‘Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat.’
Sun Tzu, The Art of War
I have been involved in strategy most of my life. As a youngster I played international-level sport, representing my country in the European Championships in Spain.
But it didn’t just happen. I had a plan and worked my way up from city to county and region, then national. I’m a huge fan of defining a strategy right at the start of an endeavour,
then developing the tactics – not the other way round.
As a point, this was as valid 2,500 years ago in the time of Sun Tzu, as it is today. Buying property at auction, property investment and business are no different:
As Henry Mintzberg said: ‘Strategy is not the consequence of planning, but the opposite: its starting point.’
Where do you start?
Whatever you’re planning in terms of investment, defining a strategy to achieve it has to be the first task. For the time being, you need to forget about anything but necessary detail and concentrate on the bigger picture.
How many times have you heard the expression, ‘Big hand, big picture’?
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The starting point is setting yourself specific investment objectives: after all, if you don’t have goals, how are you going to achieve them?
However, a strategy isn’t something that must be set in stone, and you should be willing to adapt and change it if necessary, because sometimes the market or other circumstances force change on you. You may have experienced success with off-plan investing in a rising market, but this strategy is unlikely to work in a falling market and recession – so
flexibility is key.
Strategy is a plan to achieve your long-term goals.
Investing in buy-to-let property over the long term can be a profitable exercise for those who buy and manage their properties carefully. Property values tend to rise in line with economic growth, so unless the economy remains flat or in decline forever, it’s a fair bet that a property you buy today will be worth (in real terms, and adjusted for inflation) more than you paid for it 20 years earlier.
This article will help you formulate a buy-to-let strategy in line with your investor profile and defined goals.
Your real estate investor profile
To a large extent, your buy-to-let auction strategy will reflect your investor profile:
• Attitude to risk
• Age
• Dependents
• Wealth
• Security
• Personal characteristics
• Experience
Your goals, ambition and desires will be largely influenced by your investor profile. We are all different, with different circumstances and needs, so no single strategy is suitable for all types of investor.
Creating a Property Auction Investment Strategy
Some of us will be one of the following.
The Entrepreneur Investor
The Entrepreneur Investor is focused, hasn’t much time, wants the information presented succinctly and makes a quick decision based on numbers. They don’t tend to be interested in too much detail – only the
potential profit, risk and any spin-off opportunities which may arise.
The Analyst Investor
The Analyst wants detailed information and scrutinises every last detail, producing their own spreadsheets and charts. They are likely to deal in facts, not hyperbole. For them, the numbers determine whether an investment is a starter or not – once they’ve completed their analysis,
they make a decision.
The Laid-back Investor
With a relaxed attitude to property investment, the Laid-back Investor is often hard-working and highly career and family-oriented. They tend to believe that once a property investment is made, it will look after itself – and that a good job is the best way to make money, with property providing a supplemental fund.
The Impulsive Investor
The Impulsive Investor follows the latest hotspots and may have properties scattered around the country or globe. They would consider looking at beach villas in Iceland, if that were the latest trend. This type of investor can be classified as a crowd follower and lacks any detailed strategy or idea of their intended goals.
The Information Junkie Investor
The Information Junkie cannot get enough intel. They spend most of the day on property websites and forums, listen to others who have been successful and turn up at all the property industry events. They will probably want to see every possible detail before making a decision, which means they often miss opportunities. They’re confident in their
own ability that they will invest successfully, after covering all the
bases.
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There are more types, and indeed you might be a mix of the above. The key is to sit down and really think through how your own personality, temperament and tolerance to risk fit in with a property investment strategy, and where relevant, bring on board a partner or family.
For example, the Laid-back Investor might want a hands-off investment property that looks after itself while they’re concentrating on other things. In this case, self-managed houses in multiple occupation (HMO) and student properties would not be a good option.
Which type are you? Or to get the accurate answer, which one does your wife, husband, partner, colleague or friend think you are? You may be surprised by the answer.
Copyright: Dominic Farrell
Author - Property Auctions: Repossessions, Bankruptcies and Bargain Properties
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