‘Procrastination is the thief of time’, wrote the English poet Edward Young sometime during the seventeenth century. He was certainly correct in his thinking. What he forgot to add is that when it comes to investing in property, it’s also the thief of cash flow and capital growth. Come on, Eddie lad, you missed that one.
On a weekly basis, I will have 5 or 10 telephone or email conversations with people who want to pick my brains on how to build a successful property business. What is my opinion on house prices? Will they go up or down? When is the right time to buy and where should they buy? Should they wait for house prices to drop before dipping their toe? Will rates keep going up or will they drop back down? Does this house need too much work? Do I think the rent will stack up?
All these questions are relevant concerns for a new investor, and I take my time to diligently guide them through the ghoulish thoughts that keep them awake night after night, pondering at 3am, the ideal moment to leap into action.
The goal
The fact is though that it is almost impossible to time the market perfectly. You just have to be in it to win it. I teach my clients that although those questions are important, it would be more fruitful to consider other matters first.
For example, what is their investment goal, and in what time frame would they like to achieve it? Have they considered the structure in which they intend to purchase the properties? Will they be buying in cash or mortgaging? How they plan to fund the deposits, and how to set up their new business in the most tax-efficient manner from the outset, which will save them thousands, even tens of thousands of pounds over the years ahead.
Then I show them how to get their ducks in a row from the point of view of their bankers, mortgage broker, accountant and solicitor. I demonstrate to them that having these relationships in place upfront with the correct paperwork on file will lubricate the transaction when they find the property in which they intend to invest. Without putting these things in place first, the whole process of investing will feel about as comfortable as riding a kangaroo. And not just for you, but also for the professionals around you who are picking up the pieces of the bad planning as you go along.
I always advise new investors to think about the minimum term of their property investments to be 20 years. This will avoid the pitfalls of worrying about price fluctuations. Investing in property, as I’m sure you will have read numerous times, is not generally a get rich quick scheme. It’s a slow burner but done correctly it should be not just cash flow positive, but very profitable from day one.
Welcome to the club
Using your new cash flow and drawing off some of the equity that builds up you will be able to keep up the momentum by adding properties to your portfolio. Soon you will open a new door to an exclusive club known as compound capital growth, an incredibly powerful concept that I would urge you to research. It’s a bit like that Wham! song Club Tropicana, you know the one, where the drinks are free and there’s enough fun and sunshine for everyone? Only better.
Just like Club Tropicana, the best part about compound capital growth is that you only have to actually be inside the club to enjoy it. It will provide all the entertainment for you, while you look up and smile and realise that now you’re here, you’re not required to do anything to make the magic happen. While I could spend most of my morning showing you graphs, models and real-world examples of compounding capital growth, much has already been written on the matter which is available for you, courtesy of Mssrs. Google and Co.
You miss 100% of the shots you don’t take
However, I digress. Coming back to the original point of this article, once I have guided my clients to think about the serious questions, it is time to get them in the right frame of mind to make their first investment. Like a group of ten-year-olds on the highest diving board, some will hurtle off cart-wheeling, screaming at the top of their voices. Some will peak over the edge to ensure the cart-wheelers are still breathing before taking the plunge themselves.
Then there is the last group - no matter how much gentle coaxing and firm persuasion, they will delay and delay until the guard blows the whistle and it’s time to shut the pool for the day., still asking themselves ‘what if?’ questions as walk out of the door, unfulfilled.
And it’s at that very point I find myself grabbing them by the proverbial collar, looking deep into their eyes and saying “Get off Your Arse and Buy Something!”
What are you waiting for?
Matt Cottle is a landlord and investor. He builds property investment strategies for new and existing investors. Visit www.propertyinvestmentadvice.co.uk and book a discovery call.
