Seven property investment phobias and how to overcome them

Strategies to turn fear into financial success

We’re all afraid of something. Spiders, snakes, heights, open spaces, dogs, thunder and enclosed spaces are the top seven on the world’s phobia list. Just as you have your fears in your everyday life, you’ve probably got fears (or at least strong reservations) when it comes to property investment. The property investors that we meet share many of the same concerns.

In this article, I’ll describe the top seven property investment phobias – the obstacles that hold so many people back from taking that first step of expanding a portfolio. You’ll also learn how to overcome your investment fears, and avoid looking back in later years thinking, “If only…”.

Fear of making a bad property investment

It is most investors’ first fear, especially those new to property investing. It may be that you worry about buying the wrong type of property for the market, or perhaps that you won’t buy in the best places to invest in property UK but instead in an area that is rapidly heading for a property downturn. Sometimes investors are simply scared of buying at the wrong time.

There are some actions you can take to overcome this particular phobia:

• Get yourself valuable investment education. Take time to learn about investment property, the property fundamentals that affect values and rents (shops, schools, transport links, major employers and major investment), and the difference between existing, new build, and off-plan property.

You’ll find that as you become more familiar with the terms used and the strategies employed, your confidence will grow. I bet the first time you sat in a car at the steering wheel, your hands were clammy, you had beads of sweat on your forehead, and your heart was beating like a bass drum. As time went on and you learned more about the rules of the road and how to navigate an actual course, driving became second nature. Property investment is like that, too.

• Get good at property investment research. Use all the tools and techniques available, and ensure that you dig deep to discover if an area has what it takes to provide realistic property investment opportunities. We analyse 108 data points to rank a location for its potential. Another tip here is always to keep an eye on the investment news.
• Get yourself a property investment mentor. I had one of the best property mentors I could have wished for when I was starting out: without him, I wouldn’t be where I am today. It’s easier to find a mentor now, and even possible to have ‘virtual mentors’ now that we benefit from the web. Blogs, forums, webinars, Q&A sessions, FAQs and online education, could be your virtual mentor.
• Discuss your plans with family and friends; you’ll need them onboard to provide close-at-hand support through tough times (and yes, there will be times when the going gets a little tough – you’ll come through them, and your portfolio will be stronger because of the people you surround yourself with).

Fear of financial mistakes

The reason you should be investing is to improve your lifestyle. It’s the income or capital gain from property investment that enables you to achieve this. Having doubts about the financial side is natural. After all, you’re not an accountant. You may never have run a business before. You might never have made a single investment before. What do you know about the money side of property investing?

• Do yourself a favour and get a good buy-to-let mortgage broker. The benefits of doing so could transform your investment property’s cash flow.
• Now I’ve mentioned cash flow, always make a two-year cash flow projection. Prudence about finances will ensure that you allowed for all eventualities. If mortgage rates rise, you’ll be prepared. If a tenant leaves, you’ll have the funds to cover the void period.
• Download our book “The Non-Accountant’s Guide to UK Property Tax” to become acquainted with tax liabilities and how to mitigate them by using all the tax deductions allowed.

Fear of getting bad tenants

When you’ve made the decision to invest in property, your thoughts will turn to the type of tenants you’ll get. We’ve all heard the stories about the tenants from hell, and how they trash a landlord’s property before doing a disappearing act, leaving behind a trail of devastation, a massive cleanup bill, and months of unpaid rent. It is always a possibility – it is one of the risks of property investment. But there are things you can do to eliminate this risk virtually:

• Make sure that you properly vet prospective tenants, checking employment and rental history as well as their credit rating. Speak to their employer and previous landlords.
• Ensure that the tenancy agreement is written comprehensively – don’t rely on a do-it-yourself version pulled off the Internet.
• Regularly inspect the property, and check against the inventory.
• Be a good landlord, doing maintenance work on time and being available for emergency calls.
• Get the tenant to pay their rent by direct debit, and chase up immediately if there is a problem.

Being a landlord is hard work, and it’s not why I invest in property. That’s why I choose to take advantage of professional property management. Sure, it costs a little; but everything is done by the book, and I don’t get those 2 am calls on a Sunday morning complaining of a dripping tap.

Fear of bad property management

Especially if this is your first property investment, handing over the keys to a third party to look after your property is a big step. It’s not their property, so how do you know they’ll treat it as if it is? The contract between you states they will do such-and-such at a particular time and schedule, but how do you know they’ll stick to the agreement?

• Always ask for recommendations and testimonials of the property manager’s clients.
• Make sure you have reasonable expectations.
• Check that everything you expect to be done is covered in the property management contract.

Once you have hired the property manager, check that:

• They communicate regularly and when they say they will.
• They resolve problems and maintenance needs quickly and efficiently.
• Your rental income is paid on time every month.
• They reply to your queries promptly.
• They are proactive with ideas about how your investment property can work harder for you.

A property manager plays a key role in the performance of an investment property – if yours isn’t doing the job they should, then sack them and move on.

Fear that your best tenants will leave

Great tenants are every buy-to-let property investor’s dream. You’ll never want them to leave. If you’re a great landlord, there’s less chance that dream tenants will move on. I’ve known tenants to stay in the same property for ten years and longer. So be a good landlord, listen to your tenants and their concerns, and if small concessions are needed to keep them happy, then it will be worth it.

Fear that your investment objectives won’t be met

This fear is a combination of the first five property investment phobias I’ve described above. When you begin considering property investment as a strategy to achieve your financial objectives, you’ll probably become excited by the potential before some doubts creep in. It is only natural.

Your plans rest on buying the right property, in the right location, and having it managed well with great tenants in place. If you’ve taken all of the above actions, you can be confident that your property investment will have the potential to make your dream future a reality. However, there are two more things to do to start right and then ensure the property investment is on track:

• Speak to property experts before you make an investment. They’ll be able to assess your objectives and guide you to the best property investment opportunities for your situation and circumstances.
• Regularly review your situation, objectives for the future, and current property portfolio.

Fear that Brexit will implode the property market

One of the most common concerns we hear from property investors today is the fear that Brexit is going to cause the property market to collapse. It’s not. We’ve had massive economic events before, and the property market in the UK has always pulled through (exiting the ERM, the Global Financial Crisis, the Oil Shock in the early seventies, several recessions, stock market crashes, and so on).

Demand for housing in the UK is way above supply. It’s estimated that 300,000 new homes need to be built every year simply to help solve the housing crisis. The government is struggling to meet its target of 200,000 new homes each year. The need for homes and the demand for rental properties is not going to disappear overnight.

If anything, the Brexit vote has created some exceptional opportunities to strike great bargains for investment property.

Contact one of our team on +44 (0)207 923 6100 to book a meeting to discuss your financial objectives, concerns, and hopes and fears. With dozens of years of experience, our team are uniquely placed to assess whether property investment is right for you and how it could bring you the future you desire.

Live with passion

Brett Alegre-Wood