Money while you sleep
In the course of a week I have met three clients who all run their own business, they are all small family businesses. They had all been buying a little property on the side as money came in without any clear idea or strategy but just tucking some of the profits into property as and when they got the opportunity.
In all three cases it seemed that if they restructured their property portfolios, which weren’t huge but even then, they could probably earn more money than their business was earning for them.
The picture of a mouse going around in a wheel comes to mind. Bearing this in mind perhaps it could be said they are not running their own businesses but their businesses are running them.
It could be argued if the business is dependent upon the individual then this means without the individual there is no money coming.
Some would say this is not a business, these people have a job, just a very demanding one.
Some even start a business because they think it will give them more free time and freedom, I wonder how many people got this from starting their own business.
The real test of whether you really have a business or a job is to ask yourself this question? Do you make money while you sleep? If the answer is yes then guess what you just may be able to claim you actually have a business.
When speaking to them they all accepted the logic of being able to make more money than they make in their business simply by re-juggling their property and pushing this forward in the right way.
However in an emotional relationship logic doesn’t come into the picture, hence the saying being married to your business; it becomes an emotional relationship not one based on common sense. Often their business becomes a convenient distraction in their lives, they use it as an escape. This allows them to have a good excuse to perhaps not concentrate on other aspects which would rate more highly than running a business. In the same way that many use drugs and alcohol is how many use business, it becomes a convenient distraction.
Looking at things from a pure financial point of view there comes a point when it makes no sense to be running your business for money, when very clearly it is no longer working for you.
Property is by nature a business, it makes money for you passively, whilst you sleep, on holiday and even when you’re dead. It will carry on going up in value in the medium to long term and giving a monthly return. Since it is not dependent on any single person there is no limit to how many you can own.
There was one East End landlord who built up a portfolio of 7,000 residential units and was one of the largest holders of residential property in the UK. Spookily he sold the whole lot just two months prior to the crash of 2007.
One of the three clients who had been investing with us for a short time got aggressive after each subsequent investment with us.
The first investment was done without even meeting anyone in the company purely on the basis of a phone call and without seeing the property. This first deal ended up being traded so he got his money back and a healthy return very quickly; he had tasted blood and then wanted to dive in for the second one. It was then that his accountant stepped into the picture and actually warned him to perhaps do some due diligence on us and at least have a meeting. So he then decided to meet us and then invested in a few more deals increasing in size as he went along.
Meeting the three business owners within a week is what prompted me to write this piece, this is a very common theme amongst business owners.
There’s another individual who runs a business by himself doing wholesale trade and barely makes a return. He attended a seminar of ours a few years ago and we had presented a property up for sale at the seminar he agreed the deal on the same day without even looking at the property.
This property was purchased in 2011 for £300,000 and is currently valued at £425,000. I would wager he has not made even half of this amount by running his business, this was one of the best moves he has made.
It is very important to step out of the day to day and look at your situation from outside in. However this is not enough by itself, you need to take some hard decisions and follow up with action, otherwise there is little point in even looking, simply to procrastinate and speak flowery words and do nothing to follow up on. You may as well carry on going around the wheel.
Your accountant is a good person to have a meeting with, this way you can look at the hard figures of what you have earned over the last three or five years and compare this with what you would have made in property. If you have never invested in any property look at your own home and make this comparison.
We are now in a situation where property rightly or wrongly earns more money than individuals can often earn; and many small businesses make. This makes it an indispensable asset to have if you live in the UK.
This is a broad and in-depth topic which is scarcely covered in this article, the aim was to simply drop ideas and give food for thought.
The Real Deal
Fulham, London, SW6
Purchase Price: £1.8m
- A large property configured as three flats in a very good residential location
- Scope of mansard and side extension
- Properties in this location are being sold for around £1,000 per sq. ft. while this is coming in at around £818 per sq. ft.
- Fulham Broadway shopping centre and the underground station are within 5 minutes walking distance
- Shops, boutiques, cafés, bars, restaurants and pubs of Fulham and Chelsea are also within walking distance
- Very good buy and hold opportunity
Call us now if you would like to have a piece of the pie!
Sow & Reap
A Property Investment Company
!Tips of the Week
“Big may not beat small always, but fast will definitely beat the slow.” The speed with which you make decisions and commit to them will ensure you get deals time and time again.
Bricks and mortar provide an attractive alternative to poorly performing savings accounts. Although property presents a good long-term gain, you can expect it to deliver a regular income too.