You’ve read all the books, magazines and property reports. You’ve been religiously checking real-estate websites for properties and you may have attended the odd seminar. Yet when push comes to shove, you get stopped in your tracks. Does this sound like you?
So how many properties do you have making you money?
If the answer is nada, zero, nil, garniks, then it’s time to stop bluffing, posturing and kidding yourself.
Tourists are begging you to take their money.
73.1 Million people visited Spain last year 2018, we await this year’s data with anticipation…. However, they all want quality affordable accommodation. They all stay somewhere while on holiday!
The time to invest in BMV Spanish property is right now.
If this does sound like you, you’re not alone. In fact, less than 6% of adult UK residents, or roughly 1.3 million people, own an investment property anywhere at all, even though the property is a national past-time in the UK. But it’s not surprising. A lot of people talk a good fight, but some of us tend to get overwhelmed by the process and quit before we even begin.
But it doesn’t have to be complicated. The reality is, property investing is relatively straightforward, but our investment property will not buy itself.
To help you begin your journey, here are H&Gs 10 steps to starting a property portfolio on a solid foundation, without losing your mind.
- Check your finances.
This can be as simple as listing all your assets, including incomes and work out your expenses.
This will give you an idea of how much cash you have available to invest. Don’t immediately assume that you can’t afford to invest. As long as you have a stable and reasonably well paying job with solid employment history, we can help you raise the money for your first property if you require help.
- Cash is king.
There is simply no substitute for cash purchase at the moment if you can buy your first investment property with cash, do so. Remember that we buy our properties at up to 50% BMV. So by using cash for your first purchase, you automatically have equity built into the property.
- Getting into debt.
The idea behind smart property investment is to use other people’s money, to fund YOUR property investments. A 2 bedroom apartment in a good location in Spain, will return €650 Euros per week, 35 weeks a year. This is an annual return of €22,750 Euros. (And we have not considered the winter season in this equation). This represents a far better return than anything currently available in the UK.
Not everyone is happy or comfortable with taking on high levels of debt in order to fund property purchases and that’s fine, it’s horses for courses and quite frankly it doesn’t suit everyone’s position. We wouldn’t advise it for very elderly people for instance, because if there was a short term downturn in the market (‘gearing’ or ‘leverage’ magnifies the downside as well as the upside) it would be more difficult for them to ride out a difficult period waiting for values to bounce back….as they always have. (Remember we are acquiring our properties at the bottom of the curve, 50 % BMV as such the property value only has one way to go, upwards. But even so, if you are considering a BMV Property as a pension hedge, please be sensible if you are a senior citizen).
A good thing about BMV property is that when a slump in capital values does occur it has a (but again delayed) knock-on effect on rents as rents rise then rise in a depressed market. Which means that rental yields rise even more to reflect lower property values. There’s always a silver lining!
Returning to the debt issue, we don’t see some types of debt as a bad thing. Our view is that debt to pay for exotic holidays, or depreciating assets such as flashy sports cars (that you can’t really afford!) really is a bad thing. However, debt taken on in order to secure assets which will appreciate in value and therefore make very substantial on-going profits is a very good thing!
- Get a pre-approval
We can organise and get pre-approval through our FCA Regulated UK / Spanish lenders. Going through our broker before applying for a pre-approval can be beneficial if you’re not sure which way to go initially. (Remember, applying for multiple pre-approvals is not a good idea. Each time you apply, the lender will check your credit record. If there are multiple inquiries, this sends a red flag to the lender and they may refuse your application).
- Allow H&G to find out if you qualify for a loan prior to making your move on any property.
- Allow H&G to check your credit rating.
- Consider reducing your debts pre-purchase if possible.
- Set your goals
What are you looking to achieve?
What does success look like to you?
Property investors generally invest in property for 2 reasons.
- To secure their financial future, or
- To be free to do what they want to do, when they want to do it.
In order for you to achieve your goals, you must first identify and articulate what your goals are. More importantly, you need to set a deadline as to when you want to achieve these goals. Then you can work backwards. (Be realistic, you will not have the luxury of time in some markets. The market will not wait for you. You must be in at the bottom or a rising market).
Example, if you’re looking to replace your income and retire on your investments within 10 years, you can start by creating a 10-year plan, broken down further to 5-yearly, bi-annual, or yearly, all the way down to a weekly timeline if required. This way you will not get overwhelmed by the enormity of the task.
- Understand your attitude to risk.
Your risk profile will dictate your strategy. What sort of risk can you tolerate? Getting an understanding of your own attitude to risk will help you create a strategy that reflects your wishes.
- Start budgeting.
It really isn’t sexy. It’s not even remotely interesting! But budgeting is the only way to ensure you’re able to balance your income and expenses. It allows you to see where you’ve been spending your money and helps you to plan for bigger expenses down the line. H&G will help you with this if you require help.
8. Purchase plan.
What does an ideal purchase plan look like to you?
It should facilitate your goals, it should help you grow your portfolio to a point where it’s producing the growth or income you’re aiming for. It should serve as a structure which helps you stay ahead of the game.
Here’s an example of a purchase plan you could follow:
- Define your strategy
- Set up your property criteria
- Do your research
- Cull your list
- Get appraisals
- Do your due diligence
- Make an offer and negotiate
- Get informed
Knowledge is the key to successful property investing. H&G will give you all of the tools available in order for you to make an informed decision. Understanding the market can be tricky, but it is the key to making the right investment choices, at the right time.
Being well informed also means being wary of the “get rich quick schemes” and property peddlers. If someone in the City of London was promising you guaranteed returns and overnight riches, you would walk away. Spanish BMV is no different. (The person who seeks out the maximum return on investments at all times. Is the same person who would buy a Ferrari and drive it at top speed without checking the breaks work? It’s going to be a very hairy ride)!
Remember, there’s no such thing as a property psychic and while there are tried and true methods of researching investments (algorithmic forecasting is one such tool), no one can make guarantees. So understanding your tolerance for risk will help you shape how much you’re willing to take on over the shorter and longer-term.
10. Stay focused
Make sure you stay focused! Investing in property is a business decision, not an emotional reaction to market sentiment. Or a knee jerk reaction to discovering that the government has trashed your UK pension. Or bailed out the banks with it more like!
- Be clear about what you want to achieve.
- Set a date as to when you want to achieve your goals.
- Identify milestones which you need to pass, to get to your goals.
- And act. This is the big one, the time to enter the Spanish BMV market is 2019.
It’s easy to get overwhelmed when you’re starting something new, but it’s not rocket science. You simply need to be in and out of the market at the right time.
But please don’t give up. Just imagine in 10 years, if you buy the right properties over the next couple of years. You could be sitting back, feeling happy, secure and even proud that you bought properties that have more than doubled their values while your peers and everyone else, wish they’d bought back in the day.
You will also have a steady rental incoming dripping into your account if your smart, and H&G will help you manage your properties professionally and intelligently. And with our help, it could also be a very Tax-efficient investment for you.
Yes, it can be a little scary, but fear does not drive change. It simply perpetuates mediocrity. So please do not hesitate to contact us today if you require our help.
Harriet & George.
20, Cornhill, Lincoln
Tel 01832 864020.