Times of uncertainty are often windows of opportunity, if we can remain calm enough to spot them?

It’s easy to accept that opportunity is on the horizon but what about right now. Is it too risky to complete on those deals you have with solicitors. Are you tying money up that could serve you better when these opportunities present themselves. This is a question I have going round in my mind. But I’m also conscious that money in the bank is idle. With interest rates at an all-time low I need return’s today.

I’ve spoken to many of my property investor friends this week and one thing that has emerged is that my older, time served property investors friends are much more calm about the implications of the current economic climate than the younger less experienced generation of investors. That’s because they have always held true to their long term intention’s to hold.

I’ve thought long and hard about the purchases I have going through right now and whilst everyone has to draw their own conclusion’s based on their portfolio’s and financial stabilities I am continuing to Invest but will endeavour to drive the purchase price down further right up to completion.

Here are the six most important things I’ve took into consideration when making my decision that might help you draw your own conclusion whether now is the right time for you.

  1. Long term commitment. Stick to the principals of what makes a good investment and hold for the Long term. In the short term, if a recession hits, (highly likely) and you need to sell your investment it is very possible you will lose money. However, if you hold out until the market recovers you don’t lose any money.
  2. Positive Cash Flow. Don’t buy anything that doesn’t create positive cash flow. And stress test on higher interest rates. Whilst they are currently at an all-time low right now, we can-not predict what the future holds for interest rates or property values.
  3. Affordability. Can you afford to make the investment. In my case and I know this will be the same for many, I’m in the middle of deals using the buy, refurbish, refinance (BRR) model. So please, please, please work on the basis that you are not going to get you money out in the short term. That’s not to say you won’t, but don’t play the risk game if you are relying on the money.
  4. Cash Reserves. Do you have a cash reserve to fall back on. It may take longer to rent your property whilst social distancing is in place. And, as COVID-19 continues to spread, stocks and shares plummet and small business face bankruptcy this will inevitably impact on tenants ability to pay in the short term. Ensure you have reserves to pay your own mortgages in the event your tenants default.
  5. Diversification. Don’t put all your eggs in one basket. We hear the term “have multiple streams” of income. Well, that’s a great advice but in reality not always possible, and I appreciate it’s too late for some of my friends who are purely focusing on serviced accommodation. Consider easier alternatives like diversifying your tenant profile or having multiple gold mine locations.  18 month ago, instead of focusing purely on professional’s I diversified to local authority, which will serve me well in the coming months.
  6. Demand. Whilst affordability in one thing, there’s little point if there is no demand  in the area. Speak to local letting agents to ensure there is demand for property and your tenant type.

Finally, the fact still remains that there is a limited supply of accommodation and an increasing population. This means over the long-term property prices go up. And that sums up the point I’m trying to make. Only invest if you’re in it for the long term.

Monthly cash flow and the long-term appreciation – that’s how you create real wealth through property.

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