December 2008 edition of the LandlordZONE Newsletter.
Motivational Coaching & Property Investment
The Credit Crunch has brought home to us important lessons about asset values, how they can be over-inflated and how rapidly these can be destroyed.
With commercial property values likely to decline by 50% peak to trough, and likewise at least 30% for residential we have not seen the full decline yet.
When you make an investment in an income producing property your risk is not if the value will fall—we should know that values go through market cycles—it’s about how soon you will need to sell.
Buy now and be forced to sell in 6 months and your risks are very high, but sell in 10 years and your risks are reduced to virtually zero, with the prospect of very good growth.
What is important is the intrinsic value when you buy – the discounted cash flow of a steady future income stream.
Four key provisos to investing now:
- Research, research, research.
- Rental demand—do tenants want your property?
- Buying value—buying at the right price in relation to rental returns.
- Finance—securing adequate funding and being able to service the debt
In the commercial sector rents are likely to come under pressure as businesses fail and voids increase. Covenant strength is vital.
In the Private Residential Sector demand it patchy. Although it is holding up well, and the rental market is generally buoyant, there’s oversupply in some areas, and new build apartments in some large developments can be problematic at any price.
There’s value out there if you have the funds. Repossessions are going through auctions at distressed prices. Distressed sellers are accepting below market prices, and Sale-and-Rent Back (now to be FSA regulated) is feasible.
The student and HMOs markets are healthy income producers if you are prepared for the extra management involved, but the new Local Housing Allowance rules are putting a cloud over Housing Benefit (HB) tenants—see p8—Landlord News
Good news for investors with mortgages, especially trackers, as interest rates have fallen by 2.5% to 2% since November, with the prospect of further falls. However, the key interbank rate (LIBOR) is still 1.25% above base and good finance / mortgages deals are particularly hard to get as supply has declined.
Successful investing and landlording is very much an attitude of mind. There are so many different aspects to it, which is what makes it so interesting. This brings us to Self Motivation & Strategy Development —the topic of this month’s LandlordZONE Newsletter.
Tom Entwistle, Editor
Fear and Greed are reputedly the chief motivating factors behind the investment psyche.
These emotions are very powerful and following the crowd is a natural instinct, but the contrarian approach—going in when everyone is coming out and vice versa—often proves to be the most successful long-term investment strategy.
To follow such a strategy calls for good research, good judgement—knowing when the odds are in your favour—and strong self-belief.
Markets and people’s market sentiment tend to over-react, both on the up-side, the bubble, and on the down-side, despair.
The danger at a time like this, when prices are still falling, is going in too soon.
Catching a falling knife, in the investors’ parlance, is where you can get hurt in the process.
Why not join some like-minded individuals and get some inspiration for 2009.
Book yourself on this FREE seminar in January.
7 steps to Financial Freedom – FREE one day Seminar
If you are interested in finding out more about how to manage your financial progression—from Stability to Freedom—then book onto this FREE one day Seminar in London on Saturday 10th January 2009. Phone 0845 094 6628
Coach@YvonneEmeryCoaching.co.uk or register online at www.YvonneEmeryCoaching.co.uk/seminars.html to book your place now quoting LZ103
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