Invest in property at the perfect time instead
One of the biggest limiters to successful property investment at the outset is the ‘need’ to find the ‘perfect property’.
It’s going to be hard enough to find a property that meets the stringent criteria needed for success, and passes through the property investment research framework, without raising the bar to an impossible level.
Naïve investors want their property to be in a perfect position, on the perfect street, in the perfect neighbourhood, in the perfect town. They want it to be perfectly laid out, with perfect fixtures and fittings, and a perfect view. They are, of course, being totally unrealistic. But, even though you will never find the perfect property, you can find the perfect investment property.
Why not buying the ‘imperfect’ could cost tens of thousands
A very close mate of mine (who I’d love to see become successful) sat on a sizeable deposit for three years. When property was heading upwards, he complained that it was too expensive. When it started stagnating, he became nervous that it was about to crash.
No matter how hard I tried to educate him, and demonstrate investment performance, he wouldn’t take that first step and buy. For three years I tried hard to convince him to buy his first residential investment property. But he wouldn’t.
One of the first properties I purchased in a development in which he also had the opportunity to buy, increased in price by £30,000 during those three years. It now pays me a net £120 per month.
At the time I invested, it was not at all a perfect property. The cash flow on it was slightly negative. It wasn’t on the best plot on the development.
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It still isn’t the perfect property. But £30,000 profit in just a few years is pretty good for an imperfect property. It’s certainly way more than what my mate’s ‘perfect’ savings account has paid him.
What happens if you do find the perfect property?
Imagine your perfect property. Imagine all the perfect criteria you want in a house. I’ve started you off with a few ideas. Continue the following list:
|Perfect Investment Property Selection|
|1. Local to your home|
|2. Great price|
|3. Capital growth potential|
|4. Well finished|
|5. Comfortable – airy, roomy, liveable|
|6. Rents easy|
|7. Outside area – living and lawn|
|8. Away from busy street/emergency service sirens/church bells|
|9. Shops and transport close by|
|11. High ceilings|
OK, I’m sure we could all come up with a few extras, but for the purpose of this exercise, that will do.
Now let’s imagine that you found a property that fitted all the criteria above. You paid £300,000 for it and it easily rented for £2,000 per month.
Now imagine that 10 of these ‘perfect’ criteria suddenly turned terrible. Three things would happen:
- The price would drop
- The rent would drop
- The capital growth potential may also drop
Now, if you owned the property when this happened, you’d be in a bad way. But what if you hadn’t bought it back then, but are considering buying now, with those 10 terrible criteria mixed in among all the perfect stuff?
You would buy at a lower price, and factor in the lower rent to your cash flow calculations. The point of this is that whatever your selection criteria for a property, it is always reflected in three factors:
- The price of the property
- The rent you will receive
- The capital growth potential
So, the search for the perfect property is a futile one. Paying the right price (always buy at below market value) is much more important.
Don’t wait for the perfect property: you’ll miss the perfect investment
Investors who set their standards too high risk missing out on the positive trends during the property cycle. They risk delaying buying that first property on the way to a profitable portfolio. Remember, the best time to buy property is always now.
I’ve owned many properties in many countries around the world over the years. Not one of them was perfect. Every single one of them was flawed – sometimes in a lot of ways! But the important thing was that when I bought them they were perfect because the timing was perfect. That’s what you must remember. Get your research right, and buy in the right location, and you’ll buy that imperfect property at the right time. And that is what should make you money.
When we select properties for their investment potential, we undertake extensive research into the potential to produce the best long-term return. Our top-down approach seeks to ensure that the timing of investment is always right. To discover how our research methods could help drive your investment success, contact Gladfish on +44 207 923 6100.
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