#91 - Property Strategies for 2024
What I’m Reading
On How People Are Seeing Things Differently, a LinkedIn article by Ray Dalio. It highlights how people are increasingly polarised in their views leading to a lot of conflict and people who take a more balanced, nuanced approach are drowned out. I think learning to deal with people with opposing viewpoints will be key in the world today.
Resource of the week
There’s still (just about) enough time to grab any last-minute Christmas presents on Amazon. Before you make sure you have the Keepa price tracker, it overlays a chart of the price history of products so you know if you’re getting a good deal.
Quote
“Look back at your life. It's always the hardest times that made you who you are.”
Casey Neistat
News and trends
- Government allows houses to be split into flats without the need for planning permission.
- Midlands town issues first banning order against rogue landlord. I remember when I went to the NRLA conference and Michael Gove did his Q&A someone asked what the point of so much regulation was without the means to enforce, so it’s good to see things heading in the right direction.
- House prices to fall between 2% and 4% in 2024 according to Halifax.
- Paragon offers a 5-year fix with no product fees. It’s good to see lender confidence coming back onto the market. I've seen some extortionate fees so I hope this is the start of a trend.
- That was quick. Twitch decided to rescind their new policy allowing ‘artistic depictions of nudity’ on stream. I was surprised it got to the stage they announced it to be honest.
- Investment needed if courts are to improve. And the saga goes on, this is of course, in relation to the banning of S21 (‘no fault evictions’). I’m very sceptical about any meaningful change in the near future if I’m honest. If streamlining the courts was straightforward I feel like the backlogs wouldn't be where they are now.
Thoughts
The property market has changed a lot in the time I’ve been investing. So much so that many of the strategies that worked just a couple of years ago are no longer effective in the current market. So this week I thought I’d give an overview of some of the most common strategies and how viable they are.
- Lease options
This is the OG ‘no money down’ strategy. Far more money was made by trainers teaching this strategy than people exercising this. In short, it required a very specific circumstance: finding someone who was in negative equity, so couldn’t sell their property as the value of the property was lower than their mortgage, then getting them to agree for you to take over the property in return for you to agree to purchase the property at a fixed price in the future.
Finding these opportunities were few and far between 10 years ago, now considering property prices are on average £40,000 above pre-pandemic levels alone, alongside more stringent stress tests, I just don’t see many properties in the country eligible for this. Notwithstanding the fact that you then have to convince the vendor to agree. I don’t think there’s any viability for this certainly in the near future.
- Splitting houses into flats or making improvements to a property and adding value.
It’s looking like 2024 will be a subdued year for property prices and the good thing is you’re more likely to be able to find a good deal, even more so if the property is in need of some work. The key thing is being able to correctly estimate labour and material prices.
While lenders are showing increasing confidence it is early days, so if you plan to refinance to recycle some cash be prepared to be patient if you don’t get the valuation required.
This ties in with the news that converting houses to flats will come under permitted development rights. I think this is big news and I see a lot of investors running this strategy as splitting a house into two flats in most cases should increase the value overall. Not requiring planning permission massively streamlines the process.
- Aggressive refinancing
So this was one of the strategies I used when starting out myself and something I detailed in my book. Unfortunately, it’s a lot more difficult to do nowadays. It’s mostly down to the higher rates we’re seeing so aggressive refinancing to max LTVs will hit return on investments hard. There are also the stress tests which a lot of properties are struggling to hit anyway, so even if your property benefits from growth the rent might not support the borrowing required.
I’m not saying there’s no place for refinancing but it just won’t be as substantial as in the past so I’d use to to supplement another strategy.
- BTL
It sounds boring, but it’s low risk and there are a lot fewer moving parts. At the end of the day, when starting out, my goal for getting into property isn’t to look good by doing anything fancy but maximising growth/profit with the least risk and time commitment. It’s a very resilient strategy whatever the conditions. Over the long run if you buy right the gains will snowball.
Hope that was helpful.
So this week I’ve been doing a lot of work on Property Academy, I’ll be dropping the launch date at some point in the upcoming week alongside more free email resources/lessons. Make sure you’re on the list if you’re interested!
Have a good week!
Hans