Avoid the biggest pitfall of beginner investors and forget about landlord responsibilities
One of the biggest mistakes made by beginner investors, and one that stops many from becoming successful property investors, is that they believe they must be a great landlord to be profitable in the buy-to-let market. I say avoid becoming a landlord at all costs: and I tell you this as an experienced investor and landlord.
In this article, you’ll learn why you should be an investor and forget about being a landlord.
The fear of being a landlord makes failure a fact
When you become a landlord, you get caught up in the day-to-day problems of property investment, and that challenges your time. If you’re investing for the first time, dwelling on the responsibilities of being a landlord could stop you from investing.
Let me share with you a story about a guy who came to see the team at Gladfish a few years ago. His name was George, and his day job was as a workplace health and safety officer. The problem was that he thought like one out of work as well. He was considering buying his first investment property and understood the power of property as an investment to fund his retirement. His problem was that he was overly interested in the meaningless detail.
We recommended a property to George, one that we had checked out with our usual forensic eye for property research. We knew everything about it and told George about it. But he wanted to know more… and more. It’s fair to say that George looked at every possible angle, and some of them were angles that my colleagues and I had never even thought of before.
At one point, George asked my colleague Simon “What happens if a door falls off and severs my tenant’s arm?” Simon’s face was a picture. This normally quick-witted Kiwi had no idea what to say. I answered for him.
For the next few minutes, I took part in one of the most bizarre discussions of my career. We spoke about whether the door had fallen off because of a lack of checks and maintenance; if the tenant had been swinging on the door; or if a handyman had been to the property to fix it and done a sub-standard job? You name it, I covered it. George was happy enough with the answers, but clearly, he was a worrier, a person who thought of every worst-case scenario as a bar to action.
It was no great surprise to us that after using our usual 24-hour Sleep Test Guarantee, George said he’d got cold feet. In truth, he would have had a hard time as an investor because he was so detail-oriented. There was going to be no way he was going to Set and Forget. There was no way he was going to become an investor and not a landlord.
The result? Well, I don’t know what George did with his £100,000 saved in the bank. It’s probably still there. But I do know how the property that should have been his has fared since. An apartment in London, he had the opportunity to buy in early 2011 for £295,000. It was recently valued at £585,000.
How do I know this? The investor who bought the apartment has continued to work through Gladfish, remortgaging regularly to fund the expansion of her portfolio. Catherine now owns four properties, with a total value of almost £2 million. Not bad from an original investment of £100,000 seven years ago.
Do want to be a rich investor or a poor landlord?
You may have read the book Rich Dad Poor Dad by Robert Kiyosaki. It’s the story of Robert’s two Dads: one was a rich investor, and the other was a poor investor. It looks at the habits that make some people wealthy and successful, and others less so. Like all great books, its brilliance lies in its simplicity. It describes the key behaviours and attitudes of those who make a lot of money in life in language that even I can understand!
Like the habits that Kiyosaki describes, Set and Forget is the key to successful property investment. If you ‘get it’, you are likely to be a rich investor. You’ll buy yourself both time and enjoyment, by allowing others to do all those mundane, time-consuming day-to-day tasks while you concentrate on enjoying the rewards and the lifestyle property investment brings.
If you don’t Set and Forget, you’ll end up being an overworked and poor landlord. You’ll be poor with time, lifestyle, and enjoyment. You’ll be continually chasing your tail and worrying about every little detail. Your life will be consumed by thoughts of “What’s going to happen next?”
It’s also easy to start off with good intentions, and then fall into the landlord trap. I recommend that you regularly review where you stand. Make it a diarised task to review which category you fall into the rich property investor, or the poor property landlord?
No one is an expert in everything
There are very few successful investors that I have ever met (and I’ve met thousands in my career) who can claim to be an expert in every area pertinent to property investing. The very best property investors know their limitations. They know what they are good at, and know where their knowledge, experience, or ability is lacking. Over time, of course, these successful property investors will learn more about their weaker areas. But the most successful all have this in common:
They identify and accept their weaknesses, and use other people to fill the gaps.
It is one area in which we’ll help you. As you move along your journey as a property investor, we’ll help you discover where your strengths lie, and where you need help. We’ll help you find the experts to fill in where there are skills gaps so that you can make a well-judged, successful property investment.
The first step is always the hardest. But once you’ve taken that first step, the rest will begin to fall into place. Instead of being George, act like Catherine. Take that first step, and get in touch with Gladfish on +44 207 923 6100.
Live with passion