Real estate investment, staying cool in difficult times

While politicians continue to fret about the ongoing Brexit negotiations the impact on the UK property market has to date been minimal. In the US we have recently seen the Fed rollback on threatened interest rate rises after political pressure from Donald Trump. These two scenarios illustrate perfectly why you should learn to stay cool in difficult times to benefit from long term real estate investment.

Look at the longer picture

How is it that we all know real estate investment should be seen as long-term commitments but can often let short-term considerations cloud our judgement? The key to any successful real estate portfolio is cash flow which is predominantly rent but may well be trading income from buying and selling properties. The stronger your cash flow the quicker you can pay down debt and/or look to expand your portfolio. Cash will always be King….

Research your markets

If we look at the UK in particular, some of the less well knowledgeable individuals grabbing the headlines have been talking down the buy to let market. The simple fact is that there is not only a shortage of newbuilds in the UK but a shortage of private rental accommodation. Even if immigration numbers were to fall off a cliff in the short term, unlikely, there would still be sufficient underlying demand to support the buy to let market.

If you know that the long-term situation is relatively secure then short-term “noise” should not be allowed to cloud your judgement. Stay focused….

Reacting to opportunities

Time and time again so-called experts have been talking of the oncoming deluge of properties for sale as a consequence of Brexit concerns. So far we have seen nothing of the kind, sellers have remained fairly positive with the majority unwilling to even entertain opportunistic offers. As we approach 29 March, and with the UK government facing a very important vote tomorrow, there may be opportunities for investors looking longer term. Will short-term concerns get the better of some property owners?

Retaining control of your finances

No matter how attractive the opportunities in front of you, if your finances do not allow investment without undue risk, you must be very careful. Conservative management of your finances and gradual growth in your buy to let portfolio can be very quickly undone with an inappropriate investment. If you have significant headroom between your liabilities and your net assets then you are in control of your finances. If this is turned on its head, and you are constantly battling to cover your liabilities, then your finances are controlling you.

Stick to your plan but be flexible

When setting out on your real estate investment journey you should put together a plan which takes in short, medium and long-term aspirations. As much as feasible you should stick to your long-term goals but be flexible with regards to opportunities, changing markets and emerging trends. Facts and figures speak for themselves, opinions can vary greatly, so stick to the numbers, long-term cash flow and potential for the capital appreciation. Those who chase the fast buck and a short-term profit will probably do well in buoyant markets. However, one bad deal could wipe out all profits before them and significantly weaken their financial strength going forward.

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