Why price, not perfection, is the key to profitable property investment

Stop searching for the perfect property, and find the perfect investment

When I meet with would-be investors who have constantly missed out on great property investment opportunities, it’s often because of one reason: they’ve never found the ‘perfect property’. I disappoint them when I speak to them. I tell them they never will. You see, the perfect property is just not out there. Oh, you can get close to perfection, but there will always be something missing. Successful investors know this and work with it. Instead of seeking perfection, they compensate with the price.

20 years in and I still haven’t found the perfect property!

I have been associated with property in one way or another for 20 years. I am yet to find the perfect property. And yet, I’ve consistently made money from my investments. I’ve built a fantastic property portfolio. The passive profits and income this portfolio pays me have allowed me to create the lifestyle I want. But I’ve got a confession to make: my property portfolio doesn’t include a single property that I would describe as ‘perfect’. It never has, and never will.

 

Searching for perfection produces procrastination

It is naïve investors who believe they will find the perfect property. You will never find the perfect property on the perfect street, in the perfect neighbourhood, in the perfect town. It won’t have a perfect layout with perfect fixtures and fittings. It won’t have the perfect view. I could go on, but I’m guessing that you get the picture. There will always be something wrong, or not quite right.

Many beginner investors become blinded by the ‘need’ to buy the perfect property. What they end up doing is… nothing. They raise the bar so high, that they sit on their cash and shake their head at opportunity after opportunity.

Searching for perfection leads only to procrastination. And procrastination murders investment potential. It slaughters your chances of creating a better life.

Procrastination in action (or should that be inaction?)

A very close mate of mine (who I’d love to see become successful) sat on a sizeable deposit for more than 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’ve tried to educate him and demonstrate investment performance, he is yet to own a property. Interestingly, I purchased a property in a development in which he also had the opportunity to buy. Within a couple of years, the property’s price had increased by £30,000 – and it pays me a net £120 per month in rental income.

When I invested, it was not at all a perfect property. It isn’t now, either. But a £30,000 profit in such a short period is pretty good for something that’s imperfect. And as for the income: my mate’s money is still sitting in the bank, earning next to zero.

Price produces perfection

If you set your standard too high, you will risk the sort of procrastination that is costing my mate so dearly. Don’t worry too much about timing your property investment – remember why NOW is always the right time to invest in property:

  • Long-term, property prices rise
  • Rental income pays the mortgage
  • Rents rise
  • 10 years from now, with your money still earning nothing in the bank, you’ll regret not investing in property

Of course, you need to do your due diligence before you invest. When you buy a property, it should benefit from being in an area that exhibits the best in property fundamentals: shops, schools, transport links, major employers and major investment. With these in place, a much more important factor in your investment decision is price and not perfection.

Why price point is perfection in property investment

Here’s a small exercise for you. I want you to imagine your perfect investment property, and make a list of the criteria you’re looking for. I’ve started you off. Now continue the list below:

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 – Garden and shed
8. Away from busy street, emergency service sirens, church bells
9. Shops and transport close by
10. Parking
11. High ceilings
12.
13.
14.
15.
16.
17.
18.
19.
20.

 

Now, 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. What an investment!

Now imagine that 10 of these ‘perfect’ criteria suddenly turned terrible. Three things would happen:

  1. The price would drop
  2. The rent would drop
  3. 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 work off a lower price, and factor in the lower rent to your cash flow calculations. The point is that whatever your selection criteria for a property, it is always reflected in three factors:

  1. The price of the property
  2. The rent you will receive
  3. The capital growth potential

So, the search for the perfect property is a futile one. Paying the right price (buying below market value) is much more important. In other words, the price you pay determines your return on investment. And if this is positive, and helps deliver the lifestyle you desire, then that’s perfection.

Take your first step to finding the perfect investment. Contact Gladfish today on +44 207 923 6100. Discover how we’ve helped hundreds of people like you achieve their dream lifestyles with the help of property investment.

Live with passion

Brett Alegre-Wood

About the Author

Brett has over 20 years experience in all facets of property, he owns various companies centred around property and is the driving force behind the education and training at Gladfish. His companies have sold over £850 million in UK and London property and he manages over 1200 properties through his estate agency chain. Today he shares his time between UK, Australia and Singapore. He is married to Arlene and together they have 4 kids.

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