Some simple tips below allow you to develop a resilient business model which will thrive even in a falling market as long as you plan carefully and make the right moves. In this article I aim to cover some basic tips, tricks and broader strategies I’ve picked up from advisers to make money even though the market is generally tough.
Think About Your Long Term Goals
Buying property to let out is a long term game, more so now than ever. Larger deposits mean more of your funds will be tied up in the property and in the short term you may not be able to sell at a price you find appealing/viable once you purchase. On top of that higher levels of rent defaults are expected over the coming years as the austerity measures bite home which will lead to more pressure on landlords’ cash flow during the next two years. That said almost every 10 year block you can pick (I say almost because we have suffered such significant falls since 2007 there is no way to predict the outcome of this current 10 year block) where prices didn’t rise by a significant portion. On top of this there continues to be pressure on prices from immigration, shortage of new build etc. These factors lead to a market which is very depressed in the short term but which may well work out to be extremely lucrative in the long term.
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Short Term Opportunities
Having said that there remain significant opportunities for professional property gurus to make money in the short term. Our scouts around the country tell us that in parts of Northampton and Daventry (and the surrounding towns and villages) there remains a lot of stock of houses ripe for conversion. In some parts two flats converted from one of the houses would sell at up to 30% more than the house. This leaves significant room for the canny investor to turn a profit if they manage their project costs wisely.
It’s not just these conversions which can lead to a good gain in the short term. Many property is sold at auction requiring work and at a significan discount following repossession/other distressed sale or simply just because work is required and there are less auction purchasers than usual at the moment. As long as you are experienced at controlling costs and delivering a property back to market very quickly so as to avoid unnecessary costs you can turn a good profit working with these kind of bargains.
Commercial and Retail
With many lenders unwilling to look at flats over commercial units where both are on one title (and many not even prepared to mortgage just the flat alone!) the difficulty of funding and maintaining a semi-commercial portfolio has increased. The retail and commercial sector has seen a significant downturn in some areas. However this presents opportunity to the experienced landlord with local expertise as profit is still to be made redeveloping in the right areas – to take advantage of other big local projects for example. Whatever you do though bear in mind that for the forseeable future you are investing in a property category which will be tougher to refinance and will therefore need a much higher level of rental yield to cover your finance costs – a great proposition is imperitive, and you should probably consider walking away from any marginal spots.
Despite predicted falls in prices and an expected low almost 50% below the peak there is still lots to be optimistic about in the property investment sector. Many opportunities to raise a profit in the short term continue to present themselves in select parts of the UK. On top of that the outlook for the long term supply of housing in the UK is weak therefore demand for rental property and construction will increase and be an upward driver on prices. I would think the canny investor can certainly flourish in these tough times.