As much as we all wish they would, things rarely go exactly to plan.
Wish all the best laid plans, preparations and intentions, we can never fully account for they way things are going to play out in reality.
This is true on any property investment - but it is especially true when your business is scaling up and you're working on multiple deals at the same time.
Under these circumstances, everything is scaling in parallel, so you will need to effectively manage a growing number of team members, third party advisors and contractors. This brings me nicely onto my first point.
Do you consider yourself to be a landlord or a business owner?
Before going any further with this article, I would encourage you to really reflect upon this question. There is no right answer, as we're all unique and we need to take decisions, which are in our own best interests.
That being said, it is really important that you have clarity on your vision and direction.
If you're only planning to own a few properties, the chances are that you can do a lot of the work yourself and retain a large element of control over your investments.
If you're keen to avoid building a team and working with lots of different people, you likely fall more into the landlord camp than the business owner camp. This is absolutely fine but you should be aware of the limitations this approach will place upon you - the key one being your ability to truly scale up in a big way.
If you're planning to build and really scale up your property investment business, you will need to master the essential skills needed to effectively manage a growing team of people. We're not going to cover all these points in this article, rather we will focus on one key point - namely trust but verify.
In order to delegate effectively, you need to give people the freedom to do things their own way and in their own time. Of course this needs to align with the high level goals of your company, with key milestones and deadlines being met, to ensure all runs smoothly. The key point here though, is that you must trust people to deliver against these key objectives, without constantly overseeing what they're doing or seeking to micro manage the process.
This can be a big challenge for a lot of business owners, especially if they have been accustomed to exercising a large degree of control in all areas of the business. It's an essential skill to master though and you can do so more easily, if you follow this simple mantra and put a robust framework in place.
Let's take builders, as an example here. Your framework exists in the form of a specification of works, with a set of defined milestones and corresponding payments.
It is essential that you trust your builders to get on with the job at hand but before releasing any payments, it is your responsibility to verify that the corresponding milestones have been reached. Whether you request video evidence, conduct a site visit or utilise the services of a quantity surveyor / project manager - your goal here is to protect your interests and keep the project running smoothly.
As with most things when managing teams, you need to find the right balance. If you're too trusting, you may find that people take advantage of your good nature. If you're not trusting enough, people will likely get frustrated by your constant interference and lose their sense of ownership in the project at hand.
The best and often the only effectively way to master these skills, is through experience and adopting an attitude of continuous learning / improvement. By keeping this simple principle at the forefront of your mind though, you will be well place to successfully scale up your operations, by becoming an effective delegator.
I would encourage to allow plenty of contingency in the following key areas:
In my personal experience, things always take longer than you originally expect them to take. Whether it's working through the conveyancing / finance applications to acquire a new property or undertaking development works, unexpected challenges alway arise, which interfere with your plans.
As an exercise in hoping for the best, whilst planning for the worst, it is well worth considering how you would cope in the event that a project were to take twice as long, as you are anticipating. What impact would this have on your carrying costs for example? Do you have enough cash on hand to pay X more mortgage payments if you experience delays in completing your development works, before being able to rent / refinance the property? Time is money in this game, so it's important to ensure that you're able to absorb the financial cost of delays and things not going according to plan.
Here are just some examples of needing to apply plenty of contingency, in terms of time and budget. I would encourage to think through all the possible scenarios here and ensure that you are well protected, in the event of these worse case scenarios manifesting themselves.
Something that is often overlooked is energy. When you experience unexpected challenges, which cause delays and eat into your profit margins, your stores of positive mental energy can quickly become depleted. This can have a knock on effect, in terms of opportunity cost, because your energy is used solving problems and waiting for responses from third parties, rather than pursuing new opportunities, driving your business forwards and enjoying your downtime.
In the interests of protecting your time, money and energy - be sure to allow plenty of contingency in your deals, so that when unexpected challenges inevitably arise, you're able to deal with them seamlessly and continue moving forwards.
One of the greatest drivers of stress and anxiety, is watching a project burning down your cash reserves and bringing you every closer to a point, where you're not going to be able to pay your bills.
Much like the instances referred to above, this can have many knock on impacts, particularly in terms of opportunity cost and loss of energy.
To protect your overall sense of comfort, security and general well being - be sure to retain a large cash buffer at all times. NB: this comes after having already allowed plenty of contingency in all areas of your ongoing projects.
You will find yourself in a much stronger position when you take these steps and as a result, you will have much higher energy levels. This in turn will enable you to think more clearly / creatively about new ways of driving your business forward and enjoying your leisure time.
Stacked is at your disposal 24/7 to support with: