As you can imagine over the past couple of weeks the market has softened and investors we are speaking to on a daily basis want to limit their risk exposure and ensure they are making sustainable investments, which will endure market fluctuations in line with COVID-19 implications.
Some investors will hold tight and wait and see how things go particularly in the tourism markets such as hotel investment or projects which have long-term construction timeframes, which is no doubt wise. However, we are engaging with investors daily and others do not want to wait 3 to 6 months and lose out on thousands of pounds of potential income.
In light of this, below, we’ve outlined some pointers for active investors, who may want to move funds from the stock market into a property investment and how you can ensure you are making a wise acquisition in the current climate, with security as a priority.
1. Avoid Leisure/Tourism Sectors
It may seem obvious to many but with tempting attractive returns, holiday-home and serviced accommodation investment models can be appealing. However, with severe tenant/demand fluctuations we have to be considerate of the viability of the structure given it relies heavily on charging premiums on short-term lets which have likely hit zero for most providers.
2. Income Over Capital Growth
A key decision in any investment is the growth/income model, although a good balance can be achieved most investments lean towards one strategy. City-centre residential new-build apartments in the likes of Manchester, Birmingham and even London (for the long-term) are capital growth-focused investments, e.g. the yield will be lower than alternative options but the property value will likely increase more quickly. The trouble is that you are relying on property price increases and although values typically double every 10 years in the UK, you are likely to see a stagnant market in the next year or two. Sensible income-focused investments will pay you no matter the market conditions.
3. Legally Binding Agreements
No matter the asset class, if it be traditional residential property, care homes, purpose-built student accommodation or property bonds, where possible, we want to be sure a third-party has underwritten the return and there is a robust agreement in place. There are investments on the market right now that provide high projected returns but now, in our opinion, is a good time to focus on contractually assured income rather than projected or possible returns.
4. Your Exit Strategy
Arguably, having a clear route as to how your original capital can be returned is one of the most important aspects of any investment. Yes, there are resale markets and plenty of companies out there who can assist in selling on the secondary market for liquid assets but having a buy-back agreement from a third-party, contractually assured, provides peace of mind for the duration of the investment term.
5. Risk & Reward
It is tempting to go for the highest yield you can find, we can tell you now sophisticated investors, family offices and institutional-grade funds, such as pension and insurance entities, do not scan the market for a 12% net rental income that we may see be achieved in a freehold HMO property for example. We want to look at assets that are underpinned by strong investment fundamentals rather than just the yield alone, these fundamentals vary from investment to investment.
COVID-19 Investment Environment
As a company, we have adjusted our marketing efforts to focus on low-risk opportunities of which provide immediate income, see sustainable demand and will not be affected by people self-isolating, an example of which can be seen here, providing 8-10%. Our key markets are the UK, the Middle East and the Far East, all of which have been impacted to a different degree, your location has minimal influence over your investment options.
It is a fantastic time to negotiate with developers and property management companies, so if you’re interested in one of our investments, then get in touch and we can negotiate on your behalf, let’s secure a low-risk asset that pays income and leaves no guessing or stressing about market performance. If done sensibly, now is the time. “Be fearful when others are greedy and greedy when others are fearful” – Warren Buffet.