As mentioned in my previous blog post, raising my profile online made buying over £1.25m worth of single let properties far easier (worth a read if you haven’t already). As always, thank you team Oversubscribed for helping me pull these blogs together 🙌.
In the hope it can help others make better decisions about property investing, I wanted to share some key lessons I’ve learned. Some of these sound negative, but I want to highlight that I know many people who have and continue to build long term wealth through property (I also hope to be one of them). It’s 100% possible, but it’s definitely filled with potential road blocks worth planning for ahead of time.
If you haven't seen them, you can see the exact properties and numbers attached to them.
1. It takes way longer than expected
My plan this year was originally to purchase 1 property every month, finishing the year on 12. However it became apparent by about half way through the year that this timeline wasn’t realistic. The time from agreeing a property purchase to completion varies far more than I first thought.
One property took over 7 months from offer to completion because of the seller dragging their feet (this is before we even started the refurb).
2. Annualised returns suck
This is a little more technical and I haven’t seen any property investor talk about this. But with stocks and shares, your money is put to work straightaway and will make you a return. With property, your money could be tied up for 5-7 months before you start getting a return. Even using other people's money, the annualised returns still aren’t great and would take a number of years to level back out.
3. The drip of passive income is AMAZING
I’m conscious that so far my ‘lessons leaned’ are negative. Mainly because when I started 2021, I was already aware of many of the positives of property investing. However one more positive realisation is how amazing that passive income is each month.
The first property only generated £200 passive income, which didn't change my world, but was a great feeling that I don’t get from my Index Fund investing. This is the main reason I want property to play a role in my future investments.
4. There’s a lot of paperwork
Maybe it just seemed this way because I’m used to hitting ‘buy’ on a screen for index funds, but there seemed to be continuous paper work. If you plan on purchasing properties at the rate we have, definitely make sure you have the time aside for this.
5. Small costs add up / track everything
We very quickly realised that there are a lot of small costs involved in purchasing a property. Having the experience of implementing finance systems helped this not turn into an issue, but I can see how it could trip up many investors. Using Xero, we tracked everything that left the bank against each property.
It’s surprising how these small costs add up and affect your actual return.
6. Getting a good and aligned team is super important
Without a well aligned team, buying and refurbishing properties in a reasonable timeframe wouldn’t have been possible. The need for a good team became apparent very quickly. The key players for our situation were
A solicitor
A broker
Deal sourcers
Refurb team
Letting agent.
7. Less scary than I thought
With all investing (and probably most things outside your comfort zone), it’s far less intimidating once you start. While things can and did go wrong, the whole process isn’t as hard as it seemed before starting.
8. It’s hard to know your actual return
Even tracking every penny that left the bank against each property, it’s still hard to know what the return will be. Without waiting 5 years, it’s impossible to know. One decent size maintenance issue could wipe out your returns (for our strategy).
9. A 10% maintenance budget probably isn’t enough.
We planned a 10% maintenance and voids budget in our numbers. The thinking was because the properties are being fully refurbed in most cases, that the maintenance would be low. I’m not 100% sure on this yet, but it’s likely going to be more than this.
10. Finding investors and funding isn’t hard
By raising my profile online throughout the year (with the help of www.oversubscribed.co.uk), I found accessing short term private investors a lot easier than I thought. By about half way through the year, I had access to far more private investment than I needed. This was partly down to me building credibility online, but also because there are a lot of people with a lot of money. (My investors got a far better annualised return than I will this year from property - see point 2).
11. Have to be on it with comms
You have to drive the communications amongst the team forward all the time. If not, things can get lost or forgotten about. You have to take responsibility for this and can’t blame solicitors. Effectively doing point 12 can help with this.
12. Delegate. Don't do everything
My day to day work is running a fast-paced oversubscribed marketing company (that helps entrepreneurs raise their profile online). I wasn’t sure if it was doable, but it is possible to delegate everything (including paper work). But you need a worldclass team in your corner.
13. Make a plan and stick to it
As I learned more about property, my entrepreneurial mind wanted to take advantage of some of the more lucrative property strategies that involve a higher workload, risk and reward. However, I want to be the investor and not create another business.
Having a plan beforehand and reminding myself not to get distracted was important. Avoid the shiny pennies.
14. Trust but verify
I got this from my mentor Daniel Hill (check out his podcasts). With everyone on the team, I very much trust them to do a world-class job but I always verify that everything is as it’s supposed to be. This keeps everyone (me included) on plan and on track.
15. Leverage can be dangerous
Borrowing money to build a leveraged portfolio is dangerous (even for the mega wealthy). Lending large sums of money hammered home this lesson. We have a strategy to offset this risk through different more liquid assets, but it’s something I need to be very careful about. Starting from 0 again isn’t an option.
16. Other assets are important
This is similar to the above. Everyone has a different opinion on this, but I believe it’s important to diversify and not just have property assets (in case something goes very wrong in the property market - the aim of the game is to not get wiped out).
17. Peace of mind for the future
Property has given me more peace of mind for my future financial situation. Running my businesses can be incredibly hard and long term leaves me vulnerable to industry changes or volatility in I rely on them for income. Having a predictable property income stream gives me peace of mind.
18. It's hard to know the state of a house
When buying a house, it can be hard for the team to spot certain issues. The main one for us has been the condition of the walls under wallpaper. We’ve had a couple of properties where we’ve had to plaster walls which was something we hadn't budgeted for as they seemed fine when first inspected.
19. Your investments don't need to be local
We invest over 4 hours away from where we live and it’s not been an issue. Again, this is down to a good team of people. The hardest bit is knowing the area well enough. You can get around this though, by making some local friends or estate agents (not the same as the ones selling the property).
20. You can’t be a control freak
If you want to be a hands-off property investor, you definitely can’t be a control freak. Trust but verify. If you are a control freak, it’s probably not for you (unless you want to do all the work yourself). This doesn't mean don't do your research. Limit risk by doing all the research ahead of time, then leave the team to get on with it.
21. It takes time to deploy capital
If you had a really large amount of money (we don’t), then it would take ages and need loads of houses before you’d have got all your money to work. Not an issue for us, but it surprised me how hard it would be. This is probably why people invest in more expensive parts of the country than we do.
I hope these blog posts are useful and welcome any feedback. To learn more about me, check out my about page here. To keep up to date on our latest content follow me on my social channels Instagram, LinkedIn, Facebook.
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