There is a lot of talk at the moment about the property market and whether it is a good time to invest. There are many predictions and opinions as to whether or not people should be investing or holding onto their money whilst waiting for house prices to fall.
The coronavirus lockdown has seen a surge in the value of many markets, and the property market in particular has seen huge inflammation in terms of house prices and the cost of materials to build homes. For experienced investors, the changes in the markets do not mean much to them they know exactly what to do with their money and when, but for those of you who are in two minds as to make your first investment now, consider the following points:
When Is A Good Time?
The advice from investors who have been in the property game in all markets and environments is that any time is a good time to invest in property, just as long as you know what you are doing. What we mean by knowing what you are doing, is that you have carried out extensive research as to what property strategy you are going to implement, and also have strong data that suggests there is a demand for that service in the area.
Demand for property, especially renting in the UK, is high right now. This is simply because most people looking to own residential properties can not afford to buy due to the high mortgage rates, however, investors looking to generate cash flow from the money they have to invest can benefit from renting the properties out. The success of the buy-to-let strategy of course is dependent on the area’s demand, the rate at which you can get a mortgage, and also the forecasted return on investment.
The concept of waiting to buy property when the ‘crash’ comes is of course smart if we can accurately predict when they are going to come down, but the reality is we can not precisely predict this and there will always be a worse or better time to have bought than we already did. It might seem easy to predict based on previous life cycles of the markers, but when we consider events such as Covid-19, no one could predict that this environmental factor would have come into play 10 years ago to disrupt the markets as it did. So as a whole, anytime is a good time however making an educated decision, based on what you presently know and the worst-case scenario is the key to maintaining returns on your investment.
If Buying As A Homeowner
If you are looking to buy a property under a residential mortgage to live in, you might wish to reconsider if you are only looking to live in it for the next 2 years. If you are however looking for your forever home or at least a home you are looking to love for 8 years it would make sense to buy. The importance of a financial plan and budget is key if you are looking to live in a property and make money when you eventually wish to sell it off for a surplus of money then what it was bought for.
If Buying To Rent Out
As mentioned, buying an investment property to rent out is dependent on how much money the property can generate. You should be honest with what your budgets are for purchasing a property, what deposit you can put down, and how long it would take to break even to then make a return on investment. You should do heavy market research as to what the demand for rental properties is, who your target market is if the area has a high volume of these tenants and if there is a high employment rate to predict if tenants will be able to make repayments.
Avoiding difficult tenants is one of the key factors to generating profits from rental investments, and making the mistake of rushing the process often leads investors to seek landlord legal advice to make their money back from removing bad tenants. Renting out your property is usually a long-term investment strategy, so if you are looking for a quick return on investment you might consider the BRR strategy (buy, refurbish, refinance).
Things To Consider:
If you are ready to make your investment, there are a few things you should first plan out before making any decisions:
Mortgage Rates Are Rising
Mortgage rates are of course rising since their dips within the last year or two, however, this should not steer you away from wanting to invest. Mortgage rates have always been fluctuating throughout history, and people have still made great profits even with the highest rates. It would be wise to speak to an advisor to see what your options are.
House Price Growth Is Slowing
The surge of house pricing is now starting to slow down after shooting up during the pandemic. This might convince you to leave your money sitting in the bank and lose its value, but instead, you should make your money work for you and invest in the areas in which you are growing. No matter what the house prices are, investing in an area that is seeing larger capital growth than anywhere else is the key to making a profit no matter what price you have initially bought for. Be smart, focus on the environment first, and then consider the house prices.
Inflation Isn’t All Bad
Although inflation has reached higher rates than they have been for a few years, it is not all bad for landlords. For example with the rise in the cost of living, we can also benefit from the rent increase. Of course make sure you check the area you are investing in has reasonable prices, and try to match the other rental properties that consistently have tenants. Also keep in mind that the more amenities you have in your property and the more selling points you offer, the better you can expect to gain constant profits and avoid void periods.
Final Thoughts
Property has always been known as one of the most secure investments for people to make within their lifetime. Even with this in mind, there are always risks with such investments that should also be calculated into any contingency plans. Investing in property is a good time no matter the market’s strength, but your strategy and implementation will determine whether you see huge returns on investments, or see a slow return over a long period.