Investing in property in a falling market, why now is the time to start investing in property without borrowing on a mortgage and how you can do this with just £10,000

It is cherry picking time. Estate agents who know me are ringing everyday with properties they think I might be interested in. I have given simple instructions. The seller has to be prepared to deal; I am paying cash and I am looking for bargains. In other words, properties that are well below the current market value.

Start of article about property prices.

Previous page about the banking crisis.

I know that few other people are out there buying which gives me the opportunity to cherry pick. If I can't get the property at the price I want I simply walk away, I don't have unlimited funds but my choice is virtually limitless and getting bigger by the minute.

THE TIME TO START INVESTING IN PROPERTY

Buying property in a falling market can be dangerous unless you are paying cash. I expect property prices to drop by as much as another 20% over the next eighteen months to two years. So I want to buy properties at least 20% below current market prices. If I'm wrong and they don't drop that much I have made money. If on the other hand they drop by more than that I have only made a loss on paper; property prices will come back.

There are plenty of people desperate and prepared to sell at these prices just to get the property off their hands. I made an offer on a property yesterday. It is a big corner property that I have no doubts I could get planning permission for three retail units, two offices and six apartments to provide low cost housing. The low cost housing being the key to getting the planning permission.

The roof needs serious work as the property is deteriorating and the vendor cannot raise the funds to do the work which will run to the best part of 100K. So his investment is dropping in value and in danger of dereliction. He has to sell and he has to sell fast and I am in a position to relieve him of his problem.

INVESTING IN PROPERTY WITHOUT BORROWING ON A MORTGAGE

Timing is everything. I have never bought a property that didn't return me at least 15% rental income on my investment plus of course the capital growth. This is where most buy to let landlords have made a grave error. They simply invested in properties where they believed they could get rents that would cover their mortgages without thinking about the consequences of interest rate rises or the possibility of not letting the property.

I can't see the point of investing in property where the rental return was less than 10%. Once you factored in your management costs, repairs, maintenance and bad debts, your money would have been better invested in a bank. Well may be not now in the current climate but I'm sure you understand what I mean.

I haven't had time to do all my sums but a rough calculation tells me that the property I mentioned will return me at least 15% if not 20% in rental income. This will depend on how much the roof costs to refurbish and what I eventually end up spending on the property. I have to stump up the money for the roof immediately and some other remedial work but I can then choose what I do with the property after that.

Paying cash means I can sit on it; get the planning permission and wait, or sell it on or do all the work now. It will depend entirely on how the market shifts over the next six months. The thing is I don't have to pay a mortgage on the property so I can make my own decisions without any financial pressure from anywhere.

Plus I can afford to look around at one or two other smaller projects. There is a building next to another property that I own that could be converted into two, three bedroom houses. It has been on the market for eighteen months and the vendor has dropped the price twice but it was always over valued. I had a look the other day but I got the feeling that the vendor was not too desperate to sell. So I didn't mute any interest and made no offer. Sometimes it just pays to be patient and wait for the vendor to come back to you to find out if you are interested.

Buying property in a falling market.....