Quite often, when I talk about my experiences in property I’ll be asked what the difference is between a good property investor and a poor property investor. Truthfully, that’s a hard question to answer. Some people are naturally good at things and some people are just good at property investing.
Putting natural talent aside, over the years I think I have identified at least seven mistakes that poor property investors make that the good ones don’t. So, in no particular order, here are seven things to avoid if you want to be a good property investor.
Mistake number one – They take too long to agree a deal
In a word, they procrastinate. Despite good intentions, nothing happens. Many would-be property investors fall at the first hurdle and after all the talk and wishful thinking, just do nothing. Perhaps this isn’t that surprising. After all, no property is cheap nowadays, not in absolute terms. Even a cheap property costs a lot of money, and it takes courage to spend that much. I was going to say especially if most of the money belongs to the bank who, of course, can extract a high price for failure. But on reflection perhaps it takes even more courage to risk your own money. Either way, courage is required.
A way around this is to adopt the “salami principle” and break everything down into bite sized chunks.
First, the analysis. there are various spread sheets and apps available for property investors and buy to let buyers; just the job for making sure the figures stack up. If they don’t, then you pull out of the deal. If you haven’t got one, there are relatively easy to construct although a little time consuming.
Second, assuming the figures look good or better, you can set your price. If you can agree terms, fine. If not, you pull out. So far you’ve wasted nothing but your time.
As and when your offer is accepted at or below your best possible price, you can move onto the next step, instructing your surveyor or valuer. You might do this as you make your mortgage application, or you might rely on your lender’s surveyor (if you are not taking out finance, obviously you will need to instruct your own surveyor). In practice it shouldn’t make any odds to you who instructs them as long as you get a professional second opinion on the property, its condition and its value. If you find your offer is miles over the top, now’s the time to pull out or renegotiate.
Assuming that you pass this hurdle, you can move onto the next step (although in practice most investors run this simultaneously with the last one) which is to instruct your solicitor.
Anything adverse in the searches will be drawn to your attention. If you use a local solicitor you might be able to use their local knowledge. If anything worries you, you have yet another chance to pull out or renegotiate.
The point I am trying to make is that rather than freeze in fear, try coming out of your comfort zone in stages. In practice there will be plenty of opportunity to pull out of the deal right up until the point where you sign contracts, so there is no need to feel totally overwhelmed. Just take it all one step at a time.
In the next post we’ll take a look at mistake number 2
Here’s to successful property investing.
Peter Jones B.Sc FRICS
Chartered Surveyor, Author & Property Investor