Buying property in a falling market without a mortgage, why I believe now is the time to start investing in property despite the fact that prices will continue to fall

Since I started writing this article about buying property the House of Representatives in the US have passed the bill to ratify the $700 billion to bail out the banks. This is not going to stop the property market from continuing to fall and I will tell you my reasons for thinking this.

Start of article about property prices.

Previous page about the banking crisis.

In order for property to rise in price, there has to be a steady demand from people wanting to buy property who have the funds available to invest. The banks are not going to start throwing money at first time buyers and buy to let landlords until they think that property prices have fallen as far as they can. The banks caused the problem, they have got their fingers seriously burned and as stupid as they are, they will not make that mistake again.

PROPERTY PRICES WILL CONTINUE TO FALL

Our world governments are buying up all their Toxic mortgages which alleviates the banks of the problem and they will turn their attention to markets where they are more confident of making money. In the meantime, small countries like Iceland whose economies like the UK have been built on credit are going to really suffer. The three major Icelandic banks have debts totally 8/9 time the countries gross product. They cannot afford to guarantee these deposits unless someone is stupid enough to lend them more money. This problem is not going to go away or get better and it is going to have a knock on effect.

No bank is going to start dipping its toe in the water yet and without a steady flow of money to drive prices up, property prices are going to continue to fall. The politicians have got it wrong again, conned by the bankers who have been conning all of us and each other for years. Depositors are running around trying to find somewhere safe to put their money; the Northern Rock because it is nationalised has had to close its books because they claim this puts them in an unfair trading position.

Bollocks it does; the government is once again protecting its own interests because it doesn't want a run on the other banks and bugger the consequences to any small investors who have more money on deposit than the government is prepared to guarantee.

WHY I BELIEVE NOW IS THE TIME TO START INVESTING IN PROPERTY

To be frank, I think anyone who buys a property now using a mortgage to complete the purchase needs their head examined unless they are able to buy the property at least 20%-30% below market value. This of course only applies to investors and not people selling a property and moving to another as the drop in prices affects both vendor and buyer.

However, if you are a potential property investor needing to finance your purchases you would be playing a very dangerous game as interest rates could rise even further and any property not let for just a few months that requires mortgage repayments will not show you a profit for some time to come. This is not sound financial thinking and goes against all business principals.

In fact a number of my colleagues believe I am mad to be looking at the property market now as it is such a state of flux; time will tell which of us is right; but fortune favours the brave and I will explain why I am personally going to start buying now.

INVESTING IN PROPERTY DESPITE THE FACT THAT PRICES WILL CONTINUE

As a cash buyer I am not vulnerable to the vagaries of interest fluctuations. As a cash buyer I can move fast if I need or want to. There are plenty of properties on the market where the owner or banks are keen to sell quickly and some at any price. Walking in with a cheque book in your hand creates a strong position from which to negotiate and the auction rooms are not filling up like they use to.

This is a buyers market and I am not waiting for the market to turn and prices to start rising. At that point I will have missed the boat as it will be the time when everybody starts flooding the market again. The time to buy is when few people are buying and people are desperate to sell and some are desperate to sell at any price.

I am simply going round viewing properties where I am told it is a distressed sale or repossession and if I see something that has potential, I make a low offer. If I get rebuffed I am already down the road with a list of other properties. I am in no hurry to get my cheque book out; I am like a kid in a sweet shop being told I can have anything I like. I am spoilt for choice and if I can't get a property for the price I want to pay, I know I fill find someone prepared to accept my offer.

The last thing I want to do right now is leave my money in the bank. I just have a nasty niggling feeling about the whole thing. If I invest in property I may take a hit and see the value of the property fall even further than the price I paid for it. It doesn't matter, I will have paid a low enough price to be able to rent it out at as sensible price; undercutting landlords who paid too much for their properties to ensure I find tenants and any loss on paper is irrelevant to me as I am a cash buyer and I am looking at short term high interest rental returns and long term capital growth. As I said, I never invest in property where I cannot return at least 15% pa on my investment.

Now I know that many readers will be thinking, that's all very well but I don't have enough money to invest in one property let alone build a portfolio over a period of time. Well supposing I said I had an idea where you could invest in property with as little as thirty grand, get a higher return than you can in a bank, benefit from capital growth and without borrowing on a mortgage?

Buying a property without borrowing on a mortgage.....