Martin Grainger is a Property Sourcing Specialist and he contacted me with the following:-
Up to £50,000 off 2 bedroom new build apartments in a good quality University town in the North West. That is up to 39% off.
Martin has other properties available too.
If you mention our name when calling Martin there is no fee to pay on these properties.
I have met many Professional Contactors and Freelancers who havebeen successful in property investing, and some that have not. I havealso met plenty of people that would like to be successful, in propertyinvestment and have heard lots of talk about it from friends andcolleagues but do not know where to start and do not have much freetime.
On occasions we have been asked by some clients if we know reliable sources of advice regarding property investment.
I have followed Martin Grainger from Property Secrets for a while, and think that you may be interested in signing up for his regular newsletter, and then you can make up your own mind if you like what he has to say.
Martin has a Property Finding Service which may interest you if youhave a desire to invest but no time to search and source the high yieldproperties which could form part of an overall investment portfolio foryou.
Here are some recent gems from Martins newsletters :-
I would strongly advise against anyone trying to callthe bottom of the UK market. Focus instead on the numbers right now andsee if they make good investment sense
Prices have fallen and, in some locations, by aconsiderable amount. That isn't the point, though - what matters is theyield. Yield is quite simply key in an uncertain market because itenables the investor to hold long term. And for a chance of strongcapital growth, long term is the order of the day in the UK
Our primary expertise lies in our bespoke sourcing sevice. In partnership with you, we can create and agree a specificproperty finding brief based on your strategic objectives. We'll thenapply our Intrinsic Property Value analysis to source property in thevery best locations
New Build Property, Manchester and Lancashire-Aselection of high yielding houses and apartments available in SouthManchester and Preston. - Example: 2-bed apartments available with 9%yield
Yield is the major buzz word right now as investors realise capitalgrowth is not possible – certainly in the short term. A strong grossyield of 7%+ is required by most resulting in a positive cash flowmonth on month
This is not to say we are ignoring capital growth, far from it. Ourintrinsic property value research takes us to the strongest locationsthat will come out of the recession first; these are the areas weexpect to grow the quickest. By looking at the economic factors behindeach location we can predict its potential and point our investors inthe right direction.
Also, there are a lot of great property buys out there,it is just a case of searching them out. When we are on the road we usetried and tested techniques to find out what is available, how low anoffer is likely to be accepted and rental figures to back up theinvestment.
I mention martin to you as I have been following him for a while nowand I like his approach and how he writes, so you may want to take alook. Do not interpret this article s advice to invest in property,with our without Martin's help, this is not advice it is information,and I hope you find it useful.
According to Dominic Farrell ( who wrote the Jet-To-Let Bible )at Jet-To-Let magazine the top 5 countries of most interest to readers of the magazine for investment in property are:-
- Cyprus
- France
- USA
- United Arab Emirates
- India
The results were revealed after a survey of 500 readers conducted by Jet-To-Let magazine. The UK ranked number 8 in the survey.
Sterling has depreciated considerably against the Euro in the lastyear. Whilst this is of great interest to other Euro zone residents,who can buy property in the UK at much lower Euro cost, the oppositeapplies to UK residents who have purchased property elsewhere in theEuro zone.
For instance a property in Spain costing 1.5m Euros purchased early 2007 would have required an investment of £1m sterling.
A similar property may currently be worth 1.25m Euros. This is aloss on your investment of 250,000 Euros. Common sense might argue thatif you disposed of the property now, you would merely multiply the lossby the exchange rate prevailing when the sale completed? Unfortunatelythis is not the case!
Capital gains tax legislation dictates that you compare the sterlingvalue of the purchase at the date of purchase, with the sterling valueof the disposal at the date of disposal. In our example a propertydisposal today of 1.25m Euros converts to just under £1.2m sterling.You have made a taxable gain of almost £200,000. Brilliant you may saybut what if you want to reinvest the proceeds in another property inthe Euro zone? The sterling gain of £200,000 will cost you possibly£36,000 in UK taxes; that's £36,000 less to invest!
So be wary. A loss on sale in a local currency can produce unwelcome tax liabilities when converted to sterling.
Sometimes it seems that everywhere you read there is doom and gloom for the property market.
Its certainly true to say there has been some real bad news around,but its encouraging to find someone who remains positive about theopportunities available and has some knowledge to back it up.
Dominic Farrell writes a blog Beware The Sharks and publishes a magazine called Jet To let and his last post for 2008 predicted opportunities for the savy investor in 2009, so watch this space !
By Phil Richards
The BBC report that the Bank Of England have reduced Interest Rates to 1.5% the lowest in 315 years.
The reduction of a further 0.5% agreed by the committee was tosupport the UK economy in a time of worsening global economicconditions the statement from the Bank of England said.
With everything that's been going on in the financial markets andthe media taking every opportunity to sensationalise each bit of news,it's worth taking a step back and try to see the wood for the treesagain.
The starting point of this exercise is to ask why people should consider investing in stock and shares in the first place?
Companies wanting to raise new capital to expand typically havethree main options available to them. Firstly, they can borrow it fromthe bank for which they will, over time, repay the capital plusinterest. Secondly, they can offer investors fixed interest bonds forwhich, over time, they will repay the capital and higher interest.Lastly and alternatively they can issue shares thus effectively sellingsome of the company to external shareholders.
In respect of borrowing from the bank or by fixed interest bonds,companies will do this if they believe that they can re-invest the loanto make more money than the costs of borrowing.
When companies issue shares to provide new capital for expansion,they do this because the company owners believe that they can re-investthe funds to make greater net gains, even though they will own less ofthe business as a result.
So, the first fundamental is that equities will be expected tooutperform both cash and fixed interest bonds. The second fundamentalis that in order to reduce the risk to individual companies, investorsshould spread their risk by investing in funds run by professionalmanagers who spread the fund assets over many companies in differentsectors.
Once a company has issued shares and they are available on astockmarket to investors, the next question is: what drives the priceof the shares on any given day? The simple answer is demand and supply- i.e. how many people want to buy the shares and how many want to sellthem.
It's similar, for example, to selling a porcelain collection at anauction. A seller is hoping that all of the potential buyers at theauction want to buy porcelain and that they are the only one selling.Buyers are hoping that they are the only ones buying porcelain and thatthere are many sellers. If there is competition between buyers thisshould drive the price up. If the reverse happens and everyone isselling porcelain to very few buyers, this will drive the price down.
This example translates through to the price of shares: if there aremore people wanting to buy shares than the number who want to sell themthen the price will go up; if there are more sellers than buyers, theprice will go down.
That's not to say that company profit forecasts and economic resultsare not important. Every investor, whether they are buying shares orproperty or antique collections, wants to believe that they are buyingsomething that will make them a profit over time. They are typicallyhappy to pay over the odds for something that they feel will still makethem a profit. In the case of company shares however, if either thecompany profit announcements are lower than expected or new economicdata indicates factors such as unemployment which will translate intopeople spending less on companies' products or services, thisinevitably results in investors re-considering whether they should keepthe shares or sell and re-invest in something that will give them abetter return.
This means that rather than company or economic news directlyimpacting the price of shares, it's the emotions of investors who usethis news to evaluate whether they should buy sell or hold depending ontheir own circumstances.
The herding mentality of the human race is never more evident thanin the stockmarkets where we are all sellers or all buyers.Unfortunately market data shows that by the time the equity buying bandwagon has reached the maximum, that's the time when markets startfalling. Equally, when the market has reached the bottom, that's whenno one is buying when they should be.
Looking again at the porcelain auction example, if you owned acollection you wanted to sell but learned that every other porcelaincollector would be at the next auction trying to sell their collection,you would probably say away. Alternatively, if you were a buyer, thensurely that's the auction you would want to be at.
It's strange and unfortunate that when it comes to stockmarkets,investors forget this logic and buy when shares look expensive and sellthem when they are cheap because everyone else is also trying to selltheirs.
So, the third fundamental is that investors should not follow theherd as those that do will generally lose out. This is because theywill have bought shares at a time when competition for them is high andthey will end up selling at a loss at a time when everyone is trying tosell theirs as well.
The fourth fundamental is that as a result of the human herdingmentality, share market movements tend to be over exaggerated, both onthe way up and way down, and are driven partly by emotion rather thanlogic.
So where does this leave us?
This is an uncomfortable time with poor economic news continuing tofilter through, but let's take a step backwards in order to lookforward.
Longevity is increasing so we are generally living longer and acrossthe globe there is a population boom. In essence, there are anincreasing number of consumers to which companies can sell their goodsand services to. The industrialisation and economic growth and freedomof China, India and the other emerging markets with far lower costbases than the West will allow companies to continue to move theirmanufacturing to cheaper markets, thus protecting and helping them toimprove their profits. Irrespective of the short term, these trendscontinue to support the view that equities remain a vital component toprotecting investors' wealth (after taking account of inflation) in thelonger term. In addition, interest rates are falling which enablescompanies to borrow for growth at lower costs and with the currentlower oil prices companies are able to distribute their goods toconsumers at lower costs, thus helping profits.
We may or may not have seen the bottom of the stockmarkets yet -however, as a result of the herding mentality resulting in wholesaleselling of shares, it appears to have created a false doomsdayscenario. This gives investors the opportunity to purchase equitieswithin a wide spread and diversified portfolio at what may prove in thefuture to be bargain prices.
Investors holding cash should now consider investing part of theirwealth in equities. Existing investors should not sell and in factcould consider increasing their exposure to equities at this time.
As I've previously written, the most effective way to protect thebuying power of your wealth for the longer term is to be invested in awide spread and have a diversified portfolio of real assets such asequity funds, fixed interest bond funds and property funds. In thisarticle I will explore a technique known as Pound Cost Averaging whichcan be used to lower risk by gradually investing in real assets.
One of the problems in volatile times such as we are currentlyexperiencing is that the reaction of many investors is to stay in cashrather than to take what they consider to be short term risk. Assomeone once said to me, 'the long term is made up from a number ofshort term periods added together', which is a good explanation of whymany investors end up staying in cash for the longer term - they don'tthink that it's ever the right time to invest actively in markets.
In certain respects, moving into assets where the capital values canfall as well as rise is a brave move compared to choosing assets thathave no capital volatility, but history shows that over the longer termyou get more ups than downs. It's the difference between the two whichallows you to protect your capital from inflation and which cangenerate income. Cash in the bank will never have any ups so you don'tget any inflation proofing to your capital above the interest youreceive.
The cost of delay
Invariably many investors don't take what they see as a plunge into real assets and end up in one of two different situations.
The first is that they leave it and leave it and leave it… to theextent that by the time they can actually see what the cancer of longterm inflation has done to their capital, it's too late. Alternativelythey then need to take a higher risk than they are comfortable with totry and restore their buying power. While inflation in Europe isfalling, so are interest rates, so savers are in no better positionthen when inflation was higher. In fact they may be worse off,especially when you bring the Sterling/Euro exchange rate into theequation.
The second situation is when people eventually invest because theyfind the confidence, but then follow an unfortunate but predictablepath. As markets rise, investors become less nervous and begin toconsider investing in real assets. As the markets continue to improvethey then gain enough confidence to invest. However, if you look backover history you'll see that often, the point where most people areinvesting is the point where markets have reached the top and are aboutto fall.
Unfortunately, we don't know what the top of a market cycle is untilafter it's fallen. The investors who'd waited to build up sufficientconfidence to invest at what turned out to be the top of the market seethe value of their initial investment fall. If the falls continue, theydisinvest, move back to cash and swear never to invest again.
Again, as history tells us, they shouldn't have disinvested and realised loses because inevitably markets do rise again.
A good example of the behaviour of real assets is in the UK housingmarket. If someone had purchased a property at the average UK houseprice in autumn 1989 they would have paid £62,782. By winter 1995 thatproperty was worth £50,930. By winter 2000, it was worth £81,628. Bywinter 2005 it was worth £157,387. The property value reached its peakin autumn 2007 at £184,131 and in autumn 2008 was worth £165,188.
Three questions for you: (1) Would you have sold the property inwinter 1995 at a big loss? (2) If it wasn't your own home would youhave been tempted to sell? (3) Would you now be happy with your overallreturns over the period if you'd kept the property?
The same type of pattern can be seen in other asset classes such asequities. Equities however have the benefit of being freely liquid soyou can encash them at any time, either fully or partially. Bricks andmortar are less liquid and you'll also need to spend time and money onthe upkeep.
The property scenario is an example of the type of behaviour of realassets. Investors should look to diversify across a number of sectorsto reduce the risk to a particular asset class and invest through fundsrather than direct holdings.
So how can people invest early enough but without taking on too much risk?
Although logic suggests this is a good time to invest in real assetsgiven the low market levels and analytical indicators, I fullyappreciate that some investors still feel nervous about committingfunds into them. There is a way to reduce risk which is known as PoundCost Averaging - investment industry jargon for moving money graduallyfrom low risk/low return assets such as cash into real assets such asequities.
The example below demonstrates this technique. It uses three hypothetical potential scenarios for a 12 month period.
Scenario 1 - the real asset's value increases by 8%, i.e. 2% per quarter (simple).
Scenario 2 - the real asset's value increases by 2% in the 1stquarter, falls by 2% in quarters 2 and 3 and increases by 2% in quarter4.
Scenario 3 -the real asset's value decreases by 8%, i.e. 2% per quarter (simple).
The table below compares investing a single lump sum of £400,000 inthe real asset at outset to the use of pound cost averaging - i.e.investing £100,000 at outset and a further £100,000 in each subsequentquarter until you are fully invested.
Single lump sum results Pound cost averaging results
Scenario 1 £432,000 (+8%) £420,000 (+5%)
Scenario 2 £400,000 (0%) £400,000 (0%)
Scenario 3 £368,000 (-8%) £380,000 (-5%)
By phasing investments from low risk/low return assets into realassets over a period of time, you can reduce risk in the event thatmarkets have not reached the bottom when you invest (although it doescome at the cost to the gain you could have made should markets havealready reached the bottom). In respect of scenario 3, the effect ofpound cost averaging has reduced the first year loss by 37.5%.
Pound cost averaging is a principal of phasing money into realassets. You can choose your time frames, eg, whether to invest everymonth or more or less than 12 months. The concept can also work wellfor investors who are currently sat on unrealised losses from realassets but still have cash on deposit.
As always, you should only seek professional authorised and regulated advice from a company such as Blevins Franks.
Many building firms are now holding completed residential propertywhich is proving difficult to sell in the current property market. Onesolution is to let out this property for a short period in theexpectation that property prices will recover.
Ordinarily most of the VAT paid on construction costs isrecoverable. Unfortunately rents received from the letting ofresidential property are an exempt supply for VAT purposes. Accordinglya builder who both constructs and lets residential property isconsidered to be a "Partially Exempt" trader. Potentially a proportionof the VAT recovered on the construction work may have to be paid back!
The builder may have to:
* adjust the VAT recovered on his submitted VAT returns
* restrict the VAT to be recovered on current and future VAT returns
* or do both
Fortunately there is an escape route! If the amount of input taxwhich can be attributed to the exempt rental income is below a defined"de minimis" amount, no adjustment to past or future returns isrequired - VAT input tax can be recovered in full.
Provided the exempt input tax is below:
* £625 per month, on average, up to £7,500 per year; and
* is not more than half of total input tax ,
then the exempt input tax is de minimis and recoverable in full.
Many UK share investors will have picked up shareholdings in Spanishcompanies in recent years. The most common example is Banco Santanderwho have acquired a number of UK building societies. (Abbey National2004, the Alliance & Leicester, and more recently they have bid toacquire parts of Bradford & Bingley.)
If you hold Santander shares, dividends you receive after 5 April2008 now benefit from the same 10% notional tax credit as UK shares.For basic rate tax payers there is no real change.
But what happens if you sell your Spanish shares?
Capital Gains Tax
Many UK holders of Santander shares will have paid nothing for theshares as they were acquired when the underlying UK building societieswere demutualised many years ago. Subject to the usual rules yourdisposal may or may not create a capital gains tax liability in the UK.
What many shareholders may not realise is that they also have a legal obligation to file a tax form in Spain.
The completed Form 210 and certificate of UK tax residence must bedelivered in person to the Spanish tax authorities, generally inMadrid. This means that shareholders will normally have to engage theservices of a Spanish tax representative in order to have the documentsfiled.
Form 210 must be filed within 30 calendar days of the date of the saleor gift. The failure to file the form will give rise to a penalty ofapproximately (Euro) €100, even if there is no tax to pay. This penaltymay increase to approximately €200 if the form is not filed before theSpanish tax authorities have raised a demand.