Estate Agents are Open to Offers Summer 2008

Estate Agents offices and showrooms up and down the UK are close to empty as the majority of the nation feels the effect of the credit crunch. Indeed, whilst at this time last year (at the peak of the boom) agents were reluctant to meet and greet property investors (probably because they always knew we offer low!) - the tide has changed leaving investors in a better bargaining position and being able pick up good property deals - particularly over the last few months.

Some tips on approaching Estate Agents:

(a) Take your time and nurture a relationship with the Agent. They want to know that you are serious. You should have a good understanding of your chosen area, what prices/rents are doing (head to Rightmove / Zoopla / Net House Prices) and show estate agents you have done your research. Explain the fact that you can move fast and can help fix ‘chains’ where a buyer has dropped out of a sale by completing quick.

(b) At the moment Estate Agents are not busy so it is highly likely that they would be more than willing to show you around some properties on their books. Ask them to email you the details prior to your visit and undertake as much due diligence as possible such as verifying the open market value (have their been any recent sales in the last three months?) as well as referring to our rates table via our website which is updated daily with new products on the market (what would this property need to value up to in order to get it to stack?);

(c) Dress professionally and take a tick sheet which could point out any potential issues with the property which could help you negotiate your offer price further;

(d) Act friendly and courteously whilst doing your very best to find out what is the situation that the vendor is facing. Property acquisition is a numbers game and you should be prepared to deal with the fact that most owners, even in the current climate, are not willing to accept Below Market Value (BMV) offers. However, do not let this dishearten you - once you have found a potential deal, it’ll all be worth it!

(e) At the end, thank them for their time; leave your card and explain that you will take your notes and head back to your office to do some further research;

(f) If the Agent is close to you, pop in the next day arming yourself with as much information as possible - perhaps a recent Hometrack report; some evidence of visible house price drops in your area and examples of what you will be able to achieve in rent for the property you have viewed. The key here is not to not act too bullish and confrontational and have a frank and open discussion with the Agent about why you have come to your given purchase price;

* Make lots of offers. The worst that can happen is that the vendor will say no!
* If you are polite and come across as professional the Agent will have no reason to feel ‘offended’ by your low offer;
* You must learn to develop a thick skin; and lastly
* Keep Asking!

UK Property Market July 2008

With over 1,000 properties coming on to the market on a weekly basis (largely through Estate Agents) and a recent report by the BBC stating that there is currently one buyer for every 15 sellers - now is the best time to buy discounted and high yielding property over the last two decades.

Despite what speculators and media ‘experts’ are saying, property has and always will be a medium to long-term asset vehicle. Remember, cash flow is king and as long as you ride out the tough times you will be the first to prosper when the market comes good.

Swap Rates

As property investors, you should keep aware with what is happening in the wider economy - particularly with regards to what is happening with interest and swap rates (the borrowing rates between institutions)

http://www.swap-rates.com/UKSwap_extended.html


as these can clearly effect what you will be able to borrow against an investment property that you are looking at buying and/or re-mortgaging.

Average rents have increased by nearly 14% according to Paragon.

Rents continue to grow in April as the demand for rental property increases. The increase in rental demand is in part due to the credit crunch with buyers holding off from entering the market as they are unsure of what is going to happen to house prices. The increase is also partly due to the continuing house price inceases (up to several months ago) which have made it alot harder for first time buyers to get onto the property ladder.

The average age of tenants is increasing (as people find it harder to get on the property ladder). A year ago the average age was 31 now it is 33.

The percentage of people living in private rental accomodation was 10% in 2002 and rose to 12% in 2007.

This rent increase is a silver lining to the current cloud in the property market. The current average yield is 6.3% but if this trend continues it should rise to 6.5%+.

The latest figures from the Council of Mortgage Lenders (CML) show that repossessions continue to rise.

The number of people's homes who were repossessed were up 21% in 2007. This is the highest level of repossessions since 1999. in 2007 27,100 homes were repossessed by people who could not afford to keep up repayments on homes and who didn't arrange an exit strategy with either the bank or another third party, such as a home repossession intervention buyer.

The mortgage market has recently got much tougher for borrowers with rates still relatively high and a greatly reduced number of mortgage products on the market. In April last year there were 13,428 mortgage products, there are now just under 4,000 mortgage products on the market. Many borrowers are coming to remortgage at their end of fixed rates and are expected to have to pay higher mortgage costs putting pressure on their outgoings and increasing the likelihhod of more repossessions. Even though there have been several interest base rate cuts the Government have been critical of the banks for not passing on the savings to borrowers. This stand-off is likely to continue as banks look for ways to prop up their profits following losses from sub-prime mortgages in the UK and US.

More repossessions do mean that there are more opportunities for mortgage intervention companies. These companies claim to 'buy your house quick' and generally negotiate 15 - 25% off the value. Even though it is a benefit for a home owner not to get reposessed and for them to get some equity rather than none and potentially stay in their own home there has been call for reugulation for these types of companies as there have been a growing number of complaints due to sharp/poor practise from this industry. The leading companies in this sector have welcomed the opportunity for regulation and are working with the Government to put a regulation framework together.

Be Fearful When People Are Greedy, Be Greedy When People Are Fearful

So why do so many property investors run the other way when the opportunity to "buy low" finally comes around?


The Answer Is Simple.

Most people follow what everybody else is doing. Psychologists

call this the "herd instinct".



For the most part, the herd instinct serves us well. For

example if you are swimming in the ocean and somebody shouted

'SHARK!' you'd be wise to follow the herd back to shore.



When it comes to investing however, the herd are almost always

going in the wrong direction. They tend to do whatever the

newspapers tell them to do or not to do, not realising that

millions of other people are going to be doing the same thing

in the same way!



Ordinary people follow the herd and invest when prices are

already too high. Then they get disillusioned and sell when

prices are low, vowing to never again waste their money

in the stock/property market.



Smart investors go against the grain. They buy solid assets

at knock down prices when others need to sell. They make shrewd

decisions based on sound investment principles and do very

well for themselves over the long term. That is why only 3% of

the population are considered truly 'wealthy'.



To do really well out of the current property climate, you

need to educate yourself on the things other investors have done

when previous property booms came to an end...



- How did they raise finance?



- How did they find great deals in superb locations?



- What strategies did they follow for profiting from a downward

or stable market?



- How did they maximise the cashflow form their properties?



I will be sharing all of these concepts and much more with

you on Saturday the 5th of July at Heathrow, London. That is

where I will be holding a workshop titled "Proven Time Tested

Strategies For Profiting From A Downturn In The Property

Market".



I will be sharing strategies with you that have worked for

shrewd property investors during previous downturns in the

property market - these are the investors who came out the other

end smelling of roses while so many around them lost their

shirts.



These are the classic 'defensive strategies' that you need to

be putting in place now so that you can produce superior returns

over everyone else in the next 3-5 years.



Don't miss out. Book your place today before the event sells

out (all of our workshop tickets always sell out within a few

days of them going up for sale).



To find out more about the "Proven Time tested Strategies For

Profiting From A Downturn In The Property Market" workshop or

to book your tickets visit:



>> http://www.property-system.com/ProvenStrategies.htm



As you might expect from me, this workshop is fully covered

by my usual quality guarantee - great value or you can ask

for your money back at any time during the event. I'm also

going to be giving away £1,800 worth of bonus gifts to ALL the

attendees as my way of giving you over the top value for money.



Tickets will be completely sold out within a few days. Don't

miss out if you want to learn how to adapt your strategy to the

current climate. The link again for more information is:



>> http://www.property-system.com/ProvenStrategies.htm



Please feel free to contact me if I can help you in any way.



Kind regards



Parmdeep Vadesha

Managing Director, Vadesha Properties Ltd

www.property-system.com

Tel: 0116 2460205

Vadesha Properties Ltd



314 Uppingham Road

Leicester, Leicestershire

LE5 2BE

UK

Banks are showing large drops in House Prices whereas Land Registry price figures are showing only a small reduction

This practise by the banks has been attacked by Stuart Law, Chief Executive of Property Investment firm Assetz. He condemns the banks figures as being distorted and creating alarm in the market while they continue to profiteer from inflated mortgage products and fees. Law says, "the marginal 0.2% monthly fall in house prices, reported by the Land Registry provides a true reflection of the current housing market and is far removed from the spurious 2.5% fall suggested by Nationwide last week. The Nationwide figures are skewed based only upon it's own data while Land Registry data provides a more reliable overview of the entire market."

Law expects to see individual banks and lenders continuing to report high house price falls while the truth is much lower. While there is a reduction in house prices this needs to be accurately reported and not over-hyped by banks who have their own agenda and interests to protect.

Law also accuses the banks of profiteering. "It is the the banks profiteering which has led to purchasers trying to chip away at vendor's asking prices, in order to compensate for the additional borrowing costs they now have to endure."

Rented properties will need an Energy Performance Certificate for all tenants from 1st October 2008.

Energy Performance Certificates (EPCs) were created as part of the HIPs pack which is now mandatory for all 3 and 4 bedroom houses which are for sale in England & Wales. EPCs are now being introduced to the rented sector (HIPs not needed to rent a property). The certificate will state how energy efficient the rental property is. It will use a colour chart to reflect how efficient the property is, similar to those currently used on washing machines.

Energy efficient measures such as double glazing, efficient boilers, loft insulation, wall insulation and lagging are all measures which will help the properties get a better energy rating.

There are grants available to landlords to help with energy efficiency measures. The Government makes the energy industry pay £1.5 Billion per year in to help make homes more energy efficient. At present some of these grants in Lancashire/Manchester/Merseyside include new boilers, wall insulation and loft insulation. Please contact Property Fit if you would like access to these free energy improvement measures. Property Fit works with a company called Warmfront who install the grant aided components (subject to certain conditions).

The EPC has a lifespan of 10 years and contains a list of potential energy efficiency improvements which could be made to the property. At present these improvements are not mandatory but Property Fit expects that this is part of a plan to ultimately give tax incentives to homes that have good energy efficiency or place a higher tax on those with a poor energy efficiency.

The National Housing Federation have forecast that house prices in England & Wales will rise by 25% by 2013

The federation states that while there will be a slight reduction in 2008 of 4.4% and a smaller reduction of 2.1% that house prices will quickly recover and will be rising by 9% in 2012 and 2013.

It states that one of the reasons for the growth bounce-back is that there is a great demand for housing and this demand has not diminished but in fact will grow. The demand will be partly prompted by the cutback of new houses on the market as house builders mothball and delay projects during the current housing uncertainty. People are also living longer and the high rate of divorce continues to prompt demand for even more housing as couples split up and need two homes instead of one.

The Federation predicts that the cost of an average home in England by 2013 will be £274,700.

Therefore investors need to consider 2008 as the window of opportunity to buy property as cheaply as possible. There are still a large number of motivated sellers but as soon as the market starts to recover then these sellers will be more tempted to wait or increase their prices. It is probably that the current buyer's market will only last for another 12 months so investors should consider buying now rather than paying higher prices in future years.

Thank You Juswant & Sylvia for Another Fantastic Berkshire Property Meet!

Just a quick note to say ...thank you!

Thank you to everyone that attended our Berkshire Property Meet yesterday, on Monday evening. We had another phenomenal evening with attendance of 150 people committing their time to attend and hear from Rob Moore and Mark Homer.





For those of you who missed the Rob Moore / Mark Homer double act, don't worry, you can get a whole day of their excellent talk this Saturday. Just follow the link below to register:-
Rob Moore / Mark Homer - Progressive Property Open Day


There will be another email in the next few days with a lot of information for you plus photos of the night.


We are already looking forward to August 18th 2008, at which we are honoured to have Simon Zutshi as our guest speaker.





Simon is the man behind the Property Investor Network and also author of 'Property Magic'. Simon has been a property investor since 1995.



We look forward to seeing you all next month on Monday August 18th 2008.



Connecting with other Berkshire Property Meet attendees:

Some people have asked us what's the easiest way to find and connect with those members who's details you didn't get or mislaid? The simplest way is to look on facebook. With over a 1000 members joining the Berkshire Property Meet Group, you can join too by clicking on this link:-
http://groups.to/berkshirepropertymeet/

CHL mortgages responds to base rate decision

It is unsurprising that the MPC has decided to hold Base Rate at 5% this month given the recent Inflation figures and the Bank's own view on Inflation's expected rise over the coming months. The medium to long-term view may be that Inflation will move back towards the Treasury's target of 2% next year, however, shorter-term factors are steering the ship at present. Rising food and energy prices are contributing greatly to the UK's Inflationary pressures while the economic slowdown including house price falls and fewer housing transactions provide a mixed range of issues for the Bank to digest.

In the mortgage market the Base Rate decision continues to mean very little in terms of the pricing of products. For many borrowers not on tracker rates, the Bank Base Rate has seemed irrelevant, given that most lender's own rate setting has not been tied to it.

Those investing in the buy-to-let sector are in the same position with the lack of funding available in the market continuing to impact on their ability to refinance. For those still lending buy-to-let pricing and criteria is much more realistic and responsible than 12 months' ago and those landlords with suitable financing are finding increased demand for their rental properties and increased yields. In this sense, buy-to-let continues to offer an attractive investment opportunity for those willing to take a long-term view.

MPC must not keep interest rates too high, longest serving member of the MPC has today warned that the BOE must be careful not to keep interest rates too high in the battle to fight inflation. The UK would escape a recession as seen in the 80's and 90's, but if interest rates were to rise this was more likely to tip Britain into an economic downturn.

Secured loans market 'could contract further'

Borrowers have been warned their choice of loan providers could reduce this year as more and more lenders pull out of the market.
Last week First Plus became the latest lender to withdraw from the market, joining Alliance & Leicester, Breeze Loans, Capital One Bank, LoanOne Intermediaries, Money Partners, Picture Financial, and SPPL.

The fact that First Plus which is "one of the biggest lenders" has withdrawn means that further contraction of the market is now likely.
Unfortunately, many lenders are no longer finding secured loans a viable business option.

They face the same funding issues as mortgage lenders and with house prices continuing to fall, lenders can no longer be sure that, if a consumer defaults on their loan, they will have enough equity in their home to repay the debt.

The number of lenders remaining has been greatly reduced and with First Plus's owner Barclays yet to announce if it will continue with its own loan and that offered through its Fair and Square brand, the numbers could reduce even further.
Mortgage Saints have access to the whole of the market which means we will find a mortgage suitable for your needs. Call / email to discuss in further.

Secured loans future hangs in the balance- how can the industry fight back?

So Firstplus have withdrawn from the market as of the 9th of August. 300 jobs will be lost and Moneysupermarket.com face profit losses of up to 10%. This, we know. What is unclear the scale of the devastation that may occur in the wake of this move, as Firstplus's business model was pushed to the limit by tighter lending criteria.
Some casualties have already emerged. Loanmakers, saw shares plummet by 52% and gave a statement saying that Firstplus would have an "adverse" affect on their business. Loanmakers were a major player in the industry and have overnight been transformed into a business in serious trouble. However they will surely not be alone in feeling the effects of this decision by Barclays owned Firstplus. Companies like Paragon will be put in a difficult position, as well as Ocean Finance and others. Some are deeming the move the "death of the secured loan market", as it usually follows that when one big lender withdraws the others follow having a domino effect as they panic.

What the industry needs to survive is lenders to stand strong and fight instead of becoming immediately unnerved. Firstplus's withdrawal is a hammer blow for the secured loan industry. Paragon will not absorb the massive volumes lost. The problem is more the reaction that will follow from other lenders and in particular the industry is holding its breath awaiting any reaction from GE.

Private rental housing value exceeds commercial property

The value of housing stock in use in the private rental sector is now higher than all privately-owned commercial property, it has been discovered. A new report found that the value of rental property in the UK property sector is around £500 billion. This means that it is worth more than all privately owned commercial property, including shops, leisure facilities, factories, hotels, warehouses and offices. The report also predicted that prospects for property investors will improve with house prices "almost certainly" set to increase at a more rapid rate than commercial retail estate over the long term and noted that the private rental sector is having a stabilising effect on the market.

It is a result of the appalling effects on young owner occupiers last time that ARLA took the initiative and launched buy-to-let to re-build and re-finance the private rented sector and to mitigate the dreadful social consequences of housing boom and bust.

Couples 'must save year's to pay for deposit

Couples buying a first home must save the entirety of their annual earnings for a deposit, it has been claimed. A couple must put aside £27,738 to cover the deposit, stamp duty and legal fees. This is more than the total annual earnings after tax of 25% of UK couples.

In 1996 the average couple needed to put aside just 21% of their annual income to fund the cost of a first house purchase. Access to the housing market has deteriorated as the credit crunch has taken hold of the mortgage lender sector. With mortgage approvals declining, the picture does not look like improving in the latter part of 2008 and first-time buyers will find their path to home ownership increasingly blocked.

News of the study's findings comes as separate research conducted found that the average rate on a two year fixed rate mortgage currently stands at 7.07%.

TOMORROW: Berkshire Property Meet & details of the prize draw

We looking forward to seeing you tomorrow night for another great evening of networking at the UKs Leading Property Networking Event, the Berkshire Property Meet! This is your best opportunity to network with up to 200 property investors, property experts and property professionals (250 in May), so it really is a MUST attend event.

Holiday Inn
Manor Lane
Maidenhead, SL6 2RA

Starts 7pm

£10 on the door

We are honoured once again to have a premier speaker - Rob Moore from Progressive Properties - at your meet tomorrow. Rob will start speaking at 8pm.

Who is Rob Moore?



Rob is a self made businessman, Full time Property Investor & Best selling Author of "The 44 Most Closely Guarded Property Secrets" and "Make Cash in a Property Crash".

Rob Moore & his business partner Mark Homer have been regularly buying below-market-value property with great success for themselves and fellow investors. They share what their experiences are of the current market and how they are turning this to their advantage.
Win 20 copies of "The 44 Most Closely Guarded Property Secrets" and "Make Cash in a Property Crash" and an IPOD Nano packed with great audios to help you succeed.
http://www.progressiveproperty.co.uk/landing/property-book-set-video-launch


Some of the regular experts who attend the Berkshire Property Meet:-
Glenn Armstrong - Bought and traded nearly 500 properties
Barry Danser - Finance / Rent Rescue
David Lee - Cash Flow Investor
Richard Sheppard - Property Tutor / Investor
Abdul Malik - Lease Options
Nick Pedrithes - BMV / HMO Expert / Finance
Sonny Walia - Meet the Surveyor
Darren Hunt - Property Sourcer / Investor
Simon Zutshi - Property Investor Network
Jim Haliburton - HMO Daddy
Kevan Keegan - Rent Back Charter Association
Anthony Lyons - Editor, Your Property Network
Plus many many more active investors, experts & professionals



BMV Clinic
There is also the regular BMV clinic run by our good friend and everyone's mentor, Nick Pedrithes. This is very informal and runs from 5pm until 6:45pm ish. Come along with any questions you may have Sylvia and Nick will gladly discuss your options with you.


Just follow the link to enter the DRAW:-
http://www.progressiveproperty.co.uk/landing/property-book-set-video-launch

Will the OFT Probe into 'Sale & Rent Back' Affect Your BMV Business?

Many property investors are aware of the fierce scrutiny that the Sale & Rent Back
(SARB) sector has been facing in the media of late. This has been followed with intense
lobbying from Shelter, Citizens Advice Bureau and the Council of Mortgage lenders.
In turn, this has led to the OFT launching an investigation into the sector with
recommendations due back this autumn (maybe).


Have a look at the following links for further information:-

http://www.oft.gov.uk/advice_and_resources/resource_base/market-studies/current/saleandrent

http://news.bbc.co.uk/1/hi/business/7400304.stm

http://www.guardian.co.uk/money/2008/may/14/repossessions.property



Like many other honest and ethical property investors we are concerned by the sharp
practises of a minority of 'rogue' operators that are tarnishing the name of everyone
involved not just in the SARB sector but the BMV sector as a whole.

Following a series of meetings we have joined a number of like minded investors to
support the Rent Back Charter Association (RBCA) in order to get our voices heard and to
demonstrate that the sector can self-regulate in an effective way. RBCA have already
met with the OFT and started to put across the reality of the sector and not the media
hyped sensationalism.

The Rent Back Charter Association has also lauched a web-site ( www.rentbackcharter.com )
and we would urge everyone to register if they are in the BMV or SARB business. This
will allow them to gauge interest. You will not need to pay anything to register.

There is a one year non-refundable membership fee of £295.00. However if you are
are amongst the first 50 to pay you will receive a discount of £100. So take up this offer
now if you are even thinking of taking up membership later.

http://www.rentbackcharter.com/membership.php

The aim of the RBCA is to represent those people in the SARB sector who want to
operate in a highly ethical and professional manner and want to continue to operate
without the threat of heavy and costly legislation in the market. The RBCA will be
accountable to their membership, they will publish best practice guidance and
vigorously defend their Charter Code.


If you require any further information please use the following 'contact us' link:-
http://www.rentbackcharter.com/contact.php


To be taken seriously by the OFT and to counter those that are looking to close down
the SARB sector, support the RBCA, ideally as a full member or at least register your
interest now:-
http://www.rentbackcharter.com/membership.php


This Monday on 14th July, all the founding Directors of the RCBA will be
at the Berkshire Property Meet to answer any questions you may have.

We look forward to seeing you on Monday, Juswant & Sylvia, at what will be another vibrant
meeting of networking and learning. It's the best investment of time you can make
in your property business right now. Our guest speaker will be Rob Moore.

See you there!

Florida or Bust

People have flocked to the 'sunshine state' for years attracted by the climate, the proximity to the coast and numerous theme parks. Most of all by the fact that they could buy a large property with a garden and a swimming pool for half the price of a considerably smaller house in the UK.

And if you bought your retirement house or holiday home back then, it is still doing exactly what you bought it for. Giving you a nice retirement lifestyle or somewhere to take the grandchildren to see Mickey.

The value of your house is irrelevant if you do not need to sell. In the long term, property will always be a sound investment.

"Most people bought as a mid to long term investment, to live in, have as a second home or as a retirement fund", says Lee Weaver, director of the British Homes Group in Kissimmee, "Unless you really have to sell, the advice is 100% to sit tight."

For those who have to sell their homes however, the situation is bleak. The slump caused by the US sub prime crisis has sent repossessions soaring and prices dropping.

For the investor this presents an opportunity.

A 3 bedroom home in Kissimmee that sold for $240,000 a year ago can now be snapped up for $198,000, a 17.5% decrease. And in Miami, where prices were rising by more than 20% annually as recently as 2005, house prices showed a 19.3% decline last year, according to the Case-Shiller home price index.

In parts of southern and central Florida particularly near Orlando, there are many vacant properties available.

So will the Florida market recover?

Eventually yes, because the sun still shines, the beaches await, they have great healthcare and Mickey Mouse is alive and well. It's those good old fundamentals again!

"When the pendulum swings that far to the right, it has to swing that much more to the left to even things out again" according to Kimberley Kirschner, chair of the Realtor Association of Greater Miami and the Beaches, "Prices went much higher than expected and although the drop is significant they're getting back close to normal".

She believes that parts of the Miami housing market are already on the road to recovery, helped by overseas buyers taking advantage of the weak US dollar.


In good times or bad, there's always a property deal to be found somewhere!

How can I make money in a falling market?

In the good times everything is rosy in the garden. Your chosen asset or investment is steadily increasing in value and all is well with the world. Even if you do nothing you will still make money.

But life isn't like that all the time and the value of most investments, as we are constantly reminded in the small print, can go down as well as up.

For the long-term investor, it is the long-term performance that counts. You will sit tight, secure in the knowledge that eventually your capital gain will appear (a capital gain that is taxed these days at just 18% with a tax free element of £9600).

In the short term though, how do you make money in a falling market?

The first way is that falling markets produce motivated sellers.

There are always reasons for people to move, some good some bad; relocation due to promotion or new jobs, growing families requiring more space, splitting families and mortgage difficulties. Some sellers have to move and need to move quickly.

They need to sell and you can offer to buy - at a discount of course.

Boo you say, taking advantage of others' misfortune!

Well first of all let us remind ourselves that we are in the property business to make money. That's a cold hard fact and you may have to harden your heart a little along the way. But second, let's remember that they want to sell at the best deal for them and you want to buy at the best deal for you. It cuts both ways. They would drop your offer in an instant if a better one came along.

Your finance is in place, there is no chain or complications and you can complete quickly. You are exactly the sort of buyer they were hoping for. Your appearance on the scene will save them time and the money involved in aborted transactions. Yes, you will offer a lower price because you have these advantages.

The other way to make money in a falling market is to buy at the bottom. Really? You would have to be a genius to call the bottom of a market but the good news is you don't have to be that precise, it's fine to buy just before or just after that point.

Let's call it a zone of opportunity.

How to spot that? - research, research, research, good estate agency contacts and knowing if the area you are considering is, in the mid to long term, always going to be a good bet. In other words, that the fundamentals are still in place.

Are the factors that made the investment a good one in the first place, still relevant and more importantly, still there?

Some Things We Can Learn From Donald Trump

As one of America’s five richest real estate moguls, there’s no arguing with Donald Trump’s mastery of the real estate trade. In actual fact, despite a few financial ‘hiccups’ he has one of the most admired track records for real estate investing success.

Look closely at “the Donald’s” strategies and you will find a common thread. This is a principle so blindingly obvious, you will kick yourself if you’ve missed it.

So what is this principle and how can you profit from it?

It’s simply the unchangeable LAW OF SUPPLY AND DEMAND.

Let’s look at some examples of how property values, driven by demand vs. supply may be affected by different events:-

- Low-cost Airlines: A survey by Savills Research in 2006 found that the average price of a property located within 10 miles of an airport served by a low-cost airline is 39% higher than for properties within the same distance from an airport without a low cost carrier. Rents were also found to be 30% higher.

- Hosting the Olympics: The regeneration effect of hosting the Olympic Games has generally had a positive impact on house prices. Barcelona was the best performing host city with prices rising by 131% versus an 83% increase in Spanish house prices in the five years leading up to the 1992 Olympics.

- EU Accession: When Ireland joined the EEC in 1973, GDP per head was 63% of the EU average. By 2001 this had climbed to 126%. Over the last eight years in what has come to be known as the ‘Dublin effect’, the value of property has climbed by 196%.

- New Airports: In December 2007, the announcement of plans to build an International Airport in the Emirate of Ajman had the effect of increasing property prices by 30% virtually overnight.


Now, back to the Trump factor; some of Donald Trump’s planned future developments include,

1. Trump Ocean Club Panama City, Panama
2. Trump Ocean Resort Baja, Mexico
3. Trump Cap Cana, Dominican Republic
4. Trump International Hotel & Tower Palm Jumeriah, Dubai
5. Trump Tower New Orleans, USA
6. Trump Aberdeen, Scotland

Make a note of these locations, fellow investor, that’s what is called a clue!

Sale and Rent Back Set To Soar

Landlords who get into the Sarb market can offer a service which is both ethical and profitable, says Emma Tyrrell

Last Updated: 5:06pm 30/05/2008



Thousands of landlords are attempting to break into the sale-and-rent-back (Sarb) market, drawn by below-market-value-prices, and the growing number of people facing repossession.

Despite a new investigation into the market by the Office of Fair Trading, and bad publicity over the actions of rogue operators, sale-and-rent-back is on the increase.

A Quick Sale (AQS), which claims to be the largest Sarb company, estimates that in the past four years, 20,000 homeowners have sold their properties to landlords and stayed on as tenants.

Typically they will have received 70-85pc of the property value, with no guarantee they can stay long-term. But in many cases the alternative would be repossession.

Assessments of the number of Sarb operators vary from 2,000 to 6,000, but according to research by the National Association of Sale and Rent Back (Nasarb), 43pc have been in the market for less than a year. With the number of repossessions predicted by some to hit 70,000 this year, many more could be tempted.

For the landlord, sale-and-rent-back offers the chance to acquire property at a discount, and provides tenants who want to stay long-term and will treat the property well.

But the market has an appalling reputation. Any landlord getting into it will face criticism that they are preying on vulnerable borrowers.

“The seller can clear their debts, stay in the family home, keep their kids in the same school, and the neighbours need never know,” says Chris Norris, policy officer for the National Landlords Association. “But there are horror stories about companies that don’t do Sarb responsibly. Many don’t see themselves as landlords, but as property investors who happen to have tenants. We see cases where landlords bought very cheaply, or with a very limited tenure tenancy, and after a short while the tenant is kicked out or the rent increased.”

Critics find it distasteful that landlords are able to buy property at a discount simply because the seller is desperate to avoid repossession. Those in the industry counter that sale-and-rent-back properties are often not traditional rentals, and that buying below market value may be the only way to make the rent cover their mortgage.

The OFT study will determine whether existing consumer laws can keep homeowners adequately informed and protected, and could recommend that sale-and-rent-back is fully regulated.

In the meantime, a number of voluntary codes of practice have sprung up, aiming to improve the industry’s image.

Landlords who want to operate a profitable and ethical Sarb business, need to consider several issues.

Make sure your numbers add up

The worst-case scenario for a homeowner turned tenant is the landlord failing to pay the mortgage and having the property repossessed. They will have sold for less than their property was worth, but will lose their home anyway.

To avoid this, it is crucial for landlords to ensure the rent will comfortably cover the mortgage, says Chris Francis of Sussex Property Buyers, who owns 60 Sarbs in the Haywards Heath area. “You should consider tenants’ financial situation and charge them a fair rent. But you also have to ensure cash flow is good. We typically pay 80-82pc of market value, but have 30pc equity, and a 118pc rental cover,” he says. “I also keep a cushion of rental payments to tide me over if tenants don’t pay. If I had to, I would sell to another landlord so tenants could stay on.”

The balance is to ensure you give the seller the best possible price, without overpaying.

Phil Martin, a founder member of the Mortgage Rescue Network code of practice, says landlords who miss a mortgage payment must tell MRN and immediately offer the property to another member for sale.

Security of tenure

The main attraction of sale-and-rent-back is that sellers can stay in their family home. But landlords can usually offer no guarantee of long-term tenancy.

Sarah Robson of the Council of Mortgage Lenders explains: “The majority of mortgage companies will only lend to landlords on assured shorthold tenancies, of six or 12 months. We would be willing to explore assured (longer-term) tenancies, but only under legislation or a robust voluntary code.”

Most landlords say it is not their interest to evict good tenants. “We have bought around 2,000 Sarb properties, and the vast majority of tenants are still there,” says Glenn Ackroyd of AQS. “Sarb void periods are very low. I have 100 properties and only two of my tenants have moved on in four years.”

Landlords who want to differentiate themselves from the competition could insert a right to renew clause in the tenancy agreement. AQS offers clients the option to renew each year for up to five years, while members of MRN can renew for as many as 20 years.

Be clear and straightforward

Homeowners facing repossession are vulnerable, so point out the negatives as well as positives of Sarb. Also, check that they have explored other options, such as remortgaging, a switch to interest-only payments, or a traditional sale.

Set out charges and terms clearly, preferably in a key facts illustration, and draw up a proper tenancy agreement, with no unfair terms.

John Socha of Nasarb says the most common problem is the percentage discount being poorly explained. “Also, many Sarb landlords don’t seem to know how to write a tenancy agreement. I’ve seen some try to put repair costs onto tenants, and you can’t do that.”

If you are producing adverts or leaflets, make sure they are not misleading. The Advertising Standards Authority has previously ruled against National Homebuyers for not making it clear that a survey fee had to be paid before a written offer could be made.

Generating leads

Landlords wanting to get into Sarb have several options when it comes to finding potential sellers. They can do their own marketing, using targeted leaflet drops and local newspaper adverts, or buy into a Sarb franchise. Costs vary significantly. AQS charges between £25,000 and £60,000 for a three- to five-year franchise, plus an average £1,400 a month for marketing costs, and a 1.95pc finder’s fee on leads. Meanwhile, Repossession Angels charges £2,500 to join, then £100 per month, recommending advertising spend of £800 to £1,000. It also levies a 1.5pc lead admin fee.

A third option is to buy individual leads. Phil Martin uses a company called Rapid Property Investment. “Lead sellers allow me to focus on my clients rather than marketing,” he says. “I can take a week off, and just not buy any leads.” Robert Clark of Rapid Property Investment says around 28pc of his leads are sellers wanting Sarb. “We generate thousands of enquiries a month, allowing landlords to find property deals without having to be a marketing expert.”


CASE STUDY

Keeping hold of a home full of memories

“To suggest I am preying on people’s misery is untrue,” says Phil Martin, a sale-and-rent-back landlord from Milton Keynes. “A lot of what I do is helping people to find other options than Sarb. I have been close to repossession, so I know how terrible it is.”

For Roger and Sandra Neale, however, Sarb was ideal. The couple, celebrating their 40th wedding anniversary next week, have lived in their home for 37 years. Until early last year they owned it, but were struggling to keep up repayments. “We were doing six jobs to get by,” says Mr Neale. “I had had two heart attacks, and we just couldn’t keep it up.”

The Neales say they checked out several Sarb companies, but were put off by the short six-month rental contracts. “We did some digging to make sure Phil’s was a reputable firm, and liked that it gave the right to renew the tenancy.”

Mr Martin bought the couple’s home for 82pc of its value, and helped them apply successfully for housing benefit. Their monthly outgoings have fallen from a £445 mortgage payment to a £100 rent top-up.

“We have a lot of memories in this house,” says Mr Neale, 62. “But we couldn’t carry on working as we were. From our point of view, it has been perfect.”

Mr Martin offers his clients an initial
12-month assured shorthold tenancy with a right to renew clause, giving them the option to annually renew their tenancy at a market rent for an agreed term up to 20 years.

“If you get into Sarb you need to ensure you can keep your promises,” says Mr Martin, 35. “My wife and I knew we would keep the portfolio for at least 20 to 30 years, and perhaps pass it on to the children, so we can say we have no intention of selling.

“You need a good grounding in landlord law before you start in Sarb. It’s even more important to get it right than with ordinary buy-to-let. People have ties to the property and it would be wrong to let them down.”



Code war that has put a brake on giving Sarb an air of respectability
Arguments flare over sale and rent back regulation

One is a “watered-down budget version” code of practice, aimed at stalling the threat of regulation in the sale-and-rent-back market. The other is the “creature” of its founding companies, who want to “keep out smaller landlords” and “protect their own business model”.

A war of words has broken out between two self-styled guardians of the Sarb market’s reputation, over who will offer the best code of conduct.

In one corner is the National Association of Sale and Rent Back (Nasarb), backed by the National Landlords Association. In the other is the Property Buyers Association (Probas) founded by three large Sarb companies.

The dispute is bringing confusion over best practices for landlords in a market with an already murky image. Many want their industry and its reputation cleaned up, and believe a robust voluntary code is a positive step, on the road to regulation.

The question is, which code?

Nasarb claims that 610 Sarb operators have registered an interest in joining its code. It insists that as it is backed by the NLA, it is the only market-wide body which will offer a truly independent code of practice, uninfluenced by any one group of Sarb providers. The trouble is, its code is not yet published.

“We have applied to the Office of Fair Trading to register our code of practice, and hope to put out a draft next month, and work with the OFT to formalise it,” says John Socha (above), Nasarb chairman. “It will ensure complete transparency, and ask the vendor to confirm they have either taken independent advice or turned it down.” The organisation also plans to introduce an insurance-backed scheme to pay out if a landlord runs into financial difficulties, buying a respite period to ensure an orderly transfer to another investor.

Probas has had its code up and running since February, but has only three members — founders A Quick Sale, UK Property Buyers, and North East Property Buyers — with two more going through the application process. It requires members to come up with a £100,000 insurance bond, to pay out in cases of bad practice, as well as hefty joining fees of £5,000, which it describes as a deliberate attempt to set the bar high.

“Nasarb wants to represent the smaller operator, so are never going to have the means to offer protections at the level we can,” says Glenn Ackroyd (right) of A Quick Sale.

“A lot of landlords are happy to get a badge and credibility but not to put any money up,” he adds. “We think statutory regulation is inevitable, and any regulations are likely to insist landlords have a bond.”

The problem, counters Mr Socha, is that a voluntary code without a professional body behind it will always face accusations that it is being run to benefit the operators.

Confusingly, Nasarb and Probas are not the only codes of practice in the Sarb market. Franchise operations and groupings of landlords have set up their own.

The Mortgage Rescue Network, for example, has 151 members who have paid £125 and then £50 a month to sign up to a detailed code.

BBC Money Box

BBC Moneybox – Saturday 17th May 2008 – Sale & Rent-back

LEWIS: We reported last week that the number of people facing difficulty with their mortgage payments was growing and repossessions rose sharply in the first quarter of this year. But some desperate homeowners are avoiding repossession by turning to firms which offer to buy their property for cash at below market value and then rent it back to them. We reported in February that there were concerns about this sale and rent back business and calls for it to be regulated, and as more people face difficulties these concerns are growing. Peter Tutton is Social Policy Officer with Citizens Advice.

TUTTON: They may have sold their house for a significant discount, below its market value. In return, they may have got very little security. In some cases, they’ve been poorly advised as to things like you’ll be able to get housing benefit when they couldn’t. And in other cases, even after entering one of these things, perhaps the rent then has shot up; they’ve been in difficulties with rent arrears. Or even that the person that sold them the sale and rent back agreement has then failed to pay their mortgage or gone into insolvency, so they’re still losing their house anyway. So we’ve got a whole basket of concerns about these things.

LEWIS: This week, the Office of Fair Trading launched what it calls a “market study” into sale and rent back. That would be step one if the Government does decide to regulate the sector. Heather Clayton is the director in charge of the study. I asked her if sale and rent back was right for anyone in mortgage difficulties.

CLAYTON: Without doubt, these products might be suitable for some consumers and they might be helpful for some consumers. The concerns raised are really whether consumers understand the arrangements and understand the other options open to them and what the arrangements really mean for them.

LEWIS: And what about the price paid because we’ve certainly heard on Money Box in the past complaints that people are being offered sometimes as little as 50% of the value of their home?

CLAYTON: We’ve heard that too. There’s not very much information around at the moment at all, which is one of the jobs of the market study actually - is to get better information on the scale of the problem, including the prices paid.

LEWIS: This market’s been around for a couple of years now and the concerns have been expressed you know certainly for the last 12 or 18 months. Isn’t there a danger that just as people are finding growing difficulties paying their mortgages, that these deals are completely unsupervised and by the time anything changes it will be too late, the horse will have bolted?

CLAYTON: This market study has to first of all establish a base line of just how serious the problem is. There’s plenty of anecdotal evidence around, but few hard facts. Ideally we’d like to talk to some of the consumers who have experience of buying these products. They’re unlikely to be easy to find in fact. And although we can’t resolve individual complaints, we would be very keen if these consumers would contact the Office of Fair Trading. The details are available on our website.

LEWIS: Heather Clayton of the OFT. Meanwhile, there are moves to regulate the industry. There are now two competing codes of practice - one by some sale and rent back companies called PROBAS, which we talked about a few weeks ago; another to be launched very soon by the National Landlords’ Association, as its spokesman Steve Hilton told me.

HILTON: Our code of practice, which is going to be published in the next few weeks, is indeed going to commit those sale and rent back providers who sign up to the code, will commit them to not evicting their tenants unless the tenants break the terms of the tenancy agreement. In other words, you know the landlord would not be able to evict the tenants just to make a capital profit on any property.

LEWIS: But surely if you’re giving them an assured shorthold tenancy, the only tenure they have is the 6 or 12 months of that tenancy agreement?

HILTON: That at the moment is the case. We are in discussions with the Council of Mortgage Lenders and some of the key buy-to-let mortgage providers and we are hoping to find a resolution.

LEWIS: So there could be a situation from your point of view where landlords who signed up to your code had to give people assured tenancies; that, as you say, they couldn’t be evicted unless they broke the terms like not paying the rent or something like that?

HILTON: We’re certainly hoping that we will be able to persuade lenders in due course to offer further and longer assured shorthold tenancies. I think the key issue here is that no matter how long the length of the tenancy or the type of the tenancy that’s guaranteed, that in our code of practice the landlord would not be permitted to just simply evict the tenant unless the tenant had broken the terms of the tenancy agreement.

LEWIS: But that would be a code of practice. That’s not legally binding, is it, and legally a landlord can evict an assured shorthold tenant at the end of the agreement, which is normally 6 months?

HILTON: Agreed, this is a type of self-regulation. The code of practice wouldn’t be legally binding, but there would be independent redress for the tenant if the landlord decided to evict for no other reason apart from capital growth. So unless the tenant breaks the terms of the tenancy agreement, it would be contrary to the spirit and indeed the letter of the code of practice and the impartial redress system would kick in.

LEWIS: And what about the value that’s offered for the home because one of the criticisms we’ve heard before on Money Box is that people are being offered as little as half the market value of their property?

HILTON: We certainly think that 50% is obviously massively too low. This is an issue we are already in discussions with the Office of Fair Trading on. The slight problem with this issue is that it could be that if we specify in the code of practice a minimum value, a minimum percentage for the transaction, it could fall foul of anti-competition laws, which is obviously again in the OFT’s remit, so we’re trying to be very careful about how we word this piece in the code of practice. Out of interest, the research that we’ve conducted, around 600 of the sale and rent back providers that we’ve researched, 96% of those offer in excess of 80% of the value of the property, which gives some indication that for the vast bulk of sale and rent back providers in the market, they are offering a fairly decent proposition to owner occupiers who are looking to sell their homes quickly and to remain in residence. The purpose of the code of practice will be to root out these rogue operators who want to operate under the radar and, I’m afraid to say, will of course continue to operate under the radar.

LEWIS: Steve Hilton from National Landlords Association. ….Well that’s it for today. You can find out more from the BBC Action Line - 0800 044 044 - and of course our website, bbc.co.uk/moneybox. Lots of information and of course our podcast there. Vincent Duggleby’s back on Monday at three with Money Box Live, taking your questions on ethical investing. Email now or call on Monday. And also on Monday, a special programme on Radio 4. The BBC’s Business Editor Robert Peston presents ‘Power Failure at the Central Bank’, examining the huge changes affecting the international banking system. Monday evening at eight. Join me again next weekend with Money Box. Today the reporter was Bob Howard, the producer Chris A’Court, and I’m Paul Lewis.