Seven Golden Rules
Property investing can feel so overwhelming, where do you even begin!? Luckily, there are seven golden rules to guide you along your property investing path.
MAKE YOUR MONEY WHEN YOU BUY. When I was starting out on my property investing journey, I thought the only rule was location, Location, LOCATION! As a result, I bought properties that would appreciate in capital value over time. I believed that paying money into the properties every month was a form of forced savings - the property would turn around one day, right? And make me a fortune, right? I was adopting the “buy, pray and hold strategy.” Now I know that I need to make money when I buy - no one can predict the future, there is no point in buying for capital growth. Hillbrow used to THE place to stay, need I say more? The way to make money when you buy is to buy below market value or buy a property that you can force appreciation by adding an additional room/cottage - a property where you can do something that will allow you to make more money from the property than face value suggests.
Have at least TWO EXIT STRATEGIES. I bet you have heard people say “Property is SOOOOOO risky!” “Don’t do it, you’ll lose all your money!” and sure, those statements can be true if you jump into a deal without doing proper due diligence and without making sure you have at least two exit strategies. Wait - what is an exit strategy? It is a way to make money off, or get out of the deal. As en example, you buy a property for a Buy To Let but know that you could easily flip (sell) the property after a minor refurb.
BUY TO A QUALIFIED DEMAND. You need to be able to spot the gap in market by monitoring the key market indicators. Is there any development going on in the area? Is there easy access to public transport? Are there schools, parks or shopping centers nearby? The answer to these questions will give you insight into who is likely to want to live there and why. Young parents will want to be near parks and schools. Older people will want to be near shopping centers and hospitals. Understanding the market gives you a competitive advantage, you’ll gain insight into the type of people you could rent or sell to which will be invaluable.
Should you invest in the area you live in? Not necessarily, you should always and only invest where the numbers make sense. Location has nothing to do with it, the numbers will guide your investing approach. In other words, FOLLOW THE MONEY! People are inclined to think they need to invest nearby to make it easy to keep an eye on the property. Not true. If you have the right power team members on your side, you can invest anywhere in the world!
BECOME A MONEY RAISER, NOT A MONEY EARNER. If Richard Branson wants to buy a new jet, does he log onto Internet banking and check his bank balance? Nope. Richard calls up a few of his friends and raises the money. Could you learn to do that too? Absolutely, everything is a learnable skill and armed with the right knowledge, you too could raise money for property investing. If the thought of asking for money makes you cringe, stick around! We will cover how to do this in detail in a later blog. And remember, just before you faint at the very thought - raising money can also mean from a bank, not only from other people.
BE SAFE, BE LEGAL. There are plenty reasons to be shady and the reasons escalate exponentially when times get tough. You can cut corners to keep down refurb costs, you can squeeze way too many tenants into one property, you can be paid in cash for your rental income. OK, that’s enough with the ideas - point is, don’t do anything illegal! I don’t want to have to visit you in one of Cyril’s multi lets, rocking your prison pajamas.
Jim Rohn famously said “if you let your learning lead to knowledge, you become a fool. If you let your learning lead to action, you become wealthy.” You can spend years reading the books, attending courses, learning the strategies, terminology and lingo, but until you actually commit and buy a property, the effort is all theoretical and theory won’t pay the bills. Which is why the final, most important rule is to TAKE MASSIVE ACTION!
Stick to these rules and you are well on your way to being a successful property investor!