It’s always a pleasure to be asked to write for Property Investor News - at our Partners in Property (PIP) meetings and within our community, we regularly get feedback as to how helpful and content-packed the magazine is, and we love actionable content at PIP! It is always a challenge but also a lot of fun. Richard, the editor, always seems to find inspiration for pieces and they always have a common thread…it sounds easy to write about and it is definitely something people will want to read about, but actually writing the article is often tougher than it sounds!
This month’s brief was simple, as ever - three things that I would do differently if I knew back when I started taking property investment seriously back in 2011 - if only I had the knowledge that I do now. Thus, this article lives somewhere between reflection on what I have done (which is always a good thing to spend some time on) and regret on what I could have done/what I’ve missed out on (which I certainly try not to do!).
The first one comes to mind relatively easily. Within the context that I am primarily a buy-and-holder of property, and a believer in the long term game, there’s a clear advantage in getting as much together in terms of rent roll, whilst achieving a sensible yield, earlier rather than later. I always think back to examples from my previous expertise as a wealth manager - the message is always the same at any level of savings or long-term investment strategy - the more you can put aside earlier in the journey, the far greater that the rewards will be. The miracle of compounded interest, the eighth wonder of the world according to Albert Einstein, always has a surprising effect in these circumstances - any pension illustration will tell you that. The same logic applies in property investment of course - so, keeping hindsight out of the equation, I would have bought more good value units more quickly, not because the market was very favourable for acquisition back in 2011/2012 (although that was obviously very helpful), but because one of the great clichés that gets wheeled out quite often on training courses actually makes a significant amount of sense in my eyes: “The best time to invest in property was 30 years ago, the second best time is now”.
In relation to this learning, I would also consider the concept of equity preservation to be very important. Let us look at it this way - everyone reading this article only has a finite supply of money. One of the traps that people often find themselves in with property investment is a lack of capital, because ultimately, investing in property with passive income being the goal can turn lumps of capital in a bank account or similar into paper money, yielding an income, but in a relatively illiquid asset. Deals are absolutely out there in any location, in any market – although getting hold of them is not easy, but with the requisite amount of time and effort it can definitely be done. Capital is similar but if injecting capital via loans as many investors do, the loans do need to be paid back in accordance with the terms. Equity preservation is about staying liquid as much as possible for as long as possible. Buying below value, and/or adding significant amounts of value via refurbishment, reorganisation, or other asset management strategies is the key for equity preservation.