UK Property Investment Blog

Banks have got it completely backwards- literally! Instead of helping the average Joe to get onto the property ladder and invest, they seem to go out of their way to make it impossible.

Take LTV mortgages.

I cannot tell youhow many times I have found the perfect property investment – a property that has got instant profits of over £9,000; that can generate incomes of up to £1,000 a month and that has got a strong tenancy demand – only to be left frustrated by the fact that banks want deposits of 25%-40%.

It’s ridiculous. Even with a £100,000 property that is still at least £25,000 to find before you can invest. And unless you have got this money just lying around from a redundancy or simply from your savings, the average homeowner simply cannot afford it.

Thankfully 3 of the UK’s leading banks seem to have seen sense and are finally getting off their backsides to make a difference. Read more…

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.

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!

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!

Speaking to future retirees in a recent survey, price comparison site uSwitch.com discovered that 10% of 55-65 year olds felt they did not have the finances to retire at 65.

Hindered by the increasing reductions in interest rates and pension funds, more than 18% of over 65 year olds revealed that they planned to continue working beyond retirement to help finance them in later life.

A discovery that truly puts into perspective the rising retirement crisis.

Is there an alternative solution?

Whilst many retirees are feeling the necessity to continue working well into retirement; there is a simpler route to achieving a secure future that could even allow you to retire early: property investment.

More than 1.7 million pensioners across the UK are already using property investment to help build up their pension fund by realising the equity growth within their properties. And you can do the same. The only difference will be, you will know where and when to invest.

How can property supplement your pension?

If you were one of those pensioners who had already invested, you may be finding that acquiring extra cash through the sale of your properties is now very difficult.

This obstacle can easily be overcome.

By resisting the desire to sell your properties and waiting for the property market to re-stabilise, you can sit back and watch as your property investments experience capital growth.

Alternatively, you can begin earning an instant positive cash flow of £500+ a month simply by turning your property investments into rental properties.

A task which at Property Mentor we can help you to achieve.

Structure your property investments for long term success

If you DO want to use property to help support your pension, then, choosing now to become a professional landlord could be more affordable than you think.

Many commentators are beginning to agree with me that property prices as an average across the UK cannot drop much further due to the all important affordability measure.

As highlighted last week mortgage approvals shot up in February and I expect this trend to continue now for the next 6 months.

Many potential buyers are now seeing interest rates at excellent levels, even at fixed rates which means it can now be cheaper for them to buy then to rent – which will not have been seen for a long time.

The level of discount we are seeing at the most competitive end of the market ie the under £100,000 end is almost unprecedented. This end of the market had seen strong capital growth over the last 5 years – almost anywhere in the UK where prices were say £40,000 5 years ago, values would have been up to around £70,000 by the start of 2008 – because of demand from buy to let investors and owner occupiers. Due to this demand and ease of getting 85% LTV mortgages very few big discounts needed to be offered by vendors.

With mortgages now starting at 75% LTV for investors and first time buyers having to find 10-15% deposits, anyone desperate to sell has had to offer a larger discount to be confident they will sell. However the dramatic easing of interest rates has meant many buy to let investors or owner occupiers who were in financial trouble are now in far stronger positions and their monthly cashflows have dramatically improved – anyone on tracker mortgages will have seen their repayments drop by 60-70%!

Therefore quite simply less people are in as much trouble and are as desperate to sell!

With mortgage availability improving these discounted deals are getting more and more competitive and I feel the days of getting the 25% levels of discount that we can see just now with the right contacts may well not be here in the next few months.

Undoubtedly this end of the market – ie the sub £100,000 houses which we have always recommended should be the backbone of any UK investor’s property portfolio – is as competitive as ever with every week new “Distresssed funds” being started up, and quite rightly the big institutions looking for strong yields being attracted. I have had several calls from large investors looking for large amounts of this very type of deal – not easy for us to supply, as we struggle to supply all our own investors!

I do think that any investor just starting out this year has timed this absolutely brilliantly – as buying 3-10 houses this year, with the right team around them means they will be able to look back in 2-3 years time and know they have done so well with the level of discount or equity that can be realised right now.

To be able to buy properties and get £20,000 of equity for as little as £5000 is an incredible opportunity not previously available!

Achieving Your Goals

I love seeing investors setting themselves clear goals for the year and hitting them and even surpassing them – and we have many investors like this.

Naturally we also have seen many investors who almost don’t realise just what an opportunity this is or are still perhaps putting excuses in the way of achieving their goals. We know in life the majority of people don’t set clear concise goals, never mind writing them down, which is so important if you are going to achieve your goals – and even when people do set goals they often lose the desire very quickly.

Have you set your goals?

Are you on track?

If not, why not? What do you need to do to get back on track?

It is important, whether in business, personal development or fitness that you set clear tangible goals, don’t make excuses and keep on track!

Do you know less than 20% of people with a gym membership go more than once a week?

Anyone that goes regularly to a gym will often see the same 10-20 people there – and no surprise they are the people that get the best results – as opposed to the people who “are too busy” to go!

Sure there’s risks with exercising just as there is with investing – when you exercise you know is a risk you may get an injury but overall you know the opportunity to get fitter and healthier makes it worth this. With investing you know is a risk you may lose money but overall the opportunities are there to make a very good return on your money.

The opportunities in investing in UK property right now are so great that you can make 4-5 times greater a return instantly than you would have made a year ago, or would make in another year’s time! Imagine knowing that for doing the same amount of work you did in the gym last year you are going to see 4-5 times better results this year! What should you do? Go as much as you can to make the most of this chance just as anyone keen on investing in buy to let property should be snapping up as many of the opportunities out there as they can!

I seriously think if you are thinking of buying investment property just now, but don’t then you probably never will. This is simply because you will never get a better opportunity so if are making excuses now, it will be even easier to make excuses next year!

So in conclusion:

This is one of the best opportunities to buy investment property in the UK – certainly in the last 5 years

Most people in life, don’t set goals and so definitely don’t hit them!

Many people who set goals have had distractions get in the way within 6 weeks of setting them and go off track

If you don’t buy investment property in the UK this year with the level of discount available and the strong yield available, you probably never will

So if not set your goals yet for the year, or are off track, I’d urge you to get back on track!

More than 33% of council house tenants in Stirling (Scotland) have lost the right to buy their properties a recent report has revealed.

Previously offered the opportunity to invest in their council houses at a discount price. This deal has now been temporarily removed to help accommodate the growing social housing shortage.

Instead these properties shall remain available to those who are on a lower income, thus ensuring that there is always social housing for those who need it.

However, Stirling are not the first local authority to implement these kind of changes.

They are one of twelve local authorities who have taken this deliberate step towards suspending ‘right to buy’ schemes in order to increase their social rental stock.

Why the sudden change of heart?

Since the ‘right to buy’ scheme was first introduced to council house tenants, more than 4,734 homes have been bought and taken off the market – a loss of 63% of their original rental stock.

In light of this revelation, the Scottish Government have suspended this offer across 35 letting areas, which they have deemed as being ‘pressurised’.

Areas facing these changes include:

Rural areas to the west and north of the M9/A9
Dunblane, Bridge of Allan and Causewayhead/Logie
Stirling, Riverside, Broombridge, Braehead and Newhouse/lower St Ninians area
Bannockburn, Whins and Hillpark/Firs

By relieving these areas, the government strongly believe they will be able to boost the economy and in turn the property market.

How does the suspension work?

The rulings surrounding this suspension are simple – only those who have entered into tenancy agreements after 30th September 2002 will have to wait 5 years (from the moment they sign the agreement) before they can invest in their properties.

Essentially affecting 245 tenancies with immediate affect, and over 1,349 tenancies during the next 5 years.

According to a recent survey, tens of thousands of London homeowners are turning to home improvements in order to protect their properties against the recession.

Aware of property predictions that suggest property prices are going to fall by up to 30%, many homeowners are choosing to renovate their properties instead of sell.

In some cases owners are spending as much as £45,000 on their properties to give their families the space they so crave.

During 2008 more than 40,000 planning applications for loft, ground and basement extensions were submitted in London alone.
What has inspired this surge in property developments?

For many homeowners this sudden desire to improve their properties is rooted in their need for more space.

With mortgages becoming more inaccessible and only 8% of new builds being dedicated to families, more and more homeowners are recognising the potential of upgrading their current properties.

On top of generating additional space to help cope with their growing family, these property alterations can prove invaluable in increasing their properties net worth. As a result the number of families moving house over the last year has fallen to 25% – a drop of 50% from their peak 2 years ago.

Are you aware of the current stamp duty thresholds?

Up to £125,000 = Nil

£125,001 – £250,000 = 1%

£250,001 – £500,000 = 3%

More than £500,000 = 4%

You should know that the sale of shares held within a limited company would (as the law
currently stands) attract only 0.5% stamp duty.

So it can make sense to buy a high value property that you intend to sell soon after within a
limited company and then sell the shares to the end buyer instead of selling the property
itself.