MANY of us dream of giving up the day job and making a living from our investments or hobbies, but with the housing market flat and shares looking choppy, just how easy is it?

We spoke to three people who turned the dream into reality and made enough from their investments to be able to give up work.

In each case, they make at least £100,000 a year from investments. We asked for their tips on making a six-figure income without going into the office.

The property magnate

Brian Strickland, 56, from Leigh-on-Sea, Essex, was able to give up his job as a management consultant in 1997 after the property portfolio he had built up with his wife Jan provided better returns than they expected.

They now own 130 properties worth about £20m in total and take an annual income of more than £100,000 – and all with no background in the property industry.

Strickland said: “I was working very intensively as a management consultant advising utility companies during the privatisa-tion process and I knew I didn’t want to do that type of job for ever. I wanted whatever I did next to be something that could function without me. Investing in property seemed the ideal thing.

“The housing market was in a trough after the last great crash, but I remember reading an article which said that if Labour got into power and took us into the euro, interest rates would have to come down and there would be queues down the high streets to get into property assets again.”

At the time Strickland was also unhappy with his pension fund. “I was paying huge sums of money to someone to manage my pension, and I thought I could do that as well as anyone else. Property yields were looking attractive at 12% to 14%, so it was an obvious investment opportunity that would provide a positive cash-flow. In 1992, we bought our first property in Southend – a three-bed semi – for £28,000.”

By 1997, the Stricklands owned about 35 properties, generating an income of about £50,000 and Brian took the decision to retire from management consultancy. Instead, he focused on expanding his property portfolio. The business became so successful that he has handed over the day-to-day running of it to a management firm. Even though he could have sat back and enjoyed the fruits of his labour, Strickland wanted to move on to the next opportunity.

The wealth he has created enabled him to buy a jet and he now operates a charter business as well as the property company.

However, while Strickland has profited hugely from buy-to-let, he doesn’t think now is the time to be getting in. He said: “Yields are now around 5%, which is not bad going if you have a big enough portfolio. But I don’t think you can make money from buy-to-let now, as a first-timer. We decided it was time to stop buying about seven years ago because yields had fallen to about 9%. It’s funny because we thought the market was ending just as many others thought it was just beginning.”

There have recently been signs that the market is turning with estate agents reporting an increasing number of landlords selling up because they cannot find tenants, or their rent no longer covers their mortgage payments.

Melanie Bien at Savills Private Finance, a mortgage broker, said: “While buy to let has been the big investment success story of the past decade, it is much harder to make the same sort of profits that were available a few years ago. Rising mortgage costs, maintenance charges, agents’ fees and other outgoings swallow up most, if not all, of the rent.”

Strickland has moved out of buy to let into “build to let” as he sees this as the only way to make double-digit returns now. He runs a company, Sandhurst New-homes, and buys land on which he builds properties and then either sells or lets them. He said: “Not everyone is in a position to do this, but because we had such a large bank of equity behind us we could afford to.”

The spread better

Former property developer Martin Grant, 44, from Melksham, Wiltshire, gave up renovating houses about seven years ago. He still has a portfolio of rental properties but now makes most of his money from spread-betting. Last year he boasted impressive returns of 1,400%, against 2% for the FTSE All-Share index, and earned well in excess of £100,000. He said that was exceptional and down to some bets he had placed on mining stocks. However, even in a “normal” year, Grant’s record is impressive. He said he tends to make between 300% and 400%. Spread-betting allows you to speculate on the future direction of all sorts of assets such as shares, stock-market indexes, currencies, house prices or commodities. You can bet on price falls as well as rises, which means you can make money even if markets are falling.

Grant was encouraged to give spread-betting a go by friends in the late 1990s, but he lost £100,000 in his first year. He said it took a couple of years before he felt he had “learnt” how to do it. He said: “It was only when I started shorting [betting on price falls] that things started to improve. I began shorting about 18 months before 9/11, and after that I just cleaned up as we went into a three-year bear market.”

He changed tack and began betting on price rises in 2003 after the markets bottomed out, but recently he has started going short again. For example, he recently shorted Tanfield Group, an electric bus company that has had a good run on the back of the clean-energy boom.

Grant added: “It’s a really difficult time at the moment. I still have some long bets on stocks where I think the share price will go up, but I am focusing on trying to spot companies whose share price is likely to fall. I am slowly being convinced that the bull market is over because I just can’t see where the good news is going to come from.”

Making money from spread-betting is not easy – research from the Cass Business School found 80% of those who spread-bet lose. Grant said this is because people do not do enough research before placing a bet.

Grant doesn’t bet on indexes or commodities, only on individual share prices through Cantor Index. When identifying stocks, he does not look at company balances sheets – he said he doesn’t understand them – but focuses entirely on share-price charts and trading volumes.

“Say you’ve got a share price at 95p and it can’t break through the 100p barrier – that to me is a stock to watch. I’d buy if it broke through 100p, because it could well rally further.”

As well as identifying a strategy, Grant said the key to successful spread-betting is good risk management. “If the price starts moving in the wrong direction then get out. Too many people sit there like rabbits in the headlights. Making a profit comes down to cutting the losers and running with the winners.”

When you place a spread-bet you can set up a stop-loss facility so your holding is automatically sold when the value hits a certain level – this enables you to mini-mise losses but saves you the has-sle of continuously having to monitor the price.

Most major spread-betting firms, such as City Index and IG Index, offer facilities to simulate a spread-bet without actually having to risk any money.

The small company investor

Balbir Bagria, 48, gave up his job as a computer consultant eight years ago after becoming a successful stock-market investor.

Bagria, from Loughton, Essex, started investing in shares in 1993 and by 1999 had become highly successful – that year the value of his portfolio rose 264%. He decided to take a six-month break from work to see if he could make a living from investments and never looked back.

He said: “In 1988 I gave £10,000 to a discretionary broker to invest and four years later is was worth about the same amount, so I decided to try it myself as I thought I probably couldn’t do much worse. I read a few books before I started to get tips on how to identify good companies then went from there.”

Bagria focuses mainly on small and medium-sized companies and he tends to have an investment time horizon of about six months – the maximum time he holds stocks for is a year.

“I’m not a trader, and though I generally spend an hour or so a day checking prices, I do not buy or sell every day. I think it is dangerous to overtrade – you need to spend the bulk of the time doing research and identifying the best opportunities.”

Bagria looks for firms that are likely to grow by about 20% and says he invests only if the share price is going up. For this reason he is struggling to find things to buy at present.

“The great thing about doing this is that I can invest when I want to and I have so much more free time,” he said. “I've not done much recently because I’ve been on two holidays. I also play a lot of golf. My strategy of holding stocks for three to six months gives me the freedom to do this.”

Like Grant, Bagria said it is crucial to have stop-losses set up in case you do get things wrong. He doesn’t use automatic stop-losses; instead he sets them according to market conditions. If things are volatile, the stop-loss might kick in if the share price falls by 5%, but if the markets are going up he tends to take more of a chance. In some instances he said he may be prepared to risk falls of up to 25%.

His past performance is impressive. In 2000, when the All-Share dropped 8%, his investments returned 56.5%. He also made money in 2001, when markets around the world were falling – his portfolio rose 23.5% while the All-Share was down 15.4%.

The only year he has lost money was 2002, when his investments fell by 10%. He had a difficult year last year, though he made returns of 2%, equal to the All-Share. However, he also spread bets through City Index and this helped boost his earnings. He earns more than £100,000 a year from investing.

Bagria is nervous about the market and has cashed in a lot of investments. He has only about 25% in shares at the moment and his holdings include Game Group, the computer and video-game retailer, the bus company Stagecoach and spread-betting firm IG Group. They have risen 87%, 42% and 36% respectively over the past 12 months and Bagria believes they have further to go.

PROFIT FROM PROPERTY

- Build to let, not buy to let. The average rental yield on buy-to-let is just 5%, but you could get double-digit returns by building properties to rent or sell. Several funds have opened this market to ordinary investors. Cordea Savills is offering a fund, UK Property Ventures No.1, which is available until the end of February and the minimum investment is £25,000. It has a seven-year term and aims to deliver returns of 20% a year.

- Wait for prices to fall before you get back into buy to let. You need a yield of 7% or more to make it worth it.

- Maximise your return by getting the best mortgage rate. The best two-year fix is from Cheshire building society and has a rate of 5.65%. Remember you can offset rental income against mortgage interest and claim tax relief on maintenance costs.

TOP SPREAD-BETTING TIPS

- Say you bought a share at 100p and bet £10 a point that it would rise. If the price rose by 20p and you sold, you would net a £200 profit. However, if the share price fell by 20p to 80p you would lose £200.

- Sites such as cantorindex.co.uk and cityindex.co.uk offer valuable research material such as share-price charts and company information and news.

- Set a stop-loss in case you get it wrong. You decide how much you are prepared to lose and your holding will be sold if the value of the asset moves by that amount.

- Use charts to establish the right time to trade. Look at the average movement of a stock over the past 50 or 200 days. If the price falls below these trends, it could be a sell signal but if it nudges above the line it could be time to buy. Capitalspreads.com lets you draw your own charts.

HOW TO SPOT A HOT STOCK

- Bagria looks for expected growth of around 20% in a year. The price-earnings growth (Peg) factor, popularised by City veteran Jim Slater, can be a useful indicator as it can help identify an undervalued growth stock.

- To work out the Peg you take a company’s share price and divide it by its forecast earnings per share to give the price/earnings (p/e) ratio. If a company’s shares cost 100p and its earnings are 10p, it has a p/e ratio of 10.

- Then divide the p/e by the forecast-earnings growth to give the Peg factor. So if a share has a p/e of 10 and its earnings per share are forecast to grow by 20%, it has a Peg of 0.5. A Peg below 1 is a good sign as it shows the firm’s growth is not overrated by the market; a Peg above 1 suggests the stock is overvalued.

- Find Pegs on sites like digitallook.com and advfn.com.

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