Hi, Peter Jones, chartered surveyor, author and property investor and in the second of our short series of videos looking at the twelve questions which I think every investor should ask themselves at the beginning of their property and regularly throughout their property journey to make sure that they are still doing right things in the right way at the time. And the second question that I think all investors should ask themselves is “What is the strategy I need to follow to achieve what I want to achieve?” Now if you think about it there are really three main strategies that one can follow in property;
- There’s buying and holding to rent properties out.
- There’s buying and holding properties for what we could call equity or capital appreciation.
- And there’s buying and selling properties. And when we sell on for profit then that’s essentially to make lump sums
And basically every strategy in property is going to fall under one of those three main headings. We could have a really semantic chat about what a strategy is and whether there are other strategies but I think that those are the three main strategies. Everything else tends to come under those headings and if it doesn’t fit those headings then it’s probably more of a technique. But anyway, as I say we can talk about that until the cows come home but in my mind those are the three main strategies. So when you know what you want to achieve, which is Question One, you can then start to think about what the best strategy is to help you achieve what you want to achieve. So now you can see why Question One is so important because what happens is so often that investors just jump into buying a property without even asking Question One. They don’t know what they are trying to achieve so they just go out and buy a property. Why? Because they’ve heard property is good, they read about it in the Daily Express or whatever and they think I’ll go and buy a property and rent it out. Not as simple as that. We need to be doing the right things at the right time.
So when you know what you want to achieve you can then start to think about which is the right strategy for you. So for example if you want to create income, logic would suggest that you’d follow some kind of a buy and hold for income strategy. Buy and hold a property to rent out. It makes sense doesn’t it? Does it though? We’ll come back to that in a moment.
Or it may be that if you want to grow your wealth and have some equity or grow your capital, you might buy a property and wait for the value to go up. Hum, that sounds an interesting one. Can we actually do that? Is that a wise strategy?
Or if you need some lumps of cash in your bank now. For example, if you are thinking that you don’t have very much money to start in property and you don’t have very much money for a deposit maybe the strategy should be doing some kind of a buy and sell strategy. Flipping; buying the property cheap and selling it on. Or buying a property cheap, renovating and selling it on at a profit and then you can keep the profit and use that for future deposits.
Now one thing which really strikes me a lot of the time when I talk to new investors particularly is how many investors want to create a passive income and replace their job income. They want to sack their boss and get out of their job, and quite often they will be telling me that they want to do that in the next six months or next year and the way they are going to do that is by building a portfolio. Now the reality is though that building a passive income through a property portfolio can be quite time consuming. You are probably going to need multiple properties to be able to replace your job income. So I’ll often say to them are you sure that’s the right strategy? Perhaps if you want to get out of your job, a better strategy would actually be to do something like a buy and sell strategy. Buy some properties, flip them, sell them at a profit then you can put the money in the bank and maybe live off that while you then develop your portfolio. Or maybe do a combination of strategies so do some flips, buy some properties, renovate them, sell them on, pocket the cash. At the same time, build your portfolio knowing that it might take two or three or five years to actually build a portfolio the size to replace your income.
So it’s well worth spending the time to think about what is the best strategy or combination of strategies to achieve what it is that you want to achieve in property.
Here’s to successful property investing
Peter Jones B.Sc FRICS
Chartered Surveyor, author and property investor
PS by the way, I’ve rewritten and updated my best-selling eBook, The Successful Property Investor’s Strategy Workshop, which is an account of how I put together my multi-property portfolio, starting from scratch with no money of my own, and how you can do the same. For more details please go to