EXPLORING COMMON ASSUMPTIONS

Common assumptions about property investment in the UK include:

• Property prices always go up

• Location is the most important factor

• Rental income is reliable and will cover expenses

• Buy to let is the best investment strategy

• Large amounts of capital are required to begin investing

• Residential properties are the only viable investment option

• Property investment requires hands-on management

Considering or appraising each of these assumptions is essential before determining the property investment strategy to choose:

1. Property prices always go up: The assumption that property prices will consistently increase over time is not always accurate - over the long run this has been true but the time of entry and exit can be critical. We have to acknowledge and recognise that property markets can be influenced by factors, such as economic conditions, housing demand, and government policies. To ensure investors do not fall foul of this assumption, they must focus on thorough market research, diversifying their investment portfolio across different asset classes, & considering alternative investment strategies such as property development or developing commercial real estate.

1. Location is the most important factor: While location is undoubtedly an important consideration, assuming it is the sole determinant of a successful property investment can be limiting. Challenging this assumption means exploring emerging areas or neighborhoods that may offer growth potential or considering properties with unique features that differentiate them from others in prime locations. Additionally, investors can look beyond traditional residential properties and explore commercial or mixed-use properties in non-central areas.

2. Rental income is reliable and will cover expenses: Relying solely on rental income to cover expenses is a common assumption. However, factors such as voids, fluctuations in rental demand, and increased maintenance costs can impact the profitability of a property. Recently interest rates have risen to such an extent that mortgage payments can eradicate and free cash flow previously earned. Investors can consider strategies such as short-term rentals (serviced accommodation), targeting niche rental markets, or diversifying their income streams through other means, such as adding value to the tenants, the property or incorporating ancillary services.

3. Buy-to-let is the best investment strategy: Many assume that buy-to-let properties are the most lucrative investment option. When interest rates have risen to outpace rental income rates it is essential to explore alternative strategies such as earning higher rates lending to property investors, peer to peer or crowdfunding, real estate investment trusts (REITs), property flipping, or even investing in property-related technology ventures. These alternative approaches can provide exposure to the property market while potentially offering different risk and return profiles.

4. Large amounts of capital are required to start investing: The assumption that significant capital is required to enter the property investment market can discourage potential investors. Challenging this assumption involves exploring creative financing options, such as joint ventures, peer-to-peer lending, or utilizing government schemes designed to support first-time buyers or property investors. Additionally, considering fractional ownership or investing in Real Estate Investment Trusts (REITs) can provide exposure to property with lower capital requirements.

5. Residential properties are the only viable investment option: Many assume that residential properties are the safest and most reliable investment. Challenging this assumption involves considering other types of properties, such as commercial, industrial, or mixed-use properties. These sectors can offer different opportunities for income generation and potential capital appreciation, diversifying an investment portfolio beyond traditional residential properties.

6. Property investment requires hands-on management: The assumption that property investment necessitates active involvement in day-to-day management can be challenging for individuals with limited time or expertise. Challenging this assumption involves supporting and benefiting from other active, hands on investors, exploring property investment options that require less direct management, such as investing in Real Estate Investment Trusts (REITs), property funds, or engaging professional property management services. Passive investment vehicles allow investors to gain exposure to the property market while minimizing their direct involvement.

By challenging these common assumptions, investors can mitigate risk, spread or diversify their portfolio and risk profile while exploring more novel solutions and investment strategies that go beyond the traditional approaches, thereby potentially unlocking new opportunities.

Co-Living, Serviced Accommodation and Commercial to Residential is a sound focus while providing secure returns for time poor wealthy individuals who still wish to benefit from the opportunities property investment affords.