2015 is going to be an *interesting* year, so in the spirit of all things survivalist – here are my top 3 tactics to help you survive and thrive in property!
1. Uncertainty is the new certainty
Every man, woman, dog and duck has got an opinion on property prices. And it’s set to get worse with the onset of the General Election. From talk of rent controls to mansion tax, the introduction of new stamp duty thresholds and everything else in-between – be ready for an onslaught of issues which will, however tenuously, be put forward as somehow connected to property prices. The potential demise, uprise or outright threat of a bubble or crash will be regaled at every opportunity.
Scare tactics will likely become the new norm. Depending on which side of the fence you own.
My survival advice: look after your own. Property is a long term investment. Unless you’re looking to flip a property, you need to get long-term in your thinking – that means looking ahead by at least 5-10 years from now. Assess and review any current properties owned, or future purchases according to a) you and your life, b) the local area c) the property.
Don’t be afraid to question where you are and what you’re doing. Property investment has a habit of sucking you in once you spot a never-to-be-missed-opportunity and once you’re in, it’s hard to get out. Property is a pretty illiquid asset and is expensive and time-consuming to dispose of. Not to mention more hassle than passive to manage and maintain.
2. Assets can turn into liabilities
Property investment can be a great way to make money – but it can also lose you money. Properties need to be maintained to standard if you are to reap the benefits of buy-to-let. Boilers go wrong, roofs will leak and tenants will sometimes not pay the rent. This is par for the course and part of the business.
The responsibilities of being a landlord are massive and shouldn’t be taken lightly. Even if your property is managed, the property and the safety of the tenants are your responsibility. As a landlord you are liable for a shedload of stuff and with the change in liabilities for council tax and now water rates this is set to get worse. I wouldn’t be surprised if the other utility companies soon follow suit.
My survival advice: join a landlord organisation for expert guidance and support. There are a whole host of professional organisations out there and the annual membership price is paltry compared to the service they offer. My personal favourites are the NLA and Guild of Residential Landlords. A telephone helpline is available for all members, plus they keep you up to date on the ever-changing landlord-land of changing regulations.
As an extra boost, I would also advise having legal expenses added as an option to your annual landlord insurance. This not only gives you access to free legal advice, but on many policies, also covers you should you need to take legal action against a tenant such as eviction.
3. Cash flow will always keep you afloat over capital growth
When property prices are accelerating through the roof it’s hard not to get excited about how much money you can make. However, unless you actually sell a property which has increased in value you will not have access to that money. Re-mortgaging is a potential option, although it’s important to factor in the high costs and fees involved to access the money – plus the tax implications further down the line (Rule 63: re-mortgaged funds are NOT free money!).
Regardless of how much a property is worth, if you have a mortgage on it, that will always need to be paid every month – and interest rates will go up at some point. You need to be prepared for this – plus the ongoing costs of maintaining a property. Bear in mind also, that property prices can go down as well as up.
My survival advice: make sure you have sufficient cash flow to keep you going. Always have a financial buffer in place to ensure you can cover any eventuality such as a boiler breaking or a tenant not paying. It’s advisable to keep the equivalent of at least 6 month’s rent set aside as a rainy day fund.
Where possible, look to re-mortgage onto a better deal for security and lower rates – not just to access funds. Assess your existing loans to value (LTV) and consider the option of converting to a repayment loan, or making regular capital payments to reduce your mortgage debt. While, painful in the short term, the lower loan balance will mean access to better finance deals plus an enhanced cash flow in the future.
These are my top property survive and thrive tips – but would love to hear yours! Do get in touch or leave a comment below 🙂