Healthy growth or overreaching?
We've started doing regular webinars for both beginner and experienced investors, and because we only have 1 hour per live event, it's impossible to answer all the questions that get asked.
This is why I've decided to record video answers to the common ones — and here's the first, great question that I had from Bernard Willis:
“Brett – How quickly should an investor build their property investment portfolio“
So in my reply, going to teach you my top 4 portfolio building strategies.
They will help govern the speed at which you add property to your portfolio and what KIND of properties you add. They will match the speed of your porfolio's growth with the speed of your personal growth as an investor, which is the most overlooked part of investing.
WHY YOU NEED THESE STRATEGIES:
The most important thing you need to understand as a property investor is that the “industry” doesn't give a sh!t about you or your cashflow position they're going to push you HARD to buy as often and as much as you can.
If you keep these four unique portfolio strategies in mind the next time you are presented “the best deal ever”, then you'll already be in a much stronger position and you'll be in the best place to judge whether it's the right time or not.
Enjoy and live with passion,
Here's a copy of the video Transcription:
Hi guys, Brett Alegre-Wood here. Author of “The 3+1 Plan” and chairman of Gladfish, where we help you to build a thriving property portfolio so you can live the lifestyle you've always dreamed of, but in such a way that you're not creating a second job or actually working yourself into an early grave. So what I want to do today was just, we had a webinar now for a while. And we have compiled a hundreds of questions that you guys have been asking. So I want to take those and what I've done is I've broken them down into a number of really key questions that most of you guys are repeatedly asking. And what I've done is, I want to present them to you, so you get that level of education. I've always been a massive, massive supporter of free education and so that's what I want to do for you guys today is really give you, I guess what most people out there are concerned about in the market now about property investment, about strategies, about structures about, all sorts of things. The questions that you guys have been asking. So you know, it's not now me telling you what you should be thinking, it's you guys actually feeding back and I love that about the social media and I love that about webinars. So, yeah, sit back relax and let's get started.
Okay, guys, another great question, and this question is all about time frames and how quickly you should build up your portfolio. And it's really important because I think, if you're out there and you're working with a lot of property clubs and a lot agents, they have no interest in helping you once you own that property, okay? So once you're on that property, you're own your own. Their sole focus is to sell you that one property and to sell you as often, as frequently as possible and for me, that's a massive, massive problem in industry. Because it's so sales driven, it means that it's almost sales without responsibility. And therefore, you have to take that responsibility, all right? It's up to you. It's totally on your shoulders. You're signing the mortgage docs, you're on the legal title, so therefore you have to be 100% responsible for this. And the problem is the industry is going to push you to build it quicker than you possibly can.
And that's one of the reasons why I talk so much about portfolio management, I talk so much about cash flow, I talk about visions, I talk about all these principles that mean…and what most of them do is slow you down, okay? And they slow you down because actually, you don't want to build these thing fast. And fast is, you know, a subjective thing. Because really, it's, you know, it could be fast, it could be one a year, fast could be one a month, fast could be one every ten years. Oh, that's probably actually slow, but yeah. But anyway, so let's get into it.
So time frame, all right? We are talking about, you know, you go to one two stop, five and hold, seven and ten by seven and ten. One, two stop strategy, buy a couple of properties, stop investing. Five and hold, build your portfolio to five properties and then hold off investing further. All right. Seven and ten by seven and ten, buy seven and ten properties and hold them for seven to ten years. And finally, the question mark, which is a strategy, it's called the question mark strategy. How many properties do you need to fund the lifestyle that you desire, okay?
So there are four portfolio building strategies. And for me, I'll talk through these. Really simply, there's five things that we look at or we consider when we are talking about time frame, all right? The first is how much equity you have. If you've got 25K, all right, what that means is you're going to get probably one property and it's not going to be a London property, it's going to be something up north, you know, a little bit cheaper. All right, whereas if you've got half a million, you know, liquid cash sitting there, well now you can be quite serious about building a portfolio. You could probably get 10 properties for that, all right, and maybe even more, you know, up north, maybe five in London, all right? So it all depends on how much equity you've got as to how much you can get involved but there's a few things. Income as well. Because you might have, you know, if you've got low equity, low income, it's going to be a lot slower than if you got low equity and high income. So some of them are high income has a bit more disposable income so they can actually make quicker decisions, all right?
The other side, and this probably being most important side, all right, and I'm going to grab a little thing and put this…because if I can't say this enough, this is by far the biggest determination of your success or failure in building a portfolio is emotions, okay? They're going to stop you and why haven't most people out there, bought one, two, three, four, five, ten properties? It's because emotionally, they're not ready, they don't understand, they haven't overcome the barriers that you are going to face. And it doesn't matter…I don't care your dad was an IFA, your mom was a bank manager, all right, you are going to have these emotional barriers that you need to overcome. So this is going to be the biggest restriction that will be put on you. It doesn't, you know, income and equity, well, okay, that will certainly, but actually, this is the big thing. Because we've got guys who have the half million there. They built it up, they reason they've got the half a million sitting there is because they're actually massively in fear. So they're going to take a lot longer than someone who has already got five properties, got rid of most of the emotions, and just wants to invest.
Now, the market. Because then today, it doesn't matter…any of these stuff doesn't matter. You get two properties under your belt, most of these stuff is gone, yeah? This stuff doesn't matter as much because now you've got an understanding of how cash flow works, how provisional leasing…
And this thing doesn't matter because what happens, once you run out of this, whatever happens, it doesn't matter how much, you've got half a million sitting there and you invest in property, you're now stuck until the market rises. And make no mistake, you know, the market rises. Now, it can be that you can buy and sell very cheaply, you can add value, you can do things to affect this, okay, but at the end of the day, generally the market will increase and when it does, that's when you make money. Now, buying and remortgaging, all these sorts of things will come into play today.
The other side is width profile. Some people are much more…and look, when I sit down with mom and dad, a husband and a wife, okay, what I tend to find, not being sexist here, this is just generally. One partner, and it's normally the female, would be a lot more conservative than say the other partner who the male, all right, which is a general. Now sometimes that role swaps over, you know, but generally, the majority of people that's the sort of role they fit into.
Now what I end up doing is I end up grabbing him and bringing him his expectations down to earth and I end up grabbing her, kicking and screaming along, until they get to the point where they get those first two properties and they see it working at which point I'm dragging her back down to earth and dragging him along, all right. So you know, this is all these emotions at play. But it's also, you know, this risk profile. Generally you'll find one partner will be less or more risk averse and you've got to accommodate that for that. So even though you might have one partner who wants to go out and, you know, do ten properties tomorrow and financially could, okay, what you'll find is you've got a really work to both the partners, okay. So you've got to sort of drag this one along a bit and pull this one back down to earth.
Now in terms of timings, all right, so we are looking at one, two stop. One two stop, and I'll talk about stop there, yeah, it's very emotive words, stop, in other words, stop buying, all right. What you're looking at is you can stop for three seconds, three months, or three years. Although if you're stopping for three years, I'll probably need to kick you up the bum for procrastinating, all right? So that really is up to you and it's based purely on emotions. When are you ready to go for the next step? Five and hold, slightly different, because when I say when you get to five, I want you to stop buying for six months. And the reason I say to put a six month buffer in there is because what we need to do is set up all the systems that will allow you to set and forget your portfolio. So it's not going to, again, come back to these emotion things. Because actually, if you go and buy five properties really quickly, you know, you might not have set up all the, you know, mailing and make sure you have direct debits and how do you check your rents and all these sort of things. And the problem with that is, if you don't do that, you can actually get…your portfolio can create problems for you. All right.
Seven or ten, by this stage, you're not talking about timelines. It's the rate at whatever you want to do because actually you've got the experience, you've got the emotions in check, you are a professional investor, all right? Not a landlord, a professional investor. You're looking at return on investment. You're looking at how to maximize that return. And by that stage, you know, time frame, you know, you're not asking these sort of questions. You know that by now. Okay? So really it's these two that worry. But what I would say is, I generally say, you can get to this seven or ten mark, wherever you are, if you're a 50 year old, by the time you're 60 you could have done that. You know, if you're 30 year old, by the time you're 40, you could have done that.
So I'm not talking about get rich quick, you know, to go from here to here, I used to, and when I'm talking back in 2003, 2004, when, you know, the market was very different, it was very buoyant and there was, you know, all sorts of mortgage scams where you can actually put a deposit, you know, 15%, 85% mortgage, so you put very little money in. I could take it you from 0 to 10 in 6 months. But it was an emotional roller coaster for them. So then I put these strategies in place to make sure they built it at the rate of their growth. Okay.
So guys, I'm sure you find that information really valuable. The first step really now is that you need to get a plan, you need to actually work out exactly how you're going to put this in place. So what I encourage you to do is come in and sit down with us, talk to us, you know, grab a coffee with us and what we can do is we can actually start mapping out what your plan is. But more importantly, not just give you a written but of paper that says, “Go buy a property or do this,” we can talk about structure, strategy, processes, procedures. We can talk about all the things that you need to put into that plan. We can talk about why you want to achieve this. What you're actually looking to do about this. We can talk about the where you're starting from. What sort of limitations, what sort of emotional barriers you're going to face. Then more importantly we can talk about how you're going to get there, yeah? And those three elements you've got yourself a really powerful plan.
Then the next scene is a motivation and the action, you know, I mean, nothing happens without action. And this is where, the team, you know, we can help you do this. And in fact, we can do it for you, if that's what you want. So guys, I encourage you, come in, meet with us, grab a coffee or two if you drink it, and really just sit down and get that out.
One of the things you're going to find about, you know, the way we approach this is that most companies in this industry, what they'll do is that they'll just try and sell you a property. The first phone call you make to them, guarantee, you're going to get sold a property, okay? You're going to find, we don't do that. What we want to make sure is you get that plan in place, you get all the emotional things sorted out and you know, you're aware of those. And you're really going to feel for who you're going to be working with, okay? You know, relationship is what it's all about. It's not just flog lots of properties because I can tell you, it takes about three months to buy a property. But you're going to own that property for five, ten years maybe. So it's really important that you put a structure and strategy in place, a plan, and follow that plan. Because otherwise, what's going to happen is, you can grow your portfolio very quickly, but then if you're not aware of market cycles and all these sort of things, the interest rates rising, you know, inflations and all those, what's going to happen is you're going to be put at risk down the track. It may look good now but the market changes and then all of a sudden, all of your weaknesses in your portfolio you've built are going to be displayed. So getting a plan is going to enable you to actually just get rid of that totally.
Guys, I'm looking forward to meeting you real soon at either one of our webinars, perhaps a seminar, or if you come to one of our offices around the world. Have a great day and remember, live with passion.