Research by property developer Stripe Property Group (see Lontayao 2022) has revealed how much a property in the UK cost 50 years ago and compared it with today’s prices. When I was born, the average UK property was valued at £5,158. Adjusted for inflation, this still equates to an affordable £49,333 by today’s standards. In 2022, the average UK homebuyer was paying £278,436 for the average property. That’s a total increase of 464%, with house prices climbing by an average of 9.3%, or £4,582, every single year over the past 50 years. So it seems my dad’s hunch was right – property is a good investment. It has some other advantages too, such as being exempt from inheritance tax if passed down to your direct family, and also gives you options to either downsize or take equity release in later life.
Rental is a secondary way to earn money from property and is generally thought of as buying and renting out a separate property. It’s less common but if you live in a house or large flat, why not think about renting out part of it to a lodger? This might sound slightly unnerving at first but having done it for more than ten years, we’ve found it to be safe, providing you take some common sense precautions in selecting your lodger and are clear on ground rules. It started when we were renovating our current house and Lou literally stumbled on one of her colleagues sleeping under a desk when she went into work early one morning. He’d been sleeping on his brother’s sofa when a chip pan fire had gutted the flat and the insurance would only rehome the legal tenants. Our house was a bit of a building site but Lou offered him a mattress in the spare bedroom and before long he became an unofficial lodger, paying a nominal rent. A year or so later, when I was relocated for a stint of work up in Scotland, we decided to look for a formal lodger on a Monday to Friday basis so that Lou had the security of not living alone in a fairly rural area during the week.
We found that there’s a good demand for such rentals, particularly among professionals who are working away from home on a contract but feel a hotel is too impersonal. There’s also the advantage that they’re not a permanent resident in your property; we always ensure that they have a registered family address elsewhere. A further benefit is a tax break (the ‘rent a room’ scheme), which allows you to earn up to a threshold of £7,500 per year tax free from letting out furnished accommodation in your home. When we started doing this, many friends said they couldn’t possibly handle the intrusion of a lodger in their own home. Our view was that the lodger’s rent and the additional tax benefit meant that they were paying our mortgage and contributed significantly to us being able to pay it off in our late forties. As with much of the advice in this book, it might not be for everyone but it demonstrates that you can achieve greater financial stability if you work hard at it and accept that sometimes you have to compromise.
On a similar theme, if you have a parking space, renting it out via one of the many available apps is also a great little earner, although sadly without any tax breaks. You might be lucky enough to live near a railway station or football stadium and that can give you a regular rental income.
The more common method of earning rental income is ‘buy to let’ (BTL) or buying another property to rent out. In general terms the concept here is twofold – earn a rental income that’s higher than your mortgage and let the capital value of the house increase over time. BTL has been popular over the past 20 years, with some bold investors building large property portfolios. However, I’m not a complete convert. This comes down to the recurring theme of paying off your mortgage early or, to put it another way, are you borrowing to invest? This has led to a fundamental difference of opinion among financial commentators and many disagree with my view. If you borrow (on your mortgage) at 8% but your rental yield gives you 10%, you’re 2% up. However, this only works in a steady state economy; if your mortgage goes up, you can’t immediately increase your tenant’s rent. And if you do have to remortgage, fees (often more than £1,000 for a good, market-leading rate) could wipe out that year’s profit. If you’re hit with a period without tenants (and it will happen, if only for a few months) you still have to pay the mortgage. You also need to factor in selling the properties at some point, and while their value is likely to have gone up, capital gains tax (CGT) will be due on any profit, and the allowances are much less generous than they used to be.
Lou and I haven’t ignored BTL investments but we’ve gone about it in a slightly different way, which has provided a healthy property income. Twenty years ago, we bought an old farmhouse with a couple of acres and an attached ‘granny annexe’, as we wanted to futureproof an option to care for our parents. They were getting older and increasingly frail, plus they were living on the other side of the country. Prior to my in-laws moving in a few years ago, we rented it out but because it was technically part of the main property, it was included in our deeds and mortgage and not on a separate loan. We also had an old barn, which we were able to convert into a two-bed cottage. We strove not to increase the mortgage to build it (although being on an interest-only mortgage on the main house, we had some flexibility). In effect it has allowed us to have three rentals from one property – a lodger, plus the annexe and the cottage, both now mortgage free.
While this might sound idyllic, it’s not been without some hardship. When we were looking for a property with an annexe and land, we had to accept that we’d have to compromise on location. We simply couldn’t afford such a property near a large town or close to a motorway, so we’re in quite a rural area on the edge of a small market town. We also had to buy somewhere that needed ‘a bit of work’, again down to cost, so we’ve spent a lot of time and effort on renovating the place. Being more rural has a knock-on impact on the availability of jobs and increased travel times but it was a conscious decision that worked out well in the end.
I appreciate that this won’t be an option open to everyone, but it still supports the point of having rental income without the associated mortgage debt. We have rental income every month and the only outgoing is insurance and a bit of maintenance. This significantly reduces the risk to the rest of our finances and is why, when interest rates were increasing, it didn’t affect us, allowing us to maintain rent at below market value. For us, happy, long-term tenants are preferable to pushing for a higher rent and potentially having a higher turnover of tenants.
Selling unwanted items
Consider selling your unwanted or unloved items. You’ve no doubt heard of eBay, where you take some photos, list an item for a low asking price and wait for the bids to flow in, with eBay taking a cut of the final sale price. There’s a trade-off in starting with a low asking price to tempt buyers, the risk being that there will only be one person interested and they can buy it on the cheap. My preference is to look at similar items and price accordingly or list at a higher price, see if it’s getting many hits and, if necessary, reduce the price. While I love eBay and have been a seller for many years, it requires a bit of effort and there are some new alternatives that I think are easier to use. One is Thrift, which was supported via an investment from the BBC’s Dragon’s Den. If you have a lot of clothes, particularly designer labels, and don’t have much free time, this is a great option. You’re sent a Freepost bag, which you fill with clothes and send off. Thrift sorts, photographs and lists the clothes, then you wait. When an item sells, Thrift takes a cut, a slice goes to charity and you get the rest in the form of a credit. I’ve used it on several occasions but have also bought clothes from the site. It’s an efficient process and gives some money to charity, which is a bonus.
As I’ve mentioned previously, my current favourite site is Vinted. It’s similar to eBay but I find it much easier to use. It’s simple to upload photos and although the categorisation can be a little clunky, it’s quick. The difference between eBay and Thrift is that with the latter the price you sell for is the price you get. With Vinted, the price you sell for is the price you get; the buyer pays the uplift for shipping, insurance and the site’s margin, so it’s clearer to see what you’re earning. It also seems to be gaining traction as a popular selling platform, not least when things go wrong (such as a damaged parcel). Vinted takes care of it rather than you having to sort it out, as you would with eBay. The other advantage is that once listed, an item remains live until sold, so you don’t have to keep relisting. Again, to avoid the risk of selling something too cheaply, you can always list at a higher price and then reduce it if it’s not attracting much interest.
There are other local options such as Facebook Marketplace, Craigslist or Gumtree and you might have your own favourites but I find the ones I’ve mentioned above to be the least hassle. This flips back to the point about valuing your time accurately; if you list an item for £8 and it takes about an hour to photograph, list, relist, deal with seller communications, pack and you end up with £6.50 (less eBay commission) in the bank, you’re earning less than the minimum wage. Amazon have an amusing acronym for similar situations where they just can’t make a selling margin – CRAP: can’t realise a profit. Sometimes you have to accept it’s just not worth the effort.
Over the past year, we’ve listed and sold around 250 items and earned (or more accurately, ‘recouped’) about £2,000. It really is a random selection, from an umbrella, keyrings, hats, teaspoons and a ladder right through to a 1953 fly-fishing catalogue – anything that we no longer use or want and is relatively easy to ship; otherwise it’s gifted to the charity shop. This ‘easy to ship’ point relates to the effort involved; like many others, we regularly shop on Amazon and they’re kind enough to provide many boxes and packages, which I keep in our utility room. When I sell something, I recycle an Amazon box. My internal metric is that it shouldn’t take me longer than five minutes to list, update, transact and ship an item, unless it’s going for a reasonable price – then I might allow ten minutes!
I’ll add two quick side notes on selling. First, if you’re selling, 99% of the time you’re going to get much (much) less than the retail price, so while it’s nice to make £30 on a designer shirt, if you hadn’t bought it in the first place for £80, you’d be £80 better off rather than £50 down. That said, we all tend to accumulate a lot of possessions and selling them on (or gifting them) is better than throwing them into landfill. The second point relates to our friends at the Inland Revenue (HMRC). My annual figure of about £2,000 is genuine but you need to be aware that there are tax laws regarding whether this is judged as income. If you’re selling your own possessions (normally at a loss), you don’t need to tell HMRC. There’s one exception, though – if you sell something for more than £6,000 you might be liable for capital gains tax (excluding selling a car) but if you sell items you’ve made or have bought to sell on, and if you make more than £1,000 in sales, you might be deemed a trader and therefore have to declare it as additional income. Don’t be tempted to ignore this, as HMRC does monitor these sites for evidence of trading.
Selling unwanted stuff is a good way to reduce clutter and gives someone else a chance to secure a bargain. If you have kids, it’s a great way to teach them about the value of money. If they want a new toy, game or phone, sell some of their old items first and save for it. To ensure you’re actually making some money and not just spending time selling things, it’s a good idea to set up a separate bank account to channel sales into and also to use this money to buy related items for those sales, such as packing tape, labels, postage, etc. This way, you can see the balance build up and perhaps treat yourself to something once you’ve hit a certain target.
The gig economy
Whether you’re in full or part-time employment, if you’re in the right location some of the jobs in the gig economy are worth checking out – but they do tend to be more feasible in higher density residential areas. While at Amazon, I worked on the UK launch of Amazon Flex, which is designed to offer ‘take it or leave it’ blocks of work to delivery drivers. The concept behind this and similar platforms is great but there are some frustrations. To reduce management effort, there are some big algorithms sitting behind the technology, so if you have a problem, it’s sometimes difficult to talk to a human and work it out, but overall the idea works. Many also use a surge pricing model, so during times of high demand such as Christmas, you can earn more than double for a ‘block of work’ – but you’re also fighting against many others and it can be difficult to get accepted when it’s convenient to you. Properly done, this new way of working is very flexible and without any commitments. I believe we’ll see this type of work increase as technology expands into other markets, giving further options for earning extra income.
Cash savings
If you do have cash savings, make sure you have an account that pays reasonable interest. Many high street banks have a terrible reputation for not paying fair interest rates, so don’t reward them with your loyalty – find a bank that does. Many offer attractive rates for a year then revert to a poor one, so unless you want to keep switching around for the best rate, pick one that’s consistently near the top of the best buy tables and stick with it. As more financial institutions increase their security and multi-factor authentication, it’s becoming more of an effort to keep switching and can also have an adverse effect on your credit rating. It’s also worth sense-checking what the difference in rates means in real money terms. On an average balance of £5,000, 0.5% difference in interest is £25 – so ask yourself, is it worth it?
On a similar theme, many banks offer cashback if you switch your current account. This can be quite attractive, considering it’s free money – up to £200 in some cases. The trick is to open a basic account, put a couple of direct debit payments through it and then use this ‘donor account’ to switch every year to another bank. Of the many hoops to jump through, there’s normally a minimum amount to pay in. The banks don’t seem to have clocked on to the fact that you can set up a standing order to transfer £1,000 each month (or whatever the minimum figure is) and then withdraw £900 the following day back into your main account, leaving a small balance for the direct debits.
Linked and affiliate spending
My last option to make some passive earnings is what I’d call linked or affiliate spending. Linked (or introductory) spending has taken over from what used to be cashback credit cards that gave you a percentage (in cash) against any spending. With more choice from online retailers and many more comparison websites, the cashback is paid if you shop through their site/portal. The reason they do this is to capture data about your spending habits (this is a growing trend often referred to as ‘big data’ – where technology now allows more complex analysis of larger data sets). Either way, they generally work well but there are a few golden rules to be aware of. There can be a long delay between a purchase and the cashback payment and the risk is that you lose track and don’t claim – but if you select one and check it regularly, they can generate a reasonable return of a few hundred pounds with no real effort. As with any promotion, only use it for things you were going to buy anyway and never be tempted to buy something just on the basis of the cashback, as it’s not guaranteed.
The final challenge is knowing whether or not you’re actually getting a good deal. With the growing volume of data and more complex algorithms managing offers and pricing strategies, it can be confusing. I recently received an email from a seed catalogue with a link to an offer on some bedding plants, but since I knew they were in my preferred cashback site, I logged in through there, only to see a different price. Going direct to the retailer’s website, I found yet another price! An even more complex challenge is when there are multiple layers. For example, through work I enrolled in the IHG loyalty scheme (Holiday Inn hotels group). I receive various benefits for being a ‘loyal customer’ (such as free nights) but I could also book a room at Holiday Inn through Hotels.com and receive a loyalty bonus from them as well. Finally, I could access Hotels.com via TopCashBack, which would give me cashback on my booking on top. Factoring this in against the variable pricing means you can tie yourself up in knots figuring out the best deal. It can become complicated to track the best price but it’s worth looking at alternatives when you book online. My guidance would be to use one and stick with it but only for purchases you make regularly. Again, don’t bank on it but you can get a nice bonus when the algorithms kick in and pay out. I booked some rooms for a summer break in Tenerife and hit a ‘snap offer’ of 11% cashback instead of the usual 1–2%. I was happy with the final price too, as I’d previously booked the same hotel for the same cost per night last year. Just to be clear, these are not recommendations, just my informal findings after using several of these sites. There are others, such as Quidco, Jam Doughnut or Airtime Rewards, to name a few – but the advice is the same as for a savings account. Don’t chase them all, pick one you’re comfortable with, don’t overcomplicate it and, depending on your spending profile, you could end up with a nice bonus. Although we’re now spending more on travel than others might, we have a pending cashback balance of £800 this year, which is worth having.
Loyalty and affinity cards
There’s a crossover here with a section in Chapter 4 on saving money with loyalty cards. Depending on their structure, they can fit in both camps – creating savings and discounts on things you’d ordinarily buy, or earning rewards (that have financial value) that you can effectively bank. The credit card versions were originally ‘cashback’ cards, hence mentioning them in this chapter. They’re becoming less common and the trend appears to be more software oriented or app based (such as the cashback sites mentioned above) where transactions are tracked in return for credits rather than being specifically tied to a single physical card. If you do have a credit card, it’s definitely worth having one that gives you something back; just be sure that if it’s a branded ‘reward’ you’re able to convert it into a financial saving.
Tax tweaks
Finally, there are some tax tweaks you can use to make your earnings go further but this is a large and complex subject best dealt with by an independent financial advisor. It could include transferring some of your non-taxpaying spouse’s allowance over to you to reduce your tax; entering a salary sacrifice scheme with your employer, where you reduce your salary (and therefore tax) in return for (typically) increased pension benefits; changing the beneficial ownership of jointly owned rental property; and not forgetting to use your annual ISA allowance for tax-free investments.
Side hustles
What exactly is a side hustle? There are several definitions of the word hustle, from a heightened state of activity or a sense of pace (as in ‘hustle and bustle’ or ‘hustle along’) but also slang interpretations suggesting an illicit activity or a swindle, both of which imply something quick, and possibly a bit dodgy. In the context of this book, I’m taking ‘side hustle’ to mean an easy, risk-free way to make additional money. My view is that this implies looking for a quick win in building wealth and I honestly don’t believe there is such a thing. Yes, some people can and will make money out of the following ideas but I don’t recommend them as I believe they have a high risk of not making much money, if any. While you could argue some of the subjects below are investments (and should be included in a later chapter), I’m including them here as I don’t believe they’re reliable enough for the regular person to have in their strategy. They do, however, often appear in media articles claiming to be a simple fast track to wealth – I find such posts tend to be a little light on the detail, usually focusing on a clickbait headline such as ‘I made a million from XYZ in my spare time’. Similarly, every once in a while I see an article about investing in fine art, whisky or supercars quoting sensational returns but again, I wouldn’t suggest these niche ideas for the average investor. In short, I don’t believe there are such things as guaranteed short-term wins; investments should be over the long term and demonstrate a reliable growth trend.
Vlogs and influencing
There’s an increasingly mature trend for influencers and online social media marketing. Despite what I’ve said previously, I don’t totally disagree with marketing as a concept but I don’t believe you should be persuaded to buy a product just because a well-known personality endorses it and I don’t think there’s long-term value in you becoming that ‘personality’ as a route to earning your fortune by posting about a particular product. Anyone can create an account and start posting content but there are now millions of people out there doing this and the odds of you earning a significant return for the time invested are low. Despite this, I’m interested in how people react to posts and am intrigued by what gets picked up by others. I love old architecture and also keep bees, these being the most common subjects of my Instagram posts. Maybe others don’t find ancient architectural detail as interesting as I do but I get ten times as many likes and comments on almost any bee-related post. I’m all in favour of anyone posting about their passions but I don’t see it as an income generator. Enjoy it for what it is rather than doing it in the hope that it will give you a financial return.
Cryptocurrency
This deserves a special mention; if you’re tempted, do you understand what you’re investing in or are you just following the crowd? I’ve no doubt that there might be a new form of currency in the future that’s structured differently, particularly as physical cash is being used less often in favour of digital transactions. However, what that currency format will be, I don’t know. I learned a little about cryptocurrency while mentoring a colleague over the course of a couple of years. He was much more technical than me and understood about the blockchain technology that sits behind crypto. He’d invested in a number of different cryptocurrencies and they were doing very well for him, valued at many times what he’d originally invested. I was sceptical about the stability of his returns and suggested he might want to sell some (at least his original stake) and then overall he wouldn’t be out of pocket if it all fell apart. Rather than heed my advice, to my frustration he regularly invested more! He would try to explain his reasoning and the technical developments that were driving interest and therefore price but I never really understood it. This continued until he messaged me one day and said he needed to talk to me. He’d woken up in a cold sweat after dreaming it had all crashed and he’d lost everything. So, that morning, he sold his entire holding. He was exceptionally lucky, netting more than £300,000 in profits after paying a (large) CGT bill. A few months later, the value of cryptocurrencies fell through the floor, so his dream was a fortunate premonition.
As I write, the value of Bitcoin is still more than double what it was three years ago and others are nearly tenfold up on the same period but in my view, investing in crypto is still a huge gamble. Those who invested early may still make a reasonable return but as my grandfather used to say, ‘If you see a bandwagon and try to jump on it, you’re already too late.’ I wasn’t completely immune from the lure of huge gains but worked on the principle of only betting what I could afford to lose. I bought £1,000 in a handful of cryptocurrencies, took some profit when they increased in value but am 10% down overall and still have no real idea about how it all works.
It comes back to the fact that there will always be someone who has made a huge return but it’s usually either down to luck, timing or a detailed knowledge of the product. It’s highly unlikely that the average person can replicate it, so I wouldn’t recommend investing in something you don’t understand.
Reselling returns and unsold stock
About ten years ago, we investigated buying from a trade wholesaler and selling some items online. The first thing we learned was that there was a minimum order of £1,000, which we weren’t expecting but we decided to take a chance, buy some things we liked and see whether we could double our money within a year. The quick answer is yes, we did double our money, but we also learned a lot along the way. It was mainly about finding the right product to sell; we only sold out of half of the range we bought and were kicking ourselves for not buying more of it. The items that sold well were inconsistent; some items photographed well and looked ‘worth the price’ while others were heavy and awkward to ship and the cost of packaging and sending them wasn’t really worth it. In the end we offloaded our remaining stock as a bulk buy on eBay. It was a worthwhile exercise but proved there’s some luck involved in selecting something to sell and also effort in holding stock and managing the selling, not to mention time. Could we scale it up and do it instead of our main jobs? No, because although we enjoyed it and it was profitable, there was too much risk of ending up with dead stock, so we decided not to continue. Out of the 20 or so lines we bought, the best sellers (in terms of selling out and getting a good margin) were some ceramic and glass hurricane lights (none of which broke during shipping) and a fabric pig doorstop. Neither of us would have predicted these would be bestsellers.
A variation on this idea comes from the growth in online shopping and the associated increase in the number of items that are returned. For the retailer, processing these returns is expensive and they’re often sold straight on to third party clearance houses, which auction them off. You can buy these pallets as a bit of a lucky dip of stock to sell on and you can find some real gems in there but there’s no guarantee you’ll hit the jackpot. Unfortunately, the media only spins the one pallet that turns a huge profit rather than the many that don’t.
Returned and refurbished items are classed A, B or C, with ‘Grade C’ being the most common. Definitions vary, but might typically be: ‘Inventory has been inspected, tested and restored to the original manufacturer’s operating specifications. This fully functioning product is in retail-ready condition but with significant cosmetic defects (significant blemishes and/or significant scratches, dents or frame damage).’ In other words, it works, but may not look great. There’s usually also a disclaimer that says the inventory list might not be accurate and you buy at your own risk. Looking at a sample lot, one pallet of kitchen/electrical returns had 169 items ranging from a Black & Decker vacuum cleaner and DeLonghi coffee machine down to a photo frame, an ice-cream scoop and an egg timer. The retail value was £3,026 and the pallet was being offered at 18% of this or £544 plus delivery (£45), unless you went to collect it. There’s a rule of thumb when reselling most surplus stock that 10% (of the retail price) is good value – but that’s if you can find a buyer. It’s all down to risk; you could be lucky and get a pallet full of high-end branded items that you can sell at an attractive margin but a lot of it will be mid-range stock and cosmetically imperfect. For the reasons above, I see it as just too high risk and it also consumes too much time and space to recommend as a good money-making idea. If you have a passion for a product and find a good supply, I’m all for doing a little buying and selling – but it’s not for everyone.
Drop-shipping
