Peter Calls An Expert : Valuable Advice And Support From Those ‘In The Know’
Resolutions & Goal-Setting
Every January the 1st some people lift their eyes from the treadmill, just long enough to acknowledge that they are going nowhere and need to do something about it. Within days, or even hours, these thoughts are forgotten and life carries on in the same purposeless way. The rest of the population just don’t even think about it.
This is the season of the inappropriately named new year’s resolution. I say ‘inappropriately’ because, using the definition I found in my daughter’s ‘Collins New Scholl Dictionary’, a resolution is ‘determination; if you make a resolution, you promise yourself to do something.’
In reality, most new year’s resolutions are, at best, no more than wishful thinking; at worst a mere acknowledgement of what life is lacking. It ’s important to recognise this, especially if this is the year you are going to ‘make it ’ as a property entrepreneur.
Based on the first-hand observations of already established property entrepreneurs, as well as my own experiences, you must have the right mindset and a vital mastermind team to be successful. You must also develop and strengthen certain good habits.
What do I mean by the right mindset? I think that a successful property entrepreneur must have vision, persistence, creativity and communication skills. Each of these is terribly important, if not essential and it is difficult to put them into a hierarchical order. However, I think it is true to say that without vision, the other three largely become meaningless. Anything done without purpose is really like going up one of life’s dead ends.
So let ’s start with vision. What do I mean by it? I think it is an ability to understand clearly what one is trying to achieve and why. Vision is being able to imagine the end result in detail. This is one of the reasons why I no longer make new year’s resolutions, because, in a sense, I am making them all year round. I am a firm believer in the empowerment of setting goals.
In itself, setting goals is not a magic touchstone, but the results are often highly impressive. Self-help and motivation trainers endlessly quote the story of the Harvard graduation class of 1953, because it is illustrative of what can be achieved when you are focused and have a definite end result in mind. You may well have heard this before, but it ’s still worth pondering again. Upon graduation, the class were asked if they had clear, written goals relating to the future. Only 3% had. Twenty years later the class of ’53 were interviewed again. The researchers found that those students who had established definite goals were happier than those who hadn’t. More interesting still was that the 3% were worth as much in financial terms as the other 97% put together.
So how does one go about establishing one’s goals? Put simply, we need targets to aim for at specific points in the future; targets which stretch us, but which are achievable, tangible and measurable nonetheless.
Using my experience as an example, I set the goal of achieving a certain amount of passive income from my property investments four years ago. I particularly imagined a specific, clear goal in terms of income at the end of year five.
Setting financial goals like this requires careful thought. There’s no point just sticking figures on a piece of paper. However, it ’s worth bearing in mind that most people tend to over-estimate what they can achieve in a year, but seriously under-estimate what can be achieved in five.
For goal-setting to be effective, we need to remind
ourselves of them regularly, as much as twice a day according to some motivation experts. Ideally this should be done first thing in the morning and last thing at night. This might seem like overkill, but they stress the importance of reminding ourselves what is important and what we want to achieve. The overall idea is to make our goals, and their attainment, part of our psyche. As Napoleon Hill said: “Whatever the mind of man can conceive and believe, he can achieve.” The key here is getting the mind to believe in the goals. Once it does, it will find ways to attain them. I’m no psychiatrist and I can’t pretend to understand how it works, but regular repetition of your goals will eventually sink them into your subconscious thoughts.
As well as regularly reviewing our goals, we also need to review our progress towards achieving them. This is an area where I have made mistakes in the past. I also know the same is true of other investors.
Mistake number one is obvious: that is, not reviewing progress at all. Mistake number two is more subtle, but just as damaging: using the wrong measure. For example, it is easy to set the following goal: “I will own a million pounds worth of property by January 1st in two years’ time.” For most people this is easily achievable, even if it is not so easily believable, but the goal, in itself, tells us nothing of any value. It might imply financial success, but who’s to know? We could own £1 million worth of property, but still find we are 100% geared and have no equity. The rent may not even cover the outgoings, meaning that there is a negative cash flow. It might be easier to measure success if we set a more specific goal. For example, “I will have equity in my properties of £500,000 or more by January 1st in two years’ time,” or “My property investments will produce £100,000 gross positive cash flow by January 1st in two years’ time”
These are measurable, tangible goals which are also worthwhile. Merely owning property for the sake of it may not produce any positive benefit. On the other hand, having clear and specific financial targets makes it easy to measure progress along the way. If by January 1st in one year’s time you have a negative cash flow, or you have no equity, it is clear that you need to revise your plan of action over the following year.
Even if you don’t want to review your goals as often as twice a day, still try to get in the habit of doing it regularly. Also, set intermediate targets that can act like stepping stones to your ultimate goals. It ’s a great feeling to tick them off and very motivational.
As most achievement comes down to conviction, believing in yourself and your abilities is essential. It is often the difference between success and failure. Regularly reviewing your goals keeps you focused and on track. It also reminds you of what is important. The old management cliché applies here, that if we’re not careful we will become bogged down in the urgent and never get around to the important.
To make any goal achievable we need to make a plan, breaking it down into a number of steps or processes which, if followed, should result in the attainment of that goal. Of course, things don’t always happen as we expect, so it is necessary to review the process as we go along, fine tuning our plan as necessary. Sometimes this might mean ripping up our original plan and starting again, but that doesn’t matter. Having goals and a clear plan for attaining them is only half the story. You also need to have a reason to see them through to the end. This is what Tony Robbins calls the ‘why’. If you have a big enough ‘why’, you’ll find a way. My motivation is quite simple. I want property to be my primary source of income. I need to pay the bills and support my family. It ’s really very basic, but a great incentive nevertheless.
Seeing the plan through to the end is where persistence comes into its own. In truth, things rarely go according to plan. Unless you are extremely lucky and are very well prepared, you will inevitably meet obstacles and difficulties, many of which will be totally outside of your control.
For example, you have very little influence on the government and its plans for increasing property taxes or introducing new ones. Neither is it in your control whether the Bank of England increases interest rates. On a micro-level, you cannot always control the actions and attitudes of the individuals you have to deal with. To adapt a well-known colloquial expression here, sometimes you just have to except that ‘bad things happen’.
Even so, you need to keep your eye on your goal, adapt to changing circumstances and keep on going. These factors are well recognised by personal development and business trainers. They tell us that the definition of an entrepreneur is someone who can solve problems, either of their own or of other people. They tell us that a successful person is a failure who picked themselves back up just one more time, that a winner never quits, because quitters never win.
Of course these ideas and expressions role easily off the tongue. It ’s easy to dismiss them as trite, sound bite philosophies whereas, in actual fact, the idea behind these sentiments is true. 80% towards achieving my own personal goals, I once had to get back on track after putting everything on the line for a deal which fell through after a year and a half of negotiations. I’ve had to deal with rejections from at least seven different banks. I’ve also had to accept the fact that some of my property investments have been totally unsuitable for my needs. I even had one tenant who sued me maliciously and took me to the steps of the court. Although his case disintegrated, it cost me thousands of pounds in legal fees.
These are all problems I’ve adapted to and worked around, because I am persistent and have a big enough ‘why’. I know exactly what I’m trying to achieve and I have kept going onwards.
Hand in hand with problem solving is creativity. This includes practical, as well as intellectual creativity. By practical creativity I don’t necessarily mean being good at DIY and decorating, although this is useful if you want to refurbish your properties yourself. Practical creativity is also an ability to assess the best use for a property, or ways to convert and refurbish it to maximise its value.
Intellectual creativity is required to put together your strategy and action plan, as well as devising appropriate means of financing your business, pursuing ‘win-win’ negotiations and solving problems constructively when you hit the buffers and have to find new ways forward.
Because property is a people business, an ability to communicate effectively is highly desirable. To be a successful property entrepreneur, you’ll need to deal with estate agents and vendors, mortgage brokers and bank employees, solicitors, surveyors, contractors and managing agents. You need to communicate what you want and expect, in a way which doesn’t alienate them and keeps them all on board. In essence, this is your mastermind team. I’ve quoted this before, but I’ll repeat it again, with no apology, because it is something we all need to accept. Napoleon Hill said, “Nobody ever rises above mediocrity who does not learn to use the brains of other people and sometimes the money of other people too. It takes a combination of the two.”
Attaining success in property is definitely a team effort and in a sense, you are the captain. To use a soccer metaphor, you are actually more like the player/manager. To reach your goal you need the whole team playing to their full potential. Your job is to come up with the game plan; a strategy in other words and a means of implementing it. Once you have given your team direction, you need to make sure that they play their part fully; that they are also motivated and focused on what they are doing.
Finally, what good habits should we be working on this year? I think the most important habit to develop is to do as much research as possible before buying a property. In other words, developing a system by which you undertake your due diligence.
This will include physical checks of the property itself, limited legal checks and more general inquiries to establish whether the property makes sense from an investment perspective.
You would be surprised by how many people forego even the most basic investigations. I heard recently of a purchaser who bought a property through a ‘portfolio packager’ on the basis that it was let and producing a double figure yield. Like a lot of people buying through this type of company, he took the information he was given at face value and didn’t inspect the property himself, prior to purchase. After completion, he went to view it from the outside and discovered a row of boarded-up terraced houses. He knocked on the door of an adjoining property, one of a few that were still showing signs of life, to ask where his tenant had gone. He was told that the property had not been rented out for at least two years. Unsurprisingly he has suffered a great amount of stress, currently ongoing as he tries to get his money back. I have to say that even a limited external inspection prior to purchase would have alerted him to the fact that there were problems. It ’s amazing how much we can find out just by asking the right type of question. I’m not suggesting that anybody should buy a property without proper legal searches, but before you even appoint your solicitor, you should be able to make basic inquiries of the estate agent about legal title, lease length, ground rents and service charges. You might then see potential problems before they cause you any grief, or have time to decide whether or not to pull out, long before you’ve instructed a solicitor or wasted fees and time.
Similarly, I feel the same about inspecting the property. I would never advise anyone to buy a property without having had a professional surveyor or architect, or even their trusted builder, give it the once over. Still, there are plenty of clues about the property’s condition that we can all learn to spot. 9 times out of 10 we should be able to ascertain if a property is obviously a non-runner at the initial viewing. However, a lot of investors seem to overlook this possibility.
Finally, I am always surprised by the number of investors who are prepared to buy a property, without having made even the most rudimentary checks as to whether the price they are paying correlates with the market value, or even what rent they can achieve upon letting. There are quick and simple inquiries that one can make, by talking to estate agents, reading the property pages in the local papers and even talking to residents and shopkeepers about the popularity of the area, both for owner-occupiers and tenants. This can take a lot of the risk out of buying.
You can even do a lot of your research remotely. Many estate agents now have websites and you can gather your own comparable evidence from the comfort of your own home. There are even sites which will detail the performance of property prices in certain post codes, crime rates and even grades achieved by schools in the area. If you’re willing to look, as Mulder and Scully used to say, “The truth is out there!”