Why Your Property Business Might Not Succeed (Despite What You See On Social Media)

Misleading Representations On Social Media

First of all, you need to understand that the success stories shown on social media aren’t usually representative of property success. Many people see a single great deal and believe that they can do the same with their personal portfolio, although that’s not usually how things work. 

Generally, it’s a bad idea to focus solely on the “wins.” If you do, that can lead to overconfidence and make you believe that being successful in the property market is easy, as long as you can secure debt and acquire the deed to a building. In reality, it requires careful planning with quite a bit of luck in the early stages. Doing well early on will give you confidence and provide you with the resources to make mistakes later. 

Influencers also omit the fact that there are legal risks and taxes involved in investing in property. It takes a lot of planning and checking you have the resources to make the acquisitions you intend to make. That’s why it is so critical to use a full-service firm. These enable you to source the experts you need to take you through each step of the process and, ultimately, get the results you want. 

No Clear Strategy

Another problem many people encounter is the temptation to follow hot new trends instead of focusing on the tried-and-tested methods that work. Social media personalities in the space will often focus their audiences’ attention on novel strategies and claim that the old ways of doing things are no longer viable. In some contexts, their proclamations may be true, but they often mean that people can’t focus on core activities and feel constant pressure to try something new. For example, at the moment, conventional buy-to-let strategies are seen as past their sell-by date, whereas in reality, they remain a significant second-income earning strategy for the vast majority of people involved in the sector. 

The trick here is to ask as many questions as you can before you go into a property investment. Just because something looks bad on paper, that doesn’t mean that it won’t be profitable in reality, and vice versa. Market demand, specific cities, and property types can all make a significant difference to your overall success. 

Furthermore, when you copy the trending strategies of other people, you aren’t necessarily playing to your strengths. You might be following something that worked for someone else, but that doesn’t mean it is a guaranteed path for you. You might find it hard to follow, or simply don’t have the aptitude for that particular area of the market, perhaps because of your prior experience. 

Financial Mismanagement Issues

You may also run into financial mismanagement issues if you try to start a property investing business yourself. You could find yourself in a situation where your cash flow is being tested to the limit or you can’t afford an upcoming tax bill. These problems are often serious. 

For this reason, it is worth working with experts who can guide you. Don’t follow the advice of online gurus verbatim and assume everything will be okay because it worked for them. You don’t always know their personal situation. Instead, look at the reality of your finances and what you can realistically achieve with them, as they stand. Don’t try to push ahead with plans because they look profitable on paper without talking to an accountant who understands your situation first. Get them to plan your taxes for you, showing you when you’ll need to make large payments, and how these might affect your overall returns. 

Be wary of poor budgeting. Don’t make financial plans that you can’t adhere to. Be careful to always ensure you have the cash flow to back up your strategies in property and ensure you have the additional funding and financing you require to make the best of your situation. 

Over-Reliance On Debt And Leveraging

You also have to be careful to avoid over-reliance on debt and leveraging. While it is essential in the industry and can help you make a lot of money, it isn’t always the best strategy long-term. 

The best approach to debt and leveraging is to understand the macroeconomy and money markets. If you can create interest rate forecasts, you’re much more likely to succeed long-term because you can pull out and sell before things like interest rate hikes or borrowing squeezes occur. 

If you can’t do that, then the best approach is to simply build up more equity first before opening up a new leveraged position. You might say something like you want 40% equity across your portfolio minimum to protect against issues that might arise in the credit markets. 

Don’t forget about interest rates, something that many influencers in the space ignore. Many assume that they will remain near-zero long-term. But, of course, that’s not the experience of the last couple of years, and there’s no reason to think it will continue indefinitely. Most gurus can’t explain the macroeconomy and how it functions, and if they do make predictions, they are almost always wrong (because they don’t have a working model of how the complex, interacting systems of the macroeconomy work, and how these feed into monetary policy). 

Ignoring Economic Cycles

Another reason your property-buying business might not succeed is the risk associated with ignoring economic cycles. These wax and wane over time, with booms occurring in some periods, and busts in others. 

Economic cycles are, again, not something many property investors talk about. Most take a long-term perspective, but that sort of thing only comes naturally when you have a lot of money in the bank. It doesn’t lend itself well to situations where you’re putting all your savings into a deposit and then watching your equity disappear due to cyclical forces in the credit markets. 

For this reason, it is essential to understand why property prices rise and fall in the short and medium term. Knowing the underlying dynamics at play, such as supply and demand, interest rates, and lending conditions, can help you predict how things are likely to play out in the near future. You won’t always get it perfectly right, but you will get a sense of where things are heading and if it is the right time to start thinking about putting more money down. 

Unrealistic Passive Income Expectations

You can also get into trouble if you have unrealistic passive income expectations. Many real estate investors think that they can replace their convention earned salary within a year, but things rarely work out this way.

Usually, property owners have to manage their properties and make lots of decisions. For this reason, there’s more activity in property investing than most people realise. 

Then there are the unexpected workloads associated with it. Dealing with contractors and managing tenant problems takes a lot of time, even when you hire professional managers to do most of the work for you. For many landlords, this is a significant issue, but also something that the mainstream doesn’t address very often. 

The reality is that most property investments grow in value slowly. Building a profitable property portfolio takes most investors years to achieve, instead of a matter of months. 

Following Unvetted Advice

Lastly, you can often get into trouble if you follow unvetted advice. Getting into guru culture and believing everything that they say is not a good strategy for success and could leave you with significant financial problems in the future. 

The best property gurus are those who are honest and realistic about expected returns. They understand the challenge of the environment and how long it takes most people to move forward and earn a living from it. There aren’t usually one-size-fits-all strategies that work, and most people have to go down their own path to success.