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3 posts from June 2009

June 23, 2009

Top 10 FATAL mistakes made by novice property investors ...

1. Not having a reason for doing this. Over my five years of speaking at property events and presenting at workshops and seminars, I have come across hundreds of people, who, when asked why they want to get involved in property say "I wanna be rich". That, in my opinion, is not a clear enough reason. There must be some specific goal that you want to aim for, an outcome, a purpose that will drive you to achieve success. "Being rich" is too flaky, too undefined, to wide a goal to aim for. Think carefully about why you want to get involved in property - to fund your child's education, to prop up a pension, to allow you to follow your dream, whatever that may be. Without a clearly defined goal, your efforts will be unfocussed and you will not be committed to moving forwards step by step.

2. Thinking one size fits all. Property investment is highly personal to you, your financial situation, your attitude to risk, how much time you have to devote to it, how much support you have from your family etc. The type of properties that suit my investment strategy to reach my goals, may not be right for you. You must acquire properties that are suited to your personal strategy and will take you one step closer to the goal that you have clearly defined in your own mind. This is why property clubs, passive investment programmes etc are flawed from the outset, because property is never one size fits all.

3. Not doing enough due diligence or research. Before investing in any property purchase, you MUST do full due diligence and research. We come from the school of find the demand, then create the supply. Unfortunately, most novice investors create the supply, and then wonder where the demand is coming from. In other words, it's no good buying a property, no matter how good the deal might appear, if no one wants to rent it! You must fully research an area in terms of rental demand, amount of stock on the market, etc. Understand who your prospective tenant is and then find properties that will meet their criteria.

4. Taking someone else's word for it. It is your money, so satisfy yourself of the veracity of any deal you are considering or the integrity of the company you are thinking of doing business with. Do not take anyone's word for anything. DO YOUR OWN RESEARCH EVERY TIME, WITHOUT FAIL.
Never pay large fees upfront for anything. You should only pay for results achieved, not promises.

5. Focussing too much on the deal. Time and time again, I see novice investors focussing on the deal. They are intent on getting it no money down, with a rental guarantee etc. The focus should be on pre-acquisition (due diligence) and post-acquisition (ownership and management). You may be in a business relationship with a property for 25 years. The acquisition stage is a blink of an eye in that context. There's no point in acquiring a property, even NMD, if no one wants to rent it!

6. Becoming a seminar junkie and addicted to gurus. Whilst Nick and I are all for education, there are many people out there who "follow" the wrong people, and end up paying for more and more seminars because they haven't registered that the information they have already been given has not enabled them to produce any results. They then pay to go on another seminar with the same guru, to get the missing piece of the puzzle, but that is never revealed. These people become trapped into paying more and more for information, while they should be going out and putting the original information into action to see if they can achieve any results. There are many sharks in property who make a lot of money from telling others how to make money. Be sure to follow someone who talks the talk and walks the walk. Too many newbies do not recognise that they are being "sold to" and end up spending money unnecessarily. Do not fall for marketing hype, spin, and promises of get rich quick. If you adopt that attitude of wanting something for no effort, you will fail, EVERY time.

7. Lack of massive and sustained action. To be successful in any walk of life, you must be committed, and engage in massive and sustained action every day. Many people make excuses to themselves why they will do this next week, next month, after Christmas, etc. The net result of that is that there is no result.

8. Not treating your property portfolio as a business. Cash flow is the life blood of any business, and property is no different. If you do not focus on cash flow and manage it appropriately, your business will fail. Property is no different. Too many people focus on the acquisition, with no thought of the cash flow prospects etc. A property portfolio based on capital growth/equity release is a VERY HIGH RISK strategy, and one to be avoided by novice investors or those of limited financial means.

9. Lack of education and networking and lack of commitment to learning. When working in isloation, it is easy to make mistakes and lose direction and momentum. There is so much free information available on the web, that there is no excuse for not learning something new every day. Forums such as this allow you to expand your contacts and knowledge and learn from others who are more experienced than you.

10. Thinking that property is a race or a competition. It's not. It's about you taking responsibility for your financial future and doing what is right for YOU and on one else. Take your time to build your team, research deals that work for you, and triple check your research. Never be pressurised into anything in property. There is ALWAYS time to take a step back and reflect on what you are about to do to check that it is right for you.

If you would like to join an active and supportive community of like-minded property professionals, please join our Property Tribes forum.

If you are experiencing any difficulties or problems with your property investments, please post them on the forum and myself and other members of the community, will be only too happy to share our thoughts and help you resolve them.

June 17, 2009

The 7 Deadly Sins of Property Investment


1. Arrogance/not sharing information:
Thinking you know it all. The day that happens is the day you will fail! When getting involved in property, you should acknowledge that you are committing to life-long learning. As we like to say, you can never learn less and you can never know it all! Be generous with sharing your knowledge with others. A measure of a person is what he will do for someone who can do absolutely nothing for him! It costs nothing to light someone else's candle from your flame of knowledge.

2. Treating tenants like a rent payment instead of a person: Tenants are our "clients". By paying their rent on time, and treating our properties with respect, they are allowing us to have a business and create wealth over the long term. As a landlord, you are a "service provider", and to be successful you must provide a high standard of service and accommodation. Tenants increasingly have a choice and they know it, so treat them with respect. You will only be a successful LL if your properties are fully occupied with happy tenants. Sounds obvious, but too many amateur LL just focus on rent payments, not the fact that they have to provide a service to the person paying the rent.

3. Not keeping up to date with government legislation: As a LL, you are bound to comply with certain legislation to ensure the health and safety of your tenants. These include Gas Sure certificates, EPC's, HMO licencing (where appropriate), operational smoke alarms, correct insurances, etc. By not keeping up to date with these, you are not only putting your tenant at risk, you are putting your business at risk.

4. Ostrich syndrome: Not changing with the times. Business is changing at a faster pace than ever before in history. We are in the era now of the linked economy. This has huge implications on your property business. To bury your head in the sand, and not recognise these changes, and try and change with them, may lead to the demise of your property business. Networking events and forums like Property Tribes are great places to keep your knowledge up to speed and help you move with the times.

5. Not having systems in place to manage your business: LL's should have systems in place to keep track of each individual property in terms of mortgage product, cash flow, keeping tax records, etc. Failure to do this, will lead to problems down the line.

6. Absolving all responsibility to a third party: Whether it be to pay for a portfolio building service, hand over your properties to a letting agent, or pay for property deals, you MUST take responsibility overall for your decisions. Third parties generally do not care about your business or your money as much as you do. If you cannot be bothered to take responsibility, then don't expect others to. There is no such thing as an "armchair investor". It's your business, so take care of it, or face the consequences. "Get rich quick" mentality is one of the deadiest sins in property!

7. Not taking consistent and massive action: The only way to be successful in any business, is to take consistent and massive action. Many people pay to go on seminars and courses, and then never put the knowledge into practice. Other people start out with the intentions to build a portfolio or property business, and then give up at the first hurdle. The only way to success is by setting big, fat, hairy goals, keeping them in sight, and taking steps towards them every day.

Join the 7 Deadly Sins discussion on Property Tribes here.

Tribal Meeting ...  Network for success!

The countdown is on!  Our next tribal gathering is scheduled for Sunday 21st June. The venue is the Holiday Inn, Egerton Road, Guildford.  The meeting runs from 10.30 to 14.30.  Admission costs £10.00 payable on the door to help towards the larger room we now have to hire.  Parking is ample and free.

This month, we will be talking about how to use Twitter in your business, and also discussing issues facing us all in the challenging market conditions.

Register here ...

property tribes  

For those of you who wish to get more information on Social Media/The Web and how to use it, please join with Nick on his NEW SITE - Social Media Graffiti


June 02, 2009

Top 10 reasons why you will never bring a No Money Down property deal to completion (at the moment) ...

Still think you can do a No Money Down property deal? It might be time to think again:

1. Lenders have such little appetite to lend that they are cherry-picking who they lend to:
According to my personal reseach only one in 20 mortgage applications
where the person applying has the 25% deposit are going through to
completion. What does that mean for the NMD borrower?

2. Credit rating: Credit reports are now scrutinised more
than ever before by lenders. Any missed payments or adverse credit history, and they will think
twice about giving you a mortgage offer.

3. Source of deposit: Most lenders now ask for the source
and proof of deposit. They are suspicious of where this is coming from
and now check in more detail.  This can include asking to see six month's worth of bank/savings statements.

3. Demise of the deal packager: Many NMD deals used to be
pushed through by packagers who oversaw the whole process and used a
"friendly" valuer who they could "influence". There are no deal
packagers left as far as I am aware.

4. Brokers no longer allowed to choose which valuer goes out:
Brokers used to be able to select a valuer from a "panel" of approved
valuers. This meant they could work with a "friendly" valuer. This
practice has now largely stoppped and many lenders are using an
in-house valuer who cannot be "influenced".

5. Property Valuation: RICS valuers have been briefed how
to spot signs that someone is trying to get a false valuation. If in
doubt, they will down-value. By law, they have to value the property at
the purchase price, or market value, whichever is the lower. By lying
to the valuer about the price, or not disclosing the net price or how
the deal is being structured, you are committing mortgage fraud!

6. Rental Valuation: Rents are dropping, making it harder to get a deal to stack. A down-valuation on the rent will stop any deal in its tracks.

7. Contesting a down valuation: Until recently, you used to
be able to contest a down valuation by supplying comparables. These are
now no longer accepted. The decision of the valuer generally stands.

8. Solicitors and lenders require full disclosure to all parties.
If there is any evidence of non-disclosure, or the lender gets wind of
anything fishy, they will withdraw the mortgage offer. This happened to
one person I know the day before completion, and that person has been
left on a bridging loan of £2K per month. It is extremely risky to buy
anything on a bridging loan for the above reason.

9. "Seasoning" of title: Lenders now require you to have
proof of ownership of the property for a minimum of six months before
remortgaging or re-financing. This means bridging loans are no longer a
vehicle for purchasing NMD, unless you are willing to stay on a very
high interest rate open bridging loan, which again, is a very high risk
strategy.  The number of bridging financiers is also severely limited,
as most have left this arena.

10. Education: The internet has now provided education and
transparency to allow people to understand the truth about NMD deals.
This can only be a positive thing for the property industry as NMD was
simply not sustainable and was largely a factor in causing the first
credit crunch.

Conclusion: No matter how positive a mental attitude, how many
courses you go on, how many NMD mentoring programmes you join, how any
times you pay NMD deal finders for a lead, how many times you pay for a
valuation, if you don't have the 25% deposit, it is very unlikely that
you will be able to buy a property.

Sorry for the cold hard truth. Yes,
sometimes life it tough and it hurts, but better find out now than
waste your money and time on something that is defunct. Strangely
enough, I am in the same boat as you as no lender will lend to me
anymore because I have too many mortgages, so I understand the
frustration. My advice is to keep on educating yourself, get to grips
with social media
, try and set up some JV's, and maybe source deals for
others too time-poor to do it themselves, allowing you to build up your
own deposit.

Do others agree that there is a definitive decrease in "noise" on the
NMD deal front? Is the message that there are no legitimate ways of
doing NMD deals finally sinking in? Are the reports of more and more
people being jailed for mortgage fraud putting people off talking
openly about how they are doing it? With the transparency of the web,
only the most foolish person would post on a forum advertising their
NMD scheme!

We also know that the CML and the FSA are using forsensic accountants
to see which brokers are doing a lot of business in these challenging
times, and doing audits on people buying a lot of property to establish
the legitimacy of the money trail.

Are the purveyors of NMD schemes changing their business model or have
they just gone underground? Will they all start talking about lease
options as the "new NMD"?

I personally believe that the legitimate NMD deal was dead and buried
in April 2008, when Mortgage Express withdrew their bridge/same day
remortgage product. Is this finally having an impact on the NMD

We've already had 19 replies to this thread on the Property Tribes Forum, join the discussion - here

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