If property is so easy, why do so many get it so wrong? Quite simply because many new to investing think that buying a “buy to let” is like buying their own home. I can tell you that it most definitely is not. Perhaps being a nation of homeowners makes us a bit complacent and gives us the impression we know more than we actually do. But we have to think that a little bit of knowledge can sometimes be a dangerous thing, especially when it comes to spending large amounts of money on investment properties.
One of the biggest mistakes many unsuccessful investors make is to treat property as a passive investment. The reality is that to be effective in property, you must understand that it is a business and you must therefore treat it as such.
To quote Robert Allen the American self-made millionaire, “Real estate is technically not an investment, it is a business. And those who treat it like an active hands-on business generally prosper while those who treat it like a passive armchair investment are the ones who moan and groan loudest about how lousy real estate is as an investment.”
Running property as a business requires a completely different mind-set to simply keeping property as an investment, and to be successful, you must find a way to make sure you are emotionally unattached but actively involved in all aspects of your investments.
This may sound simple, but in the early stages I found myself losing control of my properties – and at times, my business. In my case, although I was quick to learn how to keep a tight control on costs and to make realistic assessments of incomes and expenditures (this sounds obvious but many do fall down through having unrealistic expectations), I did find that even the smallest of setbacks would create in me a disproportionately negative emotional response.
Quite early on I realised that things would have to change if I was going to stay the duration. I soon bid farewell to the days of feeling ‘out of control’ with managing agents organising repairs and improvements “on my behalf”, and I stopped mulling over how I had ended up with the odd undesirable as a tenant. (Yes, I too have seen my fair share of good and bad tenants – but that’s another story).
I stopped being a passive investor who was at the mercy of others and became a proactive business owner with a high degree of control over all the processes of property investing and managing.
This was probably the most significant turning point towards my own success. I accepted that my property investments were a business, and like all businesses, some outcomes would be better or worse than others – just like they are with tenants.
I usually opt for higher yielding properties that attract tenants on benefits, so by the law of averages at some point I was going to endure some degree of problems. The difference today is that I now know and accept this, and from a position of knowledge, I know that despite these potential setbacks I’m still in a highly profitable business).
So what can you learn from this? Well, if you have not quite achieved the right mind-set, you need to consider if you’re treating property as a passive investment, and question if you’re taking a proactive-enough approach to all your investment activities. You should never allow yourself to be at the mercy of your tenants and managing agents, because if you want to keep control of your business then you must get stuck in and keep a hold on the business yourself.
Don’t leave anything to chance!
Some investors also have totally unrealistic expectations of the rent and the costs, and as a result become totally dissatisfied with the actual returns they receive from their investments. So do your sums and factor in all scenarios to avoid disappointment later.
Perhaps most importantly of all, make sure you set your goals and systems in stone and stick to them. After all, study after study has shown that those who set clear and focused goals always outperform those who don’t – and by a significant margin too!
If you need any help with this you might be interested to know that I’ve designed a simple five step system called “Goal Setting to Property Success” . This is literally a ‘step by step’, ‘fill-in the box’ template with full guidance and notes on many of the different options available. I put this together to take the hard work out of preparing a property plan and it takes you through the whole process from beginning to end. (I’ve also included some simple spreadsheets to help you conduct an in-depth personal, financial audit to make sure you get the finances right from the start too).
Take a look; I’m sure it will help!
Here’s to successful property investing.
Peter Jones B.Sc FRICS
Chartered Surveyor, Author & Property Investor
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