Are you new to the property investment game?
If so then this post is definitely for you. Even if you have been a property investor for a while there are some tips here that will help you. I have been involved in property investment for many years but I am always willing to learn new things.
Property investment is a great business to be in. But you always need to bear in mind that there is a lot of money at stake. If you make the wrong decisions, particularly when you are just starting out, then this can negatively impact your passion for the business.
While you can never be 100% sure about a property project, there are a number of things that you can do to take more calculated risks. If I was going to start all over again then these are the 10 things that I would do before I purchased my first investment property.
1. Keep your Emotions in Check
Never make a property investment decision based on emotion. I have seen this a number of times and it almost always ends in disaster. Some people will purchase a property at too high a price because they have fallen in love with it.
Others will make a property investment decision because they feel pressured to do this. They have spent a long time looking at different opportunities and feel totally overwhelmed. If this happens to you then you must take a step back and remain calm. Don’t just rush in to buy a property because you feel pressure to do this.
Getting emotional about property investments is understandable. You have started in the property investment business and you are keen to get started. You have set some challenging goals for yourself and this all starts from acquiring your first property.
But if you make the wrong decision based on emotion you could end up making little money on your project or even losing money. This is not going to help going forward so always make your decisions based on facts and numbers.
2. Decide on One Strategy and Stick with it
If you haven’t read my post on one strategy at a time then please do so. I have seen a lot of people fail in property investment because they kept changing their mind about the different strategies available.
If you decide on the “buy to let” strategy for example then stick with this. Do not suddenly decide that you want to flip properties because someone told you that it was a good idea and it was where the money was.
When you are just starting out you will want to learn everything that you can about your chosen strategy. If you keep “chopping and changing” then you will end up being a Jack of all trades and a master of none.
I always recommend that you learn as much as you can about the property investment business no matter if you are just starting out or have been involved for a while. Be selective about your learning though. If you have chosen the “buy to let” strategy then just learn about this through training courses, seminars, researching online and so on.
Once you have mastered your strategy and have a few successful projects under your belt then you can look at another strategy. I have been in the property investment business for several years and have only really got involved in 2-3 different strategies. So don’t be a dabbler.
3. Get a Mentor
There are no guarantees in property investment. If you are weighing up different investment opportunities then it is always good to have someone that you can trust to help you with this. Property investment can be a lonely business and when you are new to it you will need all of the help and advice that you can get.
Once I found a good mentor I never looked back. It cost me money but it was well worth it. I found someone that had been in the game a long time and was an expert in my chosen strategy. He knew more than me and I always appreciated that. He taught me things from his experience that I would have never learned on my own.
4. Talk to Agents
Estate agents and letting agents can make or break your property investment business. They are going to know a great deal more about the area that you want to operate in than you do. Some agents are always willing to help property investors and some are not so you need to talk to as many agents as you can to find the ones that you want to work with.
Each area of the country is going to have nuances that you will not be aware of and an agent will be. It doesn’t matter if you plan to operate in your local area and you have lived there all of your life. From a property perspective they are always going to know more than you.
If you are looking for a good buy to let property then talk to letting agents and tell them what you want to achieve. If you have some properties in mind then ask the letting agent for their opinion. Are you going to be able to find the tenants that you want who will pay the rent that you require to provide you with your desired return on investment?
5. Get out there and Compare
A big mistake that a lot of new property investors make is that they do not make the right local comparisons. They rely on the information that they see on reputable websites about what properties are selling well. This is not enough!
Take a step back here and consider the investment that you are planning to make. You are going to spend thousands of your own money and commit to a mortgage on a property because you are confident that it will provide you with a good return in the long term.
You can never do too much research in this situation. It is essential that you gather as much information as you can before deciding to purchase an investment property. You must know what you are getting into.
Visit the area where you intend to purchase an investment property. Draw a quarter of a mile radius around the property you want to invest in and look at the other properties in this area. Make a comparison on a “like for like” basis so if you want to buy a three bed terraced property then look at other three bed terraced properties.
Pay particular attention to how long it is taking to sell similar properties in the area. Also find out how the prices of these properties have changed in recent times. Look for trends such as more properties being available than there were last year. This could be a sign that other property investors are selling up.
Use the right metrics to see what is really going on in an area. You owe it to yourself and your property investment business to perform the right due diligence.
6. Get the Right Information
If you are looking at the wrong data then you could end up in trouble. You need to ensure that you have property sold price information. This is not always readily available online even with the best websites.
There may not have been that many properties sold in the area you are looking at. If this is the case then there is a good chance that websites will not have that much information. You need to get out there and talk to agents to get the facts about sold house prices.
Take your time with this as it is very important. Look at properties that have sold in the last couple of years. Resist the temptation to go back further than this or it can skew the data and you can end up being confused.
7. Know your Area
The property market in the UK is always changing. These days a lot of property investors are looking farther afield for the best returns. London and the South East has been hit hard in recent years but there are still good opportunities there.
Even if you are targeting your local area you can always learn more about it from a property perspective. But if you want to make a property investment in an area that you are not familiar with because it offers a higher return on your investment then you must go there and find out everything that you can.
I made a big mistake with this in the past and a lot of other property investors have as well. A trusted friend of mine told me that I must invest in a particular area because the returns were amazing. I couldn’t be bothered to make the trip to the area and it cost me dearly.
If you have a particular property in mind then make the trip and see what the area looks like at different times. What does it look like on a week day during daylight hours and in the evening? How about at the weekend?
By doing this you can make an assessment about how good an area really is. Using this approach has stopped me from investing before and other times it has confirmed that I should go ahead. Don’t just rely on the selling prices of properties in the area.
8. Rely on your Instincts
It is critical that you are entirely comfortable with every property investment that you make. If something doesn’t feel right to you then this is your intuition protecting you. I have pulled out of a number of deals because my instincts told me that they were not right.
You should not just consider the property but also the area that it is in. Also consider how you feel about the agents involved, trade’s people that you will use for the renovations and so on. If any of these factors do not feel right for you then walk away.
Always believe that there will be other opportunities that you can feel good about. There is a lot of money at stake here so if something doesn’t feel right then be prepared to back out of the deal.
9. Avoid Desperation
You have looked at a number of different opportunities and you are desperate to make a start with your property investment business. When you are in a state of desperation you are more likely to do something that you shouldn’t such as offer more money for a property than you should.
A lot of new property investors end up in a desperate state. If you find yourself feeling desperate then you must distance yourself and keep calm. Sellers can sense a desperate property investor and they will try all kinds of tactics to make you pay more.
10. Use a Systemised Approach
Setup a system that you can use to plug in all of the opportunities that you come across to see if they stack up. This can be a simple spreadsheet where you can enter all of the variables to see if a deal makes financial sense or not.
A system like this is always invaluable, but this is especially true when the market is buoyant because there will be more opportunities. You do not want to waste your time looking at properties that do not meet your property investment goals. If they do not meet your return on investment requirements then move on to the next opportunity.