The Greater the RISK, The Greater the REWARD in Property is very true! The opposite of this is also very true. The greater the risk, the greater the chance of failure. We have seen many fail due to inexperience, over leverage or running too many projects at the same time
Obviously nothing worthwhile comes in life without risk and hard work. The same is true for property. Let’s address the risk issue. As a property investor since 1994, I like to stay risk averse. That means knowing just how much risk is acceptable and how much risk may be too much of a gamble. With all that said, sometimes it is good to stretch ones risk mucsle.
Sometimes the greatest successes come from WALKING AWAY! Sometimes they come by taking the biggest, largest risk you have ever seen. But many business owners and entrepreneurs have fallen victim to taking on too much risk—especially at the wrong time. They also fall victim to not knowing how to evaluate a property. They fail due to a shift in the market cycle. I was fortunate to see in 2006 things shifting and stopped building, refurbing and even closed my bridging company. I avoided castrophe while others who were highly leverage became highly bankrupt.
Evaluating a block of flats or a professional hmo…it is similar to peeling back the layers of an onion. With each new piece of information, you get a better idea of what the core project will be. From getting the right paperwork, right licenses, verifying cash flow, walking the units and estimating the renovation budget there are a lot of different moving parts that must be evaluated. Miss one simple thing and it greatly increases your risk.
However, if you cover the risk your reward will be even greater!
Make sure you have the time to manage the entire refurbishment process of the professional hmo/ block of flats or the right project manager—from the big things like keeping contractors on schedule and payments and inspections on time to the smaller things like selecting finishes and incidental decisions that can play a larger role than you initially think. If you aren’t willing to make the time now to do the legwork, it’s going to be hard to make the time when it really matters.
Bottom line is be aware of the downsides and not just the upsides. This is why we sell ready made, tenanted and cash flowing Professional HMOs.