UK Property Investment Blog

For those of you who have never heard of ‘Drop Lock’ mortgages before, these clever little mortgage deals could be the key to offering your property portfolio affordable monthly repayments.

Essentially they are just tracker mortgages which allow you to switch – without penalties – to a fixed rate loan and ‘lock-in’ those repayments before interest base rates rise again.

What’s the catch?

There doesn’t appear to be one.

Whilst the base rate may currently be at 0.5% – making most tracker deals worth 3% – this figure IS subject to change. Give it 6 months or a year and this figure could rise to 4% making your monthly repayments higher than most fixed loans.

However, by adopting this ‘Drop Lock’ deal you can swap out of your tracker deal onto a fixed rate loan at any point you want and prevent your repayments from rising for an agreed period of time.

Where can I find these Drop Lock mortgages?

Luckily all the leading lenders appear to be jumping on board with this idea, offering 2, 3 or 5 fixed rate deals as part of their Drop Lock products.

Yet the best part has to be their added bonuses. Offering the deliciously tempting choice of not having to incur an Early Repayment Charge or Redemption penalty; choosing to do this deal could potentially save you a lot of money on your monthly repayments.

The HSBC for example are offering a highly competitive tracker deal of just 2.98% – at least 0.3% lower than most current tracker deals.

And although they are not openly advertising it as a Drop Lock deal, HSBC are still offering homeowners the freedom to switch to a fixed rate loan without incurring charges at any point in their contract.

Tip 1

I have been busy reading a great book called ‘swim with the sharks’ by Harvey Mackay this
month and I noticed we both share a very useful negotiating technique when putting
together deals? This is the walk away tactic.

The walk away tactic is the ability to pretend to walk away from a deal even when you are
desperate to close!

Its human nature to want something we cannot get (the grass is always greener on the other side etc) so pretty much every seller will value you more as a buyer if you are able to give the  impression that the deal doesn’t mean that much to you.

So be prepared to say to any motivated seller.

I’m sorry I am not able to help you Mr Smith. I strongly recommend going with an estate agent if you need to get that much out of this property.

It may take a few months but at least you’ll have a chance of getting that sort of price from a owner occupier?

Call Mr. Smith after a couple of weeks to check how he’s getting on if he hasn’t already called you back. You never know, he may well have changed his mind!

Tip 2

In all your marketing efforts (leaflets, ads, postcards, letters, websites etc) make sure you include the following essential ingredients to maximise response:

1. Always try to include testimonials from sellers that you have worked with in the past.

2. Include a recent photo of yourself if possible.

3. Use an 0800 number for potentially motivated sellers to call you.

4. Give a reason why you are able to buy their house so quickly.

Tip 3

I have been literally inundated with emails from investors lately, with details of supposedly
‘magical’ deals? You know the ones Mikee, they’re the deals that look far too good to be true!

Lets take a few example scenarios, and work through them individually:

1. Chap in Liverpool is selling 40 houses, all tenanted, producing a gross yield of 11%

First things first. If its such a great portfolio, why is it being sold? Usual answer: “he needs the

money” ? so why doesn’t he just refinance? These deals have far more to them than meets the
eye Mikee! You will need to individually research every single property, its location, and the quality of the tenant/s.

Keep in mind that you will need to find one specialist lender, or a number of lenders to

structure the financing for deals like this.

2. Off plan apartments being sold at 15% discount.

Once again, if they’re so good, why are they being sold to you? Why doesn’t the person selling them to you just keep them for himself?

Yes I realise the developer wants to offload them quickly, but my friends are property developers and I never see them discounting properties that they can easily sell through the normal channels at near enough market price.

The golden rules that I use for assessing any deal brought to me are the rules of ‘fingers’ and
‘customisation’.

How many fingers has the deal passed through before it came to you (think about a property
sitting in an estate agents window).

How customized is the deal to your requirements? If the deal has been brought to you as a general deal, one that hasn’t really been filtered to your exact requirements (which you should have set out clearly in your business plan) then why are you looking at it?

In my case, I get great deals offered to me all the time because I’m very well known and I advertise very heavily for motivated sellers.

Improve your communication and your ability to successfully close deals with the Property Mentor *free* course. Book your spot today and don’t get left out!

You may be wondering what the Government’s annual Budget report has got to do with property investment, but it can have a greater influence upon your investment choices than you think.

Namely on the size of your taxable profits.

What is the ‘Budget’?

Every March the House of Commons comes together to evaluate the UK’s economy, and discuss the Government’s plans for taxation changes – including the amount you will have to pay on income tax.

As an annual tax that must be renewed yearly, whatever changes the House of Commons decides to make to help boost the countries economy is reflected in the alterations they make to income tax.

Meaning if the UK is in need of more funding, the income tax you currently pay has a strong possibility of increasing in size. Even more so if your rental properties are making a substantial annual profit.

How can this affect investors?

As with all jobs, the passive income you generate as a professional landlord will be greatly influenced by income tax. The higher income tax is, the more it will cut into your passive income and vice versa.

For this reason, it is important to have an awareness of your tax liabilities. Especially if your property portfolio is meant to be a supplementary income to your existing job.

How does it work?

As a property investor you are seen by the government as being ‘self employed’ and as such must fill in a Self Assessment form at the end of each tax year in order to judge how much tax you will pay.

Compared to most ‘self-employment’ roles though, assessing your rental properties income tax is slightly more complicated.

If you have been watching BBC2′s new ‘Property Watch’ as vividly as we have this week, then we think you’ll agree with us when we say how refreshing it was to see a program which properly addresses real property issues.

As you know the media has been all ‘doom and gloom’ about the property market during the last year. Yet as Property Watch proves there are still great opportunities out there.

You just need to know how to decipher the property market.

Our Take

For months we have been reporting on the impact that interest rate cuts, plummeting house prices and decreasing mortgage options have had on the market, so it was great for us to see their experts agreeing with our own that now is the time to invest.

Take property expert Andrea Panayiotou. He is living proof that it is possible to create profitable property portfolios using little, if any, of your own money. Then there is tonight’s show which examines the pros and cons of renting. They are essentially promoting the same ideals which we teach on our 2 hour taster session – the belief that with the right insight anyone can become a successful property investor.

Quick recap

Episode One: Are we at the bottom yet?
Episode Two: Can you beat the market?
Episode Three: Are we falling out of love with property?
Episode Four: Will boom times be back?

Whatever stage you are at in your property investment development, it IS possible to turn the property market into a lucrative asset which will continue to work for you in all financial climates.

If you have missed the first couple of episodes of their show, then don’t worry. We were so impressed with Property Watch, we have created a page dedicated to the topics they have discussed, meaning you won’t miss a thing.

While the general economy in the UK continues to suffer, the property market is giving more promising news.

This shows as previously stated that the property market is not solely influenced by the economy, but mainly influenced by availability of finance, interest rates and local affordability of property.

With all 3 of these improving in investors’ and owner occupiers’ favour over the last 6 months it is natural that market activity is increasing and this is likely to continue at a steady rate.

There are plenty of examples of increased activity – I know someone who attended an auction in Leeds last week, and said there were over 300 in the room, more than they had seen for years, an investor I know was recently bidding for a property in London recently against another couple and the price went past the asking price, and we have recently been gazumped by two first time buyers on property we had secured for investors.

One of the other important things to look at is the amount of investor interest in the sub £100,000 property market!

When we first started recommending this property range we were one of the only property companies that did, as most companies recommended the expensive city centre apartments – which have been proven not to on the whole be good investments – with some dropping in value by 30-40% – and these no longer fit very well into buy to let criteria.

Many companies have also looked to the Overseas markets – as we have by looking at Czech Republic and Poland in particular – however with finance tightening up in many of these markets it has been natural to look more at the UK this year (although the economies in both Czech Rep and Poland are undoubtedly in a stronger place than the UK).

So what this means is from us being in a very small group of only 3-4 companies sourcing and recommending buy to lets under the £100,000 mark, there are now several more of these companies, and most importantly far more investor interest at this range as quite simply finance is more readily available and the level of discount means you can get some fantastic built in equity!

So what does this mean? With increased demand from investors and a limited supply of properties available at the juiciest of discounts, prices will rise…! So again is really important you maximise the current opportunities!

We are very busy sourcing some great new deals – with the team around the UK finding excellent deals in Scotland, North England and Wales!

We highlight every week our viewing trips and every week have 2-3 investors visiting one of our local teams and seeing the available properties – if you would like to spend half day meeting our local team in one of the areas, just click on the graphic below and fill your details in. These are always very useful and gives you a chance to meet our local experts!

House Sales Are Up 40% In March

As highlighted above, the latest statistics are positive.

The number of homes sold in the UK jumped by 40% in March from the previous month, according to figures from HM Revenue & Customs (HMRC).

They stated that there were 60,000 property sales worth at least £40,000 each, compared with 43,000 in February.

The figures suggest that the slump in home sales seen in the past 18 months may be coming to an end.

Even when the figures are adjusted for seasonal trends, they still show a rise from 54,000 to 61,000, a jump of 13%.

The data is in line with other figures from the Bank of England, which showed that mortgage approvals rose significantly in February after stagnating for six months which is very encouraging!

Surveyors have also reported a steady rise in the number of enquiries at estate agents from potential home buyers during the past six months.

With unemployment reaching 2.1 million people during December 2008 to February 2009, looking for other profitable avenues to support your income has never been more pivotal.

Luckily for those offered redundancy, surviving on the compensation offered by your former bosses could be easier than previously thought.

As of the 1st February 2009, firms now must pay a higher statutory limit of £350 a week – bringing maximum redundancy payments up from £9,900 to £10,500.

How can this money be used to benefit the unemployed?

In the current economic climate, nearly every job has got up to 15 applicants competing for it, meaning this £10,500 has to stretch a long, long way.

Yet it doesn’t have to be this way.

There are other profitable employment avenues that require no waiting around or competing for jobs: property investment.

Using this redundancy payment, you could take your first step to becoming a professional landlord and experience the satisfaction of earning £500+ monthly returns from multiple property sources.

As we are writing this, average UK rental properties are producing a positive cash flow of
£7,098 a year… each. Add to the equation multiple properties, and the possibilities you could acquire from these properties is endless.

Secure yourself positive cash flow!

Homeowners turning their homes into a buy-to-let properties appears to be the latest craze to hit the property market during the last 8 months.

According to a report published by the National Landlords Association (NLA), the number of ‘accidental landlords’ who have come onto the property market during 2008 has risen by 25%.

And who can blame them.

With property sales still down at 60,000 last month, choosing to take your property off the market and transform it into a rental property has proven to be a profitable avenue for many homeowners.

‘Accidental Landlords’ – what are they?

Accidental landlords are essentially homeowners who have: recognised the rate at which property prices are falling; have chosen to keep a hold of their homes and have instead chosen to turn them into rental accommodation, whilst becoming a tenants themselves.

Through renting out their own properties, the positive cash flow they generate helps them to pay their own rental costs, but more importantly enables them to move home.

Surely it is not that simple?

Whilst the buy-to-let market has flourished during the last 12 months, entering into the property market unprepared has resulted in some ‘accidental landlords’ witnessing rental reductions of 20-30% per week.* A cut that has left many struggling to cover their costs.

*Knight Frank

Yet it doesn’t have to be this way.

Did you know that a fantastic, yet immensely
underutilised method for buying property no money
down is through the use of ‘private investors’?

Would you believe me if I told you there are
hundreds, maybe even thousands of people in your
city or town with piles of cash and very little
if any idea of what to do with it?!

Well its true! I have met dozens of people like
this! Most of them are sick and tired of earning
3 or 4% from the bank or building society and
would love to make their money work harder for
them, but they don’t. Why?

1. They’re too busy

2. They don’t like risk

3. They are lazy

4. They don’t know what to do…

These are just 4 very common reasons I have
seen. Why don’t you approach local business
people and wealthy retired individuals with
your business plan? Explain how they can invest
in your deals and earn themselves 10-15% per annum
with you doing all the hard work and dealing
with any problems that arise…

When you find a good deal, approach your new
investor friends and let them know how long their
money will be tied up and how they will get it
back.

Explain the rate of return you are offering
and then build trust and credibility by actually
showing them the property and explaining your
plan.

For more detailed information, feel free to signup for the free 2 hour Property Mentor course in your city!

There are many ways to trace owners and I once
traced an owner all the way to Australia using my
contacts there, so no excuses! These should start
you on your way:-

1. Knock on the door! May seem obvious but I
have seen many a property that looks empty and
the owner still lives there.

2. Knock on the neighbours’ doors – I spent ages
tracking down an owner once and when I went to
view the property he jumped over the fence – he’d
been living next door all the time!

3. Send a recorded letter to the address – quite
often owners or relatives have mail redirected.

4. Ask at the post office – they often know of post
office boxes, redirected mail, whose moved or
died, etc. They won’t be allowed to divulge
specific information but at least you might get an
idea of where to look next.

5. Contact the local council – many now have
Empty Homes Officers – when I was trying to
trace an owner the Officer at my council knew
who owned the property and already had it on file.

6. Ask local shops and in pubs – gossip can be hot
source of information.

7. Check the births, deaths and marriages registry
- if you have a name but nothing more, then this
might give an indication of other names to follow
up such as spouses or relatives.

8. Check local papers for obituaries and tributes -
local libraries often store these – again it might
lead you to another name, relative, trustee or
solicitor.

9. Look through residential telephone directories -
look for matching names and you may find the
owner that way.

10. Use 192.com – you now have to pay for
searches which used to be free but it’s a great
service and you can do wildcard searches too for
example just enter a name and it will find all
people with that name in an area or even the UK.

Learn 10 more tips by signuping for the Property Mentor free course today!

A lot of property entrepreneurs ask me what I say
to motivated sellers when I speak to them for the
first time. I’ll give you a quick breakdown here:

1. First of all ask the person answering the
phone if he/she is the person who sent you an
email/phone call/card through the post about the
property at xxxx address?

2. Confirm a few details with the seller. I do
this to put them at ease, e.g. ?could I confirm
the postcode of the property you want to sell
please? Thank you? and to engage the seller in
conversation.

3. Next I go through my list of qualification
questions to figure out how motivated the seller
really is

4. Once I have satisfactory questions to these
qualification questions I then let the seller
know I would like to:

a) view the property
b) or do some more research before making a visit

Sometimes if I know the lead is a dud over the
phone I will explain to the seller that I cannot
help because of [and then I give the reason why I
cannot help].

The most common reason is that the
seller needs too much from the sale of the
property which leaves no equity left for me after
the seller has paid off all secured and unsecured
debts.

Learn more tips and tricks with the free 2 hour Property Mentor course in your city!