Sustainable property investment – is your property set-up for the longer term?
Over the years of my investing career, the word ‘sustainable’ has become more and more important to me in every aspect of my property investing endeavours. Why? Well, with the financial markets and overall economy having been so volatile in recent times, the need for a sustainable property business has become particularly crucial. Having witnessed countless people lose their existing portfolios, jobs and/or homes, I have discovered that there are many facets to this idea which I would like to cover here. I will list the points I want to make to help you see what I’m talking about from a clear perspective. Here’s what I mean by sustainability in terms of property investment:
- Finding a deal which will work in almost any market, which essentially means buying it at the ‘right price’, therefore affording you extra ‘margin’ to work with (and allowing you to be flexible with the way it is configured if necessary).
- The area you choose has to have a proven track record of steady or even growth without extremes of highs and lows compared to the national average.
- Prospects of regeneration or development confirm confidence in an area from government or external sources.
- The property needs to stand the test of time and be built and/or refurbished to last. In my experience, it is false economy to do a minimal amount of refurbishment when larger issues may be present and are potentially being ignored.
- It will be environmentally friendly and meet all current and ideally future energy-saving standards (especially those to be implemented by the government in the Energy Act of 2018).
- The income derived from the property will be ongoing and rental demand high.
- The cash flow created from the property will more than cover any fluctuations in interest rates over the longer term (which goes hand-in-hand with my first point about margins).
- Keep your property in a good state of repair and decorative order. Tenants who feel they are being looked after will typically (in most cases!) treat your property with respect and want to keep their home as you would like them to.
- Unless you have pots of cash, you may need to be able to ‘recycle’ your funds in order to build your business. Under ideal circumstances, if you have set a deal up correctly, you will be able to pull out most, if not all, of your own resources (initial seed capital) from any property when you refinance it so that you can continue to build your portfolio over many years. This is what I refer to as ‘The Holy Grail’ of property investment! This enables your seed capital to go a long way if you have a limited amount of funds.
- The ability to leave a legacy to your family is a powerful way of ensuring that following generations can benefit from what you’re putting in place.
If these factors are taken into consideration when building your business, you create longevity in your portfolio, thus ensuring you achieve what you had originally intended for the business.
Until next month...happy investing!
Hazel de Kloe | Why Property Works