Category Archives for "Beginner Investors"

Property Investment Strategy

5 Strategic questions to consider in choosing a property model

One of the exciting parts of property investing is that there are lots of different property models out there for making money from property.

Be it second-hand refurbs, being a developer yourself, new build and off plan, HMO, rent to rent, serviced apartments, lease options and all forms of alternative property investments like student lets, hotel investments, holiday rentals etc.

With so many models out there it is important to have a strategy in place, your strategy will give you focus in helping you determine what you should concentrate on to implement, and what model that is just not right for you, as it does not match with your situation and goals.

I come across so many people who attend property seminars and are full of enthusiasm following on from the theory they have just picked up from seminars without necessarily becoming grounded on what it really takes on a practical level to create the level of success they short term believe they will achieve after such seminars.

You’ll find that most property models being preached about at seminars are suitable for people who want to do property full time and get their income from property full time which is great if that is you, but not practical for a lot of people’s lifestyle, desires or stage in life. 

The main model you’ll get from a property seminar is either buy high yield lower priced properties or buy the worse property in a really good area/street and do it up. 

With buy high yield low priced properties, the challenge is in the areas where this happens in the UK you do not get the growth, hence why they stay cheap and usually you do not get the best quality tenants. 

The real challenge is since the growth in these areas are not there (regardless on marketing claims ), it requires more of your own funds to grow the portfolio or even worse borrowing money from friends and family and giving away the yield. 

You scale the above up and you end up creating problems for yourself with more cheap properties not growing in value, with potentially not the best quality of tenants, hence why It’s important to have a real proper assessment of your situation and goals first, as it could be best for you to focus on quality over quantity of properties.

With buy the worse second-hand properties in a really good area/street and do it up, you’ll need to be full time and effectively become a developer (There are models in place though were as opposed to being the developer, you can leverage off a great developer like off-plan when done well).

What you’ll find is, seminar students who succeed are the ones who make the sacrifice to give up their jobs and end up doing property full time, then start selling educational course, seminars or some form of mentorship which is where the real money is made from the seminar business model (Selling theory – education), not necessarily property. 

Here is a small list of factors to consider in determining what is the best strategy and property model for you based on what stage in life you are at, your goals from property and the property market cycle.

1 – What is your predominant goal from a property? 

Property is just a vehicle we use to achieve specific goals we have for ourselves. Be it as part of a retirement plan, replacing a full-time job, a hobby you enjoy, or you see It as a store of wealth to have something to pass on to your kids.

Your reason for using the vehicle will determine exactly what property model you should be buying.

2 – What return do you predominantly want from the property?

Once you have clarity on your reason for the vehicle, then the next thought should be does my reason require me to have an immediate return now to live on (income – short term) or is my focus more on getting a return in the future (capital growth – mid to long term).

This is critical to get clear on because this will determine what model you choose to go ahead with, the area you choose to buy in and the property you choose to buy.

Each property you purchase will either predominantly be an income-producing property (Generator – high yield and low capital growth) or will either predominantly be a capital appreciating property (Accelerator – high capital growth and low yield).

Whilst you can balance out your portfolio with a combination of income-producing properties and capital appreciating properties, there is, unfortunately, no perfect property that will give you both high yield (over 8%) and high capital growth (Over 8% yearly), it just doesn’t exist so stop looking for it….to achieve this you’ll need to combine several strategies.

3 – What is your current situation now – Your current Income, the current level of capital to invest and do you need the extra income now to maintain your lifestyle?

Do you currently earn enough income to maintain your lifestyle? Do you enjoy your full -time job/business and are happy to carry it on for the foreseeable future?

These are some strategic questions you want to consider because if you want to maximise the use of leverage and benefit from compounded growth using a capital appreciation strategy, then whilst the properties you purchase may be sufficient to look after themselves cash flow wise, do not expect to be able to live on the cash flow from the properties. 

You will have to have a secure and reliable source of income other than from the properties whilst you allow time for these properties to truly appreciate in value over the years.

If you do need an income stream straight away, then perhaps an income producing model may be best for you, however, if you want a significantly high-income stream, you may need to be hand on.

So the next question is: do you have the time, effort and knowledge required to follow a strategy that will produce a high-income stream for you right now?.

4 – How much time can you put into a property (Hands on vs hands off)?

Most people nowadays no longer work from 9 am to 5 pm. Most full-time jobs are now realistically 6 am from when you get up to 7-8pm when you arrive back at home.

Property investment, to do it properly using second-hand models is a full-time commitment and it’s very competitive.

If you have the time and passion for property then the second-hand route whether via refurbs, being a developer, rent to rent, service apartment or HMOs might be the way for you, but expect some competition and be prepared to work hard to see some results. 

You also want to put a value on your return on time invested. Is your time best rewarded working on something else other than property?

Alternatively, if you haven’t got enough free time or realise that you can get a greater return on your time from something else other than working on property, then new build and off plan model could be right for you as it requires less of your time, and produce a higher return for your time invested.

5- What is your current age (Life Stage)?

Finally, your age is an important factor. You speak to any expert out there and they’ll say get into the property as early as possible why? Well, one reason is one of the greatest assets we have whilst we are young and earning a good income is our ability to leverage and benefit from compounded growth.

Your ability to leverage diminishes as you get older as most banks’ lending on Buy to lets will lend to you right up to the age of 65 to 75 (In some case 85). But let’s be honest do you really want to be worrying about debts by the age of 65? So, assuming you are 60 years old, then you’ll only be able to get a 15-year loan term maximum with most banks.

It’s best to use good debt to your advantage when you are young to create wealth that you can live on when you are older.

If you are already in your 60s then an income-focused strategy could be best for you, unless you do not need further income and just want to invest for something down the line for the kids.

No doubt there are a few things to consider when determining the best strategy and thus property model to meet each person’s individual situation and goals.

Once you have considered all these factors mentioned above, the most important next step is to gain the knowledge surrounding your strategy and the knowledge surrounding the property model you’ll use to meet your strategic objectives.

You need to invest the time to learn everything you can about that strategy. You want to know the good, the bad and the damn right ugly. You obviously want to learn how to avoid the bad and the ugly.

One of the best ways to developing knowledge is by spending time with people who have implemented that strategy and are willing to share their knowledge with you. Contact the team at Gladfish today.

Cheers,

Manny Esezobor

Cashflow and Interest Rates

Cashflow and Interest Rates… where they’re likely to go?

Video Transcription:

Hey guys. So Bretts Property Rants. So what I wanna chat about, I guess, is cash flow, and in particular, interest rates, and where they’re likely to go.

I mean, we have had the lowest interest rates ever in the history of the world, I think, to be fair. Probably not the history of the world. That’s probably a, but certainly, in modern history, it’s been the lowest for the longest. And I don’t think they’re ever gonna go back up to where they were, because, you know, corporate debt in America is nine trillion. You know, their consumer debt is 22 trillion. You know, they’re huge numbers. And the problem is if interest rates go too high, then they can’t afford anything, and they’re gonna have massive defaults, et cetera, et cetera, et cetera

And there’s a whole range of reasons why I don’t think it’s going up too high. But I do think the interest rates will go up, and they will need to go up, and I think the key is for you, personally, have you actually calculated all of your debts, put ’em all together, okay, and then worked out if interest rates rose, let’s say 1%, 2%, 4%, you know. I think at 4%, that’s really going to be a massive stress test, you know. And when we look at that, that’d be a massive jump for most people.

So I think if you can sustain a 4%, you’ve got absolutely nothing to worry about. I think 2% is about what, you know, what you really need to account for and you really need to calculate. If you’re gonna struggle, then what you might need to do is, right now, start to look at how you can start putting money aside, maybe paying off some debt or, you know, paying down that debt. If you have to, sell a house. If you have to, you know, don’t take on more debt. All these sorts of things. Don’t just include houses, ’cause this is not just about houses. This is all debt, okay.

The availability of your debt is gonna start decrease, and the money supply is decreasing right now. So, effectively, what that means is as the money supply decreases, you tend to find we go into a recessional downturn, okay. And so all these sorts of things are starting to kick in and start to move forward now. So, you know, you can sit there and say, oh, no, no, no. I’ve been watching the hundreds and hundreds of YouTube channels that say, no, house prices are gonna continue. You know, corporate debt’s gonna continue. Everything’s fine. But I would just say that lot of the indicators now are pointing towards a downward happening. And it could be in 2020, it could be in 2021, it could be in 2022 but somewhere around now. I mean, there are lots of things that countries could do to stimulate and to sort of, you know, stretch it out.

I think the UK’s in a reasonable position because it’s got a very strong economy. And actually, to be fair, we’ve had a pretty rough time over the last two years with Brexit. And that’s kept, the growth down. And that will play into, that’ll put us in a good position if the rest of the world does go into a downturn. That’s not to say that we’re not gonna, you know, see things changing and not have to do this. But I think for this, you know, what have you personally done? Have you done that calculation? If you haven’t, it’s probably time to do it, and then if you want to, you know, one of the big things we do is portfolio management.

So, if you’re not sure what to do, if you’re not sure how to do it, get all figures together, you know, book with a team, and, you know, sit down with them, and get them to run through the implications of that. ‘Cause when you run through the implications, you know, knowledge is power, and you can act on knowledge. You’re sticking your head in the sand and waiting for a kick up the ass, you know, that’s not the way to do it. That is not the way to do it. That’s gonna create stress. Maybe, right now, you can live blissfully, but that’ll create stress down the way, whereas you don’t need to.

Actually, what we find with most of our clients, they are fine. Once they do the numbers, they realize they’re fine, and they can then almost kick back and relax because they don’t need to worry. By far the majority of people are gonna be absolutely fine with that sort of 2% increase in interest rates, okay. So if you’re sitting out there, and you’re concerned about it, and you’re thinking your head in the sand, don’t, give the team a call, like go through the numbers and really get you a sense, you know, some certainty. That’s really what we want, is to give you a sense of certainty as you’re building a portfolio. Now it may be that there’s actually some leeway there if you take advantages and opportunities now. ‘Cause what we’re seeing is, you know, vendors and developers are starting now to give a bit more, you know, flexibility on their pricing, because things have slowed now You know, the numbers are slowing down.

Look, the price houses haven’t dropped off, but they will follow. And, you know, that will start to come, you know. But, right now, you know, things are still looking pretty good. But now’s the time to really make those adjustments if you need to make them.

Alright, guys, have a great day. Live with passion, see ya.

Bretts Property Rants

The North and South Divide in the UK

Video Transcription:

Hi, guys. Brett’s property rant. I was just reading an article about the north-south divide in the UK, between the southern counties, London and the southern counties, and the northern counties. Just talking about how that’s changing now. Now Wales actually kinda doesn’t include it. That pattern is changing. I think, to be fair, we’re gonna see a lot more of that. I’m saying right now, and I’ve been saying for the last couple of years, we’ve sort of backed away from selling in a lot of areas.

I just don’t want to sell ’em ’cause I think long term we’re not really gonna see the growth that you would expect from that property. What’s happening is the fundamentals are moving into the cities, into the major cities. That’s more where our investment focus is and that’s where more your investment focus is, but what that means is that rather than being a north-south divide, I think what you’re gonna start to see is… I think there will certainly be a north-south divide, but I think the other side of it is that there’s going to be a cities and suburbs divide. If you’re looking prediction-wise, give it, you know, maybe 10 years, 20 years, but certainly within a generation, I think we’re gonna start to see the suburbs becoming quite desolate. It’s almost like the Hollywood movies with the tumbleweed rolling down the town that used to have hundreds of people in it. I think that’s gonna start to happen a lot more now.

What you’re gonna find is your rents won’t go up. Your capital values won’t go up. That’s going to be the initial phases of it. As it goes further and further on and it becomes less and less attractive an area, then what you’re gonna see is actually it’s gonna get harder and harder to rent your property out. It might still be fine for owner occupies, but actually, if you’re gonna rent the property out, you’ve gotta be careful. That’ll be the next stage of it. I really don’t think you want to be involved in an area when that hits. Cities, what you’re gonna see is more and more, they’re gonna take over as the place to invest. All right, guys. Have a great day. Live with passion. See ya.

Property Investment Manchester

For property investment, Manchester is hard to beat

Six reasons you will want to invest in Manchester

Manchester is a highly desirable place to work, live and play. It is being developed at a faster pace than most cities in the UK and is attracting high numbers of businesses and young professionals. For those considering property investment, Manchester should be high on your list of UK locations.

Here are six factors that underpin the potential of investing in Manchester property.

1.    Manchester is a mecca for retail and leisure enthusiasts

Manchester has some of the best retail and leisure facilities in the UK. These range from the world-renowned intu Trafford Centre, to the Arndale, Exchange Square and Market Street, and fantastic boutique shopping districts around the city.

For the culturally minded, there are more than 30 museums and galleries to visit. For fresh air enthusiasts, Manchester is a stone’s throw from several of the UK’s most beautiful rural areas.

Manchester is also the home of two of Europe’s best football teams (Manchester United and Manchester City), and Old Trafford is the home ground of Lancashire Cricket Club.

2.    Manchester is the place for exceptional education

With hundreds of schools in the city region and 25 primary and secondary schools rated as outstanding within three miles of the city centre, parents are spoiled for choice for their children.

There are also 20 higher and further education establishments. The total student population is one of the largest in the UK – presenting an exceptional opportunity for investors in student accommodation.

3.    Manchester’s tremendous transport

Manchester benefits from road and rail networks that connect the city to all corners of the UK. When HS2 services start running, London will be only an hour away.

The Manchester region is served by regular bus services, and rail and Metrolink services.

Manchester Airport is the North’s only major international gateway. It serves more than 22 million passengers each year – a number that is expected to rise to 50 million by 2030.

4.    Manchester is a city open for business

The city region houses a population of 2.8 million in its 10 metropolitan boroughs – the largest UK city region outside of London.

With a GVA of £63 billion, Manchester’s economy is extremely diverse with major employment sectors including:

  • Financial
  • Advanced manufacturing
  • Life science and healthcare
  • Energy and environment
  • Creative, digital and technology

Many major companies are located here (including names such as Barclays, BNY Mellon, Cargill, Heinz, BAE Systems, the BBC, Google, and IBM) attracted by the city and its stock of well-educated workers. The rate of start-ups here is also strong.

Consequently, the growth of more than 2% per year in employment that Manchester has experienced in recent years is expected to continue.

5.    Regeneration and development are booming in Manchester

Manchester is the beating heart of the Northern Powerhouse, and billions have been spent and are being spent on regeneration and development. Key projects include:

  • The Manchester Enterprise Zone (business and office space, manufacturing, health, and bioscience facilities)
  • The Corridor (now the UK’s largest academic campus)
  • Manchester Science Park (a world-class science and technology hub)
  • Spinningfields (mixed-use development in the heart of the city centre, providing space for mostly financial and professional services firms)

Regeneration projects include:

  • NOMA (an £800 million project)
  • St John’s Quarter (a mixed-use development including 2,500 new homes)
  • Ancoats (developed with £1 billion from the owners of Manchester City FC)
  • Greengate (2,000 apartments to be completed in the next 15 years)
  • Middlewood Locks (A £700 million mixed-use development)
  • Kampus (200 new apartments, and independent bars and restaurants)

The latest Deloitte Crane Survey forecasts more residential units will be delivered in the next three years than in the previous 10 combined.

6.    Manchester – where the population just keeps growing

Manchester’s city population has grown by 6% in the last three years – three times the national average. With more businesses moving to the region, HS2 soon to run services here, and a young, diverse and well-educated population, this rate of growth is set to continue.

Summing up

World-class retail, leisure and education make Manchester a good place to live and learn. The incredible transport links and a young and vibrant population make it a good place to do business. Add it all together, and Manchester is a great place for property investment.

You can learn more about the best property investment opportunities in Manchester by contacting the team at Gladfish at +44 207 923 6100.

Live with passion,

Brett Alegre-Wood

Property Investment UK

Why property investment in the UK is so attractive

Where else could you achieve these huge benefits?

Property investment in the UK is still attractive, despite the headwinds of higher stamp duties on investment properties, a tougher borrowing environment, and changes to the tax relief on buy-to-let mortgages and wear and tear costs. Here are a few of the major reasons to invest in UK property.

Demand for property outweighs supply

The law of supply and demand has impacted the UK property market for centuries. A continuously growing population fuels demand for new homes. This boosts the price of homes and is great news for property investment in the UK.

According to the Office for National Statistics (ONS), the UK population is forecast to grow to:

  • 2 million in 2026
  • 70 million in 2029
  • 9 million in 2041

This is population growth of more than 11%. To put this in some perspective, the UK would need six cities the size of Birmingham to house it – or 13 Manchester, or 12 Liverpool. That’s a huge demand for extra housing.

UK property investment has continually proved itself as a solid investment

The average UK house price has doubled every eight to 10 years during the last 100 years. Even during financial crises, property investment in the UK has proved more resilient than other assets. When the stock market almost halved in 2008/9 because of the Global Financial Crisis, the average UK house price fell by just 14%.

Stock markets tend to have crashes every 10 years or so. The Oil Crisis was blamed for the slide in the mid-1970s. Then there was Black Monday in October 1987. The dotcom bubble burst in 2000. Throughout such stock market volatility, UK investment property has remained remarkably resilient and astoundingly stable. As ‘safe as houses’, as they say.

(Read our article “If you’re a long-term investor in stocks, you’re a long-term loser” to discover the truth your financial advisor would rather you not know.)

Inflation-proofed income – great for retirement

When you invest in buy-to-let property in the UK for the long term, you benefit from the rental income that you control.

Generally, rental prices increase in line with inflation. Sometimes they rise slower, and sometimes faster.

If you are investing for retirement, the inflation-proofing quality of buy-to-let investment property in the UK will be very attractive to you – especially when measured against the cost of an annuity designed to protect your income against inflation.

You make money on other people’s money

In the UK, you can borrow to invest in property. This means you have the potential to make money on other people’s money, thus boosting your comparable return.

As an example, let’s consider an investment of £200,000, using £50,000 of your own money as a deposit and a £150,000 buy-to-let mortgage to fund your investment. Let’s say that the mortgage interest rate is 4.5%, and you achieve a gross rental yield of 7%.

You will make a gross income of 2.5% on the £150,000 you borrowed, after allowing for the interest payment. Put another way, your gross rental income is £7,250 (7% x £50,000 + 2.5% x £150,000), or 14.5% of the capital you invested.

It gets even better. Should the property value increase by, say, 30%, it would now be worth £260,000. Before costs and tax, this is a profit of £60,000. That’s 110% on your original £50,000 investment.

Such incredible potential returns are all thanks to the benefits of leveraging in property investment.

Perfect passive income

Finally, here is the one that will really make a difference in your life. Who wants to work for their money, when you could be sitting at home (or on a beach) enjoying the fruits of someone else’s labour? Hire an investment property manager to manage your property, and benefit from the perfect passive income that could give you the lifestyle you deserve.

Summing up

For its potential to produce incredible passive income and capital growth over the long term, property investment in the UK is a highly attractive option. Projected population growth should help it to produce the kind of returns it has historically, as you benefit from using other people’s money to maximise the return on your own investment capital.

For more information about investing in UK property, contact the team Gladfish today, at  +44 207 923 6100.

Live with passion

Brett Alegre-Wood

Making money from property

5 Ways for making money from property in the UK

Profitable property investment strategies for all investors

Making money from property is one of the most satisfying ways of investing. And there are many strategies that you could use to do so. In this article, we describe five of the most popular.

1.    Long-term buy-to-let property investment

When you purchase a buy-to-let property, you are investing for the long-term potential in a growing private rented sector in the UK. By investing wisely and getting good tenants, you should profit from inflation-proofed rental income and long-term capital gains from rising property prices.

You can take advantage of the benefits of leveraging in property investment, which massively improves the returns on your invested capital.

You can pass on many of the duties and responsibilities of being a landlord by hiring an experienced and competent investment property manager. With effortless property management, you should benefit from perfect passive income.

2.    Short-term flipping

Investors who want to profit from capital gain, without holding the property for the long term, can do so by using a strategy commonly called ‘flipping’. Two ways you might flip property are:

  • Buying a property that needs refurbishing, doing the work, and selling for a profit
  • Buying off-plan property and selling before the property is complete (or shortly after completion)

If you choose the first method, making money from property this way takes discipline, tight control of costs, and a systematic approach. You’ll need to consider that a short-term fall in property values could damage your forecast returns.

With the second method, you are somewhat protected against the potential for short-term price volatility – thanks to the discount when you invest in off-plan property. By the time you come to sell, this discount will act as a buffer against a fall in the market. If the market price has increased, this will be translated into a larger profit.

3.    High-yielding holiday lets

Investing in a holiday let property is similar to investing in a buy-to-let property, except that making money from property this way relies on a steady stream of short-term vacationers rather than the more stable income from longer tenancies.

There are some tax advantages over buy-to-let investment. For example, you can offset all your mortgage interest payments against your letting income, and the cost of furnishings can be deducted from your income before tax is calculated. Also, because this type of investment is classed as a business, profits become ‘relevant earnings’ for pension purposes – meaning you can increase your pension contributions.

Holiday lets pay higher yields, but you will need to market your property effectively to take full advantage. (Read our article “Is holiday let property a good investment?” for more information.)

4.    Fixed-term hotel room investments

For cash investors with a fixed timeline for their investment, and who want a guaranteed return, investing in hotel rooms may appeal. You gain exposure to high-yielding property investment, without having to buy (and run) an entire hotel! In brief, this type of investment works as follows:

  1. Do your research and select a popular destination.
  2. Select a hotel that offers the benefit of location and good management.
  3. Buy the hotel room.
  4. Receive income from your investment (usually around 8%).
  5. Your capital is returned at the end of the fixed-term of your investment.

This could be a great way for making money from property if you have a cash pot that you don’t need now but will need in, say, five or seven years (for example, to pay school fees for your children).

5.    Diversify with developer loan notes

Have you ever wished you could make the profits that banks make when they loan money to others? Developer loan notes allow you to do just that. In effect, you lend a developer money over a fixed term to help them fund their project. In return you get:

  • A fixed (and high) rate of interest
  • A guarantee on your capital invested
  • The flexibility to take your capital back early

The amount needed to invest is smaller than for most other property investments, and you can build a portfolio of loan notes paying interest and maturing at different dates – allowing some exceptional budget planning.

Summing up

There are many ways of making money from property. The five described here are among the most common. Which is best for you depends upon your personal circumstances, investment objectives and other factors. For a confidential, no-obligation discussion of your options, contact one of the team at Gladfish today at  +44 207 923 6100

Live with passion

Brett Alegre-Wood

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