Recently, in having conversations with property investors, I was quite surprised by the reaction I received from amongst some of these said investors. As a property investor myself, I am very aware of the often changing environment in the property market and different external factors that affect such investment.
As a stock market trader, I see this much like trading commodities. There are many factors to keep in mind when trading commodities. One has to understand seasons, weather patterns, supply and demand to name but a few.
So when I mentioned that tax changes and Brexit should be considered as potential risk factors, I was surprised by some of the comments I received. A favourite comment was that Brexit is an opportunity, not a threat. I like that mindset, but to use the opportunity, one needs to make some adjustments in your current course. Similar to adjusting your yacht’s sails in changing winds. If you do not make the necessary adjustments to the sails, you may find that the sails can get torn, the mast damaged, or you are going in a direction you never intended.
External factors influence our investments if we see them as threats or opportunities. Our point of view will help us to navigate the changing conditions or let the changing conditions navigate us.
In an article in www.Landlordtoday.co.uk repossessions of buy to let properties have surged by 40% in the third quarter of 2019.
David Smith, of the Residential Landlords Association, told the press: “Repossessions for mortgage arrears take place for many different reasons.
“Mortgage interest relief changes, which are now almost fully implemented, the increasing cost of regulation and the ever-increasing time to repossess a property are all major factors.’
This only deals with the tax and regulatory changes that has taken place, so what about Brexit. Well, that’s my point. We are not sure what the effect is going to be. We now have a general election that no one thought of when Brexit came into being a few years ago. We read in the different political party’s manifestos different stances concerning property investors.
“The Tories, have vowed to introduce a new scheme to permit tenants to transfer their tenancy deposits when they move properties.
The new Lifetime Deposit scheme will allow renters to transfer their deposit from one property to another instead of being left out of pocket for weeks while they wait to be reimbursed from their old landlord but have to spend money securing their new property.
The Conservatives have reaffirmed their commitment to abolish Section 21 of the Housing Act.” – www.landlordtoday.co.uk 25/11/19
“The Lib Dems will aim to tackle the housing crisis with tax changes, government-backed loans, and a housebuilding programme.”
“Labour manifesto: Right to rent, Section 21, rent controls and licensing”
David Alexander, managing director of Apropos by DJ Alexander Ltd, commented: “Everyone involved in the housing sector will welcome the Labour party’s plans to build more social housing. There is a growing need for social housing due to the rising population, the increase in the number of smaller households, and the ageing population so more homes are urgently required.”
“However, hostility to the private rented sector (PRS) is implicit in the Labour party leader’s policies.”
Alexander added: “The Labour manifesto seeks to vilify the private rented sector and blame landlords for all of the woes of the housing sector. The truth is that the PRS has stepped in and resolved a property shortage caused by successive governments lack of investment in social housing. Punishing this sector is not the way forward.
“The manifesto mentions rent controls, which generally don’t work and result in newer tenants paying more than their predecessors as initial rents are set higher to cover the fixed rents of the earlier tenants. Policies that aim to punish the PRS could result in large numbers exiting the market, and if that happens, then Labour will have to build a lot more than one million homes in ten years.”
One way, as I have explained so far, is to be aware of the changes and make the necessary adjustments.
Another way that I like to introduce is to make sure you have multiple streams of income. This is a very rewarding take on change and riding out troubled times. I have personally found as an initial property investor, that investing in the stock markets as well, gives excellent returns. This does not exclude you from external factors, but if you are aware and get educated, it is also a huge investment in yourself.
So, here is what I say, do not put all your eggs in one basket. Be investors, not just property or stock market or old car or vintage wine investors. Do your due diligence and let your money work for you.
Someone told me long ago, play the game, it may be their ball, their rules and their field, but if you play the rules, you can win.
Get to know the rules and play to win!