Last week, I had a lunch meeting in London and, since it was one of those all-too-rare sunny days, I took a pleasant stroll from Waterloo Station, past the London Eye and out across Westminster Bridge. As I crossed the bridge, I noticed several groups of people huddled around at the side of the pavement. My curiosity piqued and knowing that my lunch guest was so habitually tardy he’d be late for his own funeral, I decided to hang around on the fringes of one of these huddles to see exactly what was going on.
As it turned out, it was that oldest of gambling games known as the ‘shell game’. I’m sure you’ll have seen it before. I watched as a man, wearing a green baseball cap knelt in front of three cups and very deliberately placed a ball under one of them. He then shuffled the cups around and invited one of the tourists in front of him, a Japanese lady wearing a polka dot hairband, to guess which cup concealed the ball. She confidently pointed to the centre cup, which he duly lifted to reveal the ball. Having complimented her on her skill, he suggested she do it again, this time for a wager of ten pounds. Having handed him a freshly minted tenner, he replaced the ball and repeated the shuffle. This time, as anyone watching would have spotted, the ball was surely under the left-hand cup. But the Japanese lady looked rather unsure. She nervously stroked her lip and then turned to the crowd as if to get their assurance. Eventually, she pointed anxiously to the left-hand cup, and the man slowly lifted it to reveal… the ball!
The Japanese lady looked delighted and relieved in equal measure, and the man dug out a well-thumbed tenner, handing both notes to her. He then suggested that she go double or quits, which she duly did and, seemingly filled with more confidence this time, she picked out the correct cup once again. This time, the man scowled and rather grudgingly handed her the four notes, imploring her to double down once more. But the Japanese lady was having none of it. She deftly trousered her winnings and left to spontaneous applause while about half a dozen other tourists waved tenners at the man, imploring him to choose them next. You probably know where this is going. Unsurprisingly, the next few tourists didn’t fare quite as well as the Japanese lady. They won at first, but as soon as they had a couple of wins under their belts, the ball mysteriously failed to appear under the cup where everyone could have sworn blind it would be. Eventually, each one reluctantly agreed to cut their losses, having lost a few brown notes to the man with the cups. Having successfully fleeced a few sheep, he upped his sticks and left. As I headed on to my lunch date, I had to smile with grudging respect. £100 for twenty minutes work isn’t a bad rate of pay, even in the capital.
Being able to keep your eyes on the prize leads me neatly on to one of the biggest newbie mistakes that I see in property development. To reinforce the importance of it, I should begin at the beginning and ask why people develop property in the first place. It’s not a trick question – the answer is obvious. While there will undoubtedly be a small number of developers doing it as a hobby, most do it because it can generate a lot of capital relatively quickly. In short, they’re in it for the money. Profit is the prize, and there’s no embarrassment in that. The problem occurs when developers start taking expected profit for granted. In my book, there are five essential rules you need to follow if you want to stay in the black.
