Should property investors still be buying properties in the current property market? This article endeavours to explore this question and answer it once and for all.
In the last few months many lenders have made it increasingly difficult for new entrants to break into the buy to let market. The credit crunch has hit lenders hard and in response they have hit the buy to let investor harder.
Banks don’t trust each other and therefore are no longer freely lending money to each other; this is having a knock on affect on their lending to the general public and investors. The number of mortgage products available has decreased by almost 75% since April 2007. Significant players like mortgage express have pulled key products leaving many buy to let landlords wondering how to make their next property purchase stack up.
Every Tom, Dick and Harry seems to be claiming that they can be the solution to the property investor financial problems and that they can still offer products like instant remortgaging. Investors have become weary of these deals and promises because they know some of these deals maybe bordering on the fringes of what is lawful.
Should you be buying properties at the moment?
Well it depends on what your strategy is. Are you a buy to let investor who is in this for the long run? Can you handle the negative comments in the media and not have a heart attack every time you hear the words “Property Market Crash”. If you answered yes to both these questions, then you should still be buying.
However, you should be analysing your strategy, as it might need tweaking in the current market conditions. By following the guidelines below you stand more of a chance of building a robust portfolio at this time.
Focus on buying for more than 25% below market value. Focus on buying lower value properties with good rental yields and positive cash flow. – Stay away from anything off plan, or anything that it is difficult to get comparisons for. Don’t release equity and put it all straight into your next purchase, begin to build up a bit of a cash reserve to help you weather any storms if things get any worse. NEVER, miss a mortgage payment. At the moment if you miss a mortgage payment on any of your properties, you are probably going to decrease your financial options even further. Lenders are being more stringent with applicants than they used to be and the odd blemish on your credit file that you might have been able to get away with before may now stop some of your mortgage applications in their tracks. Buy properties where you are able to simply and easily rearrange the internal structure. Doing things such as moving internal walls around to create added value such as an additional bedroom, could be crucial at the moment. Do everything you can to entice the buyer. Consider advertising that you will pay stamp duty and all legal fees, this can be the difference between success and failure in the current market place.
For the investors that understand the property and financial markets and learn how to work with them in any and all conditions, the next few years promise to be times of learning and expansion, not contraction. Yes there are difficult times ahead, but out of huge challenges can come tremendous growth.
If you have hit an impasse, use all your powers to work out how to push through it. Maybe you need to learn a new skill such as lease options, sale and rent backs or investing abroad. Be adaptable, be resourceful, ask questions, learn from others, do joint ventures, make up your mind to push forward not go backwards.
This is when the men get separated from the boys, the novice investors from the professionals and tomorrows property multimillionaires from the “I could have been somebody” crowd.
Overseas property investors ask the questions
Buying property overseas has become more and more popular this is demonstrated by the fact we have an increase in the number of people who now own a home abroad. Investors are also on the increase and with so many emerging markets overseas property investors are spoilt for choice. The Bank of Ireland reported that Ireland’s keen property investors were now having a beneficial impact on the countries economy. All the indications are that owning a home abroad is here to stay
Your objective ask yourself some questions
When buying a property abroad it is essential to know your objective. Is the property simply an investment or is it somewhere to live or visit. Do you want short term capital gain or do you want it to provide a one off profit over a particular period of time. Is the property to provide a long term regular income? Or are you buying off plan/pre construction and intend to sell before completion.
Golden rule keep your cool
When buying property abroad you need to stick to your objectives and never buy unplanned on a holiday. Lack of planning may mean you might live to regret the purchase you are about to undertake. A cool ahead is essential, ignore the pressure some agents may pile on you. It’s a good idea to see your chosen area at varying times of year. A self imposed cooling off period will make sure that you have not bought in haste.
Buying property off plan
Buying a property at the drawing board stage or pre construction can be very rewarding. It is possible to be an armchair overseas property investor and have no intentions of visting the region.Developer’s need the extra finance and can give some impressive incentives and return rates
Questions to start with
1. What guarantees do I have that the developer would not go under or this project would not go under?
2. Will my deposit be placed in an Escrow account
3. Tell me about the building company, what work have they done in the past
4. Has the builder secured planning permission and local permissions for the project
5. Are there any legal safeguards for foreign investors in the case of non-completion or poor construction work by the developer?
6. If I decided to sell before completion of the project, would that be possible and would I be penalized in anyway?
7. How easy is it to buy and sell property in this country? 8. What if I decide to sell my (residence/hotel suite)?
9. Are there any other fees while the project is being built and what about after completion?
10. What do you anticipate the rental income to be once the facility opens based on current rates at similar properties?
11. What is the payment schedule
12. What happens if the building is delayed
13. What is the rental yield I can expect?
14. What are the tax and inheritance implications
15. What is the buying process in this country
Buying property overseas safely
Overseas property buyers should take advice from qualified solicitors or other independent professionals and ensure that sales documents, title of property, building permits and registrations are correct and translated into the language of the purchaser.
Copyright 2006 Nicholas Marr
Buying property abroad can make even the most seasoned property investor lose their financial sense especially when faced with an absolute bargain. Overseas property buyers who are in search of a second home abroad need to be aware of the ‘wow’ factor when searching for property abroad. Overseas property can be considerably lower priced than an equivalent property at home. Many overseas property markets are set to make short term gains and some investors rush in without taking full consideration of all the financial aspects of buying a home. Buying a property overseas is more than just the price of the property.
Failing to plan is planning to fail
Let’s get to grips with a simple but essential element in financing property abroad. Setting your budget. You know how much you can afford and you must be realistic in finding your actual budget. Take into consideration, legal costs, maintenance charges, money transfers, mortgage repayments, flights , accommodation and insurance costs to name but a few. Ask yourself if your mortgage rate went up would you be able to sustain the payments. Assume the worst with occupancy rates for a rental investment property and arrive at your bottom line. Once you have found your budget stick to it!
Overseas mortgages obtaining the best product will save you thousands
Overseas mortgages are a specialised field and it is an area that requires sound independent advice. The overseas buyer has to look at the options available. It is best to examine this with an independent financial advisor with expertise in the area of overseas property.
Raising finance for to buy property abroad it’s your choice:
How to raise finance for your purchase is down to each individual’s circumstances each method has its pros and cons.
1.) Raising finance at home
Re mortgaging an existing home to release equity is a popular option .Many overseas property buyers live in countries in which the housing markets that have left them with equity in their own homes. The UK property market is a good example of this many people have benefited from steady house price increases leaving them with small mortgages and large amounts of equity.
2.) Using a local overseas mortgage lender
Many emerging markets are getting to grips with overseas buyers and can now provide a real alternative for the overseas property buyer.
3.) Securing an overseas mortgage with an international mortgage provider
International mortgage providers can provide mortgages in a whole host of countries. The choice of countries is increasing as the demand for overseas mortgages develops. International mortgages advisors tend to be knowledgeable in this specialist field and provide overseas buyers with a real alternative to other financing options
Currency transfers an essential element in financial planning.
Planning your money transfers keeps you in control and lets you get the best out of your money. This element is often ignored by those buying property abroad and can cost you dearly. But how do you plan for transferring money abroad at a rate of exchange that you are happy with? Currency brokers can book good exchange rates for long periods in advance therefore protecting the overseas buyer from the uncertainty of the currency markets. Exchange rates change constantly and 10% fluctuations in a relatively short space of time are not uncommon. This could effectively increase, by 10% or more, the sterling amount that you will have to pay. Specialist currency dealers will normally offer you a better rate of exchange than your bank and provide a more personalised service.
It is clear that obtaining the best overseas mortgage advice and using a currency broker are essential elements when buying a property abroad
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