UK Property Investment Blog

House swapping is becoming the latest market craze according to leading home-swapping websites HomeSwapper4-Sale.co.uk and EasyHouseExchange.

With mortgage loans becoming harder to attain and house prices expected to fall a further 10% by the end of 2009, thousands of homeowners have turned to house swapping as a solution.

As the name suggests ‘house-swapping’ involves homeowners cutting out the middle man, and exchanging properties directly with other owners.

The only difference being, instead of exchanging homes for a 2 week get-away, homeowners are choosing to swap for good.

Yet it seems this scheme could be doing homeowners a favour, saving them on legal fees and costs.

One instant saving that has got homeowners buzzing is estate agent fees. Traditionally based on 3% of the properties selling price – when sold as part of a chain – homeowners with a property worth £100,000 can now make an immediate profit of £3,000 simply by swapping their properties.

However many estate agents are surprisingly behind this new method, as they can still recieve a commission from those who require an estate agent to organise their negotiations and HIPs.

And it is a scheme that could help alleviate the slump in the housing market.

The only factor homeowners still need to be aware of is all the extra hidden costs:

1. Cost to join ‘home-swap’ website – on average £19.95 for 3 months
2. Taxes, legal fees and due digilience – to make the house swap legal (and permanent), a solicitor still needs to be involved
3. Property Survey – recommended to prevent any future unseen costs
4. Market Values – must check the market values of the properties involved. Any differences should be met with a cash payment
5. Mortgage – if a mortgage is involved, make sure there is enough funds to pay it off

Accumulated together, these fees can mount up.

Then there is the further complication of matching these properties accordingly to the right person.

When most people wish to sell they do so based on the hope of either up-grading, downsizing or moving closer to their jobs/family. It a move fuelled on choice, making finding a property that is exactly suitable for both parties a slim, if not impossible, task.

For real choice and flexibility, buy-to-let is still the only reliable route left. Especially for individuals seeking to move without facing the complications of buying and selling.

Interested in learning more about how property investment can offer homeowners an easier route to moving home?

FROM: Property Investment Specialists

It’s clear to us that there are a lot of investors out there assessing the UK market and deciding that now might be the time to start snapping up property and expanding their portfolios.

Martin Greinger is the Head of Portfolio Development for a popular UK property sourcing service. There is no-one better placed to tell you the type of demand there is for UK property right now.

We caught up with Martin between phone calls to ask him a few questions.

Martin, what demand are you seeing for property sourcing?

The demand is certainly growing and has been steady since the turn of the year. The media has helped by outlining the drop in prices over the last year and savvy investors realise there is an opportunity right now. Although we may not be at the bottom, we are fairly close and over the next 6 months is the time to increase your UK portfolio.

Waiting until the market is right at the bottom is risky as you could then be competing with an influx of investors and rising prices. Investing when it is a buyer’s market allows you to make aggressive offers on properties – especially distressed properties – more than compensating for any further drop in prices.

Low prices also give higher rental yields and immediately cash-flow positive investments – with capital growth to come in the longer term.

What are clients after? Are yields important or is it capital growth?

Yield is the major buzz word right now as investors realise capital growth is not possible – certainly in the short term. A strong gross yield of 7%+ is required by most resulting in a positive cash flow month on month. The combination of achieving a low price in a solid rental location – driven by our analysis and local knowledge – is paying dividends.

This is not to say we are ignoring capital growth, far from it. Our intrinsic property value research takes us to the strongest locations that will come out of the recession first; these are the areas we expect to grow the quickest. By looking at the economic factors behind each location we can predict its potential and point our investors in the right direction.

We have already done research on a number of locations and successfully sourced property there. We have realized that property is usually cheap for a reason and we would not want our investors buying into an area that is not going to recover from the recent downturn.

Are there active buyers or is it mostly “observers”?

There is a mixture of both to be honest; I will always have clients who like to watch what is happening from a distance. Those who are buying are doing so because they see an opportunity where developers and agents need to sell in order to balance the books. Where I can pull a number of investors together we can negotiate better prices by buying in bulk and cash is certainly king right now. Cash buyers can carry a lot of weight into price negotiation.

One other important aspect is finance; although the banks have tightened up I am still seeing many buy to letters obtain suitable mortgages for their investments. It is all about speaking to the right people and doing your research.

Do people know where they want to invest or are they led by our IPV research?

Again this is a mixture of both. Some investors approach me with a set brief and ask me to work to that, it is clear that many do not like to step out of their comfort zone, say 20 miles from their home. I can understand this as it makes management so much easier although it does restrict your potential.

The investors who ask for our research will have a set plan; they know how much they have to spend and want us to tell them where. Our research can be adapted to all parts of the UK and is similar to the work we did in CEE between 2004 – 2008. If someone wants us to look at the whole of England we can break it up into counties or major cities. First of all I will need to know their objectives, timescales and budget, then we can start to build a brief and discard the locations that do not fit.

If someone wants to buy in bulk we will look at locations that are not oversupplied and have a need for good rental properties; rent is important at the moment so void periods need to be avoided. It is therefore important to be conservative with our figures; overestimating rental income can make an investment look a lot better than it actually is.

So what types of opportunities are the sourcing team uncovering?

Each brief is different so we are finding a great variety in our sourcing results. Many investors prefer newer build property as it is less management intensive although apartments are not to everyone’s taste. We are coming across excellent bulk buys so it comes in useful if we have three or four investors all looking for similar location with a similar budget; this is where our negotiating can save clients a lot of money.

Because we go to the source rather than locate property from the office we can cut out the middlemen and get the best possible prices. Speaking to people face to face and looking around sites is proving our tactic right now and it is really working.

Whilst I don’t want to give actual examples, we are seeing properties at much less than half the price they were selling for 2 years ago and with great rental potential.

What insights can you give our clients about UK investment property?

Don’t tie yourself down to one location; with the UK in the state it is and with so many businesses and industries under threat it would be dangerous to rely on one city. If you are based in Bristol, explore Cardiff and Swansea, likewise if you are in Manchester, ask your self what is happening in Bolton and Liverpool.

Also, there are a lot of great property buys out there, it is just a case of searching them out. When we are on the road we use tried and tested techniques to find out what is available, how low an offer is likely to be accepted and rental figures to back up the investment.

What insights can you give our clients about UK investment property?

Finally, and probably most importantly, do our key clients believe now is the time to buy and why?

Yes and no. We have been instructed by a number of our high net worth clients to source property for them. This is a good sign for the smaller investor because they can jump on the back of some of their deals, thus forcing the price even lower.

Some clients are playing the waiting game and will buy during and after the Summer. Mortgages have some part to play in this and reports that prices are still falling.

We know from talking to many others in the industry that there is a lack of good quality stock and this is an area we honestly believe we can help with. The deals that have gone through this year have been examples of that and provided our investors with excellent cash flow positive properties.

Thanks, Martin.

Three pieces of fairly positive property news this week.

Tony Pidgley, the Chief Executive at Berkeley Group, who also called the 1990′s housing market correctly, says we’ve reached the bottom of the market. “We all accept that, give or take 5 per cent, the market is somewhere along the bottom (of its economic cycle).”

Tony was interviewed in The Independent, and stated there will be between 35,000 and 50,000 construction starts on new homes in 2009. And you will recall that the government wants 240,000 new homes built each year just to keep pace with the demand for new households. So based on supply and demand prices will rise.

Also over the last couple of days, the National Association of Estate Agents (NAEA) said the average selling price of a two-bedroom flat increased by 1.6% during the month to £124,727, while the sale price for a three-bedroom terrace increased by 0.6%.

Top end, executive properties enjoyed the biggest lift, with the price for which they change hands soaring by 11.1% during February to average £591,111.

But three-bedroom semi-detached properties and four-bedroom detached homes fared less well, seeing their prices drop by 3.8% and 4.2% respectively.

Peter Bolton King, chief executive of the NAEA, said: “Smaller houses actually saw their value increase – this suggests that people who are buying are picking up smaller houses than they may have done previously, possibly because they can only get smaller mortgages. It may also reflect a trend of downsizing.

The price of small properties and executive homes rose during February but the value of other houses continued to fall, research has showed.

“The very top end of the market has also performed well, demonstrating not only that the very rich can still afford a high end property, but that with plummeting interest rates are now perhaps more tempted to put their money into bricks and mortar.”

The figures come after property website Rightmove said house prices rose for the second month in a row during March.

What does this tell us?

Well as we have felt for the last few months the huge bargains at the lower end of the market may only be with us for the next 3-6 months, as once financing improves more and more people will be looking to buy and snap up the bargains and properties at high yields.

We are busier than ever with new and existing investors – this morning I took a call at 8.30am from someone with over 5000 UK properties, looking to buy another 1000 over the next 6 months!!

It also shows that the larger family properties will continue to slow down, in my opinion, for the next 12-18 months as many professional families will have had a scare and be careful about taking on increased levels of debt on their family properties.

I firmly believe the market will continue to move in different camps ie the lower end of the market, the investment end where first time buyers and investors compete for properties, will be more and more competitive, while the £200,000-500,000 end of the market will continue to slow for the next 18 months.

From the stats above this is looking the way it is going, and I see no reason why this will differ. So buy as many investment properties as can just now, and hold off moving home for a while is my opinion!

One of the key elements to attaining a successful property portfolio is ensuring that you offer your rental properties only the best in quality tenants.

Yet in a recent survey by LPS, of the 10,000 investors they surveyed, LPS discovered that 42% of them had received fake references from tenants aged 29 and below.

With at least another 50% having received a fake reference at least once during their career.

Yet this statistic is only a sample of the numerous deceptions investors have encountered from their potential tenants.

Continuing in their report, LPS noted that investors had also experienced similar instances from other age groups; some of which you may find surprising:

Aged 50 and above: 43% offered fake references
Aged 60 and above; 21% offered fake references

Without proper measures in place, the above figures could prove to have a detrimental affect upon the size of your passive income, by removing a vital part of any property investment strategy: a paying tenant.

So what do you do?

The only sure way to guarantee that your tenants are sending real credible references is to request these references yourself. Plus during this time it is essential that you have access to resources that will enable you to check out the validity of your tenant.

The key areas you will need to establish are:

1. Their credit history
2. Current/previous employment
3. Current/previous landlord references
4. P roof of income.

And in terms of external character references, LPS have proven that given the opportunity tenants will opt to send fake references in order to acquire a tenancy agreement.
So, are you building your property portofolio?

Is this the best time to buy property in the last 5 years?

I was discussing this with an investor last week and we both agreed that the opportunities just now are fantastic….!

What makes this the best time to buy?

Quite simply the affordability and the strong rental yields that are now available.

You can buy properties with excellent in built equity on day one – giving you fantastic wealth.

Previously, we would buy and recommend buying a house at say £50,000 on an 85% mortgage – putting your 15% deposit in plus buying costs – so total in of say £10,000.

After 18 months would expect capital growth of say 10% per annum and so a value of £57,500 now.

So your £10,000 when invested was worth £10,000 and after 18 months is worth £17,500.

You could then refinance and reinvest! There are costs for doing this, both finance and legal costs.

However this worked well over the last 5 years and allowed investors, as long as you managed your cashflow, to build up good equity and wealth. This is now harder to do as you can only get 75% loan to value mortgages so will have to wait longer to draw funds out ie wait until prices have risen by at least 25%.

Nowadays with the right team you can buy into attractively priced property ie under £100,000 with strong positive cashflows and get excellent built in equity.

For example we are able to package deals where you can invest say £6-7000 all in and get an instant £20-25,000 of equity! Ie buy a property valued at £100,000 and only have a £75,000 mortgage. No having to wait a year or 18 months and paying expensive re-financing costs!

The cashflow on these deals works really well as well with just 75% borrowing, as opposed to the 85% mortgages previously available.

In the past we were very against so called low money down deals simply because the figures didn’t work and these were dangerous deals for investors to do.

Ie buy an over priced city centre apartment at say £180,000 that would only rent for around £650 a month – not a nice deal even if you get into the deal for no money as you will be paying thousands each year to cover your borrowing costs.

Nowadays this method can work brilliantly and allow you to not only get a strong positive cashflow property but you can spend around £6-7000 and immediately make around £20-25,000 of equity – based on today’s prices.

So if you have say £30,000 you could buy 4 properties and easily gain around £100,000 of equity – ie for every £1 invested get around £3 straight away! How good is this?! If I could get unlimited mortgages right now, I would be buying everything in sight that fits to this formula as the next 6 months can allow huge wealth plus positive cashflow to be built up which will secure many people’s financial future.

Can you think of any other investment right now that will give you this instant 300% return and good cashflow?

One of the investors I met in London said he could never understand why we never promoted the city centre apartments before, and were always keenest on terraced houses – but understands now why this type of investment – affordable property under £100,000 that appeals to investors and owner occupiers alike – is the most appealing and makes excellent investment sense.

Another investor said over the weekend she thinks the deals are almost too good to be true – and she’s right we are very spoilt with how good these deals are right now! To be able to turn £30,000 into £100,000 in equity could safeguard your financial future. We sourced 5 properties that worked in this way last week, and not surprisingly they all were snapped up within hours by our investors.

As discussed earlier, I would be buying all these if I could get unlimited finance right now – that is the one restriction right now, but there are still good lenders out there lending to us and our investors.

I hope these figures are clear, and you can understand just how brilliant this opportunity is right now to build up some quick and instant equity!

The phrase ‘you get what you pay for’ no longer applies to the property market according to leading mortgage lenders.

Look back 5 years and £150,000 might have bought you a London Garage or a small 1 bedroom terrace, but in the current financial climate this figure now holds a whole new meaning for investors.

In a report released by Nationwide they reported that the average UK property is now worth £150,501 with the key difference being the types of property investment that are available to you has substantially grown.

For £150,000 you can now invest in a 2 bedroom semi-detached in Cheshire or a 1 bedroom Victorian studio conversion in South London. Essentially, properties that were previously out of reach, are now more widely affordable and easier to attain.

However, this is not the only positive news to come from these price falls. Under the governments new stamp duty scheme, each of the afore mentioned properties require no stamp duty fees:

Up to £175,000: 0%
£175,000 to £250,000: 1%
£250,000 to £500,000: 3%
Over £500,000: 4%

With property prices at their lowest since May 2004, the combination of the above information with these figures means investing in properties has never been more profitable, making now, more than ever is the perfect time to start structuring your property portfolio for success.

Property investment in the UK has never been more attractive according to leading property investment magazine Jet to Let.

Following their recent annual survey into popular investment locations, the UK for the first time ever entered in at number 8 in their Top Ten places to invest.

An accomplishment that proves that the UK property market is on the brink of change.

Other countries included within this survey were:

1. Cyprus
2. France
3. USA
4. United Arab Emirates
5. India
6. Spain
7. Italy
8. UK
9. Morocco
10. Greece and Turkey

One of the reasons Jet to Let offered for the UK’s sudden appearance in their magazine was increasing property interest from foreign investors, and we can see why.

With the Euro already taking 20-30% off UK property prices, investors can now benefit from an instant 50% profit when investing in our reduced property prices. A profit that has spurred investors back onto the market.

Of those who were interviewed for this survey, 36% stated that they planned to make an investment in the UK in next 12 months, whilst a further 26% planned to invest even sooner opting for the next 6 months.

When you take into account that previous to this survey the UK has never before received such a high ranking globally, both of these statistics go on to prove that confidence in the UK property market is returning.

Investors have recognised the long term potential of investing in the UK and are taking advantage now in preparation for the capital they’ll receive when the market begins to stabilise.

An event that may not be that far off.

In the last two months, UK properties have on average experienced a value growth of £7,400. An increase that has occurred across the entire breadth of the UK.

Probate properties can soon convert to the driving force of the property market, concording to recent studies.

Reputed for bearing lower cost tags than other properties on the housing market, these hidden property jewels could provide the perfect investment answer for investors seeking continual sources of investment.

HomeTrack’s property analysts explained that while property sales may be cut down by 50-60%, the number of probate properties appearing on the market is still consistent. And part of this reason is due to life expectancy.

Although it may sound morbid, people are still dying at the same rate as they did before. It has not risen or fallen like house prices, but has remained the same.

For this reason, probate properties have become a core part of the economy. Bringing with them 500,000 new properties every year, which families traditionally try to sell fast in order to enable them to sort out their family’s inheritance tax.

Yet the important feature about these types of property has to be their ability to remain flexible and accessible in all financial climates.

Having earned themselves the reputation for being run down, tired and in need of repair. The main reason why probate properties are so cheap is due to their need for renovation. They need more work than the average household.

Now whilst as an investor your sole goal will be to rent out accommodation and not sell it, the easy accessibility of these properties means you can make increased instant profits on top of only investing for 80% of the properties real value.

Here is a very, very common question I have encountered over the years from fellow property entrepreneurs:

“How do I find bargain property?”

You need to know where sellers are and how you can find them.

Apart from the usual auction and estate agency routes there are many other ways of finding sellers but you must be ‘in the market’ to stand a chance.

You need to spend quality time letting people know that you can buy properties QUICKLY for CASH (whether you are a quick cash buyer or not is irrelevant at the
moment).

You have to get yourself known because motivated sellers (for obvious reasons) do not shout and scream about their debt problems or impending divorce…

The secretive nature of motivated sellers is precisely why it is so difficult to find and buy bargain property!

You MUST spend quality time nurturing relationships with people who come across motivated sellers, so that they call you right away as soon as they hear of
somebody needing a quick and/or cash sale of their property.

Some examples of people you need to know:

• Local estate agents
• Local letting agents
• Anybody involved in the building trade
• Surveyors
• Mortgage brokers
• Your local postman/post lady
  
• Local busy bodies (usually older ladies/gentlemen or members of neighbourhood watch).
  These people are surprisingly aware of what is happening in the
  community.
  
• Property finders – Usually paid a percentage fee for locating property.
  
• Local property dealers – also paid a finders fee.
  
• Solicitors – probate etc.
• Accountants will know of clients that may be in financial trouble.
  
• Your hairdresser – he/she will always spend a lot of time gossiping with customers so make sure you let him or her know about your property business, and the fact that you pay a finders fee for referrals.
  
• The owner of your local off license/store. He/she will also spend a large amount of time gossiping with customers. Sometimes storeowners will let you stick up one of your business cards on the window or door.
• Don’t forget to hand out your business card to EVERYBODY you meet, you never
  know who will come across a motivated seller.

I have purchased two of my properties from people who referred leads to me simply because I handed them my card and told them I paid £500 for referrals
(always mention you pay a finders fee!)

Remember referral leads will make you the most money because they cost nothing to obtain, somebody they trust has referred them AND they have already been pre-qualified for you.

Learn to become skilled at analyzing a deal by asking relevant questions of the seller (or agent, finder, dealer etc) when you speak to them – this process is known as ‘qualifying’.

Curious of other strategies to get property bargains? Click here to claim your FREE property course!

The press may be all doom and gloom at the moment, but the property market certainly isn’t. In fact it seems to be getting better and better with each passing month.

In a recent report released by the Royal Institution of Chartered Surveyors, they experienced – for the third month running – an increase in property interest of up to 16%.

An increase that backs up the growing theory that buyers and investors alike are returning to the property market.

But the Royal Institution of Chartered Surveyors are not the only ones to feel this surge in interest, the National Association have also reported a similar uptake.

Discussing these details in their January report, they found during the first 2 weeks of January, that the number of first time buyers investing in property more than doubled to 22.5%, whilst the number of registered buyers rose to 14.5%.

This sudden burst in interest is not that far off what is considered to be the first signs of a market recovery. The NAEA for example witnessed a surge of property sales topping on average 4 per estate agent during these same 2 weeks, compared to their 6 property sale average during November and December.

Now whilst the recession has still got a way to go, all of these figures when placed side by side, equal optimistic news for the property market!

Having lost a lot of consumer confidence during the onset of the credit crunch, the fact that 22% of these sales were due to property investors, proves that confidence is returning.

And it is not only property investors who are feeling the pull of the property market.

With property prices now 17.2% cheaper than they were this time last year, the appetising appeal of these properties is attracting a lot of interest.

The only obstacle left for obtaining these incredible deals is getting a mortgage – something that as an investor you won’t have to worry about if you take the first step towards your property success.