Invest or don’t invest? (We really think you should)

We are currently in strange times as buy to let investors. On the one hand we have endless headlines about increasing number of buy to let mortgages at record low interest rates, then on the other hand we see that lending criteria is becoming stricter and stricter for landlords, especially first time investors.

The other big change we have seen is the tapered removal of tax relief on buy to let mortgages for investors who buy in their own name. This change was predicted to drive many investors from the market yet conversely it has seen a huge increase in people purchasing through limited companies and a large growth in mortgage availability for that specific purpose.

So what is going on? Lots of low interest mortgage products are available but are difficult for individuals to qualify for. Disincentives to invest in property as an individual but lots of advantages if you buy as a company.

In our opinion there appears to be a very obvious drive to force individuals out of the market place in favour of larger corporate entities and limited companies. The reason for this is probably that it is far easier for governments to regulate and tax larger corporate bodies plus, they believe, that the corporate landlord will be a “better” landlord by having access to larger resources when dealing with property maintenance and corporate governance requirements. This long term trend will result in massive corporate landlords managed by large corporate agencies. In essence a form of property feudalism with an asset owner class and renter class paying them.

The good news is that it is not there yet! If you have the chance to purchase property then long term you will see fantastic returns. Whether you can qualify for mortgaging, or buy cash and then re-mortgage (which has more flexible terms as a rule), then you can get the assets you need now to earn long term income for the future. With everyone living longer, income will be the necessity for people to live comfortable in retirement. You pay your bills from income and property still provides the best chance to achieve a stable sustainable retirement for the majority of people.

Choices Investments currently has numerous opportunities that yield anywhere up to 11.4%. We have some opportunities which yields 10% net yield for three years. These deals, if purchased with a mortgage, give an annual return on investment of up to 20%. Given interest rates on an average current account are under 0.5% per year it seams a “no brainer” decision to make your money work for you.

If you are interested in how we can help you achieve financial freedom, whether as an individual or with a company structure, please contact us on 01342 840050.

It’s time for a change with freehold sales

Following increasing scrutiny on unfair ground rent multipliers and one large developer saying that they now only want cash buyers for their properties, is this the beginning of the end for freehold sales?

For many years, property developers have been setting ground rents that double after a given period, often every 5 or 10 years, in order to achieve a high sales price for the freehold. This obviously boosts the profits from each site but for an owner of a flat it soon becomes uneconomical to own the property.

The Mortgage Works, a leading mortgage lender, has announced the following criteria for all new build properties:

  • Minimum acceptable lease term on new build properties (including office conversions) is 125 years for flats and 250 years for houses.
  • Maximum starting ground rent on all new build properties with a leasehold tenure is limited to 0.1% of the property value.
  • Ground rent must be reasonable at all times during the lease term. For example, ground rent escalation should be linked to RPI (Retail Price Index) or a similar index, and unreasonable multipliers of ground rent will not be permitted, for example doubling every 5, 10 or 15 years.

If further lenders decide to take up this policy then it really does spell the end for the unfair multipliers seen in recent years. If developers want to make the same profits that they have been achieving then it is likely that they will have to up the prices of their properties.

The short term view of some developers to just avoid mortgage buyers will not last if they want to sell their properties. If the properties were just trophy assets in central London you may be able to get a sufficient level of interest to make this work. However outside of London and well know university towns this strategy is going to hold up sales.

The moral here is that developers need to work with buyers and not swim against the tide.

Ensure your investment is protected

The SRA (Solicitors Regulation Authority) have released a warning notice about so called “investment schemes”.

In summary, solicitors are being warned about schemes which are being promoted as involving the routine buying of a property when in reality the buyers’ money is being used to finance a development or refurbishment. This is of particular concern when applied to unusual investments such as the buying of individual hotel rooms, rooms in care homes, or self-storage units. These concerns also apply to some extent to any “off-plan” purchases where greater than a 10% deposit is required to exchange contracts. A further issue raised is that the promises of substantial returns are often illusory around many alternative property investments.

The full SRA Warning Notice can be accessed here.

The good news is Choices Investments only offer properties which require a standard 10% deposit to exchange and we only deal with developers with a proven track record and where your money is protected.

Choices Investments have a selection of opportunities that fall within the above criteria currently available. If you would like more information, please email or call us on 01342 840050 and you can speak to an advisor.

Future proof your property portfolio

The General Election, Landlord Taxes, Brexit, President Trump……

2017 is shaping up to be a very interesting year. With a general election around the corner, new landlord taxes coming into force and further political and financial questions to be asked with Brexit on the horizon, it is no surprise that property investors are trying to work what is the best strategy to deal with it all. Should you buy? Should you sell? Is renting really worth it anymore?

2016 Property Market Review

We are seven weeks into 2017 and the figures have now been collated to gain a fair review of the property market in 2016.

The average house price in the UK increased by 7.2% in 2016 taking the average property value in the country to £219,544, information released today shows. England had the largest increase at 7.7% with Wales (4.7%), Northern Ireland (5.7%) and Scotland (3.5%) showing modest growth.