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!

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.

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.

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.

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.

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%.

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!

As promised, here is the link to see the photos of the recent
Berkshire Property Meet on 17th September. It was a phenomenal
evening with over 100 people and next month is going to be even
better so keep Monday 15th October free! Our guest Speaker will be
announced shortly.

We would like to give special thanks to Belinda, Hus and Darren
Hunt for their help during the evening.

There's a lot to tell you in this email in direct response to your
questions following Monday nights' Berkshire Property Meet, so I
hope you find this informative.



1) We were very fortunate to have a friend of ours, Brian
Ollivierre, come and take some great snaps for us. Please go to the
following link to view the pictures:

http://picasaweb.google.co.uk/mrandmrsrai/BerkshirePropertyMeetSeptember2007



2) Huge thanks to Glenn Armstrong for taking the time to come down
and talk at the Berkshire Property Meet. Also thank you to Barry
Danser, Nick Pedrithes and Jason Bonner for ensuring the evening
ran smoothly. For those of you who asked for more information on
how Glenn built his property portfolio of 150+ properties please
see the following link:

http://tinyurl.com/3yx5sp



3) Many people ask how and why we do what we do. Where do we find
the time and energy and still work full-time as well? One of the
driving forces behind this was an amazing event we attended last year.
Again, we have been asked for more details which you can find at:

http://www.mrandmrsrai.com/chrishoward.htm

Interest rates kept on hold at 5%

UK interest rates have been left unchanged at 5% following the latest meeting of the Bank of England's Monetary Policy Committee (MPC).

The decision to hold rates had been widely expected amid concerns about the pace of inflation.

Rising food and fuel prices pushed inflation to 3% in April, well above the government target of 2%.

The MPC has already cut interest rates three times since December 2007 in an attempt to help the slowing economy.

However, the economic slowdown and falling house prices had led some to call for another cut in rates to boost spending.

Businesses squeezed

Many economists feel that the MPC needs to wait and see whether higher food and fuel prices lead to higher wages or lower spending in other areas before changing rates.


The necessity to write a letter to the chancellor should not be the overriding consideration for the MPC
David Kern, British Chambers of Commerce

If inflation rises above 3% then Bank of England governor Mervyn King must write to the chancellor to explain why.

At the MPC's last meeting in May, only one of its nine members voted to cut rates.

"The Bank had little option this month other than to leave interest rates on hold," said Ian McCafferty, chief economic adviser to the employers' group, the CBI.

"Oil and commodity prices are still of great concern and businesses are having to raise prices as profit margins get squeezed further."

Slowdown predicted

House prices are falling as the credit crunch makes lenders reluctant to provide mortgages.

The latest figures from the biggest mortgage lender, the Halifax, showed a 2.4% fall in house prices during May.

This week, the Organisation for Economic Co-operation and Development predicted that UK growth would slow to 1.8% this year and to 1.4% in 2009. It said the global credit crisis, the high costs of commodities such as oil and slowing property markets were all hurting the UK economy.

On Wednesday, the Home Builders Federation called for a half-point cut in interest rates 4.5%, saying a cut was "imperative" to avoid a severe housing market slowdown.

Also on Wednesday, figures from the Chartered Institute for Purchasing and Supply indicated that the UK service sector shrank in May for the first time in five years, as costs rose and confidence in business prospects fell.

Threats to growth

The British Chambers of Commerce (BCC) said that the MPC should be considering the whole economic outlook and not just inflation.

"We understand the critical need for the MPC to maintain credibility, but the MPC cannot disregard the worsening threats to growth," said BCC economic adviser David Kern.

"The necessity to write a letter to the chancellor should not be the overriding consideration for the MPC."

But the British Retail Consortium supported the decision to keep rates unchanged.

"Struggling customers and retailers certainly need a boost but, with rising oil and commodity prices stoking inflation to well above the 2% target, leaving rates unchanged was the wise option," said its director general Stephen Robertson.

Sale and rent back schemes 'desperately need regulating'

The sale and rent back sector in the UK housing market "desperately needs regulating", a charity has claimed. The Office of Fair Trading (OFT) is currently conducting a market study into sale and rent back schemes, whereby homeowners sell their property at a discount in return for the option to remain in their home as a tenant.

Controversy has surrounded the schemes with consumer groups cautioning that some homeowners who take up the offer are offered little protection from rent increases and the prospect of being effectively forced out by their landlord.

Responding to developments, the Homeowners Advice Centre welcomed the OFT probe which it claims is required in part because the number of people opting for the scheme has increased "steeply in the last few months" thus leaving many more homeowners vulnerable to unscrupulous investors.

A spokesman said: "I estimate 95 per cent of all companies advertising on the internet and the classifieds are individual landlords or small companies looking to build a cheap buy-to-let portfolio quickly as opposed to organisations that have set out to provide long-term lets and debt relief. "I suspect that most of the smaller providers would close down or stop advertising if the OFT ensured that the lease was a minimum of 20 years and they had to have £1million in equity or liquidable assets before trading."

Thank your customer, tell them how valuable they are to you, but don't go overboard. Insincerity is easy to spot.

Mortgage approvals hit 15-year low

Mortgage approvals for house purchase dropped to the lowest level since 1993 during April. According to new data from the Bank of England, some 58,000 home loans were granted by lenders in April. This compares to a figure of 113,000 for the same month last year and is the lowest figure recorded since the Bank began compiling housing market data. The overall value of mortgages approved was £23.8 billion - £2.3 billion below the average lent by mortgage providers in the previous six months.

This highlights very clearly the real problem facing not just the property market but also the wider economy. A collapse in transactions of this magnitude has major implications both for consumer spending and a wide range of ancillary industries.

Lenders are continuing to tighten up on the conditions accompanying new loans making it hard for first-time buyers to take advantage of the modest fall in house prices seen over the part few months.

Base rate 'to hit 4% by end of next year'

The key base rate of interest could come down to around four per cent by 2009. Relief is on the way for beleaguered homeowners but they should not expect dramatic cuts of the kind imposed by the Federal Reserve in the near term.

The extended muted economic activity will eventually markedly dilute underlying inflationary pressures and lead the Bank of England to cut interest rates further.
.
The benchmark rate of interest currently stands at five per cent.