Are you a first time property investor?
Do you believe in the concept of property investment as a mechanism to provide you with the freedom that you want but could do with a helping hand?
This post will tell you the 10 things to consider as a first time property investor. I have drawn on my years of experience in property investment to create this list and they are all things that I live by with all of my projects.
Getting the right start as a first time property investor is crucial. You do not want your first project to be a disaster. It is OK to make mistakes as you can learn from these, but you want to have a degree of success with your first project. This is important as it will provide you with the drive and determination to carry on.
All businesses have an element of risk and property investment is no different. A savvy property investor does everything that they can to minimise that risk. You can never eliminate risk entirely but you can do a lot of things to keep it to a minimum.
And that is really what this list of 10 things to consider as a first time property investor is all about. The steps that you need to take to minimise your risk. Following this list will help you to make better decisions and maximise your chances of achieving the results that you want.
1. Treat it as a Business
There is no room for emotion in property investment. It is very different investing in a property to turn a profit than it is to buy a property of your own. When you are looking to buy your own home then it is good to use emotion. You can picture yourself living in the property once you have purchased it and check how that makes you feel.
But when you are looking at a property as an investment then you don’t want emotion to come into the equation at all. If you see an investment property that you really like then you need to fight any emotions that you experience. The point of investing in the property is that you want to make a profit.
To help remove any emotion from your property investment decisions I recommend that you have some way of “running the numbers”. What this means is that you enter the purchase price and other details into a spreadsheet for example and you can see at a glance if the property is right or not. If you rely on emotion you are very likely to pay too much.
2. Research and Research again
You may think that this is obvious but I have seen a lot of examples of property investors purchasing the wrong property because they didn’t do enough research. I have said this many times – you cannot do too much research. Some people think that doing a lot of research leads to decision paralysis but not if you are smart about it.
There is so much information about property investment available these days. Go online and search for it and you will not be disappointed. You can also purchase books written by successful property investors where you can learn a great deal.
Be prepared to invest in your property management business. If you need to pay a few hundred pounds for the right training then do that. There is a lot involved with property investment and the more that you know the more likely you are to succeed.
3. Set Goals for your Property Investment Business
How much do you want to make from your property investment business? How long are you prepared to wait for this money? How much do you need to be financially free? How many properties will you have in your portfolio?
Can you honestly answer these questions right now? It is OK if you cannot answer them but you certainly need to think about them before you start with your property investment business. If you just go into the business without a target in mind then everything will be a lot more difficult for you.
You must set yourself financial goals for your property investment business. These goals will help you to determine the right investment strategy to follow and help you to determine which properties will meet your financial criteria.
If you want to make a lot of money very fast then you could go down the house flipping route where you buy a property for a low price, renovate it and then sell it at a higher price for a profit. You then need to learn everything that you can about this strategy to provide you with the best chance of achieving your financial goals.
Alternatively, you may want to develop longer term passive income streams from your properties and to do this you could follow a buy to let strategy. Again you need to know everything that you can about the strategy to get the best results.
It all starts with your financial goals. Have you read my post on goal setting? Take your time when you are setting the financial goals for your property investment business. It is not something that should do quickly.
4. Be in it for the Long term
While it may be tempting to invest everything you have into turning a quick profit on one property after another it is very unlikely that you will make a lot of money doing this in a short period of time.
I never consider property investment to be a way to getting rich quick and I suggest that you don’t either. To get the best results from property investment you need to make the right decisions and move along at a steady and considered pace.
What’s the alternative to this? Well you could make some very risky decisions chasing potentially high profits. If there is one thing that I can guarantee about the property investment business is that things are going to go wrong. When this happens it can literally mean the difference between making a profit or a loss.
By treating your property investment as a long term business it doesn’t mean that you have to wait forever for your freedom. It is certainly possible to achieve a significant return on your initial investment within 10 years and sometimes earlier than that. If you go too fast you can risk losing everything.
5. Choose a Strategy and stick with it
Please read my post on focusing on one property strategy at a time. I have seen property investors get into a right mess because they tried to flit from one strategy to another. I have tried this in the past and I can tell you that it doesn’t work.
If a buy to let strategy is right for you then focus on this and learn everything that you can about it. Maybe serviced accommodation is the right strategy for you. Whatever you choose stick with it and be the best that you can be.
You will get to know other property investors and from time to time one of them is going to tell you that there is a massive opportunity with another strategy. I am not saying that you shouldn’t take a look, but it would have to be really good for me to follow a different strategy. If it seems too good to be true then it probably is.
First time property investors who dabble in different strategies rarely succeed. But many newcomers to the business do this. I was guilty of this and it took me a while to realise that choosing one strategy and sticking with it was the best option. Don’t make the same mistake as I did.
6. Follow a Proven Checklist
It can be overwhelming as a first time property investor. There are always a lot of things involved and a lot to remember. You do not want to forget anything so it is a good idea to follow a proven checklist used by an experienced property investor.
A few months ago I shared my property investment checklist on this blog. Of course I am not saying that you have to follow my checklist. But I do encourage you to read the post as the checklist that I use is the result of years of experience.
You should be able to find checklists from other property investors online and feel free to use these if you want to. As you become more experienced you will be able to create your own checklist. But when you are just starting out it is a good idea to follow an existing one.
7. Research your chosen area
Even if you are going to look for properties in an area that you are familiar with it is always a good idea to do some research first. A lot of property investors are looking further afield these days as they find that the area they live in does not have the best buy to let yields for example.
It is not difficult to research an area that you are considering purchasing an investment property in. There is a lot of good information online and you can get your hands on local newspapers and other local information to find out how much houses sold for, the rental prices in specific locations and more.
When you are looking at an area that you are not familiar with there is no substitute for taking a trip there and finding all of the local information that you need. Although there is a great deal of information online, nothing beats paying a visit to an area to get the “look and feel” of the place.
8. Build a Professional Team
You cannot be successful as a first time property investor on your own. So you need to build a professional team that will provide you with the right advice. A local estate agent will know what is going on with property sales, and will have access to properties for sale that you will not be able to find on your own.
It is also a good idea to find a good mortgage broker who can find the best loan deals for you. They know a lot about the property market and their advice can be invaluable. Get a good solicitor on board as well who will be responsive when you need them. If you are going to renovate properties then you will need to know some good people in the trade as well.
9. Learn good Financial Management
As a first time property investor you need to know that you will have to manage payments going in and out. Cash flow is essential so you need to create a budget and stick to it as closely as possible. It is very easy to run out of cash to pay bills if you do not keep a tight rein on things.
You will need a good accountant for your property investment business, but before you do that make it your business to learn about financial management as much as you can. There is plenty of information online and in books so it is just a matter of finding the time.
10. A First Time Property Investor must Invest in the Right Properties
Again this is another one for the “obvious” category, but I have seen a newbie property investors purchase the wrong properties a number of times. Wherever you choose to purchase your first investment property you need to be sure that it is going to sell pretty fast after your renovations, or that you will be able to find a tenant to rent it out.
If you purchase a property in the wrong part of town where there is very little demand then you could end up making a significant loss. Don’t take an estate agent’s word that a property is right. Do your own due diligence to back this up. Sometimes estate agent’s can be wrong and you do not want this to happen at your expense.