Simple Strategies To Be A Successful Property Investor And Become Financially Free In 3-5 Years
Contents
Introduction................................................................................................................................................................3
14 Simple Steps To Be A Successful Property Investor And Become Financially Free In 3 – 5 Years ... 4
8 Most Common Mistakes People Make When Buying Investment Properties ........................................ 7
Introduction......................................................................................................................................................................................7
Mistake #1 – Starting Without A Clear Strategy.............................................................................................................7
Mistake #2 – They Make Decisions On Emotion ............................................................................................................9
Mistake #3 – Quantity Over Quality..................................................................................................................................10
Mistake #4 – They Spend Money On The Wrong Things .........................................................................................10
Mistake #5 – Try To Cut Out The Professional ..............................................................................................................11
Mistake #6 – Buying Just Because It Is Cheap..............................................................................................................13
Mistake #7 – Buying On Auction To Get A “Bargain” ................................................................................................14
Mistake #8 – Buying Property For The Maximum They Can Afford....................................................................15
Closing ..............................................................................................................................................................................................15
HMO MADE SIMPLE:...............................................................................................................................................17
DEFINITION ....................................................................................................................................................................................17
HMO MODEL .................................................................................................................................................................................17
LICENCES.........................................................................................................................................................................................17
MANDATORY CONDITIONS FOR A HMO LICENCE ...................................................................................................18
HEALTH AND SAFETY...............................................................................................................................................................18
LANDLORD/MANAGEMENT DUTIES ................................................................................................................................18
HMO COSTS...................................................................................................................................................................................19
Flipping Property / Trading Property? ..............................................................................................................21
The Seven Secrets Of The Serious Investor .....................................................................................................................21
Surveying The Property. .......................................................................................................................................................... 23
Check The Electrics And Plumbing.....................................................................................................................................24
How Can You Invest In The UK Property Market? We Have Put Together Some Q A For You.......... 26
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Introduction
If you are reading this and have a little bit of experience in real estate investing we hope we can inspire you on your journey by giving you some of our knowledge for free?
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Simple Strategies To Be A Successful Property Investor And Become Financially Free In 3-5 Years
14 Simple steps to be a successful property investor and become financially free in 3 – 5 years
Sometimes real estate investing for beginners can seem a bit intimidating and it’s easy to get lost in the lights and sounds of all the blogs, books, and television gurus with their slick hair. To help cut through the crap that’s out there we wanted to create a short list of tips you can use as you embark on your journey to find financial freedom through real estate.
No, this isn’t going to teach you everything you need to know. However, I hope this list will help point you in the right direction. It’s not exhaustive by any means, just a brief list of lessons we’ve learned along the way and hope will help propel you toward success.
1.) Be Resolved.
Real estate is not something to do on a whim. Investing in real estate is a lifelong pursuit to take control of your
Financial future – not a get-rich quick scheme. As an investor – you will struggle. You will make mistakes. You will fail. The successful investors are the ones who can take those experiences and turn them into lessons to improve their skills.
2.) You Don’t Need to Be an Expert in Real Estate Investing.
Too many individuals talk about investing in real estate but instead just get bogged down with the vast amount of information out there. But the simple fact is no one knows it all. You don’t need to be total expert in all things real estate.
3.) You DO Need to Do Your Homework.
Do your homework. Study the niche you want to invest in and learn everything you can about that subject.
4.) Learn to Love Reading.
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Simple Strategies To Be A Successful Property Investor And Become Financially Free In 3-5 Years
5.) As a Beginner, Connect with Local Investors.
Start by go to as many as possible property networking events in your local area or even start hanging out where they hang out.
6.) Learn your numbers!. This is an important fact or partner with someone who can do the numbers for you
7.) Get Creative. One of my favourite lines in one of my favourite books, Rich Dad Poor
Dad, says “The poor say ‘I can’t afford it.’ The rich say ‘How can I afford it?” Lasting wealth is built through creativity. Practice changing your thought patterns from “I can’t” to “how can I” in everyday life. This simple practice will change the way you view conflict in all areas. Your real estate business. My wife likes to throw this on me when I tell her we can’t afford something she wants. She’s a smart gal.
8.) Learn to Sacrifice. How bad do you want financial freedom? If you want to use real estate to start living the life you’ve always dreamed you are going to have to sacrifice.
You may need to forgo a vacation and use the money toward a down payment instead. You may need to move several times in order to build up enough capital to begin investing. You may need to learn how to use a paint brush and do your own work. Investing in real estate is the most rewarding– but it’s not always been easy.
There were years of sacrificing (time, money, and opportunities, friends and family) to get financially free. If you are looking for a get-rich quick scheme – look elsewhere.
9.) Learn (and Trust) Basic Math.
The math involved in a real estate investment is not college calculus. We’re talking fifth grade math and it isn’t difficult to learn. Income minus expenses equals cash flow.
A gallon of paint costs $20 but a painter is going to cost $200. That’s the kind of math you need to get good at. Don’t assume anything – but use your math to make sure a deal is solid. Use a basic spreadsheet to analyse a deal or (shameless plug) analyse every single deal you do. Once you understand the math – don’t deviate from it. Trust it. Don’t let your emotions get involved. Real estate is a number’s game and the quickest way to fail is to forget that.
10.) Make a Written Plan. You wouldn’t take a road trip across the country without a map, so why take your trip through financial freedom without a map? When I first began investing, I actually sat down and 5
11.) Its Okay to Start Small. You don’t need to buy a 24 unit apartment complex right out the gate. You start with just a 50/50 partnership on a small flip. This is okay it’s easy to get over impressed by the big deals that the internet gurus talk about but even they had to start somewhere.
12.) Treat Your Business as a Business.
Real estate is a business, so treat it that way. Keep it organized, build systems to manage your life, and seek to improve your efficiency. The reason so many landlords get burned out and hate the role is because
They treat it as either a hobby or a job. It’s neither. You are a business owner and as such it is your job to manage the business to the standard which suits you best.
13.) Start with Good Bookkeeping Now. This was a huge mistake for me. When I first began, the paperwork was just a small blip on my radar and as a result my bookwork
– to this day – is a giant mess. I’m slowly untangling the mess and creating a system that works but had I started with a system I would have significantly less stress
(especially around tax time.) Meet with an accountant as well as a lawyer after your first purchase and begin plotting your bookkeeping, taxes, and legal holding status.
Your future self will thank me.
14.) Don’t Quit Your Day Job. Investing has two faces: the career side and the investment side. It doesn’t need to be both. Use real estate as both!!
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8 Most Common Mistakes People Make When Buying
Investment Properties
Introduction
The content is based on my personal investment experience in South Africa. It is to be used as guidelines and not seen as advice. Always consult a professional to assist you with the correct tax and company structures that will work best for you, as individual cases and investment styles differ. Property investment is daunting to many people across the world, but it is very rewarding and has created a wonderful life for us. Happy investing!
Wouter
Mistake #1 – Starting Without a Clear Strategy
You need to clearly define your real estate investing strategy before you start looking at properties or investment opportunities. It will be wise to consult a professional once you have an idea of what you want to do, to ensure you have the correct and most efficient tax structures in place to support this.
Let’s have a look at what Wikipedia says about real estate investing and investment strategy:
Your real estate investment strategy, might only be a small part of your bigger wealth creating strategy, but it is just as important to define. In the beginning, it can be as simple as one or two rules or guidelines you stick to. To keep it simple, let’s look at two examples:
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An investor might decide to only buy second hand residential properties and you can further define this to be more specific in your decision making:
. Renovation is needed – this also gives you room to negotiate the price.
. The deal needs to be cash flow positive from day 1 to have as little as possible money flow out of your pocket monthly.
. You can go as deep with this strategy as you like. You can define what cash flow positive means to you, will it be only to cover the mortgage or financing for the property or will it be after all the recurring monthly expenses.
. You can decide that you only want to buy houses where vacant occupation is ensured upon transfer.
. Define the area you want to invest in, this will ensure that you can keep your finger on the pulse with the prices, both for the property and the rental income in the area.
. What does your ideal tenant look like and what are their needs, etc.
All these things together, define your strategy and give you a clear indication of where to start looking.
New developments have different benefits, but you will mostly have a shortfall when it comes to monthly cashflow. The property is brand new and no money will be spent fixing it up to rent it out.
. Transfer fees are mostly included in the purchase price, you can decide that you only buy when it is included
. You can decide that you only want to buy in phase 1 and only from the developer
. Decide on an area you are comfortable to invest in and the list goes on
There are different investment styles for capital growth, than what there is for rental income investments. There are many factors that influence the capital growth of a property.
8Simple Strategies To Be A Successful Property Investor And Become Financially Free In 3-5 Years
In summary, you always have to buy right, does not matter what strategy you follow, you make your money when you buy a property, not when you sell. It is important to define your real estate investment strategy and stick to it, it does not matter how pretty the house is, if it is not part of your strategy, you walk away. Without clearly defined goals and strategies, you will not have clear focus. The clearer you are on what you want to achieve, the faster you will achieve it and the easier it will be for you to make decisions. One of my mentors tells the story of Alice in Wonderland…
Mistake #2 – They Make Decisions on Emotion
Under no circumstances should an investor ever get emotionally involved in the transaction. It is not a home you are going to live in, it is a business transaction and it is an investment. You need to treat your investment portfolio like a business and make the decisions with the same mind-set.
The calculations need to speak for itself. Once you are satisfied that the calculations meet your minimum requirements, look at the location of the property. You can always renovate or change a bad property in a good area, but you cannot pick up and move a beautiful house from a bad area into a good area. The location is important for the tenant, not for you, for example, make sure it is close to public transport, schools or universities, easy access on main routes, hospitals and places of work for young professionals, the more the better. This ensures you always have a wide spectrum of tenants to pull from. Always look at the structure and the layout and if there is possibility to make changes to the property to achieve higher rent.
Remember, the beautiful furniture and decorations will not be there when you take transfer of the house and you will be left with an empty shell.
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Simple Strategies To Be A Successful Property Investor And Become Financially Free In 3-5 Years
Mistake #3 – Quantity over Quality
People quickly rush out to see how many properties they can buy to impress their friends and relatives. Be conscious of your ego when you invest. Four good performing properties bought according to your strategy, can yield much larger income than 14 properties bought for the sake of buying and owning property. You don’t want to sit in the position where you can tell everyone you have 14 properties, but you conveniently forget to tell them that you are servicing 14 shortfalls every month. (You are paying in every month on the shortfall of your monthly mortgage repayment.) You are sitting with maintenance and tenant issues you did not foresee and you end up spending much more time and money than what you have anticipated.
It is better to wait for the right deal that fits your investment criteria, rather than rushing to buy the first and cheapest deal that comes along. If you do not know how to do the calculations yet, get someone professional to assist you with this, who has experience and the know how to avoid you making the mistakes and to fast track you towards your goals.
Remember, this is not a sprint, it is a marathon. You will build your equity with properties over time, you don’t want to go back and start all over a couple of years from now. Build it right from the beginning to ensure you have lasting wealth.
Mistake #4 – They spend money on the wrong things
Before you start doing renovations to the property, ask yourself these questions:
1. Will it add value to the re-sale value of the property in the future?
2. Am I over capitalising for the area it is in?
3. Will it add value on a monthly basis to my rental income?
Tenants traditionally just want a clean, workable space where they can live. They are generally not looking at things like what brand the taps are, if there are expensive chandeliers in the living area or if the rooms have top quality carpets. The finishes need to be functional and durable and the garden easy to maintain. This is one of the reasons I mentioned earlier, that you need to define your area and know what your ideal tenant looks like. This makes it easier to know what their needs are and this will change for different areas and different income groups.
Make a detailed budget and stick to it. Allow for an extra 40 % on top of what you have budgeted for. Until you are more experienced with the costs of repairs, this is a good rule of thumb to protect you against unforeseen costs.
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Simple Strategies To Be A Successful Property Investor And Become Financially Free In 3-5 Years
The extra allowance is not to add nicer things to the list later on, it is for unforeseen expenses that you did not calculate for. For example, a tile is loose in the bathroom, it ends up being a leak and not just a loose tile, you need to open it up to fix the leak and in the process a few tiles are broken, but there are no extra tiles and you end up having to re-tile the bathroom. You always want to be sure that you can finish the project you started. (These calculations are part of your initial calculations before buying the house. You need to factor this in to ensure the deal will work for you.) Plan your work and work your plan.
When you are renovating, it is always a good idea to use finishes for the kitchen and bathrooms that is a slight touch above the standard of the other houses in the area.
Especially if you buy in a street where many of the houses look the same or in an apartment block where you do not own all the units. It will ensure your units are filled easier if there is more than one available at a given time. When you get work done, always get 2 – 3 quotations or bids for the work. If you keep using the same contractors, they tend to see that and slowly but surely the jobs get more expensive and more and more items are replaced on the houses, because there is no healthy competition.
Be careful and keep in mind what the maximum ceiling price is for houses in the area when you do your planning. Buyers will always try to negotiate the price down to that price and the money you spent will be lost.
Mistake #5 – Try to cut out the professional
It can be really costly to cut out the professionals when it comes to investing, especially if you are not involved in it full time and you don’t have the experience yet.
A good estate agent, for example, is trained to handle the negotiations of the terms of the contract on your behalf and they have good deals coming to them on a regular basis that you can choose from if you build the relationship. They know their territory, what new developments or roads are going to be built in the area and who might be a motivated seller.
Estate agents can be a great source of good deals for you. Ensure they know exactly what your investment criteria is, what your appetite for risk is and which areas you are looking to invest in with what type of yields. They will keep you busy with many deals if you did not clearly define what you want in the beginning. Make sure that they know you are a willing and able buyer and that you are ready to close when they have the deal. Then – be ready. If they bring you deals you require and you are not ready and able to take it, they will end up giving it to someone else. Don’t disappoint the guys who have the good deals.
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Simple Strategies To Be A Successful Property Investor And Become Financially Free In 3-5 Years
They can be of great value to you in the beginning, as they can recommend service providers to you, like a tiler, electrician, plumber, or other contractors and even managing agents. They know the quality of workmanship and the prices you can expect to pay. You need to use reputable companies who are referred to you in the beginning, to lower the risk of them not finishing the work and disappearing with your money.