Below Market Value Property - Are You Still Buying?

This seems to be the most popular question amongst property investors at the moment. We have moved from a borrower-led to a lender-led market in a very short space of time and the credit crunch is certainly making it ever harder to get deals to stack.

But property is just like any other business – it doesn’t stay static. It evolves and all successful business people know this and grow and evolve with their market place.

So whilst some investors are giving up and pulling out of the market, others are simply lowering their offers. Some are investigating other market sectors such as HMO’s (multi-lets) which offer fantastic cash flow if you buy correctly, and some are seeking innovative financing strategies such as assignable contracts, to out-manoeuvre the lenders.

With every market cycle there comes new and increased opportunities – particularly if you can be a trailblazer ahead of the crowd. The key is in knowing your market place and then knowing where to look and how to harness the opportunities presented. Many investors are therefore focusing on the increased number of repossessions that the credit crunch will bring to the market. With an ethical ‘problem solving’ approach there is a massive opportunity for investors to grow their portfolio whilst helping others. Even with the PCOL (online court diaries) being shutdown following alleged consumer complaints of spamming from investors, the canny marketers out there are still finding ways to reach their target market.

For my money, the smartest full-time investors are those that are not just doing some/all of the above, but are stepping back to look at the bigger picture. Every business survives or fails on its Cashflow. In changing markets there can be increased lulls between deals, and tighter margins. There is no point boasting that you are still buying at the same rate if you are simply doing the same deals that DID cash flow but now need to be subsidised every month. So the onus is ever more on the king they call CASH FLOW. It may mean you rejecting more deals and growing your portfolio at a slower rate – but better to build a sustainable portfolio than one that is going to kill your cash flow… and kill your business!

If you can look after your cash flow then it gives you the time and space to redevelop and refine your property investment strategy in line with the changing markets. However, the chances are as a small business you are already working flat out and do not have the time and energy to invest in growing other income streams. To succeed in property you HAVE to remain focused. So the secret is to develop associated income streams that align with your property business or at least do not need much looking after which would pull you away from your property business. Nearly all of the successful property investors I know have more than one income stream.

Some offer to help other investors by providing products and services. In fact the very reason I started The Property Investor PA back in 2006 was to trade my time and expertise in order to ease my cash flow situation. Judging by the interest on the forum in the EI42 online shop opportunity and the number of property investors I meet at every Utility Warehouse gathering, there are plenty of smart investors out there working on looking after their cash flow. Both of these passive income opportunities work so well because they require only a small amount of time and effort and yet you really can build a substantial recurring income. For example In the case of utility warehouse, from the off you can sign up your own properties for a minimum of gas and electricity, and maybe phone and broadband too. It makes no odds to your tenants except that the services are usually cheaper, but every time they use the services you earn commission EVERY MONTH – for doing nothing!

So the real question is not 'Are You Still Buying', but 'How have you refined your strategy to keep buying AND look after your Cash Flow'?

(c) 2008 John Rattigan