Like many buy-to-let investors I fell into property investment by mistake. When my wife and I first decided to move in together we “debated” about what we should do with the respective flats we owned.
Should we sell them both and buy a bigger place or keep one as a rental property? I suggested the latter. That way we’d be starting our life together with an appreciating asset that would also generate some income. Surely it was a win-win?
But my wife didn’t quite agree. After further “debate” I eventually talked her round – after all her flat was in a highly desirable location, walking distance to both the river and train station in Kingston-Upon-Thames. As it was on the outskirts of London, I was sure that the value would only rise and we wouldn’t have any problem with the rent covering the mortgage. What could possibly go wrong?
Well, I have to admit my first foray into property investment wasn’t exactly an overnight success. During the first couple of years that flat cost us more than it was making.
But slowly things turned around – the rental market improved and as I’d predicted the value of the property increased. In fact, it’s now worth more than twice what my wife paid for it and she finally admitted I was right! (Well, this is myversion of events!)
And that gave me the confidence to buy another rental property, this time a House of Multiple Occupation (HMO) and eventually make property investment a full time business. But as well as discovering that my wife isn’t always right (just most of the time!), what else have I learnt during my first few years of property investment?
Don’t be afraid to make mistakes
I’m a firm a believer that pushing past the fear of making mistakes is key to developing greater knowledge and experience. To initially fund Lord Panda Property, “we” decided to sell our existing (four bedroom) home and buy a fairly dilapidated two-bedroom property (without carpets and central heating) that I could develop and sell on. As you can imagine my wife (who was three months pregnant) and three children were delighted with this move.
All I needed to do was put in a double storey extension, sell it on for a sizeable profit and all would be forgiven. But unfortunately the local council didn’t share my vision and the project had to be reassessed.
While it didn’t quite turn out as planned I was still able to modernise the property and sell on at a (marginal) profit. But this early mistake taught me a number of lessons.
- Plan for the worst (even while expecting the best)
- Allow much more time in project plans (for planning development and unforseens)
- Simplified developments can still turn a profit
- The better you manage your costs, the better the returns you can generate for your investors
- Don’t push your luck with your wife.
Create a specific business model
Initially my approach to property investment wasn’t particularly structured. I had the buy-to-let flat in Kingston, a student HMO and had embarked on my first development project. All were generating revenue (or would eventually) but I soon realised that I needed to have a specific strategy and business model. This would not only give me focus but would also make it easier to attract investors.
So it was at that point I decided to focus on student properties. I realised there was a demand (and lack of supply) of premium accommodation and a bit of a backlash to purpose built student property – both from older students who wanted something less sterile and investors who wanted less risk. While purpose built student property does generate revenue there isn’t much protection from the downside.
If there is a dip in demand developed residential properties can easily be let out to professional renters or if necessary, sold at a profit due to the improvements which have been made.
Strong relationships pay dividends
One of the first challenges I had to overcome in the early days of Lord Panda was attracting investors. However, before moving into property I’d had a successful career in advertising and had built up a strong business network. These were people that I knew had a sizeable amount of investable income and had shown some interest in property investment but weren’t actually sure how to go about it. As I had worked with them in the past they knew that integrity and transparency were values that I hold in very high regard.
From the revenue I was generating from my small portfolio and the success of my first development (despite the early hiccup) they trusted that I knew what I was doing. And as I say, having finally refined my business model and settling on a specific niche I had a strong model for them to get behind.
Now that I am regularly developing and letting properties I continue to build strong working relationships in the property world – with builders and contractors who help me develop the properties as well as the letting agents and the students I let to. This way I not only have a dependable team around me but also have a strong understanding of subtle movements in the markets – whether that’s changing demands from tenants or buying opportunities.
And this is why we continue to grow the business and generate healthy returns to all our investors.