When the going gets tough, the tough dig in while the weak clear off. In other words, whatever your feelings on Brexit, it may prove to be a great opportunity for astute property investors who are prepared (financially and emotionally) to ride out the turbulence Brexit is forecast to bring. If that sounds like you, then here are five tips to help guide you safely through the storm.
Focus on yield rather than capital appreciation
Capital appreciation may be a nice bonus of property investment, but you only realise it when you sell a property and you’ll almost certainly have to donate a large chunk of that in tax. Yield is what pays your bills from month to month, which means that the right property can turn you a tidy profit even if you wind up selling it for less than you paid for it (although in the UK property market, if you hold a property for any length of time, it’s highly unlikely that it will decrease in value at all and certainly not significantly).
Make realistic offers
Any experienced property investor will know that overpaying for a property is a mistake which can eat into your profits. It therefore makes sense to aim to acquire property at the lowest price you can and it is entirely reasonable to use your status as a cash buyer or someone who has been preapproved for a mortgage to encourage sellers to choose your lower offer over a higher one from a less-qualified buyer. At the same time, however, don’t overdo it and risk losing a good property by making what the seller perceives as an insulting offer.
Be careful about subdividing existing properties
Subdividing existing properties can be a perfectly valid way to create more profit, however, again, be careful how far you go with this, especially if you are in the student property niche, where there are legal minimum room sizes. Even when there are no restrictions on room sizes, always remember the difference between paper and practice. In other words, even if you can come up with a floor plan which covers all the basic essentials for life in your property, that floor plan will only keep tenants happy if it actually works for them on a day-to-day basis. If it doesn’t, they will simply exit the tenancy as quickly as they can, leaving you to deal with voids and the search for new tenants.
Remember customer service
These days many property investors opt to work via lettings agencies and there is a lot to be said for doing so – provided that you choose a good one. In this context, good means one which will remember that happy tenants mean lower voids and will ensure that any reasonable requests are actioned in a timely manner. You may even want to consider giving your tenants a way to contact you directly if they are unhappy with the treatment they have received from your chosen agency.
Always have an escape plan
In investment terms it’s usually called an exit strategy, but it’s the same principle. As the UK’s exit from the EU is still being negotiated (and isn’t likely to be resolved until at least 31st October 2019) the future for the UK property market is still unclear, so it’s sensible to have an exit strategy in place should the worst happen.