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Home Insights & Advice London rents are falling – Get ready for investment opportunities

London rents are falling – Get ready for investment opportunities

by John Saunders
27th Jul 20 5:41 pm

Property investors could soon see a big opportunity to buy property in London for much less than usual. According to data published by The Guardian, London rents dropped by 8-18% between February and July. Falling rent is good news for tenants, but not so great news for the landlords who depend on rental income to earn a living.

Landlords aren’t dropping rental prices for no reason. The devastating financial impact of the coronavirus pandemic is forcing many landlords to lower rents or risk sitting on empty units. Since more employers are allowing people to work from home, tenants are packing their bags and moving as far as it takes to get cheaper rent.

Landlords who can’t afford to drop the rent will soon find themselves with empty units and will be forced to sell their investment properties. The only landlords who can take the hit of low rents are landlords who have paid off their rental mortgages and landlords who have additional income to cover short-term losses.

London landlord losses could be your gain

If you’re an investor, be on the lookout for properties priced to sell. Under normal circumstances, cheap prices would be a red flag. However, the coronavirus situation isn’t a normal circumstance. Many investors will have no choice but to sell their properties and cut their losses before they dig a deeper hole of debt.

Investors will likely sell off small properties first, like single family homes (as a sole investment), duplexes, and apartments with only a handful of units. Larger rental properties are more likely to be owned by career investors who have multiple properties and the income needed to get through this crisis.

Negotiations for acquiring property will be easier 

Under normal circumstances, you’d want the current homeowner to perform all repairs before the sale is final. However, being more lenient about what you want the seller to do will get you a better deal during these hard times. 

For instance, if the property has a leaky roof and the seller can’t afford to repair the roof, they’ll probably be willing to drop the sale price by the cost of the repair (or more). For the seller, dropping the sale price is the better option. If you’ve got the money to perform the roof repair, the deal is in your favor.

Pandemic buyers are getting great deals

In the United States, investors (dubbed ‘pandemic buyers’ by the media) are cashing in on some great deals. In the formerly-booming city of Houston, for example, Texas investors are finding great deals and keeping the housing market alive at the same time.

Live in the U.S. or Canada? Consider investing internationally

If you’re a serious investor, but you haven’t invested internationally, now is a great time to find a good deal to get started. Investing in international property is easier than it might seem. 

You’ll want to see a property in person before committing to a purchase, but once you get the property ready to rent, you can hand off all responsibilities to a property management company.

London was growing before the coronavirus hit. When the housing market returns to normal (or at least returns to a stable state), London will naturally start to grow once more. If you buy an affordable rental property now, by the time the market stabilizes, you’ll have a profitable international investment.

If you have the funds, don’t miss this opportunity

Although nobody knows how long this coronavirus situation is going to keep the world shut down, at some point, the housing market has to turn around. The only question is when. If you have the funds to invest in property, even if it means charging lower rent until the market turns around, don’t miss this opportunity.

Great deals won’t last long. According to data published by money.com, in some U.S. cities, homes that used to spend a median of 100 days on the market are now on the market for just 23 days. While most home buyers during the pandemic will likely be individuals, investors can take advantage of this situation to acquire decent rental properties.

Don’t wait until officials launch an initiative to encourage people to take out home loans to buy up all the properties. If you wait until that happens, you’ll miss the really good deals. If you wait too long, prices might be lower overall, but you’ll be competing with other investors and you’ll miss out on the priced-to-sell opportunities.

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