Coronavirus has had an undeniable and distressing impact on lives and businesses the world over – investors, consumers and politicians!
NHS workers have been doing an incredible job, and sadly many have not only been suffering from coronavirus itself, but with a sense of anxiety around the health, social and economic consequences. It’s a difficult time for all.
I wanted to share 3 things you need to know about how coronavirus affects you, if you’re a UK residential property investor focused on long term investing – like buy to let investment. And it’s not all bad news.
How you’re affected will very much depend on your circumstances, for example:
- Have you borrowed money to invest?
- If so, is that via a buy to let mortgage, a commercial mortgage, or via equity release? On a fixed or variable rate?
- What type of properties and tenants do you focus on?
These will affect how coronavirus affects your property investments, and what you can do to minimise the impact of immediate threats like loss of income – for example using mortgage holidays, which for the record are not really holidays but deferments. You can find out far more about these policies and how they can be applied to you by speaking to your bank, and will want and need to work directly with any tenants who are struggling financially as a result.
More broadly…What do you need to know about coronavirus?
1) Value is not disappearing – buildings are not going to fall down – there’s no need to panic as a long term investor. Capital values may take a dip, but the truth is even in the last Global Financial Crisis, rental levels hardly dipped across the board. So if you’re investing in assets which are priced well and deliver long term value via rental income, there’s no need to stop. From a users’ perspective, we need houses more than ever over the coming months!
2) The opportunities are changing – and some new ones will appear. All-time low interest rates create a huge opportunity for investors using bank lending. Meanwhile, the attractiveness of some strategies is falling, in particular certain approaches that have become popular relatively recently, like more compact living – for example via Houses in Multiple Occupancy – and shorter term models like serviced accommodation. It’s not all bad: working from home is clearly on the up in the short term. Consider what opportunities this entails – as mentioned earlier, residential property has in many ways never been so important! And it’s likely that there will be a great buying opportunity, as fewer investors have appetite to buy at times of crisis. As ever, there’s strengths, weaknesses, opportunities and threats – the classic SWOT analysis always seems to come in handy!
3) It’s more important than ever to make strategic, not emotional decisions. In investing, it’s all to easy to follow the herd or the heart. Unlike the benefits of Herd immunity for our population-wide recovery from a medical perspective, herd mentality is often unhelpful from an investment perspective. To avoid emotional decision-making, make sure you’re clear on your goal, and if it’s a long term goal focused on income then you may simply need to focus on tactics: what deals will you be able to do, and what operational procedures are now required, to make the best of this challenging situation?
So, stay safe, sane and healthy, wash your hands, and do what you can to take strategic, not emotional decisions.
If you want to find out more about long term residential investment and adapting your strategy to suit the current climate, I regularly share content via social media, in particular linked in, and via my newsletter.