5 secrets to success,
1. Take responsibility and educate yourself
When it comes to investing my money, I would never invest in anything that I didn’t know implicitly. The most costly error I see beginner (and even ‘experienced’) property investors make is to believe they know all the “ins and outs” of the property market. In reality, they lack property investment education. When things go wrong, they then blame other people: banks, tenants, agents… in fact anyone they can, except themselves.
This self-belief that so many beginner property investors have has its root cause in the fact that property is something with which we all grow up. After all, from the moment we’re born we’re cocooned in a house or apartment; we understand that a mortgage is paid instead of rent, and those buy-to-let property investors simply sit back and rake in the profits!
But being a property investor is not the same as being a homeowner. It’s a completely different beast. Indeed, as a homeowner your downside is very limited, and while you own and live in your home you are the one receiving all the benefits. A buy-to-let landlord gives up this benefit in exchange for rent.
Every successful property investor I know (including myself) has invested time (and often money) in getting the highest level of property investment education possible before investing.
2. Know what you’re doing, take out the risk
One of the first lessons I learned as a property investor was that my entire risk was down to me. If I bought a dud, it was because I either hadn’t researched the market properly or I hadn’t paid enough attention to the financial side of the transaction. And when I say the financial side, I mean adherence to cash flow and risk analysis – the risk that mortgage rates might rise, or that there might be void periods when I had no rental income.
As a property investor and buy-to-let landlord, you’ll need to understand the property market and the finances of being a buy-to-let landlord.
3. If things go wrong, they can go badly wrong
One of the first examples of an investment strategy that imploded I remember was the collapse of Barings in 1995. The bank had been making a fortune, and its directors and shareholders had pocketed small fortunes by way of dividends and bonuses.
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However, almost the entire profit of the bank had been made by a single trader, Nick Leeson, in the Far East. He was trading in complex financial derivatives the big bosses didn’t understand. When things started to go wrong, Leeson doubled up and doubled up several more times in the forlorn hope that the market would turn around. It didn’t. When the directors finally discovered the massive losses that had been accumulated, it was too late.
The real problem was that the bank, its directors, managers, and supervisors didn’t understand what Leeson had been doing. So they didn’t know the reason why that money was being made. They didn’t understand the risks the bank was taking.
4. Know what you want to own and why
Any old fool can stick a pin in an estate agent’s brochure and come out smelling of roses when the market is rising. It’s when the market is moving sideways or falling back that a property investment education really pays off.
The property investor who knows what they want from their investment, and is able to align their goal with their investment research to ensure the property they buy moves them towards their goal, is the investor who will be prepared for any market condition (and have the ability to take advantage of the best opportunities when they arise).
5. Education is the best investment
It was the great stock trader who first coined the phrase, “The best investment you will make is in yourself”, but that holds true for whatever you want to do. If you want to be a successful engineer, you’ll need a degree. To be a carpenter in demand, you’ll need to learn your craft. You get the idea.
To have success as a property investor and buy-to-let landlord requires property investment education. With deep-seated knowledge of the property market and how to manage the financial side of property investment, you’ll improve your chances of success beyond your wildest dreams.
Property investment education, like any education, comes at a price. But that price doesn’t have to be financial, as you’ll see in my next post. Start your investing journey with a simple idea in The 3+1 plan, or to learn from our comprehensive property research, call the team today on +44 (0)207 923 6100 today.
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