First 5 Steps to Start Your Property Investment Business
You’ve decided you want to invest in property. Great. But now where on earth do you start? With newspapers talking about the crazy profits to be made by popping a property on AirBnB and programs like Homes Under the Hammer flooding your tv with success stories of buying, doing up and selling on, how do you decide what’s best for you? It’s a big decision after all, as there’s always someone’s money at stake. To help you sort your ideas and imagination into some sort of order and set you on the right track, follow these first 5 steps, all from the safety of your own home!
1. Define Your Why
What is your reason for wanting to get into property investment? For me, I wanted to get out of my job ASAP and replace my salary with passive income from property. I wanted control over my own time, so I could choose to see my friends and family when I wanted and fit work around the things that mattered most in my life. However, I know other people who don’t want to give up their jobs at all and instead want to use property to build up a fund towards their child’s future or pay for amazing travels around the world. Whatever your reason, spend some time thinking about why you want to get into property and what that will mean for you and your life. Write it in a journal, create a vision board, stick your reason on the fridge…whatever will keep your WHY at the forefront of your mind. That way, when your offers get rejected, when you get outbid at the last moment, when your building project runs over schedule or when you just have a bad day, you will have a reason to pick yourself up and carry on until you make your dreams a reality.
2. Assess Your Financial Freedom
What does being wealthy mean to you? Is it bringing home £250,000 each year? Is it having £500,000 sat in your bank account? All that might sound very attractive, but what if in order to earn that £250,000 you have to work a 70 hour week, every week? What if you are working so many hours with so little time off that you can’t even squeeze in time to spend that £500,000 on things you actually want to do? Wouldn’t you rather earn £50,000 and not have to work at all? True wealth isn’t a monetary figure or a big salary, it’s having enough money coming in each month to cover your needs whilst still having the freedom to choose how you spend your time and who you spend it with. That’s financial freedom and property can be an excellent way to get there.
A good place to start for most people, is to work out how much money you want or need to be making each month from property. The only way to do this, is to take a good look at the cold hard truth on your bank account statements and assess where you are right now. Write a list of all of the expenses you pay each month, such as rent, bills, subscriptions, phone contracts etc. Add in any payments towards debts like loans or credit cards and then add on a realistic figure of what you spend each month on food, alcohol and other items like clothes (you might have to look back a few months to get an accurate estimate – lockdown numbers don’t count!). Add them all up to come up with an overall figure for roughly how much money you spend each month. Before you move on, consider if there is anything you could cut down on to reduce this number. Maybe you could look at moving somewhere cheaper to reduce your rent, or you could cut back a bit on meals out. The lower you can realistically make this number, the better. Now, the fun part – how much of that figure would you like property income to replace? Half of it, so you could go down to working part-time? Or maybe all of it so you no longer needed a job at all? If you get to the point where passive income from property covers everything you want and need to spend each month, then you can choose to spend your time how you want. You are free, financially free. And whatever that number is, that is your Financial Freedom Figure. If you would like my Financial Freedom Calculator to help you find your Financial Freedom Figure, grab yours for FREE here!
3. Build a Basic Business Plan
Property can offer all sorts of benefits, from topping up your income, to fully replacing your salary or from a nest egg for retirement, to a brand new business and career. There genuinely is something for everyone, the problem is choosing the right property niche which is going to inspire you and give you the results you want. So, once you have worked out your Financial Freedom Figure, you can start setting yourself very specific goals and a timescale to achieve them. This step was an absolute game-changer for me, so stick with me! For example, if your Financial Freedom Figure was £2400 per month, you might aim to achieve that as a passive income within 3 years. In Year 1, you could aim to build up a passive income of £600 per month, in Year 2 (now that you have already put in a lot of the ground work) you could add an additional £800 per month and in Year 3 you could add the final £1000 to reach your £2400 monthly total. Then, you can break down what this looks like in terms of property projects each year, for example:
Year 1 - +£600/month – 3 Buy-to-Lets added to the portfolio Year 2 - +£800/month – 4 Buy-to-Lets added to the portfolio Year 3 - +£1000/month – 5 Buy-to-Lets added to the portfolio
Build this up into a 5 year plan so you have something to aim for and you know exactly what you need to focus on first. But, you don’t have to stick to Buy-to-Lets. If you’ve always been intrigued about HMOs (Houses of Multiple Occupancy), add them in! Maybe aim to add 3 Buy-to-Lets and 1 HMO in Year 3 to your portfolio instead of 5 Buy-to-Lets. Add in lump sums if you want to do Flips (buy, refurbish and sell) to pay off chunks of debt or build up funds for more projects. Add in learning about Commercial Developments and Build-to-Rent if that excites you (perhaps after you have a few BTLs already lined up in your portfolio to give you experience and confidence). It doesn’t matter exactly what you include in your plan, it matters that you have one. So long as you have a plan, you can go and find all the knowledge you need and the people to help you along the way to make it into a reality.
4. Master Your Strategy
Right, so now you’ve made a basic business plan, you have an idea of how you are going to start out. Are you going to be buying some unloved, dated houses, refurbishing them and turning them into desirable Buy-to-Lets? Or are you going to dive in at the deep end and jump straight to Commercial Developments? There isn’t a right answer here, but I would strongly suggest that you pick one strategy and master it before moving on to the next, otherwise you risk crippling yourself with overwhelm.
Research your strategy online, join webinars and workshops, read blogs and books, go on training courses and ideally find a mentor who has done it all before so that they can accelerate your progress and help you avoid any nasty pitfalls! Get to know all you can about your chosen strategy and you’ll be surprised at how quickly it becomes much less scary. You’ll also be surprised how many people completely skip this step and jump in virtually blind, making you an expert in no time!
5. Find Your Area
In order to make plans to go and view potential properties in the big, wide (post-lockdown) world, you need to know where you are looking! Depending on which strategy you have chosen to pursue, you may need to look in slightly different areas of the country. For example, if you want to set up an AirBnb for holiday-makers, you need to make sure it is in a popular tourist destination. Or, if you want to get the best possible returns on Buy-to-Lets, you need to look in areas of the country where rents are high relative to house prices. Every strategy will have its own criteria that will define where in the UK it will work best, but you also need to consider how far and often you are willing to travel. It might be that you need to look specifically in one region, or maybe you need to look in cities and towns with excellent transport connections and plenty of industry. Try to define the most important criteria that will make your properties as financially profitable as possible for you, by making sure they are attractive to the specific prospective renters or buyers you want to target. Research which areas in the country satisfy your criteria (a great source for this is usually a website such as RightMove) and start picking a few (5-10) towns/cities to delve into further. At this point, I usually pick up the phone to estate and letting agents in the area who might have the kind of property I am looking for and start having some conversations. Quite quickly, you can begin to rule places out and narrow your list down to just 2 or 3 promising areas. Then, and only then, are you ready to book in some property viewings and meetings with agents and get out there. Hopefully, just in time for lockdown restrictions to ease! If you are thinking of getting started and have any questions about these first 5 steps, please do send me an email (firstname.lastname@example.org) or enquire through the website and we can grab a call to get you started on the right track!