Why some investors fail to make money

Investors Fail

Having a DIY mentality can be one of the biggest causes of time wasting when investing in property. Failure to manage time wisely causes so many to fail in achieving their goals. There are a limited number of hours you can physically work in a day and so you need to utilise every minute wisely.
This is especially true when starting on a part-time basis as you will have a lot of time restrictions to begin with. Firstly, let’s look inside the mind of a typical DIY property investor and focus on the decisions that needs his/her attention and time draining tasks that need to be dealt with on an average day.
Due to page limitations, I have highlighted only a fraction of the important tasks that need to be addressed however, there are sufficient to illustrate the point

This graph illustrates some of the typical areas that may need your attention in sourcing properties.

PROPERTY INVESTOR
1. Sourcing Properties

     - News Paper

     - Magazines

     - Networking

          a. Development Evening

          b. Property Shows

          c. Seminars

          d. Clubs
    - Sourcing Agencies
    - Website
    - Viewing Properties
    - Negotiating
    - Estate Agents
    - lettingAgents
    - Auctios
    - Friends & Relatives
    - Researching Area

2. Selling
    - Solutions
    - Estate Agents
    - Letting Agents
    - Accountant
    - Surveyors
    - Mortgage Brokers
     - Viewings
    - Website
    - Negotiating
     - Revorbishment
     - Home Staging

3, Buying

4. Renting

5. Finance

6. Marketing

7. Administration

8. Refurbisment


So what’s the solution?
Outsource. This is the solution. Look at every task you need to get involved with and then find a trusted professional to do it for you. Looking for professionals or ‘Super Heroes’ that fit your needs and budget will itself take time but it must be in your plan if you are to succeed. There’s simply too much to do yourself. You might be saving £180 in painting the walls in your new house but if your spending 2 days doing this then someone else is sourcing the properties with over £10,000 profit. Isn’t that false economy?
When is it best to outsource?
To judge when it’s best to outsource a task or when to do it yourself, you need to assess what your time is worth. Then calculate if it’s better to outsource the job or if it’s better to do it yourself

 

How to calculate what your time is worth
Here’s an example of how you can work out what your time is worth.
Your ideal salary £80,000
How many hours a week do you work? 40
How many hours a week of non-productive time? 15
(Non-productive time is time spent where you are not actively making money including talking to
friends, surfing the internet, reading emails, answering phone calls, learning, traveling etc.)
How many productive hours a week? 25
How many working weeks a year? 46
25 hrs X 46 weeks = 1150 hrs of productive time.
£80,000 / 1150 hrs = £69.56 per hour
So, if your task can be done for less than £69.56 per hour then outsource it!

Bad Property Managers and Mistakes We Made

Bad Property Management

We are still picking up the pieces from a very bad experience we had with an out of province Property Manager. It turned out to be an incredibly costly, stressful and time-consuming process that set our real estate investment goals back several months.

Initially our PM seemed great, he came with a great reputation, impeccable references and an extremely professional demeanor. Where did it all go wrong?

Looking back, it's easy to see where cracks started to appear. We took our eye off the ball, so to speak. We put far too much trust in what our Property Manager told us. It certainly didn't help that the property was in another city, in another province. The first warning sign was when the once monthly statements became more and more infrequent. Excessive charges began to be applied to our account, some for regular maintenance work, other charges for miscellaneous services such as the time a hefty snow removal charge was applied when it hadn't snowed for weeks. Rental cheques got later and later and vacancies took longer and longer to fill.

Looking back, we ask ourselves what we could have done differently? Without a doubt, we cut corners on our due diligence. We should have put more time and effort into the due diligence that is required when hiring a good PM - it's just as important as the due diligence required when purchasing the property. It was up to us to put strict processes in place to manage our Property Manager.

Communication is a certainly a big part of the process. Once we realized that his performance was not improving, and there was a continued lack of responsiveness from him, we should have taken immediate action. We put ourselves in a position that ended up costing us a lot of money.

Don't make the same mistakes we made. Keep in touch with your Property Manager often enough for them to know you - that's at least every month. Put your requests in writing. Make sure they're not on auto-pilot when things are going wrong. Be brutally honest with them and let them know you're on the ball. Good Property Managers find great tenants, report back to you regularly, conduct business efficiently and ensure you make as much profit as possible. When you find one, not only will you stand to reap all the benefits of property investing, you'll dramatically increase your peace of mind.

We learned lessons the hard way but it has certainly made us more vigilant. We continue to work with PM's who manage various parts of our portfolio - when they are good they are very, very good. Despite having difficulty with one PM, we have made up for it with the awesomeness of our other PM's.

How to Find a Property - Knowing Your Market Area and Market Value

Knowing your Market Area

There are 6 key methods which you can use to find a property but before you actually start the search, it is imperative that you know the market area to be a successful investor.

To fully understand the market you'll need to narrow your focus to a few selected areas as your target point for purchasing investment property. Because of the number of properties on the market available in any city you simply cannot know the entire city market. In fact, in the larger cities the average investor with limited time will be doing well if they have a good grasp of only one or two percent of the market.

Based on your analysis of the demand and supply issues in each city you should be able to narrow your focus down to a few selected areas. You'll need to do thorough research in these areas before choosing a property to purchase.

You must know what prices properties in your target area sell for. You need to be able to walk into a property and know within 5% what it is worth and what it would rent for.

When it comes to understanding the property market, there is no better way than old-fashioned foot-slogging. You need to get out and visit home opens, look at rental properties, and be aware of the market so that when an opportunity arises you will be able to seize it.

Astute investors always keep a careful eye on property values in the areas in which they are interested in. This way, they can avoid paying too much for a property and can always be in a position to distinguish a bargain.

So what is market value? In general terms, the market value of a good or service is the price at which a willing, but not anxious, buyer will pay to a willing, but not anxious, seller for that good or service.

For products which are plentiful, transacted often, and are largely the same as each other, determining market value is relatively easy. But property is typically not like this. Each property tends to have features that make it unique in the market - its location, size, age, etc. Even two properties side by side on the same street will be valued differently if they differ in size or age. To make things even trickier, property is typically not transacted very frequently, making it hard to compare a property you are interested in to a similar one that has sold recently.

Fortunately there are a number of information sources available to make your estimates of market value as accurate as possible. It's also a good idea to drive through the neighbourhoods you are interested in and check with real estate agents the prices that recently-sold properties fetched.