Welcome to today’s episode of the New Era podcast where we discuss all things property and hopefully share some tips and ideas on what to do – and what not to do! Today' episode is called How To Lose Money In Property! In which we'll be discussing the main ways in which we've seen investors lose money in property in the hope we can all learn how not to!
Presented by Lorraine Gannon & Sam Lawson we'll be taking you on a tour of all things property today!
Today we’ll be talking about;
A fantastic (& free) resource that you can use to buff up your knowledge on all things planning related!
An updated forecast for what’s going to happen in the property market in 2023
And we’ll be diving into today’s main topic of How To Lose Money In Property - sharing some of the main ways in which we’ve seen people lose money in property so hopefully you can avoid making the same mistakes along the way!
Sounds like we’ve got plenty to talk about so let’s start with our news story…
News Story
This week's story comes from Property Industry Eye - its a prediction that house prices are due to drop by at least 10% in 2023 - full article here!
https://propertyindustryeye.com/uk-house-prices-predicted-to-drop-by-at-least-10-in-2023/
We’d love to know your thoughts on this, are you seeing pricing start to drop in your areas? Or the opposite? What’s your forecast for next year?
Value Give
So, today’s hot topic is “How to lose money in property” - we’re going to be looking at some of the key ways in which people generally lose money in property investing!
I think we’ll take it in turns and let’s do 2 each
Sam's First One;
Under-estimating refurbishment costs - This has to be at the top of my list for places where people go wrong and can get themselves into trouble. Most of the time this is down to not being willing to do the leg-work to get meaningful quotes - often investors walk around a property and pick a number from thin air. This rarely takes into consideration the specification or how quickly the work will be required to be done.
My best advice on this is simply don’t be afraid to do the work to get meaningful quotes & try to have a clear idea of the cost of going over schedule - the cost of your bridging finance, council tax, utilities, lost rent, opportunity cost etc. etc.
Lorraine's First One;
Buying properties with too low a yield - In our portfolio & training company, you’ll see we have a bias towards high-cashflow strategies. The reason is that it’s entirely possible to purchase a property at a reasonable price, refurbish it and rent it out for - let’s say - £1,000 per month - and then when you refinance be disappointed with the actual net amount of money you receive each month.
The three main factors (generally) in this are 1) the amount of rent 2) the amount of debt and 3) the interest rate.
We’ve found that there’s lots of viable high-cash flowing property strategies out there that consistently perform well - even with interest rates being where they are today! So my big tip would be focus on high cash flow strategies & deals!
Sam's Second One;
Ok, so you’ve got me thinking now! Building on from your last one - People that enter and exit the market too often! Now this isn’t to say you can’t/shouldn’t sell property BUT you’ve got to know the costs attached to it - solicitors fees, capital gains tax, agents fees, potential finance costs etc. etc.
And, if you’re only selling one property to then use these funds to buy a different property you’ll be looking at another round of buying costs - solicitors, lender solicitors, brokers, valuations, professional consultations, SDLT, lender application and arrangement fees etc. etc. PLUS lost time and lost rental income!
It’s quite easy to sell a deal for a decent profit and to erode all of that profit in selling and buying costs without realising this. You’ll also miss out on potential capital growth on the property you sell as well!
I’m team “buy and hold” so my tip on this would be to focus on buying quality assets that you’ll keep for the long term. I think this advice stacks up even if you do end up having to sell!
Lorraine's lasst one;
Ok, last one for “How to lose money in property” - I’m going to open a can of worms here I think but my pick is “Taking out a bridge loan without a robust exit strategy and an accurate done-up-value”
Now, for people that aren’t aware, Bridge loans are a type of short term finance that are used to “bridge” the gap between purchase and, in property, usually exiting to a mortgage or selling - most often used for property that’s un-mortgageable and often undergoing major refurbishment works.
The reason I’m picking this as my last choice is that many of the horror stories that we’ve heard over the years of people losing money are due to buying a property on short term financing without a robust plan on how to exit the bridge. If you can secure the price you were hoping for, it can leave you stuck on an expensive bridge loan - accruing interest daily without any way of exiting.
I’m a bit of a nerd when it comes to property research so my tip here would be to make sure that you’ve done your due diligence and are confident in your exit strategy and the done-up-value of the property! I’d also strongly recommend having 2 or 3 exit strategies for your deal as a back-up plan!
Resource
This episode’s resource is all about planning - and it’s The Planning Geek website! Now if you’re not familiar, this is a website that’s been created by Ian Walmsley - it’s probably the largest public online resource on planning outside of the Planning Portal itself!
It’s called Planning Geek - I assume because Ian is absolutely a planning geek! And is home to a huge amount of information but today I’d specifically like to draw your attention to the section of the site dedicated to Permitted Development.
Now you can find this by just visiting gpdo.co.uk
On this section of the website Ian tackles your options under the General Permitted Development Order (hence the shortcut to the site being gpdo.co.uk) - there is an incredible amount of information on the site but it covers everything from HMO conversions all the way through to casinos - and everything in between!
It’s also worth noting that Ian run’s a facebook group by the name - Planning Geek Community - so if you can’t find what you’re looking for there’s a fantastic community online that can offer some insights and support as well! An ideal place if you’re looking to buff up on your planning knowledge!
Final point to make on this is that the website and facebook group is that they’re both free! Which is incredible when you consider the amount of time and effort that must go into creating and maintaining these!
Sign Off
That’s a wrap for this episode! We hope you’ve enjoyed it and remember to like, subscribe and share it with a friend! We’ll catch you next time when we dive into more property mishaps, tips and ideas! Until then, remember to have some fun!
