UK Property Investment Blog

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.

Up sizing to a larger property is becoming increasingly harder for families in the current financial climate.

In a report released by the NAEA they found that despite smaller two bedroom properties experiencing a 1.6% increase in price to £124,727, larger properties faced an entirely different story.

During January and February 2009, 3 bedroom semi-detached houses fell in value by 4%, with 4 bedroom detached houses witnessing a similar fall from £339,072 to £316,228.

Yet despite these evident changes in property values, home buyers are still having to downsize their properties due to the increasing number of restrictions that are being placed on lending.

Beginning with the FSA’s proposal. Speaking earlier this week they called for the abolishment of 100% mortgages and for loans to be reduced to 3 times an individual’s salary.

With such restrictions in place, homeowners are left with no choice but to invest in smaller properties as they are unable to raise the capital they need to offer lenders a larger deposit.

Withdrawing equity from your property may be easier than you think according to equity specialist advisors Key Retirement Solutions.

Speaking on the dilemma many homeowners are facing of wanting to release equity from their properties but being too nervous to do so, KRS proved that this is still possible.

That no matter how much your property has fallen in price, there are still opportunities for acquiring equity from your property.

The first point they divulged on this subject was the fact that only 15% of their clients ever choose to release the full amount of equity accumulated in their property.

The vast majority choose to only release a small fragment of this figure, meaning that no matter how much a property is worth now compared to its original investment, homeowners can still unlock the capital they need to support their finances.

Why current property prices will make no difference to the equity you release

In light of the property markets’ repetitive nature to fluctuate following periods of recession, they strongly believe that the equity you take out today will be safely restored into your property long before you consider doing anything else with it. Namely selling it.

Their theory has already been justified.

Over the last 2 months we have witnessed property price increases of 3%, with Rightmove reporting a 17% rise in the number of enqueries they received on their website, when compared to this time last year.

On their own client base, KRS found that their average equity releases reached only £54,000 – a third of the value Halifax have predicted to be the UK’s average property price (£163,996).

So whilst property prices may have fallen by 10-15% in the last 12 months, KRS’s statement proves that there is still potential for substantial equity releases from your property. More so if you invested more than 10 years ago.

So what does this information spell for investors? The incentive to resist the temptation to sell and to instead use their properties for more lucrative means i.e. extending their current property portfolio further.

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.