Lifehacks that helped me buy a flat in London
Backstory
The world is run by bankers, real estate tycoons and property sharks. In London, they all seem to be the same people. The quintessential immigrant from a developing country does not dream of disturbing that establishment. He just wants to abide by the rules and go back home. Buying a house there is a very distant dream for him. He has other priorities to deal with in life before he can even think of buying a house. Having been sold a pretty picture of life in London, he comes to the capital of the world only to realise that life there is faster and harder than back home. He is just a needle in a haystack of people striving and struggling to climb that elusive financial ladder that most never succeed. Having fought his way up the classes, he finds himself pushed to the bottom of another classist society. I was one among them just a few years ago. I couldn’t accept that. I had to change that. This is the story of what it took me to turn that fate around.
Initial realisations
I landed in London in 2016 with very meagre savings to my name. I had no inheritance, no benefits, nothing given on a silver plate. Very early on, I realised a few things.
- Rent took up 30% of all my spendings. I conducted a poll in a popular London Facebook group asking people how much of their salary went for rent. Most people were paying upwards of 30–40% of their earnings in rent. This was in 2016 before rents skyrocketed to where they are now.
- Rent and Lifestyle were the biggest differentiating factors between me and the average Londoner. If only I could find a way to cut those costs, then at least theoretically speaking, I realised I would be slightly ahead of the curve.
- My rent payments went to someone else’s mortgage payments and the longer that went on, the longer it would take me to get out of that trap.
Execution
With those realisations in mind, I knew I had to do the following at the very least:
- I knew I had to save whatever I could for a long period until I saved enough for a minimum deposit.
- I knew I had to find a way to grow my income exponentially.
- I knew I had to close the gap in my knowledge of Real Estate.
The ideas were simple, but they required brutal execution. Not coming from an affluent background meant that it was easier for me to sacrifice luxuries than others. For a full five years, I was disciplined in my spending. I lived a very frugal lifestyle. When others spent, I saved. While others ate out, I cooked. When others chilled, I worked. When others slept, I learnt.
But saving peanuts didn’t take me anywhere. Inflation was eating away all my savings. There was no way I was going to catch up with the required amount. That’s when it dawned on me something that is now one of my life rules:
Doing everything everyone else did would only get me as far as where everyone went.
I had to do something different. I had to think out of the box. I had to outthink a system which was designed to keep me poor. It required a complete shift in my mindset and lifestyle.
The mindset shift
Firstly, for the longest time, I thought the net worth of a person was how much money they had saved in their bank account. It took me a while to realise that it was the wrong way of looking at it. The net worth of someone is how much the banks are willing to lend. Suddenly, I was worth 5 times more than I thought I was. This was key. It was this mind shift that opened the doors to buying a flat.
Secondly, I had to think of the purchase as an investment. This was hard. This can’t be taught easily and requires a specific mindset to be able to think this way. It took me a year of research to grasp this idea. So many things like interest rates, types of mortgages, inflation, and rental yield are involved in this ordeal. Treating it as equity made looking at it at face value easier.
Thirdly, I had to build a stomach for risks. Especially in a time like this. I bought this house at a time when the Bank of England kept raising the interest rates by the day to tackle inflation. I kept telling myself how the rewards are always in the risks. I had to prepare myself to lose everything to the bank to enter into a commitment like this. I did extensive research on the eventualities of all potential scenarios and made the decision to go ahead with the purchase.
Lastly, the understanding that interest rates, house prices, demand and supply and rental prices are all interrelated. And then there is where you are in your life. One can never get the best of all worlds. The right time to buy a house is a sweet spot amidst all those things.
The lifestyle shift
I was frugal. I saved a bit unconventionally. For most people, a linear increase in salary usually is followed by an exponential increase in their spending. I made sure my salary growth was linear, and expenses constant. And I made sure that my salary doubled every 2 years. I had to go out of the country for a few years, but I made sure I did everything to double my salary. To say this was hard is an understatement. I will get into how I did that in a bit.
Below is the average Londoner's salary/expenses over time graph. His expenses grew as he saved. As you can see, the blue area of the graph is savings. It grew linearly year on year.
Shown below is my saving pattern. Even when my salary increased, I made sure my expenses were the same. I did not upgrade my lifestyle, I did not treat myself. And this meant that my savings grew exponentially year on year.
Until now, I and the average Londoner were at par. This was my winning shot.
But how do you double your salary every 2 years? Well, to begin with I started off with an average salary. So doubling it once wasn’t a big stretch of the imagination. But doubling it two more times was not so easy. How did I achieve that? I invested. Again, not conventionally in stocks and shares and stuff or in crypto. To invest in something and not know if it will go up or down is just gambling. And I haven’t even started talking about the capital gains taxes. So I did not waste my time in the stock market. Instead, I invested in my skills. Now that was something under my control, probably the only thing under my control. I knew my digital skills were in high demand. I researched what technologies companies were looking for. I attended interviews as a way to learn to negotiate, bargain and reject offers. This was the differentiating factor for me in the end.
The home-buying process
With my deposit looking good for a house, I started the home-buying process. I hadn’t the faintest of ideas of how to go about doing that. But in hindsight, the timeline looked like this:
- I fixed my credit scores, got an online Decision in principle and started doing viewings.
- Did about 100 viewings over 2 years throughout London and other cities, made 4 offers, 2 got accepted, 1 fell through, and 1 succeeded. So the rate of success was 1%.
- I started reading about property investment and listening to podcasts.
- I interacted with a lot of estate agents and went to property meet-ups.
- I appointed a Mortgage Advisor who applied for the mortgage.
- I appointed a Solicitor who did all the legal bits.
- I appointed a Home Buyers Surveyor who surveyed the property for potential issues.
- I signed and exchanged the contract, and moved in.
The entire process took about 2 years. The legal stuff took 4 months.
Conclusion
I now have my own address very close to the Prime Meridian in Greenwich. Whether or not this was a good decision, time will tell. But I certainly have learnt a lot. About myself, my abilities, life, money and how it drives things in this amazing city and about a lot of other things. And to me, it was an act of defiance. Defiance against a system that once imposed itself onto my people, against the system that has made it so hard for Immigrants like me to climb that homebuying ladder and lastly, against my own prejudices about myself and money.
It’s been a few months since I moved in and I am loving every bit of it.
