I’m now well past my tenth year working in property as a property investor, buy-to-let landlord, mentor and educator. I’m also lucky enough to be partnered with some very talented individuals. Well, today’s article is about taking stock and trying to pass on some of the key lessons I have learned on my journey so far.
1. It’s okay to change your plan
2. Choose the best possible area
3. Work with the experts
4. Ask for help
5. Concentrate on cash-flow
6. Don’t take it personally
7. Form a joint venture (or more)
8. Have a contingency budget
9. Know your exit strategy
10. Build your business so it doesn’t need you
11. Don’t be afraid to look stupid
12. Trust your instincts
Hello and welcome to today’s video which is where we are going to be looking at 12 things I’ve learned in the last decade of being a property investor, buy-to-let landlord and a property investment mentor.
1. It’s Okay To Change Your Plan
The first thing is that it’s okay to pivot. It’s okay to change your strategy. As you grow and develop as a property investor and buy to let landlord it’s okay to change your plan.
Most people start off in property investing with buy to let. That’s their main strategy. It’s certainly where I started off. I thought that buy to let model was the best possible strategy. It was the one that made the most sense, made the most money, had the greatest demand.
And at the time, it was the method everybody was talking about.
But as you develop you get more experience and more confidence. You start to look at more areas, more types of property, different strategies. What tends to happen is that people develop, from being a buy to let landlord to becoming more of a developer. They start to look at other strategies and more cash-flow-rich, high yield types of investment property.
The more experience someone has the more confidence they will have with trying out different types of deal.
Ultimately, it’s okay to pivot and change your investment strategy. Don’t feel like you are painted into a corner. Don’t feel like you are fixed, wedded to one particular concept or strategy such as the one you started out by doing.
Even if you really love doing things in a particular way, and it’s right for you at a particular point in time, don’t worry if things change. If things change, your situation, your circumstances don’t worry about changing your strategy as well.
There are always other opportunities. There are a lot of ways to adapt.
2. Choose the Best Possible Area
Number two is that you should buy property in the best area you can afford and then work all the other criteria back from there.
Good quality areas stand the test of time. That’s why the old adage location, location, location is still so popular. That’s why people make money in property investment over the long term even if they don’t really know what they’re doing when they start out.
There was a period of time in the early 2000s where property investors made a lot of money as the prices were going up. They might have bought the wrong type of property and looked at the wrong type of tenant profile – but if they bought property in the right area then they still made a tonne of money. This is because equity growth, capital growth in that period of time was excessive. People did well.
Of course, this isn’t going to always be the case and the rise in house values in that period of time was far from typical. But, if you buy in the best area you can afford then this is going to stand you in good stead over the long term.
If you look at the best area you can afford you will be able to work out a strategy that will work in that area.
I advise against looking only at cheaper areas, even ones that on paper seem to offer a high yield. Buy the best you can afford in the best area that you can afford. In my experience, if you approach your investments in this way you will do much better over the long term.
3. Work With The Experts
For number three – you should always work with the experts. Don’t try to be a one-man-band.
This is certainly something I suffered with when I first started out. I wanted to do everything myself. I wanted to do all my own management. Admittedly I was never good enough to do my own maintenance but when dealing with the tenant; I did all that myself.
Time and Energy
I’d go out to a property and make sure that the tap I’d been told was leaking, was in fact leaking. Then I’d call the plumber. If there was an issue was a door, I’d go out an check the door only to confirm that there was indeed an issue with the door that needed sorting.
It’s a complete waste of time…
When you’re just starting out, you’re fresh and enthusiastic and sometimes your enthusiasm gets the better of you. You want to be involved when, for sake of efficiency, you should aim to be as hands off as possible.
If you want to build a portfolio you want to work with the experts and certainly, you don’t want to work completely on your own.
Work with maintenance teams. Work with letting agents. Work with mortgage brokers or financial advisers. Work with property sourcers, property investment companies – people who can help you find deals that you might not even have considered – or might not be in a position to access were it not for a little help.
If you work with the experts from day one you’ll find you can scale your business more effectively, more efficiently and more profitably.
You’ll be able to get a lot more growth out of your properties than you could, operating as a one-man-band. There will be more potential to scale and a lot more profit.
It’s limiting, to try and do everything yourself. I did it when I started out. I speak to investors all the time that are struggling because of this.
They’re trying to do everything themselves.
I’d certainly recommend working with experts where you can. If you do this your property career will jump forward leaps and bounds.
4. Ask For Help
Number four is simply to ask for help.
Investors can be quite gung-ho with the challenges they face, their properties. Dare I say they can be quite insolent.
They don’t want to speak to other people about what they’re doing, about the properties they’re investing in.
I get that. I was like that when I first started out. I didn’t want to come across as naïve. I didn’t want to let it be known that I didn’t always have the answers…
Private Ownership Isn’t New
Housing has been around for hundreds, thousands of years. It’s not a new concept. Having a property with tenants in it isn’t a new concept, rent isn’t new.
Development teams aren’t a new concept…
What I’m trying to say is that none of this is new. Somebody will have gone through an experience similar to what you’re going through. They’ve been in the same career, been on the same journey.
There are people out there that you can ask for help if you need it who are going to be happy to oblige.
So if you have a situation with a tenant, or you are unsure about how to select your team, or you are unsure about how to select the best location for your investment property; you will be able to find someone to offer advice and ultimately help you out.
There will always be someone who has done what you are trying to do before. There will be someone you can talk to.
Speak To Your Peers
Speak to your colleagues. Look for the information online. Speak to property mentors. Go on property forums. Speak to land agents. Speak to estate agents.
You might even get a few good referrals… you’ll certainly get some good advice. You’ll get good advice on tackling a given situation; for instance, a bad tenant.
The National Landlord’s Association
I’d recommend that you join the National Landlord’s Association.
They have a fantastic helpline, a fantastic support system. It’s who we talk to when we have a difficulty with a tenant or an agent…
But the take-home message is this; ask for help. There is plenty of support out there. You’ve only got to look for it.
5. Concentrate on Cash-Flow
Number 5 is the one metric I really rely on every property deal I do and that’s cash flow (over and above capital gains).
Capital gains are of course fantastic. It’s where a lot of investors, in the right areas, make their money. These tend to be areas of very high property value.
If you think about London, for example. Property prices are high but the yields are quite low. The income, therefore – the profit generated from those deals – tends to be connected to growth in value over a period of time.
It’s a very undefined process – and you don’t know what’s around the corner. Things can change and you don’t know what the future holds. You might need to sell the property quicker than you anticipated. You might need to sell the property later than you anticipated.
Depending on when you sell it there may or may not have been some growth in that area.
The only thing you can really bank on is going to be that cash flow. That is the rental income.
Or, if you’ve opted for a development strategy the only thing you can rely on is that the figures work on the deal – independently of growth.
Don’t rely on growth when you are figuring out whether a property is going to work.
Focus on the here and now. Focus on cash flow. Focus on the income that a property can generate for you as the MAIN criteria for deciding if you are going to invest.
Combine that with making sure you buy in the best area you can afford and you’ll be on to a winner. Don’t just rely on growth, focus on cash-flow; but buy in an area that has good potential for growth…
If you follow these rules then you’ll do very well when investing in property.
6. Don’t Take It Personally
Number 6 is don’t take in personally. Over the course of a career investing in property, there are a lot of things that can happen.
I’ve owned and managed property for over ten years. I’ve had some terrible situations to contend with. I’ve had any number of tenants where they have damaged my houses or not paid the rent. There have been fall-outs between my tenants and the neighbours.
All manner or things have gone wrong.
Try not to take it personally.
You need to think of this as a business, as an investment…
You need to buy the right properties; properties that make business sense. You need to have the outlook of a person in business.
Sure, there is nothing wrong with having a personable nature, of course. You can enjoy great relationships with your estate agent, your letting agent, your mortgage broker, your refurbishment team and your tenants. You should enjoy these relationships. The property business is a people business after all. You want to enjoy your work and appreciate that with this type of work you get to meet some fantastic people.
But when something goes wrong or some outcome doesn’t happen as you would hope; when someone has let you down – try not to dwell on it.
As I said before, don’t be afraid to ask for help. Whatever you are facing there will be other people that have faced it before.
if you have a tenant that’s in arrears, or who has caused damage to property, don’t take it personally.
If something goes wrong doesn’t mean you have handled the situation badly. It’s just the way that things sometimes play out. If you are in the property investment game for the long run then every now and then you are going to find yourself in a bad situation.
What’s important is your ability to just keep moving.
7. Get Involved With Property Joint Ventures
Number 7 is to form a property JV.
This is something I really wish I’d concentrated on more, early on in my career.
As I mentioned earlier when I first started out I was trying to do everything myself. This is because I felt like I could profit more from my projects by doing this, and I thought it would give me more of a sense of ownership as well.
A Joint venture can really open up your available opportunities. When I started to get involved, that’s when I started to see significant growth in my business.
Joint ventures give you greater access to deals, funds and provide a greater variety of opportunities.
Whether you are just getting started in property, if you’re brand new, if you’re a seasoned hand or even if you have a high functioning portfolio already – I recommend joint ventures as a way of both achieving growth and increasing satisfaction in your career.
There are a lot of ways to structure a joint venture; limitless, in fact. And joint ventures can offer some fantastic ways to diversify your portfolio and of course grow your personal wealth.
8. Have A Contingency Budget
Number eight is making sure you have a contingency budget.
This is really important. When it comes to planning your property portfolio you MUST have a contingency budget. If you are a property developer and doing renovation work then the same applies.
I see a lot of investors get into investing in property with nothing – no money in the bank – and that’s fine. When I started building my portfolio, I didn’t have a great deal to get started with either. I took a risk. In truth, I took many risks.
I certainly didn’t have the contingency budget I have now. But, I have no idea how I got away without having it.
I was lucky. I wouldn’t advise doing things this way.
If there’s one thing I’ve learned it’s that things go wrong. It might be as simple as a boiler breaking down or some small bit of maintenance. These things come out of the blue, they have to be put right, they cost.
Not having a contingency budget can really scuffle your plans. It can stop your portfolio from growing but it can also stop a property from working at all as a rental. If a property is damaged or badly maintained then tenants aren’t going to want to live there.
They’re not going to pay rent. They’re going to move out. You’re going to have void periods and arrears.
It can become a vicious cycle…
Across a large property portfolio not planning in contingency funds can be devastating.
Some investors grow their portfolios very quickly and lose sight of planning for contingencies. Say you have 5, 10, 20, 30 properties and no backup. If two properties end up vacant at the same time, two sets of tenants go into arrears, two big maintenance bills come in – then the whole portfolio comes under pressure. You need to plan for that happening.
When you are involved in refurbishment or renovation projects the same is true; don’t assume the quotes you’ve got are accurate. You’ve got to have something in the background for when things run over (as they often will).
But more than the security having a contingency budget will offer, it will give you the confidence that comes with having security. And confidence is what is going to drive your portfolio to the successes that you want to achieve.
9. Know Your Exit Strategy
Number nine is plan your exit.
We do this for every deal we consider but I admit that I didn’t do it when I was first starting out. I didn’t have the experience. I didn’t know how important it is to do.
Because it is very important to do.
As I say, we factor an exit strategy into every deal. Certainly, your exit strategy shouldn’t define what types of deal you do but it should play a central role in how you decide what locations to look at and how you structure the deals you put together – particularly in terms of how they are financed.
Understanding your exit strategy is of the utmost importance. You have to plan on getting out of the deal in a year as much as you plan to get out of it in thirty years.
You Have To Cover All Eventualities, All Time-Frames
So whether it’s one year, or five, or thirty, you have to have a strategy. Whether it’s selling it, refinancing it, whether it’s passing it into a trust; you should have a plan.
Let’s face it, you are going to exit the project at some point and you need to have a plan – or several plans – as to how you are going to do it.
The trick is to have taken everything into consideration from day one. This is especially true with regard to how you are planning finance and accounting…
Structure the deal well, taking your exit plan into consideration on every deal, and your portfolio will perform a lot better in the long run.
10. Build Your Business So It Doesn’t Need You
This might seem strange but number ten is to always plan your property business like you might disappear tomorrow.
That’s macabre, so let’s put it another way…
You need to plan your acquisitions, how your portfolio will grow, like you would if you were going travelling for a year, starting tomorrow.
The reason why I say this is because a lot of people get too involved in the nitty-gritty of their portfolio. If anything happened – if they had an illness and weren’t able to work the next day – they’d be in a lot of trouble, given the way they’ve structured their portfolio.
If you are the one who chases the rent, checks maintenance inquiries; the one who is responsible for finding the next deal, in charge of the refurbishment; what happens when something happens to you?
Sometimes it’s ok to be hands-on. While you are growing a portfolio, sometimes it’s necessary.
But the sooner you can remove yourself from a hands-on role the better. As soon as you can you should build yourself a team. Work with the experts.
As soon as you can you want to remove yourself from the business, so you can work on the business, rather than for the business.
This point is absolutely critical to building a large portfolio.
Work ON Your Portfolio, Not For It…
At some point in time, something will happen that will stop you from being overly hands-on with your portfolio.
You know it’s true. So, you need to plan for that eventuality before it happens.
Planning is going to help you in the long run. And you should be planning like it’s not going to involve you in the morning.
11. Don’t Be Afraid To Look Stupid
Number eleven is never be afraid to look stupid.
Again, this might seem a bit of a strange and again, this issue is related to asking for help when you need it.
We speak to a lot of investors, sellers and developers on a regular basis. A common thread is that a lot of people when putting a deal together, want to be received as an expert.
As a result of not wanting to say the wrong thing, they don’t ask enough questions or they ask the wrong ones. By not wanting to appear stupid they simply don’t get enough information.
Housing is an asset class and like all asset classes, there are risks. It has its ups and downs but more importantly, it’s expensive. With property there is a lot of money at risk. When you are investing in property, if there is anything you are unsure of at all – whether it’s a particular deal, a particular location, a particular strategy – you have to ask the question.
Don’t Be Afraid To Look Stupid
Ask as many questions as you need. If you do just this simple thing it’s really going to help stop you from making mistakes. It will stop you from entering into property deals that you maybe wouldn’t have done if you have known a little bit more about it.
It will stop you from buying in areas that you wouldn’t have done if you’d known a little bit more about them as well.
So don’t be afraid to look stupid and ask as many questions as you need.
12. Trust Your Instincts
To round all this up is number twelve. With all the experience that I’ve got; more than a decade spent buying properties as a property investor, being a buy to let landlord and property mentor; by speaking to my clients over the last five years I’ve spent training other property investors; one of the things I always say along with everything else I’ve mentioned in this article is to trust your instincts.
This is because investing in properties like any business is really about people. It’s about vendors, investors, mortgage brokers, refurbishment teams.
If, for any reason, at any time, you find yourself dealing someone you don’t quite trust, or you’re not quite sure why you are dealing them, then trust your instincts and take a step back.
Similarly, if the deal just doesn’t feel right; if you are not sure about it, not sure about the location – again, trust your instincts and take a step back.
You need to trust in what you feel to be right.
Combine this with all the other things we have covered in this article and you’ll be well on your way to a successful career.
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