It was encouraging to recently spend time with a good number of investors at the last Property Success Network event and something that came up quite a lot in conversation was the unpredictability of the property market.
For better or for worse, the property market in the UK really has had a challenging couple of years.
What with Brexit, the madness of COVID-19 and a raft of new legislation and standards (such as section 24) along with upcoming changes such as the Rental Reform bill, it’s hard to keep up, let alone stay ahead!
Regardless of this, keeping one step ahead will certainly help investors not just be more effective, but protect their investment for the long term and ensure they do not find that they’ve made an extremely costly oversight.
So, the question to ask ourselves is ‘what’s the key to staying one step ahead?’. I know it’s not that plain and simple, but here are my top tips:
In a recession, buy for future performance
In times of economic uncertainty, property investors will want to focus on finding properties that will perform well in a recession but perform significantly when a recession is over.
January saw the fifth month of house price falls in a row and with these drops in price come reduced price properties that may be suitable for investors.
Just remember however, always buy in a good location with future potential (such as central Chatham or Rochester) and where properties will rent easily. In an economic downturn, rental accommodation is generally in high demand.
The important point to remember is that a recession doesn’t last forever and investors who buy during a downturn can benefit from increased property values along with higher rental yields when the market recovers.
Be aware of current and upcoming compliance
It can certainly be hard to keep up with the demand on landlords when it comes to compliance. Not only are there a significant number of pieces of legislation to be aware of, but it can also be hard to keep on top of the hoops you need to jump through!
This is particularly challenging for self-managing landlords and to be honest, this is why I’d always recommend utilising the services of a reputable managing agent who will make sure you are always kept up to date.
For self-managing landlords, I would recommend utilising a robust compliance tracking system (particularly where they may own multiple properties), signing up to articles from places such as LandlordZONE and showing an active interest in UK property legislation.
You will also want to keep briefed about upcoming changes (such as the proposed EPC bill) which could cost a significant sum of money in order that, should they hit, you can be prepared.
Just remember, getting compliance wrong (even by mistake) can be a costly affair!
Have reserves and a realistic reinvestment strategy
Staying one step ahead is also about remembering you need to function as a business and how any successful business has a healthy level of reserves to cover unexpected costs.
Bleeding the company dry when it comes to cash will leave you exposed should there be any repairs, void periods, or other issues such as non-paying tenants. Doing this is dangerous and it’s worth having six months to a year’s worth of potential costs cash available.
On top of having strong reserves, you will want to have a reinvestment strategy. The most successful investors do this extremely well, leveraging cashflow and appreciation in an efficient and effective way to help grow their portfolio.
Identify upcoming areas
This one is simple. Do your research, identify potential areas where there is likely to be strong future growth and demand, then capitalise on them.
If you’re able to do this successfully you will be able to buy whilst prices are lower and benefit from the appreciation.
Key things I always advise investors to look out for are signs of investment in areas such as key infrastructure (road & rail) along with large scale investment from bigger developers (as with Chatham town centre right now).
Network to remain current
Networking is a crucial part of any investment strategy and as well as connecting with potential partners, you will be able to keep appraised of market trends, opportunities, and risks.
I run the Property Success Network in Medway every third Thursday of the month and if you’re looking for where to start, I’d certainly recommend popping along!
Failing to plan is planning to fail
There’s so much more I could include, but these are some of the key areas that investors will want to take note of. The final is simply to have a plan and stick to it!
Where there is no plan, investors really do risk just drifting around and losing out on what really is key potential that could show significant long-term gains. I recommend that investors take time to put their plan (including financial strategy) on paper and then follow it.
When it comes to having a plan, the key point to remember is that the end goal doesn’t change but the pathway there may do. Your goal may be to become financially free by owning five HMOs but get to four and find you’re there already (or vice versa)!
Do you have anything to add to this? Certainly staying ahead is tricky to get right and none of us do it perfectly (look at the developers stuck with cladding for example), but getting some way there really does help protect you for the long term!