JUNE 2020

A Strategy to Follow

Lets look at one of the potential strategies to follow.

As a reminder, there are 4 stages of a typical property cycle. Which typically occurs every 7-10 years. It is fundamental to any successful long term property investor to know exactly where we are in the cycle and therefore adjust accordingly their strategies for investing in long term success. This separates the amateur against the professional property investor.

The professional property investor can profit from property at any part of the property market cycle:

  • Expansion
  • Contraction
  • Recession
  • Recovery

Different strategies will yield different results according to where we are in the cycle. To take a ‘helicopter view’, during the ‘expansion’ part of the cycle, a buy to sell strategy is very lucrative. Even if you just buy at market value and sell after a few months, you would have some great returns. Just imagine the returns if you could either add value or buy at a discount. And if you hit the holy grail of both buying at a discount and adding value during this part of the cycle, you would have some fantastic profits.

However, we are not in an ‘expansion stage but the opposite. We are in the ‘recession’ part of the cycle.

It should be clear to everyone that it is not the best time to be buying and then selling properties. Any uplift in the value obtained from refurbishment and any equity gained by buying at a discount will be wiped out by the market falling against you.

Therefore we are looking at a buy and hold strategy. I’ve had my ears close to the ground and been watching the big plays. One of these is that there is a lot of Singaporean money coming in as cash. Buying £50m developments at 30% discount, with the aim of holding the units, renting them out and then selling them off in 3/5 years when the market picks up. I’ve been privileged enough to see the cashflow spreadsheets regarding this play and I’m impressed with the returns, and I’ve been in the game for 20 years.

I am looking at replicating this play, but to a smaller scale. I’ve been running the figures and it only works with a minimum development project of £5m.

There it is. I just wanted to update everyone now where we are in the JV set up and my thoughts on what would be one of the best strategies during this part of the property cycle.

I’ll be in touch very soon.

Thank you once again for your patience.

Kind Regards

Harry

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