Property Investment at Any Price?

Who would buy an asset at the top of a market?, well most people buying in the South East of England actually. The only ones who are giving themselves a chance are those who buy property with potential for improvement, or expansion, or with planning gain possibilities.

Anyone else who is happy with a rental yield in the 3% range or lower is taking a huge gamble, even in the medium term. Not only are tenants getting harder to find, mortgage rates rising and bankruptsy rates rocketing, but if property values start to fall as in 1989-1992 then you are sitting on a "millstone".

When looking at a property investment (and assuming you are not buying outright, and with unlimited cash reserves) you have to look at the borrowing rates and rental yields. Even if you will not actually borrow against the property!. Why, becase they give a good rule of thumb as to the quality of an investment. At 3% yeild as above you may as well put your money in the bank!, at least you will not have the worries of finding tenats, getting the rent and re-furbishing.

With the market in the South East overheated, the risks of a downturn can turn an investment gain of a few %, into a loss of 10-15% on several hundreds of thousands! Therefore look at the attractions of the North, rental yeilds of 8-10% plus capital appreciation as they try to catch up with the North-South property gap.

Now at these yields it is OK to borrow against these properties. Because you can borrow at a rate below the rental yield, means that you are making money on the loan!. This is how we have built up our portfolio in the last 3 years. By a process of buying, renting, improving, re-mortgaging, we have about 50 properties.

So the moral is: treat property as an investment, seek out good investment returns, and be prepared to walk away from over priced property. In the process throw at the vendor an offer of 30% below the asking price. Once in a while you will get a YES!