In this blog I'm going to share with you what I believe is the best strategy for 2021. How do I know? Well, I've been investing in property for 25 years. I'm the founder of the Property Investors Network, and the author of Property Management, the Amazon number one property best seller. I've also helped thousands of investors like you to become successful investors. Now, what is the best strategy for 2021? There are so many different investing strategies out there, sometimes it's a bit confusing and people get overwhelmed and they don't know what they should be doing. So there's a couple of things we need to consider.
When thinking about the best property investing strategy you need to think about what's happening in the property market. You need to think about what you want to achieve and what are the resources that you have available to reach those goals.
The Property Market Right Now
We've seen the property market absolutely boom over the last 10 years. I think most people believe that property market is going to crash in 2021. What does that mean? Should you wait until we hit the bottom? No, don't do that. As long as you know what you're doing, pick up properties right now, make sure it's a great location. Make sure you can get great cashflow from it. If you're holding for the long-term, it doesn't matter if you buy something now, and in six months later it's worth a little less, because you're waiting for the long term, and in the UK over the long term property prices rise. Why does that happen? Because we live on a little island. It's a very popular place to live. We have an increasing population due to increasing birth rates and longer life expectancy. Over the long term property prices go up cause we don't have enough supply.
In the UK the government say we need about 300,000 properties every year. We're very good as a country at building 200,000. So it's just not enough. That's why long term property prices go up, but we've had this property boom for the last 10 years.
When you have a boom, it's followed by a bust. Given what's happened in 2020 with a pandemic, and the recession, we get to see property prices come down in 2021. The UK government's doing everything they can to stop that, to try and prop up prices like the Stamp Duty Holiday which has come in and is in place until March, 2021. I wouldn't be surprised if it's going to be extended longer than that. So let's look at the market first of all. The market might be coming down. If you are already investing, what you've been doing over the last 10 years may or may not be the best strategy to use moving forward because it's going to be different market conditions. It might be time to learn a new strategy.
What Do You Want to Achieve as a Property Investor?
The next thing is we need to look at what do you want to achieve as a property investor to help work out what is the best strategy for you in 2021? What most investors that I meet, they want to get cashflow. They want to get income coming in that is separate from what they make in their job, or what they make in their business. I think one of the lessons from 2020 pandemic is that you know what, if you have one income stream, you're in a very dangerous place. You might have a great job, or a successful business, but something can happen and wipe that income stream out. So, having multiple income streams is really important, having that cash coming in is a fundamental thing.
Of course, we want to own property as well for the long-term growth, but income is probably the most important thing. Now, what are the resources available to you? If you're going to be buying investment properties obviously you need to be able to get deposit money to buy those properties. In the UK typically put in a 25% deposit, and we borrow 75% as a buy-to-let mortgage for my mortgage company. The idea is we rent that property out. The rental income that comes in not only covers the cost of that borrowing of the 75%, it covers the insurance, the maintenance, the management, so each property gives you excess cash, extra cashflow that you can put in your pocket. Now, obviously we do pay tax on property income, and the way we tax has been changed, but there are ways of minimising your tax that I talk about in other blogs, that you can check out.
“So that means we need to look at what are the appropriate strategies for using given the market conditions, given what you want to achieve, and also your personal resources that you can use.”
So buying a property depends on your ability to get deposits and a mortgage. If the property market is coming down, it may be difficult to get finance, as this was the case in the 2009/2010 crash. It was very difficult to buy properties even if you had the deposit and wanted to buy. Why was that the case? Well, mortgage companies, obviously in the last crash were hit because of the global financial crisis. They worried about lending to property. They reduced the amount they were prior to that. In some cases stopped lending altogether cause they had so much exposure to property that had come down in value.
So I think the lessons from last time, lenders will be very cautious when the market starts to come down. Even if you want to buy and you find a really good investment it might be difficult for you to do so, not just for you but every investor in the market. That means we need to look at what are the appropriate strategies for using given the market conditions, given what you want to achieve, and also your personal resources that you can use.
Best Property Investing Strategy for 2021
There is a strategy and I call it a strategy, but it's more like a tool. It is a tool which you can use in conjunction with every other strategy in the market. This tool I'm about to share with you that I believe is probably the best strategy for 2021 is something that can be used in conjunction with Single Let properties. It can be used in conjunction with HMOs. It can be used in conjunction with serviced accommodation. It can be used in conjunction with Commercial Property, Commercial to Residential Conversion, Property Flips. Pretty much every strategy you want to use you can use these tools. These two particular tools I think are going to be the best tools for 2021 are called Purchase Options, and Purchase Lease Options. They're very similar, but there is a key difference. So a Purchase Option is where you have the rights to buy a property at some time in the future.
Now, why and when would you use that? Well, let's say you find a property that is a cash only purchase. Properties are often listed as 'Cash Only' because there's a problem with the property. It is probably not mortgageable, therefore only people with cash can buy them. The reality is very often you can fix that problem. Therefore if you could take on the property on an Option, with the right to buy it in the future, you then fix the problem. It's then becomes mortgageable, and you can then buy the property, but you're buying at a cash price, which is very advantageous for you. The other way you use the Purchase Option is maybe you find a piece of land or a building, and you want to convert it into something else. You might need to get planning permission to do that. Instead of buying and having the risk of not getting planning, you control it on an Option. You then get the planning in place, then you buy the property. This is how all land development is done. All the big developers, they buy land on Option. They get the right to buy it, once they get the planning permission in place. So that's a purchase option.
Purchase Lease Option Tool
A Purchase Lease Option is very, very similar but you just have the extra Lease elements. So you got the right to buy this property at a fixed price within a certain period of time, you pay a monthly option fee to the owner, and then you get to use that property. This means you can control property that you don't own, and you can take it on. You could rent it out to some tenants.
Tthe idea is what you charge the tenants is more than what you pay the landlord. So you make a profit on the difference. You charge tenants a certain amount, you pay the landlord less, and the difference is your profit that you make every single month. In other words, you can make profit. You can make cashflow on property you don't actually own. It stays in the name of the owner, and they still have a mortgage on it or maybe not. But you babysit that mortgage for them. You make the payments for them. You look after the property as if you've purchased it, but because you haven't actually bought it yet, you don't need a 25% deposit, and you don't need to be able to get mortgages.
As we see the property market come down and sellers are struggling to sell their properties, they might be happy to rent them out whilst they're waiting to sell. That is exactly what we're doing with a Purchase Lease Option. We're effectively renting the property with the right to buy at some time in the future. This is why I believe Purchase Options and Purchase Lease Options are going to be the perfect strategy for the 2021 market. If the market comes down as I believe, and many other property investors believe is going to happen, it's going to be the ability for us to find people who need to sell and help solve their problem.
“Purchase Lease Options and Purchase Options solve all of these problems, and this is why these are the perfect strategies to be using in the property market 2021”
NEW Live Online Training
I have got some live online training that explains how you can implement this Purchase Option and Purchase Lease Option strategy within your property investing. If you look at the link below this video you have to come register for this live training. If you don't have any questions, you could read other people's questions and hear the answers to those.
When you're looking at what's the best strategy for you, and what's the best way for 2021, when it's me look at what's happening in the market, when it's look at what to you want to achieve, and also into your personal resources. We've talked about the market coming down in 2020. We've talked about most people want to get cashflow and equity growth on their property, and we talked about needing to look at your resources. Are you able to put deposit in? Can you get mortgages?
FREE Purchase Lease Options Training - LIVE
If you would like to learn more about Purchase Lease Options, join Simon Zutshi for some live online training, all about how you can use Purchase Lease Options and Purchase Options in your property investing.
Click here to register and get your questions answered about these incredibility powerful investing tools.
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