This is a question that I am frequently being asked as more and more people seem to be having problems when buying packaged deals. The answer is, as my friend and mentor, Dolf de Roos, would say…It depends! In this blog I would like to share my views on how to minimise the risks of buying deals from other investors!
My initial response is that it is always better for you to learn how to invest in property yourself, instead of relying on someone else to do it for you. You might expect me to say this as I have been teaching other people how to successfully invest since 2003, when having become financially independent through my own portfolio, I discovered by chance that I loved to speak, teach and share my experience with other people.
However, if you are cash rich and time poor, then it could be a wise idea to get someone to help you build your portfolio rather than miss out and not get any property at all. Many people use “lack of time” as a reason why they don’t get into property. This is just an excuse. We can achieve anything we decide to make a priority. We have had many delegates on my 12 month Property Mastermind Programme who have purchased a significant amount of property despite having very busy full time jobs because I showed them how to work smart and get other people to help them.
Giving someone a large sum of money to build a portfolio for you is a very bad idea. There are too many people who have offered this service and then gone bust. I think it is a flawed business model. No one is going to build a portfolio for you for free, why should they? After all they will put in all the time, effort and experience. So if you are going to pay someone to help you, then I believe it is far better to use a pay as you go system, so that you take each property deal one at a time and only pay once the deal is completed.
Very often I hear people say “Well if it is such a good property deal why are the selling it? Why don’t they keep it themselves? These are great questions. And the answer is that most people finding deals will indeed keep the best ones. However, when you are finding lots of deals, there will be some deals that are outside of your area, don’t fit your strategy or require too much cash input. Rather than waste these potentially good deals it is much smarter to make some extra cash flow by selling them onto other investors who struggle to find their own deals. This is one of the strategies I teach my students to make extra cash flow.
If you decide to get other people to find deals for you, please remember that you cannot abdicate responsibility to anyone else just because you have paid them a few thousand pounds. Investing in property is a big decision with financial consequences. You must know what makes a good deal for you, and how to do your own due diligence to check the information you are being given. This does not take long once you know what to do, which means that you should be able to quickly and easily decide if a particular deal is right for you.
When using other people to help you build your property portfolio there are five simple principles to follow to help minimise the risks.
1. What is their track record like?
The best way to find deal providers is through word of mouth recommendation from people you know and trust who have used their services and been happy with the outcome. You can do this through networking events and on line forums.
2. Do your own due diligence.
Never assume what you are told is correct! When offered a potential deal check it out yourself using the internet, local knowledge from Letting agents, estate agents and other investor you know in the area. This need not take too long. Know what makes a good deal for you and be decisive. Never buy blind. You or someone you trust must have seen the property.
3. Never pay a large upfront amount
Whilst I believe it is perfectly reasonable to ask you to put down a reservation deposit (of say £1000) on a particular property to prove your commitment, never pay the full finders fee in advance. Pay at completion.
4. Make sure your deposits goes into a client account
This means that they cannot use the money until they have provided the service for you.
5. Understand their terms and conditions
Make sure you know what happens if the deal falls over (which can happen when dealing with motivated sellers.) Understand your obligations and commitments so that you know when you get your fee back and when you don’t!
What to learn more?
If you would like to learn more about how to find and package deals yourself then you may like to look at his new website packed full of valuable information for investors at www.Property-Mastermind.com
Founbder, property investors network
and Property Mastermind Programme