Grosvenor Gardens

Eleven ways to make money in 2011. #7: speculate on property

Guardian Business

It’ll be hard to go wrong buying within the M25, and there will be money to be made outside it too, if you are predatory

Someone is going to make a killing in property in 2011 and, as the National Lottery slogan goes, “it could be you.” Despite most forecasters predicting falling house prices, look at what the property investors of yore did. They didn’t make money in property because they sold it for a lot but because they bought well, and I predict 2011 to be a year you can buy property well.

Let’s be clear, 2011 will also be a year you can lose your shirt – and many will. A government report in December suggested that as many as 4 million mortgage holders would be in negative equity if prices fell 10%. The main house price indices confirm that they are already on the slide. It is the people who have got it wrong who will provide many of the deals for those who will lay the foundations to a property fortune.

Investing in any asset is not for the faint-hearted: if you are squeamish, go and find a friendly deposit account. Making money in property requires you to take advantage of others’ misfortune. The three Ds will drive the market this year: death, debt and divorce will be the motivators that throw up the bulk of the opportunities.

Geographically, the UK residential market will be divided between the gated community within the M25 and everywhere else. The London market will prosper and almost anything you buy in the right location and at a sensible price will increase in value in 2011. Outside, you will need to follow my carnivorous instincts when I am advising clients and be predatory. Unless a property is seriously cheap and the seller is offering his first born to take it from him, the chances are you will find you are paying too much for something that will be cheaper tomorrow.

This year we will return to the Sarah Beeny school of property investment. Look for something you can add value to. The days of sitting back and watching values rise like barometric pressure are history. Look to convert old pubs. Watch out for commercial properties that were originally houses – they will readily convert back. Identify what people are looking for, check that they can actually buy and then go source the raw material.

On the subject of buyers, forget the literally “poor” first-time buyers. Let the government worry about building for them (which they won’t). No one wants to lend to them and they struggle to save the £35k deposit out of taxed income now that they have to repay their student loans. People downsizing have cash and they don’t need to borrow.

Abroad, follow Ryanair. Where can you fly for a fiver? Look to buy or rent a second home there. As with the UK, follow the smell of rotting meat and make derisory offers.

Don’t forget buy-to-let. It may not be fashionable to say it but income is good and, if you’re clever, you should also get capital growth.

Housing expert Henry Pryor was an estate agent for 25 years and now advises high net worth and media clients. More at housingexpert.net

And here are the rest of our 11 money-making tips for 2011:

1 – make things, 2 – get a better paid job, 3 – buy and sell shares, 4 – open your own coal mine, 5 – invest in a high risk fund, 6 – rent a room, 8 – trade in your clutter, 9 – antique furniture, 10 – clinical trials and 11 – sperm and opinions.

Here are Patrick Collinson’s best and worst investments of 2010, and Rupert Jones provides tips on how not to make money.