Business

IS THE FISCAL LANDSCAPE CHANGING? WHO THE HELL CARES! WHY ADAPTING, NOT WORRYING, IS THE KEY TO YOUR INVESTMENT SUCCESS

By July 5, 2018 No Comments

It’s been said that money is a fiction. The way central banks have been allowed to take control of global economies and scale up on output, aka QE, would suggest that there is a grain of truth to this idea. And now they’re tapering the flow.

That’s right, the cash tap that was turned so quickly on and that made such a happy splash is about to be eased off, bringing to an end the long run of cheap and easy money. Is this anything to worry about? Well that depends on whether or not you’re prone to worrying about things you ultimately can’t affect or change.

Me? I choose not to worry. I’m inclined to agree with the journalist Mary Schmich, who famously wrote that ‘worrying is as effective as trying to solve an algebra equation by chewing bubblegum.

And that applies to those of us working in property, too. Because worrying is not investing. Worry will never make or break a deal. It will only infect it with doubt.

What’s of far more value is having a pragmatically defined structure in place that ensures the deal is watertight well in advance of signing any paperwork, and that puts doubt where it belongs—in the bin. Worrying is the mind arguing with itself, too lazy to find a logical way out of what is nothing but a mental feedback loop. Above all, it is the antithesis of the clarity of mind required to find, figure out, fund, and finalise the very best deals.

It’s commonly said that ‘turnover is vanity and profit is sanity’, but I’d like to rephrase that slightly and suggest to you that ‘worrying is vanity and yield is sanity’. Because those that focus on turnover often realise, when they come to do their accounting, which is usually when it’s too late, that they haven’t made much money. They are already, or soon become, the worriers in life for the simple reason that they focus almost entirely the final destination without ever planning the route. They focus on the money they want and expect and not on the means by which the money is attained.

In order to avoid worry, it’s vital to know the outcome of a deal at the outset of a deal, and map the way between them with clear signposts. Importantly, the outset is the point where you park your passion, curb your enthusiasm, and get to grips with the figures that are the engine of every deal.

Dull and boring? Only if you think that real profit in the form of income and yield is dull and boring.

But going even further back, to the real basics; of all of the ways to make money or grow capital why choose property in the first place? So many of the worriers I meet in this industry are biting their nails to the quick because they’ve got skin in the wrong game. They took a dodgy turn, got lost, and ended up in a casino at the wrong table when they should have been walking out onto a football field. Those are the people that need to re-orientate. Those are the people who should be either investing elsewhere or letting other people handle their investments for them so that they can get to where they really need to be—even if that’s with their feet up at the poolside.

I know that for me personally, getting involved in property was a very clear decision. I meet plenty of people who get into property because they see it as a gravy train, and they hear so much about it on the news and around at friends’ houses—many of whom will be amateur landlords or have-a-go investors themselves—that they simply cannot resist trying their luck on what appears, on the surface, to be a sure thing. And that is a bonafide mistake. Because if you’re going to invest in anything, or putting a finer point on it, if you’re going to do anything in the hope of making some money, it helps if you are genuinely inspired by that thing.

You need to have some fire in your belly for what you want to do. Especially in today’s market. Why? Because first of all you need to sit down and work on those ‘down and dirty’ figures I just talked about. Decide if they withstand the pressure of being pulled about and prodded from every side. So many people jump because everyone else is jumping and never stop to ask why they joined in with the jumping when they have a broken leg.

One of the most important questions to therefore ask is: ‘am I about to invest in property because I’m really passionate about it and have the requisite skills to make it work without giving myself an aneurism, or am I just following the herd?’

For example, if you’re going to—as I did back in the nineties when Labour leaders were cool and Blur and Oasis were fledgling bands—start building a portfolio in buy-to-let today, you need to have drive and desire, of course, but more than those things you need to understand, as in really understand, just how much the landscape has changed since those halcyon days. Because there are so many more pitfalls now, mostly dug and covered by the last two chancellors. And what that means is that fiscal vigilance down to the penny is vital if you’re going to make it work. Still, so many people don’t pore over the readily available data, and believe the hype in preference to finding the answers, often because those answers get in the way of their delirious plans.

The political volatility surrounding buy-to-let is one of the main reasons I called ‘time’ on the sector and started looking for less contentious investment options, and is why I am now almost exclusively in hotels. But back then, for me, it was all about buying small houses. Boring houses you might say. I bought my first property when I was nineteen. My motivation? Quite simply I was experimenting with an alternative to the lousy pension my dad got when he retired after 40 years of working his fingers to the bone. And when I did the numbers and combined it with an almost naive (but absolutely spot on it turned out) belief in the fundamentals—that houses at least double in price every 15 years—I realised that property (and I’m talking just one at this point) was absolutely the right thing for me to get into. In addition there was enough excitement in the deal to provide me with the psychological impetus to continue.

Fast-forward 25 years, and I’ve acquired for myself and other investors nearly 500 properties, and have just completed on my 18th hotel investment. What have I learnt along the way? That at no point did worrying about what was going on in the wider economy play any part. Because the wider economy has, and always will be, beyond my control. I simply did the sums and trusted the numbers. That has never changed—because that has always worked.

What I did then, and what I will carry on doing, is the thing that has allowed me and those I invest with and for to thrive—I adapt. I look at what’s up ahead, not a million miles away, just far enough away so I can get my head around things, and adjust my position and calculations to make sure that the numbers work in whatever the new, given context is. The best part is, I can honestly say that this is a core strategy that has never let me down.

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