Currently, there are many doom and gloom stories regarding where the property market is going to go in the next few years. There is talk the market could drop by as much as 30%, and that a further drop in Sterling, caused by the instability of Brexit, would mean interest rates will need to rise. This would cause havoc in the property market, as we have been having an over extended honeymoon with low rates.
However, who is actually benefitting from these rates? If you were to apply for a standard BTL mortgage, the rates you will be getting will not have much correlation with the base rate. Those who are benefiting from these low rates are those who were fortunate to go on base rate trackers prior to the credit crunch.
So, how does one invest in a market which is likely to go down further? Or, does one simply sit back and wait until there’s blood on the street; and then re-enter? That’s certainly one option. When the mass of buyers have been scared off from the market, you will find properties which are on the market because they need to sell. They do not have the luxury of choice. We have covered these types of sellers in earlier articles, the 3 Ds, the deceased, divorced and distressed. At the moment, we are focusing on the deceased; or more accurately those who administer the deceased person’s estate. This can provide a lucrative source of business, and until someone can find a way to stop death, there will always be a supply from this sector.
I believe there are three targets one should focus on in this market. One, is the 3 Ds. Another, is to purchase in areas which are set to rise heavily over the next 5 – 7 years. These will be bread and butter areas, where the average property price is below the £300K threshold. The other obvious focus should be on yield. If you can work a property by adding value, to give you a 10% yield, who cares which way the market goes? Your money is coming in every month; there is
no speculation required as to where the market will go in the future. People like simple statistics. To say the market is going to drop 30% is too broad a brush to paint the property market with. For example, a £10m home could drop to £6m, fuelled by a divorce – and I have actually come across such a situation. And a small property near a Crossrail station, could go up from £250K to £275K. The former drop would swallow the small gain made by the smaller property, and skew the statistics. This is how averages work.
There are some areas which are so desirable, that as soon as a property comes up it is pounced on. The liquidity in these locations is very low. Will these patches be affected in the same way? I think not. Property demand varies, according to locality and sector. I suspect properties below £300K, which are priced at entry level for first time buyers, will be less affected. This is because, they are satisfying a basic human need. A need for shelter.
Agony Agent is here to help!
Q: My tenant has signed a tenancy agreement and is due to move in soon. But, his references have not come through yet. What should I do?
A: I would always recommend for agreements to be signed only once the tenants have passed references.
If you have an agent working for you, now is the time to apply the pressure and give them a call. They should not have allowed this to happen. If you are handling the referencing, the first step would be to inform the tenants that they can’t have access to the property until they achieve a pass. Inform them of what is outstanding and get them on the case as well as you. I do not recommend that you let them move in without the references. If the references do not come back in time, I suggest that you tell the tenant they are not starting the contract on the agreed date, and you will have to redraft another agreement.
Sometimes, a tenant might offer to pay two or three months in advance; however, don’t bite their hands off at this time, as this might be the last payment you see from them once the money has run out! Without references you have no idea who you are letting in.
DO NOT CRITICISE
We live in a world that is very polluted. However, we do not often reflect upon the prevailing sound pollution and what this does to our hearts and minds. The "blame" culture affects people's behaviour, souring the prevailing mood and spreading
fear. Clearly, we must discriminate. We need to decide who to spend time with, and with whom to do business. However, our air waves and e-waves are a maelstrom of abuse, criticism, anger and vitriol. We are so inured to this modern reality that we have become undisturbed by a malevolent culture that has crept us and overtaken us.
A good life comes from a clear mind, and a joyous heart. My experience is that eliminating the listening to and partaking in criticism significantly improves my quality of life, my happiness, my well-being and effectiveness. Where I can directly impact a situation with constructive feedback to the right person at the right time then I will. This is, however, targeted and appropriate and will result, I hope, in a positive result for all concerned. Most prevailing criticism, however, consists of the aimless slinging of arrows of hatred that penetrate our hearts, often unknowingly, poisoning our psyches, draining our energy and sapping positivity.
The good news is that we have control over this and, if we are conscious, we can improve our lives by controlling what enters our ears and what comes out of our mouths.