Going back to basics – Part 3

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Over the last couple of weeks, I’ve been sharing a series of posts talking about the importance of having strong foundations, both in your life in general, but also in your career.

There are some fundamentals you have to get right from the very outset, which you can do by asking yourself some very important questions: what, why, when, where, who, how, and how much.

Being able to answer these questions can stop you going in the wrong direction and put you in a better position to move forward with whatever goals you have in mind. 

Having looked at ‘The What’ and ‘The Why’, this week we’re looking at the next two elements – The When’ and ‘The Where’.

Time is of the essence?

When do you want to start? Or perhaps the better question is, when should you start? And obviously I’m thinking here of the old saying: the best time to plant an oak tree is 20 years ago; the next best time to put an oak tree is right now.

But let’s pause here for a second to talk about timings in terms of the economy: is now a good time, or is it a bad time? Where are we on the economic wheel? I’ve talked before about how the economy (especially in terms property and construction) works in a circular manner.  There are oscillations, ups and downs and people often think to themselves that they’ll easily get the timing right, but you need to know where on the wheel you are.

What time is it?

You could think about it as a clockface: the top is 12 o’clock, the bottom is 6 o’clock, and you have 3 o’clock and 9 o’clock to the far right and left. If you could just think about the cycle that we’ve been in over recent years, we’ve been watching prices rise, meaning we went from six to nine, or nine to 12.

With Covid, Brexit, and the current economic issues we’re facing, I feel like we’ve gone past the midnight point and if you’re somewhere between midnight and three, it means that there’s actually potential for this to continue going down for another while until you hit six.

If you go into your first deal knowing that, you might think there’s no great rush to go and buy right now because market prices are going to be falling: you can sit back, continue saving your money and continue preparing yourself, analysing the market and making sure you’re aware of everything that’s happening.

Taking your time means you’re aware of all any risks as well as all the other deals that may be around. It allows you to build your network and get to know investors before you need their money! That’s always a great thing. If you can establish relationships when you don’t need them, it always makes them a little bit stronger.

Forging relationships

If you’re going into a working relationship in a needy way (when you desperately need someone’s money to do a deal), it will come across very quickly, and not in a good way. If you seem desperate, it will put people off straight away. And so, the best thing is try to establish relationships before you need the money, then when the time it comes around to have a conversation about a deal or opportunity, you have a little more credibility.

Your prospective associate already knows you: you’ve talked about your philosophies, you know your ideas, you’ve talked about more than just this deal. Because you know this potential investor, you know what kind of risk they’re prepared to accept, the area that they like to invest in, all the important bits.

When you don’t know someone, you’re on the back foot every time they open their mouth: maybe they share a new piece of data you didn’t know until they mention it (or similar). You’re constantly adjusting as you go and you could end up starting to contradict yourself – not a great look.

I guess my key point here is that ‘The When’ is an important consideration: you don’t need to go in all guns blazing, especially when it comes to building potentially useful relationships.

Location, location, location

The next one is ‘Where’: where do you want to invest? Do you want to invest locally, nationally, or internationally?

Now, you may have dreams of owning property in far-flung countries, but my advice would always be that if you’re starting out, you should stay local.

Invest where you know

The real estate game is very much a local business: you can actually become a millionaire without going more further than a mile from where you live! You know the people around you, you know the areas, the history, local laws, all of that is familiar to you.

So it gives you a clear advantage over people from further away – you’ve got the inside track. If you’re looking at a national investment (say for example, you live in the north of England and would like to invest in London), it’s definitely an enticing aspiration, but it’s something I think you should be patient about – don’t rush in, get your feet wet at home before you start trying to move to the national level.

A Place in the Sun?

Now, buying internationally may sound very glamorous and enticing, but there’s an awful lot you need to think about first. I have made a lot of mistakes investing internationally, and I’m an experienced investor!

It’s definitely not as easy as it might seem. You might think that something looks like a fantastic deal, but what are you comparing it with? A property in Spain may seem cheap compared to your home market, but is it really?

You have to do your homework: if it took you a couple of years to learn your local market, why do you think that you can just arrive into an international market and learn all of the same information in a couple of weeks?

For instance, if someone is selling a property in an international location and foreigners are buying it, ask yourself, why are the locals not buying? Is it perhaps too expensive? What do they know that you don’t? The last thing you want to be is the gullible tourist coming from far away to spend your money, whilst the locals are laughing all the way to the bank.

Investing in foreign property can be very rewarding, but you have to make sure you’re doing it for the right reasons and understand all the risks involved. Don’t get swept up in the perceived glamour: getting a deal wrong in a strange market is far worse than getting it wrong in your home market.

Like the ‘What’ and the ‘Why’, ‘When and Where’ are important parts of the jigsaw! Whilst you might be tempted to dive in headfirst to the first deal you can afford, taking your time can stand you in good stead in the long run. And whilst you may dream of one day owning property in sun-drenched destinations, it’s far better to start small and local before you try and tackle the international market.

Join me next time when we’ll be looking at the next piece of the puzzle: The Who – see you then!