Everything you think you know about property investment is WRONG… and here’s why.

By Matthew Moody | Business

Everything you think you know about property investment is WRONG… and here’s why.

I want to spend some time talking about myths that are going on right now in the property industry, because there are a lot of them, and explain some of the things that are plainly, plainly wrong.

So, here goes.

Property Myth One

The first one that I want to cover is; there is a myth out there that is predicated, and positioned, and proposed by a lot of educators, and training companies, and so-called gurus that to invest in property, you don't need any money.

And in fact there's been books written about no money down property investing and I want to debunk the myth that that's actually not true.

You do need money to invest in property investment

As to how much money you need, that is a different question entirely.

So when we look at the amount of money that's required; let's say that you're not going to actually purchase a property, but you're going to do some kind of rent to rent or lease on a property.

If you did that, you would have to find the money to pay the first month's rent, and pay the deposit more often than not, potentially pay some admin fees. And you would then need to furnish the property.

Now this is because most properties that you're going to rent or lease in order to make a return on the difference between what you're renting it at and what you're renting it out for are going to be done through some kind of HMO or potentially even serviced accommodation combination.

So you'll have to get furniture.

Now, there are ways in which you could rent furniture for sure, but most people when they're getting started are probably going to buy the furniture outright.

Room
Photographer: deborah cortelazzi | Source: Unsplash

And you may have to put in things like fire alarm systems. You may even have to get white goods and brown goods. So you're going to be looking at really four, five, six thousand pounds in terms of doing that to get into a rent-to-rent or a lease option.

So when people come on and say, "Oh, you don't need any money," that's not true. It's just not true.

Now, I'm not saying that you can't find people to help you with the money, and obviously there are investors out there that potentially would give you the money, providing that you position the deal and it is a good deal.

But if you're just getting started and it's your first deal, that's going to be pretty tough to do.

So the first myth is, no money down is not true.

You'll always need some money, always. And we haven't even talked about anything to do with legals, brokerage, surveys and all that jazz – if you're buying a property.

There are ways in which you can purchase a property and refinance it and pull a lot of money out.

Absolutely.

But in terms of having the money in the deal and not having any money leave your bank account and go to the vendor's bank account, it's just not going to happen.

Myth Two

The second myth that I wanted to share with you is, there's a myth out there at the moment as well that you have to be in this whole property investment arena full time in order to make a success of it.

And again, you don't.

There is a myth out there that if you're not full time in property, and you've not given up your job, and you've not gone into it 100%, and you've not burnt all your bridges, and you not said goodbye to employers; you're not a real property investor.

That is not true.

You do not need to be full-time in property investment to be successful

It is perfectly reasonable, and in fact I have many clients that are still in a full time job or run a full time business that are building a property investment portfolio on the side as side income. And because they're doing that, that means that they're able to still benefit from the job that they have and the credit that comes along with that job; in the end, the potential ability to borrow that comes along with that job.

It also means that they're able to build this pot, this portfolio, which grows, and grows, and grows the more, and more that they develop it and effectively build more properties and refinance over, and over again.

So when people say, "Oh, you can only do this if you're full time," it's not strictly true.

And in fact, I firmly, firmly believe and am of the opinion that you can get involved in property investment in probably around five hours or so a week and make a success of it. Absolutely.

“Be able to love, heal and accept yourself, so you can then offer these gifts to others”
Photographer: Lesly Juarez | Source: Unsplash

So it is a myth that's out there and I think it should be taken with a pinch of salt.

Obviously, if you are spending all of your time and energy on it, then you're potentially going to accelerate a lot quicker. However, at the same time, you are not necessarily going to be any better off than the person that is still employed or in the business and building a portfolio on the side.

So you don't have to be full time property to be an investor.

What you have to have is the right tools, the right power team, the right structure in place in order to make it successful.

Myth Three

The third myth that I want to get out there, and this is one I see time, and time, and time, and time, and time again, is people talk about, "I've got to get a deal," and it's all about the deal, and nothing else matters.

And I'm here to say that that is actually wrong.

What's really crucial when you are investing into property and you are effectively wanting to build a portfolio, it is not the deal to begin with.

It is not the deal, because I could show you a deal right now and say, "Hey, here's this deal. Here you go."

Let's say I have a deal and I say to you "Here's the deal. It's a great deal. It's 20% below the market value and you're going to make £1,000 a month, and it just needs a small refurb and you going to make all this money, and it's great, and you should buy it."

But you don't know anything about where it is.

You've just been told it's a deal.

A deal is not a deal if it’s in a location you don’t know

And the thing is, it's easy to present a deal if you don't know the area. It is really easy. It's almost, basically, it's a little bit like pick-a-mix to some degree.

You can go and you can pick something, but you're not really sure what you're getting, but you know you're getting a sweet.

And it's the same thing in chasing deals. You've got to stop chasing the deal. It's the wrong thing to do, and everybody is doing this. All you have to do is focus on chasing the location.

Kynance Mews
Photographer: Bruno Martins | Source: Unsplash

This is what people do wrong over, and over again. So chasing the deal is not the right way to go about it because unless you understand and know the area in intimate detail, it's just a potential deal.

Now, if one of our agents rang me today and said, "I've got a deal," and it's in our local target area where I buy all the time, I would know pretty much within seconds of him or her telling me what the deal is, is it actually a deal?

And the majority of times it is, it is a deal.

Sometimes it isn't, but you've just got to be aware of this that from the perspective of really focusing on what's out there and what's happening in terms of deals, it is very much, a deal in an area that you understand, and if you understand an area and you know it well, then it is a deal.

But I'm so, so frustrated with people, even clients calling me up and say, "Oh, I've got to deal. I've got a deal." "So, where is it?" And it's in an area that they're not researching. It's like it's not a deal. It looks like a deal, it ain't a deal.

Myth Four

The fourth myth. This is something that is very rarely mentioned by a lot of the big training companies, big gurus, the big people that run around the stage, jumping up and down, getting you excited and speaking really fast, then moving their hands around and getting you to invest in nonsensical 2 grand courses that deliver naff all; you know the kind.

Property investment is made and is at the same time killed through your tenants.

Now what do I mean by that?

Effectively, your tenants who pay your rent effectively pay your mortgage.

Anything that's left over from that, it's where you make some cash, which you can then reinvest into other properties, reinvest back into the property, take something to live off, build up your savings, whatever it is you're doing.

But it's tenants that do all that for you.

So if you're not looking after your tenants and you are not making sure that the property is safe, clean, it works, everything works, and you're addressing maintenance issues, and that they're happy. Then without having tenants being happy, then you run into problems and issues.

And this is when tenants stop paying the rent. It's when tenants basically start moving and getting into this whole issue around causing problems.

And this is when we run into issues regarding the eviction of tenants through Section 8 and Section 21, and they're not leaving, and then I have to get bailiffs involved.

A happy tenant pays on time and keeps the property in a good condition

So the fourth myth that no one talks about, but is actually the foundation of which property investment is made, or isn't made, are tenants, look after your tenants.

Saturday. Summer. Beautiful sunny day, so my friends and I decided to make a picnic and watch the sundown. Pretty fun and relaxed day.
Photographer: Helena Lopes | Source: Unsplash

So if anything, if you're going to be a property investor, and even if you're going to be one that is say, having this as a side income and you either outsourced some of that to let's say an agent, you've got to make sure that they are looking after the tenant for you.

Because if you're not looking after the tenants and they're very much around this whole issue around not catering for the tenants' needs, looking after them, then you will run amok very, very quickly.

You could have the best deal ever in the world. But if you're not filling the property with good tenants, then the deal is not a deal, right? It's just not a deal.

So that's the kind of fourth myth that's kind of out there.

Myth Five

The fifth one, and it's the one I want to end on is really around this other myth that's out there at the moment that again is being positioned, and proposed, and talked about by a lot of big training companies, and a lot of these so-called gurus out there is that you can be a jack of all trades.

What do I mean by this? You’ve seen these sales pages and videos and they say, "Oh, you're going to come along to this event and we're going to teach you how to do buy-to-let, we're going to teach you how to do HMO, teach you how to do service accommodation. We'll teach you how to do flips, going to teach you how to do small developments, going to teach you how to do to big developments, we're going to teach you how to do this, this, and this."

And in the end it's like… you don't need any of that stuff.

You just do not need any of that stuff.

What you really need to get started is a thorough understanding of what it is you actually need from a revenue and income perspective, how much it is you need to live on, and then you need to look at what strategy allows you to do that the quickest.

The reason why this is so relevant is because when I first got started in property investment, and you can check out previous articles/videos in terms of how I got started and why I got started; I focused on DECIDING.

life is a succession of choices, what is yours?
Photographer: Javier Allegue Barros | Source: Unsplash

But when you're starting to get going in property investment, you really need to look at, where you're at the moment, and where you want to get to.

And what I quickly realized is, it will be impossible for me to go and buy standard buy-to-let properties and replace my income, which is what I wanted to do at that stage.

I was in a position where I had to leave my money, my job, my world, my career. It would just be impossible.

So this is why I specialized in HMOs, which became rent-to-rent, lease options and refurbishments, small developments, and so on, and so forth.

But going down a very similar route, which is, the whole thing around HMOs, whether it's boutique, or professional, or student, or whatever.

Now, it's really easy to get into the whole shiny penny syndrome and think, well, let's say that you're in an area and bread-and-butter buy-to-lets work really well for you. Let's say you're in the north and you're getting nine, 10% deals, and you think, "Right, well now I need to start doing something else."

So you start maybe doing some small developments, and then they don't work as effectively because you're not necessarily an expert in that area.

You don’t necessarily have a power team behind you and you've diverted your attention from where you were, to something else.

Being a generalist in the property investment world does not work.

All the people I know that are making really good money and are really crushing it are focused on probably one strategy, two maximum, but certainly one main strategy.

And the second one is a side strategy and it gives them some income, but on a periodic basis, not every single month.

So, if you are getting started in property investment and you're thinking that you've got to do this, this, this and this, you don't have to do all those things.

You don't have to run around doing four or five different strategies at once. It will be foolish for you to do that. You want to start, and you want to focus, and you want to go really deep into a strategy to make it work for you. And that way, you'll start to build up your income really, really nice.

SUMMARY

So, just recapping where we are in terms of these myths then, because there's five myths that I explained.

The first myth is everyone says out there, you don't need any money to get started in property. I say that's bulls**t, you always need some money.

Now it may not be yours, it may be an investor's and if you can persuade an investor to give you their money and you don't have any experience, then well done, you've done really well.

But for the majority of people, that first deal that you do, you're going to have to put some money in. And the lowest amount of money you're going to be putting in is probably five to 8,000, probably around that figure.

The second myth is you don't have to be full time to do this.

Everyone tells you, you've got to dive in. There's this whole thing around ‘I want to become a property investor so I can leave my job’. It may not be the job that you hate, it may be the fact that you're reporting to someone that you don't like, and it could actually be that your industry is still really good for you, but don't leave too soon.

Start percolating, building it up in the background and really start focusing on having that income coming in, whilst you then build up your career at the same time. Maybe move company's get someone better, and keep building that portfolio up.

The third myth is that you shouldn't be chasing the deal.

What you should be chasing is the location, and then the deals will come to you in the location.

Don't get focused on, "I've got to find a deal. I've got to find a deal, I've got to find a deal." What you want to be focused on is, you've got to really focus on getting the right location right, and then when you've found the location, then the deals will come to you.

The fourth one is, in order for this property investment to work, you have to have tenants.

You have to look after your tenants, you have to respond quickly to tenants, and you have to make sure that they are happy.

Happy tenants pay your rent, and unhappy tenants do not pay your rent, but the best rule in the world, you will always have at some point issues with tenants and you will always have issues with them not paying money. This is going to happen. It will happen to you. So do not go into this with your eyes shut thinking this is not going to happen. It will.

The fifth one is the fact that you cannot be a generalist.

You can't be doing three, or four, or five strategies.

You've got to focus on one strategy. You've got to get really good at that one strategy. You've got to go deep into that strategy. You've got to master it in your chosen area.

Then when you've hit those target levels that you're aiming for in terms of perhaps you have all of your bills paid for so that you can then potentially leave your job and go and do some charity work or set up another business, or do something different, but have an income level in place that you're aiming for, and at that stage, maybe think about doing another strategy, but don't do it too quickly.

The focus needs to be on doing one strategy really, really well and really then leveraging off the back of that.

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