The investment property market has become an important part of the wider property market in recent years. So here we’ll review prospects for the investment property market, and share some tips for agents and others who are involved in it.
What’s the future for the investment property market?
In recent years some commentators have suggested that, after many boom years, the investment property market is in decline. They suggest that tax changes and the extra red tape of being a landlord have encouraged more buy to let investors to sell up.
That’s probably true, to an extent. Many amateur and small property investors have probably realised that it isn’t as easy as they were led to believe. It’s also worth remembering that a property investment is often thought of as a pension. So many investors who bought in the 90s and 2000s may have reached the point where they want to release some of that pension.
Some recent reports, however, suggest the buy to let market could be heading for growth again.
The landlord ‘sell off’ has slowed to a seven year low this year, according to Hamptons March 21 Monthly Lettings Index. (They add that landlords made a substantial £82,450 on average from each property sold after owning it for an average of just 9.1 years.)
For the first time in four years the proportion of landlords who say they plan to expand their portfolios (19%) is higher than that who intend to reduce it (17%), according to research by Paragon Bank.
In particular, the foreign investor market looks like it could be an even more important source of property sales in the coming years. Some investors, such as those from the Middle and Far East, appear to be increasing their interest in the UK.
The number of overseas landlords has reached a five year high, according to a report from Ludlow Thompson. They say that the number of foreign investors in UK property has increased by 19% over five years to reach 184,000.
Several reports suggest rents are rising again after a difficult few years, which could bode well for investors. This report quoting ONS figures says rents rose by the highest amount in two years (1.5%) in May.
This report quoting RICS from last year suggests rents will rise 2-3% annually until at least 2025.
The advantages of selling property to investors
There are a number of advantages of pitching your property to those who might want to buy it as an investment, including buy to let landlords.
* Investors will often buy property in areas where few owner occupiers are willing or able to buy.
* Investors will often buy property that owner occupiers cannot buy. For example, property that is unmortgageable and/or requires extensive renovation. Also commercial and mixed use property.
* Investors may be cash buyers. So are attractive to vendors. They can also help to avoid and break chains.
* Investors offer ongoing income streams for agents, such as management services and property to let.
The disadvantages of selling property to investors
* Investors need to buy at competitive prices – or at least those who want to be successful do. They may be looking to buy at below market value.
* The market for investment property is generally more sensitive to the level of house prices, interest rates, the economy and property legislation than the owner occupier market.
(Many people will agree that there aren’t many disadvantages of pitching your property listings to investors.)
Tips for selling into the investor market
The recent boom in owner-occupier interest may have prompted some agents to overlook the potential of selling to investors. But’s important not to overlook it in a market where investor interest could be rising again.
If you’re asked to value or sell a property that is suitable for the investment market suggest the possibility to the vendor.
If you’re asked to value or sell a property that is already a buy to let suggest the possibility of marketing it as such to the vendor. This opens up the possibility of selling it as a turnkey buy to let investment, possibly with tenants in situ.
Advertising that you specialise in selling ex-buy to let property and helping landlords get the best price and/or a faster sale could be another good marketing angle to use.
When listing a new property, consider mentioning or even pushing its investment potential in order to attract extra interest and potentially more offers. Mention issues such as lettability, local letting demand and yield potential.
Target investor markets in your advertising and marketing. Consider targeting overseas investor markets. Point out that you can advise investors on finance, the purchase procedure, letting and management – if you have that sort of expertise.
A good CRM system can help you target the investor market more successfully. A CRM system, like Apex27, can help you pitch your business to the investor market as well as owner occupiers. It can help you manage and progress leads from investors, create listings and marketing material that will appeal to them and progress enquiries, viewings and sales to investors too.
You can find out more and sign up for Apex27’s free and paid plans here.