Our MD, Shiv purchased his first buy-to-let property in 2014. It was a semi-detached property with a garden in East Leeds and the lessons he learnt from that first purchase were some of the most important in his property investment journey to date.
From finding a great letting agent to being in control of your emotions, in this article, he shares the top 5 lessons that have shaped his investment journey since & made him a successful property investor.
Lesson 1 – It’s not a ‘get rich quick’ investment
When I started investing in property, I had this ideal scenario in my head – you buy a property, rent it out and watch its value increase every year. I found out quickly that buying a BTL property is not as straightforward as I thought it would be, and it certainly is not a ‘get rich quick’ investment.
There is a lot of effort involved in buying a BTL property and building up a portfolio, and most of it isn’t very glamourous either! As well as spending much of your time looking for the right property, travelling around doing viewings and building relationships with local agents – don’t forget to take cake with you! – there’s also the hours spent number-crunching and trying to negotiate deals with the agents. And once you’ve completed on the property, you’ll need to collect keys, take meter readings, notifying the utility companies, find and vet a tenant… the list just goes on.
It’s definitely not get rich quick, but it is get wealthy for certain!
Lesson 2 – Don’t get emotional
It’s much easier said than done – buying a property is a big investment and it’s difficult to remain neutral. It took me five to six months to find my first BTL property and because I didn’t want to lose it, we paid a bit more than we probably should have done – I let my emotions control my decision making Admittedly, it has worked out as the property has increased in value over time, but of course, that isn’t necessarily guaranteed.
On the other side of the coin, most people become apprehensive when buying a BTL property – it is probably one of the largest purchases you will make! The nerves really start to come out particularly if the survey report has highlighted any issues. In many cases, resolving the problem can be quick and relatively simple, and your ability to see the facts and separate out your emotions could mean the difference between being the owner of a great investment or letting it go.
Investing in BTL properties is at the beginning, entirely a numbers game and your emotions must be left out of the equation.
Lesson 3 – Don’t penny pinch
Whilst I paid a bit over the odds for my first property – I really didn’t want to lose it – there have been plenty of times when I’ve lost a great property because I didn’t want to pay the extra £500 that the vendor was asking for. That little bit extra probably won’t break the bank and over the long term.
If I could have my time again when I first started investing in property, I would not quibble about paying an extra £250, £500 or even £1,000 for a property, as long as it didn’t mean I was paying over-the-top. The fact is property tends to increase in price and you’ll probably make that money back by the time you finish the refurbishment. Besides, in five years’ time, you’ll look back and wish you had purchased twice as many properties.
Lesson 4 – Find a great lettings agent
Half the job of building an property portfolio is finding the right property and sealing the deal. The other half is finding a great lettings agent that will work hard to source the best quality tenant, look after your property as if it was their own and always be transparent in their communication, particularly if you are a remote investor.
Whilst it’s great to find a lettings agent that will find a tenant and manage the property for a management fee below 10%, you ultimately get what you pay for. A good letting agent is worth their weight in gold!
Lesson 5 – Don’t focus on the Yield
If you focus on just maximising yields, which many London investors do, you could be missing out on making the level of return that you had hoped for.
Using the yield to pick your property could actually lead you down the wrong path entirely. Let me give you an example; I bought my first BTL property in a cheaper area of Leeds and whilst it was a lower price and the rent was reasonable, the capital appreciation on the property wasn’t that high. I later invested in slightly more expensive properties and not only got higher rents, the capital appreciation was greater.
Look at it this way; if you buy a property for £60,000 and its value increases by 10% over the year, you’ve earned £6,000. But if you bought a property for £120,000 that will generate a similar rental return, when its value goes up by 10%, you’ve earned £12,000. Over the long term, it’s the capital appreciation on the property that’s going to make you wealthy. So, it’s worth buying your property in an area that will appreciate in value as well as one that gives a good rental return.
Why are we telling you this?
Those who succeed in property know what they want to achieve, understand the market and have the knowledge and expertise to pick the right properties.
But you can only gain the experience by actually investing in the first place, and this may well be your first time purchasing a BTL property! Talk about a catch 22!
So for anyone who hasn’t yet invested in property, we hope these lessons give you a little insight before you start on your own investment journey.