Colour Investments Property Investment

With the current state of the UK residential market, it is quite easy to heap a lot of the blame on apparently overpriced new build properties. However, there are a few things to consider.

Firstly, the government still has a target to build around 3,000,000 new homes in the UK before 2020 (as per the recommendations of the Barker Report). This target is only going to be reached from the creation of new builds.

Secondly, it would seem as though the era of cheap credit, buy-to-flips, and, generally short-term property investments is truly over. As a result, people need to start realising that property investments should be a long term investment and this is where most of your value will be added.

What to do? Investors need to start going back to basics:

Net rents (after management fees etc) should exceed your mortgage repayments and still provide a decent buffer. Do your own research on the rental levels in the particular area you want to invest in. Achieving favourable mortgage terms may mean putting more money down as a deposit, however, this is clearly going to have its advantages.

Capital growth: ask yourself – ‘why do I believe that house prices in this area will go up in the long-term’ – if you can’t give a good answer, it probably means the opportunity is poor.

Exit strategy: perhaps the most important consideration. This is the only way an investor will realise their capital gains, so make sure you have one that is specific to your portfolio.

Emotions: if you are investing, then you should purely think of a property as a source of income or a means to achieve capital gains. Mixing emotions into the equation may be detrimental to your investments and investment strategy.

This may seem like general common sense, however, it is amazing how many investors do not abide by these basic principles. This is not a secret – it is a way that investors, such as myself, have a balanced portfolio that is fairly resistant to short-term fluctuations. One thing that is certain is that you do not need to attend a property investing seminar and pay ridiculous amounts of money to know this.

If you follow these steps, you will still see some very good deals in the market. And remember, it is always the right time for a good opportunity and it is never the right time for a bad one.

For specific advice, please contact us and speak to one of our Portfolio Managers.