This is a question that was posed to me only the other day by a novice investor and it is not an easy answer. I then read an article in one of the nationals which drove me to writing a response.
Lets look at the facts where we stand right now:
- House prices have dipped year-on-year and are continuing to slide in most areas by between 1 to 2% per month according to latest land registry statistics
- Buy to let mortgages are at an all-time low of less than 500 products – and these seem to be diminishing daily
- Confidence in the general economy, financial markets and world trade is low – and driven by media doom and gloom is rapidly vanishing as the media drive us into a recession (whether we wish to be in one or not)
- the credit crunch as its called has impacted the property markets due to liquidity issues impacting the ability for property investors to buy houses
However, lets step back and look at property investing for what it really is: a long-term investment designed to build month-on-month cashflow and capital appreciation through rising equity in the property.
The general rule of thumb often touted is that property doubles every 7.2 to 8 years; whether we will see this happening after recent events is difficult to say but even if it takes 10 or even 20 years for the value of a property to double; it will double in price for certain.
Why do I say this? Simple; the burden on new housing is so immense yet so maligned and ignored that it beggers belief. With the rising tide in immigrant workers, contract workers, divorcees, extended families and social patterns changing; there has never been as much demand for housing. With the failure of the national housebuilders to even match demand and now with a widespread halt on all building; it will be virtually impossible for the housebuilders to keep up with demand; even if modern construction methods and materials are used, they are still at the beck and whim of the local planning departments who don’t have the same sense of urgency in pushing planning applications through.
So, is it the right time to get into property investing?
Well, lets look at what you can expect if you decided to get into property investing now.
- There have never been so many bargains available. Whether its repossessions, developers off-loading stock, distressed and motivated sellers; there is a bargain around every corner. In this market, we’ve seen discounts of up to 50% off houses and average discounts of 25%-30% are not uncommon. So, even for a novice investor, I would argue that its possible to get into property for less money than you may have needed last year as the discounts are larger.
- There are mortgages available for cash-positive deals. I know a lot of property investors have invested in off-plan apartments, sale and rent backs and low-yield deals across the country in exchange for equity in a property. Whilst I’m not saying from a general equity growth perspective that this strategy may work; its not something I would recommend in the current climate. You need to get the best possible cashflow out of any property you buy – as a minimum I would aim for £100 minimum before any additional bills kick in. If you want true cashflow, then invest in HMO’s; to start, then go here and view this article https://www.yourhmoexpert.com/hmos/what-is-a-hmo-house-of-multiple-occupancy/
- Those who build their portfolios carefully in this market will be the wealthy property investors of the future. Say that property does drop by 20-30% and you are buying at 20-30% discount to the market value. Your equity is already locked in and then when house prices start to rise again, your net worth will begin to increase exponentially. Its often said that you only need £1,000,000 worth of property to live comfortably off (and I’ll cover the economics and maths of this in another post) but say you did buy this amount in the next two years (and believe me, thats easy to do in this market), then in 10 years from now, you’d have a portfolio worth £2,000,000. Just say you had never remortgaged or taken any money out – do you think that you might be able to take a few hundred thousand out at that stage? Its a no-brainer.
- The market is not risky and the credit crunch is a transformational phase that we must go through in order to emerge stronger than before; rental demand has never been higher. We are getting more and more calls from people looking for accomodation. You just need to follow the normal rules of property; buy in the right location at the right price. Follow these rules and you will never go wrong.
So, is now a good time to get into property investing?
Yes, yes and yes.
To access the article which rankled me slightly, go here but come back here afterwards to learn more about cashflow secrets in the property market.
Nice article and I rlaely have learnt a bit of how the housing deals are handled differently in the various states in America. Such articles should be included so that we know briefly about the different rules that govern housing in different countries. Thanks !