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10 Things I’ve Learnt (Part 4)
The next thing on my list of 10 things that I’ve learnt over the last 20 years is that: “You Don’t Have To Run Out Of Money.” Or to put it another way, you don’t have to stop buying property.
Over the years I’ve listened to a number of very experienced property investors who’ve come out with blanket statements like: “You’re going to run out of money at some stage and so you’ll have to stop buying properties”. At the time, I nodded and agreed. Then it occurred to me that I’m still buying properties twenty years on, and have continued to buy properties even though technically speaking I’d run out of money.
The truth of the matter is that I’ve been able to do this due to market movements and because property prices have increased. Over time, the value of my assets has risen and this has enabled me to take equity out to keep building my portfolio. So, whilst at times I may have been completely spent out, I haven’t actually run out of money to buy properties.
When I don’t have any more money, what I do is follow the model and refinance. I’ve made this possible by buying particular deals that would allow me to refinance in the future, or by waiting for market movements in the value of properties to go up so that I could then borrow out the equity.
The point is this: you don’t necessarily have to run out of money but you do need to be very strategic about how you buy and plan. You need to make sure that you only take on properties that fit this strategy in case you find yourself with a lack of cash in the future.
But what if you did run out of money? Well, whilst this sounds very blasé, the obvious answer is to just get some money from somewhere else.
Last week we considered that the money for your property business doesn’t have to be your own money. In this day and age, it’s is relatively easy to find people who want to invest in property as a JV partner or sleeping partner, or to just finance specific “one-off” deals.
Out there are many people who are getting poor returns on their money; and if you were to offer them even just a nominal amount (e.g. 5-6%), more than likely they would bite your hand off because this would be far better than the 0.5% that they’re getting in an ISA.
For this reason, my advice is that you let the JV partner suggest how much interest they would like to get. When you’re asking a partner to invest in a deal, don’t go in thinking that you’ll offer them a set figure of say, 10%. Whilst this does appear to make you look generous, you don’t know what they’re thinking and they might be perfectly happy with 5%.
What’s more, I know of people who have offered very generous amounts of interest in an attempt to entice a JV partner to invest in them. However, all this did was make the JV partner very suspicious, thinking that nobody could possibly offer a return this high. So, let them tell you what they want and keep things nice and simple – they may shock you.
To summarise: do we have to run out of money? No, we don’t – and even if we do, it doesn’t mean that we have to stop buying property. If this does happen, we can access other people’s money to make up the shortfall.
In property, there’s always a way.
Here’s to successful property investing.
Peter Jones
Peter Jones B.Sc FRICS
Chartered Surveyor, author and property investor
thepropertyteacher.co.uk
By the way, I’ve rewritten and updated my best-selling e-book, The Successful Property Investor’s Strategy Workshop, which is an account of how I put together my multi-property portfolio, starting from scratch and with no money of my own, and how you can do the same. For more details please go to:
thepropertyteacher.co.uk/the-successful-property-investors-strategy-workshop
