10 Common Property Investment Mistakes New Investors Make In Today’s Buy To Let UK Property Market
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10 Common Property Investment Mistakes New Investors Make In Today’s Buy To Let UK Property Market


Tony Law: Today let me share with you 10 big
mistakes that I think lots of you property investors are making. Hi, my name’s Tony Law
from Your First Four Houses. My channel’s all about helping you achieve financial freedom
from your property. If this is your first time here, be sure to subscribe to the channel
and click the bell notification icon so you don’t miss out on any of the free content
that I give you each and every week. Tony Law: In preparing for this video I had
a list of about nearly 50 different mistakes I think new property investors tend to make
when they’re just starting out. I’m not going to put you through that list, I’ve trimmed
it all the way down to just 10 big mistakes that I think new property investors tend to
make. Tony Law: Let’s get started. The first one
is, not knowing your investment objectives before you start investing. Are you looking
for cash flow today? Are you looking for long term capital growth? Are you looking for a
mixture of both? You need to decide what your investment objectives are before buying investment
property, number one, and you then look for properties that align with that investment
objective. Tony Law: Next one, waiting for the perfect
property to come along. I am so guilty of this, that’s what I started to do when I first
started out. I had a bit of money to invest and I was looking for something that was a
perfect deal and I found something that was really quite good but it wasn’t perfect so
I didn’t do the deal. I let it go. Six months then went by without me finding anything that
compared with that. Don’t make my mistake, don’t wait for that perfect deal to come along
because you might be waiting for some time. Tony Law: Along a similar vein but on the
other side is, don’t become a motivated buyer. By this, what I mean is sometimes people have
a lump of money in the bank. They’ve realised that property investing is where they need
to be and they’re becoming motivated by it, they’re looking to buy anything, frankly.
That’s not what you should be doing. Having the money in the bank is wonderful, it gives
you an opportunity to go out there and take lots of action and find a really good property.
Maybe not that perfect property as we were just talking about but find a really good
property. Then do the deal, don’t think that you’ve got to spend that money today. Tony Law: Next one, letting emotions overrule
investment logic. You’re never going to live, well hopefully not, you’re never going to
live in this rental property. I think that what you should be doing is using investment
logic to decide whether you should buy that particular property. What do the numbers look
like is the big thing of course. Also, look for other factors as well and I’ve done videos
on this kind of thing. Buy for investment logical reasons rather than emotion. Tony Law: Next one, doing insufficient due
diligence. Now, I personally think I can now search any property in the UK in about 15-20
minutes but it’s taken me quite a long time to be able to do it in that short amount of
time. What you should be doing initially is doing loads of due diligence … Bit of a
tongue twister there, due diligence, maybe taking a few hours to really research that
first or second property before jumping in and putting your money on the line here. You’ve
got to get good at doing that and then only in time can you start to refine down how long
it actually takes you. Tony Law: Next one, not getting appropriate
financial advice. Now again, I talked about this before. You should have a competent tax
adviser on your power team, somebody that you can phone up and he’ll give you advice
on how you should be buying that property. You need to have a competent independent mortgage
broker that you should be speaking to and he’ll give you advice that’s appropriate for
your set of circumstances. Tony Law: Then, last but perhaps most important,
you should have an accountant. Go and sit down, spend the money that is required and
get his financial advice. Then, and only then should you be taking action. Next one, paying
too much. Now, it’s ever so easy to find a property, that’s on the right move, that’s
already on the market, it meets pretty much all of your needs and you go in either close
to or on the actual, what they’re asking for the property. Tony Law: You know what? Just because they’re
advertising it for that, that doesn’t mean that’s what you should actually be paying
for it. Work out what the deal is actually worth for you based on your experience, and
I appreciate it takes time to build up that experience, that’s what you should be paying
and no more. If it doesn’t work for the seller that’s okay. Put it in some kind of a follow-up
system and if they haven’t sold in three, six months time or even four to six weeks
time then you go back to them. You say, “How you doing? Are you interested now? Can we
do something with this property now?” Don’t pay too much for that next deal. Tony Law: Next one, underestimating refurbishment
costs. Now, wow have I paid too much for refurbishment of properties over the years. Now I kind of
think I’ve got a pretty good handle on what the costs should be. When you do property
number one or two, let’s be honest, you’re probably going to overpay for some of the
refurbishment costs but note down all of the costs, all of your expenses in property number
one and two and three. Each time you do that next property, you can go back over those
costs and say, “Actually, what did it cost me to build that acoustic wall? What did that
on suite bathroom actually cost me? Let me look back at my figures.” Tony Law: Next one, keeping up to date with
rent rises. Now, I know that’s a bit of an old one but when you start to build a bit
of a portfolio and you’ve got a few properties and maybe you’ve had them for a few years,
what you’ll realise is that sometimes tenants keep very, very quiet because they know they’re
paying less than the market rent. They don’t want to bother you. They might not want to
bother you because they’re simply lovely people, that’s absolutely wonderful, but sometimes
tenants look at the market rent around them and they’re aware that actually they’re underpaying
slightly so they keep very, very quiet. Tony Law: What I now do every single year
is I look at my properties on a specific date and I go and look for comparables out there.
“If I was renting this property today what would I actually be renting it for?” By that
I mean I don’t automatically put the rent up. I look at comparables and if it is actually
slightly below where it should be then I’m going to be speaking to that tenant now. Sadly,
unfortunately, the price is going to actually be going up. Tony Law: Lastly, investing for the long term.
I personally think lots of people are making short term decisions when they’re building
their property portfolio. Where I now come from is I look at a property and I think to
myself, “Do I actually want to keep that property forever?” If the answer’s yes then that’s
a really big tick in my book and then I will probably be buying that property. Tony Law: I hope you found that helpful. For
more tips and tricks like this, be sure to subscribe to my channel. Also, make sure that
you take away this 50 point checklist, what are things that will really help you the next
time you want to buy an investment property. My name’s Tony Law from Your First Four Houses
and I look forward to seeing you in the next video.

16 Comments

  • Q Dog

    Can you elaborate on Number 5 please. I'm a stickler for the details and due diligence but what do you go through?

    My standard due diligence (on a refurb project) takes me through buy price, sell price after refurb (based on historical sales within a year and current prices), cost of financing, stress testing on costs, build quotes and getting a solicitor to check legals. Beyond that what else do you check?

  • MartialVidz

    Number 9, is a bit unfair as you want to keep your long term tenants from leaving; thus avoiding voids.
    If someone has been with you for 10 years, there should be some incentive; compared to a tenant that has just moved it 6 months ago.

  • Dalbir Rai

    Hi Tony, in order to keep the costs down would you suggest managing your rental properties yourself in the beginning when you only have a few or in your opinion is it best to out source this to an agent giving you true 'passive income' ?

  • James Palmer

    Hi Tony, I'm really enjoying your stuff! A quick question(s!) if I may. I own a house outright (thanks to inheritance) worth around £475k, which I'm currently renting out. I'm looking to potentially take some money out of this property to use as a deposit for another house/houses! I will do the necessary accountant/mortgage advisor/tax advisor research, but is there anything you can see in my particular situation that might be a pitfall that could be in my (considerable) blindspot!

    would it be better to try and get 1 house or multiple homes with the cash I can extract from the property to use as deposits? Is there a benefit in getting 2 £200k properties Vs one £400k property from a stamp duty point of view? or should I not even worry about that as I'm in it for the long term?

    Apologies for the rambling and endless questions! :O

    Many thanks

    James

  • Adam Long

    On point 5) you can do 15 min research on a property (granted due to experience) but that would make a great video!! Hint, hint…

  • Josh Grace

    Do you have a Facebook group as opposed to a ‘like page’? I’m interested in joining a community of like minded people. Thanks

  • Alessandro Santese

    Hi Tony, great videos as always. I bought my first property (where I live) 2 years ago at 265K and it's not worth more o less the same. Considering that I have put down a 10% deposit am I right to say that if by the time the 2 year fix mortgage ends (march next year) the property value stays at around 265K I would have an equity of more less 46K? This would come from current value of 265K (assume it remains that ) – 219K (265K(current value) – 26.5K (10% deposit) + ~20K (2 years of mortgage payments))? Did I get this completely wrong or am I right? Thank you

  • Terence Booth

    Hi, could you do a video about the types of expenses you can claim as a landlord for both buying in your own name or in a company or a trust? and the pros and cons of each? I think its a great bit of info that nobody covers

  • Gabriel

    I got ripped off on refurbishments. I was charged £700 to plaster a hallway for £15 worth of plaster. I was so incensed I learned to plaster and saved myself thousands for me and wider family. Theres loads of great advice and instructional videos o youtube to tackle any domestic job.

  • Josh Cox

    Hi Tony – IV been watching your videos now for a few days and I'd like your advice on something I'm 24 rent a small flat with my girlfriend and I'm wanting to start investing in a property to rent out and earn some sustainable income however I'm not exactly educated mortgage wise and don't have any large amount of money in saving how would you suggest going forward I know I need to educate myself more on this before committing to anything but what from your personal opinion would you suggest ? Anyone elses input would be great too ,thanks

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