Mistake #6– Over killing on the Refurb

If the property requires some sort of renovation, do the bare minimum. Do not get drawn in by those magical makeover TV programmes, where the selling price is largely overestimated, and the time and cost of the project are both underestimated. Always over estimate
90% of anticipated selling price is a good figure to work on. Factor in your profit and loss AND account to see if the project is really worth your time. Remember, it's anticipated, it could be more or it could be less!

Also remember that a refurb to rent needs FAR less work and expense than a refurb to sell!

Mistake #7 – Getting emotional about the numbers

The numbers never lie. Do not get emotional over property as this will cost you money. And cause you pain. Don’t chase the deals; let them come back to you. Play the long game – we had a deal that we recently exchanged that we have been negotiating on for 2 years that fell out of bed 3 times! This is not uncommon, and far better than trying to tie a price up too early and getting too emotionally involved and ‘wanting to get the deal done.’ Beginners are especially susceptible to this.

Have a strict set of rules and do not deviate from them. If the numbers do not work for you, don't think they won't for another investor. Consider selling the lead on/packaging the deal up. Maximise your revenue streams!

Mistake #9 – Selling your Property

If you have read our first book, ‘The 44 Most Closely Guarded Property Secrets’ you will know we bang on quite a bit about you make your money when you buy…

and not when you sell.

The reason we believe selling is a mistake is because you are transferring your wealth to someone else. You are slaying the goose that is laying the Golden eggs.

Now, we do believe that IF your property is not performing well, or you have bought a property out of area or you can flip a low yielding property on a quick turnaround, then selling the property to reinvest in another better performing property project or to get out is a viable strategy.

The mistake we often see is investors not investing for the long term. If we go by past property cycles, and property prices increasing in value over time, then continually selling your properties reduces your asset base and long term wealth

Mistake #10 – Buying Overseas, off plan & out of area

This is probably the biggest one and why we have saved it until last. We learned this the hard way in our earlier investing days when Mark bought his flat in Bulgaria which rents out for 2 weeks per year!

Many investors are often hypnotised with the fancy artist impression of some beautiful luxury apartments by the sea: somewhere in an idyllic holiday location 3 years off plan

They are advertised by the big glossy marketing packs as being fully serviced and having a rental guarantee for at least SIX years! Wow amazing…

That’s not all: the icing on the cake is the property is being offered at 50% of its original list price

We would all want a piece of that right…..Ehhh…Actually No and here’s why:

The list price is some inflated figure without any proven comparable values

Nine times out of ten, the purchase has to be made in cash

The clauses in the contract state that after the 5 year period if the buyer does not pay the services charges (which will be an extortionate amount) the property will be seized..

and…

to top it off, the property is worth less than you paid for it

You pay the developer a big chunk of profit. You pay for something new, which devalues immediately it isn’t new (which is as soon as you buy it!)

We would go as far as not investing overseas unless you can speak the language, know the locality, have trusted contacts and know the property buying system: which actually makes it a local purchase!

However we will always speak to a few investors who ignore our advice and buy an overseas property which has turned out to be a property nightmare! Many of the people who come to Progressive Events do so because of these early mistakes

Over the last few years Mark and I have talked to 1,000’s of people who have started investing in property but have made mistakes which have cost them a huge amount of emotional and financial pain.

Now although we’ve met many ‘experienced’ or ‘seasoned’ investors at networking events who on paper looked like they were doing well, this has mostly been in a rising market, where mistakes can be disguised, rather than solid property investing strategies – absolutely vital in this market.
Property is a fantastic wealth creation vehicle, and it can give you long term financial independence if you can successfully get to grips and overcome some of the challenges that many investors face.

This short article will highlight some of the main reasons why investors fail and give you some solutions you can implement right away to succeed in your property business:

Mistake # 1 – Not Buying Under Market Value

Ok tell us something that isn’t new…Well sticking to the basics is often sooooo easy to forget that it is sometimes important to refresh our minds with the fundamentals. Warren Buffett has stuck to them for 50 years.

You are in the business of finding motivated, distressed or desperate sellers who want to sell quickly at a discount and where you can help them with their problems. Where price is NOT their most pressing concern.

Buying UMV will you give instant equity and a buffer if property prices were to fall further. It also allows you to remortgage and remove your initial deposit as soon as circumstances allow, thereby significantly reducing the risk of losing money in the short term, as you will have left none of your own money in. 0% risk on finds, infinite ROI

With this concept (which works in any market) you do not need property prices to increase in value as you are making money straight away from the discount and locked in profit

Nice eh?

Mistake #2 – Underestimating the importance of cash flow

Not treating your property acquisitions as a business is a recipe for disaster. We know the old adage that cash flow is king and without a healthy flow of cash your property business will fail

Now, we are not only talking about having good cash flow properties which is essential but also having a buffer of mortgages payments and an extra for expenses, to counter interest rate rises which can put a dent in your monthly profits or if the tenant leaves and you have to fund the void periods.

What if you have an unexpected cost such as having to replace a boiler?

If you are starting out, this can be tough, we know that. However, without having cash reserves building a successful property business can prove extremely difficult

However, all is not lost. If you do not have cash reserves set aside, then perhaps you could find a JV partner who has a cash sitting in the bank [getting no interest], who can have an equity share in the property

You can become very wealthy by utilising and reinvesting using other people's money [OPM]. Have a read of our blog post on raising JV & PI finance: http://tinyurl.com/3a44svr and become a fan of our Progressive Property Joint Venture Millionaire facebook page and hit the 'LIKE' button and get access to the resources: http://tiny.cc/1hpce

Remember the 'number of properties you own is vanity, the cash flow you make is sanity and the cash you got in the bank is reality'.

Mistake #3 – Buying for Capital Appreciation [Growth] and not Yield

Many investors base their entire business model on capital appreciation and underestimate funding the shortfall in running their property portfolio. This is a very big mistake and a very high risk strategy to be avoided at all cost. It was the strategy that financially ruined many people 2001 – 2007

All things being equal, we buy our stock on the basis that property prices will never rise, meaning our model is based on instant profitability: income from rent NOT just growth. This mentality helps us make sensible decisions that the figures and the investment will provide a positive income. Capital appreciation is seen as bonus

Sure, we all know property prices virtually double every 10 years, but as portfolios grow shortfalls can become out of control if they are bought on a growth only model

Never ever buy with emotions. Remember, an asset is something that puts money in your pocket and a liability is something that takes money out of your pocket. You should be turning away more deals than you buy, making sure the yield is good, and factoring in ALL of your costs

Something to think about…

Mistake #4 – Not doing enough research

It is imperative that you do enough research and due diligence before you buy so that you reduce and minimise the risk you are about to make

Most novice investors create the supply without the demand. There is absolutely no point (if your strategy is buy to hold, see mistake #5) buying a property that you cannot rent out.

Your local post code district within your goldmine area must be fully researched in terms of the rental market and the amount of current stock within the area. The bridge between supply and demand must be closed

Buying purely because there is a big discount is a mistake, because you will be left paying the mortgage and the operating expenses that come with holding the property. Buying property with apparent discounts without understanding comparables can give you unrealistic perceptions of actual value

Other research you should do along the way:

Is the property mortgageable? Is there any structural damage? Find compatible sold prices, instructing independent valuations, obtain recent sales and letting demand confirmation from agents, check both the Land Registry and current value prices, check LHA rates, have a schedule of any refurbishment costs that will require works, a summary of the locality of the area, transport links, demographics from government and council stats, crime rates, proximity to schools etc

Mistake #5 – Not having an Effective Investment Strategy

Investing in property is a personal strategy based on your personal financial situation, your attitude to risk, the level of funds you have to invest etc

Preparing and understanding your own motivation, goals and aims will help you with your first step and give you a structure about your strategy

For example, if you have a £50,000 worth of capital or less to start off with, then investing in HMO’s will be a pretty tough business because you probably need more upfront cash, but that does not mean you cannot invest in single let properties adopting our model of buying, refurbishing and remortgaging your fees back out

Buying a Property is easy. It’s easy to do, but it’s also easy not to do

However, buying a property that will meet and deliver on your personal strategy and your financial objectives is more of a science and one that you should familiarise yourself with

Other things to think about are how much time you can afford to put into your property business. Many people are unrealistic about the time they can afford: they think they have more or less than they do in reality. If you don’t have much time, perhaps you may need help. If you have lots of time then you probably don’t need the same seed/start up capital.

Watch out for the next 5 mistakes coming soon.

Following from the success, empowering &inspiring first day, day 2
of the Property SuperConference was kicked off by Rob and Father-
daughter duo, Francis & Emily Dolley..

‘Multi-let Without the Sweat’ is a niche little strategy which involves finding a tired landlord or someone struggling to rent their property & offering them a ‘guaranteed rent’ for a fixed term at below market rent & multi-letting the rooms at market value& keeping the difference. Usually this would involve setting up a managing agreement & positioning yourself as a letting agent, keeping the surplus cashflow as your management fee.

This concept is great for a few reasons: You don’t need a mortgage, a deposit, high refurbishment outlay, or planning permission, as you will be taking over established HMO’s & making between £500-900 pcm.

Who wants a piece of that cake?!

Whilst on second stage, Mark & Trevor Cutmore were delivering
No Mortgage, No Deposit, 2012 Cash flow Investing Techniques..

.. This was a fantastic section for those Investors who couldn’t get mortgages, didn’t have money for deposits and were able to make between £200-£400 pcm per deal using lease option & instalment contract strategies.

We were fortunate to have Trevor Cutmore, sharing his experiences once again, tailing off the back end of the Progressive training, showing how he is attainted over £30k per year passive income from his residential and Option portfolio. Trevor was a Progressive student and is now head LO trainer at Progressive because of his fantastic knowledge and amazing results. He is now buying more than we are at Progressive!

Recovering from a short power networking break, Rob went into detail about
finding your local goldmine area.

In simple terms, a Goldmine investing area = locality + tenant demand + volume of discounted stock + 8.5% plus yield

Rob went into detailed specifics on the CASTLED model when researching your micro areas (This is pure gold in the right hands…)

Ok, let's take a look…

C.ashflow – Not treating your property acquisitions as a business is a recipe for disaster.We know the old adage that cash flow is king and without a healthy flow of cash you won't have a business period.

Tip: Look at micro areas with the highest yield & return.

Remember – the 'number of properties you own is vanity, the cash flow you make is sanity and the cash you have in the bank is reality'

A.menities – The availability and accessibility to local amenities and facilities such as local transport links, employment opportunities, local businesses, retail parks,
supermarkets, schools and colleges, will ensure your investment has strong tenant demand & the highest capital growth potential.

S.upply – Ensure properties in your micro-area have the strongest (and fastest growing) level oftenant demand relative to the supply of properties of that type

T.enants – A simple thing you can do to check high tenant demand in an area is to put an advert in the local paper for a property which you propose to buy

(could just be a general ad in the classifieds)

List the type of property and the rent and put your mobile as the contact. Gauge how many calls You get and monitor the number of enquires. Clearly lots of calls means that it is likely to be a reat area, none means that there may be low tenant demand!

Your risk is vastly reduced as you know whether it will rent BEFORE you make the decision to purchase. Also check LHA waiting lists in your area.

L.ocal – Not only does buying in a tight local area allow you to understand exactly what the tenantdemand is, but it also ensures you understand the price of the local stock inside out and (this isthe big one) you can manage them properly jumping on voids, high maintenance or bad debt.. all things, which left unchecked, can really hurt you.

E.xisting – You will focus better on 1 or 2 property types in an area, say EXISTING 2 or 3bed terraced houses, as you will likely end up knowing the prices better than the surveyors, agents, vendors & investors. This means when something is priced cheap, you'll be able to spot it right away whilst others don't.

D.iscounts- By getting a good level of discounted properties whilst ensuring a number of greater comparable units are selling at open market values, you've got instant equity and a buffer if property prices were to fall further. It also allows you to Remortgage and remove your initial deposit as soon as circumstances allow, thereby significantly reducing the risk of losing money in the short term, as you will have left none of your own money in. 0% risk on funds, infinite ROI.

We've never previously revealed the CASTLED model (except for our LIVE presentation at the PPSC) so we hope it helps you get the highest ROI in your goldmine area

Simon Zutshi was delivering some golden nuggets on second stage on making great returns flipping deals that didn’t fit your investment strategy or had little or no equity. This was insightful to say the least.

Next we had Mark detailing another investment strategy that we are utilising very much in the current climate that we’ve never shared before – Title Splitting or otherwise known as Buy One Get One Free (BOGOF).

This is very specific sexy strategy which involves buying a property & developing it into self contained flats, creating separate titles & separate leases. There's often a large gap between the value of a house and what it might fetch converted to flats.

The flats , combined are worth more than the value of the houses on its own. We recently purchased a property for £185,000 (15% UMV)& developed them into 4 self contained flats, total value after refurb £415,000 & generating £880 NET cashflow pcm.

This talk was definitely an eye-opener for some: taking such a simple strategy & exploiting it to its core in terms of cash flow & uplifted value

Next we had the UK’s leading authority on LHA, Mike Frisby sharing his cashflow nuggets especially his 2 + 2 strategy which we never heard of – this was a fantastic section & Mark was certainly implementing these tricks the next day for our properties let to LHA tenants..

We had the crazy Austrian& Brand Expert, Daniel Wagner revealing his
“Expert Success Formula”..

Imagine what it would feel like Right now to be BOLD and turn your dreams into reality… Work when you want, where you want, and how you want. No more alarm clocks ringing at some ungodly hour every morning, each weekday, no more struggling to work, squeezing through bumper traffic, underpaid, unfulfilling work for 40-60hours a week [or more] for the rest of your life…

Daniel was absolutely mind-blowing. Now was the time to turn your life around, cash in and develop your niche area of property investing & brand so you can teach and build your portfolio & generate income, and leverage yourself as a brand expert.

What was even more powerful was that he was actually doing it LIVE, teaching you how to influence and get people to buy your products, while doing it!

Inspirational to say the least

Lastly, Rob held the audience with his spellbound skills in the advanced bare knuckle negotiation section.

A truly gritty and practical segment from Rob, with a no BS, underground presentation you wouldn't want everyone knowing, especially estate agents and vendors – his 'sudden change of behaviour' technique was extremely powerful.

To end a fantastic start to a great day, we donated over £28,000 to Cancer Research (topped up by Rob & Mark to £30k)- Thank you for those who joined us last making the 2012 Progressive Property SuperConference the most amazing yet.

We are all looking forward to next year already ; -)