I have only been in the property game for 15 years. In this time all I have seen is Up, Up, Up, Up and Down on prices. I have just seen property prices rise to the point when they fall outside of my criteria of buying and now fall back in.
So when you look at the forthcoming years of property price predictions they all largely say the same thing:
FLAT
Flat is something I have not experienced before. You mean that if I buy a property today it will not be worth any more OR LESS than what I paid for it? Sounds good to me. At least I can accurately predict how many properties I will buy over the coming years.
If prices genuinely stay flat then I welcome this with open arms. I buy up in Scotland and if I knew that the 2/3 bed properties I buy will value at £35,000 and I can buy for £24,500 then it is happy days for me.
I will, with regularity, buy 20 properties a month building my cashflow every month.
I will also let you in to this brain wave I had which I feel embarrassed to tell you about.
I realised that I need to sell more.
Can you believe I just said that? I always barked on about how you should never sell and keep building on what you have no matter what. I remember when I did sell on the odd occasion and feel really down about it (well not that down that I would want to slit my wrists or anything!).
But then I started to think about opportunity cost of capital. I have some properties with tens of thousands of pounds locked in which I cannot access unless I sell. Now I should sell, pay my tax and buy the whole of Scotland. As I said before I hate selling but paying tax on top of it makes it a big NO NO.
But after careful consideration even after paying your tax your money can work harder for you during these bleak times. It also got me thinking of the strategy and the strategy should be this:
- Buy (and never sell) properties until you hit a portfolio value equal to 10 times your desired income.
- Once achieved buy and sell properties that realise at least a £12,500 profit on sale and net proceeds after tax of £6,000.
So in my situation I have a property portfolio worth around £12m. The income I believe I can get from this is 10% by buying and selling. This equates to £1.2m per year. I think we can all live on that don’t you?
If one is not greedy and look for only a £12,500 profit on sale (Which can be achieved anywhere between 6 month and 10 years of ownership) then you will easily earn a 10% yield on your portfolio value.
So:
- Get your portfolio value up to the desired level
- Get trading
And if you are wondering whether it is a good time to trade I have realised it is always a good time to trade. Reason being:
- When the market is down, even though you get rubbish prices for your properties, your cash goes a lot further thus your return on capital (ROCE) can be better than the boom times.
- When the market is up, even though you get better prices for your property, you have to go further afield when you invest in the non-boom locations
- When the market is flat, you have a nice calm playing field where you can pick and choose when and where you buy and realistically predict where you will be in the next few years.
If you ask me a FLAT MARKET is the desired state for me. I am quite happy to acquire methodically and systematically and sell routinely and dispassionately to earn my 10% on capital.
How about you?