Challenges are what make life interesting, overcoming them is what makes life meaningful.
Property investing has been one of the hardest, most time-consuming and stressful businesses that I’ve ever been in. But, it’s also the one business with the most capacity for passive income.
With that said, today I want to share with you how you can conquer the 4 most common challenges of property investing.
1. Inaccurate Property Investment Deal Analysis
Property investing is a numbers game. If you understand the numbers, you can make an informed and educated decision. If you don’t know the tried and tested formulas, you might get seduced by estate agents and pay premium prices for the property.
In property investing you have two major strategies, buy to hold and buy to sell. To successfully buy and hold, you need to ensure the monthly rental is greater than the monthly expenses so that you walk away with a monthly positive cash flow. Buy to sell requires you to buy the property at a discount and then sell it at a premium price, making a lump sum of profit. (Read more: buy and sell, the basics of running the numbers)
To understand these different strategies with real numbers, check out our tutorial videos below:
– How to analyse a buy and hold deal
– How to analyse a buy and sell deal
The key formula used in My Property App’s algorithm is Return on Investment. The equation for Return on Investment is profit divided by capital invested.
Profit
Capital invested
Once you have determined your ROI, you can compare that with the interest you receive at the bank. If this deal brings an ROI of 15% and you are getting 5% interest at the bank, it means that this property investment is helping your money work 3 times harder than at the bank.
If you don’t like numbers, you won’t ever have to worry about your numbers again. My Property App has a range of property investing calculators that will do the math for you.
2. Vague Plan
The most important factor that will determine your success… GOAL SETTING. Sometimes in life, your further behind than a lot of other people, you might have less resources and opportunities, but the one thing we all have that is consistent, is time. That is the only thing that every human has the exact same of. It’s the ones who best use their 24 hours that have the competitive edge, and goals helps you channel the best use of your time.
Why is having a plan so important?
- It gives you clarity and motivation towards your future.
- You can see measurable growth, as well as see what is and isn’t working – which can influence your plan on how to get there.
- With goals, you will feel you are making progress, even if you haven’t received any material rewards yet. Sometimes your goal is to earn a certain amount of money, but that might take a few years to achieve. Keeping your momentum is important and if you can accomplish smaller goals, you will feel that you are getting closer and thus be motivated to keep going.
Time is the only thing that you can’t buy more of. It’s a precious resource that needs to be used correctly. The key advice here is to implement 2 life changing techniques, namely; goal setting and time sheets.
Goal setting:
We recommend you plan your week every Sunday. Every 10 minutes of planning saves you 1 hour of execution. Therefore, if you can commit to planning your week for 1 hour every Sunday, you can buy back 6 hours of execution time per week. That’s over 20 hours per month and over 300 hours per year.
Click here to get a free copy of our Advanced Financial Goal Setting eBook.
Time sheets:
It might sound strange that we recommend you track your hours, but you can’t improve what you cannot measure. You can use a time tracking app or good old excel to analyse where your time goes and where it can be improved.
Below is a review of the time spent by me. You can see the percentage of my working time (i.e. x axis) over the various months of 2019. At times I spent over 15% of my working day on property, other times it slumped to 8%.
3. Poor Due Diligence
Finding the right area to invest is tricky. Some areas are safe, secure and provide a small return. Other areas are risky but provide attractive returns. In order to make an informed decision, you need to make use of unbiased tools. The tools I like are TPN and LightStone.
TPN is filled with tons of valuable insights. For instance, you can see in the below image that TPN tells you which areas are green (good), yellow (ok) and red (bad) in terms of your chances of getting your rent paid on time.
LightStone on the other hand provides useful information regarding sales values of areas. For instance, the below image depicts the previous sales prices of properties in the Bonearo area. You can use this information to determine a fair market price for your property. This will give you confidence in running your numbers and determining a good discount that will secure a nice profit for your first buy and sell investment.
Read more: How to find the best property investment areas.
4. A Lack of Property Investing Education
The main reason for my success in property? Coaching. It’s simple, the quickest way to success is to follow in the footsteps of someone who has already achieved it.
Throughout my coaching journey, I learnt about the difference between assets and liabilities, how inflation is different from appreciation and the power of compound interest.
Education gives you the competitive edge, because the more you know, the more you can do.
Thanks for reading and you are welcome to share your feedback.
Please feel free to contact Laurens directly, alternatively, if you have any questions or recommendations for future articles, please contact our support team.
