Smokescreen?

With 3 institutions (so far) suspending dealings in their commercial property funds, the downside of investing in such funds has emerged. For further reading, please visit LandlordZone.


Gambling on the future

Whenever I count from numbers 1 to 10. I find it easier to count up, rather than down. If you don’t know already, try this for yourself: count from 1 to 10: do you find it easier to…For further reading, please visit LandlordZone.

Stands to Reason

The more you pay for a commercial property investment, the less you are likely to make out it at least in the short term, and quite possibly long-term too. For further reading, please visit LandlordZone.

The Smart Money

The smart money is getting out of property. The smart money has long regarded property to be treated like any other commodity, to be bought and sold whenever the time is right. For further reading, please visit LandlordZone.

Yield and Return

A concern for investors in commercial property is how well the investment is performing or how it is expected to perform. Knowing how to gauge performance is essential which is why it’s important to understand the difference between yield and return. For further reading, please visit LandlordZone.

Chasing Rainbows

Unlike investing in stocks and shares where the volatility of share prices and uncertainty of dividends can lead to long term buy and lose, investment in property offers two advantages: … For further reading, please visit LandlordZone newsletter issue 21 - click here

Yield and Pricing

The current trend for private investors in the retail market to be more concerned with short term gain than long term income is worrying.

Participants seem to have overlooked the fact that the essence in capital gain to date owes more to previous levels of inflation than to design. And even if high inflation does return, the retailing revolution will stultify any likelihood of a repeat boom.

Many new investors believe that rental value reflects expected investment yield, based upon the price they have paid. In fact, investment value is calculated by reference to the level of rent and not vice versa. However, high prices paid for some investments can only reflect a very optimistic view of rental value. With the exception of property formerly owned by notedly cautious landlords, the idea that the previous owner must have agreed too low a rent, especially if set during the period 1981-1983, is too simplistic. By having always to aim for the top rental on review, to cover purchasing expectations, any failure to achieve the objective rubs off on the relationship with the valuer whose advice is dismissed as 'negative.'

The tenant becomes saddled with a difficult landlord and often with a rental commitment far above the economics of his business. In the open market, cyclical change is inevitable, but in the quest for short term gain, while the loss of one particular tenant may not matter, it is the collective effect of the pressure for high rents which radically affects long term stability, since there cannot be capital gain without security of income.

In the past, their owners' low inflation investment values have had a useful way of adjusting to mistakes, but with changes in the pattern of retailing, and high interest rates, the margin for error now is very small.

The investor who overpays, through ignorance or greed, only to find that the resultant yield, following review, is well below comfortable resale price will have to fund the shortfall somehow. While it is churlish to insist upon strict consideration of investment criteria, since the pressure to use substantial borrowing facilities dominates the market, the problem is unlikely to grow.