Two little spoken of attributes of being a successful property investor are momentum and certainty. This piece by Kylie my fellow blogger and property investor illustrates these quite well I think.
One self-sourced deal collapses after five months, as two more from a sourcer are added to one already completed to keep her moving forward.
Sourcing great deals can be a bit of a numbers game, with fallout at each step of the way possible and even preferable as we shall see. There is a funnel involved in sourcing deals with ever decreasing circles as we progress down it.
We have a long list of 'potentials' - some will be qualified out by simple screening against our criteria
Of the remainder, some will be screened out under more in-depth scrutiny & due diligence
Of the remainder, some will not accept our offer
Of the remainder, some will fallout after survey, financial or legal issues that emerge
Of the remainder, some will fallout due to a change on the buyer’s side, like the change of mind as Kylie illustrates here
There may be other steps and events that cause a potential deal to fail to turn into an actual deal and this can be frustrating.
The solution is to either have more deals of our own in the funnel or have more sources of deals coming to us, or maybe both. The former usually means us working harder - searching - assessing - doing due diligence - offering - progressing – completing – and so on – repeated several times over.
The latter could mean having access to someone with better connections than we have, or at least more time & systems to replicate what we can on our own...usually with access to bulk opportunities, such as those put forward by RMP Property mentioned by Kylie.
Whichever route we choose to adopt - or even a combination of both - what we are looking for is momentum and certainty. As in retail, one measure of success is stock rotation i.e. how many times a year the retailer sells its average stock; so too in property investing is investment funds rotation...how many times a year (or at least how fast with a single investment fund) we manage to get our funds invested into suitable qualifying investments or in other words...momentum (speed & velocity) and certainty (actual completions).
If we don't really mind what we invest in then this is pretty simple - find a property for sale and pay the asking price or even above asking price in some cases. But if we are to be a prudent investor, we look to access in-built equity or discount when we buy, potential to create or add value and decent returns on our investment in the form of rental yield, capital growth and return on investment. This by definition would mean that not every opportunity could possibly become a 'deal' for us. In fact, there is much to be said about having some fallout – if we are getting all of our offers accepted and through to completion then chances are we are overpaying in the first place!
This brings me back to my point about some opportunities collapsing being 'preferable' at times. Too many collapsing and we lose momentum; too few and we lose value and investment returns.
Therefore, in order to increase our momentum and certainty we simply need more opportunities and ideally from good sources...whether our own or from others.
I should know, it took me five months from deciding to buy an HMO at the start of the year to actually completing on the sale. Then a further twelve weeks to do the refurbishment, a further month or two to secure the required extra bedroom planning approval that I need and then a further couple of months to refinance off bridging onto a long-term commercial loan will see off most of this year. If only I could have done two of these, or three, or even four...what would my portfolio look like at the end of the year?
Actively looking to improve on my investing momentum and certainty going forward is my constant thought companion therefore.
Source: diytopropertyinve