Wednesday, November 25, 2020


Should You Invest In Property In A Pandemic World?

October 21, 2020 by  
Filed under Business, Money, Opinion, Weekly Columns

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(ThyBlackMan.com) The old adage is that investing in bricks and mortar is as safe as houses. For decades, people have chosen to make their savings work more aggressively for them by trying to make money on the property market. While allowing your savings to languish in your bank account will be a sure fire way of keeping your money safe in a low risk investment option, the interest rate will be woefully low and you will be frustrated with the lack of movement in your cash. Instead, you need to consider other ways to be more proactive with your money.

The obvious option is housing. With the emergence of TV shows demonstrating just how easy it is to buy a pad at auction, renovate it, and put it back on the market to sell at a profit within three months, more people than ever are turning their hand to amateur property development. The TV shows may make property renovations seem simple, but they are anything but. You need to do your research before taking the plunge and purchasing a home to do up. It takes a time commitment, hard graft, and working at weekends and evenings around a full-time job to make your foray into property work. However, it can be a fantastic way to make money as a side hustle, learn new skills, and enjoy seeing your long-term nest egg for your twilight years grow. Go into the renovations with your eyes wide open and consider whether you can invest in property in a pandemic world.

Auctions

The world of property auctions will be your first port of call when you seek a second property. As a homeowner, you will be in a strong position when demonstrating to home loan lenders how responsible you are as a borrower. You should be paying your mortgage on time every month without any default payments. Head to a couple of auctions before you are tempted to lift your paddle and make any reckless bids on properties you haven’t even seen. Auctions are fast paced and highly pressurized environments so you need to get a feel for them first.

Take a friend and sit in the middle of the auction room. Get a feel for the increments that the bids go up in, consider how the guide price is worked out, take a look at legal packs, and chat to some professional property developers and ask for tips. They will be more than happy to impart their knowledge to a new developer. 

When looking at the properties in the auction catalog, consider how much you think they could go for, budget a pretend scheme of works, and consider the profit you could make. You must remember that you may need to pay an auctioneer’s premium on the purchase price and you may have other fees and taxes to pay on top of any renovation budget.

When ready, you can head to the auction for real. Beforehand, you should have viewed the properties you are interested in bidding on. Going in blind and bidding on something unseen is foolish and could result in your picking up a money pit. Also, consider the legal pack. These are crucial documents that you must read thoroughly. The pad you are interested in may be on a flood plain, it may be underpinned or it may have some odd covenant on it rendering it worthless. To make a bid, hold back initially. See where the bids on the property are going. As the bidding slows, enter the fray and be calm and measured. Set yourself a budget for the purchase and never go over it. It may be tempting to make just one more bid, but you could end up overspending meaning that you cannot make any profit on your dwelling. You need to think with your head and not your heart to become a successful amateur property developer.

Where To Buy

It’s always a good idea to buy where you know. Opting for a second home purchase locally means that you don’t have to travel too far when doing renovations and you can source local deals on tradespeople and services. While it may be tempting to go for that ‘up and coming’ area, you need to make sure that it is actually up and coming and that it isn’t just a euphemism for a region that is a little unkempt with high crime rates, poor schools, and a serious lack of amenities. 

Opt for the sort of area that is desirable. You are looking for great transport links, a range of amenities close by, and decent schooling options for families. Check out the property market history of an area and if the houses have seen an increase in value for the previous five years, you know that you are onto a winner. Consider your budget and always try to purchase the worst house on the best street. There are many homes for sale that could make great vacation rentals, long term lets to professionals, or short term lets to students. However, when purchasing the worst house on the best street, you can outperform the property market by creating the best house on the best street, raising the ceiling price for an area, and maximizing your profit. These properties are elusive and competition for them will be fierce.

Budgeting

You may have a healthy balance in your savings account. It can be nerve-wracking committing to releasing some of these funds to purchase an asset. To obtain a second mortgage on the new pad, you need to consider how you can demonstrate your ability to make the monthly repayments. You may need to show the bank your plans for the property and your financial forecasting for when you sell it. By showing that you have thought through your figures and you are a safe bet to pay back the home loan, you can go ahead and purchase a new pad. Never overstretch yourself and always factor in the scheme of works you need to complete.

When you have purchased the property that you are looking to renovate you need to ensure that you have enough readies in the bank to do your renovations and sell on the property at a profit. Go room by room and list every single job that needs completing. This doesn’t just mean the largest jobs, like the new kitchen or bathroom, it also means the new hinges on the doors and screws for the shelves. By listing every job, you can be sure of an accurate budget. However, with all home fixer-uppers, the chances are something will go wrong so you need to factor in a contingency of around ten per cent. Once this is done, you are ready to begin your renovations.

Big Or Small

With most houses, you need to think about how grand you want your renovations to be. You could choose to do the bare minimum, keep the configuration the same, and make a tidy little profit with a spot of redecoration. However, if you really want to outperform the market and raise the ceiling price of an area, you will need to go big. Think about creating a home fit for the twenty first century that will seduce buyers with a lifestyle template. The poky rooms of the mid century, the avocado bathroom suites, and the swathe of mahogany wood paneling are no longer conducive to family living. You need to go more modern and open plan.

By opening up the kitchen dining space, you can create a large family room that becomes the hub of the house. The homely style of living, combined with excellent decor choices, white walls, a crisp finish, and stunning fixtures and fittings can appeal to a wide market. You want potential buyers to be queuing up at your door ready to put an offer in on your pad. You may need to extend in order to achieve this. While this costs money, you will reap the benefits as you add square footage and space to the home you are looking to flip. When renovating houses for the modern family, you need to think big and speculate to accumulate.

When it comes to installing new kitchens and bathrooms, don’t scrimp on the design, but do check out the ex-display models alongside engineered laminate work tops that look like granite quartz but are half the price. These ex-display models may have been out on the shop floor but they will still be near perfect and can save you a small fortune. The same goes for your new vanity unit, your new bath tub, and your new integrated appliances.

Flipping a house was a lot easier in the 2000s when the housing market was booming. You could even buy a house, do nothing to it and sell it on at a profit three months later because the market was esculating so rapidly. The property market shows no sign of slumping so it might be worth taking a chance on it. While it may take a little more effort and nuanced market decisions, you can still invest in property in a pandemic world.

Staff Writer; Gary Harris


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