BLOG: An expert’s warning to all amateur property investors
As a professional property investor, I have found that while most people enjoy the financial benefits of owning an investment property, many do not take the time to learn the fundamentals of property investing.
You must treat your investment property as a business and make decisions based upon numbers and educated judgements; not on whims, hopes or personal desires. Only buy if “the numbers work”; do not be ruled by your heart.
Many new investors try going it alone and realise after a few years they have made costly mistakes. You must learn the fundamentals.
It is therefore essential that you know the full investment process and buy the right property in the right location at the right price. You must ensure you consider this from the tenant’s position; a regular home buyer’s position and yours – the investor. If anyone of these elements is missing, then the purchase is unlikely to be beneficial, certainly in the short term.
To understand ‘the right price’ means knowing ALL the numbers involved in the cost of borrowing money, buying, doing-it-up, renting out and managing the property as well as allowing for contingencies such as ‘a boiler breakdown’ or ‘interest rate rises’.
‘The right price’ also includes being able to obtain your property with a discount. This will give you equity from day one and will speed up the process of reusing your initial deposit over and over again.
Probably the most important consideration is ‘the right location’; knowing where in the country properties give good cash flow and where they go up in value more quickly.
Do not be tempted by glossy brochures that promise high returns without doing your own homework to ensure that their promises can be fully substantiated.
This also applies to overseas properties where legal fees, taxes, the law and currency exchange rates adds to the ‘unknown’ and ‘hidden’ costs.
You need to be clear on what you specifically want to achieve from property otherwise you will always be chasing the next shiny object and end up frustrated that you have wasted time and money getting nowhere.
I suggest that you find a mentor who you can trust and who understands your specific needs and desires; someone you can work with and supports your personal development. You will achieve your goal more quickly.
My passion is to help people, through my education and mentoring programmes, to accomplish financial independence so you do not have to rely on others to provide you with a salary or pension.
If you would like to find out more, I discuss this topic and much more in my book, Retire Early Retire Wealthy – Your essential guide to Successful Property Investing (£14.99 Panoma Press).