Researching Investment Opportunities
June 16, 2012
There are not as many solid PRS investment opportunities as you might expect considering the current economy. Yes, there are many ‘deals’ floating around, but finding investments that you can have a sensible discussion about with both a client and a lender is far trickier.
There is a school of thought that if a lender will lend on the property, it is worth buying. However, this suggests that the lenders are the best judges of an investment – and that’s a whole different topic!
As with any investment decision it’s all about knowledge, or advice from those with knowledge!
Due to our knowledge of London, we quickly have a good idea if something sounds interesting. We can compare new opportunities to previous investments that our clients or ourselves have made, to existing PRS properites that we are asset managing and, importantly, compare between different areas of the capital. I tend to feel the best way of valuing property is by looking at what it will rent for. The rental market moves much quicker than the sales market so there are more live examples of pricing. Also, you can assess whether a renter with £350 per week to spend would live in one area rather than another and in one specific property or another.
With sales transactions being so low, finding useful, accurate sales comparables is difficult. However, it is wrong to take short cuts. You need to put in the leg work, do your research, find the right comparables and read the story that the numbers are telling you.
Combining your knowledge and feel for an investment is important, but you need to stand back sometimes and challenge those beliefs. Markets change.