10 Things I’ve Learnt (Part 4)
You don’t have to run out of money
In my last post we considered that a lack of money should not hold you back from getting started in property, and this week we’re going to think about how you don’t have to run out of money. Or, put another way, you don’t have to stop buying property.
I’ve come across many very experienced and knowledgeable property investors who’ve stated: “I’m going to run out of money at some point and so I’ll have to stop buying properties”. At the time, I nodded and agreed until I considered that I’m still buying property twenty years on, and did not stop buying property even though technically speaking I’d run out of money.
In my case, this was possible due to market movements and because prices had increased. The value of my assets had risen over time, and this enabled me to take equity out to keep expanding my portfolio. As such, whilst at times I lacked disposable cash, it didn’t stop me from buying properties.
When I do get low on funds, what I do is follow the model and refinance. Having opted for specific deals that would allow me to refinance should I need to, or, by waiting for property prices to go up to enable me to borrow out the equity, I’ve managed to keep pushing ahead.
So, my point is this: you don’t necessarily have to run out of money but you do need to be very strategic in your approach. You need to make sure that you only take on properties that fit a strategy such as this to enable you to work around a possible lack of funds in the future.
Nevertheless, what could you do if you did run out of money?
Whilst it sounds somewhat nonchalant, the obvious answer is to just get some money from somewhere else.
In my last blog, I discussed how the money for your property business doesn’t have to be your own money and how there are no special prizes for only using your own money, in fact, you’ll probably find that you do worse or not as well as if you’re prepared to be a bit more flexible and use other people’s money.
What’s more, in this day and age it’s relatively easy to find people who want to invest in property as a JV partner. Quite often, they’ll be happy to simply be a sleeping partner, so they wouldn’t necessarily have to even be in your property business.
It might also be that they come in and finance specific “one-off” deals. Many people are getting poor returns on their money, and if you were to offer them even just a nominal amount (e.g. 5-6%), more than likely they would bite your hand off. After all, this nominal amount would be a great improvement on the 0.5% that they’re getting from their ISA.
With this in mind, my advice is that they suggest how much interest they would like to get. They might surprise you and be happy with a smaller percentage than what you had in mind.
In conclusion: we don’t have to run out of money and even if we do, it doesn’t mean that we have to stop buying property. We can use other people’s money to make up the shortfall.
Here’s to successful property investing
Peter Jones B.Sc FRICS
By the way, I’ve rewritten and updated my best selling eBook, The Successful Property Investor’s Strategy Workshop, which is an account of how I put together my multi-property portfolio, starting from scratch and with no money of my own, and how you can do the same. For more details please go to ThePropertyTeacher.co.uk