Have you ever asked yourself the question ‘when shall I invest in property?’
You would be like any other investor, new or experienced, if you have, and we have many people asking us this very question now.
With all the changes in the property market such as the tax changes, there is a lot of un-certainty on what is going to happen in the next year or so.
A lot of people are thinking is it the right time in the cycle? Are property prices too high? Will interest rates change or rise? Can property prices keep going up or will they stall?
Because of this many people are waiting for a perfect time, for all the above to be just right, before they decide when to invest in property and we don’t think this is the way forward, as there will always be challenges or things against us, but it is how we mitigate these to stack the odds in our favour. This can be things such as fixing the interest rate on your mortgage to make sure you are not affected if rates do rise in the near future.
You see the years pre-recession and property crash were a good time to buy as prices were rising and there were discounts, and yields and cashflow were high, and many people made a lot of money doing this. You could buy a property and by the time you finished the refurbishment it had gone up in value in some cases. You could buy, refurbish, and then re-mortgage and a lot of the time the banks would give you any money you wanted, and shrewd investors cashed in.
Then there was the crash where prices were low and discounts were big, however the finance was not as readily available meaning people where finding it hard to buy. People still made a lot of money buying but it was mainly people ready and armed with finance in place. Of course, other investors also invested using more creative cash-flowing strategies such as lease options.
Today, post property crash, on the upward recovery part of the cycle, the property market is telling a different story and this is putting some investors off. This is because sellers are becoming well-informed and know that they can get a good offer quite quickly in some areas, especially in London & other big cities. More buyers are coming back into the market because confidence is back and demand is high. But what is true in the wider picture is, prices are rising, back above pre-crash levels in a lot of areas.
Many new investors are now entering the market and some more experienced investor/landlords, are exiting the market due to market conditions and tax changes.
Although it could be argued that now is a harder time to invest, we believe now is always the right time, but to make cashflow and money at times, we need to be more creative and look for different ways to profit. Below are five tips to still get access to profitable properties:
1. You will need to find different ways to add value to the properties.
You want to look for property where you can add 15% or more. Prices have corrected so discounts, though possible, are less available and so you will want to look for ways to really add value to the properties.
Ideally if you can source dirty, unattractive single lets which need cosmetic work and nothing structural, then this is the way forward, as it will put many other people off and give you more bargaining power.
Our refurbishments are usually things such as a new kitchen, bathroom, a lick of paint but nothing too heavy. This can allow you to add value to the property but not spend too much. Ideally a £5000 refurbishment would add at least another £10000 to the value of the property.
2. Look for different types of properties that may have less competition.
There are different sorts of properties you can look for that are not that attractive to others as above, but there are also other types that are out of many other people’s price range or current skillset.
This could be old pubs, nursing homes, empty offices where you can ‘change the use’ to add lots of value converting commercial into residential.
You can also look for leasehold properties with short leases, properties with absent freeholders, properties with Japanese’s knotweed or minor asbestos, and properties unsold at auction, amongst others. All these potentially can be converted and made good for a lot less than the value you can add.
This also avoids having to offer too low with Estate Agents & upsetting them long term.
The reality is, there is nothing wrong with paying ‘market value’ for a property if it makes sense to do so and the value added far more outweighs the cost to fix the problem, because the market is changing and you need to adapt. This is a mind shift for many people but it a way to not miss opportunities just because they don’t give a 20% discount.
3. Use non-bank finance and work with other investors.
We have a separate report on this topic where you can see how we work with other investors and the process that works for us. When you have JV finance you don’t have to refinance all the time and recycle your deposit, as you can use other people’s money. There is more information on the report below.
4. Focus on return on investment (ROI)
This in my opinion is just as important if not more than discount. This is because discount can be eroded with a turn in the market however ROI can be steadier if you manage the property correctly and take fixed mortgage rates (Contact a qualified financial advisor for advice on this). Return on investment is widely thought of in the business world, and in property this is calculated by taking the annual cashflow and dividing it by what you have put into the property. If you re-mortgage in the future and take all your money out you have an infinite ROI.
5. Look for the opportunity and not the negative views.
There are many people out there who will bad mouth the market no matter what is happening.
There is a big section on this, and my experiences on how to still profit in the book below.
So, in conclusion when do I feel the best time to invest in property is?
If you look at the richest people in Britain, then it seems the answer is always ‘now’ as rich people are nearly always investing no matter what the market is doing.
I think the question really is, ‘what strategy do we use for the property market we’re in, and what fits best with your individual circumstances?
Look out for more information in the future on our blog page, on the different strategies you can potentially use.
For more information on any of the services we offer contact firstname.lastname@example.org