Everybody ready for Brexit?
No? We didn’t think so.
Well, you should be. You only have until March next year to sort your finances out, and make sure that your business is resilient enough to handle the impact.
If the various daily papers are to be believed, we’re heading for a hard one (snigger), with everything that entails. No freedom of movement. Trade barriers. British based banks won’t be able to do business freely on the continent.
In all likelihood, there will be a drop off in European workers coming to Britain to earn their crust, and foreign students at British universities will look elsewhere for their educations.
For HMO owners, it could be a little bothersome.
It’s probable we’ll also see interest rate hikes, and the confusing phenomenon of high inflation combined with lower house prices.
For property owners everywhere in the UK. It will be an actual disaster.
Remember the 2008 banking crisis? It’ll be like that. No. It’ll be like the late 1980s.
But hold on there for a minute. As a professional landlord, is this really going to affect you that badly?
If you’re so overexposed that a few percentage points onto your mortgage is going to cripple you, that’s too bad. For landlords with low or no mortgages, this has the potential to be better than business as usual. This is an opportunity.
Sure, negative equity looks bad on paper, and your net worth will be a little lower than it used to be. But really, those are abstract numbers. Unless you’re actually planning to sell your properties, they make no difference whatsoever. Your rental income will be the same, and in a few years time, property values will go up again. There’s no great harm there.
The real opportunity for cash-rich investors is the potentially steep rise in interest rates. Not for locking your money away in a bank of course, but for getting more properties cheaply.
Like the poor, overextended individual we were addressing earlier, there are thousands of landlords who are barely meeting their mortgage payments already, thanks to factors ranging from pricey landlord registration fees to costly and compulsory gas inspections.
All it takes is one little nudge to push them over the edge. They might survive a one percent rate rise, but five percent? Probably not.
People who have a mortgage on their own homes will be in for a shock too, and will be making a choice between selling up, cutting back, or doing some hard negotiating with the bank.
In short, there will be an awful lot of people staring down the barrel of repossession. For an investor with ready cash, it will be time to head down to the auction houses, as banks seek to get some value out of their security.
Reserves are generally set at whatever debt is still outstanding – often well below the actual value of a house, and with luck, there will be such a glut on the market, that you can snap two or three up at a time.
And there won’t be a shortage of potential tenants either. After all, those former homeowners need to live somewhere.
Image credit: Duncan Hall