Every week, I answer my audience’s questions on YouTube. If you have an important question you need the answer to about property or business, please put it in the comments section of this week’s video. I will do my best to answer as many questions as I can next week.
This week, I answered a really interesting question about whether now is the right time to buy real estate or not. A lot of people are thinking about this right now, so I thought it would be worth covering it in a blog post. Here is the question.
Dave T asked….
I still think your videos are fantastic but I'm worried house prices are currently at an all-time high; building material costs are going up; interest rates are likely to be going up; inflation is going bonkers. Is taking out a big mortgage for a buy-to-let still a good idea?
Dave, what I would say to that is when you're buying a property you need to make sure that the property is cash flowing positive. If the property's cash flowing positive, and I'm not talking about making 50 quid a month, you don’t need to worry.
If you buy a house, say for £100,000, and then you spend £50,000 on it, then you refinance it and you pull your money out and it's making good profit (maybe you rent it out room by room and you're making £1000 a month) even if interest rates go up you are still in profit.
Interest rates are gonna have to go up to like 20 percent for you to not make any profit at all. Are interest rates gonna go up to 20%? Of course not, they can't. I mean historically even if you go back to the 70s and 80s where there were at a ridiculous high, so much so that people are still scared about it to this day, they were 15%. So interest rates aren't going to really stop my profits coming in. If I've got enough cushion, if house prices go up or if they drop, it doesn't matter.
I remember buying houses in 2009 and the house prices dropped in value, but it didn't matter because I was still cash flowing positive. So I was still getting paid to own the house. So you just don't sell it when it drops, and in terms of refurb costs, who cares? Because when properties are going up and they're going bonkers like they are right now, you can find a reason why not to buy. When properties are going down and they're crashing you can find a reason why not to buy.
The truth is it's always a good time to buy, if the properties are cash flowing positive. Because ultimately bricks and mortar will always hold its value better than money in the bank. So, if you own a house there's a limited amount of land in the world. So, if you own a house someone's always going to need to live there. If it cash flows positive, it's probably a good property. So that's generally my thoughts.
If you would like to see all the questions and answers from this week’s video, please check out the full video here.
If you would like to learn more about how to get started in property, why not come down to the Property Investors Crash Course. Tickets are free and you can book one here. Coming down is the best way to find answers to your questions about property investment.