Anyone who has spent any reasonable time in a corporate environment is familiar with objectives. But how many of us take a step back from that and consider the bigger picture? What I call the “view from 10,000ft”. What is actually driving your desire to invest in property? In other words, what is your “why”?
Determining Your Why
What are you hoping to achieve from property investing? I don’t mean some new age waffle about “wanting to grow as a person” or “achieving my potential”, but in pure economic objectives. We have covered alternative investments, so what is it you want to achieve from property investing in particular?
This is important, as it guides your Property Investment Blueprint – essentially your business plan of how you are going to get from where you are, to where you want to be.
Examples might be:
- To supplement my income to pay for nice holidays.
- To pay for future private school fees.
- To allow me to transition to a 3-day working week.
- To allow me to take a pay cut and do a job I am passionate about.
- To create a pension income for when I retire.
- To supplement my pension when I retire.
- To allow me to take early retirement.
- To provide an asset base for my children.
- To get my children on the property ladder.
- To replace my day job.
If you understand exactly why you are going down this path, then it is much easier to stick to the process when you hit the inevitable bumps and roadblocks along the way, because I can guarantee it won’t always be interesting and plain sailing.
It is from why that you will derive your objectives.
Make Your Why Concrete
Put some proper numbers around this. What does it mean exactly? If you want to generate a lump sum to buy a yacht on retirement, then how much of a capital lump sum do you actually need? If travel to exotic locations is your thing, how much income must you reach to achieve this? If you want to retire 5 years before your company pension kicks in, what does your income need to be?
It is much easier to track your progress if you fully understand what the end goal is and these are vital ingredients in driving your Property Investment Blueprint.
Forget about the type of property to invest in, the number of properties you want (a red herring) and anything else related to property strategy. Work through these steps and fill in the blanks:
- I want to invest in property in order to _______________.
- This means I need to generate an income of £_____ per year, by the year _____ , and/or:
- I need to generate a capital lump sum of £_____, by the year _____.
It is important to be realistic. Shooting for £1m per year income from a standing start with only £20k to invest is dreaming. This is why your “why” is important. I am willing to bet your why is realistic, as it is grounded in reality, rather than some “shoot for the stars” random figure you would come up with otherwise. Remember: Property investing is a capital intensive business. There is no easy way around this.
Furthermore, stating an ambition purely on monetary grounds usually leads to failure. It’s all very well having some abstract notion of wanting to be rich, but that will be difficult to sustain when the going gets tough or dull, which it will. If being rich is what you seek, then if you dig deep enough, you will find the real reason you want to be rich and it is likely to be what you want to do with the money (or the time it buys you), rather than the actual money itself.
Your why is what keeps you driving forward. It is what will help keep you going when you suffer the inevitable set-backs and challenges when things don’t go your way.
Besides the feeling of comfort and security, having a large sum in the bank or in a property portfolio doesn’t actually change your life. It is what you can do with it that makes the difference. So take time to study exactly why you want to do this – to invest in property.
Note that at this stage, we are not talking about specific property investment strategies. That will come later. Too many start with an ambition of “I want 20 properties”. This is meaningless and an ego target only.
Also be cognisant of the fact that your why may change, over time. That’s OK too, your Property Investment Blueprint is something that you should be revisiting regularly and updating to reflect changes in your life outlook, income / capital goals and investment landscape.