Entrepreneur is not a risk taker. This is a myth. Many people think that an
entrepreneur is a risk taker. Research shows that they are trying their best to
control the risk factor and will not take unnecessary risks. Every time they
enter into a business commitment or try to introduce something new to the
market, they appear to be taking risks, but in fact they have their plan and
strategy in place to control the risks. They are not gamblers and in order to
success, they have learned how to minimize and control the risks. Because of
this, they can take more risks compare to others and achieve something that
others always dream about.
Entrepreneur is stubborn. An entrepreneur is stubborn with both vision and
ideas. This is very important at the early stage especially with a new business
venture that is not proven yet. Usually at this stage, there are a lot of
rejections, criticism and negative comments from others. Their stubbornness
will make them move forward here no matter what happen in this stage.
Entrepreneur likes to keep everything as simple as possible. They know that
only the simple things can be totally accepted and hence can boost their level
of success. If you are able to keep everything simple, it will be much easier
for you to take action easily.
* An Entrepreneur can see “success”.
Successful entrepreneurs can see success in their future. Many top businessmen
see the potential of their project and believe that their business can bring
them to the next level of success. For example, Richard Branson believed in the
potential of music distribution and spent most of his early career dedicated to
building up the business. This is a great example of how an entrepreneur
visualizes success and plans the way to achieve it.
Entrepreneur is perseverant. This is another stubbornness of entrepreneurs.
They can persevere in their goal in any condition. They know what their goals
are, they set a deadline, they understand the tasks that they must accomplish
to achieve the goals and also the obstacles they may come across. So they focus
on their goals.
Entrepreneur understands the importance of discipline. Discipline is the key to
success in any field. As an entrepreneur, besides working hard, he/she must
have self discipline. We see lot of fast ways to success being introduced to
the market. However, in most cases, this is nearly impossible to achieve
especially if you want long term success. Entrepreneur understands that only
discipline and hard work can bring them the rewards.
Entrepreneur is good in time management. Every day there are a lot of tasks
waiting for entrepreneurs to tackle and accommodate. So time management is
important to accomplish all the tasks on time. They can make decision, take
action and accomplish their tasks quickly.
This makes them productive and high effective.
Entrepreneur maintains good habits. Generally, an entrepreneur has a lot of
good habits that make them succeed. Habits such as punctuality, good manner and
remaining cool under pressure are very common. You will know this if you have
an entrepreneur as a friend.
You can see the most important
thing to be a great entrepreneur is habits and mindset. They are related.
There’s a lot to think about, so let’s get started.
of Timing in the Repossessed Property Market
the property pro's would collectively agree that nobody can always time the
property market, not even them. This may leave you wondering: If the pros can't
time the market, how can you? The answer is simple, it’s regional. They work
globally. You work locally. You must have your ear to the ground in your own
area, your comfort zone. Stick to that
For starters, you employ the same techniques that
have worked for many who live by property dealing: Buy low and sell high.
The first step is to determine the type of property market that exists in your
Knowledge is vital for success in property.
Despite your best efforts, you still haven't
uncovered the "trick," the "secret," the mysterious
"key" to making an overnight fortune in property trading. There is
nothing more frustrating than being able to see where you want to go ... but
not knowing how to get there!
We can't promise you will make money. How can we?,
we don't know you, your talents, background or anything about you. One thing is
absolutely certain. We can show you how to make money
To make money you have to buy right before
you can sell and you need Information,
Knowledge and Data to help you.
That’s the place to start.
Economics is at the root of any investment
decision and property is no different.
Do you know of anyone who has made a fortune
buying from estate agents? No! Neither do we. However we do know a lot of
people who make serious money selling through estate agents!! There’s the
difference. Love them or hate them you do need Estate Agents!!
little point in buying from property clubs or seminar promoters "of plan
developers" either. They are far too expensive and they make their money
by selling to you. If you are going to buy off plan then try and go direct.
Your initial strategy: “Buy undervalued properties in the right
area and add value” then sell. Simple!!
no simpler, faster or more effective way to make money from property than
sourcing repossessed houses, or renovation properties! If you choose well when
you are buying a property you can be set up for life, making massive gains in
just a few years for relatively little capital outlay.
properties for a discount of up to 40%. That's a saving of £40,000 on a
£100,000 house. Buy a bargain Property...Then Sell for a Handsome Profit! Any
experienced property dealer will tell you that the first rule is to buy
property at the right price in the right area, and that's what we'll show you
how to do! You don't need experience of business or property. Anyone can
Homeowners facing repossession are the most
‘Motivated Sellers’ you will probably ever find, and as such, having exhausted
most other options, they often sell below market value for a quick sale to
prevent the repossession of their home.
Property Investors / Professionals know how
lucrative this market is and many spend thousands of pounds on advertising,
trying to attract this type of homeowner, usually paying 15%-30% below market
value and in some cases discounts of up to 50% have been known.
UK property is as healthy an investment as you
are likely to find anywhere. Over the medium to long term, UK property simply
can’t be beaten.
1948 property in the UK has risen on average 11.3% years on year.
the 32 years the Department Of Records have kept statistics, house prices have risen in 28 years and fallen in only 4.
1962. The office of national statistics have recorded that rents have risen on
average by 13% per annum.
recent study predicts that by 2020, house prices will grow from £101,161 to
£300,643 by 2020. If you buy a house today, you can expect its value to rise by
197% over the next 16 years.
is already a shortage of 4 million homes in the UK and the population is
expected to rise by 10% in the next 25 years.
Experts have forecast house prices will continue to rise by 20% over the next
average, UK property prices more than double every decade.
Property in some hotspots has been growing by 50% and more a year in recent
the last fifty years, property has only gone down twice in real terms –
1971-73, and 1989-92. Five years out of fifty.
government estimates that we need to build 250,000 new homes a year, just to
keep pace with demand. We are currently building less than half that number.
Demand outstripping supply is a market condition that’s here to stay.
stocks and shares, property is a solid, useable proposition. Everyone needs
somewhere to live.
Unlike other investment vehicles, property is built on land and, as Mark Twain
once said, you should buy land, as they’re not making it any more.
Unlike other investments, you can buy your investment property with other
people’s money (OPM). As a result, you can take advantage of the magic of
gearing. A full and detailed explanation of gearing will come slightly later.
short, property is an ideal money making vehicle.
The statistics demonstrate that property is a
great investment vehicle which means there is a high demand.
Over the medium - to long-term property prices
rise which means that everyone wants in.
Due to these two factors (among many others)
demand consistently outstrips supply which means an upward pressure on prices
These three factors have led to property as an
asset group performing incredibly well over the last 50 years or more. When we
talk about a high-performance asset group that everyone wants, we’re talking
about a market that is consistent, that is rising (in the medium- to long-term)
and that is economically efficient. Right!
If you were to go out into your local
town tomorrow and ask a hundred people if they thought it was possible to buy
half-price houses, even cheap houses, how many do you think would laugh at you
and perhaps think you were a bit odd ? My guess would be – a hundred!
That’s because the properties the average person
looks at when they’re buying, when they’re selling, when they’re curious, tend
to be properties in the windows of estate agents and what they see there is an
efficient market that continues to rise (with the occasional plateau or
down-spike). And when they think about it, they realise that makes perfect
sense, because of the factors laid out above.
Then, they look no further.
They don’t know there is a chain similar to any
other market place. Retail gets stock from wholesaler. The wholesaler from
distributor. Then distributor from the manufacturer (Builder).
of course are buying at retail.
What they don’t see is that, even in a market
that is super-efficient on the surface, there is another, deeper, more hidden
layer where deals are done, where property is sold off ‘on the cheap’, and
where there are half price properties available all the time.
Usually, these deals are offered to property
professionals first. This is not because it’s a closed market; it’s simply
because half-price properties are often half-price because the vendor is in a
hurry to sell, for one reason or another. Property professionals can usually
move fast in making a decision, in raising money, and in completing on the
deal. They are Entrepreneurs
The important point to note is – it’s not a
closed market. If you know what to look for, and where to look, there are half
price properties out there for the taking.
The best kept secret in property is that you
never have to pay the full price, providing you talk to the right people, look in
the right places, and focus on the right deals.
So, let’s consider:
properties come onto the market at below market value (BMV)
sells properties at BMV PRICES?
you can track these properties, make offers on them, and add them to your
five sources of BMV property,
to talk to in order to do a deal
Sells Houses Cheaply? And Why!
If property is the ideal investment, and UK
property is such a good proposition over the medium- to long-term, who in their
right mind would sell properties at BMV prices?
Well, there are several categories of property
vendor who regularly sell properties cheaply, and it’s usually a question of
expedience, rather than sanity.
the main ones:
* Banks and building societies
* Large property holdings
* Pension funds
* Probate sellers
* Distressed sellers
* Private landlords
Let’s take a look at each one of these in detail.
In the property crash of the late 1980s, when the
bubble burst and we were all paying 15% interest on our mortgages – remember
those days? – Barclays Bank unwittingly became, for a time, the largest
landlord in the UK.
When you consider that position, is usually held
by the NHS, or the MoD, that’s quite an achievement.
The reason for this was the sudden deluge of
repossessed properties. Many good people got caught in the so called negative
equity trap in those dark years, where the value of their home fell below the
amount they owed on it, and the interest rates made repayments almost
impossible to meet.
Add to that a rash of redundancies, and you have
a recipe for disaster.
Contrary to popular belief, banks don’t want to
repossess the home of a customer.
They know the pain and hardship that causes – not
only is a family being effectively made homeless, to add to whatever other woes
they have at that time, but their credit record is effectively destroyed for
years to come.
They also have an image to maintain of being a
caring, local, helpful institution.
Plus, banks are not in the business of managing
or selling off properties. So, when a bank finds itself the effective owner of
a repossessed property, its main objective is to off-load it as quickly as
Time is of the essence – an empty property on the
books represents tied-up capital that could otherwise be put to work elsewhere.
It’s almost impossible to insure and is therefore a significant liability.
The other thing to understand here is that, while
time is of the essence, price is often largely irrelevant. Banks insure
themselves against a borrower defaulting on the loan, and the insurance company
picks up the tab for any losses.
the bank have just repossessed a property with a market value of £120,000, and
an outstanding loan of £100,000. Their primary objective is to claim back their
£100,000. So you can immediately see that they may happily sell the property
for £100,000, regardless of the market value.
But, if the property is damaged, or the market is
flat, or it’s Christmas, or
whatever, they might be prepared to take, say, £85,000, because they have an
insurance policy under which they can claim back that extra £15,000 from the
If you’re the buyer, you’re getting a £120,000
house for £85,000 – a discount of £35,000, or nearly 30%.
We’ve already mentioned the NHS (National Health
Service) and the MoD (Ministry of Defence). Other national and governmental
departments may be included here, such as local authorities. The point to
remember is that they all have significant property holdings around the country
and, at various times and for various reasons, they decide to sell off some of
what they own.
example, the MoD once had a vast number of houses around the country that were
given over for the use of servicemen and their families. You can see them
around any major military base, and even around some smaller ones.
As budgets and manpower numbers shrink, and
priorities change, many of these houses have become surplus to requirements and
are sold onto the open market. Now, the attitudes here are not the same as the
The likes of the NHS, the MoD and local
authorities have a public duty to maximise their returns on the sale of any
property. (We could get into a long discussion here about whose properties
we’re actually talking about here. After all, the government is an expression
of us, the public. And the only assets and cash the government has belong to
the taxpayer. But that’s beyond the scope of this book.)
On the other hand, there are resource
constraints. In other words, if the MoD wants to sell 255 ex-service houses in
various places around the country, it would be too expensive, time-consuming
and labour-intensive to list each one separately with a local agent. Instead,
they tend to sell through property auctions. And even then, using local
auctioneers to ensure the property is auctioned locally may not be feasible
easier to hand all 255 properties over to one of the large, London-based
auctioneers like Barnard Marcus or Allsops, let them sell them as they see fit,
and present the MoD with a single cheque once the transactions are complete.
Property is held as an investment by many of the
major pension funds and, like any other investment, the properties are bought
and sold periodically. When a decision is taken to sell, it rarely concerns a
single property. So, as bulk sellers, their motives and methods are broadly
similar to those described above.
A probate sale takes place when the owner dies,
and the property has to be converted into cash in order to be distributed as
part of the estate. Such a sale may be the express wish of the owner, or that
of a beneficiary of the will, or it may be necessary because the owner died
intestate (i.e. did not leave a will).
The property will often be sold at auction and,
once again, the primary motive is often to get rid of the property as quickly
and as expediently as possible. Of course, the vendor can always limit his or
her downside by imposing a reserve price, below which a lot may not be sold.
But a motivated seller may chose a very low reserve (relative to the market
value of the property) or even decide not to have a reserve at all.
The statistics for divorce rates in recent year’s
make grim reading. Often, a divorcing couple jointly own a property, and
circumstances dictate that this must be sold, the debt cleared, and the
proceeds split, before they can move on to pastures new.
Again, the main aim is to get rid of the house,
not necessarily to get the very best price for it. Of course, people aren’t
stupid. They want a reasonable price for their property, but in some such
circumstances they are prepared to accept a BMV price, seeing the difference as
a premium for getting the sale completed quickly and without complication.
If you’re a landlord yourself, you know how
quickly things can change. One minute you’re coasting along, with every
property more or less covering its expenses, and then –WHAM!! –
You’re offered a drop-dead-amazing deal that you
can’t possibly pass up. But you need to raise funds to do it, and you need to
move fast. For the best of reasons, you become a motivated seller, and are
prepared to accept discounted prices for your properties providing the buyer
can move fast and pay you quickly.
In these circumstances, you’re likely to sell at
auction. Of course, there are many reasons, other than the one outlined above,
why private landlords may look to sell a property quickly, and be prepared to
accept a lower price in return.
These are the main sources of bargain properties.
There are other sources, and other scenarios that bring properties onto the
market at BMV prices. All you need to remember is that such sellers are out
there right now, and properties like this are selling every day.
How Can I
Of course, it’s no easy task, searching for
bargain properties. You have to know where to look. You need access to
specialist agents. You need subscriptions to a range of different databases.
And, most of all, you need to spend the time, not only to find suitable
properties in the first place, but also to research them, conduct searches and
surveys, instruct solicitors, arrange financing and so on.
If you are serious about investing in property,
then you already know that your profit is in the purchase price. Buying
property at BMV prices can make the difference between taking seven years to
double the value of your investment, and taking three. If you have the time to
track down these properties then a good place to start is www.propertyenquiries.com or www.repossessed-house-sales.co.uk
, where you’ll find links to many of the sources We’ve used in building our
Alternatively, consider a subscription to www.profitdata.co.uk , I have to declare at this juncture that I
do have a vested interest in these sites.
Now, read on for the Five Sources of Bargain
Sources of Bargain Properties
Now we know that there are properties coming onto
the market all the time at BMV prices. We know who’s selling them and, broadly,
why they are selling them at such low prices. Now it’s time to discover where
you can go to source such properties, and how you go about tracking them down,
investing in them and adding them to your portfolio.
Let’s be clear about one thing. You won’t find
half-price properties at all of these sources. However, you will find them at
least one – regularly. And, as a bonus, the final source is where you can find
properties for no cost whatsoever.
Source 1 – Property
These are not the closed shops they were a couple
of decades ago. Property auctions are now user-friendly operations that
encourage the attendance of seasoned investors and newcomers alike. Indeed
auctioneers, though they are working for the vendors to get as high a price as possible
for every lot, are more than happy to help you with any queries you may have,
whether they are general ones, or about a specific lot.
auctions are not for the faint-hearted. It’s a high-energy, frenetic atmosphere
in which it’s very easy to get pressured into a bidding war for which you
If you’ve never been to a property auction
before, go along as an observer. You’ll be made welcome, and you can get the
feel for it without having the pressure of bidding for a property.
There’s a strange truism in the property market –
people tend to under-estimate the cost of structural repairs and over-estimate
the cost of largely cosmetic work. Also, if the cosmetics of a property are
truly terrible, this can have a sufficiently strong emotional effect on
potential buyers to put them off. If you’re not looking for a full-blown
renovation project, the best properties to seek out are the run-down, shabby
For emotional reasons, these will attract less
attention from the crowd and, consequently, the price will remain depressed.
Providing you can keep your emotions in check, and be sure there are no lurking
structural issues, shabby properties can be turned into the best of bargains.
Look for Un-mortgageable Properties. This is a
contrarian strategy, but only suitable for those who can buy investment
property without the aid of a mortgage. Mortgage companies simply won’t touch
properties with structural faults until these faults have been rectified. So
how can a property that’s falling down be classified as a good deal? Well, in
reality, these un-mortgageable properties are not generally falling down at
banks are wary of them is that they are not in a fit state to sell quickly and
recoup their money, should you default on the payments. That’s all they’re
really interested in. The fault may be a crack that signals subsidence, for
example, but it may be decades old, and the subsidence may have stopped long
Of course, it’s worth getting an expert
investigation into it, but in many cases you’ll find that the problem is an old
one that no longer exists, the damage is not significant to the structural
integrity of the house, and there’s no urgent need to do anything about it. The
upshot of this is that you could pick up such a distressed property for perhaps
50% of its repaired value; it’s a great combination of low interest on the
auction floor, because of the structural and financing problems and a low
reserve price to ensure the place is sold. If you can repair the damage for
less than 50% of the repaired value, you’re in profit.
could let it at the full rate on the basis that an old crack isn’t going to
impinge at all on the tenant’s safety or their enjoyment of the building, with
the idea of repairing it in a year or two. And that will translate into a
fantastic yield on your investment.
If you find yourself in a position whereby you’ve
done all the research on a particular property, checked it out as best you can,
decided on your upper limit, gone along to the auction, got involved in the
bidding, only to see it withdrawn as it failed to reach it’s reserve, then make
an approach. An unsold lot does no one any favours.
The auctioneer misses out on his commission.
The vendor is stuck with a property he doesn’t
No one is
So when you come along with an offer a little
over the final bid from the floor, you’ll be welcomed with open arms. Now
that’s not to say you’ll necessarily get it for less than the reserve (although
you might). But the auctioneer and the vendor are likely to be keen to help
you, and drop large hints as to what you’ll need to pay to secure the property.
This is a strong position to be in. Don’t be
tempted to go over the limit you set yourself, and don’t be afraid to negotiate
hard. Walk away if you don’t think they’re playing the game. If they chase
after you, your position just gets stronger.
If they don’t. Well, there’ll
always be another property.
The main point here is to move fast. The vendor
may actually be in the room, fed up that he hasn’t sold the property, and will
be ready to listen to you. Approach the auctioneer at the earliest opportunity
– perhaps during a break – and get things rolling.
A word of warning. This applies throughout – Buyer Beware! When
properties don’t sell, it may be for a good reason. However, buying
post-auction does give you more time to do your research, and the last bid
shows you what at least one other person was prepared to pay for it). For a
full list of property auctioneers in the UK go to www.profitdata.co.uk .
You can also join one or more of the online
Source 2 – Repossessions
Currently there are huge numbers of repossessions
and they are very cheap
Indeed, in 2001, according to government figures,
there were 27,000 repossessions in the UK. In 2008 so far that number has doubled.
Every one of these will have been sold by the repossessing mortgage lender in
order to get at least some of their money back
In an auction catalogue, you can spot them by
scanning the sellers for each lot. If the seller is a bank or building society,
the chances are it’s a repossessed property. Also, look for tell tale phrases
the instructions of a liquidator
the instructions of a LPA receiver
behalf of mortgagees in possession
Elsewhere, mortgage companies are obliged, by
law, to advertise the fact that they’ve had an offer on a property and, if
there are no better offers within a stated timeframe, it will be sold. These
announcements tend to be buried away in the smallest classifieds in a local
newspaper, but they’re worth looking out for to guide you to repossessed
properties. It’s called the 7 day
There is little point in contacting mortgage
lenders for current lists of their repossessions as they won’t supply them due
to the data protection act.
When you’re buying a repossessed property, there
are a few extra things to watch out for, in addition to those associated with
any property purchase (such as surveys, searches and the like). Primarily, you
need to be certain that the former occupiers' debt problems don't affect you.
The credit reference agencies, (Experian and
Equifax) records rely on addresses and postcodes. You may find that they
inadvertently assume you're connected to the former occupier. Check this after
a couple of months by contacting Experian or Equifax and asking for a copy of
the information they hold on you.
You'll have to pay a £2 fee for this. You can do
it online, too. They should send you a copy of the information within seven
working days, and they'll include information about how you can change the
record if it's incorrect.
Don’t wait until you’re turned down for credit!
That rejection alone will affect your future rating, regardless of the
Apart from watching the credit situation, you'll
probably have to pay for the utilities to be reconnected.
Source 3 – Reversionary
Investing in reversionary properties is almost
certainly the easiest and lowest-risk way to invest in residential property,
with the highest potential return. You simply buy residential properties from
elderly homeowners who need to raise capital and increase their income. On
completion of your purchase, your solicitor grants them a lease.
They continue to live in the property, but as
your tenants. They only pay a nominal rent so, to compensate you for this, you
buy these properties with a discount of up to 60% off their vacant possession
When the property is vacated, whatever the
reason, you can then let it at the full market rent, or sell it with vacant
possession for the full open market value. You profit from the 60% initial
discount and 100% of all its appreciation since you bought it. But there are
many other benefits;
RPI (reversionary property investment) is geared, without any of the normal
* You only need a relatively low initial
investment. Since the price of an RPI is discounted by around 60%, it offers
you low capital cost and dramatic medium- to long-term capital growth. And,
unlike buy-to-let properties, everything is already provided by your tenants.
properties come with prearranged financing in the form of a non-status mortgage
(currently fixed at 5.95%). There are no fees to pay. No proof of income is
needed. There's no application form to fill out and no redemption penalties.
the terms of the lease your tenants (the elderly inhabitants you buy the
property from) are legally required to maintain and repair the property and pay
all expenses and outgoings. Not only that, many of them use some of their new
capital to refurbish and modernise your property.
tend to be pleasant, well maintained homes in good areas, owned by people who
are reluctant to leave. The cash they receive enables them to maintain the
property and stay near their friends and neighbours.
Although ideally a medium- to long-term strategy, you can sell your RPI at any
time. Your selling price will take into account any increase in the value of
the property and the increase in the age of the tenant.
There are only two vendors of RPI’s to
individuals in the UK, as far as I am aware. I have personal experience of just
one of these – Cavendish Property Investments – and I have no hesitation in
recommending them to you.
Source 4 – Off-Plan
Buying a property off-plan has become rather
popular over the last few years, and many private landlords and property
investors have made it a central plank to their investment strategy. The basic
premise is that a developer, keen to sell the properties he’s planning to build
quickly, is prepared to accept a lower price in return for a rapid exchange of
contracts, typically before the development is complete, and sometimes before
it’s even begun.
From the point of view of the developer, the
deposits paid by the buyers become working capital, or ease their debt burden
on the project. You, as an investor, can enjoy four major benefits;
a. You are buying a brand new property for
typically 10% or 15% BMV.
b. You are gaining control of a property for just
the outlay of a 5% or 10% deposit, with nothing more to pay until completion.
c. You have the benefit of the notional capital
growth between the time you exchange and the time you complete. This can be
anything from a few weeks to a couple of years, depending on the development.
d. If you get it right, you can finance to buy on
completion, then immediately refinance at the higher value – due to the
combination of the initial discount and the capital growth between exchange and
completion – and thereby extract your deposit.
Here’s how an off-plan deal might work.
Let’s say a developer has planning permission for
thirty apartments on a city centre site, and is due to ‘break ground’ in the
next few weeks.
The plans and artists impressions are all drawn
up, the work crew are booked and ready, and it’s just a case now of getting the
apartments built. Similar apartments in the area, with a similar spec, are
selling for £160,000.
year’s time, when the development is due to be completed, they are expected to
be selling for £175,000 (given current growth rates). The developer agrees to
sell some or all of the apartment’s off-plan at a 15% discount to the price
today, i.e. £136,000, or a discount of £24,000.
As the investor, you exchange and pay a 10%
deposit today (£13,600) and then do nothing for a year. On completion, you
raise finance on the buy-to-let basis of 85% of the purchase price (£115,600)
and find an extra 5% yourself (£6,800). Then you immediately have the apartment
valued to ascertain the actual value (£175,000), refinance to 85% (£148,750),
pay off your first mortgage (£115,600) and pocket the difference (£33,150).
In this way you have taken back your 15% deposit
(£20,400) and made an extra £12,750 on top. Very nice! However there are, as
you might expect, a few potential pitfalls that you really must be aware of,
look out for, and factor in to your planning for the ‘worst case scenario’,
just in case.
When looking at a deal, you have to be very wary
of the discount stated. The developer will, of course, want to make the deal as
attractive as possible, and therefore make the discount sound substantial.
However, it’s not beyond the realms of possibility that such a discount may be
In other words, the price given at the outset,
for the apartments if they were built and ready today may be 10-15% higher than
reality, in which case the discount is not real. To get around this, do all you
can to satisfy yourself that the discount is a true one.
Research similar properties in the area. Look at what similar properties sell for, and
not just the advertised price. Find out what the capital growth picture is for
the area. And look into future demand projections for rental property (if
you’re intending to let) – are there new employers moving into the area?
Is there heavy investment expected? Are new
transport links being planned?
Even if you fully satisfy yourself that the
discount is real, it still pays to be cautious. In other words, if you’re going
into a deal for the discount and nothing else, it may be better to walk away.
Other than research, there’s not a lot you can do
about it if the local or national market suddenly plateaus or falls. If the
local market is currently rising by 8% a year, you must find out all you can,
of course, about the factors that might keep it at 8%, or push it up to 12%, or
take it down to 0%, or even reverse it to –5%
Then, you must make your own judgement as to the
risk of zero or negative growth between your exchange and completion. Build it
into your worst-case planning; how does the deal look if, a year down the line,
you’re completing on a property that hasn’t gone up at all?
Remember, if the growth projections the developer
makes (and you accept) turn out to be wrong, and your property doesn’t grow in
the year or so it takes to build, then that removes your refinancing options,
and means your deposit remains tied up in that property until the market moves
upwards once again.
Will you be able to handle that?
A similar reality on refinancing strikes if the
value of the property does as you expect, but the rents in the area drop from
your initial projections, perhaps because of a temporary over-supply of rental
I had exactly this situation a couple of years
ago. I was offered some off-plan apartments in a good city-centre location at a
15% discount, and almost a year to completion. I decided to go for two
apartments in the last of the three phases of the development, on the basis
that I’d get the longest period of capital growth before completion. That part
of the plan worked fine. What I failed to factor in was that Phase 1
properties, the first to complete, generated exactly the sort of rents we all
expected from the outset. However, Phase 2 apartments all made slightly less
because Phase 1 had soaked up much of the initial demand. By the time I
completed in Phase 3, of course, rents were right down.
This put me in the situation where the value of
my investments were what we expected them to be on completion but, despite
this, I couldn’t extract my deposit because I didn’t have the required 130%
repayment coverage from the rents.
In a similar way to capital growth, you can do as
much research as possible on what similar properties are getting before you
exchange, as well as the likely scenario for the next year or two. However, if
rental demand suddenly drops off for reasons unexpected (or not spotted, as in
my case above!) then you’re at the mercy of the market.
In terms of deciding whether or not to go ahead
with a deal, you need to be sure that you can still make it work, even if rents
remain static or fall below expectations.
It’s rare that developers strike discounted
off-plan deals with individual investors, unless you can afford to take on an
entire development and benefit from bulk pricing.
Developers are simply not geared up to sell
single apartments to small investors. As an individual, you will almost
certainly have to buy through one of the companies that specialise in putting
off plan deals together. They negotiate the deal as a bulk buyer, and commit to
taking on an entire development, or a significant number of properties,
regardless of whether or not they can sell them on.
They then market them to their members or customer
base, passing on the discount in full but charging investors a finder’s fee in
return for the negotiations, the risk and the administration that they take on.
Like any other service, there are good and bad providers, and there are those
who charge reasonable fees, and those that are somewhat extortionate. Finder’s
fees are fine, but when there are membership fees to add in on top, the fee
structure can begin to look a little top heavy.
If you don’t like the idea of ‘going it alone’ in
off-plan, you might like to think about joining a syndicate that has off-plan
as a key part of its strategy. Google off-plan syndicate and you’ll be spoilt
for choice! Please do be careful In this field there are a lot of sharks
circling waiting for the unwary!!
It’s a well-kept secret that properties come onto
the market every day at BMV prices. The exciting part is that, with the
information and database driven web sites laid out here, you can go and buy
them almost as easily as the seasoned, well connected property professional. Happy
Whether you’re conscious of it or not, gearing is
the one thing that places property
investment in the medium, to long-term. Streets
ahead of other forms of investment.
So what is gearing? The nearest simile is
Gears in a car essentially allow you to do more
with less. The revolutions per minute (revs, or RPM) of the engine stays the
same and you keep your right foot in the same position, yet the car moves
faster as you climb up through the gears.
financing also allows you to do more with less.
Here’s an example.
Let’s say you have £10,000 to invest.
You consider three options – leaving it in an
online bank paying 5% interest, investing it directly (and wisely) in the stock
market and getting a 10% return, or using it as a 10% deposit to buy a property
with a sitting tenant and a modest yield of 8%.
Which is the most lucrative option? On the face
of it, the stock market looks the best.
But this is where gearing comes in to skew the picture
in favour of the property.
Let’s work each one through using simple, rather
than compound, interest.
10,000 x 5% = 10,500 after 1 year.
Gain - £500
The Stock Market
10,000 x 10% = 11,000 after 1 year.
Gain - £1,000
10,000 used as a 10% deposit on a 100,000 house
The yield is 8% x 100,000 (NOT 10,000) = 8,000
Gain - £8,000
Even after costs are deducted, this is still
spectacularly better than the other options. And this is taking no account of
the possibility of capital growth. If the property increases in value by a
modest 8% in your first year of ownership, then you can add another £8,000 on
to double your gain!
The concept of gearing is where you use your
money to take control of an asset with a value far greater than you have at
your disposal. Your outlay is the same – you’re accelerator pedal and RPM are
the same – but by gearing up, your investment is suddenly turbo-charged!
Interest is the 8th Wonder of the World (Albert Einstein)
combined with gearing it is an amazing financial tool.
often neglected source of BMV property is Overpriced Homes, Do not ignore them!
Not Always a Physical Defect that Drives Away Homebuyers
Don't Home Buyers Make Offers on Overpriced Listings?
* They don't want to offend the seller. It
goes against human nature to offer substantially less than asking price to a
seller. It's insulting to the seller and embarrassing for the buyer.
* Buyers erroneously believe that the
seller knows the home is overpriced. They believe that if a seller would be
willing to sell for less, the seller would simply lower her price.
* Buyers also assume that the seller must
have turned down low offers from other buyers because surely someone, somewhere
along the line, had offered a reasonable price to the seller. But many times,
there are no offers at all.
not every home that is overpriced will ultimately sell for less than market
value. But many homes that are listed at unrealistic prices are owned by
sellers who are motivated and who are willing to listen to reasons why they
should sell at a reduced price to you. If you find out that a seller has turned
down multiple offers for less money, it might mean that it's just a matter of
are overpriced gems hiding among the homes for sale every day. Don't just pass
them by. You could be passing up an opportunity to buy into sheer profit.
How Do You Find an
easiest way is to research the average days properties have been on market in
your area. It’s fairly easy to compute
the D.O.M. Go to www.oodle.co.uk or a similar property analysis site. Check by
postcode every property that has been on the market longer than the average
D.O.M, (days on market) Many agents refer to "average
days on market," which is derived by adding all the days on
the market of each property and dividing by the number of properties for sale.
In a buyer's market, the D.O.M is generally higher because houses take longer
to sell. In a seller's market, the DOM is fewer.
Examples: The average days on
market in a hot property market generally fall under 30 days.
your Estate Agent is a neighbourhood specialist, it is likely he has toured
these homes and has intimate knowledge of condition and layout of these homes.
Ask him to share this information with you. You can also ask your estate agent
which of the homes he thinks are overpriced as well.
will be amazed to learn that often agents don't tell vendors whether their
houses are overpriced because agents don't want to offend anyone either! But
agents aren't infallible. Sometimes they make mistakes when estimating market
value prices for a seller.
however, remember that it is always the seller's responsibility to select the
Would a Seller Lower the Price?
They offered the seller a sizable earnest
money deposit to show that they meant business. And they also showed the seller
a list of homes that sold in the neighbourhood at more reasonable prices.
a Human Face to the Offer
is a people business. Sellers have an unexplained desire, sometimes buried deep
inside; to know that the house they are selling will fall into the hands of a
worthy buyer. It's more than four
walls, floors and a ceiling! A seller's house is a place where joy is shared,
sorrows are expressed, hopes and dreams are crafted; it's a place of treasured
When is the Best Time to Buy a Home?
There are at least two days of the year that
give buyers the edge.
spring Estate Agent signs start multiplying across the country. As soon as the
For Sale signs appear, swarms of activity buzz in the streets as sellers,
buyers and Estate Agents crawl out from wherever they have been.
is nothing like a spring Property market. Offers fly over fax machines and
mobile phones ring constantly. Everybody wants a deal, and everybody wants to
sell. Typically the market is flooded with properties for sale. There is more
on the market in the spring than any other time of the year.
also the worst time to buy a home. Except for one day! There is one day
in the spring that a buyer will have the edge against all the other buyers.
2nd best day of the year to buy a home is Easter Sunday.
* Easter falls sometime between March 22 and
* It is the first Sunday after the
ecclesiastical moon after the vernal equinox.
* The vernal equinox is always March 21.
1st best day of the year to buy a home is Christmas Day. Refer
back to repossessed property and bank sales
looks at homes on Christmas Day. But buying on Christmas Day is a good move. If
you scout out the homes on which you'd like to make offers a few days before
Christmas, you'll be better positioned. Why is Christmas Day so attractive?
* House prices are at a 12-month low in
* If a person has their home on the market
over Christmas, that person is definitely serious about negotiating and selling
that home. You can bet on it. Better yet, why not write an offer?
course, the key is to find estate agents who will work at Christmas.
Day is the Worst to Buy a Home?
the last Friday in May.
problem that arises is not contingent on whether home buyers start looking for
a home in February, March or April. The problem is many eventually settle on a
home in April. Then, they make an offer with the completion date for the last
Friday in May
is the last Friday in May the worst day to buy a home? There are many reasons,
starting with competition from other buyers and ending with the actual move
* The best new properties sell first and at
a higher price.
Location plays an important role. If homes in
the best condition at appealing prices are located in desirable neighbourhoods,
many buyers will want them. Competition breeds multiple offers, so, sometimes
buyers end up paying more than they had planned on paying.
* You might not complete on time. Pending
sales often peak in April, resulting in a larger-than-average volume of
completed sales in May. Normal workloads for estate professionals can triple
during this month, which can result in a backlog.
Many people leave town for long weekends and
are unavailable to work on your transaction. Sometimes, lenders can't process
loan documents fast enough to keep up with demand. Fewer days to work in the
week puts pressure on closers, too, meaning something has to give. So, it might
be your file that gets pushed into June.
* A delay in completion could mean paying a
higher interest rate. If you have locked a mortgage for 45 days, that rate will
expire at the end of that period. If rates go up -- often rising because demand
goes up -- you could find yourself stuck with a higher mortgage payment due to
the rate increase.
* Removal Companies charge more. Moving
companies know that many people want to move at the end of May. Increased
demand equates to higher moving costs. And that's if you can find a mover to
hire. Some movers are booked solid every weekend through July.
of Property Markets
there are many variations and twists, basically property falls into three
Buyer's markets exist when there are more
houses for sale, than buyers. Because buyers have many homes to choose from,
not every home for sale will sell. Most experts agree that if property is on the market more than 6 months,
it is a buyer's market. Also note that in buyer's markets, fewer numbers of
buyers will result in fewer sales, which can skew median prices.
in a Buyer's Market
put, buyers' markets exist when there are a lot of homes on the market and very
few buyers. If the number of homes on the market in your neighbourhood has been
rising, it's likely that the days on the market have been increasing. Coupled
with declining sales figures over previous months and home buyers are in an
enviable position to negotiate. Here is how you can use the situation to your
Request E-Mail Listings & Updates
80% of home buyers today start a home search online. However,
many buyers are unaware that the data they are viewing could be dated.
Many Web sites reboot every 24 hours. On other sites, agents sometimes leave
expired and sold listings as active, hoping for sales calls. To avoid wasting
your time, register your e-mail address with Rightmove, Oodle and Primlocation
so you can receive daily changes of reduced prices and new properties on the
market. This is one way to gain access to the same data agents receive. Compare
this data with online home value sites and you'll see first-hand why the data
your agent gives you will be more accurate.
a buyers' market, you're in control.
Always renegotiate after viewing Home Inspections Reports,
vendors have to obtain a home inspection report. Most contracts give buyers the
right to cancel a contract if the home inspection reveals repairs or defects
that are unacceptable to a buyer. However, if the repairs are minor, you might
want to renegotiate the sales price. Caution: don't ask for a price reduction
if the repairs were evident when you first saw the home or the seller might not
be willing to negotiate with you.
realize that in buyers' markets, often they have to give a little something
extra to the buyers to entice a sale. Don't be afraid to ask for a home
warranty protection plan that covers you in the event an appliance breaks down
or the plumbing or heating malfunctions. Normally these plans protect you for
one full year from the completion date.
Ask for an Item You Don't Want
you like the sellers' dining room table? china cabinet? Fish tank? Ask for it
in your offer and use it as a negotiating tool. Often this draws the sellers'
thoughts away from price and directs those thoughts toward the personal
property. If the sales details stated the washer and dryer are not included in
the sales price, ask for them. If the sellers balk, tell your agent to say,
"OK, if we leave the washer & dryer, are you then ready to sign the
Shorten Acceptance Period
often is no reason to give a seller more than 24 hours to make a decision about
your offer. If your agent is presenting the offer in person, he may ask for a
decision upon presentation. But don't give them days to talk to Uncle Harry,
their neighbour down the street or the co-worker who knows everything about
property. You would be amazed how many
property experts there are in the World!!! There are a lot more homes on
the market and you want a fast answer.
you are going to buy a home and can afford to wait for primo conditions, a
buyer's market is it; there is no better timing. Here are a few advantages to
buying in a buyer's market:
* Lower sales price
Sellers are more willing to wheel and
deal because they know if they refuse to accept your purchase offer, they might
not receive another. When fewer homes are selling, prices typically fall.
* Buyers can command concessions
Buyers can ask sellers to pay their
conveyance costs, providing their lender will allow the credit. Buyers can also
expect sellers will pay for special reports such as vermin inspections or roof
certifications and a home warranty.
* Contingent offers are more acceptable
Sellers are generally more agreeable to
accepting a contingent offer that is dependent on the buyer selling the buyer's
existing home. An offer in the hand is better than no offer at all.
* Request for repairs easily negotiated
If the home is in need of repairs or
updating its systems, sellers will often credit the buyer for the repairs or fix
the problem(s) noted by a home inspector.
* Buyers control the transaction
Buyers can ask for longer inspection
periods, extend closing deadlines and ask for early possession -- terms that
would be automatically rejected in a seller's market.
in a Buyer's Market
a seller does not need to sell, there is no logical reason to put a home on the
market in a buyer's market. Here are disadvantages to selling in a buyer's
Sellers in soft markets lose equity.
Little demand for homes puts pressure on sales prices, causing buyers to make
* Buyers expect concessions
Buyers will ask sellers to pay for
closing costs, thereby lowering the seller's net proceeds.
* Contingent offers are riskier
If a buyer's home does not sell, neither
will the seller's, and by that time, the number of buyers typically dwindle
* Buyers demand repairs
All those little things sellers have put
off repairing will pop up in the home inspection, and buyers expect sellers to
* Sellers do not control the transaction
Buyers tend to ask for "out"
clauses that would let them walk away from the deal all the way to closing.
* Seller's markets
Conversely, in seller's markets, there
are more buyers than available inventory. Because there are fewer homes for
buyers to choose among, almost every home will sell. Typically, there is much
less than six months of inventory in a seller's market. In extreme seller's markets,
there is less than two months of inventory in reserve.
in a Seller's Market
a buyer has no urgency to buy a home, it's not a good idea to buy in a seller's
market. Here are a few disadvantages to buying a home in a seller's market:
Multiple offers are common. Sellers
command list price and get it.
* No concessions
Sellers are reluctant to pay any of the
buyer's conveyance costs or pay for inspections.
* Contingent offers rarely happen
Seller doesn’t want to wait for a buyer's
home to sell.
* Request for repairs are not honoured
Sellers will typically tell buyers to
purchase the home "as is."
* Sellers control the transaction
Most sellers will not bend from the
original contract, regardless of circumstances, because there are three more
buyers around the corner.
in a Seller's Market
is the best time to be a home seller. Here are a few advantages to selling in a
* Higher sales price
list-to-sales-price ratios are lower in seller's markets, meaning sellers
command higher prices, sometimes over list.
* Concession refusals
Sellers refuse to pay buyer's conveyance
expenses, and they often reject offers asking for seller-paid inspections.
* Contingent offers are rare
Buyers find it easier to sell their homes
and realize sellers will not agree to a contingent offer with 10 buyers in the
* Buyers rarely request repairs
Buyers still obtain home inspections but
forego a request for repairs, accepting the property "as is."
* Sellers control the transaction
It's common for sellers to negotiate
shorter inspection periods and to demand buyers waive certain contingencies
such as independent valuation or loan contingencies.
* Neutral markets
Neutral markets are balanced. Typically,
interest rates are affordable and the number of buyers and sellers in the
marketplace are equalized. The scales don't tip in either direction, meaning
the market is normal without experiencing volatile swings. Inventory is
generally around four months, give or take.
Note that good buys exist in neutral
markets, but there are no overall indications that favour buyers over sellers
or vice versa.
below market value property and sell in a sellers market at high end price.