Blog: The Shiny Penny Syndrome

If you succumb to this disease, the shiny penny that pulled you off track is eventually overshadowed by yet another shiny penny, and another…It’s a vicious cycle.

There are many different strategies in the UK property investment sector and it is just not practical to be a master at all of them. As the saying goes it is better to be a master of one than a jack of all trades; meaning focusing on one strategy and mastering it pays dividends.  The rest is just noise that can detract you so cut it out and stay focussed. In my experience whilst certain other strategies may look or be portrayed as en vogue and financially more lucrative, once you do you dig a bit deeper and do your due diligence you can find the reality is different to what is being portrayed on social media. The grass is not always greener on the other side.

The sheer amount of information available at your fingertips nowadays whilst extremely accessible can have the ability to lead to information overload and can be more harmful than useful. So whilst it is good to know what other people are doing and what other strategies are currently popular, do not be attracted by the shiny penny and let it detract from your core strategy.

Of course, this is all based on the premise that you have a core strategy that you have spent time mapping out, developing and building. Once you have done this, you must take action as knowledge without action is a wasted asset.

If you are early in your property investment journey, I will share some points which I have undertaken which help me avoid being attracted by the next shiny penny. My strategy is quite simple, I invest in UK residential properties (buying BMV or being able to add value at the outset) with a long-term time horizon benefitting from the rental income on an on-going basis and capital appreciation over the long term. Simple right! Well, yes and no - I have had to adapt a lot to prevailing market conditions to enable my business to continue to grow whilst making good investment decisions.

You are more likely to stay focussed and less distracted by the shiny penny if you:

• Understand your why. Why do you want to pursue your given strategy? You have to dig a bit deeper- this isn’t purely a financial reply. For me my biggest why was to give me the time-freedom to do whatever I want with my time. Hence why I have stuck with buy to let and long term tenancies as I find that systemised properly this is a relatively passive strategy (and I self-manage all my properties and tenants)
• Understand your investment objectives, attitude to risk, time horizon and start with the end in mind. Seek appropriate tax and structuring advice at the outset so you are best positioned and tax efficient.
• Be realistic about the time and capital you have available and choose a strategy that meets this. If you are time poor but cash rich then a buy, refurbish and refinance buy and hold strategy may be most suitable or at the other end of the spectrum a turn-key property that provides a good cash-flow. You can of course outsource activities to your trusted power team.
• Build a power team and a solid network of property professionals that you can turn to for advice/mentoring as required.
• Have a clear business plan that you review on an on-going basis but one that you follow. This will help you avoid chopping and changing direction. To this end, the Property Investing 101 team can provide you with a portfolio prediction plan. Please follow instructions:
• Have someone that can hold you accountable and help you take actions against your business plan – this could be a mentor but like anything do your due diligence and make sure that you choose someone that you are inspired by and aspire to
• Once you are clear on the above, focus all your attention into building relationships with agents and sourcing suitable properties that meet your strategy.
• In a hot market you will have to work a lot harder and potential expand your geographical location. If you move into a new area you will need to spend time understanding the demographics of that area, the desirable locations and potential regeneration plans that could make the area attractive over the longer term.
• Have a deal analyser system in place tailored to your desired quantitative requirements so you can put any deal through it to see what price it would work for you
• Put in appropriate risk-management tools – for example if you are building a portfolio, you should stress test the debt on your portfolio at a higher borrowing rate and make sure it is still profitable. I use 6 percent as my borrowing rate. You can also mitigate risk by fixing your mortgage for 5 or even 10 years. Speak to a broker but in my opinion, there are some very competitive long term fixed rates available currently. Now could be a good time to fix.