Archive for September, 2009

Buy to Let Opportunities

September 30, 2009

There is now a growing buyt o let opportunity for investors as the percentage of landlords selling their properties has risen in the recent times and at the highest for many years. Despite this, some investors are being more careful about investing into the buy-to-let market due to fluctuating market conditions. The much more selective lending of residential and commercial mortgage products by the banks does not help matters.

My advice in the meantime is to look for private money to help fund your purchases. This is a worthy strategy to any investor’s business plan.

Some financial institutions have even withdrawn their buy to let mortgages while on average, the deposit amount investors are asked to produce is up to 35 percent as compared to only 8 percent back in 2002. Some of these lenders even added a requirement that the rent for the property must be more than 125 percent of the mortgage payment. New landlord instructions, which indicates the buy-to-let activity, also dropped to a low point.

Some buy to let landlords may even hold onto their properties until later this year before considering selling due to these factors. However, just remember, most property investors are in it for the medium to long term. These may seem daunting to new and inexperienced investors but with the proper guidance and help, these are mere hiccups which could easily be resolved.

Many big-time and experienced investors could not care less about predictions of a buy-to-let slowdown caused by interest rates and lending criteria. Some of them are even exploiting this time to expand their portfolio this year while others continue to maintain their portfolio without worrying about property market trends. The smart investors believe in the “buy low, sell high” philosophy and the smart investors have definitely starting to creep out of the woodwork to take a piece of the bargain pie. I have personally noticed a marked increase in the number of investors looking to buy and capitalize on the low prices. After all, we all know that if historical indicators are anything to go buy, anyone buying property at such times look to gain significant profits on the long term.

So for anyone fretting from the mad panic created by the media, just learn from the smart buyers who bought at the slumps of the 1980’s and the 1990’s to create massive wealth for themselves.

  • Share/Save/Bookmark

Time to Buy Property?

September 27, 2009

If you are new in the property investment sector, you will probably have read a lot of recent doom and gloom reports of the slowing property market that made many investors wary. In the recent months there was a slight increase in prices in certain areas and investors and house buyers are watching the property market eagerly to see which way the market is continuing to head.

The economic situation, and more specifically the banking situation, is definitely better than it was a year ago, but any signs of recovery seem fragile and a lot still needs to be done to build a solid foundation for the banking system and the world economy before we return to the good times of property investment. The buy to let mortgage lending from the banks is still very tight to give way to any significant movement in property prices and this has led to lower demand in property. There is less money for both residential and commercial mortgage products to allow any significant property buying activity that we witnessed during the peak periods of the property boom.

Now, this may be a cause for concern especially for house sellers but for property buyers and investors, it is a good thing because plunging property prices could only mean one thing, great deals for properties at below market value prices. According to RICS, a fall in property prices are mainly due to weak demand and not due to a surplus of properties. New buyer enquiries were falling and it seemed, many of them either could not afford to purchase properties at this time or they were just being extra careful due to the uncertain economic conditions, locally and internationally.

This does not mean there is plentiful supply of housing, new or otherwise, in the market. There wasn’t any glut at all. In fact, housing supply is still suffering a shortfall, but this very fact did not help the market because ultimately, the market depends more on the demand for housing. So for those investors

The property price falls, demand nose diving and less than buoyant market conditions could only mean one thing. Good news for investors! Yes, this is the time when investors could go right in and make a healthy profit amassing more below market value properties than you ever thought possible!

So if you are currently side lines watching the property market, now may not be a bad time to consider making a move into picking up a few bargains while the property market is down.

  • Share/Save/Bookmark

Reading the property market

September 26, 2009

There are a few basic ways for new investors to study the property market conditions in any area without having to study endless number of surveys and statistics by housing experts. Of course, you could easily consult me for advice and tips but I am sure, most of you would prefer to do some background research yourselves every once in a while.

Let’s say you are interested in investing in a property at a particular area you have taken a fancy to. Perhaps you plan to live there or perhaps you just like the idea of adding one of the properties there to your portfolio. Whatever your reasons, it is important to first take note of the property market conditions of the area, regardless of the general property market conditions of the country.

The reason for this is simple. Property market conditions sometimes depend on the locality, the accessibility and the economy situation of the area. Take London for example. With the falls in residential property prices in UK and a gloomy outlook for the market this year the fall in London is not as severe as in other parts of the country. The property market in London still has a higher demand then that compared to other parts of the country despite the declining overall market conditions. For example,

Now lets get on to identifying the markers of whether the property market conditions of an area is thriving or dying. First, take a look at the developments in the area. Are there signs of a thriving area with plenty of new and old successful shops and a growing number of estate agencies? Are there large construction projects involving a mix of commercial and residential properties on the way? Is the area easily accessible with plenty of links via various public transportation? If the answer is yes to all these questions, then, it could safely be said that the area is definitely growing with an imminent increase in people moving there. You see, you don’t have to do in-depth research because the developers building the mega projects and the estate agencies have already done that before they set up base there. They are often quite good indicators, much like bees leading you to the honey.

What if the area is a derelict area but you feel that it has potential? What do you do to find out if it would be redeveloped and turned into a thriving area in future? Well, there are signs of a dying area being revived which can be spotted if you look carefully. It is almost the same as looking at a thriving area except that this area, you look for signs of growth. There could be some openings of new shops and businesses in the beginning. Then the huge chains come along such as Starbucks and McDonalds. Again, a sure sign, is the opening of new estate agencies all over the area. Check the local property websites and if there are signs of prices going up, then it is your chance to grab the opportunity before it is too late!

As for how to detect dying markets, it may not be as easy as looking for thriving markets. Sometimes, the property market conditions may seem slow on the outside but it does not necessarily mean that the market is dying. More obvious signs could be the lack of new developments such as construction of new buildings. Estate agencies are closing down instead of increasing. Also look at the demand for rentals, if the overall demand is low, then this could also be an indication of a dying market. Do remember that decrease in demand and a slide in prices could be due to several contributing factors such as higher interest rates, accessibility problems and most importantly, lower employment rates. Without enough supply of work, the economy of the area will tend to slide and this could affect the property market as more people move away to greener pastures and demand falls. These indicators should be good enough for investors to stay away unless there are signs that this area could soon be revived such as a future infrastructure project linking it closer to London or Edinburgh or something like that. Then it would be a good time to invest now and reap the rewards later.

I would like to end this by saying that these tips are merely general and broad term tips which may not apply to some market conditions with varying degrees of developments. As I have said, it is helpful to seek the advice of experts and professionals to be sure. After all, investment is about gaining long term financial success and not facing heartache from mistakes and badly made decisions.

  • Share/Save/Bookmark

Looking at Commercial Property?

September 25, 2009

If you are waiting for an opportunity to grab commercial properties at bargain prices, now may be a good time to consider doing so, with the prices declining due to decreasing tenant demands and even fewer new buyer enquiries.

The situation looks gloomy as the demand for the retail sector has plummeted at the fastest pace within the last six year period, due to the recent credit turmoil and the consequent effect on the housing market. A recent Royal Institution of Chartered Surveyors (RICS) survey revealed that new buyer enquiries for all property sectors have also declined, with the retail sector experiencing the sharpest reduction in enquiry levels. This is especially so for retail properties in Central London and Wales. The survey also revealed that surveyors’ confidence in the office and retail sectors have dropped to its lowest since 2003.

As for rental expectations, these turned negative for the first time in four years while investments into commercial properties also slowed due to the credit crunch. The net balance of capital values in the office and retail sectors reportedly fell between 20% and 30%. Team that with less availability of capital funding, many investors are holding back from purchasing any commercial property. That includes the office sector which had remained buoyant previously before it joined the retail sector by taking the escalator down recently.

Reading through the various reporting sources, the outlook is indeed looking pretty bleak, especially as surveyors expect this situation to continue for sometime. In other words, commercial property prices are yet to hit rock bottom and so, prices will continue to fall. This may seem a bad sign for those looking to sell or trying to rent out these properties during this period.

However, to many a savvy investor, the gloomy figures are a potential indicator to purchase as many commercial assets as possible at bargain prices. Every cloud has a silver lining. Previously expensive commercial properties will now be priced much lower and if you have the resources, expertise and funds, it may be a good time to invest in UK commercial properties, be it in the retail office or other commercial sector. However, keep watching the market, there is still some time before the market is set to bottom out.

The future outlook for this sector may be depressed for now but when we talk about spending hundreds of thousands or even several millions on an asset, it means you are likely to be committed at least for several years. So, if the market is bad now, get the properties now because it is at below market value. With the assets in hand, you will definitely get into position to realise a nice profit once the market goes back up, perhaps after six months or a year or several years. It depends on your investment strategy of course but investments need not bring immediate substantial returns. In time, tenant demand and new buyer enquiries will increase and that is the time that investors, who have cleverly grabbed this golden opportunity now, will reap their rewards.

In conclusion, investments into commercial properties during this slowdown is worth it in the medium to long term. However, make sure you get good professional advice and a good commercial mortgage source so that you do all the due diligence necessary to be as sure as you can of a sizeable return in future. Let me know how you get on

  • Share/Save/Bookmark

Positive Cash Flow Property

September 6, 2009

When you begin to learn to about property investment, you will find a lot of different strategies and lots of people pushing different views on the right strategy. Its important to have an element of wise ness and common sense when making decisions in choosing the property investment. This article discusses positive cash flow and talks about what to look for when buying an investment property.

The concept of positive cash flow is straight forward; it simply means that the property that you invest in generates more monthly income for you than you have to payout. In other words, the rent that you generate is more than the combination of your outgoing payments on buy to let mortgage interest rates, your property management fees, bills etc. Having a property that gives positive cash flow means that you have a property that gives you a regular income as opposed to losing any money.

So why would an investor not purchase a property that generates a positive cash flow regularly? The counter view to buying positive cash flow property that people talk about is the fact that with property investment you need to think about 2 main elements; the rental returns (whether the rental income is positive or negative) and capital growth. Many people take the view that you cannot have both elements working for you in your investment strategy and believe that you can have one or the other. It is generally believed that if you get a property with a positive cashflow, it is usually at the detriment of the capital growth. With so much of the money coming from property capital growth, in a lot of cases, the capital growth can be compromised in a positive cashflow property, so it is something you would want to keep an eye on and ensure that having a positive cashflow does not mean you sacrifice capital growth.

If the research is done correctly, there are definitely investment deals out there that offer both capital growth and good rental returns. The key is in doing your research before completing on the purchase. If you are unprepared to do the work, it is unlikely that you are going to find the right property investment deal. That means looking for the right property sellers, looking into untapped towns and areas and getting the properties in the growth areas.

  • Share/Save/Bookmark