How to benefit from good property investment education
We all know the property, right? After all, we grew up living in a house or apartment. Over the course of time, we’d have heard our parents talk about mortgages and rent. We understand that there are household bills to pay – utilities and council tax. We may even have been coerced into helping our parents paint and decorate. We’ve watched as contractors have replaced roof tiles, repointed brickwork, and added extensions or converted lofts.
Yep, by the time we’re in our late teens or early twenties, we probably know all there is to know about property. And property investment is just a stone’s throw away from owning a home, isn’t it?
In this property investment blog, you’ll learn why home ownership and property investment are a million miles apart, why you need property investment education, and what good property investment education looks like.
Property investment is not home-ownership
Buying an investment property and purchasing a house are both significant financial commitments. A lot of homeowners think of their home as if it were an investment. This idea probably comes from the fact that, historically, homes have piled on value.
As we highlighted in our investment blog “Top 4 tips to make the best property investment decisions”, house prices have consistently outstripped the stock market. If you’d paid the average UK house price in 1999 for your home, you’d have seen the value of your property grow from around £60,000 to more than £200,000 today.
Buying a home has a different purpose to investing in property. A home provides shelter. An investment property provides income and capital growth.
What we learn from our parents (and anyone else who is a homeowner) is how to treat a home. We teach home economics and how to budget for home-ownership. That’s not any different to the discipline required when you rent. No one would consider renting as being the same as investing.
Property investment is all about the numbers. Rental income, mortgage repayments, maintenance, and other costs. It’s about interest rates, contingencies, property management and property investment cash flow projections.
A home doesn’t generate cash flow. A home might produce a capital gain when you sell it, but then where do you live?
So property investment is different to home-ownership. What about investment risk?
Now you understand that property investment is different to home-ownership, let’s talk briefly about property investment risk.
Buying property as an investment has risks. Just like buying shares, bonds, gold or silver.
- If you buy an investment property at too high a price, you’ll probably lose money.
- If it doesn’t make the rental income you expect, your cash flow will suffer (and you’ll probably lose money).
When you break property investment down into these simple components, the risk is easy to understand. The secret to successful property investment is learning how to do three things:
- Find the best places to invest in the UK property
- Invest with a strategy that maximises income and profits and minimises costs
- Use strategies that reduce risks
Luckily, you can learn all three elements of successful property investment.
Lessons from an uneducated property investor
In our investment blog “The foundation of profitable property investment”, we recounted the story of a first-time property investor who made these six common mistakes of uneducated property investors:
1. Buying with your heart and not your head
You purchase a home that you’d live in yourself, rather than a property that appeals to others.
2. You invest too much
You may overpay, and then compound this mistake by not allowing enough for a contingency. You base your cash flow projections on the interest rate today and don’t plan for a rise in interest rates that will increase your costs.
3. You go it alone
You think you know all there is to know, and don’t seek advice from more experienced investors. You don’t take into account the views, concerns, hopes and fears of family and friends.
4. You forget to factor in the extras
You work out a cash flow and budget, and it all looks good to you. But you’ve forgotten to include mortgage set-up charges, stamp duty, and solicitor’s fees.
5. You learned everything you know from the television
Watch those property investment programmes for their entertainment value, not their educational value. You won’t hear of the mistakes made, the losses incurred, or terrible decisions taken.
6. You don’t have an exit strategy
Life has an unerring quality of changing on you. Even the best-laid plans can go wrong. Think about what you’d do if interest rates rise by 1%, 2%, or 3%. What about if a planned road isn’t built? Or simply that the rental income doesn’t match up to your expectations? Always have a plan B.
You can avoid all these mistakes by becoming educated in property investment.
Why we all need property investment education
Property investment education should give you the knowledge to get started in property investment. You should also gain confidence in that you are buying in the best place to invest in property UK, that you've created a solid financial plan for your investment property, and that you did all you can to reduce investment risks. Property investment education is the factor that is the difference between profit and loss for first-time property investors.
I’ve been investing in property for more than two decades now, and I still learn about new investment strategies, types of properties to invest in (consider our hotel room investment blog, for example), property and investment taxes, investing and landlord laws, and so on. We continue to learn because the world continues to change. It provides new challenges and new opportunities. Continual learning enables you to face the challenges head on and maximise the opportunities they present.
What does good property education look like?
Property investment education should work to provide the new, inexperienced investor with a base of knowledge, and update the most experienced investor with market changes and more sophisticated strategies. Today, investment education is provided in many forms. This include:
- Websites, investment blogs and articles
- Books and eBooks
- Seminars and webinars
- Videos
Whatever method you use to access property investment education, it should give you the knowledge to:
- Research investment opportunities diligently
- Make sure you know how to carry out a comprehensive cash flow projection
- Understand property market cycles and the strategies to use to profit throughout
- Discover all the people with whom you’ll need to foster working relationships
- Understand yields, income, taxes, deductibles, and so on
My experience has led me to believe in two things, as far as investment education is concerned:
- Investment education should be free
- You never stop learning
Get educated to know why you invest and what you’re investing in
When markets are rising strongly, it’s easy to pick winners. You could do it blindfolded, with a pin and an estate agent’s brochure. When the market starts to move sideways or falls back, things get tough. Those properties that were profitable – the ones picked with a pin – suddenly go from golden geese to lame ducks.
Good property investment education gives you the knowledge to make good property investments that perform in the long term, through the property and economic cycles. When you can articulate your investment objectives and understand how to do the research to ensure your investment property moves you towards your goals, you’ll be prepared for all market conditions. You’ll be able to take advantage of property investment opportunities when they arise.
The best investment you will make is the investment in you
Don’t leave your success in property investment to luck. Whatever you choose to do in life, you need to learn how to do it, and then gain the experience to do it well. There are plenty of property gurus that offer ‘free’ property investment education. Here’s how to tell the good from the bad:
- Is that seminar aimed at educating or selling?
- Do you gain knowledge that you didn’t have before?
- Does the investment education keep you updated on changes to laws, markets, strategies, and so on?
- Does the investment education discuss downsides and risks, as well as potential?
Most of the property gurus I know don’t give you all four of the above in their education offerings. They certainly don’t tell you the risks.
When you understand the risk associated with property as well as the potential of property investment, that’s when your property investment success soars. So get educated in property investment. Your education will come at a price, but that doesn’t have to be a financial cost. This property investment blog is free, comprehensive, and continually updated. If there is any help you need or questions you want to be answered about property investment that you can’t find here, contact us today on +44 207 923 6100.
Live with passion
Brett Alegre-Wood
