Should I buy investment property now? That's what this property education training blog is all about. This is a question I'm always asked no matter what's happening in the market. The thing they're thinking about is, is now a good time to be buying investment property here in the UK. I think most people expect the property market might dip down into 2021. We expect you might have a crash and some will say, well, hang on a minute. Should I buy now or maybe I should wait until the prices hit the bottom? So let me give you some thoughts around that, is now really the right time?
The 5 Golden Rules of Property Investing
So, here's my views, in my book, "Property Magic" if you've read it you might remember I talk about the five golden rules. Now I wrote "Property Magic" in 2007 and I had been teaching other people for about four years by then. I realised that I had made a lot of mistakes in property. I also realised that many people make common mistakes in property. I wanted to come up with some simple guidelines that we could use to help people minimise the risk of investing in property and maximise the return of investing in property. So I came up with the five golden rules of property investing, and these are very relevant to the question of, should I buy investment property now?
- So golden rule number one is, Buy from Motivated sellers, people for whom the speed and search of the sale is the most important thing.
- Golden rule number two is, we only Buy An Area of Strong Rental Demand.
- Golden rule number three is, we must make cash flow profit from the property every single month.
- Golden rule number four is, we only buy property for the long term. That's really important given the question. Should I buy property investment now? Golden rule number five is, always have a cash buffer.
Now, if you think about these golden rules, people think, should I buy property investment now? They're thinking the value's here. The value might come down the next 6 to 12 months. So should I wait? Because if I buy now, I might pay more than the value might be in a few months time. People think, does that mean I'm going to lose money? You only lose money if you sell the property you buy.
If you're holding long term, which is golden rule number four, it doesn't matter if the values here now, you buy here and the value comes down a bit. It doesn't really matter because we believe in the long term property prices are going to go up.
Long Term Property Prices
Why does that happen? Well, here in the UK, we're living on an Island with a limited supply of accommodation and an increasing population. What that means is that over time we have increasing birth rates, longer life expectancy. So the population is growing, but we don't have enough accommodation. So that means over the long term rents and values of property, both go up. Now, they don't always go up. They go up and they come down. It's a cyclical market, but the long term trend in the UK is up. That's why it's a great place to invest in the UK.
So, with that in mind, as long as we're holding long term, following golden rule number four, it doesn't really matter as long as we can afford to hold the property in the meantime. So think about rule number two and rule number three, we want to make sure we can easily rent it out. Rule number two and number three, it must make positive cash flow. So we think about that. If we could always rent it out and it's making positive cash flow, even if the values come down, it doesn't matter because we're holding long term. We don't plan to sell, or we could wait for the market to come back.
“It doesn’t really matter because we believe in the long term property prices are going to go up”
The Only Difficulty You Face
The people who get into difficulty when the market falls is people who've bought property where it's not making the money. In fact, they're subsidising it, having to put money in and then suddenly they can't afford to do that 'cause maybe they lose their job. And suddenly it means they've got property that's costing them money, that's come down in value. They decide to sell, to cut their losses and they crystallise the loss. The only way you lose money, if the market comes down is if you sell the property, if you don't sell, if you can afford to hold because it's a strong rental demand with a positive cashflow, it doesn't matter if short term prices come down.
My Final Answer
So my answer to the question, should I buy property investment now in the UK or should I wait is, as long as you know what you're doing, as long as you're following the five golden rules in "Property Magic", my answer would be buy now. It's easier to buy when the market's coming down, when sellers might be more open to negotiating a discount because they think it's coming down instead of when it hits the bottom and everybody believes the market's going to come up. It's much harder to get deals when the market's coming up. It's not impossible because there's always motivated sellers if you know how to look for them, but it's harder to get discounts because most sellers have the hope and the belief that someone will come along and offer more money for their property because the market's generally going up.
So, rather than trying to guess the market and buy when it's low and sell when it's high, which is a concept that comes from the stock market investing, as long as you educate yourself, as long as the property stacks up and makes money for you today, my advice would be always buy the property now and then hold for the long term.
6th Revised and Updated Edition
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