It’s all about time
Journalist, market expert and show panellist Sarah Davidson summarises Paul Mahoney’s investment insights.
Investing in property has been branded a “really good hedge for inflation” with experts claiming that even if house prices were to fall by 10 per cent, over six years landlords would make money.
Speaking at the National Landlord Investment Show in London in July, Nova Financial Group chief executive Paul Mahoney said “time in the market” was far more important than “timing the market”.
“Even though house prices fell by about 20 per cent on average between 2008 and 2009 after the credit crunch, in the long run average house price inflation is up 6 per cent a year,” said Mahoney.
“Property downturns typically last between 12 and 18 months and then prices start to recover. You can always make money investing in good properties, in good locations with good rental demand so long as you are comfortably covering your costs.”
He suggested investors looking for locations “on the rise” should consider areas undergoing large scale infrastructure investment, where companies are moving lots of jobs, where industry and amenities are nearby and good quality, and where people want to live.
Mahoney, himself a landlord with a portfolio of more than 500 properties, said: “We’ve found the fringes of the big cities have done really well, high quality properties in central city locations in the country’s other big cities such as Liverpool, Manchester, Salford are also always going to be in demand.”
Before investing, Mahoney warned landlords to get to grips with how demand for rented accommodation compares to supply.
He said: “Building 15,000 new apartments in Manchester city centre might sound like flooding the market, but if Manchester City Council says they expect to need 5,000 new homes every year for the next five years – that’s a shortfall of 10,000 properties.”
Return on cash should be a priority when buying a buy-to-let, he cautioned. “Capital appreciation is where property investors make the bulk of their profit, and it’s also how you scale your portfolio,” Maloney told delegates at the conference.
“There’s this myth that you can’t make profit on mainstream buy-to-let anymore, but if I put £50,000 down on a £200,000 property and it goes up in value by 5 per cent, it’s worth £210,000 and my cash return is 20 per cent. You can then look to remortgage to realise those gains and reinvest into your next property.”
To be successful, Mahoney said landlords must diversify, adding: “Five years ago buying up lots of properties in Heathrow sounded like a no brainer – airports are always going to need people to work there.
“No-one foresaw the pandemic, but airports closed for the best part of two years. Someone adopting that strategy would have been wiped out. That’s why ensuring the area you choose has strong employment and a diverse range of jobs and companies protects your investment from unexpected events.”
There’s this myth that you can’t make profit on mainstream buy-to-let anymore, but if I put £50,000 down on a £200,000 property and it goes up in value by 5 per cent, it’s worth £210,000 and my cash return is 20 per cent.
Paul Mahoney | Nova Financial Group