Don't Let FEAR Freeze Your Property Investment Progress
Five years ago, I was on a mission; I was out to buy my first buy-to-let investment property. At this point, I had £0 capital and no experience of buying a house whatsoever. I had been to a couple of weekend training courses, scrawled as many notes as my poor hand could cope with and was determined to put what I had learnt into action!
After hours of desktop research, I'd narrowed down my search to 3 potential investment areas, meaning it was time to get out there for my first ever area visit! The first place I visited, I decided I needed to come across as a confident professional who already knew what they were doing so that the agents would take me seriously. So, I chose to wear a dress I had previously only ever worn to interviews and introduce myself as a "professional property investor".
Unfortunately for me, acting as a corporate "professional" doesn't come very naturally for me. As I entered the first estate agents, I could feel my heart racing. As soon as I began speaking to real, living, breathing estate agents, my carefully planned sentences disappeared and I could hear the nerves coming through in my voice.
The problem wasn't that I was in the wrong area. It wasn't that I didn't know what I was talking about. It wasn't even that I didn’t mean it when I said I was treating property as a professional business. The problem was FEAR. I was terrified that the agents wouldn't take me seriously, and consequently, they didn't.
Since that first day, I have learnt a lot more about property, dealing with property professionals of all kinds and also about myself. But the fear never quite goes away when I'm doing something new or bigger than ever before. I've been scared to call agents and put in offers which I know are going to sound very low. I've been frightened of meeting a builder or surveyor in case I look like a fool for not already knowing the correct terminology for various elements of a house. I've nearly frozen completely and been tempted backed out when signing for finance on houses and land even though I've done all of my numbers and due diligence ten times over!
The biggest thing I've had to learn in property investment, is that fear is a natural part of the journey. In fact, it can be a very helpful emotion. Right from the start, fear made me choose to read widely, attend training courses and sign up to mentorships to make sure I knew my stuff before jumping in. Fear still makes me double check my figures many times over before committing to a purchase. If I had never been afraid of investing in property, I could have acted carelessly and lost hundreds of thousands of pounds (of other people's money!!). Learning to harness your fear and manage it is what will make sure you succeed in property investment.
Why is property scary?
Property investment is inherently pretty scary. There are large sums of money involved and the best way to grow your business quickly is to leverage i.e. making use of other people's money. Straight away, this adds a huge level of risk which you need to become comfortable with in order to take on a project. Then there's all the specialist terminology attached to property which can be absolutely baffling. Take a look at my recent blog, A Jargon-Free Guide to Mortgages, if you would like the basics of mortgage terminology explained! And if you are going to treat property investment as a business, you need to involve quite a few professionals, both locally in your investment area itself and centrally as your power team. It can be very daunting trying to convince yourself you know enough to be employing the services of all of these experts.
Overcome YOUR mental blockers
There are some common fears, or blockers, which I see crop up time and time again for both my clients and myself. It’s far too easy to hide behind any one of these reasons and never move forwards in property. Don’t let it happen. Here are my top tips for each of the most common fears I’ve experienced and seen in my clients:
Money – No one wants to be left with debt and so virtually everyone fears losing money on property deals. The best way to combat this fear is to build your confidence in your calculations and due diligence: - Learn from someone who has done it before so that you make sure you include all the less obvious costs in your offer calculations, e.g. solicitor fees, the cost of any interest on borrowing the finance, buildings insurance, mortgage exit fees (if applicable), council tax whilst the property is empty… - Give yourself 3 exits. One exit will be that everything goes to plan and you manage to rent or sell your property as you hoped. But what if you can’t get the BTL mortgage you need? Or what if there is a sudden downturn in the market so you won’t achieve the sale price you need? You need some back up options for worst case scenarios. Could you re-finance the property with a new private investor? Or let the property out whilst you are waiting to sell? What about selling the property if it doesn’t let out as expected? Do your numbers on these other options and make sure you won’t be losing money if your original plan doesn’t work out.
Time – I have often been told how “lucky” I am to have the time to go and find my property deals. It’s as though everyone forgets that for the first 18 months I was fitting it all in around a full time job on shift! When you first start out in property, things do take a lot of time because you have to get to know what you are looking for, what does and doesn’t work in your area and how to assess each and every deal. What makes this whole learning curve a lot easier (and a lot quicker) is making sure you have a focused plan. Setting clear goals right from the start will mean you don’t waste time chasing shiny pennies in each and every property strategy that you hear about: - What do you want out of property? I like to call this your WHY. Do you want to replace your income, build up a big lump of capital for a specific purpose or create a passive income which will serve as your pension? Once you’ve got your WHY, you can translate this into financial figures and decide which strategy is best suited to achieving it The more you can focus what you are looking for, the quicker it will be until you are efficiently finding, assessing and executing amazing property deals. - Outsource where possible. For me, time is the most precious thing I have, so I don’t want to be spending my time on things which I could get other people to do quicker and probably better. This is where the true value of letting agents (see Why Letting Agent’s Are an Investor’s Best Friend), accountants (see The Value of Accountants) and other professionals comes in. If you are really struggling for time, consider using a Property Sourcing Agent to find your deals. Just make sure you do your own sums to work out the returns including their fees before you commit!
Distance – It can be very daunting putting a whole lot of money into properties in an investment area which is hundreds of miles away from you. If you really don’t like the idea of this, then consider strategies which can work closer to home. However, distance can quickly become far less scary: - Commit to visiting your area at least once/month to start with. Regular visits will help you get to know an area quickly and will start to build you a network of contacts. - Make sure you allow time on your visits to meet estate and letting agents as well as builders etc. People who have lived in the area all their lives are bound to give you valuable insights which you just won’t get from other sources. Knowing these insider opinions will help to build your confidence in the new area and will undoubtedly help you when analysing demand.
Professionals – To run your property portfolio as a business (not a hobby!) you will need to enlist the help of lots of professionals. I found this step especially scary as I assumed the experts wouldn’t take a newbie like me seriously. Plus, I barely knew who I would need doing what in the first place! - Build a Power Team – once you have a team of at least a solicitor, a mortgage broker, an accountant and a mentor in place, your property purchases will suddenly feel far less of an effort on your part. It’s worth finding these people before you even have a sale agreed, just so you have them lined up and ready to spring into action the minute a good deal comes your way. It can seem a little foolish to contact them before you have a job for them to do, but try not to let fear stand in your way. Making the call is well worth it as it puts you in a position to act quickly with people you have already found out more about. - Find a Local Team – this is the team of surveyors, builders, letting and estate agents and perhaps even a property sourcing agent who you will need in your investment area. Again, getting this team in place as early as possible will mean you have time to carefully select the right people to work with YOU without holding up any future projects.
Personal – Everyone has their own individual mental blockers which are personal to you. For me, being a short, young women has sometimes made me feel somehow inadequate in a predominantly male dominated industry. I constantly have to work to keep this inner fear in check despite having a proven track record of successful projects. The biggest thing which helps me with this fear is constantly meeting and keeping in touch with other women entrepreneurs from all walks of life. Speaking with like minded people who have had similar struggles builds my own strength and motivation to keep going. Anyone can apply the same logic by seeking out people who have similar backgrounds or have done it all before and spending time with them to learn how they overcome their own individual fears.
No one ever said that starting out in property is easy, so don’t beat yourself up if you’re finding it all a bit intimidating! Focus on working out the root of your fear and learn to deal with it in a positive way then the journey will be a whole lot easier. I’ll leave you with one of my favourite quotes which pushes me forwards when I want to curl back up in bed and hide from everything outside my comfort zone: