Most of us love the ‘new’. It is exciting to be in the dreamy phase. All those possibilities.We get that new lease of life we’re looking for. We can turn our back on all the problems of the old thing & they will just magically disappear, right?
Look how green that grass is over there.But how long does it last? & is it indeed everything we want? The naive fantasy is that it will be easier & better doing something else, with someoneelse.
There is as of yet no proof that it won’t be better, so your imagination can run free.You get seduced that all the difficulties will just slip away when you start again.But is anything new really better? Or just different? Well, it dependsIf you’re running away from the struggle, the new alluring thing will present exactly that same challenge until you master it. Like clockwork.
Like the lover who seems to attractthe same kind of partner time & time again that hurts them, or the person that losesmoney in every new venture.When you do something new, the downside is equal to the upside:
- You think you have ridden yourself of all the problems? No, you just get new ones, or the old ones in a new form.
- You think the downside was that you had difficult customers? Well now you have none.
- You think the downside was staffing issues, well now you have to do everything yourself.
- You think the downside was that you got critics? Well now you have no fans.
If you want the struggle to change, there is only one way that it will go away. You have to learn through it, grow through it, endure it & master it.
And then you think you can settle down on a beach & sip cocktails? Ha! All that happens is you pave the way for the next level challenge that you weren’t ready for before.
But what if what you are doing, you know for sure you don’t love?
Well, in everything you now hate, there are always parts you love. It might be the securityof the job you want to quit.
It might be the non-loneliness of a difficult relationship or the money of a JV partner that has leveraged & controlled you.
So before you go into something new, especially if you have been doing your old thing a long while and have built history, check the following:
- Am I being weak & running away
- Am I naive of the downsides of the new thing
- Am I repeating a pattern in all the old-but-used-to-be-new things I started?
- Is this a test to grow through
- Am I being seduced by someone/something else?
- What do I have to start again, again?
Only do something new if it is aligned with your vision & values. Only do something new if you are eyes-wide-open about the downside & prepared to endure it
And then once you are clear & sure, go for it, endure the short term downsides like lack of income, security & fear, & then stay on that path for as long as you can, because there will be future wobbles where the temptation of the new & the romance of the easy will tempt you.
Depending on when you ask the question of how risky investing in property is, you might get some varying replies. In the lead up to the 2008 financial crash, you wouldn’t have met too many who would have deemed it overly risky to invest in bricks and mortar. However, with house prices at an all time high, there are many more doubters of the wisdom of property investment than there used to be.
This argument does also depend on how you approach the market and the good news is that there are a number of low risk methods that can be employed to protect yourself in the current housing market and whilst there is no such thing as a ‘no risk’ strategy, there are certainly some that put more in the hands of chance than others.
1. Play the long game
Whatever the properties are that are bought and sold over the course of your property investment career, you will be, for the large part, at the mercy of both the market and things like interest rates. There are many variables at work which often fluctuate, but the overall trend has been, is and pretty much, will always be an upward one.
House prices 20 years ago were significantly lower than they are now and in 20 years time, the chances of values being lower than they are now, are slim to none. As long as you buy well, don’t overstretch yourself financially and are prepared to ride out the rougher times, eventually you will reap rewards.
2. Don’t rush and overpay
When you set out on the road to making money through property investment, it can be very easy to rush into things and pay over the odds. Every pound that you spend on the purchase is a pound that you’ll have to recoup at the other end, so it’s vital that before bidding on properties, you comprehensively research the locale and more importantly, what constitutes a fair price.
This knowledge puts you in an extremely strong position when it comes to negotiation and it could literally save you thousands. Research will also pay dividends for buy to let investors, as a bit of research will give you lots of insight into rental demand and factors like how long it averagely takes to get tenants in the area.
3. Insure against bad tenants
Speak to an average buy to let investor and they’ll tell you that the one thing that keeps them awake at night is figuring out what to do in the event of their tenant stops paying rent and/or trashes the property.
All of this panic can be easily addressed by organising buy to let insurance from one of the major insurance providers. Letting agents often also offer this kind of facility as part of their service, which they will charge you seperatly for.
A typical policy will kick in when a tenant stops paying until you are able to rectify the issue. Cover does vary, so you must check the small print to see what each policy actually covers you for.
4. Vet your tenants thoroughly
There’s one thing that’s harder than finding tenants to put into your rental property and that’s getting problem tenants out. Ensuring that your tenants are asked to provide valid references, which themselves are verified, is a vital aspect of your buy to let investment strategy.
If you can, it’s also an idea to be the one showing potential tenants around, as meeting the people who will be living in your house will tell you a lot about them. When combined with a throughout vetting process, the chances of you getting problem tenants will drop significantly.
5. Factor rate rises into your budgeting
The Bank of England base rate of interest in the UK currently has much more scope for rising than for falling, sitting as they do at just 0.5%. This is in stark contrast to the worst times in the 1980s when they were pushing 15% and those who lived through that time will know that even a small change in the rate can have quite a big knock on effect on how much you have to repay for your mortgage.
The best way to avoid getting into financial difficulty, is to factor this into your budgeting before you buy. If you max out your borrowing and the rate then goes up, you’ll find yourself paying more than you’re getting in rent or with a mortgage you can’t afford to pay. Both are undesirable scenarios, so make sure you leave a bit of slack to take account of rate changes or opt for a long term fixed rate mortgage.
In summary
If a property purchase goes wrong due to factors out of your control, it’s distressing, but when it happens because of a lack of preparation and, you’ll end up kicking yourself. Thinking about what you could do minimise this risk before you start may seem like you’re being unnecessarily cautious to some, but to those who find themselves on the wrong end of the equation, it will seem like an entirely sensible and prudent thing to do.
Prep properly and you’ll take much of the chance out of the process, so make sure you do yours or you might end up regretting it.
