11 minute read
HOW TO FIND DEALS IN ANY PROPERTY MARKET
From a red hot market where deals are rare diamonds to fears of a dip or worse - how can you make the best moves in any market? We talked to a host of experienced investors to find out
This year has certainly been a challenging one for property investors. Have you called up to view a property only to be told the vendor already has half a dozen offers? Have you had a down valuation that has scuppered your plans? Despite the mainstream media shouting that landlords are leaving the business in droves due to Section 24, it has certainly felt like properties have been, well, seriously hot property.
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Whether or not you believe that, as interest rates rise, we are witnessing the early signs of cooling or even a drop, this past year has made one thing clear – for long-term property investors doing the same thing over and over again really is the definition of insanity.
So, as an investor does that mean you should shut up shop and stick it all in an index fund?
Well, the answer might well be yes if you are not ready to go the extra mile to secure that elusive deal when required. However, for those of you who have the mindset that they should always be buying, boom or bust, how do you go about it when it has felt like deals are as hard to come by as a table in a beer garden on a balmy bank holiday? And what happens if there is a crash and credit starts drying up?
ON THE HOUSE Magazine consults some seasoned investors with almost a century’s worth of experience between them - who have
benefitted from booms and bagged bargains during busts - to help you figure out how to always be closing great deals.
THE ROAD LESS TRAVELLED
One of the key themes the expert investors agree upon is that, in a challenging market, if you want unusual results you have to be ready to do the unusual. Now that can mean many different things (see our list of deal-finding options) but for Kevin Wright, property investment mentor and finance expert, it doesn’t necessarily mean eschewing Rightmove. It means keeping an eye out for problem properties and being the right person to solve those issues.
“You’re going to struggle to do deals [following the herd]. So, the answer is to go down the road less travelled… Properties no one else wants to buy, which are properties with a problem.”
Of course, he advises that you must be equipped to solve that problem be it subsidence, damp, modernisation requirements or a myriad of other issues. Wright also says that looking for properties where you have the opportunity to increase the footprint through commercial conversions or permitted development rights is another example of approaches that might yield strong results.
There is one strategy that Wright counsels could prove challenging in this market – flipping.
“If you’re flipping, then when you buy and when you are able to put it back on the market to sell is pretty critical. So, you need to have a bit more of a crystal ball if you’re flipping. If you’re buying, holding and renting out, it doesn’t really matter.”
He advises building in at least a 10% sale price contingency if this is your chosen strategy and also ensuring you have more than one exit such as renting the property if it fails to achieve a higher sales price.
Still, Wright, like many successful investors, believes deals can be found in every market but rather than the mantra ‘always be buying’, he has a slightly different take.
“No, it should always be looking to offer,” he says, advising investors to put in many offers, expecting rejection, but continuing to follow up and build those relationships with agents.
Whatever the market conditions chartered surveyor and commercial property investment trainer, Suzi Carter, advises niching down. This could mean specific areas, strategies,
SUZI CARTER
particular property types or tenant profiles. With a background in property investing that includes both residential and commercial, she says niching down helps you find your competitive edge.
“You need to carve out your own niche. Invest in an area that is ticking current or future trends and that is in a location where there’s potential for future growth,” she explains. “Before I knew this stuff, I think I was in the market just waiting around with everybody else. And you never really become a master of something if you’re flitting between different strategies, different towns, whatever. If you really niche down and go an inch wide and a mile deep into something and really understand it, you can get a competitive advantage.”
Danny Inman started investing in property over 10 years ago when he was 23. Since then he has moved up the value chain from BTLs, through social housing and HMOs to largescale developments and investing in the Dubai property market.
Looking back, he says he has always tried to separate emotion from his property decisions and “the best thing that served me in property is just being uber logical”.
That evidence-based approach led him to look for ‘ahead of the curve’ opportunities, citing developing HMOs as an example when they were not commonplace. This is something investors can aim to emulate by studying prevailing market conditions and again, as Carter alluded to, looking for trends. While people struggle to find on-market deals that stack, one trend Inman expects is many more BTL deals coming to the market in the next few years.
“I think we’re going to go full cycle and back to buy to let, if I’m honest, I think that when the market changes and at some point, it will change, the opportunity will be back to whole of market.”
For those starting out Inman says: “You have to be very clear on the reasons that you are getting into it… I think too many people get into property just because they’ve heard it’s a good idea.
“They have a little bit of cash and they know property is a good idea over time. They know wealthy people who have property but they themselves don’t really have a strategy or an approach and don’t really understand the market that they’re getting into. I’ll buy property at the peak of the market, I mean, without trying to time the market, I’m still happily buying property today because mine is a 25-30 years perspective. If that’s my mindset - that property that I’m buying today, in two to three years, I won’t regret buying.”
VALUE IS VALUE
As the old adage goes time is a great healer and this is especially true when it comes to property. “Value is value,” he muses. “So, you know there’s always going to be a demand to rent property, both residential and commercial. If you’ve got a solid rentable property then just stick with it. Time resolves most things. Property is an endlessly cyclical market… if you are in it for the long term, it’s about getting the knowledge to operate in both markets; a buyer’s market and seller’s market.”
He goes further to say that fixating on the purchase price is not necessarily the way to look at the market. “This is a very similar market to the early 2000s which was equally as buoyant and sellerfocused with an abundance of buyers and too few properties on the market… So to make money on that, you’ve got to be focusing on adding value, not purchase price.
”One thing Inman says you should really value as an investor is your professional reputation and track record - something that will see you find deals when others are struggling or even if lending dries up.
“Whenever people come to me and go, ‘I really want the 2008, 2009 market again so I can buy a load of property’. I always say to them well, you realise you’ve got a different challenge at that point in time, because yes, you can find the deals, but raising the money becomes more challenging,” he explains. “The perfect market does not exist for a property investor. I genuinely believe that when it’s easy to find deals, it’s hard to raise money. When it’s hard to raise money, it’s easy to find deals. And that’s just the way the market is. You have to continuously be working on all areas and building as many relationships as possible.”
PHIL COMBER
MIND OVER MARKET MATTERS
Whether the market is booming or busting – there is always an abundance of noise. Noise from the mainstream media, noise from detractors and cheerleaders alike, gurus, pundits and fraudsters. “Don’t listen to the noise, understand what’s happening in the market, understand the
sentiment,understand where the market is, but don’t necessarily follow the herd,” Carter advises. “I work daily on my mindset… For me, it’s kind of feeling the fear and doing it anyway. Meditation has helped me progress into areas that I never really would ever have expected and I think that’s the best training that I ever had. I meditate daily because I think that you’ve got to have some balls to have your own business and you’ve got to work on that mindset daily.”
An up market, down market or stagnant market, whatever the prevailing wind is in property, it is always important to skill up and it is not just trainers saying this.
Phil Comber is an investor with experience in serviced accommodation, buy to lets and garage rentals.
“I think anyone starting out now would be best spending a lot of time researching the areas they want to be in, listen to podcasts, go to some local property meetups,” he says. “Get on all the forums like the Buy To let Facebook Group, read books or listen to audiobooks.”
For Wright knowledge goes hand in hand with finding that edge and then safely following that strategy. “If you’re not sure, talk to people who are longer in the tooth in terms of investing and see what they did - anyone that’s been invested for 20 years would’ve had to buy property in the last rampant sellers’ market - ask what they did?”
DON’T OVERTHINK IT
So, to sum up, we’re in challenging times for investors. It is important that you find an edge or a niche to specialise in, work on your knowledge of the factors influencing the market and various strategies, build your network and team, and always be offering plus focus on your mindset. Phew! It certainly sounds like a lot and you’ll definitely be a very well-rounded investor if you can do all of that.
But sometimes you have to just pull the trigger. “I have a very Doctor Pepper mindset around property investing; ‘what’s the worst that can happen?’,” says Inman. “And realistically, a lot of the time, it’s not that bad. Most people that get into trouble in property do so because they bury their heads. They don’t have the conversations with the lender or the tenant, buyer, or seller, whatever it may be and the issue compounds. That becomes a real problem.”
DANNY INMAN
YOUR DEAL FINDING CHECK-LIST
Here is a by no means exhaustive list to get you thinking about different ways to nab your next property deal:
1. Rightmove and Zoopla – Email alerts
2. Direct to vendor letters and leaflets‘We buy in cash’ – posters, hoardings and car decals
3. The Property Investor App
4. Probate letters
5. Letters to empty property owners via Land Registry searches
6. Look for tenant in situ properties
7. Check Rightmove, Zoopla, Gumtree, Spareroom, Open Rent, Facebook market place for tired rentals and call up
8. Check-in with agents daily including lettings agents asking if they have any landlords who are considering selling? Property or whole portfolio
9. Follow up on sold properties in case sale falls through
10. Work with compliant deal sourcers
11. Tell people what you do and incentivise people to bring deals inc tenants. You never know where a deal will come from.
12. Incentivise trades people to bring deals to
13. Follow up, follow up, follow up
