How to make the biggest profit with property investment
Increasingly, we’re finding clients have one of two main objectives. The first of these is for property investment to produce an income now, perhaps to allow a new mum to work only part-time and spend more of that never-to-be-reclaimed time with a newborn baby and through those key development years.
We’re also finding that more people are falling into the accidental buy-to-let landlord status: they’ve inherited property and decided to hold onto it and rent out – though, actually, these landlords are more akin to those benefitting from the investmet opportunities for let-to-rent property landlords.
The second common objective of today’s property investor is to build a pot for the future when he or she needs it most: in retirement. Pension funds have performed poorly for years. Annuity rates have retreated to the point of being totally inadequate. And the stock market has been being up and down more times than a world record yo-yo for the last 20 years. Currently, it is more than 12% below where it was at the end of 1999 (Dec 1999, the FTSE 100 stood at 6930; June 17th, 2016, the FTSE 100 ended at 6021).
Property investment – the gilt-edged asset
For those of you that don't know what a gilt-edged asset is, it's simply a high grade bond or asset issued by a government or corporate that is very likely to pay. In the old days the bonds used to actually have gilt (or metallic) edges, hence the name.
Compare returns on the stock market to return on property investment and it’s easy to understand why the property investor is a clear winner. Just looking at how the average property investment has performed since 1999, we can see that the property investor is the big winner, with capital growth of almost 200%! And that’s before allowing for rental income.
No wonder property investment is the gilt-edged asset for investors.
Remember, though, these returns are only based on averages – if you really knew how to pick your property investment back in 1999, you’d have made a lot more. Here are four of my top tips to make the best property investment in 2016.
1. Don’t invest in today’s hotspots – find tomorrow’s
If you rely on the press, estate agents, or the scribblings of the latest overnight millionaire property investor, self proclaimed property guru, you’ll find yourself investing in the latest hotspots. This is a BIG mistake – property prices have already moved, the best property was taken, and you’ll probably be buying above real market value. I wrote about this as long ago as 2005, and the myth of investment property hotspots still holds true.
This is one of the reasons we’ve spent time and resources developing the most comprehensive hotspot selector. Using 108 data points, our hotspots algorithm ranks property investment potential with uncanny accuracy.
2. Buy property below market value
I always look to buy below market value. This might be by investing in off-plan property (in fact, this is one strategy I love at Gladfish – find out why here). Or it could be by investing in ‘cheaper’, older houses (though don’t forget about refurbishing costs, the need for more maintenance, and the greater difficulty in renting at a top rental price).
Whichever route you take, learning to negotiate on price and terms after calculating the real market value is one of the keys to maximising property investment once you’ve found a top location for investment.
(Why not download a free copy of the award-winning 3+1 Plan, which includes a section about value and negotiation?)
3. Never invest without calculating your cash flow
Cash flow is king. Always, always, calculate what your cash flow position is, and how you’ll be affected by changes in the interest rate. When you do so, be conservative with your estimates of income and overestimate your outgoings (items such as maintenance, repairs, void periods, etc.). Do this, and you’ll never find yourself in the position of being strapped for cash, or worse still, being a property investor forced to sell their property investments.
4. Don’t manage the property yourself
I didn’t become a property investor to be chained to being a full-time landlord. I invest in property so I can better my lifestyle, spend time with my 4 kids and wife, Arlene. This is what I recommend you and all my investors should do. Factor into your cash flow professional property management, and, when it’s right for you, you’ll be able to sit on a beach sipping a cocktail while your property investment does what it should be: a ‘box that makes you money’, or doing whatever you really want to do with your time.
Take advantage of effortless property management and you’ll never look back.
So there they are, my top four tips for the property investor to make the best property investment in 2016. What is your route to making a great property investment? Is there anything you’ve done that you wish you hadn’t? (I know I’ve made plenty of mistakes in the past.)
Get in touch on +44 (0)207 923 6100 and let us know what your main objective is for your property investment, and perhaps we’ll discuss it (confidentially, of course).
Live with Passion and Fun,