Each and every week, I answer my subscribers’ questions about property and business on my YouTube channel. If you have a burning question you really want the answer to, please place a comment on my latest Q&A Sunday video. Next Sunday I will answer as many questions as possible, hopefully yours will be among them!
This week I got a great question from a subscriber called Mefruz Rahman about whether you should invest without having an emergency fund. This was my reply…
That's a really good question and I'm going to answer that question in two parts. Number one, I'm gonna tell you what I would advise or what most people would tell you is the right thing to do, and then I'm going to tell you what I did.
If I was putting my sensible hat on, I’d say of course, have an emergency fund because if you invest all your money into property, and you haven't got any cash in the bank, you've not got any cushion, any oxygen. Because money is oxygen, money just makes things happen. If you invest it all into property and you stretch yourself, then should an emergency happen you are over stretched, over leveraged and you can't afford to do it.
So get your emergency fund sorted; make sure you've got a little bit of cushion; a few thousand pounds in the bank; and then invest what's left into property. That's probably what most people would advise you to do.
That is, however, not what I did myself and that's also not what most people that I know who are succeeding have done. When they start out, most property investors, most entrepreneurs, they put everything on the line. I did that. I was so stretched, I remember at about 18 years old driving in my Purple Ford KA and my car was so low on petrol. I couldn’t afford to get petrol because I had no money in the bank. I'm overdrawn; my credit cards are overdrawn; and I remember thinking I'm just gonna have to make it home and wait for some rent to come in. I've got a few properties right now.
So I'm driving and guess what? My car runs out of petrol. I'm pushing my little Ford Purple KA to the nearest petrol station in the rain. I get to the petrol station; I put five pounds in because I can't afford any more than five pounds, just enough to get me home. I go to pay and my card is declined! My credit card and my overdraft is maxed out.
I have to phone my little sister who's four years younger than me, who's like 15 years old, and beg her to transfer five pounds to my account so I can afford to put some money in my car to get home.
That was me and at the time I was buying houses, I had quite a few houses at that time. So I can’t really stand here and say to you be sensible when that’s not what I did. You know what? If you want to be ridiculously successful in this business, you can't be sensible, you have to be a little bit crazy. You have to be prepared to do things most others aren’t prepared to do.
So I couldn't advise you to do what I did, because some people would have a nervous breakdown. But that's what I did. Another thing is people say I'll make a nice salary, I'll save some money and then I'll invest what's left over. Guess what's going to be left over? Nothing. So you're better off to invest what you can't afford to invest because at least then it's invested.
Then you'll be broke. Good. You'll be broke, but you'll be invested. Then you’ll have rent coming in and the properties appreciating in value. I just had some of my houses valued that I bought back in those days. I remember buying a house when I was a teenager; I just had it valued this week and it's almost tripled in value! I get about a thousand pound a month cash flow off of it.
So glad that I stretched myself 10, 12, 13 years ago because now I'm reaping the rewards. I did what most people weren't prepared to do. Now, I'm prepared to live how most people can't live. So hope that helps!
If you would like to see all the questions and answers from this week’s video, please check out the full video here.