by If you sometimes wonder if you’re living in a movie, you’re not alone. The sheer madness of events in the world and the speed at which we are swaying from crisis to crisis is dizzying. At times like these, you probably want to pull yourself up, grab the duvet, and hibernate until things get better. Herein lies the secret to successful investing: knowing that tough times will pass and things will get better.
However, I cannot deny that it is difficult to plan in these challenging times. For five minutes, we thought the Government had changed its mind about repealing Article 21. But after seven minutes or so, they’ve definitely not changed, at least for now… who knows? This uncertainty hurts trust, but it’s crucial to remember that, despite such rapid changes, the underlying asset remains unchanged: a property is a property.
Home prices can rise and fall (probably will drop for a while as you deal with the mortgage market downturn), but over time things will improve. Once there were high interest rates, then they were at the bottom, now they will be slightly higher as the Bank of England is fighting inflation, then they will be lower: this is the cycle of the markets. Staying calm is crucial to making him a successful real estate investor.
I’m biased, but in times of disaster, owning property is the safest place. People always need a place to live. It is an asset that will not disappear overnight. But like any creature, it needs protection. And sometimes this is where investors fall short in their expectations of what the property has to offer, because while it’s a relatively safe bet in a crazy world, property can go wrong. The property can cost you money; It can be a liability. Property can protect you and provide you, but this is not a one-way relationship, property must also be protected if it is to remain a good asset.
1. Don’t overstress yourself
One of the most important measures to protect your property is not to overuse it. With rising interest rates, this is more important than ever. The more equity you have on your property, the safer you are from skyrocketing rates and the threat of unsecured rent. That’s why I regularly have pending orders on certain properties (properties I plan to hold for decades) to pay additional overpayments. Repayment mortgages are perhaps the gold standard, but for me the lack of flexibility is a barrier. Cash flow is everything in tough times and you need to be able to adapt to changing circumstances.
2. Save at least 15 units to finance maintenance
Keeping your property in good condition with regular maintenance and planned upgrades is also an important part of being a proactive investor. Properties are not a hands-on investment and will require time and money to make sure the properties not only function but are a sought-after and desirable home for tenants. The best way to fund these businesses is to save some of your monthly rent in a separate bank account. Personally, I like to save 15 percent, but when inflation was so high, I revised it to 20 percent.
3. Good property managers are worth paying for
Excellent property management should never be underestimated. It only takes one bad tenant to destroy years of profit. I cannot overstate how important it is to have a comprehensive tenant reference and, if possible, a guarantor and rental guarantee insurance. Inspections should be carried out at least once every six months and faults should be resolved quickly. Tenants should also be encouraged to report problems in a timely manner. Problems do not improve on their own and will get worse over time and cost more to resolve.
These may be chaotic times, but with preparation and planning, the future will be good.
Secret Host is a column published monthly by an anonymous buy and rent investor. Email: secretlandlord@telegraph.co.uk
