The tips and tricks of property investment…..
Hey guys,
I’m not a professional ad writer. I’m a property investor but what I have to say is so important that I decided to sit down to write this blog for you in the best way I know.
People are always asking me about discount property investment companies and more importantly about why they have become so popular for buying discount property and building a property portfolio through.
Even though I tried and tried to write a good ad telling people all about property investment companies, I just couldn’t do it. So I finally thought — why not just tell you exactly what I’d tell you if we sat down for a cup of coffee?
So here it goes, I’m going to attempt to ‘tell all’ about property investment and reveal the ‘tips and tricks’ that can help you.
What is a discount property investment company?
A discount property investment company can help you in three profound ways.
1. They will save you time and create instant equity for you by sourcing the best performing properties across the UK and in the process they will negotiate discounts of between 10% and 15% for you.
2. They will then manage the process of buying the property for you, from reservation through to completion and letting.
3. Finally, they will support you to create a portfolio of properties which over time will create significant equity and positive cash flow that will allow you to enjoy the lifestyle you’ve always wanted for yourself and your family.
My own experience as Managing Director of Your Property Club and a number of other property-related companies has proven one thing beyond a doubt:
People just like you are looking for a simple and secure way to invest in property without the need to spend countless researching, building relationships and managing the process of buying.
That’s why Your Property Club’s number one purpose is so simple: to simplify the process and allow you to effortlessly build a portfolio of buy to let properties, leaving you time for more important things.
We get up early. We scour. We schmooze. We hunt the best deals we can find, and give them to you.
But maybe you are thinking…..
Why don’t I go and do this myself?
There are several reasons why choosing a property investment company is the best way of building your property portfolio.
We do the hard work so you don’t have to
In fact, we’ve recently hired some of the finest property scouts in the biz to drive the length and breath of the country for us and search out the best performing properties, the best value deals and the most exciting up and coming hotspots.
Their brief is to provide us with detailed, on-the-ground research of each local area they investigate. We then double-confirm the information they provide us with our own, even more detailed research into local councils, governments and community groups. All this goes into the mix to create an amazingly detailed picture of the future potential for both equity growth and the letting of your investment.
To give you an idea of how stringent our property filter is; our property scouts will examine up to 20 developments each and every week.
They will immediately filter out 18 or 19 of these as unsuitable, bring the remaining ones back to us onto which subject our rigorous 81 point due diligence process.
Our super-thorough process means we may end up presenting something new to our members every two or three weeks, but it’s this attention to detail that allows them to invest with confidence and certainty.
Each investment comes with its own detailed prospectus, summarising everything you need to know in nitty-gritty detail. Floor plans, white papers, council plans, local area info literally hundreds of hours of research, hard work, and tough questions all rolled into a single easy to understand report; and it’s all available our members at no charge.
If you’d like to find out exactly which investments have recently passed the ‘unreasonable’ standards we set, simply click here for our brief membership form.
Developers prefer to deal with an investment company rather than individuals
It takes the developer roughly the same amount of time to deal with you as an individual buying one property as it does a property investment club who buys ten or more. Obviously a property investment club buying ten is of more value (from a profit perspective) than you buying just the one. It’s for this reason that the developer is happy to negotiate bulk discounts with property investment companies but not with individuals.
It can also be a question of relationship. Your Property Club has strong links with a number of developers who we have built considerable trust with. They know that when we take 10, 20, or even 200 properties from them that their problems are solved because of our relationship with our members. So much easier than having to deal with potentially unqualified buyers and uneducated investors.
But…you may ask
Why do developers give a discount at all?
The answer to this is threefold
1. Developers often need to secure seed capital
When a developer wants to begin a development they will normally require funding and their bankers will require they show a certain amount of sales ‘off the plan’. The developer can either invest in marketing directly to the general public or offer a discount to a property investment company like ours with access to active investors. For this they are happy to pass on a discount that they would normally lose to marketing.
You’ll normally find that a high percentage of the total number of plots are offered in this way and they normally present the best long term growth potential.
2. Developers need to achieve year-end sales targets
If an area sales manager has a sales target to achieve they may pass a number of plots to a property investment company to sell quickly. In return for the short timeframe they’ll offer great discounts. You will normally find that between 5-25% of plots in any given development are offered in this way and normally present a great short term return on capital.
3. Developers need to sell the final few plots
The developer will normally have sold most of the plots and has only a few left which are eating into their precious profits through their onerous holding costs. They’ll pass these to a property investment company to sell quickly and allow the developer to close the sales office and complete the entire project. These offer a quick turnaround to completion and make “flipping” easy as you are selling on a completed property.
Beware!!
Before you get too excited about any 10-15% discount, you need to understand what an inflated valuation is.
In some cases that we’ve seen, builders and property investment clubs alike will inflate the actual true valuation of the property in order to advertise discounts off this valuation. In some cases the inflation can be 10-15% higher than the true valuation.
Luckily, there’s a simple way to protect yourself. Every valuation you’re given must be backed up with a written valuation from a surveyor registered with the Royal Institute of Chartered Surveyors (RICS). Additionally, the valuer should also be on the panel of lenders that you wish to choose for your mortgage.
Property investment companies will sometimes try and convince you that it’s not a problem since you’ll be using their solicitors and mortgage brokers . This is a tell-tale sign of price inflation. Be very wary since you may not discover that you’ve been the victim of an inflated valuation until you attempt to re-mortgage the property after completion!
So now that we have looked at the 3 major reasons why a developer will offer a discount lets answer the most commonly asked question.
How our clear communication will give you a great night’s sleep
If you have previously bought property or know someone that has, you well know how stressful and nerve-wracking the process can be. Dealing with mortgage brokers, solicitors, developers can be an onerous task; this is why we retain professionals heavily experienced in each area of buying property.
At Your Property Club, they’re called property consultants and their most important role is to call you before you need to call them.
As a Your Property Club client, we never want you to be out of the loop with your property. Your property consultant will communicate on your behalf with solicitors, mortgage brokers, developers and bring the whole deal to a smooth and peaceful conclusion. They will even assist the process of getting your first tenant.
Now that you are acquainted with your property consultant let’s introduce the next person who plays a key role in the development of your portfolio: your Property Portfolio Manager.
How to see the market through a professional’s eyes
The portfolio manager’s task is to bring the many investment opportunities to life. As they have a full understanding of your individual situation and current portfolio and they have an in-depth understanding of the investments on offer, they can best present the relative benefits and deficiencies in each opportunity.
Important!!
Let me digress here as this is an important point. Discount property investment companies and their team members are not subject to financial services authority (FSA) or other regulations. This means that they cannot recommend individual investments to you, what this means is that you must make the decisions yourself. They can point out potential outcomes, possible benefits but they must stop short of providing investment advice.
This means that the decision comes down to you and you alone. After all, it’s your signature on the mortgage documents, so you need to be very aware of this. You are always 100% responsible for your investment decisions. A good discount property investment company will always explain this to you.
Ok, let’s get back to the portfolio manager. Let’s talk about how exactly they’ll work their magic with your portfolio. It all comes down to 5 key qualities and your portfolio manager had better have all of them.
1. They should understand the emotional aspects of investing
First, a good portfolio manager understands the various questions, concerns and fears that invariably pop up as her clients build their portfolio. For example, a common concern is fear over taking on a large mortgage. In most cases another look over the opportunity plus a little education is all that’s required to put the mind at ease.
2. They should understand the practical uses of off-plan property strategies in building your property portfolio
There are a number of more advanced strategies that can be employed in off-plan property, so an understanding of the strengths and weaknesses of each of these will ensure that you can maintain the growth and momentum of your portfolio and avoid the dreaded periods of stagnation.
3. They should understand how finance is structured
This is fundamental to building a large portfolio. The buy-to-let market is changing constantly. Lending guidelines will change too, but the underlying principles don’t. Your Portfolio Manager will be able to explain the basics of structuring your finances and refer you to a skilled mortgage broker if necessary.
4. They should have appropriate back office support
The back office support is important because a portfolio manager will normally see many clients in one day and their back office support will ensure that commitments made are actually kept in a timely manner.
5. Finally, and I feel most importantly, they should own and actively invest in property themselves
How can anyone tell you how to be successful in property until they are successful investors themselves?
I cannot stress enough about the importance of the above 5 qualities. They’re so easy to overlook when the sales pitch is wonderfully impressive. 10-25% off valuations, instant equity, no hassles property! The reality is that if you follow and adhere to the simplest of principles in property, take a long deep breath before any important decision, research thoroughly and/or build a trusted relationship you will normally come out on top.
Summary of what a discount property investment company will achieve for you:
o Source the best performing properties around the UK
o Negotiate true discounts on your behalf of between 10-18%
o Manage the process of buying the property
o Present regular investment opportunities to you, outlining the comprehensive research that has been conducted by the company
o Explain the state of your current portfolio including potential equity for investing
o Educate you about the benefits and disadvantages of the various strategies that are open to you
o Provide a transparent referral service so that you may access skilled professionals for each of the investment functions: legal, finance, furniture, lettings and management.
Can we help?
I hope that this blog proves to be highly informative and will aid you in making the best decision for you.
I can’t complete this informal chat until I have made the shameless promotion of my own company, Your Property Club. Please take some time to review the site and contact my office on 0207 812 1255 to find out exactly how we can help you achieve your financial goals, or simply click here if you’d like to register (it’s free!) and benefit from our expertise and advice.
Live with Passion,
Brett Alegre-Wood.
My guide to surviving the current ‘economic crisis’
The Credit Crunch- A new sting in its tail
Credit Crunch Stage 1
This stage was all about poor lending practices in the US and the fact that these lenders in the US had sold their loan books onto other companies around the world. This stage was also about declaring the losses of large institutions, but it didn’t really directly affect the individual investors (like you and I) — except through perception.
Stage 1 also saw many lenders profiteering from the squeeze. Loan to values dropped to 75%-80%, interest rates went from 5.5% to 6.5% and arrangement fees went from 1% to 2%.
The end of the credit crunch appeared to be around the beginning on May when mortgages settled down and lenders began to hold products long enough for people to actually apply for (and get) the mortgage.
All seemed rosy and delightful albeit that prices were falling and the economy slowing. Then came along a new sting…
Credit Crunch Stage 2
One of the byproducts of the credit crunch is that as the rates and arrangement fees increased, and loan to values decreased, a lot of people began to run into difficulties because things had changed so quickly, and to such a great degree. It especially hit those coming off the fixed rates and those with low discretionary incomes.
So the sting in the tail is…
As mortgages became more expensive and harder to secure, more and more people will default on their mortgage payments. Increased defaults mean the lenders who want to sell their loan books off will struggle. This could well have the effect of further prolonging the credit crunch.
I believed that the worst of the credit crunch will be over in the last quarter of the 2008. I still believe this to be the case. Employment is still strong, inflation is high, but most commentators agree that it will come down next year. In addition, it’s mostly food and fuel inflation as opposed to wage and lifestyle inflation which is good news for the Bank of England and for our interest rates as well.
As always the team are happy to discuss the current market with you should you need a little clarification or guidance. In times like these, it’s vital you get quality information, not the sensational bullsh*t being printed in the papers.
What does it all mean?
Don’t get too bogged down in all of the happenings and goings on in the financial markets, to do so will simply scare the pants off you and cause you to take no action.
Supply and Demand…
The single and most important fact right now that you need to bear in mind is Supply and Demand. That supply of property is at an all time low and well below the 250,000 per year required (its about 110,000 this year) and secondly the demand for property is still increasing, when you consider rented property and property for sale.
Sure the demand for property to purchase is at a low because most investors are sheep and follow what the news says. The real investors realise that this is all temporary and that now above all is the time to be jumping at it. Once the markets settle down confidence comes back to the market, everyone will realise that they should have been buying property throughout this past 12 months and over the next 12 months.
I reckon this will be the tail end of 2009 before we are back to normal. That’s when a lot of people will be complaining about missing the boat again and that it’s all too expensive. Typical, please don’t be one of them.
I dare you…
If you don’t think that property is the right thing, the only thing, then call up your pension fund and ask for a statement, then compare with this time last year and the year before that.
It’s a sad fact that most pensions are already down about 30% on last year. Some more!!! It’s what I have been saying for over 10 years now. Having a pension is not the answer, having a portfolio is…
Even if my portfolio has dropped 10% across the board (which is hasn’t) I am still better off than if I had a pension. I have a very close mate in Australia who has seen a 40% drop in his pension or around the last 8 years of payments he and his employer have made, it’s shocking!!! Hmmm, not a good time for pensions…
A portfolio shouldn’t take a huge strain on your time and more importantly, though it may go down in value if you have bought well you will still have equity available.
10 tactics to survive the 2008/2009 downturn
1. Read beyond the headlines
For every dramatic sensational headline you see in the newspaper on the radio or TV make sure that you read the whole thing. More often than not the headline will be ‘Prices drop 30%’ but once you read the text it will say ‘if this continues, if it gets as bad as the nineties’ or one the many permutations of this scaremongering headlines.
There is always a perfect and plausible fundamental explanation as to why it probably won’t happen.
Remember the headlines are there to attract your attention and the negative ’sky is falling in’ sells better than the ‘everything is fine’ headline. It’s just plain old boring human nature at work – Pain sells better than pleasure.
2. Take a long slow breath
Before you run off and slit your wrist just simply take a deep breath and ask yourself ‘How does this really impact me?’ You may be pleasantly surprised to find that most of the doom and gloom doesn’t actually really concern you. Try NOT reading the papers or watching the news for a week. If by the end of the week you are still alive and well then hopefully you have seen how little effect of the negative press really has on your life. If the sky has fallen in then I guess I was wrong! Although I think we both know what the result will be after a week.
Remember whatever happens take a long slow breath and get on with your life.
3. Remember that statistics are based on averages.
That 7% drop that everyone is talking about, of course it is in your street, in fact they are talking about your house aren’t they? It never ceases to amaze me at how humans can take a general statement and personalise it to our lives. Again its just plain human nature. The flip side of this is the human ability to detach. We are so very good at believing it’s someone else’s house not ours.
The bottom line with all of these negative statements is that they are based on averages. Read into them a little more and you might find that your house is not an average house, that your street is not the average street.
4. The 7-10 year cycle always has a downturn.
The shock!!! The horror!!! ‘The property market is having a downturn, why it’s never done that before!’ Well that is not since the last cycle. You guessed it, it has all happened before.
For some strange reason we all act surprised when the property market downturns. Let’s be absolutely clear, the cycle will always have a downturn, always… The reason is simple! Greed… We all get far too greedy and eventually this greed has to be paid for. Again it’s just the basics of human nature and human nature hasn’t changed for thousands of years.
So when you read the paper next week (that’s after your weeks break and the sky hasn’t fallen in) understand that this downturn is as much a part of the process as the boom years, which incidentally come hot on the heels of the down turn.
5. Cash flow is king
If you have the cash to see you through this downturn then you can sit back and forget about Mervyn King, forget about Gordon Brown (I think he still runs the country although I haven’t heard from him for about a year.) You can even forget about the value of your house because with cash flow all things are minor and insignificant.
If you don’t have it or its limited then closely follow it, track it and make sure that you act sooner than later to secure it.
6. Know your indexes
HBOS, Nationwide, land registry, RICS, CML, Rightmove, Findaproperty they all track different data to give them a picture of what the trends are.
RICS will tell you what things are valuing at, CML will tell you what’s happening with mortgages, Land registry will provide the gross prices of property.
They all use different data to produce a different result. Make sure that you compare apples for apples! Let’s face it journalists trying to get your attention will use the data from one index today and then the data from another tomorrow. This is why house prices can be falling and going up at the same time. It’s all about the indexes they are choosing to use.
7. What is an economist!
An economist is a highly academic professional who understands the relationship of things within a political, social and economic framework. They study in detail the relationships between interest rates, wages, unemployment, government spending, consumer sentiment, share prices, consumer debt, consumer spending, household incomes, the economic cycle, exchange rates, foreign debt, and about 1000 other variables.
Based on their understanding of these things they make judgement calls about various things that affect their jobs. You see very few economists that are quoted in the press are actually totally independent. Most work for banks and financial institutions who have hired them to interpret all of the economic, political and social data and make predictions about it.
Now as humans we will always attract that which we are seeking (it’s called the law of attraction) so if you are working for a bank you will attract the data (or ’spin’ the data) which supports your cause and therefore present this angle on things.
This can mean that using the same data you can get different results. The question is what data you believe. This is one of the reasons I have become very experienced in interpreting economic data. My school economics and accounting teachers would be proud to know that these are the two subjects from school that I use most in life.
8. Know your product or trust your broker…
I cannot stress enough about the relationships that you must build and nurture. The better your relationships, the better the advice you will receive and the more certain you will be throughout this period of ‘uncertainty’. I say that word ‘uncertainty’ like this because if you have done everything I have said in my blogs you will have absolute certainty and the uncertainty won’t exist.
The point is that building this relationship will enable you to be certain about the products on offer and therefore you can make fully informed decisions throughout this period.
So many people are concerned in the 6 months leading up to a remortgage because they are hearing the negative and pessimistic news but not checking the reality. Speak to your broker and rest easy and if it will save you the sleepless nights remortgage early to secure your cash flow.
9. Take action early, stress later
Following on from the last point, if you are not passing my ‘Sleep Test’ that’s the one where ‘if you don’t sleep a full night of restful and meaningful sleep waking up refreshed and enlivened then you either need to stop drinking so many coffees or you need to take some action.’ The earlier the better.
Let me make myself absolutely clear…
If you aren’t sleeping because you are worrying then you had better take some action as early as possible. If you then find out that there is nothing you can do at the moment then stop stressing, set a definite date to follow up and forget about it. Now we both know that the game of property is an emotional one so I would be stupid to believe that you are going to full forget so this is where my next point comes in.
10. Who do you call, mentors
So you read the headline and all the text, you took a long slow deep breath, you realised that the statistics are all based on average and you aren’t the average, you know that every cycle has a downturn, you treat your cash flow as king, you understand and can read the various indexes, you know that economists just play with models and data and come up with different results from the same data, you trust your broker BUT you still think its all turning from bad to worse. It’s time to call someone and the ghost busters aren’t going to help you with this one.
These are the times when you need to have mentors that you trust who can direct your attention and your actions towards solutions, not emotions. Call them, sit with them and get very clear about what you options are.
I spend hours and hours every week developing clear strategies with people, giving them certainty and allowing them to pass the sleep test. It’s amazing the difference an unemotional, detached, fresh pair of eyes can have on the situation. For more information check out my free educational blog.
Everyone loves surprises (except in property)
My biggest bugbear in property is having surprises.
In any other aspect of life I love the joys or challenges a surprise can bring, but when it comes to property it is just something I try to avoid.
In working with clients I adhere (as best as possible) to the service promise that simply says ‘When you work with me, you will be told upfront and to the best of our knowledge (and experience) exactly what to expect at each point along the portfolio process.’
Effectively, I simply say that dealing with me you will experience – NO SURPRISES!
No surprise costs, fees, charges nor expenses.
No surprise dates, changes nor amendments.
But most of all No blank looks, vacant stares nor excuses in the times when life does throw a surprise at us.
After all, when you deal with property there are so many interested parties, so much legislation as well as the natural force of the open market. The trick to these surprises is communicating upfront and honestly and then when things do happen communicating immediately and fully.
Its all about relationship, you expect to be told the truth so that you can make an informed decision all along the process. Without this communication the trust falters and eventually breaks down.
I actually (sometimes) enjoy telling clients things have gone wrong as I can enlist their help in solving it and generally (because I have been honest) the relationship strengthens.
Surprises appear in so many ways in our industry that you would think that it was the first time anyone had bought a property.
Read the entire article on my blog:
Everyone loves surprises, except in property…
Give your module a title. Titles can only be one line, so keep it short
Give your module a subtitle.
Enter your text below. The limit is 2500 characters. My biggest bugbear in property is having surprises. In any other aspect of life I love the joys or challenges a surprise can bring, but when it comes to property it is just something I try to avoid. In working with clients I adhere (as best as possible) to the service promise that simply says ‘When you work with me, you will be told upfront and to the best of our knowledge (and experience) exactly what to expect at each point along the portfolio process.’ Effectively, I simply say that dealing with me you will experience – NO SURPRISES! No surprise costs, fees, charges nor expenses. No surprise dates, changes nor amendments. But most of all No blank looks, vacant stares nor excuses in the times when life does throw a surprise at us.
After all, when you deal with property there are so many interested parties, so much legislation as well as the natural force of the open market. The trick to these surprises is communicating upfront and honestly and then when things do happen communicating immediately and fully. Its all about relationship, you expect to be told the truth so that you can make an informed decision all along the process. Without this communication the trust falters and eventually breaks down. I actually (sometimes) enjoy telling clients things have gone wrong as I can enlist their help in solving it and generally (because I have been honest) the relationship strengthens.
Surprises appear in so many ways in our industry that you would think that it was the first time anyone had bought a property. Read the entire article on my blog: Everyone loves surprises, except in property…
In search of the perfect inside track property deal
One of the most damaging limitations that a beginner investor faces when building a property portfolio is the dreaded perfect deal.
As if trying to find the a property wasn’t enough the budding investor now has to find the perfect finance, the perfect solicitor, the perfect area, the perfect rent, the perfect growth prospects, the perfect builder, the perfect sales consultant, the perfect club, the perfect interest rate – everything has to be nothing short of PERFECT.
So how do they achieve this? In short, you simply don’t and despite everyone’s best intentions you won’t.
I have been in property one way or another for over 9 years l am yet to find the elusive perfect deal. I have however consistently made money from property and built a substantial portfolio of properties, despite every single property that is part of this portfolio being imperfect in some way.
So what’s the motto?
Be realistic but practical. Do your due diligence using the various guidelines I have suggested to buying, holding and selling property but don’t use these as a excuse for procrastination.
Click to read the rest of this article at my blog: In search of the perfect inside track property deal…
Which inside track strategy is the best of all?
I find it quite easy to tell an experienced investor from an inexperienced one these days. A phone call, an email or a 2 minute conversation normally reveals a person’s understanding of property.
Property is such a diverse and sometimes complex investment vehicle that no-one could possibly know all things, all structures, all strategies, all procedures, or all markets. I don’t know a great deal about commercial property, nor do I know a lot about planning permission, developing property or SIPPS.
In fact, the more I learn about property, the more l realise I don’t know. Does that make me a bad investor? Does that mean you shouldn’t read my educational blogs or work with my team?
Well – yes – if you want to develop property, buy commercial or invest in SIPPS.
BUT – if you want to learn how to use new build or off plan residential property to build your portfolio from 0 – 10 and in the process self fund your retirement – then yes, because that is my specific strategy.
I have discovered that the people who make the most money in property are those that know a lot about a little. Specialists in a specific strategy.
For the rest of the article, click: Which inside track strategy is the best of all?…
Inside track property fact: why mortgage lenders never lose…
The mortgage arrangement fee is a fantastic marketing tool that the mortgage lender “kindly” allows us to add to the mortgage and it’s been so effective that in fact a lot, if not most of the mainstream buy to let lenders have introduced one.
Simply adding it to the mortgage apparently makes it OK to charge such an outrageously high fee. In some cases as high as 1.5%!
Some genius first introduced it (l bet they received a promotion) so that they could offer an incredibly low rate or as we call it in the industry the ‘headline’ rate. Don’t be fooled. Remember the adage if it’s too good to be true, it probably is.
Here’s how it works:
Click for the full article: Inside track property fact: why mortgage lenders never lose…
How to buy inside track property
The UK property market is changing and as investors we need to change with it if we’re going to stay on the “inside track”.
The market cycles. Lending criteria change. Rates change and legislation changes. The whole market evolves and unless we evolve with it we potentially risk using structures that are now frowned upon, or in the worst case, are now illegal.
The UK property market is maturing a lot faster than the Australian market that I was watching carefully in the 90’s. Frankly, I’m impressed at the rate of change and I think it’s a positive step each time we remove the various loopholes that exist which put investors at risk either because of their own level of education or because they feel that it’s OK to bend the rules.
I always say that the spectrum of structures people use on the inside track when purchasing a property runs from the white through the grey and definitely into the black.
The white is how the average uneducated investor buys property. Perfectly legal and perfectly working in everyone’s favour, except theirs.
The black is illegal and although we certainly don’t want to be here, the unfortunate fact is that some investors do end up here when working with inexperienced, unprofessional or downright unethical property clubs who will promise you a quick access to the inside track to property. 
It always pays to remember that property clubs are not regulated in any way so they must conduct themselves by their own code of ethics. If you’re thinking of dealing with a club that doesn’t have them published as prominently as we do, then be sure to ask some serious questions.
The grey is where I like to play. It’s where the highly educated investor plays. It is perfectly legal even though most people would proclaim you can’t do that!. I assure you its perfectly legal and unlike the white the odds are definitely in your favour.
Read on for my entire article: How to buy inside track property…
Inside track tip: who will rent your new build property?
The one thing I have learned from properties that I have owned is that it doesn’t matter how good the deal is, unless you can get a tenant it will soon turn into a very painful financial decision.
That’s why as part of my two laws of property I also say that the property must be able to attract a tenant.
For me this means looking at the mass market in each area and buying houses they would live in. I call this the “everyperson” house. Obviously the everyperson house will change between areas — London city centre would be a 1 or 2 bedroom apartment valued between x & y and Newcastle would be a 3 bed terraced house outside the centre worth between x & y.
What I am saying is this buy a house that will have the biggest demand for the area. Stay away from huge mansions or low valued properties.
Always think — I’ll buy this, but who will rent it?
Read more about this topic on our blog: The everyperson house strategy…
2 greatest inside track property concepts
Lets look at the 2 most important financial principles that will get you on the inside track to a profitable property portfolio.
The first is Leverage, it is the lesser of the two but means that we can use the second much more effectively.
Leverage from a property perspective means borrowing capital to invest. It will take the form of either a mortgage, personal loans, credit cards. I will leave the last 2 out and focus exclusively on the mortgage aspect.
A mortgage represents huge capacity for leverage. Say you had saved £10,000 assume you could buy a property with this and that property after a year was worth £20,000. You have made £10,000 or 100% return on investment. In this example you have not used any leverage.
Now lets say you took that same £10,000 and went to a bank and borrowed £90,000 at 10% interest rate. Then using the £10,000 and the amount borrowed you bought 10 properties with your £100,000.
At the end of the same your each of your 10 properties has doubled to £20,000. You have just made £100,000 less interest of £9,000 (£90,000 x 10%) so £91,000. So without leverage you made £10,000 and with it you made a cool £91,000.
Hopefully you can see why leverage is such a great facility.
If you’d like to read about the second inside track property concept, click thru and read the whole article on my site: Inside track property concepts…
Inside track myth: hotspots
I don’t believe in property “hotspots”!
It might sound like a stupid statement coming from an experienced investor but all my training & experience in property tells me that being a “set and forget” property millionaire is not about hotspots but about fundamentals.
Let me explain: a property hotspot is somewhere where you can invest and in a very short space of time make a disproportionate return when compared to other areas you could have chosen to invest in.
My definition of a hotspot is simply ‘good fundamentals surrounded by salesmanship’.
What l mean by this is that if you understand the basic fundamentals of property which is just basic economics & human nature then you back this up with good solid research you can pick a hotspot before it becomes a hotspot.
Now granted, something like the announcement of the Olympics in East London can cause an immediate hotspot. So no amount of research could have forseen this and those that claim they wisely advised you to invest here prior are simply gamblers that got lucky so beware.
Now my point is this… If we assume that property… all property, will double every 7-10 years (and this is the only true assumption that l make in building a portfolio) then assuming this it actually doesn’t matter where or what you buy because in 7-10 years you have doubled your investment.
Take this concept one step further and you can effectively buy any property anywhere with NO RESEARCH and still make money.
Want to learn more? Click to read my entire property hotspot article…
