11:12 AM, 13th December 2010, About 11 years ago 4
By Mark Alexander.
The next generation of property investors will:
Gone are the days when speculators with little to lose could legally borrow 100% + of property values in the belief they would always increase in value. This was possible up to about 18 months ago but it isn’t any more. This article explains more.
As property values have fallen and mortgages have got a lot harder to obtain, especially for the self employed, many more people are choosing or being forced to rent. As rental demand has increased, rent increases have followed. The result is that people getting into the market now are making far better returns on their capital invested than they were before. If and when borrowing does become easier, the demand for owner occupied properties will increase and this will drive up values. The longer the Credit Crisis remains, the greater demand will become for rental properties. People need to move homes for a plethora of reasons including expanding families, work relocation, divorce etc. If they can’t buy they must rent. It’s a win/win scenario for people who invest now. Either rents or values or both can only head in one direction over the longer term.
It’s fair to say that there are nowhere near as many new entrants to the property investment market than we saw in the decade prior to ‘the crunch’. That’s because it’s virtually impossible to own property without money. The new entrants are those who have seen the opportunity in its true light. They’ve usually lost faith in other forms of investment, are getting very poor returns and are realising that property is the answer. Not all investors have other investments to cash in and fund deposits though. Some have used their surplus incomes to pay down their personal mortgages over the years and as a result of this, and the long term increases in the value of their properties, they have plenty of equity. The same people often have surplus income too and prefer not to save it in banks, building societies, pensions and other forms of investment as the returns are so low. Therefore, they are using their surplus income to service a larger mortgage secured against their own home. The extra money raised is being used as deposits to buy bargain properties with high rental yields. Admittedly, this strategy isn’t without risk, however, sometimes people choose to ‘speculate to accumulate’.
With the right advice and guidance, the new generation of property investors are in a great position. They should, however be very wary of anybody who tells them that they can buy properties without the need to pay a deposit from their own resources. See this article.
The evolution is already occurring and we are already witnessing the following:-
Make no mistake, there are still several of the ‘pre crunch’ generation of Property Investors who are still investing. They are also constantly evolving their working practices, throwing away their paper diaries and book-keeping records and using technology to streamline their businesses and their business decisions.
What other key differences do you think we will see in the next generation of property investors?
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