Half a dozen essential property investing questions to ask before you start

Property investing is not for everyone. The amount of time it takes to set up and (initially) maintain the investment is massive. On top of all that is the fact that you are somewhat responsible for someone’s living conditions… and then there’s the issue of capital.

Perhaps you can’t invest in your local area because the deposits are too high for you and your team of investors. What then?

In this article, we’ll talk you through the six questions you absolutely need to ask yourself before you begin investing in property.

1. What’s your nominal financial freedom figure?

gold, how-to, success
Image Credit: Jeremy Schultz

First, make sure you know why you are investing.

How much is your nominal financial freedom figure? This is the amount you want to earn per year and what you will use the money for.

You need to calculate the cash flow you require to continue your current lifestyle, pay off debts, and have some extra in order to save/re-invest in other streams of income.

Note: Be sure to include approximations for tax in your calculations.

Once you know your financial target (e.g. £20,000 per year from property investments or £3,000 per month net of passive income) you can work out approximately how many properties you need in your chosen investment location to achieve that nominal financial freedom figure.

2. What type of income do you want?

beach, passive income
I could live here and still be making money

Make up your mind on what you want to do with property investing.

Are you buying for passive income or are you buying to renovate and resell at a higher amount? Your income strategy affects where you will buy.

If you are buying for rental (passive) income then you will need to invest in the specific areas that your prospective tenants want to live in. If you are buying and reselling (active income) then you have a larger area in which you can invest.

As an aside, I prefer passive income over active income as the risks are much lower. For example, many active income investors have lost money when property prices have declined, they’ve used the wrong contractors, or have simply had bad luck.

3. What type of guests do you want?

students, tenants, passive income
I also love students as it gives me a chance to help them out with CVs, finding jobs, and learning about the world Image Credit: Tulane Public Relations

Decide on the type of guests you would prefer to rent or sell to. This is incredibly important as it affects the location you will be investing in.

The types of guests you could have include; pensioners, those on social housing benefits, students, professionals, overseas ex-pats and so on.

My target guests are students, so the locations I invest in are 5 to 10 minutes away from universities.

If your target guests are young professionals you should invest in areas that have high employment or good transport links to those areas. If your target guests are families, then you should invest in the suburbs. If your target market is wealthy overseas visitors then you should invest in city areas that have luxury flats.

A lot of the time your location will affect who your tenants are. You may live in an area with a lot of young professionals, so they’d be your best bet.

Look at your local property market and the demographic of the people who’d want to live there. The type of guest you select are your ideal, but may not be your reality.

4. What is the size of your deposit?

shark house, property, wealth
We’re gonna need a bigger deposit… Image Credit: Eddie Keogh

This is pretty basic but often overlooked. Work out how much money you need to make a deposit on a property. Knowing the amount of working capital you have to make deposits on properties also affects where you can invest.

This allows you to set savings goals for yourself, and you’ll only hit goals with a clearly defined target.

Another route is to draw up a list of angel investors, JV (joint venture) partners and find out how much they have to invest along with your own money.

The more experienced you become, the less of your own money you will need. Once you start being able to find good deals,  create nice living spaces, and source tenants, people are far more likely to trust that you can give them a return.

Similarly, as you stick to your property goal and make it a focus in your life you’ll meet more and more people who will want to help you. This will happen through the magic of socialising.

5. How many properties do you want by the end of the year?

Monopoly, property investing, wealth
Don’t ever play Monopoly with Jess, she will fight to the bitter end Image Credit: William Warby

Decide on the number of properties you want to purchase per year. How many properties you wish to acquire will also affect the investment location. At the time of writing, in my home area, the average three bedroom house costs £450,000.

However, take a four-hour drive south and the average 7-bed house costs £180,000. So the same deposit for a 3-bedroom house in my area would buy three larger properties four hours away.

Again I’d like to reiterate that’s important to go with the flow.

Although the 7-bed looks like a great deal, you’d spend eight hours driving there and back, and those properties would cost more to renovate. On top of that you’d have a four hour response time to any emergencies that may occur, and some tenants “emergencies” are not worth the hassle.

As with most things, slow and steady wins the race. If you’d like to buy three properties a year, but can only afford one in your local area, simply change your time scale to investing in one property a year. You’ll save a huge amount on travel costs, be less stressed, and have an easier time managing the property.

6. How much time do you have to devote to investing?

Clocks, property, success
If bought these, I’d have all the time in the world Image Credit: Ianezz

Finally, you need to decide on the maximum amount of time you have available per week to look at properties, speak with estate agents and walk around the streets of your chosen area.

Time, is perhaps, the most important metric.

As a single mother once said, “My children are more important to me than how fast I want to make money, so I decided to invest close to where I live.”

When I was working full-time, I could not afford the time costs of driving to and from a distant location. So the travelling distance had a huge impact on where I could invest. As a result, I invested in my local area which, luckily, is close to a university.

A working example of the best area to invest in

Teaching, property, physics
It’s not rocket science

Now that you know the criteria, it’s location decision-making time. Here’s an example of how to turn your answers into an action plan:

  • I want to receive £60,000 (after tax) from my investments
  • I want passive income
  • I have £200,000 to invest
  • I want to invest in properties for students
  • I want four student houses by the end of the year
  • I can only manage travel within a 20-mile radius of where I live

It’s now time to get the map out and look for all the universities close to where I live. I have one university on my doorstep but house prices only allow me to buy two houses, but there is another university 15 miles from me.

Next, I use some of the online tools in the UK (such as Zoopla and Rightmove) and check out the cost of houses 5 to 10 minutes away from the university.

I then have several discussion with multiple estate agents, to get a rough idea of what I can negotiate a property for.

Then I chat with the local letting agents who provide information regarding the demand for rental properties and which streets rent out the fastest.

To verify the estate agents and letting agents I check the demands for property via adverts or online tools such as Spareroom listings.

From my research, I work out that the property prices at the other university are the same as my area. I look on the map to see if there are any other universities within a 20-mile radius of where I live. Sadly there are none.

So I have a decision to make: Perhaps I only buy two properties in my area or I need to change my target guest. If I change my target guest to professionals I find out who the biggest employers are within the 20-mile radius and repeat the previous steps.

Unfortunately, it turns out that house prices are the same for whatever target audience I go for.

My one major criteria is how much time I can spend investing so I can only invest within a 20-mile radius. This means that I choose to grow my portfolio slower than I first anticipated.

Property investing 101

education, personal development

By asking these six questions you will have narrowed down what it is that you’re looking for which makes property investing so much easier! You have also developed a rough road-map of your property journey. Those six questions again are:

  1. How much do you want to make through this income stream per month or year?
  2. Do you want to buy and sell (riskier but faster to make a profit), or make money through rental (safer but slower)?
  3. What types of tenants do you want?
  4. What deposits can you afford?
  5. How many properties do you want to buy this year?
  6. How much time can you invest?

700 techniques that will dramatically increase your saving

For most of us saving consistently is a struggle. It’s taken me a while to develop the right mindset, and to stop craving quick returns from my hard earned cash!

Whether it’s for a deposit on a house or that all important capital needed to kick-start your business, you need to cut your spending and start saving.

For most of us saving consistently is a struggle. It’s taken me a while to develop the right mindset, and to stop craving quick returns from my hard earned cash!

Once I shifted how I thought about money, I managed to get rid of a £1,500 overdraft and give myself a comfortable sum in a savings account (which is only going to increase).

Today, I’m going to share with you seven steps to start, and stay on track, with saving so that you can reach your goals.

1. Get yourself in the right mindset

If you’ve never thought about saving you need a paradigm shift in how your brain thinks about money. The way I managed this is: I set myself a financial goal. For some, it may be a house, a new car, or even having some for a rainy day.

First, make a list of your income streams and any expenses you have. Then simply do the maths. How much money are you left with after you have paid all your expenses? Now how much of that money can you save?

Though at first it may not seem a lot each month, work out how much it would give you after a year. Then think about what that could money get you. A car, a deposit for a house, or is it enough get your business idea started?

The purpose of this is to help put things into perspective. If you’re able to save £100 a month you’d have £1,200 after a year. No matter what your goal is, £1,200 can buy a hell of a lot more than 12 £100 purchases.

2. Pay yourself first

Currency, wealth, money

This is something I picked up from The Richest Man in Babylon by George Clason where he discussed that the money you earn is yours to keep.

“A part of all you earn is yours to keep. It should be not less than a tenth no matter how little you earn. It can be as much more as you can afford.” – George Clason [Richest Man in Babylon]

Before discovering this concept any attempt I made at saving failed. I saved very little and I found myself dipping into my savings more than I put money away. I was more worried about paying my expenses before I paid myself!

Of course, you need to pay your bills and not get into debt but you need to put yourself first and then work your expenses around you, not the other way round.

The first thing I do on payday? Transfer money to my savings account and the amount left is used for my expenses and whatever else I choose.

A good benchmark to start at is to save 10 per cent of your wages after tax. This is where I started and after a couple of months I was saving 20 per cent, then 30 per cent and now I’m almost saving 50 per cent of my income.

3. Budget to zero

budget, zero-sum, saving

When it comes to saving a set amount each month to reach your final goal you need to save effectively, without allowing debt to catch up to you.

First, take the list you made of all your expenses and decide which of your expenses are needs and wants. Start tackling the “wants” and set a budget for how much you can realistically afford to spend on them.

Expenses like rent, bills, and car insurance are what you call “needs” because you have to pay them to get by and you don’t have much control over these amounts. When creating a budget, you need to ensure that you cater for all your “needs” before your wants.

Your “wants” would be things such as entertainment, online accounts like Netflix, and memberships. These will vary for people but if they prevent you from saving or paying your needs then set a limit on how much you can spend on each.

I use a budget planner for the year that I created myself, which you can also use here.

As you input your income and expenses it automatically calculates how much money you’ll be left with each month and that will be carried over to the next. This is extremely useful as you can plan for anything further in the year.

4. Keep track of your spending

spending tracker, apps, saving

Once you’ve established a budget you need to make sure you’re sticking with it! To do that you need to keep track of everything going out of your bank. Here’s what I do:

  • Check your bank balance regularly (I do this almost every day)
  • Keep your receipts
  • Use a money management app (I use Spending Tracker)

Check your bank balance regularly as it gives a clear indication of overspending.

It’s also good practice in case you receive any unexpected bills or payments, which you could potentially avoid in the future, or it can show you how to adjust your budget accordingly.

Keep your receipts to understand how much you’re spending. I use my receipts to input my outgoings in the money management app that I use, Spending Tracker.

I like it because I can organise my outgoings into categories that show me what I spend most of my money on. Each month I review the ways I can cut down expenses in that category.

If you use the app accurately you can see your exact bank balance throughout the month without having to wait for payments to process on your bank statement.

5. Trim the fat

£2 coins, wealth, success
Just saving £2 a day adds up to £730 a year

Steps one to four should give you a good idea on how you’re spending your money. Although you may still be in the black at the end of the month there’s a good possibility that you can save more.

Review your expenses and think about where you could save some extra money, even if it’s only a little.

By reviewing my expenses and trimming the fat, I was able to keep saving more, which led to me be able to save 50 per cent of my income. Here are the “phat trims” that helped me save the most:

  • Bringing lunch from home
  • Cancelling subscriptions I didn’t fully utilise e.g. Netflix
  • Stop buying snack food when away from home
  • Socialising less and using the extra time to be more productive
  • Sharing lifts to work with colleagues

By reviewing your monthly expenses and looking for ways to reduce them, you’ll reach your financial goal in no time at all.

6. Use cash

Gift, betrayal, finance

In a time of contactless payments, debit and credit cards, and “one-click payments” it’s far too easy to spend money. Buying a few things on your card here and there adds up.

When I use my card, paying for things is so easy I lose track of my spending and ruin my budget. So, I simply just started using cash.

I have a set amount that I’m allowed to spend each week on personal spending such as eating out, drinks with friends etc.

Let’s say you’ve budgeted £40 a week for “entertainment”. Withdraw £40 from the bank and leave your bank card at home.

Spend your cash on drinks, pizza, whatever and once it’s gone, it’s gone until next week

If you only spend £20 one week then do one of two things either; put the remaining £20 in your savings, or add it to your next week’s budget. This will allow you to build up your budget if you have plans one week that are going to be costly.

7. Reward yourself

wealth, success, passionate

I like to have a good time at the weekend and this used to be the main problem that got in the way of my savings. I thought that saving money meant that I wasn’t able to have as much fun, but I couldn’t be more wrong.

Admittedly I don’t socialise every weekend anymore (which is good not only on my wallet but also my health) but I still have fun. Watching my spending and saving money has enabled me to do more meaningful activities compared to when I was just wasting my money every weekend.

Since I’ve started saving I reward myself with:

  • Traveling to visit old friends and family
  • Having days out in neighbouring cities
  • Buying vinyl (something I wasn’t able to do often)
  • Going to the cinema
  • Having a night in and getting a takeout

Although these are not all “meaningful” rewards, I used to not be able to do these very often. For me, buying vinyl is something I enjoy but rarely got the chance to do due to my financial situation, so now I consider it as a reward for my saving.

It’s important to see a benefit to help keep you in the right mindset. Like most things in life; if you hate doing it you’ll stop, and saving is no different.

Reward yourself every now and then but stay within your means. Do something that you wouldn’t normally do because of lack of money, without busting your budget.

For example, in the last week of October (when I used to be down to my last £50) I drove over 200 miles to see a friend for a few days. Although this didn’t necessarily cost a great deal I was still able to see an old friend and experience meeting new people in a city I’ve never visited.

7 steps to spectacular savings

houses, property, money

These are some the tips that I’ve picked up since I’ve started saving money and I hope they will help you the same they helped me. Here’s a quick roundup of those steps:

  1. Change your mindset: Think about what you’ll want in the next year, and in the future. Look at how much you’ll need to save in order to achieve that.
  2. Pay yourself first: Decide on a set amount you’re going to save at the beginning of each month and use the rest on expenses. Aim to save at least 10 per cent of your income.
  3. Budget to zero: Establish a budget and stick to it. Tackle your “wants” by reducing these outgoings to save more money.
  4. Keep track of your spending: Regularly check your bank balance, keep receipts and use money management apps to prevent overspending.
  5. Trim the fat: Review your spending and look at ways to reduce costs, no matter how little or large. Think about what you need and what you can live without.
  6. Use cash: To prevent overspending budget yourself each week and withdraw it from the bank. Leave your bank card at home and once you’ve spent the cash you can’t spend anymore till the next week.
  7. Reward yourself: Remind yourself of the benefit of saving and treat yourself to little rewards. These should be things you don’t often do or buy to give yourself a “well done” on all your saving.

If my seven steps have helped you please share this article with a friend who will find this useful.

7 ways to obliterate paperwork stress

Yes! Admin day is finally over *Sign of relief*. I wish I had a cheese and wine night planned for tonight. That would make me so happy.

Today I am writing an article/blog/whatever to remind me how I am able to get into the frame of mind necessary for completing all my paperwork. Paperwork is the least interesting aspect of being in business and property so I tend to be several months behind on dealing with it. As you can imagine, it builds up. However, today I finally completed all the paperwork and my office is much cleaner! More importantly, I am proud of what I have accomplished today.

What does my paperwork include?

  • Filing bank and credit card statements
  • Paying utility bills, service charges, invoices… parking fines :S
  • Setting up direct debits to reduce time spent on the above bullet point
  • Printing off bills sent online
  • Bookkeeping
    1. File statements from bank accounts and credit card statements in SEPARATE folders
folders, shelf, manage, property

I helped set up four different companies this year. Each business has a different bank account. I have debit cards, pin numbers, login details etc for each business, it was a nightmare keeping on top of.

Login details and PIN numbers for everything are now stored in the same place in each business’s folder. You can say what you want about security. For me, it is about ease of access and practicality.

Every time I hide something or make it cryptic, I can never remember the place or what my coding system was. I then spend hours on the phone to the bank asking them to reissue my login details/PINs etc, but oh wait. They can’t. First they need to do a security check and want the first and third letter of a password I have forgotten.

This dramatically slows me down on bill paying. If I don’t keep on top of the bills I get chased by our suppliers, and I hate being chased.

2. Isolate yourself from everyone

beach, passive income
Unfortunately, my office does not look like this

Admin is mind numbing. Everyone suffers from shiny object syndrome while doing their admin. Find a room (ideally your office where all your folders and stationary is) and shut the door. Make sure no one disturbs you.

If someone asks you to do something which is non-urgent, tell them you can’t do it now but advise they put it to you in an email. You can deal with it later.

3. Do not check emails

property, taxes, wealth
My internal monologue; “that’s it Jess, keep your eyes on the prize and your phone face down”

If something is urgent people will call you. If you have urgent emails to send, do it before you start the paperwork.

Checking your email distracts you from getting through the paperwork. I have to restrain myself from checking emails. I know when I check my email, I am programmed to respond and deal with the contents. When you begin (at least for me) responding to emails it usually opens up another can of worms and more paperwork. Deal with the paperwork you have got, before acquiring more.

4. Food and movement

sweets, success,
So tempting, but sweets are for after the admin work

Stock your fridge with healthy food the night before and plan your meals for the day. Sugary, starchy foods, and too much caffeine, negatively impacts our ability to focus. If you want to get your admin done as quickly and effectively as possible, you need to maintain a consistent energy level.

Personally, my body and mind work more effectively when I eat small portions of healthy food throughout the day. E.g. five mushrooms dipped in hummus, an apple, Zucchini and hummus (basically anything with hummus is great).

Drink

Water. Simple.

Movement

It’s important to take regular breaks and move our bodies around. I usually do press-ups or dance around the lounge if I am working from my home office. If you are in a public office, try going for a brisk walk or to a park and run on the spot. All I am trying to do is get the blood pumping around my body. This helps me stay alert and focused.

6. Listen to a Youtube motivational talk or your favourite music

The majority of my paperwork is basic sorting and filing. It really is mind-numbing and can be done without much thought. Having something useful or enjoyable on in the background helps pass the time and makes my paperwork hours fun or educational.

7. Have a big desk or a big floor to organise initial paperwork

todo list, busy, dream
This is basically what my floor looks like for a day

Although I try to self-organise paperwork in nice compartments, a large amount of receipts, bills, contracts are left in a pile. With a big desk or empty floor space, I can organise my paperwork into which business or property they relate to. Within the properties, I have subdivided my receipts further into months. Within the months, I organise the receipts into travel, utilities, subsistence and whatever else my accountant prefers.

It is so easy to think “if I did my paperwork at the end of every week, I wouldn’t then have to face this paper mountain!” Of course, it isn’t really a mountain but it feels like it is. Dealing with the paper mountain simply isn’t as exciting as looking at new deals, swapping transformational tips with other investors and business owners, attending and networking events, and helping people understand their finances and reduce their costs (I’m addicted to helping people budget for success).

So that’s all for now. Hope you are able to use some of my story to help you get through your paperwork.

If you enjoyed this article/ found it helpful please share it with a friend.