The Uncertain Future of Property Investing

Some people believe I have a crystal ball stashed under my desk. Either that or a Deloren parked next to the Ferrari... Why?

How else can I consistently and profitably source financing for the Property portfolios we manage..?

Especially right now, seeing as “the doomsters” were proved right and the UK has steamed into a double dip recession, which we’ll be stuck in for at least the next 12 months, with banks and financial advisers perceived as nothing more than B.S peddlers and, like You, most investors looking for something real, something more controllable and something they can rely on for their future. So it’s no surprise that many traditionally educated, sensible people see Property Investment as “uncertain” at best.

So how do I do it? And how do You move forward?

sustainable property business

The answer is Clarity.

The key to profiting obscenely, while others languish in “uncertain times” is actually clear and simple, once you can see through the fog. It involves a little change in strategy and focus, and perhaps a little courage, and most of all, knowing WHERE to look.

If you’re still thinking that what worked in 2004 will work now, you’re going to come unstuck.

One of the many reasons? Inflation. You simply aren’t going to get realistic “official” inflation figures from the government. “3-4%”over the last four years, apparently... Do you believe that? Your supermarket receipts tell a different story...

Take a look for yourself. When you realize that everyday grocery prices are well into double digit inflation (I’m taking about 20-30%!) over the same period of time, and the Bank of England themselves whisper “7.5%”as the real figure, you’ll start to wonder who you can trust.

Think it’s just your savings that are fast being eroded? The Halifax reported average house prices dropped 2.4% in the first half of this year, with the expectation that prices will fall a further 3% nationally by the end of 2012. Buy and wait? hmm...

sustainable property business

The reality is that the market is broken. Seriously broken.

(For most, but not the few contrarians, I’ll get to them in a moment) -

As if you need any further proof, inflation in the UK over the past 4 years has been higher than in any other European country except Estonia, Bulgaria and Romania. What else does this mean to You?

If you’re a home owner, your mortgage is a tightening noose around your neck. It‘s just tightening a little faster now...

And the reality is that a standard long-term capital repayment mortgage won’t even come close to the paying off the loan principal (capital) that you hold.

However, with interest rates being what they are (and not what he government advertises them to be) the principal owed with an interest only mortgage will, untouched, reduce year after year...

Think about that for a moment -

You pay the interest only on the mortgage, while the principal actually becomes less and less over a few years, just because of inflation! You see, knowing how to re-focus and re-strategise is key.

What if you’re a first time buyer? Unfortunately, things just got a lot more difficult. Here’s why:

Mortgages advanced on properties to first time buyers, between March and April this year, dropped by 48%. On a wider scale, but just as relevant to You, more than 1 million people will be locked out of home ownership in 8 years time, making up a population that is marginalised and renting (opportunity). The reality is that we are creating a lost generation of renters who have no hope of buying. The gloomy forecast 1.5 million 18-30 year olds will be renting a home by 2020, whilst another half a million young people will choose to stay at home.

Got a savings plan? Expect a typical cash ISA to return 0.61% and 0.2% from a typical instant access savings account... pathetic, right? All a direct result of the gap between inflation and low interest rates.

And if you’re relying on drawing a pension? You’ll be in a (genuine) crisis.

Think about this: In 1989 a £50,000 pension pot would produce a 65 year old man £150 a week. Today, that would be under £65 per week. Pensions have dropped in value by around 15% in the last 10 years! A recent Panorama investigation showed that paying £120k into a HSBC pension plan over 40 years would result in around £99,000 being taken in fees and commissions.

You see, its these negative elements in the economy that require us to change our focus and strategies. Do you have the courage? Do you have the choice?

They create big opportunities, in specific areas. With prices having fallen up to 30% in some, many low end properties are now below the cost of building them. Peterborough’s now hit around £80/Ft for properties, which would cost over £100/Ft to build, forgetting the land value! With rents rising and demand for housing increasing (without enough being built) the pressure cooker is continuing to expand.

sustainable property business

Bargains are everywhere, you just need to know WHERE to look. Auctions are full of “problem properties,” scenarios that most investors pray for but when they arrive they’re too busy hiding from all the doom, and they miss the rain they danced for so long.

And again in the “problem” lies opportunity, which, for someone with cash or JV finance, means access to very cheap deals.

But what about competition? Again, with lending at a low, it’s been mostly removed... creating an opening for those who have the education, foresight and entrepreneurial qualities to move quickly.

Now is Your time. And the future for good staple buy to let strategies has never been better.

I believe in you. You’ve read this far. You want more and you want to take your chance. Capre diem my friend, we’re with you every step of the way.

Single lets and Multi let (HMO) type properties work year in year out and have stood the test over “fad” type investment strategies. HMO properties are on the increase. With fewer people being able to afford to live in family homes and, with people being more mobile for work and due to social changes, the rise of the HMO property is here, now.

Average loan-to-values for HMOs are now up 6% to 66% from lenders such as Paragon, the Mortgage Works and Aldermore. High yields (often 16%+) and cashflow have made this a very desirable area to invest in. Most areas of the country aren’t inhibited by legislation (which will require HMO properties to have planning permission before they can be let). For areas that aren’t covered by this legislation, now is your chance! A Window of opportunity exists to get these properties into use and get them let out.

By the way, You know this isn’t going to last, right?

When the pressure cooker of higher demand vs. supply blows and the market turns upward, prices will react quickly as lending returns, and you’ll be too late.

Will it be You repeating the old familiar phrase “if only Id been buying in the early 90s” when You look back in 10 years?

Markets run in cycles. As do Investment strategies. Give it 10 years and, just like the “if onlys” of the 2000’s, You might well be wishing You had started to load up in 2012

Don’t lose out because of fear and uncertainty ruling the market, and your head. Those who have gained clarity and educated themselves in solid strategies will win.

Do something now. Take a (calculated) risk. Observe the masses, do the opposite, you might just surprise yourself. And stay in touch, we’re here with you all the way to the bank.

Or don’t. Disagree with what I say? Have a strong opinion? Leave a comment below.

Mark Homer

Co-founder at Progressive Property, 600 + properties bought & sold.
Full time property investor/analyst/geek & World Record Holder

Author of No.1 Amazon best-selling book Uncommon Sense, Low Cost High Life and Commercial Property Conversions.

About Mark

Co-founder at Progressive Property, 600 + properties bought & sold. Full time property investor/analyst/geek & World Record Holder Author of No.1 Amazon best-selling book Uncommon Sense, Low Cost High Life and Commercial Property Conversions.

If you liked this post you may like these: