Risk elimination is an essential business skill especially when property investment is involved. In this interview, Eugene Gamble and Ben Chai share several tips on how to eliminate and reduce risk in property investment. This interview was taken at the JT Foxx family reunion (now Mega Success event) for wealthy entrepreneurs and business people.
For internet connection challenged environments, we’ve written a summary of Eugene’s risk elimination tips below the video. However we recommend you listen to Eugene to hear many more in-depth insights on risk elimination than our notes provide.
How to Eliminate Risk in Property Investment
1. Identify a niche
Eugene’s first top tip to eliminate risk is to find a property niche to operate in. Finding a niche, on the surface appears like a simple strategy. However, depending on the area of property investment, finding your niche area can take a considerable amount of time.
One recommendation to find your niche, is to get some basic experience in your business or property investment. For example purchase a small buy-to-let. The experience of buying and renting out your first property will provide you with clues about the kinds of property you enjoy investing in and how that property investment strategy will synchronise with your financial and life-style goals.
For example, several friends invest in mobile homes whilst other friends specialise in housing for people on benefits. Every niche has its pros and cons.
Investing in mobile homes has a huge advantage because you don’t need a large amount of investment capital to get started and the margins are surprisingly high. However, the downside is that whilst the margins are high, the actual amount of return is small. So, you will need to build and manage a large portfolio of mobile homes to reach your financial goals.
Through finding your niche you minimise risk as you learn who your target audience is, what they want from a property, and how best to market to them. Refurbishing a house for professionals to rent requires a different strategy to flipping a house to sell on to an investor in student housing.
2. Make money when you buy
Eugene’s second tip to minimise risk when investing in property is to make money when you buy. This means that if worst comes to worse and you are forced to sell the property, you still make money.
It’s important to know what the resale value of the property is before you buy. An estimated resale valuation of the property can be quickly ascertained by a qualified surveyor. The trick is then to buy the property at BMV (Below Market Value), but why would anyone sell at lower than what the property market suggests? Here are three possible reasons:
- The house has negative memories attached to it
- The seller needs the money quickly
- The property has been on the market for a long time
When Eugene finds a property that he thinks is a good deal, he’ll make an offer 30 per cent below the market value. Then if the seller agrees, Eugene’s made money as soon as he owns the house!
Another factor to think about is how quickly the property can be sold. It may sound great buying a property at BMV, but if that property takes a long time to be sold then a lot of your capital is tied up.
3. Don’t be greedy
The final piece of advice to eliminate your risk is to not be greedy. As long as a healthy return on your investment is made, you needn’t strive to get huge returns. Again, this is where understanding your niche comes in.
If you see a deal that you know you can easily make 15 per cent from, and you know you can do it quickly, it’s worth spending the time to make that deal work. When you focus only on large returns, you will miss great opportunities provided by easily executed smaller deals.
Huge thanks to Eugene Gamble for sharing his insights with us. If you found this interview helpful:
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In the meantime, if you want to learn more about property investment from other people’s journeys, click the following articles:
- How to build a one million property portfolio in just 2 years
- How to turn £6250 into £1.5 million – one man’s incredible property journey
- Lessons from my first property lessons
If you are starting your own financial freedom journey, enjoy the following articles from our library. These articles will provide you with further insights in how to achieve your dreams.
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