get better a place to live and I lived it up for those six years as young man about town. In 1999 I got engaged we decided that we would buy a house together, but I didn’t want to sell my mews house! I absolutely loved that house: it was so convenient being right in the middle of town – I could sit in my back yard and listen to concerts playing at the Royal Dublin Society, and the big rugby matches were on the doorstep too. It was the centre of the universe as far as I was concerned.

I really did not want to sell this property so I decided to rent it out. I found my very first tenant very quickly; that’s the great thing about a good location – you’ll never struggle to find a tenant! In those six or seven years that I’d been living there, prices had risen quite steeply so the rent was 1400 pounds per month. If you do the maths you can figure out that the yield on this property deal was quite good: I had paid 85k for that property and I was now getting 1400 a month for it. That’s 16.8k pounds per annum and if you do the the calculation to work out the gross yield that works out at a 19.7% gross yield (so we’ll say ballpark 20%).

That effectively meant that the rent that I was getting per year was equivalent to one-fifth of the cost of the property, so every five years that I rented the house out at that amount, that was the property paid for.  In the end I held on to that mew house for almost 20 years and believe it or not, I had the exact same tenant for those entire 20 years! During those 20 years he paid me 330,000 Irish pounds, so effectively the house was paid for about four times over throughout my ownership of it.  

My first deal

So that was my very first property, now for my first property deal.

This was a three bedroom, slightly bigger house and a little further out of Dublin. I believe this house had been built around about 1952, and the reason I know that is because when I was renovating it, we found a milk bottle buried in the concrete. When we smashed open the bottle, we found a newspaper and a handwritten note saying this bottle has been left here today in the concrete as we’re setting it.  It was really fantastic to find that so I took the newspaper and the handwritten note, framed it and put it on the wall of the house as it was really interesting bit of nostalgia.

I really loved this house when I went to view it. First of all, I was an architect so obviously the mind is always working on what you could do with a space, but what was really stood out for me was the rear garden.

It was completely overgrown, I mean completely overgrown! I decided I wanted to go out and see how big it was you so I scrambled out into this jungle – brambles coming out right into the middle of the garden, lots of apple trees – and it was so thick, I felt like I needed a machete to get through it! I eventually managed to make my way to the back after I found a stick to beat the stuff back, turned around and looked and the house and garden and remember thinking, wow this is a huge garden. I think it was over a hundred foot long and so I saw huge potential there.

I was the only person at the viewing who went to the trouble of getting to the back garden because it was so difficult to reach and I remember thinking to myself that this was a big opportunity with a lot of room for expansion which nobody else would know about.

The other interesting thing was that it was an executor sale. An elderly lady had been living in the property and after she died it passed on to her children. They’d decided to put the house in the hands of an auctioneer: it was put on the market as is, so you would be taking the property in its original state, so it becomes a real fixer-upper.

In this case, it was super-dated. Everything was original so the windows were single glazed and the kitchen was like really out of date – it was like a scullery with huge, deep kitchen sinks.  The bathroom was super old as well – it didn’t have a shower, only a bath. Everything about it had to change, so I decided I would try to buy the property.

Going, going, gone

This was back in May 1999 and it was my first auction. If you’ve never experienced one, an auction can be a scary thing – you have to send your solicitor in to do a review of the title in advance, because you go in there ready to buy straight away, and if you’re successful you’re instantly committed! The speed it goes at is crazy.

I remember going in and had set myself a limit of £350k. I sat up the front wearing my jacket and tie – I wanted to look respectable and wanted to be taken seriously because I was still a youngish guy. The auctioneer started by saying “Do I have 250 [thousand]? Do I have 250, do I have an offer of 250? Do I have 250, anybody?”. Everyone was looking around the room, and I decided (being green as I was) to make the first offer – something more experienced bidders wouldn’t do!

The price quickly went up and up at breakneck speed, with three people bidding on the property:  myself and two others. It was going up rapidly in 5k increments, and ended up being between me and one other buyer at £380k.

“Do I have 385?” – I put my hand up… then it went up to £390k, and then the guy that I was bidding against bid 391k. The auctioneer turned to me and asked if I wanted to go again – I said 392, he looked at the other guy, who guy backed out. Boom he went with the with the big hammer, “Sold 392 to this man here at the front row” and that was it!

In the blink of an eye, in under 60 seconds, I was now responsible for the purchase of this property and writing a cheque right there and then. It was quite scary, but at the same time exciting because now I owned this property, without having to go back and forth with estate agents.

What made it a great deal

Because the property ended up being my family home, any increase at all in the value would be completely tax-free, and because it was in such a poor condition, I completely modernised it. I probably spent around £200,000 on improving that property but I sold it seven years later in 2006 for 1.9 million – so it was a massive profit, completely tax free.

Some of the work I did on that house was quite unconventional: I demolished the garage and created a side passage, then extended the house out, but only half of the distance that the garage had sat. That might sound counterintuitive, but meant that rooms deeper in the house actually got a lot of direct sunlight and that had a lot of light coming in. It’s something that doesn’t always work out. I also extended out the rear and built a lovely family room with double doors out into the patio. It was fantastic house. I really enjoyed living there and financially it worked out really well too!