The process of buying discount property is very straightforward however, the market is highly competitive with many websites and every auction house vying for your business.

With so much choice out there, choosing who to do business with can be a daunting prospect, especially for those looking to step-on to the property investment ladder for the first time.

It is regrettable that some company’s charge no small amount of money as deposits or for attending their course or series of events that will teach, all-you-need-to-know about investing in property.

So, is buying property so difficult that you need to part with money that could otherwise be used to buy a property? We say, not!

Self-professed property guru’s, property investment clubs and joint-venturists are not going to tell you anything that isn't common sense however, if you insist on paying several thousand pounds to find out how to do it, we've a bridge in London we can sell you!

So, what do you need to know?

1. Do I need/want to get into property?

2. How would I benefit/lose from owning investment property?

3. How much money am I prepared to risk?

4. Am I in this for a short-term fling or, the longer-term prospects?

5. How much time can I divert to property?

Q1 It is no mere whim that every wealthy individual owns investment property! It is not a coincidence that every insurance company invests in property funds! Property is a fascinating and fun business, but it is a business. With it come responsibilities to the Taxman, to the tenants and to the mortgage lender (if you borrowed money).

Q2 Traditional investments such as stocks and shares or insured schemes such as pension funds provide for capital growth OR income. The point of property is it generates capital growth over the medium to long-term whilst also providing excess rental income above the costs of owning/operating the property (or properties). In short, it provides capital growth AND income!

 

But, what happens if loan interest rates increase? What happens if a tenant trashes your property? Before you think of paying yourself, buying that posh car or travelling the world, your rental income needs to cover the following typical operating costs:

With the exception of tax and paying yourself, all of the above add up to 65% of the rental income but, these are all deductable expenses to off-set against your tax calculation. This is why you probably will only need to budget 10% for tax (and you may even get change out of that)!

So, for every £100 rent you receive each month, you will probably enjoy net income of about £25, assuming the above estimates remain fairly constant.

Q3 Anyone may buy a property worth £75,000 for as little as £14,000! How? By purchasing property with 25%-off its open market value (£56,000) with a 75% loan-to-value mortgage (£42,000), leaving you with a required deposit of 25% of the purchase price (£14,000).

It is not rocket science that the key to maximizing your rental income is to buy the property for the lowest possible purchase price and that means buying through a reputable discount website/agent or buying at auction (under the hammer).

In addition to the purchase price of the property, you need to add-on between *£50-£5,000 fees (*depends on where the property has been sourced), payable to the selling agent, plus your buying solicitor and mortgage fees (If applicable), between £1,000-1,500 for property costing up to£100,000.

 

So, for a modest investment property producing a reasonable rental income you will need about £20,000 cash inclusive of fees.

Q4 It is possible, in the short-term, to buy-and-sell-on property quickly (flip), but it relies on having your buyer waiting in the wings, before you buy from someone else. This method is not for the faint-hearted and rarely for the new property investor with limited funds, so we shall not dwell on it within this blog.

  

Most investment property should be viewed as a medium (5-15yrs) to long-term (over 15yrs) holding.  We mentioned that purchased wisely, investment property offers capital growth AND income (rents). In today’s supressed market however, most investors favour purchasing property for income.

Ask yourself: where could I achieve a gross return on investment (ROI) of 30%+pa, that’s £5,400 each year (not including capital growth) based on an investment of £14,000? Deposit accounts won’t offer this rate of return, nor will pension funds, and stocks and shares are highly volatile compared with immovable property!

Q5 High Street estate agents just don't offer significant discounts on property purchase, as they are legally bound to the seller to obtain the highest sale price possible.

 

This leaves two principle opportunities of investing in discount property:

When buying at auction, most properties require moderate to heavy refurbishment, which is why they are being sold at auction!

 

It is important when deciding what your maximum bid will be, to deduct the costs of fixing up the property from the typical neighbourhood open market value of similar property, before applying a 25% purchase discount.

 

For example, if a key-ready house in the same neighbourhood is worth £75,000 in good condition and the property at auction has estimated refurbishment costs of £10,000, you would be unwise to bid more than £48,750 (i.e. £75,000 - £10,000 x 75% = £48,750), if you want to enjoy a genuine 25% discount from open market value.

 

When buying through a reputable discount website, this process has been calculated for you, with the best sites clearly laying-out the math within the illustration, together with photographs of front and rear aspect, garden, kitchen, bathroom, sitting-room and main bedroom.

One more thing to consider! Rent is lost for every week a property is without a tenant. If rental income for a property is £450pcm, every week that passes-by, without a tenant, costs £112.50 (25%) on top of refurbishment costs! When you add up the time to view several properties to be auctioned, attend each auction house, organise and manage the work-team, the proposition for buying discount property through a reputable website is increasingly attractive.

Thank you for reading this far. We intend to write other articles however, if you have continued interest in finding out more about what type of property offers the best return and where they are located, call John on 0203 239 4359 or email This e-mail address is being protected from spambots. You need JavaScript enabled to view it  

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Double-dealing is when a buyer of a discounted property makes two seemingly unrelated legal arrangements, through two separate solicitors, with the seller.

The buyer instructs the first Solicitor to complete the purchase of the discounted property, seeking maximum borrowing on its full market value.

 

Rather than use his/her own money for the deposit, the buyer arranges funds through a separate commercial lender (Bridging Finance). These bridging funds are used to pay the mortgage provider their required deposit against the purchase price of the property.

The second Solicitor arranges for a return of cash from the vendor to the buyer, equal to the deposit paid to the mortgage provider, to repay the Bridged Funds.

 

This results in a no-deposit mortgage loan, with the mortgage lender providing 100% mortgage to the buyer! 

Lenders unequivocally condemn this practice as wholly unacceptable and may pursue those involved in any associated transaction, as it comes to their attention, when such means has been/was executed to obtain a level of loan that otherwise would not have been granted.

The Fraud Act 2006 (the Act) came into force on 15 January 2007 (which repealed various parts of the Theft Act 1968, including obtaining property by deception) and applies in England, Wales and Northern Ireland (similar legislation exists under Scottish Law).

Under the new Act, Section 1 creates a general offence of fraud and introduces three ways of committing it set out in Sections 2, 3 and 4:

Fraud by false representation (Section 2); 

Fraud by failure to disclose information when there is a legal duty to do so (Section 3); and 

Fraud by abuse of position (Section 4).

The offence is complete as soon as the Defendant fails to disclose information provided he was under a legal duty to do so, and that it was done with the necessary dishonest intent. It differs from the deception offences in that it is immaterial whether or not any one is deceived or any property actually gained or lost.

Following conviction, the court can impose: 

a fine; and/or,

a prison sentence of up to 10-years.

 

In addition, assets may be seized under the Proceeds of Crime Act, which includes property portfolios proved to have been acquired through criminal activity.

If you are at all in doubt about the advice you are receiving when considering the purchase of discount property, we strongly recommend you seek appropriate legal opinion.

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Estate agents have a legal obilgation to the seller to achieve the properties open market value, or close to it from the comfort of a furnished office.  

 

Auction houses sell knock-down property, mostly in need of serious work, often achieving a profit following refurb' of around 15-25%, several weeks/months after purchase.

 

Only genuine discount property websites provide a combination of the above two services with Key-ready property opportunity from the comfort of your own home!

 

Recent research reveals that many of the pitfalls experienced by landlords can be avoided by investing through a reputable discount property website, engaging a professional lettings agency to fully manage the property.

A big rise in the number of portfolio landlords losing control of their costs is just one reason why it makes sence to be a hands-off investor. 

Though many BTL landlords felt better to doing-it-themselves, it is worth remembering that property investment is a business and trying to do everything is actually counter-productive in the long-run as you will be spending more time managing the properties and tenants, rather than expanding it to add more income.

For every £15,000 original investment, two £75,000 BTL properties may be added each year to your portfolio. And every property you don't have, costs you over £400pcm rental income.

£45,000, will add 6-propeties each year and, £150,000 could build 24-properties over 24-months. Looking after two-dozen properties will demand all your time hence, it becomes counter productive.

Hands-off property investment has been gaining popularity because it offers a relatively low risk, low maintenance alternative to self-managing. Hands-off means hands-off! It allows the investor to concentrate on building rather than maintaining.

For the new and experienced investor, student POD accommodation is becoming one of the simplest options as studios will be under full, on-site management with on-going demand from student-tenants ready to fill units each academic year. 

Security, maintenance, safety, laundry services, computer services, WiFi are all taken care of by experienced property management companies.

If your investment is truly hands-off, you probably won't even need to see a tenant particularly if it's an under-garduate studio investment where it is up to those who manage it to deal with occupation and day-to-day issues. 

Net yields on student POD's are comparable with the average 1-bed property in most areaa. They tend to offer lower void periods too and often guarantee first-year rent. For instance, an under-grad' studio POD in SE9, discounted by 40% to £85,000 can yield a gross rent of £780pcm. 

The European Parliament has passed a regulation which allows expats in France to dictate in a Will that they want the law of the state of their nationality to apply to their estate and not French inheritance law. This, in effect, means Britons in particular can leave their estate to whomever they wish and not be bound by strict inheritance rules as at present. It is expected to be operational from 2015.

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The amount a lettings agent may charge for advice can range between 5-15% of the monthly rent depending on how many of your properties they manage.

 

Fees alone however, are not the single most important factor in choosing a lettings agent!

Paid-for advice is not like buying groceries and any professional adviser needs to be selected for their relevent expertise and background within their advertised discipline and lettings agents are no exception. 

 

For example, you probably wouldn't take advice from a divorce solicitor when buying a property, or take tax advice from an engineer.

 

So, choosing an appropriate lettings agent is essential to your success as a landlord as not all of them may specialize in your type of property or be a registered member of SAFEagents.

When choosing a suitable lettings agent, seek answers to these questions and reduce the chances of potential expensive, poor service standards.

1. How long have you been trading as a lettings agent? ~ some Estate Agents have started lettings to shore-up dwindling property sales and have no long-term experience in letting homes.

2. What professional body are you a member of? ~ www.safeagents.co.uk lists membership of registered professional bodies which offer rules of conduct and a redress process should a member get it wrong.

3. How many properties do you manage in such-and-such postcode(s)? ~ less than 10-units of your type of property is a worry as values and rentals are usually assessed from their own records, and you need enough relevent comparison.

4. How many of these properties have been taken-on by your agency within the past 1-mth, 3-mths, 6-mths? ~ if it has been more than 6-months since their last registration, is this agent really in touch with the local market?  

5. What Rent Deposit Scheme do you subscribe to? ~ it is a legal requirement to hold tenant deposit within an authorised scheme. 

 

6. Do you offer full inventory service? ~ a full written record with dated photographs prior to occupancy is essential to counter any tenant claims or press home your claim for damage/loss. 

 

7. Do you offer full advertising and interviewing services for occupancy? ~ unless you intend to invest a lot of time finding your own tenants, this service allows you to get-on with adding more rental income. The real purpose of expanding a property portfolio. 

You do not always need to meet your selected lettings agent but you must obtain a letter confirming their answers to the above questions, together with a copy of their terms of business and copy of insurance that covers your rent should the tenant default, before you sign a contract.

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Research carried out by Paragon has reported a positive start to 2012 for landlords in the Private Rented Sector (PRS), with increasing optimism among landlords and very low void periods.

The PRS Trends Report for Q1/2012 sought landlords views on tenant demand, planned property purchases and their opinions on the wider BTL market.

Yields remained at a healthy level with landlords reporting an average yield of *6.2%, which is the same level achieved during Q1/2011.

Void periods also remained low, decreasing further from Q4/2011, from 2.9 weeks to 2.6 weeks.

One-fifth of the landlords, who took part in the survey, say they are planning to purchase more BTL property in Q2 with almost 1-in-2 of those planning to purchase terrace houses and 1-in-3 expecting to buy **apartments or maisonettes.

Landlords’ views on tenant demand remained largely unchanged during Q1, with just under half saying tenant demand was growing or booming and just over half saying they expect demand to increase over the next 12-months.

Nigel Terrington, CEO of Paragon said, The findings of the Q1 Trends survey are interesting and show that it has been a positive start to 2012. Landlords are optimistic about the year ahead and are planning to invest in their portfolios ... Despite some reports suggesting tenant demand may be falling, landlords are still experiencing decreasing void periods, so the appetite for quality private rented housing is still very much there.

 

*this figure rises to 8.2% yield when buying property 25% below market value

**purpose built, student PODs represent high-demand, hands-off investment opportunity 

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With a high level of change, over the past couple of years, in the way UK Universities are allowed to operate, investors may be forgiven for not thinking about student accommodation as a highly lucrative property investment sector.  

Recently published reports highlight how Uni's are experiencing an overwhelming amount of applications, something that existing accomodation just can't cater for. 

 

Global student mobility for Higher Education has been steadily rising for several years, with non-domiciled students accounting for more than one-sixth of the UK student population.  

Although rising tuition fees is causing outrage amongst British students, compared to worldwide fees, the UK remains highly competitive at number three in the world. In addition, work restrictions put in place on student Visa's for entering the country by UK Border Agency last year means that only the most affluent of students will be able to afford to study here with fees for non-EU students even higher. 

As recorded in a recent overview, the private sector currently accounts for c.40% of all UK student housing needs and Universities are increasingly finding that they cannot keep up with the demand for affordable accommodation.  

United Kingdom student accommodation accounted for more than £740m worth of capital in 2011, driven in part by the growth in rental prices and high occupancy levels in regional cities.  

Historically, student accommodation has always been picked up by institutional pension funds. Over the past year or two however, the market has been steered towards the private rental sector as commercially built, on-site managed units are offered to private investors or parents seeking to reduce the costs of educating their children. 

Attracting well above average rental yields, domestic and overseas buyers are chasing high-end, affordable, purpose built studio apartments for the consumer-focused student with Government actively encouraging Chinese investment in our University Cities. 

With guaranteed rental yields at the top-end of the scale and with the knowledge that in-house management companies handle everything, there is an extra-ordinary opportunity for high, on-going occupancy, which shows why student accommodation is one of the strongest performing asset classes in the UK.

 

 

 

See www.bmvpropertyinvestmentdeals.co.uk for Portugal discount deals. 

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More than a quarter of landlords are optimistic about the BTL sector for 2012 following average rental yield of 6.2% in Q1 with void periods remaining low.

 

Paragon’s PRS Trends Report, Q1 asked landlords for their views on tenant demand, planned property purchases and their views on the wider buy-to-let market.

It found that yields remained at a healthy level with landlords reporting an average yield of 6.2%, which is the same level achieved during Q1 2011.

Void periods reduced further from Q4 2011, dropping from 2.9 weeks to 2.6 weeks. 

Smaller-scale landlords saw a slight decrease from 2.7 weeks in Q4 to 2.6 weeks in Q1, whilst professional landlords saw a bigger decrease, dropping to 2.6 weeks in Q1, from 3 weeks in Q4.

One-fifth of the landlords, who took part in the survey, say they are planning to purchase more buy-to-let property in the second quarter of this year.

Landlords’ views on tenant demand remained largely unchanged during Q1, with 44% saying tenant demand was growing or booming with 53% saying they expect demand to increase over the next 12-months.

Paragon CEO Nigel Terrington said, The findings of the Q1 Trends survey are interesting and show that it has been a positive start to 2012. Landlords are optimistic about the year ahead and are planning to invest in their portfolios ... Despite some reports suggesting tenant demand may be falling, landlords are still experiencing decreasing void periods, so the appetite for quality, private rented housing is still very much there.

What We Say ~  The average yield of our discounted properties currently listed is 10%, that's a whopping 60% more. Why buy open market value when you can buy at discounted prices?

 

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BM Solutions reported average UK rents for 2011 exceeded *6% with average monthly rents throughout the country finishing the year £34 higher than in 2010 at, £716pcm.

 

By region, average yields were 7% in the north/north west, with 6.3% in Yorkshire and the Humberside. Wales was 6%, with 5.9% in the west/east mids.

East Anglia returned 5.3%, the south east 5.2% and, the south west 5.0% with Greater London bringing up the rear at 4.8%.

Phil Rickards, BM Solutions said, There is a very healthy demand for rental properties across the UK right now, which in part may be driven by the costs associated with buying a home: costs which, for some, will only increase as the stamp duty holiday comes to an end. Average gross yields on a buy-to-let property have been just over 6% for the past two years, driven by growth in rental values. However, with house prices likely to remain broadly flat again this year, buy-to-let landlords can again expect little capital gain on their investment in 2012.

While the national average monthly rent grew by 4.8% year-on-year, there were more significant gains in certain regionals. 

The largest increase in rents were recorded in East Anglia at +8.0% and the North at +6.9%, with the South East and Greater London recording +5.8% and +5.6% respectively. In contrast, rental increases in Wales was just +0.1% and Scotland +0.7%.

Of course, the average rent in Greater London remains higher than elsewhere in the UK, at £1,212 pcm but, you would have to spend up to 4-times more money to buy a similar property than in the midlands or north of the country.

The average monthly rent in London City is 69% higher than UK average and 41% above that in the South East but again, purchase prices in these regions remain the highest in the UK.

Wales returned the lowest average rents at £474 pcm, with the North, Yorkshire and the Humber yielding £488 per month.

*If you had saved 25% against the open market value, average UK rental yield would have been 8%+.

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