A comment which I sometimes see made on social media, like on the Facebook, on different sorts of property groups on Facebook, is that buy to let is an outdated model.
In fact sometimes people will come to my YouTube channel and do little troll type posts saying ‘Buy to let is dead, property investing is finished blah blah blah…’
But when I see a statement like that what I realise is that most times I’m assuming that whoever’s put that comment doesn’t really understand how property investing works, because what they probably think of is property investing means saving up forever to save a deposit to buy a property, buying an expensive property in an area where probably the returns are going to be quite low because the properties are so expensive and although you might get a reasonable rent it’s probably only just going to cover your costs, and then you sit back and wait for capital values to increase.
And usually, the comments saying that buy to let is an outdated model usually relies upon the argument that the property market’s about to crash anyway and so anybody who buys a property now is an idiot, or even if the property market doesn’t crash now values are now so high that they can never possibly get any higher. And of course the interesting thing is, I think that through every age, and through every decade, and practically every other year, that’s what people think.
But of course, prices keep moving on because we live in an inflationary economy. The Bank of England are actually charged with creating inflation at the moment, they’re told it should be around about 2%.
So that is probably always going to drive property prices as well as the usual arguments about demand and lack of demand-supply, lack of new housing, and all of that other kind of stuff, which I’ve covered in other videos.
But it makes me think that whoever says that buy to let is an outdated model doesn’t really understand.
It’s not about buying a property and waiting for capital growth. In fact, I mean, capital growth is fantastic but most investors if not all proper serious investors will tell you that first and foremost they’re buying for cash flow, and that means buying a completely different type of property.
In another video, I’ll talk about which types of property are actually best for buy to let.
But if you follow the model which I follow then you would do something like this: rather than buying an expensive property and then hoping that you can just about cover your costs and then hoping that values will go up, you’ll buy a cheaper property in a cheaper area, you would buy a cheaper property at a bargain price so that the cheap property is even cheaper, if that makes sense, you would then add value by doing a simple refurb, and then after six months you would refinance the property. And if you’ve got your figures right you’ll get all , almost, or at least a lot of your money back out of the deal so that you can use that money again and then recycle that into your next deals and start building at the end of it a fairly sizeable portfolio starting only with a limited amount of cash.
And the great news is, and this is a subject for another video in the future but, it doesn’t even have to be your cash you could use 100% other people’s money, for example, to get you started and buy the property and then refinance in six months time when you’ve added the value and pay your original investor back.
So is buy to let an outdated model? Absolutely not.
And one of the ironies is that one of the best times to buy properties for buy to let is probably when the property market isn’t doing that well when we are looking at the possibility of a decline. I won’t use the word crash because it’s a very emotive term and the property market generally, what we call a crash is actually a decline which could happen over a number of years.
In the 1990s I think prices in the property market declined over four years, in 2007/ 2008 the decline took about 2 years, so it’s not like they’re all going to sort of fall on Tuesday afternoon it’s going to be a gradual process. So crash is, let’s say, an emotive term.
But can the property market decline? well yes, it can but that can be one of the very best times to buy anyway which in my mind proves it’s certainly not an outdated model it’s a very current model but you need to know what you’re doing and you need to follow the right strategy.
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And if you come over to my website thepropertyteacher.co.uk and click on Learning With Peter, you’ll find loads of great resources including my best-selling home study course The Successful Property Investor’s Strategy Workshop in which I’ll take you through how I started my property business with literally none of my own money and bought £2 million worth of property in just four years and replaced my day job with passive income from the portfolio. It took me four years of trial and error to learn the best way to do this but because I’m going to show you everything I did right so that you can copy it and everything I did wrong so that you can avoid it I’m sure you can achieve far more than me and far more quickly.
So please visit my website for full details of this and all of my other resources.
And until next time, here’s to successful property investing.
Peter
Peter Jones
(ex) Chartered Surveyor, author and property investor
https://thepropertyteacher.co.uk
PS. By the way, I’ve rewritten and updated my best-selling e-book, The Successful Property Investor’s Strategy Workshop, which is an account of how I put together my multi-property portfolio, starting from scratch and with no money of my own, and how you can do the same.
For more details please go to:
https://thepropertyteacher.co.uk/the-successful-property-investors-strategy-workshop
