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.
More and more investors are now being lured to the below market value property investing market. Whatever be your target, whether ‘buy to sell’ or ‘buy to let’ property investments, the competition for bmv properties is growing by the day. No longer do you find leads being passed on for free or at extremely low upfront fees. Local papers seem to be full of people targeting property in your area. What then should your sourcing strategy be for 2008?
One of the more recent and controversial sourcing techniques is Court Diaries for Repossessions. Keeping in mind the current and projected growth in repossessions, the interest in this sphere is increasing in leaps and bounds. Earlier, online court diaries for impending repossession hearings were available, which could provide you enough information to get talking to the home owner. You could then see if you were in a position to offer an appropriate solution to prevent repossession. Following complaints from vendors, who were pestered by property investors, these online diaries were withdrawn. Now the process is tedious and not everyone’s game. You now need to visit the courts to check court lists. It is worth noting here that property investors hanging around in the court premises are not very welcome.
Auctions offer is another means of sourcing property. You will get to hear of several success stories where people made a lot of profit through this method. If you search properly and have a prudent approach, you just might hit the right below market value property deal. If you are one of those property investors who believe in ‘No Money Down (NMD) property investments,’ then auction offers are not the right mode for you. It is another story, however, if you have someone else’s money to use.
Radio advertising offers another bmv property sourcing alternative. While the general perception is that this is expensive option and results are not that good, it has worked for some and might work for you.
An effective and established way to reach out to potential motivated sellers is Classified Ads. You can put together a catchy advertisement and place the ad for several weeks. A popular choice amongst property investors is the local free property supplement. You can, however, choose other publications as well.
A popular choice amongst several successful property investors is lead buying from reputed lead suppliers, such as Rapid Property Investment.com. This method is both time and cost saving and does not require any more effort than moving your fingers on the mouse. You can glance through hundreds of leads every week to find one that best suits your criteria.
If you are out there to strike good deals, you’ve got to try everything possible under the sun. From printing leaflets to classified advertising, building contacts or networking, give it all a shot. When it comes to sources, it simply is “the more the merrier.”
Turkey, the country famously known as the bridge between Europe and Asia, is proving to be a popular place for British property buyers to invest. The country has one of the largest economies in the world with a growing population that currently numbers over 70 million, 66% of whom are under thirty. There is also around 20 million foreign tourists visiting the country each year, and the number is steadily rising.
The popularity of Turkey as a holiday destination has created strong buy-to-let opportunities for property investors, and the Turkish government, keen to see this trend continue has pledged approximately
A couple of decades ago, French property was the top choice for people investing their money; old farmhouses, rustic mountain chalets and slick inner-city pads could be picked up for a reasonable price and the market was growing. As the prices rose, the opportunities for buying low and selling high became fewer and further between, and investors began looking to Spain where the boom in package holidays to the Mediterranean coast meant apartments were being built everywhere and rental potential was high.
Now the Spanish property market has also matured and investors have had to look further afield to find places where money could be made. One of the biggest influencing factors to have occurred over the last decade is the expansion of the EU. This has meant that many countries that previously were a minefield of legal barriers and red tape are now much more open to foreign investors.
The fact that several of the new EU states have already, or soon will be adopting the Euro, has also facilitated property investment, as well as sending out a signal to investors saying that these countries are stable places to invest. The eastern expansion has mean that many exciting opportunities for investors have appeared, and there has been a lot of interest in Slovakia, Poland and the Czech Republic; but by far the most attractive country for property buyers has been Bulgaria.
Perhaps one of the greatest attractions for property investors in Bulgaria is the huge choice of real estate to invest in. Those looking for an inner city purchase will find Bulgaria’s vibrant capital Sofia, an ideal place to invest, but it has been the ski resorts and beach destinations that have been the biggest draw.
Bansko is Bulgaria’s leading ski resort, with the longest slopes in the country and the best snowfall records. The development of state-of-the-art lift systems, combined with a rustic old town with meandering cobbled streets have raised Bansko’s profile and put it on the international ski map, making it a very popular choice with investors and meaning most new developments sell out long before completion. Beach-side developments along the Black Sea coast are in similar demand, due to the golden sands, clean and safe water and excellent value property.
However, nothing lasts forever and like France, Spain and countless other property hotspots, Bulgaria’s time will come and go; but for now, this Balkan country is being touted as the best property investment in Europe, so get in there while you still can.
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