Sun Tzu is the reputed author of the popular book The Art of War, which some consider to be the best single book ever written on the subject of war. Sun Tzu himself was a military specialist active during the turbulent late Chou dynasty. Sun Tzu’s work became known in the West only in the late eighteenth century and was not properly translated until the twentieth.
The interesting point regarding Sun Tzu’s approach to warfare, unlike that of Western authors, is it does not put force at the centre, indeed the Chinese character for force occurs only nine times in the text’s thirteen chapters. This reflects the conditions of warfare in China at the time (force was then in fact of limited utility) as well as Sun Tzu’s conviction that victory and defeat are fundamentally psychological states.
This treatise has been applied to the world of business, as business is underpinned by psychology. This advice has since been co-opted by legions of armchair soldiers and generals in the business world. Many people now consider The Art of War to be their bible in business. The book is composed of 13 chapters, each of which focuses on a different aspect of war.
You may ask: this is interesting but what has it to do with investing in property? In the same way applying force without any thinking is not always the way to win a war, just dumping money in a property is not also the most productive method. It is important to have a strategy of how much and where to apply your funds.
I would even suggest having a lump of money is not the most essential ingredient in investing in property, done the right way it can take very little or even no money in the property.
One of the chapters focuses on the importance of making quick decisions; note this does not mean rash decisions, but where all possible information is at your disposal then a decision must be made.
Master Sun talks of decisions as the ‘well-timed swoop of a falcon’; ‘energy may be likened to the bending of a crossbow and decision, to there leasing of a trigger’. What he’s saying is that once the information has arrived, be decisive and advance with force and commitment from that decision.
It has been said ‘indecision and delays are the parents of failure.’
Sitting on the fence won’t win wars, neither will it make you successful in investing in property; that is not to say each decision will be a positive one.
In business there is rarely anything to be gained from sitting on the fence. An investor’s job is to make the hard decisions, even when all the facts are inaccessible. Learning to take a view on some aspects of the deal is what will give you the edge.
It’s rare in this age to find a deal where all information is available and the property is still a deal, often views and assumptions will need to be taken; there are known variables and unknown ones.
I have seen more people losing money from not taking a decision than making the wrong one, when it comes to investing in property. Why? Because property is a forgiving asset class, should you make the wrong one, the property price will come around given enough time… like having a bad haircut. Even in this era of credit crunch the banks are still willing to lend 75% pretty much based on the value of the property alone.
We have had many ‘clients’ who have been thinking about investing in property, but that’s all they have done for many years, in the same way people always think about dieting and getting fit. There has been business made on the back of this procrastination, of books, magazines and commercials. A decision can be taken in a second or can be pondered over for years.
With property, procrastination can cost money – the longer you take to decide, the higher the property will go, literally month on month. Recently this has worked in someone’s favour, a property which had been agreed five months ago has just been exchanged, this kind of time period means the property has risen in value since being first agreed.
One of the fastest turn around deals we have done is no 92 Shirland Rd, W9. This was a freehold building made up of 5 self contained flats, we came across the property in auction. The tenancies were unknown, however through one of the agents we knew we discovered this property was all under ASTs (this was verbally confirmed) and the ex husband was selling the property without the consent of the wife who lived in the property and who happened to manage the rest of the flats in the building.
We discovered this only the day before the auction, the same night I phoned a client and told him this is something we should take a punt on and go for. We were prepared to bid up to £1.3m, yet luckily we managed to get the property for £1.1m; three days later we sold the property for £1.35m.
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Our cheque for £110,000 had not even had time to clear with the auctioneers before we had sold the property on again.
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Conversely we had a pharmacist client who for years used to call me up every so often to tell me he’s interested in investing. Each time I showed him a deal he responded with some excuse or another, and then he ran off into the sunset as he couldn’t make a decision to go for the property, meanwhile the property prices in the area were only go in one direction and that’s upwards.
After all that, he turned up at a seminar and I asked him why he hasn’t invested and why he was wasting both mine and his own time. One of the replies he gave was that we always insisted on a quick decision.
I explained this was not me doing a hard sell on him, that these properties require a quick decision, and that if we do not go for it the deal will be pounced on by someone else. This was the reason, and this does not mean we take short cuts on the legal paper work, but simply that he needs to decide quickly.
My speech clearly made sense and he agreed to go for the next property we showed him, he ended up purchasing a two bedroom in Hallfield Estate in W2 near Queensway. We picked this up for him at £315,000 and this was rented at £500pw, eight months later it was valued at £375k!
Another property, 41 Burlington Close was offered to an investor in Jan 2012 for £325,000, he saw it and then said he needed more time to make a decision, I told him we did not have more time – all we needed was a decision, the rest we can take care of. One of the most common excuses in regards to avoiding making a decision is needing more time. A decision can be made in a second. Another client of ours purchased this, and it is now currently being marketed by Foxtons for £450K; we are confident of getting offers around £425K.
Delay causes more losses in property than a wrong decision. We delay because we are more averse to the pain of losing something than we are attracted to the pleasure of gaining something. The fear of losing what we have leads to indecision. The sad fact of the matter is many investors are already in a situation where their funds are being lost day by day. It is simply being eroded, sitting in the bank with paltry levels of interest rates being paid. And the services which used to be free are now being stripped from you, like the NHS. In the future you will need a lot of money at your disposal to enjoy the same level of facilities you have currently.
Once this is known then something has to be done as your funds are already on a downward slide. The fear should be in play already! It should be used to move you to more solid ground.
The Real Deal
Hampstead, London, NW3
Purchase Price: £805,000
- A large two bedroom flat in a highly sought after residential area
- Valued at more than £900k
- Long Lease
- Priced at £671 per sq ft
- End value after works would be more than £1.1m
Call us now to reserve!!
Suresh Vagjiani
Sow & Reap
A Property Investment Company
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!Tips of the Week
While using mortgages for buy and flip deals, the most important fees are the arrangement fees and the exit fees, not necessarily the interest rates.
Always get two or three quotes for the works to be done at a property; but don’t go for the cheapest one, go with the builder who can give the highest quality and complete on time. If you have finance everyday is costing you money!
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