How the Power of Gearing makes Property a Better Investment than Stocks and Shares

By admin on June 2, 2010

 How the Power of Gearing  makes Property a Better Investment than Stocks and Shares

Debating  the pros and cons of investing in stocks and shares versus investing in property is a popular subject amongst analysts, brokers and investors. This debate is often conducted under the guise  of comparing traditional pensions versus property investment, as most traditional pensions are invested in global stock markets.

Stock market analysts will often accept that property is the better investment in a given year compared to stocks and shares. However they will often fail to take into account some of the major advantages that property investment has over stocks and shares when declaring that stocks and shares have ouperformed property in another year.

For example, a stock market analyst might attempt to promote investments in stocks and shares by stating something like this:

“Last year  average property prices increased 7% and the stock market was up 10% so stocks and shares performed better  and represent a better investment.”

While the facts as stated, in terms of percentage gains, are entirely true, to claim that this automatically makes stocks and shares a better investment is very misleading. It is understandable  that, after giving such figures a cursory glance, you would believe that in the‘last year’ you  should haave been investing in stocks and shares . Indeed that is exactly the conclusion the analyst might want you to reach.

Gearing and the Return on Capital Employed

The Return On Capital Employed  (ROCE) from property in this case  will have easily been far higher. Why?  Because you can borrow money from a bank or other lending  institution to buy property and secure the loan against the property that is being purchased. This means that you only need  to invest the amount of your own money required to pay the deposit on the purchase rather than the full price of the property. This is often referred to as Gearing or Leverage and it is not something that can easily be achieved when investing in shares.

Banks will generally not accept shares as security since they are considered highly volatile .Not only can they go down in value as well as up but, they can in certain instances lose almost all their value in a very short space of time. Companies can quickly hit huge difficulties  due to  factors such as poor management, strong competition and unfavourable market conditions. For example, shares in the HBOS group were trading at around £12 each before the credit crunch hit Britain, only to fall to be values at just a few pence during the height of the crisis. Such volatility simply does not occur in property markets. Despite all the media talk of a crash of epic and unprecdented proportions in the UK property market between 2007 and 2009,  the average house price decline amounted to around 15% at it’s worse.

The power of Leverage can be seen in this simple example:

In order to buy £100,000 worth of shares you need £100,000 in cash,  but to be able to buy a £100,000 property you would typically need £20,000 because you are able borrow the rest from a bank. Banks are happy to secure the £80,000 loan against the property being purchased, safe in the knowledge that people will always need somewhere to live ensuring that demand for the property, and long term price rises, will almost certainly guarantee the safety of their loan in the event of default

After a property is purchased and a mortgage isput in place you are then able to rent the property out to service the cost of the loan and other expenses and in many cases provide extra profit.

Using the above example we can examine the ROCE in 2 scenarios, one in a year where percentage gains were higher in property and another in a year  in which percentage returns were higher in shares.

Year 1 Capital Invested  Asset Value at Start of Year % Increase Over Year Profit
Stocks & Shares  

£20,000

 

 £20,000 7% £1,400
Property  

£20,000

 £100,000 10% £10,000
         
Year 2 Capital Invested  Asset Value at Start of Year % Increase Over Year Profit
Stocks & Shares  

£20,000

 

 £20,000 10% £2,000
Property  

£20,000

 

 £100,000 7% £7,000

 

As you would expect property provides the better return in the year when property prices rose higher than share prices – delivering a massive 50% ROCE with just at 10% rise in prices. However, due to the power of gearing, property also provides a far superior return to stocks and shares (2.5 to1) in the year that share prices rose higher than property prices.

As you can see, the Return on Caital Employed (ROCE) is a far better inidciator of profitablility than the headline percentage return for an asset class.

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The Importance of a Positive Mind Set in Achieving Success through Property Investment

By admin on May 10, 2010

To achieve success through Property Investment, just as in any other type of business venture, having the right mindset is vitally important. Here are a few tips on developing the right mindset to become a successful property investor.

 Develop a Positive Attitude

Most of you will probably have heard of the movie ‘The Secret’ that took the world by storm a couple of years ago. If you haven’t then I recommend that you check it out on Youtube or get yourself a copy of the video or book. The basic principle of ‘The Secret’ is ‘The Law of Attraction’, the notion that your experiences in life are a result of what your mind focuses on. Focus on failure and difficulties and that’s what you’ll get. Focus on success and you’ll experience success. It’s not quite that simple, you can’t just spend all day thinking positive thoughts – you must also take action of course, but most successful people will tell you that this principle holds true.

Successful people in all walks of life have an ability to focus on the positives and not dwell on the negatives. Everyone experiences setbacks and periods of self doubt, and you’ll experience plenty as a property investor, but it is how we react to them that matters. Successful people will learn valuable lessons from their setbacks but will not dwell on them. They remain positive and look for the next challenge.

 

Maintain Self Confidence

 If you can maintain a positive attitude you will most likely already have the self confidence required to achieve your goals. In order to succeed in any area of life you must first have the belief that you are a success and be comfortable in what you are doing and trying to achieve. By merely making the decision to look in to property investment, you are taking positive action to improve your future and this in itself should give you a level of self confidence. Confidence and self belief will help to keep you on track through the tough times.

 

Break down any limiting beliefs

Any blocks, or limiting beliefs, the “Oh I couldn’t possibly do that…”  type of  persistent thought, need to be dealt with; and eliminated. In their place, you must program empowering beliefs, that are in line with your desires, aspirations and objectives. How can you do that? One simple method is  to jot down what your associations with making money from property are. For example, “its hard to make money from property”, “property investment is only for the rich”, and so on. Next write down the opposite of each of your limiting beliefs. E.g , ” it’s easy to make money from property”,” there are plenty of  opportunities for me to make money  in property”.  Then set these empowering beliefs in your mind by having them on your notice board, computer screen etc or any other place where you will see them frequently every day. Think about them as often as possible and in due course, you will have weeded out the limiting beliefs and will have instilled your empowering ones.

 

Be fully aware of what’s driving you and stay motivated

Obviously we need to be motivated to be successful.  In order to be a motivated Property Investor you will need to know exactly why you are investing in property. Motivation comes from knowing why you are doing something, and the clearer you are about why then the more motivated you will be.

We often don’t take the time we should to consider our actions.  We know that adding property to our portfolios is going to increase our net worth overall in the long term, and we aim for the type of property that brings in sufficient monthly income to cover mortgages and other expenses and still make a profit, but that doesn’t really answer the question of why we are investing.

 

What are your reasons for investing?

Make a list of your reasons and read them every day. Put the list somewhere prominent.  Reminding yourself constantly of the reasons behind your investments will help you to stay motivated and focused, especially during the tough times

 

Your Reasons can be anything that matters to you

 When considering their reasons many people often fall in to the trap of believing that only positive reasons are relevant. However, you can just as easily be motivated by something that you passionately do not want. For example, you may not want to have to continue working over the age of 60 like your parents are having to or you may not want to live in your current home for much longer.

Having said that, positive motivation works well for most of us. You may want to take  your family on an overseas  holiday every year, or buy the new car with the private number plate. 

 

Focus on the end results

Whatever you want to achieve in 5 or 10 years’ time, make yourself a list of the benefits you will get as a result of making these property investments. This will help you to build up a picture of what success means to you. List all the benefits you will be enjoying if your investments go to plan. One of my mentors asks his clients to write down 100 benefits they will get from making more money. Many of his clients will say that they cannot think of 100 benefits, but he tells me that it is almost always the people who are able to identify  100 benefits, able to visualize success,  that go on to be  achieve their goals.

You can also try making yourself a list of the consequences of not investing, to illustrate what life will be like in the future if you don’t take action.  Which list provides your greatest motivation?

There is no real point at all in accumulating property for the sake of it.  It’s not going to make you happier, unless you plan your investments to match your reasons for investing.  Without understanding your reasons, you may find that it becomes a burden or even a chore.  You won’t concentrate on the important tasks at hand such as collecting rents and finding the next bargain property to buy because you have lost the focus on why you are investing. If you know why you are investing then it is far, far easier to work out how you are going to invest and that will keep you motivated.

 

Need  Some Help to acheive and maintain the right mind set ?

Its one thing knowing that  you need to keep a positive mind set to ensure success,  but it can be very difficult to put this in to practice sometimes, when everything in the world seems to be going against you.  At times like these you might need a little help to stay on the right track.

I was lucky enough to discover a great program  called   Six Minutes Can To Success that has really helped me to maintain a positive outlook and greatly increase my success. You recieve a daily video message from Bob Proctor, one of the teachers in ‘The Secret’, in which he gives you a simple, 6 minute exercises, that will make sure you start each day on the right track and help you to quickly accelerate your progress towards your goals. Take a lokk at the program by clicking the link below.

Six Minutes Can Change Your Life! Find Out How.

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How to Select the Right Tenant for your Property

By admin on May 4, 2010

 In a previous bulletin we discussed how to find a tenant through marketing and advertising your property. As we discussed, it is usually quite easy to find tenants who want to live in your property. However, finding a good tenant who pays the rent on time and keeps the property clean and tidy is a little more difficult. A careful methodical approach should ensure that you pick a very good tenant.

 

Below I explain the procedures I undertake to ensure that I select the right tenant for my properties.

 

 Listen to your Gut Instinct

 For me, the most important  initial consideration is the gut feeling I get about the tenant when I meet them for their property viewing.  If I get a bad feeling about the tenant I will never let the property to them, even if there appears to be no logical reason for my concerns. As a landlord you quickly develop a sense of what makes a good or a bad tenant and usually you are right. In the past I have gone against my gut instinct and it proved  to be a long, difficult and expensive process to evict the tenant when they stopped paying the rent.

 Usually, if a tenant is late for their viewing and doesn’t offer an apology, is particularly scruffy or behaves suspiciously at the viewing, I will discount them straight away. The tenant’s appearance may seem irrelevant but I find it is a good indicator of how well they will treat the property whilst they are living in it. A tenant who pays the rent on time is only a desireable one if, when they vacate the property, they also return it to you in the same condition it was in before the tenancy began.

  Of course, if I like a tenant at the viewing it doesn’t mean I will offer them the property straight away. It just means that their application will move to the next stage of the checking process.

  

Collect the Tenant’s Details

 The first part of my formal checking process is to ask the tenant to fill in an application form in which  the data I collect includes their full name, date of birth, current address, previous addresses for the past 3 years, national insurance number and employment history. The information I collect here can tell me if they have moved around a lot and are unlikely to stay in the property long. It also provides me with details that would help me to trace them in the event that they vacated the property owing me money.

 The form is quite comprehensive and if a potential tenant shows any resistance to providing this information I take this as a sign that they probably have something to hide and are therefore not a suitable candidate for my property.

  

Charge an Application fee

 I believe it is wise to charge an application fee to a tenant who has expressed a desire to move in to the property and completed you tenant data form. Although this will offset the costs you incur in the tenant selection process, I do not view this as a money making venture. By paying a fee at this stage (I usually charge £79) the tenant is demonstrating their commitment to your property and is much less likely to go looking at alternative properties, whilst you carry out your checks.

 

 Collect References

 Assuming that the prospective tenant has completed the application form to your satisfaction and paid their application fee, you should then take up references. These should include an employer’s, bank, previous landlords’ and character reference. The employer’s reference (assuming they are in employment) is the most important as it gives some assurance that the tenant will be able to pay the rent.

 Alternatively, if the tenant is going to be claiming local housing allowance to pay the rent you should ask for written proof of the tenant’s entitlement. Also try to establish if the tenant fits in to one of the categories that allows their rent to be paid directly to the landlord.

 You should be aware that the applicant’s current landlord reference may not tell you the whole story as the landlord may be anxious to get rid of the tenant and thus provide a reference that is more positive than it really should be.

 

Do a Tenant Credit check

 Complete a credit check on the tenant. There are numerous online companies providing this service and most are fairly cheap and very useful. They will pick up if the tenant has  any County Court Judgments (CCJs) against them and will also verify that the employment and address information they have supplied on their application form is correct.

 

 Get a Guarantor if required

 The credit check will also provide an assessment of the tenant’s ability to afford the rental payments. If the check suggests they might have difficulty you would be wise to ask them to provide a guarantor who will commit to pay the rent in the event of the tenant defaulting. Of course, if your tenant does need a guarantor you must also credit check them to be sure they have the means to pay the rent, on top of their own commitments, if necessary.

  If a tenant passes all of the above checks to your satisfaction it is very likely that they prove to be a good tenant for your property.

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How To Find Tenants for Your Rental Properties, Free of Charge, Using the Gumtree Website

By admin on April 26, 2010

I’ve talked briefly about using gumtree  (http://www.gumtree.com) to advertise properties for rent in previous bulletins, but I wanted to devote a full bulletin to this subject because I’m a big fan of the site.

For a few years I shied away from using Gumtree because it was really a London focused website and, with the majority of my portfolio being located in North West England, I felt it wouldn’t be particularly useful for me. However in recent years, Gumtree’s use has expanded well beyond the capital and it is a great resource for most urban areas of the UK.

 I’m not suggesting that Gumtree should be the only method you use to market your property but it should definitely be one of your primary resources, assuming that you are happy to find tenants yourself, because it is free, quick and easy to use and generates a lot of enquiries

As with any marketing strategy, there are certain principles that should be applied  in order to achieve the best possible results. Here are my  tips for getting the most out of  Gumtree.

1. Before posting an advert, check out competitor advertisements

You’ll find it useful to see how other landlords are marketing their property. Before creating an advert, search the website for similar properties in the same area to your own.  For a start you will quickly discover if your planned rental price is competitive with the price offered by other advertisers. Consider marketing your property slightly below the ‘going rate’  for the area to generate more enquiries.

You should also  try to put yourself in the shoes of a potential tenant when looking at competitor advertisements. Observe which adverts intrigue you and make you want to find out more details, and consider using some of the wording of these adverts in your own  copy.  Its equally important to observe the unattractive adverts to ensure that you don’t make the same mistakes.

2. Market your property in the correct city/region

This is very important to ensure you get the best response rates. The Gumtree website organizes its listing by location (major cities and counties). Make sure you create your advert in the correct location. For example if your property is in Leeds, make sure your ad is created on the Leeds page of the website. It is very easy to get this wrong because the website sets the default location tp London if you fail to specify a different city or county. I’ve created adverts in London before instead of Lancashire. You can navigate to the correct location by clicking “change city” in the top left corner of the page.

For some properties your choice of Gumtree page will not be so simple. For example, I own a number of properties in Warrington which does not have its own dedicated page on Gumtree and lies approximately half way between Manchester and Liverpool, without  being considered to be a part of, or attached to, either city. In this case your approach should be to test your advert in all appropriate locations to see which  gets you the best response. In my case, I posted adverts in all the ‘North West’ locations – Liverpool, Manchester and Lancashire. I found that Liverpool and Manchester adverts both delivered a decent level of response but my Lancashire listing delivered very little. I therefore now routinely post ads for my Warrington properties in both the Manchester and Liverpool pages.

3. Regularly renew your adverts

Gumtree search results are displayed in order of age with the newest advertisements, i.e. the freshest content, appearing at the top of the listings.. Obviously, it goes without saying that adverts closer to the top get more exposure.

It used to be possible to resubmit your ad without changing it and this would result in your ad being returned to the top of the listings. However this feature has been abused by many advertisers, resubmitting their adverts on an extremely regular basis and gumtree now charges £2.00 for your advert to be bumped to the top of the listings.

The way to get around this is to create a new advert by cutting and pasting the details from your original advert. It only takes a couple of minutes to do this and get yourself back to the top listing position. How often you will need to do this really depends on your location. In an area such as  London, where gumtree is very popular,  there are hundreds of properties being added to the system daily, so your property will slip down the list rapidly and you may wish to renew your ad daily. However in other regions of the UK it may only be necessary to renew the ad every couple of weeks – hopefully  you’ll have let the property by then !.

4. Use an attention grabbing headline for your advertisement

Tenants will be scanning several adverts so you want to make sure that your advert stands out from the crowd. If you look at most adverts on gumtree, the headlines nearly all follow a similar format, along the lines of “Beautiful 2 bed apartment available in great location”. Try to think of a headline that will make people click on your advert before the others. For example a headline that I use when advertising properties that are well suited to housing benefit claimants is “House available, free to DSS”. The word ‘free’ grabs the attention of the reader and encourages them to look at the advert. In reality I am merely pointing out that a tenant who qualifies for housing benefit will have the rent paid by the government – which would most likely be the case with any property they were to rent.

 

5. Upload good quality pictures

Gumtree  have stated that adverts that include photographs get, on average, double the number of responses compared to adverts that do not contain photos, so it really makes no sense to post an ad without photos. In this digital age, when technology makes it so simple to upload photos to a website, potential tenants are naturally suspicious of adverts that don’t include photos, often thinking that the landlord has something to hide and that the property is probably in a bad state of repair.

Make sure you use good quality pictures, and show the most attractive features of the property. Always try to include a picture of the front of the house, and  two other photos of the property’s best features. Currently gumtree allows a maximum of 3 photos to be displayed.

6. Create a full and accurate description of the property

Try to provide as much detail as possible and draw attention to the properties best features  in your description. This will weed out the people who require something that your property can’t give them and the potential for wasting time conducting unnecessary viewings. If you don’t mention the fact that your property has no parking facilities you really don’t want a two car family coming to view it as it just won’t suit them.

Try to include the following features in your descriptions:

  • Number of bedrooms
  • All other rooms
  • Parking  spaces/garage/off road parking
  • Bathroom facilites – bath/shower etc
  • What bills/charges are included in the rent
  • property condition
  •  gardens
  • central heating/double glazing
  • proximity to shops and other local amenities

7. Provide email and telephone contact details

Gumtree allows you to be contacted via email and/or telephone. I used to provide only email contact details but found that I received a lot more enquiries when I started to provide my telephone number. Some people, especially the older generation, are not comfortable with email and find it difficult and time consuming. These people will often only contact you by email if they have been unsuccessful in securing a property after calling other landlords who did provide a contact number. It pays to make it as easy as possible for someone to contact you.

8. Don’t use the paid options unless you really have to

Gumtree provides a great free service  but also offer various paid options such as the ‘Bump your ad up the list’ service discussed earlier and the ability to feature your ad at the top of the listings for up to 14 days. I’m sure the people at Gumtree won’t thank me for saying this but their free service is so good that you shouldn’t need to pay for these services. I’ve always been able to let my properties using the free service and if you follow the guidelines above you should too.

If you’re exceptionally busy and can’t spare a few minutes to manage your ads to ensure you always have a presence high up in the listings then it may make senses to you to pay for the services to keep your adverts high in the listings.

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For Property Management Jobs How Do You Pick the Best Manager?

By admin on April 26, 2010

Are you a rental property owner who is worn down by your property management jobs? Then read on to find out how to pick your perfect property manager who can help you manage both your tenants and real estate today.

What Can a Property Manager Help You with?

The following are the more crucial property management jobs that a property manager can do for you:

- Find new tenants for your rental property if it is unoccupied and screen any potential tenants by interviewing them and running credit checks.

- Help you maintain your property in habitable condition according to the local health and safety codes. This will include making any property repairs if necessary.

- Collect rent from your tenants and prepare an income statement of your rental property so that you can monitor how well your property is doing financially.

- Attend to any requests and complaints that your tenants may have.

- Handle any problems that are caused by nightmare tenants and evict them if needed.

How do You Pick Your Perfect Property Manager?

The first rule in hiring a property manager is to make sure that he is licensed by your local housing authorities. This is one way of picking someone who has at least gone through some formal basic training to watch over your rental property.

Just like any other employer, you should always interview your property manager before hiring them. During the interview, take the chance to ask him for his past experience and references for the properties that he has managed before. You should also give his past employers a call to ask them for their opinions on his skills as a manager.

Ideally your manager should have at least 3 years of experience in handling property types that are similar to yours. If you have a residential townhouse, his experience in managing commercial shop fronts may not be helpful because the difference in the laws and tenant’s needs.

Some real estate agents manage properties and tenants for their client part time. While their services may be cheaper, I will highly recommend that you choose a professional property manager because running a rental property demands quite a lot of skill and attention.

Should You Hire a Manager for Your Property?

If you own rental properties, you will know that being a landlord can be a full time job. While some landlords actually enjoy dealing with their tenants and property management jobs, others dread every moment of it.

If you enjoy dealing with people or is handy with property repairs, then you may want to try your hand at managing the property yourself first. That way you can see if property management jobs are your cup of tea and you can also save money at the same time.

Being a landlord is something that becomes easier with experience so if you have been managing rental properties for a period of time you can consider just hiring a property manager just to handle certain property management jobs. For example you can choose to handle any property repairs yourself while your manager takes care of the tenants.

On the other hand, some landlords see their rental properties purely as investments and do not want have anything to do with their day to day maintenance. If you are willing to give up about 5 to 10 percent of your monthly rent, then it makes sense for you to hire a property manager.

Hiring a property manager is highly recommended as well if you own rental properties overseas. Just the amount of money and time that you save on air travel will make it worth your while to hire a manager.

Teo Zhenjie has been showing landlords how to manage their tenants and rental properties effectively on Propertydo http://www.propertydo.com/ – To learn more important tips on property management jobs, visit his website today for step-by-step real estate guides, free resources and forms.

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For Property Management Jobs How Do You Pick the Best Manager?

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5 Tax Charges You Can Expect to Face When Buying, Owning & Selling Property Overseas

By admin on April 21, 2010

Most countries tax non-residents on property in their country. Furthermore, most double taxation agreements between the country and the UK do nothing to prevent this. Consider these five categories.

1. Tax on property purchases (similar to UK stamp duty land tax). After over 20 years in the tax advice business, there are few things which still surprise me. One thing which does still amaze me is just how often people still seem to overlook the fact that the UK is not the only country in the world with taxes. Anyone who invests abroad has a potential exposure to overseas property tax. Wherever you buy, you will face overseas property tax. Foreign property taxes generally fall into five categories; tax on property purchases; annual charges; tax on income; tax on property sales; tax on death or gifts. It is interesting to note that all but one of these categories are likely to apply to a foreign holiday home owned by a UK resident and if the property is ever rented out, all five will apply. This just goes to show that, when it comes to foreign property tax, the investor and the holiday home owner have more in common than you might expect. Many countries impose a tax charge of some kind when property is purchased, usually based on the purchase consideration paid.

2. Annual charges (comparable to UK council tax).These come in many different forms and are often charged by local or regional governments. There may be an annual charge on property ownership on either a flat rate or linked to the property value. Additional charges sometimes apply to properties which are not the owner’s main residence. There may also, or alternatively, be an annual charge on property occupation – either at a flat rate or linked to the property’s value. Another common annual charge is a wealth tax. Many countries impose this charge on non-residents based on the net value of the property and other assets which they hold in the country. Where a UK resident suffers annual charges on occupation or ownership, these may usually be treated as running costs and can be deducted as an expense from rental income or trading profits for UK tax purposes. Such costs are only partly deductible where there is some personal use of the property. The treatment of wealth taxes is less clear. These are often regarded as a personal cost with no deduction available in the UK.

3. Tax on income (similar to UK income tax). Most countries will tax profits and income derived from property whether through letting, development or dealing. Rental income may either be taxed on an accounts basis, based on profits after certain deductible expenses, or as a flat rate on rent received. Where an accounts basis applies, each country will have its own rules regarding what expenses are deductible. Flat rate systems allow for little or no deduction of expenses. In many cases, the tax on non-resident landlords is a simple flat percentage of rent received and may have to be withheld at source (i.e. a withholding tax). Reduced rates of withholding tax often apply under double taxation agreements and must be claimed where available. Profits from property development and dealing are usually taxed on an accounts basis and sometimes also attract additional social taxes like the UK’s national insurance. For UK tax purposes, double tax relief is usually available for overseas property tax on property income or they may be claimed as a business expense.

4. Tax on property sales (comparable to UK capital gains tax). Having spent more than 20 years in the tax advice business and having dealt with many overseas property tax authorities, another thing which does still amaze me regularly is how often people seem to think that they can sell a property abroad and not face a tax liability on it. Wherever you sell, you can expect to face up to foreign property tax. Some countries charge tax on the gain arising when a property is sold. Many countries do provide an exemption for the owner’s main private residence although you will find that this is not generally available to non-residents. Properties held for longer periods are also often exempt. Many countries, like the UK, will treat profits derived from property sales by developers and dealers as income. Double tax relief for overseas property tax suffered on capital gains is usually available against UK capital gains tax. Tax on property sales is often overlooked by UK investors, and they do so to their cost.

5. Tax on death or gifts (similar to UK inheritance tax). Many countries do not have any death taxes but just as many which do. Generally, where there is a death tax, there will usually be a similar tax on lifetime gifts as an anti-avoidance measure. Most countries with a death tax will charge it on non-residents in respect of property and other assets within their borders. Double tax relief for foreign death taxes is available against any UK inheritance tax liability arising on the same assets. Double tax relief will also be available for foreign tax gifts if the same gift gives rises to a UK inheritance tax liability although this will be rare unless trusts are involved. Wealth warning: do not assume that there will be an exemption from foreign death or gift taxes in respect of transfers to your spouse or civil partner. This will not always be the case. Furthermore, it is crucial to be aware that foreign gift taxes may apply to lifetime transfers of property or shares in property (e.g. putting a foreign property into joint ownership with your spouse).

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5 Tax Charges You Can Expect to Face When Buying, Owning & Selling Property Overseas

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Property Investment in the UK

By admin on April 16, 2010

In other parts of the world, what you pay for property in the UK largely depends on that property’s location. Where a property is situated and what services and amenities are nearby is often more important to property buyers and investors than the state of the property itself. If, for example, you are looking for property in central London then you can expect to pay a premium price for that property. In the north of England and in some parts of Wales and Scotland property prices are often much cheaper.

Before you decide to buy property in the UK it is best to assess why you want the property and what type of property would suit your needs. If, for example, you are moving house to another area because the schools are better in that area then you should expect to pay more for a property than the amount you get for your current property. If you want the property as an investment piece and are thinking of entering the buy to let market then you might not be quite so restricted as someone who needed to buy a property in a certain area of the UK.

There are many different types of property in the UK for buyers to choose from including commercial property. If it is housing that you are looking at then you can choose between detached and semi-detached properties, as well as flats, maisonettes and bungalows. You might decide that you want a particular type of detached property, say one that is in the Tudor style – these are known as mock Tudor. Then you have to decide whether you want a modern detached property in Tudor architectural style or whether you want an actual historic, Tudor home.

One of the main differences is that Mock Tudor homes were built after the nineteenth century and although they have the same black and white exterior the interior beams are there purely for decoration purposes – what is known as half timbering. In Tudor period houses the beams acted as part of the supporting structures.

Most of the Tudor houses that you will find on sale today do not date from the original period of 1485-1603 but are of a much later period, generally the nineteenth century when there was a revival of this particular style. Tudor houses generally have a timbered front and in houses built at the time this timber was part of the structure. The doorways will be lower than normal and arched rather than rectangular. If you are looking for an original Tudor property then these are rarely for sale; but if you should find one then it will tend to be in an area of the UK that was famed for its Tudor architecture – if the building is original then it is probably a listed building which will put all kinds of caveats about what you can and cannot do with the property.

If you are a first time buyer looking for a property then you may come under the new regulations the Government have brought in which encourages mortgage providers to give firs time buyers a longer payback period with a longer term fixed interest – this is designed to make monthly mortgage repayments lower but it can involve extra costs in the long run. Some companies will allow new purchasers to borrow more than the value of their home in order to help with the deposit and with the legal and estate agent fees that are incurred in the first year of buying a property. The Government also runs a number of shared ownership schemes in an attempt to help first time buyers break into the market.

You may not be a first time buyer but a flat owner looking to upgrade to a house. If you are looking at buying a brand new build then you could save money on surveyor’s costs. Some builders are offering good deals to buyers of new property either by paying their stamp duty or offering a cash back bonus when a person moves into the property. Whatever you decide to go for make sure that you have sound legal advice concerning property and property buyer’s rights and obligations.

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Property Investment in the UK

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7 Reasons Why Property Can Become the Perfect Investment

By admin on April 8, 2010

When many people hear the term ‘property investment’ they automatically think of what they have read in the papers: falling house prices, fluctuating interest rates and the failing economy.

They see this press. Take it to its word. And forget that hidden beneath its outer exterior the property investment market has got a lot to offer.

It is not inaccessible either. All it takes to access the true potential of the property market is the knowledge to know where to look and ‘know how’ to make it happen. 

Remember, despite all the hype, property is still an investment vehicle. A vehicle that gives investors – we mean you – the flexibility to control your involvement and how much time you invest within them.

Take a look at stocks. Do you really understand how they work? Not many of us do, but we still invest in them because we know there is profit.

But imagine what you could achieve with an investment that you could completely control? No worries. No fear. But knowing exactly where you.

Well with property you can. Your choices will be endless.

Real Estate Stocks and Mortgage instruments

Now if you wanted to be a passive investor this is the route to take. Here you can place funds into the stock market in the form of equities of major national homebuilder firms, and they will do the rest for you.

Or alternatively you can follow another investment strategy: discounted notes.

The rules to this investment are simple.  Sellers quite often are quite happy to accept a mortgage from a buyer to begin with but later want to convert it to cash. To do this they need to sell the note to an investor – you – at a discount. And the rest? Well. Whilst they are free of the mortgage, you will be receiving monthly repayments from the buyer – when you have never even seen the house. How simple is that?

Appreciation of property values

This one is the more traditional routes and one we’d most recommend if you plan to sell your properties later on.

Take the current financial climate. You can now invest in properties at 70-80% of their original value without a second thought. Giving you instant free equity.

Now consider this. After investing you decide to either rent your property out or live in it yourself. Over time, your property investment will begin to appreciate in value, and if it is anything like what we have experienced before, you will have access to a property that is greater in value than the top properties of 2007.

And if you do eventually sell, you will not only experience a return on your investment… you’ll have that initial extra equity to boot too.

General Price inflation in the economy

Even if your properties are not appreciating in value – as properties are doing now – this is not the end of your property investment. No. Their value can also be affected by economic inflation.

So let’s just say for example that you are developing some properties. If the cost of labour and materials is continually rising, then the cost to build an identical property could be more than the original. And if each property you build in one area is costing a bit more each time, then in turn their value as a complete development site will have risen.

Meaning at the end your property values will be higher than they were to begin with.

Cash flow and mortgage repayments

Compared to traditional investments that require some money on your part to maintain and pay for them, with rental properties you don’t have to deal with that. Your tenants will essentially pay your repayments for you, whilst giving you an additional positive cash flow each and every month too.

With figures like these it is easy to see why property is considered a stronger investment than stocks and a bank account – the gains are much more profitable.

And here is the best part. Even if your rental income covers only the mortgage repayments. No more. No less. You will still have the joy of watching the equity in your property grow over time.

Buying below market value

Look in the papers and you’ll read many reports of investors who are selling up in the current financial climate in order to maintain their profits. This is a big mistake on their part, but one you can take advantage of. You see they will be so keen to access the equity from it, they will be happy to sell it to you for below value. Great!

Then there are other cases when a property has gone into a foreclosure. To sell the property and get their money back, lenders will often take less than the market value so that they can avoid any further marketing expense and begin again with a clear slate.

Now here is the advice you have been waiting for… Find one of these properties and you will immediately enter into an equity position, purely based on profits.

So if you do spot one… gets investing and buys low. The long terms profits will be incredible.

Converting the use of your property

Imagine investing in a run down 5 bed property and being able to convert it into student accommodation or 2 apartments. You could potentially increase your rental income and benefit from having multiple tenants all within one property. Meaning there will always be someone living in your rental property.

This is what is so great about property investment. You can do a similar thing to any type of property. Take for example this concept. You have just invested in some apartments that currently have low rental yields.

With a little remodelling, you can convert these said apartments into condominiums, and nearly double your rental yields.

Create new value

Every region or neighbourhood goes through a price fluctuation at some point. So spotting a potential hot spot – before its property prices have increased – can be quite profitable.

In this one area you can build up your property portfolio and sit back and watch as your properties appreciate in value. Perfect!

Get the picture – property investment can offer you consistent ‘positive’ cash flows every single month, plus can come in all shapes and forms for you to choose from.

So if you are looking to invest in rental properties consider your options for a moment. There is more to property investment than meets the eye.

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7 Reasons Why Property Can Become the Perfect Investment

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Investment Property – How to Spot Tenants That May Want to Use Your Property to Grow Illegal Drugs

By admin on April 6, 2010

As a landlord, when you let a property, you hope that your tenants will treat your property with care and respect ensuring that, at the end of their tenancy, they return the property to you in the same condition they found it in when they arrived. You also assume that your tenants will not undertake any kind of illegal activity in the house. Unfortunately, this isn’t always the case. In the UK there is a growing trend towards rogue tenants renting properties for the purpose of cultivating illegal drugs. Make sure you reduce the risk of becoming a victim of this type of activity by learning how to spot the warning signs of illegal activity.

The equipment and materials required for growing cannabis can be acquired quickly, cheaply and legally by almost anyone. This combined with the attraction of being able to carry out the activity in someone else’s property and at someone else’s expense has made it a relatively simple task for the criminally minded tenant to set up a cannabis factory. Cases are on the increase and this problem has become a major talking point in the world of uk property investment in recent months. However you can mitigate your risk of falling foul of this type of activity by looking out for a few simple clues.

Your vigilance should start at the tenant’s initial viewing of the property. Tenants intending to grow cannabis may show little regard for the practical considerations that would normally concern prospective tenants when viewing a house. Considerations such as identifying a space to accommodate their washing machine and fridge freezer in the kitchen or checking that there are enough sockets in the corner of the lounge where they would want to position their television may seem of no interest to someone viewing the property for the purposes of turning it in to a cannabis factory. Often this type of person will not not even bother to look in all of the bedrooms when viewing a property. This is because they do not intend to use the property to live in, in a normal fashion so such things are of no concern to them.

You should also be wary of tenants who show an unusual interest in the electricity supply at the viewing. If a tenant asks repeated questions about the location of the rcd board, the location at which the supply enters the house, and other aspects of the electrical infrastructure this could be another indicator that they intend to grow cannabis at the property. The reason for this is that cannabis needs a lot of heat and light to grow, meaning that the electricity consumption in the property will increase massively. Invariably the grower will try to tamper with the wiring, by bypassing the electricity meter, as a way to avoid detection. He or she will need to ensure this will be possible before taking the tenancy on.

You should be suspicious of any tenant offering to pay the rent for the entire tenancy upfront and in cash at the start of the tenancy. Cannabis growers will often make such an offer to try to ensure that you do not visit them and disturb their activity, during the course of the tenancy. Also, doing this will mean that you do not have their bank account details, making them more difficult to trace if their activity is discovered.

When a tenancy has started there are other signs to look out for. Cannabis cultivators will obviously try to hide their activity from view and therefore will ensure that curtains remain closed and windows blacked out at all times. If you notice this to be the case during the day time it should arouse your suspicions. Similarly if a light constantly appears to be on behind the curtains at all times of day and night, this could also be a sign that cannabis is being cultivated.

If you spot either of these signs whilst passing the property you should then attempt to contact the tenant to arrange a property inspection. You only need give 24 hours notice of your desire to inspect the property. If the tenant ignores your attempts to make contact or tries to avoid an inspection taking place, this indicates that they do not want you to see the inside of the property and should arouse you suspicions further.

In such cases you may wish to examine the rubbish being thrown out of the property for further evidence. Large quantities of plant waste and an unusual odour provide more reason to be suspicious.

Following these tips should ensure that your UK property investment is not an easy target for cannabis growers. However, if you have reason to suspect that cannabis is being grown in one of you investment properties, you should contact the police immediately and ask them to investigate.

Mark Bottomley is an experienced investor and landlord in the UK property market.

For more information on issues related to investing in property in the UK go to:
http://www.thepropertyinvestor.info

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The Property Investor – To Be or Not to Be a Landlord

By admin on March 19, 2010

If you want to enjoy wealth, you should learn the basics of real estate investing. The property investor should try to gather enough information about the market and the particular property that he is interested to purchase. There are those who prefer to buy and sell properties but some investors decide to become a landlord. So, which type of investor are you going to be?

Almost every individual has already experienced buying a home or a land property, or perhaps rented an apartment. As long as you know how it feels to be a homeowner or renter, you can already think about becoming a property investor. Typically, the property investor will purchase several houses and become a landlord. Within 30 years, all the mortgage loans can be repaid and the value of the properties has already doubled. The rental prices at this point have also increased and so you see how much money you can make.

The situation seems so easy and inspiring but once you’re already there, it becomes daunting. For instance, if one property cost you $80,000, you can pay off the mortgage within thirty years. During that point in time, the property will amount to around $350,000 and you can get gross rents of $12,000! So you see, you can definitely generate wealth through property investments.

You need to be aware that many investors fail because they lack cash flow. While you are busy as a landlord, you can also purchase houses or properties and flip them to other investors. For every property, you can get $5,000 to $20,000 that can help in providing for your cash flow.

The property investor should know how to manage properties especially if he plans to hold it for the long term. As a landlord, you will need to manage your properties that you have rented out. This can be a smelly and dirty business but as long as you’re equipped with the right knowledge, you can earn profits from it. Learn the basics of land-lording and with the right strategies, you can pull it off.

If you decide to become a landlord, you should be free from other major debts. With a significant amount of starting capital, you can succeed in this kind of business. If you think that this kind of set up will work for you, go ahead and become a landlord but if you’re having second thoughts, you might as well stick with flipping properties.

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