Lots of people throughout the years have made considerable sums of money from property, but it seems unlikely that many started out as buskers.
Here, in this special two-part interview, we check in with Paul Hanafin to explore how he went from a chemistry degree and singing at weddings to his own sizeable property portfolio.
Science degrees, pub singing and getting started
“My start in property was quite an interesting one,” Hanafin tells us. “After graduating with a degree in medicinal chemistry, I got a job in the science industry. I didn’t enjoy it, and as music had always been a hobby of mine, I decided to try and make a career out of it.”
“I ended up playing around the country, writing my own songs and even lived in Spain to perform at holiday resorts. I was on the radio, too, but no number one albums! I managed to just about make a living out of it.”
For ten years, throughout his twenties, Hanafin was singing at weddings, pubs and bars, a regular busker and a resident musician in his local pubs. By the time he was in his thirties, though, he had his own family and didn’t want to do gigs in the evening anymore because he knew he’d never see his kids. He needed to find a stable job so started teaching music instead.
“I was going through an emotional time. I was a bit lost career-wise and I was frustrated at teaching kids who didn’t listen. I was suddenly facing the harsh reality that I was never going to be a touring rock-star. I came across Robert Kiyosaki on YouTube, and he introduced the idea of different business styles and not needing to be an employee to make money. It hadn’t occurred to me that it was even possible to make money in this way.”
Off the back of his work singing at weddings, he set up a wedding services rental business, renting out photo booths and the like. “I learned how to orchestrate the business — not only hiring the booths out, but getting people to man them, too. I ended up earning a relatively passive income, so I started to look for other ways of creating an income from renting things out. I realised that property was the best way to do it.”
Through Facebook, he started seeing adverts for Robert Kiyosaki’s seminars and events. He attended one and joined the property circuit.
“At this point, I knew that property was the way to go. It felt like the right time to set up a property future for my family, build something stable and not be reliant on a fly-by-night business.”
Hanafin bought his first property four years ago as a buy-to-let (BTL). “I tried to do it sensibly, so I bought one that didn’t need doing up, just so I could learn the process of buying and renting it out.”
He decided to take on a small project for his second property, to learn how to do a refurbishment.
“And it went from there,” he explains. “I eventually worked up to HMOs, and I suppose I’m still on the journey now. I’m looking at some bigger developments at the moment, but you can always go that one step further. I think I’ve done a lot in the time I’ve been doing it.”
As his portfolio has grown, he’s built supporting businesses around it with other members of staff and business partners.
“I started buying a BTL with no money, and now I have a lettings business, project management business and a sourcing business, on top of my own portfolio.”
He adds: “One of the things I realise about what I’m doing is that I was singing in the street for a few coppers, and I’m now overseeing millions of pounds’ worth of financial transactions, just solely from my own activities. It’s quite a change!”
He says it’s benefitted the local economy, too. “I employ a lot of tradesmen and contractors, and there are tens of thousands of pounds running through all the time. I did a calculation recently, and worked out that there was at least £3 million of capital coming to the region I live in, all based on things that I’ve done.”
He says this can be anything from an investor in London buying a property facilitated by him, or the contractors who are paid to do the refurb. “It’s a lot more impactful than what I used to do in terms of the local economy, so it’s quite rewarding and interesting to see how far I’ve come.”
How to get started financially?
It’s difficult getting started for most people, Hanafin admits. “How do you buy a property when you haven’t got any money? It’s not just about getting the deposit, because there are a lot of other risk factors involved with purchasing a house. I learned that I had to be prepared for much more than I thought.”
When he was working on the wedding business, he started to gather together some savings, but these weren’t anything special.
“And my first couple of deals were quite risky, because I used business loans and paid contractors on credit cards. It was a gamble, to be honest. I didn’t have any money, but I threw myself into it and used the loans and credit cards to get going. It was a crazy way to do it.”
He says he attended a lot of courses with various providers in the UK, and learned as much as he could, which helped him a lot in the early part of his journey.
“There’s a lot of talk out there about how courses are pointless and everything can be found in a book, but I didn’t feel like that. For me, it was money well spent,” he says.
“Someone close to me lost £100,000 because of a property deal that went wrong. They didn’t have access to property education and took bad advice from other people. I didn’t want that to happen to me and I didn’t want to repeat those mistakes. I needed to learn what to do and not take any uncalculated risks, because mistakes can be a lot more than the price of a course.”
Hanafin says the education paid off and the revaluation was exactly what he thought it would be. He got the money out and nothing was left in.
“It was mortgaged, but there was no remaining capital left in from me. It worked, and it’s a good job it did. I just repeated the system and reinvested the money and have gone on from there.”
Rinse and repeat
Hanafin says he found that the best way to recycle funds was to find creative solutions. “There’s no way I could build a substantial portfolio by saving for every deposit. It could take years to just get a handful, and a handful doesn’t change your life.”
The philosophy he has to do it quicker is to use other means of finance – i.e. not using his own money.
“Cash is limited, and when it’s all used up there’s nothing more to do other than stop. I’ve developed good relationships with angel investors, and it’s been a big lesson for me,” he says.
“At first, I felt like I was asking someone to borrow money, but now that thought has been flipped on its head and I realise that I’m making them money. Even if they are not actively involved, they’re still getting paid. I commit to giving them the returns on their money that they couldn’t get in a bank, and I need to work my socks off to find deals to enable me to offer this.”
In order to grow, Hanafin says, he thinks both cashflow and capital are necessary. To get cash flowing, ‘the main strategy is to buy and keep’, and capital is the method of ‘raising finance through earning, not loans’.
He claims flips are a good example of gaining capital. “We also have the other businesses to generate revenue through sourcing and project management.”
A big learning curve for Hanifan was realising that to buy a lot, he had to use other people’s money, and in order to make that safe, he needed to be generating capital to pay it back or to pay down a deficit if money was left in deals.
“People talk about the deals with all money in and all money out, where the refinance covers the costs. However, in my experience, it’s not that common and it’s not possible to build an entire portfolio by buying this way fast. It’s quite a complicated topic and I’ve mulled on it day in day out for years.”
Support from friends and family
When he first started out, Hanafin didn’t tell anyone what he was doing for a long time. He didn’t want to receive any advice from anyone else, because he wanted to do what he wanted, make his own decisions and didn’t want any outside influences. To this end, he didn’t tell anyone he was attending classes or courses.
When he eventually told his wife, she was very supportive. “She didn’t discourage me, but when I opened up to other family members, they were more cautious and concerned for me in a well-meaning way. I have many family working with us now so it has moved on. You have to make and take responsibility for your own decision in life, that is the only way to learn for yourself.”
In part two, Hanafin discusses balancing life and work, locations and strategy, and his advice for those starting out in property investment