I'M A FIRST-TIME PROPERTY INVESTOR WHO GREW MY PORTFOLIO TO $5.5 MILLION IN 3 YEARS. HERE'S HOW I DID IT WITH MINIMAL SAVINGS.

  • Alfred Dzadey, 29, bought his first property in 2020 and renovated it into an HMO in five months.
  • He sought loans to finance his investments, then renovated, refinanced, and rented the properties.

This as-told-to essay is based on a conversation with Alfred Dzadey, a real-estate investor who lives in Coventry, England, about building his portfolio. Insider has verified Dzadey's rental income. The following has been edited for length and clarity.

I pursued a degree in aerospace engineering. After graduating, I realized my degree wasn't going to help me get wealthy young, as I'd hoped. I started researching how rich people built their wealth and found that owning real estate was a key factor.

In 2018 I was 25 and worked as a project manager for Jaguar Land Rover. I invested £25,000 of my savings in in-person real-estate courses a friend recommended. The course gave me the confidence and knowledge to eventually build a real-estate portfolio worth £4.2 million, or about $5.5 million, in three years.

I started asking family, friends, and colleagues who knew how serious I was about real estate if they wanted to invest with me. I told them I'd pay them the initial amount they loaned me plus a fixed interest rate higher than what their money would earn in the bank.

A few months later I'd collected £150,000 from four investors and drafted loan agreements with each of them. I'd pay them back over 12 months, starting when they signed the loan agreement.

Figure out what you're comfortable investing and fundraise your down payment and renovation costs

There's no magic number to start real-estate investing, but securing the capital for a down payment, about 25% to 35% of a property's value, is a good start.

Investors in my network had shared which property investments were working for them. Using that knowledge and help from a local agent, I purchased my first property in February 2020: a mid-terrace house in Coventry, West Midlands, for £225,000.

I invested in this house because I thought it would make a good HMO: a house of multiple occupancy. I used £60,000 of the money I'd collected as a down payment for the home. In April 2020, my work contract was terminated due to COVID. I decided it was time to prove I could make real-estate investing a full-time career.

I tapped my property-investor network for referrals for trusted contractors and put the remaining £90,000 toward refurbishing the home.

The renovations were completed in five months. We had the house revalued, and the value had increased from £225,000 to £360,000.

'Buy, renovate, refinance, and rent' is a lucrative strategy to scale fast

My strategy became clear: purchase a property, refurbish it so it gains value, then use the difference between the amount I owed the bank and the value of the property to recycle into the next deal.

My aim wasn't ever to sell for a quick return. My long-term goal was to hold the properties and build equity.

One month after the refurbishments were complete, I started renting the property for £3,500 a month. After bills and expenditures, my profit was around £1,400.

I used the equity — the difference between the house's worth and the balance I owed to the bank — in the first property to purchase my second one. I paid back all my investors at the end of the 12-month term.

After I paid back the investors, I had to raise more money, since I was working on several projects in parallel.

For each new property I wanted to flip, I assessed how much capital I needed and raised it, as required, from my network. For example, if the equity on the property I was completing was £50,000 short of what I needed to purchase the next property, I'd reach out to my network and crowdsource it.

This continued until I had eight properties to my name in three years. I renovated each one and then rented it out, using the rental income to reinvest in other projects.

The more properties I purchased, the more I learned about what works well

I use the same property-management company to vet renters and keep the rent paid for all my properties, which saves me a lot of work. I use that time to find new opportunities and raise more capital.

With each purchase I learned which properties made lucrative investments. I favored properties closer to Coventry city center because of easy access to shops, amenities, and transport links, making them enticing for renters in all market conditions.

I'd also research which types of rentals were in demand in an area before purchasing a property. For instance, an area with families wouldn't do as well renting out a house of multiple occupants, but an area with lots of students would.

Also, I researched how local authorities reacted to unit modifications in the area. Were they lenient about changes? Or did they make things difficult?

Return on investment was always a driving factor. If a property was too expensive or cost too much to fix, that was a red flag.

Once, I bought a property with the plan to do a loft conversion; later I found out the roof needed to be replaced because it was caving in. In another instance I learned that damaged or diminished glaze on Victorian windows could cost up to £7,000 to replace. I turned down projects requiring fixes to these types of windows and properties with a botched roof or those at risk of subsidence.

I gathered a team of builders to help me evaluate properties and alert me to concerns. I connected with them through my network of experienced investors and paid them per project.

Sites like Zoopla and Rightmove were helpful to identify potential investments, but nothing beats a strong relationship with a real-estate broker. Agents I'd worked with were soon calling me to offer off-market deals because they knew I was a credible and serious buyer.

Also, spreading the word to people I knew came in handy. For instance, I came across one property because a neighbor knew I was in real estate and offered it to me before listing it.

Finally, nothing outvalues the importance of mentorship and learning. The book "The 10X Rule" taught me a lot. I also have mentors and coaches I rely on who I know through personal networking.

Now I help others invest in real estate

I also give real-estate classes and mentor others to secure projects, raise capital, and scale.

I've grown my portfolio from one to eight properties within three years. My current portfolio's valuation is nearly £4.2 million, with £1.2 million of that comprising my equity and the rest belonging to the bank.

I make about £25,000 a month right now, and it will jump to nearly £30,000 next money as I've just got tenants in a new set of flats. All my properties have healthy cash flow. Because of the desirable locations, generally when one tenant moves out of a property another moves in within a week.

This is just the beginning of my real-estate journey. My plans include taking inspiration from the multifamily market in the US and replicating this in the UK.

2023-07-17T10:46:06Z dg43tfdfdgfd