Buying Property at the Top of the Market
First of all, I am not saying we’re at the top of a property market cycle. I do not have a crystal ball. If you are an investor that believes the real estate market is about to crash, please consider this quick thought. I recently had a phone call from a gent that said “I have been betting on the Toronto real estate market to crash for the last seven years. Man, I missed a lot of opportunity.” This example shows that we don’t necessarily know when we’re literally at the top or the very bottom of a market. I will say with certainty that we’re not at the bottom. We’ve had a really good run over the last 8 years in most parts of the UK. Yes, we’re not at the bottom, but we don’t know if we’re at the complete top.
One could easily say, “I’m not going to do anything,” you could miss out on opportunities. What if this incredible run we’ve been on continues for another three to five years? Yes London is going down…but the Northwest such as Manchester is rolling. More so we create value. We create value by doing Professional HMOs and Social HMOs. In some of the areas in which we are buying we are still at 2008 prices with double digit returns.
The key is to determine property value the right way. It’s based on comparable plus think in terms how you can create value. In an end terrace you might be able to create an extra bedroom or a bathroom. If there are 2 reception rooms you can make a bedroom. If you’re in an uncertain market situation and relying on comparable sales, then you’re basing your decision on that market condition. Which can be great if you’re flipping house, but what if you’re buying a home for the long-term? What if you’re buying an investment property for the long-term?
Time has a way of making a property profitable as long as you are not over leveraged and can manage the property correctly. You can pay down a mortgage or simply cash flow with a Professional HMO or Social HMO.
Eventually populations in the UK grow and due to supply and demand the property prices go up. Even if you are at the top of the market, as long as you’re buying properties below intrinsic value, you will remain in good shape.
Personally we like to own Social HMOs that have no management or voids…plus we do the Professional HMOs to sell on in order to hold more Social HMOs