UK Property Investment Blog

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.

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.

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!