Going into the property business 

I’m a tech entrepreneur and that has not changed, but after six or seven years of trying to have at least moderate success, I’m starting to hedge my bets.

On the side, I want to have some passive income and it looks to me like buy and hold properties, that is, buying them and renting them out, also known as buy to let, is the way to move forward. I identified some very profitable areas and they are in the least expected places. For example, in London you can expect a return on investment of around 3% while I’m getting something around 16%.

If you want to listen to my journey, I’m documenting it as I go with Clayton Morris on his podcast about investing in property. He just published the second episode in which I talk about getting the money for my first two deals.  I just pulled the trigger on starting the business. I’m super excited and I can’t wait to share more good news in the next episode. 

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Bank says bad debt OK, asset not OK

I want to start buying property with the goal of generating passive income from rent. I’ve read a bunch of books, listen to podcasts, did my research and I stumbled upon a good opportunity that needs more money that I have right now but still a very low amount. So, I need a loan.

I went to a couple of banks to ask for a loan and the answer was essentially: no, we cannot lend you the money to buy this asset that will pay for itself, but if you want to blow it up on a holiday and buy some useless toys, sure, here it is!

Mind you, I can easily pay the loan from my salary. I actually save more money every month than the monthly payment of the loans and I have in the bank a third of the money. My salary has been steadily going up and I’m in an industry in which I’m in a lot of demand. Where my plan is a safe bet, betting on me is even safer.

I’m not one to believe in conspiracy theories but it almost seems like their rules are designed for people to be stupid, instead of smart, with their money; to get in bad debt instead of growing their wealth.

Now, for the nitty gritty details: I asked for a personal loan, some banks disqualify me because you are not allowed to use it for business, some banks disqualify because I’m planning on buying property. They say: “we cannot give you a personal loan for property because you may also get a mortgage”

“Ok, can you give a mortgage then?” “No, because your property is in another country”

“Can you do anything?” “No”

Let’s say I take this supposed mortgage they are so afraid of and the plan fails. Whoever has the mortgage will repossess the property and I’ll pay the bank out of my salary the same way I would if I wanted to spend the money on a caribbean cruise or home improvement.

This feels utterly ridiculous.