The Biggest Investment Lessons Property Never Taught Me

I've spent the last few weeks writing about the experiences that have shaped the way I invest in property.

I started with teaching and mathematics, moved through leadership and living overseas, and this week found myself writing about economics, parenting, buying businesses and a graph theory problem I used to set my Further Maths students.

Somewhere along the way, I realised I'd probably been asking the question backwards.

I'd assumed I was exploring which skills from my previous life had turned out to be useful in property.

Increasingly, I don't think there is a "previous life" in quite that sense.

The way I analyse risk, the questions I ask before investing, my preference for cash flow and resilience, the importance I place on people and my willingness to walk away from an opportunity weren't lessons I suddenly learned when I became a property investor.

Most of them came from somewhere else.

Property is simply one of the places where all those experiences now meet.

What Skills Make Someone a Good Property Investor?

When people think about becoming better property investors, the natural tendency is to learn more about property.

That's obviously important. You need to understand financing, rental demand, costs, regulation, property management and the market in which you're buying.

But I'm increasingly convinced that some of the most useful investment skills aren't property skills at all.

They include being able to break a complicated problem into manageable parts, distinguish what you know from what you're assuming, understand people, ask good questions, recognise uncertainty and occasionally accept that the correct answer is simply "no".

I learned most of those things long before I started investing seriously.

How Has Mathematics Influenced the Way I Invest?

My degree was in Mathematics with Economics and, although I briefly taught A-level Economics, I spent the overwhelming majority of my teaching career teaching mathematics.

That distinction probably explains quite a lot about the way I approach investments.

Economics gives us useful ways of thinking about the environment in which we're investing. Interest rates, inflation, employment, house prices and rental growth all matter.

But I don't particularly want an investment that requires me to predict those things correctly.

I'm more interested in analysing the investment itself.

Can the rent comfortably service the debt? What free cash flow will actually remain after the real costs of ownership? What happens if maintenance costs more than expected? How exposed am I if interest rates remain higher for longer? How much room is there for my assumptions to be wrong?

That's a very mathematical way of looking at the problem.

I'm less interested in producing one prediction of the future than understanding the range of possible outcomes and whether I'm comfortable with them.

Why Is “I Don't Know Yet” a Useful Answer in Property Investment?

Occasionally, when I was teaching Further Maths, a student would ask me something and I wouldn't immediately know the answer.

I became perfectly comfortable saying:

"I don't know. I need to go away and work on this."

What I really meant was I don't know yet.

That wasn't an excuse to stop thinking. It was the beginning of the process.

What do I already know? What information am I missing? Which question should I ask next? Is there somebody who understands this better than I do? What evidence would allow me to reach a sensible conclusion?

I approach investment due diligence in much the same way.

If something doesn't make sense in an acquisition, I don't think an investor or adviser needs to manufacture an immediate answer. The better response is often to identify what isn't known and work out whether it can be known.

That distinction matters.

Why Is Saying “No” an Important Investment Skill?

I used to give my Further Maths students a deceptively simple graph theory problem.

I'd draw a network and ask them to find a route through it. They would try one route, fail, try another and usually become increasingly inventive in their attempts to solve the problem.

The trick was that it couldn't be done.

There was no route.

The interesting moment came when somebody stopped asking, "How do I solve this?" and started asking, "Is there actually a solution?"

One of the most powerful answers in mathematics is no, provided you understand why the answer is no.

There is an obvious investment parallel.

Sometimes investors become so focused on making a particular property work that they stop questioning whether it should work at all.

They adjust the deposit, assume stronger rental growth, reduce the maintenance allowance, increase the future sale price or find some other way of persuading the spreadsheet to produce the answer they want.

Sometimes the better question is simply:

Should I be trying to make this investment work?

Due diligence isn't only about gathering enough information to say yes. Sometimes its greatest value is giving you enough confidence to say no.

How Has Parenting Changed My Approach to Investment Risk?

I have three children. One is now at university in Manchester and the younger two are still living with us in Indonesia.

Twenty-one years of being a parent has changed my relationship with risk.

Before having children, the consequences of getting something badly wrong were largely mine. Parenthood doesn't necessarily make you risk-averse, but it does change what you're prepared to put at risk.

I've certainly continued taking risks. I've invested in property, moved countries, borrowed money and bought businesses.

But I've become much more interested in the relationship between the upside I'm pursuing and the downside I'm accepting to get it.

Do I really need to risk something important for a little more return?

That has increasingly pushed me towards investments with sensible debt, dependable cash flow, liquidity and options if circumstances change.

I'm not necessarily interested in eliminating risk. I'm interested in making sure the risks I'm taking are worth taking.

What Did School Leadership Teach Me About Buying Businesses?

When my business partner Peter and I bought our first letting agency, neither of us had operated an estate or letting agency before.

We also both lived overseas.

We therefore knew very quickly that the answer couldn't be for us to become experts in every aspect of the business ourselves.

Our initial assumption was that we needed an office manager. The previous owner recommended somebody from the existing team who might fill the role. It soon became apparent that they were probably the least suitable person in the office.

That turned out to be useful.

It forced us to stop looking for somebody who could simply become "the manager" and start understanding the people we had actually inherited.

There was considerable expertise already inside the business.

That felt remarkably familiar from my years running schools.

I taught mathematics well and could teach Physics to A-level, but nobody sensible would have expected me to walk into a French or Computing classroom and tell an experienced teacher how to teach their subject.

Leadership wasn't about being better at everybody else's job.

It was about recognising expertise, building trust, developing people and identifying those capable of taking greater responsibility.

Peter and I approached the business in much the same way.

Because we intended to grow, we weren't simply asking who could perform each role today. We were also trying to identify who might grow as the organisation grew.

Why Do People Matter So Much When Buying a Business?

Financial due diligence tells you an enormous amount about a business.

We look closely at revenue, costs, margins, recurring income, debt and cash generation when considering an acquisition.

But the spreadsheet doesn't tell you everything you've bought.

It doesn't necessarily tell you who possesses the institutional knowledge, who other people turn to when something goes wrong, which processes depend upon one particularly capable individual or who might become a future leader if given the opportunity.

You can acquire the shares or assets of a business relatively quickly.

Understanding the organisation you've acquired takes much longer.

That's why I think investment analysis has to extend beyond the numbers. The numbers matter enormously, but so do the people and systems producing them.

Should Investors Try to Maximise Returns?

I've become increasingly uncomfortable with the idea that the purpose of every investment decision is to maximise the theoretical return.

There is always another risk you could take in pursuit of another piece of upside.

You could borrow more. Hold less cash. Buy something more speculative. Assume stronger growth. Concentrate your investments further.

Some of those decisions may be perfectly rational.

But the highest possible return isn't necessarily the best outcome for a particular investor.

What matters is what the investment is intended to achieve.

For me, that increasingly includes security, dependable cash flow, resilience and optionality alongside growth.

An investment that produces slightly less in the optimistic scenario but leaves me in a much stronger position when circumstances turn against me can be the better investment.

The spreadsheet can't make that judgement for you.

How Should a Property Adviser Help Someone Make an Investment Decision?

I think this distinction matters particularly when giving property investment advice.

The job shouldn't simply be to find a way of making the property somebody already likes appear to work.

Sometimes the most valuable part of the process happens earlier.

What is the investor actually trying to achieve? What time horizon are they working with? How much risk can they sensibly accept? Do they need income, growth, flexibility or some combination of them? What happens if their circumstances change?

Only then does the individual property become particularly interesting.

The question isn't simply:

Is this a good property?

It is:

Is this a good property for this investor, for this objective, at this price and with this financing?

And sometimes the honest answer at the beginning of that process is:

I don't know yet.

That should lead to better questions and more analysis.

Occasionally, the eventual answer will be yes.

Occasionally it will be no.

Both can be valuable outcomes.

What Is the Most Important Lesson I've Learned About Property Investing?

After spending a month thinking about it, perhaps the most important lesson is that I didn't learn most of my investment philosophy from property.

Mathematics taught me to question assumptions and become comfortable with uncertainty. Teaching taught me patience and the importance of understanding people. Leadership taught me to recognise expertise rather than needing to possess all of it myself. Living overseas taught me about trust, systems and resilience. Parenting changed my relationship with time and risk. Buying businesses reinforced how much of an investment exists beyond the spreadsheet.

None of those experiences gave me a formula for investing.

They gradually created a way of thinking.

Perhaps that's true for most investors. We don't arrive at investing as blank sheets of paper and then develop an investment philosophy from scratch. We bring our careers, mistakes, relationships, responsibilities, successes and failures with us.

Eventually, if we're paying attention, we begin to recognise the pattern.

I've spent this month asking what the rest of my life taught me about investing.

I think I now have a slightly different answer.

Property is simply one of the places where all those lessons meet.