Property investment is a long-term commitment. Before deciding what to buy, where to buy or which strategy to follow, you need to understand what you actually want property to achieve.
It sounds obvious, but it’s a step many investors miss.
I regularly speak to people who have already found a property on Rightmove and want to know whether I think it’s a good deal. Eight times out of ten, my answer is no.
Often, there’s nothing fundamentally wrong with the property. The problem is that it doesn’t fit the investor, their circumstances or what they’re trying to achieve.
That’s why I believe every property investment journey should start with an audit.
What do you want property investment to achieve?
Before looking at individual properties, you need to understand the destination.
Are you investing to:
Generate additional monthly income?
Build long-term capital growth?
Create an alternative to your current income?
Diversify your existing investments?
Build assets for your family's future?
There isn't one correct answer.
The important thing is knowing yours.
From there, we can look honestly at your current position, including the funds you have available, the time you can commit, your existing assets and your expectations.
Once we understand where you're starting and where you want to finish, we can work backwards and create the pathway between the two.
Conceptually, it's simple. In practice, it can completely change the way you invest.
Why buying a property too quickly can be an expensive mistake
Property is a high-value, relatively illiquid investment. You can't simply change your mind and sell tomorrow without potential costs and consequences.
Yet investors can feel enormous pressure to get started.
Sometimes that comes from other people. Sometimes it comes from themselves.
Without a clear strategy, it's easy to become distracted by the latest opportunity, a property someone recommends or a strategy that seems to be working for somebody else.
The fundamental questions should come first:
What should you buy? Where should you buy? Why are you buying it?
Without clear answers, an inexperienced investor can lose money or, just as importantly, tie up their available capital in properties that prevent them from progressing.
A bigger portfolio isn't necessarily a better portfolio
I once worked with an investment banker living in London who had already built a portfolio of properties scattered across different parts of the UK.
On paper, they were a property investor.
In reality, the portfolio was causing problems.
There were difficulties with letting agents and tenants, high maintenance costs and properties generating very little money.
We audited the entire portfolio.
We looked at each individual property, its quality, local demand, management and performance. We then completely restructured the investment strategy.
Some properties were sold. Others were retained.
This released capital and created an investment pot that could be redeployed much more strategically.
Initially, the result was a smaller portfolio, but it contained higher-yielding properties in locations where we believed there was also potential for the assets to appreciate over time.
We hadn't simply added another property.
We had created a better portfolio.
Choosing the right property investment strategy
One of the biggest surprises for new investors is just how many different ways there are to invest in property.
Buy-to-let is only one option.
There are HMOs, serviced accommodation, commercial property, development opportunities and numerous variations within each.
Different strategies also require very different amounts of time, capital and involvement.
For example, somebody may tell me they want to invest in HMOs or serviced accommodation without appreciating how much work those strategies can involve.
Another investor might say their priority is capital appreciation while pursuing a strategy primarily designed to generate income.
Neither strategy is inherently right or wrong.
The question is whether it is right for you.
What should a property investment audit look at?
I start at the end.
What do you ultimately want to achieve?
From there, we look at:
Your goals and expectations
Your current financial position
The funds available to invest
Your existing assets and investments
The time you realistically have available
Your appetite for involvement
The different property strategies available
The level of income or capital growth you're seeking
Sometimes people arrive with very clear targets.
Others simply know they want to invest in property.
In that situation, part of the process is exploring the options, understanding the realities of different approaches and working out what property could realistically do for them.
A proper audit can take several hours and sometimes more than one conversation. That's intentional.
Large sums of money are involved. Taking the time to understand what you're trying to achieve before investing can save considerably more time and money later.
Be careful who you take property investment advice from
Property education is a crowded market.
One mistake I see repeatedly is investors taking advice or buying deals from people with very little investment experience of their own.
Before following someone's recommendations, ask questions.
What have they actually bought? What have they managed? What have they developed? Have they experienced different market conditions? What happened when things went wrong?
Experience doesn't guarantee that every decision will be right, but when significant amounts of your money are involved, understanding the experience behind the advice matters.
Is now a good time to invest in property?
There is never a universal answer to this question.
Higher interest rates have made it harder in recent years to find properties capable of producing the yields some investors became accustomed to.
At the same time, changing market conditions can create opportunities for well-prepared buyers.
The important distinction is between asking "Is now a good time to buy property?" and asking "Is this the right property, at the right price, for my strategy?"
I find the second question far more useful.
Markets change. A well-considered strategy gives you a framework for making decisions through those changes rather than constantly reacting to them.
Start by understanding your position
If there's one thing I'd like you to take from this, it's that property investing deserves more thought before the buying starts, not less.
You're dealing with substantial amounts of money, long-term assets and decisions that can affect what you're able to do next.
Understand where you are.
Decide where you want to go.
Then build a property strategy designed to get you there.
Start with a free Position Audit
If you're considering property investment but aren't completely clear on your next move, this is exactly what the Position Audit is designed for.
It's a free 30-minute Zoom call with me. I'll ask a few straightforward questions about your current position, what you're trying to achieve and where property might fit.
My aim is to give you at least one observation about your position that you haven't heard before.
There's no pitch, no slide deck and no upsell on the call. If it makes sense to explore a next step afterwards, we'll talk about that by email.
