I put this up because it reflects the possible questions on your mind, which is again addressing subjects that are coming up either on an ongoing basis or historically and those of you that are looking to consider getting into property or maybe already dabbling in it, possibly starting on the journey and the question is what type of property investor do you want to be?
I think there’s a slightly broader question we need to address, but the reason I put this image up there is because for a lot of people they’re looking to win back time they want to generate some kind of passive income or some sort of profit that allows them to go and have experiences, spend money on themselves doing things that maybe they wouldn’t normally be able to as they’re head down, working, working, working.
The question is should I be buying property should I just be investing in something that buys properties?
The first step, you’ve got to ask yourself, are you looking for more income?
Are you looking for capital growth or you looking to generate cash because they are the three main categories within property, meaning you buy property rent it out and generate cash flow, or you could buy and sell the property generate cash or it might be that you buy a property and over time the capital value of that property goes up, so you’re still doing whatever you’re doing you’re supporting it while it goes up in value. Do you want to be hands-on or hands off?
As I got older I am less hands-on in my property business still doing deals looking at developments and also looking at properties that generate cash flow and we do that on a weekly basis, we grab opportunities, we put offers in we lose them, others we go yes, there’s a deal here.
The hands-on is everything from I do everything i.e. you go out do the research run the numbers, go into the market view the properties meet the builders meet the agents, meet everybody and then get involved in the process of the build and all the way through to the end or the renovation of the project, then you get the letting agents on board and tenants in place and you can manage them.
That’s an extreme case of hands-on and there are many, many gradients all the way up to hands off meaning, actually I don’t do anything I put my money in and I get a return on that money or get cash flow on that money. You’ve got to decide where you want to get into the scale of this. Hands on can also mean like I do at the moment I can put offers on property I can view properties through a team of people. I have somebody manage the portfolio, looking after the finances and then typically what happens is a deal comes on the table I’ll review and assess. I say the numbers stack up yes, I’d like to put an offer in. The offer goes in and then once it gets accepted there’s a whole team around me that can do the work for me. So, still hands-on, but more hands-on as a business owner making decisions as opposed to hands-on doing the business and doing every aspect of that as well.
So think about this when you look at the property business certainly starting out if you do want to get into property properly I recommend getting very hands-on initially to get a sense of what the different moving components of the business are, so you can step away and hand some of those components over.
The hands-off approach you’ve got options. One is yes, you have a team in place you’re still hands-on in the sense that you’re running the business and in making decisions in choosing properties, that’s one way to do it, so that’s sort of fairly hands-on if you like, and fairly hands off in the middle.
Or you go fully hands off where you literally just park money with somebody who manages and does it all for you and you get a return for that. It could be like an angel investor to a business where they give you 4, 5, 6, 7% per year. We have people that we work with who like that they have a lot of capital and they just want to get their money working harder than if it was in the bank for example, and that’s another approach. Or it could be that you are somebody that says, well, I want to be a joint venture partner, so I’ll put money in, split profit on the deal for example, I want to be hands-on but only part of that business.
Or it could be that you have somebody find you property deals for you. In other words, you are an investor, you’re hands off, you’ve got a certain amount of capital and then you get somebody to find those property deals for you. If you do that I still highly recommend learning to do this professionally, so you know how to filter and choose the person or the people finding you properties because there are a lot of people out there that I’ve come across over the years that actually use what we call sourcing agents to find deals, but because they weren’t educated in what to know and what to look for, how to analyse and evaluate property they were found shit deals and it’s cost them a lot of money.
That’s happened to me way back in the past when I started and these are things you’ve got to be mindful of.
The final thing is just how much time do you have? What return on investment are you looking for?
If you’re more hands-on, then the chances are you will get a higher return on your money if you put £100,000 into property that you do yourself, you might get 20, 30 worth of investment as an example. But you’re putting your time into that whereas if you go more hands off you might get if you’re an angel for example you might get seven or eight percent return but you’re doing nothing, you just park the money there and somewhere in the middle of that is the 10, 15, 18, 20%, potentially if you’re slightly hands-on and slightly hands off, so you’re balancing it out that’s pretty much how it works. You as an investor, if you want to get involved get it going and then transition to a more hands off which is how I did it.
Spend some time finding out about this. At least get your head into what are the elements needed to make this happen, of course, if you go this is amazing, I really want to do this, then invest in yourself go further down the rabbit hole. Money spent on you is always going to pay dividends in the future.
So the more knowledgeable you are about a subject, the more selective you can be with your strategies.
For example, I choose to be somewhere in the middle, but on bigger projects I will go down the rabbit hole to be a lot more hands-on because it’s a project I’m excited and I want to be more hands-on, whereas this run-of-the-mill deals last five or six properties we bought I haven’t seen them, they’re more hands off. You can get a balance and that’s probably best to learn that process.
I’m going to sign off now. Hopefully you have a great day.
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