3 Key Ingredients to Successful Property Investing
Finding deals, analysing them, securing them, funding your purchase, refurbishing, tenant vetting and ongoing property management. Phew! It’s quite some list of tasks. Not to mention what strategy you should wrap this all around. Single lets or HMO’s? Then there is the question of where you apply all this.
At this point it is tempting to binge watch a series on Netflix instead.
But let us step back. What does all the above actually boil down to?
It turns out that property investing is not rocket science. But successful property investing does require a combination of the following to get started and provide the foundation to move forward with. These key elements are:
Your personal, unique, combination of the above will set the direction of your initial plan, or Property Investment Blueprint. I call this the TKM Triangle.
Let’s explore each of these in turn.
Most of you will have a combination of the following to juggle:
- A job
- A partner or spouse
- A social life
- Relaxation / time out
On top of all this, you want to get started in property investing?
So be realistic about what time you can afford to devote to the process. Whilst you can outsource some tasks, some decisions will be down to you as the CEO of your business and there are some tasks you shouldn’t outsource.
Planning on embarking on an intensive strategy such as serviced accommodation probably isn’t a great idea if you work an 80 hour week.
The point is that property investing can be time intensive when building the portfolio and you need to understand if you can devote sufficient time to do this.
If you want to make serious progress, I would suggest allotting 5 hours per week in your diary to devote to property investment.
Don’t have 5 hours? I bet you do, if you’re honest with yourself. What dead time do you have? What do you do every evening? How do you spend your lunch hour or your weekends?
Whilst property investing isn’t particularly complicated, you nonetheless need quite a varied knowledge in order to be successful in property. This includes hard knowledge such as:
- How to source deals
- How to analyse deals
- Understanding how to refurbish and how to price
- Regulatory knowledge
- Landlord / tenant law
As well as softer skills such as:
- How to negotiate
- How to manage people (both contractors, tenants and potentially staff)
What knowledge, skills or experience do you have?
For example, if you have a background in construction then forcing appreciation through developments or conversions is going to be much less daunting than to someone who can’t even hang a shelf!
If you have good people skills, then you might be suited to managing Serviced Accommodation, Houses in Multiple Occupation or networking to find private investors or working with agents.
Some of your knowledge gaps can be filled relatively easily with a little effort (e.g. regulatory concerns), some will be down to your personality (e.g. people management) and some won’t be truly honed until you have gained real-life experience (e.g. managing the letting lifecycle for a property).
This is quite obvious: This relates to the initial capital pot you have to get started with, together with any potential additions you can make to this pot with regular savings or a buy-to-sell strategy.
Whilst you can (and should) leverage that pot with financing, the amount you begin with largely dictates your initial direction and strategy.
The smaller the pot, the harder you will need to make it work to grow a portfolio and will need to pay extra attention to buying well and forcing appreciation so that you can refinance as much working capital back out as you can.
A larger pot opens up more opportunities, specifically for larger purchases and more significant value add via conversions, extensions and development.
The 4th Power
The thing is, once you have harnessed the three key elements and actually start investing by purchasing your first property, then you gain the 4th power: Experience.
This is where you begin to gain momentum. It gives you:
- Confidence. Once you have bought your first property, it won’t seem so difficult after all. This gives you confidence to progress.
- Motivation. Got a property generating a couple of hundred in cash flow per month? Imagine what 5 properties will give you.
- Growth. This allows you to build on what you have and sets the stage for growth, whether through bigger deals, different strategies or just scaling what you have achieved to date.
But this all begins with an honest assessment of your personal TKM Triangle.
Your own MKT Triangle will be unique to you and will define which approach to meeting your property investing aims will take, or, highlight the areas where you are deficient and would benefit from improvement.
- Lacking in time? Where could you find time? Where could you be more efficient in using dead time?
- Lacking in knowledge? Welcome to this website! 😉
- Lacking in money? You either need to be patient and save, work hard at identifying opportunities where you can buy well and add value to give scope to refinancing most of your limited capital back out, or you need to find investment partners.
What is your own assessment of your personal TKM Triangle? Where do you need to improve?