Is Your Focus Skewed?

During COVID the government tweaked the tiers for stamp duty. To keep property moving, they lessened the burden of stamp duty, but it was never meant to be permanent. The reduced stamp duty tiers will revert to their original levels in March 2025.

As people have got used to the lower rates, most property investors see this as an increase, rather than a return to normal. Add that to the recent increase from 3% to 5% and there’s been a lot of grumbling about targeting property investors.

We’ve already talking about the Renters Reform policy that’s currently going through parliamentary process – and the potential problem that will create for landlords when it goes through.

Many landlords are throwing in the towel – they simply just can’t be bothered with it all.  And that opens the door to people who can see the opportunities.

It’s all about framing and anchoring

If you’ve ever done a course on negotiation, you’ll probably have heard these terms, but if you haven’t, let me give you the quick and dirty version.

Framing is about how you set up a deal. It’s about directing the other party’s attention to the things that will benefit them – but it’s important to frame things well to get the most beneficial outcome for both parties.

Let’s look at an example:

You’re in the process of furnishing a property you’ve just refurbed to let.  You’re in a store looking at rugs for the bedroom and have found some decent quality rugs that are £50 for a pair.  As you’re looking at them an old friend appears and you chat.

“Are you going to buy those?” he asks.

“Yes, they’re a good price and will be great for my new property,” you reply.

“You can get exactly the same rugs, at the discount warehouse, for £40,” he says.

The discount warehouse is a 15 minute drive away, but a 20% discount sounds good.  You thank him and set off for the discount warehouse.

A few days later, you’re in an electronics store, looking at a new entertainment package for your own home. It’s £1,000 for the screen and sound system with all the bells and whistles.

You’re cogitating about whether you should go for something smaller, but you really like this set up.  Then your friend – who gave you good advice about the rugs, wanders into view.

After exchanging pleasantries, he admires the set up you’re looking at and then he says, “I’m sure this exact set up is £990 at the Tech Outlet in the next town.”

That’s a short drive away – maybe 20 minutes.

So, do you drive for 20 minutes to save £10?

Most people wouldn’t dream of it – after all, it’s only £10.  But remember, that you were willing to drive for 15 minutes to save £10 on the rugs.  That £10 in your pocket has the same buying power, regardless of the sum you’ve saved it from.  

The framing in your mind is focused on percentages. £10 off £50 is a 20% saving, while £10 off £1,000 is only 1%.  But it’s not about the percentage saving, it’s about the amount of money in hard cash you save.

Your focus is anchored to the wrong information!

What has this to do with increasing stamp duty?

It’s simple – you’re looking at the fact that it’s going up, not that it went down previously and is simply returning to its usual rate.

If you’ve purchased a property during the past five years, you’ve already saved money on stamp duty!

It’s all about perception.  Too many people are anchored to what used to be the situation and, instead of addressing the actual situation today, they complain about the changes.

If the Renters Reform legislation is enacted, that means that landlords will need to tighten up on references for potential tenants.  It may take more effort to carry out due diligence, but on the upside, you’ll end up with good tenants that pay on time and look after your property.

Looking back in time, property was much cheaper to buy, a house that cost £80,000 in 1995 is likely to be worth five times that today.  But you’re buying property in today’s market – what it used to be worth is irrelevant.

A pint of milk in 1995 was 36p, today it’s more like 85p – and fish and chips from your local chippie have soared from  just £1.68 in 1995 to upwards of £9 today.

Prices rise – and complaining about that is an exercise in futility. Focus on what you CAN do and create strategies that address today’s situation. 

Build increased costs into your selling price or ROI of your rentals.  Deal with changing legislation by putting strategies in place to protect your properties.

Improve your negotiation skills

Knowing how to frame and anchor are essential skills in negotiation.  So learning how to reposition situations so that there is a positive outcome will stand you in good stead when you’re negotiating  future deals.