Avoid the mistakes that crush people’s property investing ambitions
Property investing in the UK has produced spectacular real yield on investors’ money for decades. By investing with a buy-to-let mortgage, you make rental income and capital gain on other people’s money. That’s an income stream you don’t have to work for.
Many would-be property investors never get their investment ambitions off the ground. They spend their lives saving in cash accounts that pay peanuts. They invest in expensive stock market funds where the only real winners are the fund managers who are paid exorbitant fees regardless of performance.
Why do so many miss out on the profits of property investing? The answer is that they don’t have the deposit, and don’t plan to save one. In this article, you’ll learn why would-be property investors find it so difficult to save a deposit, and how you can avoid the same mistakes.
What’s the real reason you can’t save a deposit?
We live in a society which isn’t conducive to saving. Prices keep rising, and retailers keep selling stuff to us! We are constantly urged to upgrade our iPhones, our cars, improve our homes, and buy the best of everything. Addiction to the consumer culture is a major roadblock to building financial freedom. The short-term pleasure you receive by spending today pales into insignificance when compared to the long-term pain of not having enough money to relax and enjoy your life.
In addition to your love of spending (often money you haven’t got), other reasons that might be stopping you from saving that deposit:
- You’re an inexperienced saver, and spend first before saving
Saving is a habit. If you have never saved, it is hard to get into the habit of doing so. Work out how much you need to save and when you want to invest, then start paying yourself first before paying your monthly bills.
- You’ve never been taught how to budget
Budgeting is not easy for many but is essential for those who want to save and build a better lifestyle. Understanding where your money is disappearing to is a big step towards starting to save.
Keep a note each week of what you are spending money on. What can you cut out of your daily spending? Many of my clients are astounded at the amount they spend on lunch and coffees each year. The morning Costa coffee and the Greggs sandwich and cake at lunchtime doesn’t seem like a big expense. But over the course of a year, it runs into thousands. You can easily save at least half of this by taking a packed lunch to work and buying a jar of coffee for the office kitchen. Hundreds more can be saved by reading free news on your iPad instead of buying a daily newspaper.
Know what you spend, identify what can be cut, and become money disciplined.
- You don’t earn enough
It is a reason for not investing that I often hear. Could you do some overtime? Perhaps your partner could take a part-time job to put more money in the savings pot? Or how about learning a new skill and increasing your wage? There are plenty of ways to increase your earnings. Get creative and find your best route to higher wages.
- You buy on impulse
Many people are impulsive spenders. They see something, want it, and buy it. Usually, the money is wasted.
Always take a list with you when you go shopping. Stick to the list, and if you do see something that catches your eye, use the 30-second rule: walk away, and spend 30 seconds questioning why you must have this item. Ask yourself if those few pounds spent today will give you any real long-term benefit. 99% of the time, you’ll walk away without spending unnecessarily.
- You don’t have a specific target for your saving
It’s hard to save if you don’t know how much you need to save. Whether you need to save £5,000 or £50,000, knowing the target creates focus. Break your target into smaller milestones, and keep a note of how far along the road you’ve come. If you start to weaken in your saving resolve, review your progress and revisit your vision for the future.
- You don’t have a reason for saving
“I want to invest in property” is not the reason to save and invest. What is it that you want from life? Early retirement? An around-the-world cruise? Private education for your children and grandchildren? A new car every year? Property investment could give you all of this and more. Investing in property is not your goal. Your desired lifestyle is your goal.
- Your deposit goal is too big
If your goal is too big, you could be put off even starting to save. You’ll be in a rut like most people. Instead, make your deposit goal realistic.
Consider investing in off-plan property. Your initial investment will be smaller, and you’ll buy time to save more for staged payments. Plus, if the property market continues to rise, your property will be worth more when you complete than it was when you agreed to buy. You may also get a discount from the market value at the time you make the investment deal.
- You and your partner have different objectives
It’s vital that you and your partner have the same goals. If your partner doesn’t share your financial and lifestyle ambitions, they will never have the same drive to achieve them. While you are busy saving, they are busy spending.
Sit down with your partner and discuss your lifestyle goals. When you are both on the same page, your joint drive and determination will galvanise your savings efforts. Each of you will have the other to lean on for support when the going gets tough – and you’ll achieve your goals faster.
Take the first step to a successful and profitable property portfolio. Contact one of the Gladfish team today on +44 207 923 6100. We’ll be happy to discuss how you can begin building a property portfolio to achieve your unique lifestyle goals – including strategies to save the deposit for your dream property investment.
Live with passion,