What Stopped the Property Market Crashing
The fact that COVID-19 was hitting, no one really knew what was going to happen. However, the UK government stepped in and brought in some very clever measures to stop the property market crashing last year. They introduced the furlough scheme instead of millions of people going onto the unemployment lines. They said that you'd get 80% of your salary whilst being at home which was pretty good, uncertainty obviously, but it meant that people weren't suddenly losing their jobs.
I've talked about this in previous blogs so I don't want to go over it too much again. What's going to be interesting is to watch the £500,000 Stamp Duty end at the end of this month, and then the £250,000 Stamp Duty Holiday ending at the end of September.
It's going to be interesting to see what happens. The government initially gave us a Stamp Duty Holiday on purchases up to £500,000, until the end of March, 2021. Everyone was worried, what's going to happen, will there be a semi dropping off the cliff because everyone’s going to try and get there?
“…as I said last year, when Furlough ends we’re going to see a slow dip in prices'”
We're going to have to see what happens based on where you are in the country. If you’re in the South East, most properties are probably worth £250,000 or more. So by the end of June, these benefits are no longer going to help you. But if you live in other parts of the country, where lots of properties are less than £250,000, there will still be lots of transactions going through. This might be till the end of September. Solicitors are really busy, they’re still taking a long time to get transitions through due to the boom in the market. However this is probably not going to continue and Furlough is predicted to end.
“Property price is cyclical, but if you believe that long-term prices go up, stop waiting to buy property, stop waiting for the right time because I don’t know when the right time is going to be, no one really knows. If a property works today, it is then the right time.”
How You Can Find Property Hotspots
I want to give you a tip here because a lot of people say, "well, I want to buy in a hotspot." I don't like recommending property hotspots for the simple reason, what's a hotspot right now, might not be in six months or 12 months time. So I'm going to share with you how you can find hotspots. Here's the secret, find areas where the population is growing faster than other places. So the average population growth needs to be faster. Why is that good for you? Well, if the population is growing means people are coming into the area, generally for work and what that means is, there's going to be an increased demand for accommodation. People want you to buy property and also people want to rent property. So in areas where the population is growing faster than average, you generally have better capital growth.
Five Golden Rules of Property Investing
I like to refer you back to the five golden rules of property investing that I talk about in "Property Magic." A lot of people say to me, "Simon, should I buy now? Should I wait until the market starts to dip? If it's going to crash, should wait until it's crashed." Well, here's my honest opinion. I believe, if you find a great property deal in an area that works for you and you're following the golden rules, there is no need to wait. I'm just going to talk about golden rule two, three and four.
Gold rule number two, is that we buy in an area of strong rental demand. What does that mean? We want to be able to make sure we can rent that property out. The current tenants move, we can quickly and easily find more tenants to come into the property, that's the first thing.
The third rule but second point I want to make is, we only buy property that gives us great cash flow. So, we take the rent, less the mortgage, the insurance, the maintenance, any other bills we have to pay, the management fees and there must be profit leftover at the end of every month. We only buy property that gives us profit today.
Rule number four, the third point I want to make, is we buy for the long term. You see, if you think about it, in the UK we have a growing population. We've lost some people because of Brexit. We are losing some people because of COVID obviously but over the long-term, the population is still growing. What that means is that there's not enough accommodation. The government put out statistics. They said that there are 300,000 homes required every single year. We’ve already built 200,000 of them so there is a shortage. In some areas there's an oversupply, somewhere there's so, again, this is very much an average we're talking about here, but here's the point. If you believe that long term property price will continue to go up, they'll come up, they'll come down, they'll go up. Property price is cyclical, but if you believe that long-term prices go up, stop waiting to buy property, stop waiting for the right time because I don't know when the right time is going to be, no one really knows. If a property works today, it is then the right time. If you can rent it, If it makes you cash flow, if you're holding long term - it doesn't matter if you buy something now and in 6 or 12 months it is worth slightly less.
Find a Great Deal and Act Quickly
It only matters if you want to sell that property. But if you're holding it long term, because you know you can rent it out, you know you're going to make great cash flow. It really doesn't matter when you buy as long as you know what you're doing, as long as you do your due diligence. When you're investing in property, it's a big financial commitment, you must do your due diligence as much as you can. It doesn't mean you have to take a long time because if you find a really good deal and you spend too long thinking about it, someone else will come in and snap up that deal from under your nose. So it's about knowing how to find good deals. What makes a good deal for you? Because what makes a deal for you, might not be what makes a good deal for me.
So you're going to have to be clear on your criteria. Then when you find a good deal, you need to act quickly. It helps if you have your power team, the people who can help you. Your mortgage broker, your solicitor, all of whom ideally invest in property themselves, they understand exactly what you're trying to do. Getting the right power team is really going to help you grow your portfolio. No matter what's happening in the market, whether the market's booming, stagnating or crashing, I believe there's always opportunity. When there's a booming market, IPO say, "Oh! I'm not investing now because everyone's going for high prices."
Yes, people are going for high prices but when a sale falls through, and one in three sales in the UK fall through, that seller is going to be really motivated. If you are following up with that seller and you're in the right time, at the right place, then you might get a very good deal because a seller might be more motivated. They might be prepared to sell less than the market value.
When great opportunities come up, you need to move fast. If you think about it too long, you're going to miss out. I believe successful people are decisive people, they take action. Whereas not so successful people, they tend to think about things too long, they overanalyze and they end up not taking action. So a great saying for one of my mentors, Robert Allen is, "Why wait to buy when you should buy and wait." Do your research, find a really good deal. Make sure you rent out, make sure you get great cash flow, hold long term. It doesn't matter what happens to short term prices.
So I'm going to continue to do these monthly updates as new announcements come out from the government, I'll share those. Yet these are going to be the same for a while as the Property Market sales are going up. But at some point it's going to turn. After every booming market, there is always a bust. I know people who've been waiting a year to get into the market, to wait for the bust. Don’t do that. If you find a good property, take action and get out there. I know I've repeated some of these messages but I want to make it really clear. Get the knowledge. If you want training, hey, come and speak to us, we can help you with that, but there's lots of free information we provide for you. You just have to make a decision and you have to take action.
6th Revised and Updated Edition
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