your property network issue 19

Your Property Network Magazine Issue 19 January 2010

FEATURE

Your Property Network Magazine Issue 19 January 2010 Page 5

FEATURE


mAnAging yoUR pRopERTy


EDUCATion


FEATURE


EDUCATion


bUying


FinAnCE

Selection of Latest Mortgage Products (correct at time of going to print)

Rate Type Period Arr Fee Max LTV Tie in

3.29% Tracker 28/02/2011 3.5% 60% None

3.74% Tracker 28/02/2011 3.5% 70% 28/02/2011

4.09% Tracker 29/02/2012 3.5% 70% 29/02/2012

4.70% Tracker 2 years 2.5% 75% 2 years

5.69% Fixed 28/02/2013 3.5% 70% 28/02/2013


FinAnCE


mAnAging yoUR pRopERTy


REFURb & REnnovATion

WhAT hAvE KEvin bRiTTAin, nigEl CARTER, KEiTh WoolEy, bARRy millER AnD ADAm piERs To nAmE jUsT A FEW goT in Common? They are amongst 200 investors who have made around 5 million of equity from deals we have sourced this year in the UK! Impressive eh?We have seen many investors clean up so far in 2009, making between 100-200,000 in equity across various property deals, for as little as 6000 per deal. How well have they set themselves up for life? Id say pretty well - I dont know many people saving 100,000 in a year.... That is the power of investing in property, and get-ting strong leverage and good cashflow.

We have been sourcing for around 5 years, and we have seen big changes in the property market over those 5 years!Some have been good, some have been tough, but it has been a case of adapting to the changes in the various markets, and making the most of them.What have been the main changes we have seen in the UK?Well the credit crunch in the UK, has had a big impact.Previous buy to let mortgages were very easy to get, at 85% LTV on a self certified basis.Now buy to let mortgages are currently at best 75% LTV of the purchase prices for existing prop-erties, and 65% LTV on new build properties and self certified mortgages are no more.I think most people would agree that the lenders were far too irresponsible with some of the lending previously, you had people earning 20,000 per annum who were getting self certified mortgages up to 200,000 in value, with rental coverage of barely 100% - not a good deal for the lender or the borrower!So this has restricted prices on new builds, and properties over 150,000 as they are far tougher to fit for buy to let purposes.The end of the market we have always concen-trated on, properties priced between 60-120,000 have seen some slowing of prices, as mortgages have also become tougher for first time buyers with lenders again looking for borrowers to have some deposit to put down.However rental yields have stayed strong.So prices overall have dropped an average of 10-12%, with new build flats dropping around 20-25% from their peak however on houses in particular prices have started to grow again an average of 2-3% in the last 6 months according to most indicators.What does this currently mean for investors?Well as always any serious investor is looking to secure properties at a good level of discount the price you pay and level of discount will be crucial for any property investor, and the performance of their assets.We source existing properties at a minimum of 20% below current valuations so this is around 30% below the peak valuations in 2007 that is a huge discount! This is around 2004 values of properties.

Lets look at an example:

So the property was worth 70,000 in 2004In 2005 80,000In 2006 90,000In 2007 100,000

In 2008 90,000In 2009 90,000 We will secure this property for an investor at around 70,000 ie around 20% below current values, and 30% below the peak valuation in 2007. As you can see buying at these values around the values from 2004, gives you strong instant equity, and a fantastic investment knowing you have bought at low prices, with a strong yield.

Apartments

With apartments the changes have been even more dramatic due to the changes in lending, plus the prices being too high initially.An average 2 bed apartment say in Liverpool would have seen values of:2006 - 170,0002007 - 180,0002008 - 145,000 - 20% drop2009 - 145,000We aim to secure the properties around 30% below current valuations ie around 100,000!So a massive 45-50% discount from their peak values! We had never recommended apartments in the UK until this year because as you can see based on values above, the figures work for us now, based on yields and affordability these values are back down to values from around 10 years ago, and for us now they work based on the huge level of discounts highlighted above.This will continue into 2010, with values staying fairly flat, but most likely rising slightly over the 12 months I would suggest around 2-4% as an average increase.Lenders have found their feet again, and are get-ting more confident about lending, although are still keeping to sensible lending criteria.We shall continue to source some excellent deals with the level of discounts highlighted above, mak-ing 2010 a phenomenal opportunity to get some excellent equity, and become a highly successful investor!An example of a property deal:3 bed house valued at 100,000Mortgage at 75,000We can secure this property for a net price of 80,000 so investor can get into the deal with 20,000 of equity, and we can package this up so you can buy into this deal for just 6000! So for 6000 can get 20,000 of equity!On a 75% interest only mortgage, your monthly repayments will be only around 240 a month, and with rent of around 450 a month, your monthly cashflow will be comfortable.We source properties all around the UK Scotland, N Ireland, Wales and most of England and can assist with management of all the properties we source, giving you a complete package from point of reservation through getting the mortgage with one of our team of brokers, to getting all legals organized, through to management on completion!We have re-opened our Portfolio Building Pro-

gramme, which allows you to gain this sort of equity, and a positive monthly cashflow for very little money in! We had been looking at all our options to offer in-vestors a further Armchair style service that can help them carry on with their busy lives but also help kickstart their investing and build up some significant equity! We have put together 2 basic packages for inves-tors to sign up to, where perhaps you are too busy to check every deal for yourself or would like to make sure you are not left behind and actually achieve the goals you want to achieve! Package 1 For just 23,999 + VAT, we will: 1. Choose you 4 properties with 80,000 equity within the next 6 months 2. Help with the full buying and management process 3. Go for positive cashflow properties 4. Give an excellent mix of properties! Package 2 Or for 43,999 + VAT, we will: 1. Choose you 8 properties with 160,000 equity within the next 9 months 2. Help with the full buying and management process 3. Go for positive cashflow properties 4. Give an excellent mix of properties! This allows you to build up a huge nest egg, or pension while you carry on with your busy lives, knowing you are going a long way to securing your financial future! Lets look at the return on Investment Invest 24,000 - buy 4 properties at an aver-age of 80,000 (purely for this example) with 60,000 mortgage. Immediately turn 24,000 into 80,000. This includes all buying costs!

Lets say in 5 years time prices have risen just 2% per annum. Each property is now worth approx 90,000. Your 24,000 is now worth 120,000, assuming a neutral cashflow (in reality would expect this to be positive).

So if you have a 5 year plan, can turn 24,000 into 120,000 ie sell properties at realistic prices of 90,000 each after buying costs. Lets say you have a 10 year plan

Lets assume properties rise at say 3% per annum from years 5-10. Remember while 3% seems a low rate you have a highly leveraged property so your return is much higher.






Apartments











Apartments







bUying

your property network issue 19

Documents

property market

various property deals

big changes

refurb rennovationwhat

main changes

big impact

good cashflow

various markets