So how can property investors help out in this coming crisis and create a profit while we’re at it?

1. Expect a significant number of below market value property opportunities next year as more people face repossession.
2. Savvy investors will buy the best opportunities using creative financing (see how on www.property-finance.com), rent the property, hold and sit tight for at least five years.
3. Some over extended developers will need to sell land and unfinished buildings to stay afloat. Smart well funded investors will step in and build their own land banks at bargain basement prices.
4. Spooked buy to let property investors will sell individual properties and even whole property portfolios. Look for the really distressed investors with at least 30% or more equity. Offer very low. Buy cheap. Hold.

Auctions will market in increased number of distressed sale properties. In fact the percentage of lots offered at auction on behalf of distressed sellers is already rising dramatically according to RAPID – a joint initiative between Allsop and the Essential Information Group.

They go on to estimate that 30,000 repossessions (much more than the CML predicted) will take place this year alone with 13.1% of them going to auction. From a low of 3.1% in 2004 their distressed seller data (includes domestic and failed buy to let landlords) shows that 13% of all auction lots in 2007 are being offered on behalf of distressed sellers. The trend is increasing.

By region, the North of England and Scotland show the highest number of distressed seller lots followed by the Midlands, then Outer London and then Central London showing the lowest number.

RAPID also reported that half of all the lots offered at Allsops September auction were from distressed sellers.

You have to look at the positive effects of all the mass media speculation. First of all, you’ll have less competition from amateur investors. The professionals will still be gobbling up properties (that’ll never change) but at least you’ll have less amateurs to contend with.

Secondly, you will have more negotiating leeway with distressed sellers. Lower demand = more supply = pressure on sellers.

So What Should We Watch Out For?

If the banks stop lending on property then we’ll have a problem. We both know that’s not going to happen. In fact it cannot happen. Banks must lend because that’s one of the ways they generate revenues to pay their savers. Property is one of the few safe tangible asset classes so the banks will still be out there albeit with some extra restrictions.

Over the long term I believe UK property prices will continue to rise. The law of supply and demand, a growing population, an appetite for property as an investment vehicle, historical trends and above all the need for tangible asset classes all point to an upward trend even if we experience a few road bumps along the way.

There you go. That’s my thoughts on what’s going on at the moment in the property market. I guess it’s not much good to you unless I give you some guidance too so…

1. Keep your offers low – at least 20% below market value. Buy at sharper discounts to market value than you would normally work with.
2. Watch you don’t over extend yourself. Keep your mortgage gearing manageable even if that means putting some of your own money down on some of your deals.
3. Call a few mortgage brokers and make sure you get the very best rates – go for discounted fixed rate periods if you want to know where you’ll stand for a while but watch out for early

That’s my strategy in a nutshell. It’s not the best strategy in the world and it’s certainly not going to work for everyone but it makes sense to me. And that’s how you need to feel about your strategy. Don’t expect to come up with anything fool proof – just create something workable.

The key is for you to:

1. Think about the lifestyle you want. Set your own goals. Devise your own investment strategy based on your goals. Property is just one of many investments you could make
2. Make sure you have a diversified portfolio of investments.
3. Look carefully at what’s going in the area in which you invest or intend to invest. Aim to know the local nuances in your area just as well as the most experienced local estate agent.
4. Your knowledge of the local market is a source of added value. This will naturally make you more successful over the long term compared to others in the market.
5. Digest as much as property related information as you can – www.tycoons-forum.com is a great place to gather information and read up on the views of over 1,000 property investors
6. Make up your own mind on where you think property prices will go next year.

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