Hey there! Today, I share a bit about my story in relation to property investment and a couple of lessons I have learnt in the process.
In one of my first few blog posts about financial freedom I told you about how I developed a sudden need to divest myself of all debt, to the extent that I needed to sell my home! The plan was to use the equity from that house to buy another one outright.
As I embarked on the process of acquiring a new property, I quickly realised property prices wouldn’t permit for an outright purchase (at least not in the location I had settled on) and, the thought occurred to me that I could use some of the funds from the sale to invest in another property and let it out. Then I read Robert Kiyosak’s Rich Dad’s Cashflow Quadrant and learnt about good debts (which increases your wealth) and bad debts (which increases your liabilities) and that whole need to divest myself of debt seemed to disappear! Talk about a 360* turnaround!
And so I started what I call my property investment journey. When I started out, I knew I could buy a property and rent it out and then I started interacting with property investors on social media and joining online property networks and very early on, learnt that there were so many other property investment strategies (and not just buy a house and let it out) – and eye opener (and attestation to the saying “you don’t know what you don’t know”!
The strategies shown in the table above is not an exhaustive list, but they are the more common ones. There however are some more complicated ones and new ones evolving as investors navigate through the pandemic. Of course, most of the strategies shown require an initial capital outlay that would be deemed substantial for most, but I want to draw attention to the fact that there are also some that require very little initial outlay. In fact, in the property investment community they reference “no-money down strategies”; I haven’t seen any of such, but I know the R2R strategy requires less of an initial outlay than if you were buying; and property sourcing is probably the one I will accept is a no-money down strategy, as it mostly involves time put into research and negotiating deals. If you are interested in getting into property investment and don’t have a substantial amount of money, these are two strategies you could use as stepping stones to however high you want to go on the rungs of the property investment ladder.
From interactions in property networks, masterminds and trainings attended, I learnt that it was best to focus on a one strategy (and best to choose a strategy that moves you towards achieving your goals) and that it wasn’t as easy as just going out and buying the first property that appealed to you! One phrase that is usually bandied about in the property investor community is “you make your profit when you buy” – meaning that your focus isn’t shouldn’t be on the profit you’d make when you sell from appreciation of value in the long term, but it should be on profit at point of purchase, which is only possible if you manage to find a property being sold below market value or one that you’d refurbish or perhaps one that needs minimal tweaks that will result in increased value. The rationale being that if you buy a house today and have to sell it (for whatever reason) in the short, rather than long term, you’d still be able to make a profit (or at least not make a loss).
This meant I couldn’t operate based on my usual modus operandi of “jump in and learn as I go”! I guess if I did that, any mistakes made here might be costly; so I engaged a property investment coach from whom I learnt a great deal, including how to assess property deals (while continuing to interact with property investors, joined property mastermind groups, etc.). I also spent hours and hours, late into the night, early hours of the morning (after and before I signed off from/in to work) and weekends scouting through Right move, Zoopla and other property sites!
Guess what; after more than five months of scouting through hundreds of properties online; about 60 of them being potentials and only about five of them being worth a viewing (and only one of those warranting a second visit), it was almost time for my busy time at work (end of year audit: during which time I knew wouldn’t be able to give property investment the focus it required) and I hadn’t identified a suitable deal! My coach encouraged me to keep going and they, and other people in the property investment community alluded to the fact that deals had become harder to find with the pandemic and resulting lock down.
Suddenly one of my contacts in the property investment community, mentioned they were looking for an investor in order to be able to complete on a property investment deal. I mulled this over and thought; well, the funds have been sitting in my account for almost a year (yielding interest at less than 1%) and I knew I wouldn’t be using it before the audit at work was over; so why not invest at a fixed rate for a short term. After negotiating an amicable interest rate, the deal was done! The thought that struck me as we were negotiating this deal is “there’s always multiple ways to skin a cat” – while I haven’t actually purchased a property, I have invested in enabling completion of a property deal and it could technically be said that I am a property investor; no? One school of thought advocates for “being stubborn about your goals, but flexible about your methods” and this is a clear articulations of being flexible about how one’s goals are achieved (while being clear on what the goal is).
As I mentioned in last week’s post, the audit is now over (well mostly), so I’m about to get right back on to the wagon of searching for property deals. I am a bit wary given the current economic climate of uncertainties, but am still committed to the goal of building a portfolio of investment properties, so we’d see how this year goes (keeping my fingers crossed)
So today I leave you with the below lessons I have learnt from my property investment journey so far (and hope it is of value to you):
• For young ones (and older ones with minimal capital) interested in property investment: go research property sourcing and R2R as potential starting points
• There’s always multiple avenues to achieving one’s goals, so be flexible about the method and rigid about the goal (though some might argue that even the goal evolves with time, so it’s good to be flexible with that as well)
Have a good weekend and see you next week.
Like, share and let me know in the comment if this is of any value.