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Well after a year that started off so well I am sure there are a lot of investors out there who are unsure where to invest and whether property is still a suitable investment vehicle. This article lists some key points that any buyer should keep in mind before making any purchase decision for investment property in 2008.
In my opinion, property investment will still provide you with the best return for your money, but for all you armchair investors out there; You’ll have to lift the lever on your recliner and sit up straight for the New Year to face the tougher challenges ahead.
Remember that each region will be different
This week there is an announcement from Nationwide on the property forecast for 2008. On the face of it the prediction of 0% wealth growth for 2008 doesn’t sound good, but when you read these headline-grabbing figures you begin to understand the regional differences. This figure takes into account the overall growth potential for each sector. So while Northern Ireland is expected to see an overall decline of -5%, Scotland’s growth rate is expected to increase by around +4% in 2008.
Ignore generalist media advertisements about development and look at local reports of the areas you want to invest in. If you are online there are plenty of sites out there that will provide an overview such as mouseprice.com but this information will always be out of date when compared to the knowledge local estate agents and letting agents have to offer.
Generally more people will be put off by negative national press coverage, but this means less competition for the astute investor who knows the best areas to invest! Let most people read into media blurb while you gain real insight into prime locations by networking with local investors, connecting with local agents and professionals.
Likewise, each area will differ in terms of the level of rental demand and need for housing. If you’re focusing on student assets, make sure you find out whether the local university has any new plans to build hall accommodation or move any courses to a different campus. These are important factors that many people miss out on and will affect future demand and hence the rental levels that can be achieved in your area. Similarly for professional tenants, have any new businesses moved into the area or are any old businesses moving out? Your local letting agent will be on top of all leaked information because of their local connections.
make your broker work hard
Brokers are the key to a good mortgage which in turn gives you a ‘good’ or ‘may be better’ purchase to invest in. You may have the right location, but the wrong finance deal can spoil your plans. This is why you need a decent broker who knows which strings to pull (legitimately). A good broker can be the difference between a £10,000 deposit or a £14,000 deposit or £400 vs £450 a month. So a good broker can leave you with £4,000 more in your pocket for your next investment or a better £50 per month discount. It still amazes me how many brokers miss the fact that 90% LTV is possible to buy and are quite happy to let you go with 85%.
Weigh all your finance options and ask about all the products available to you. Are you able to put down a low deposit and get 90% finance because the rent is so good? In my opinion the £2k arrangement fee added to your loan should make no difference in the long term, if in the short term you will benefit from the higher leverage; A lower deposit or mortgage payment currently leaves you with more cash in the bank, while your investments make up for higher arrangement fees.
Ask about base rate tracker available – The Times newspaper reported on 15 November that the Bank of England would cut interest rates on two occasions shortly before next summer to combat credit problems and predict the development of a less normal housing market. seeking to reduce. Based on this information and the fact that interest rates have risen and remained flat since August 2006, it is far better to look into a base rate tracker mortgage rather than a fixed rate, which has become an increasingly popular option among our investors. Is. Be throughout finance and newspapers to determine what is right for you at that time! We live in a world where these attitudes are constantly changing.
In my opinion I would not go for a variable rate mortgage for any type of purchase right now as there is no guarantee that should interest rates drop that the lender will follow suit. Lenders are under no obligation to reduce their variable rates if bank rates fall. As most lenders are trying to recoup losses elsewhere, they are not passing up the chance to reduce rates on their bread-and-butter variable mortgage products.
be on all data
You find a property that sounds like you like it, how can you tell when the purchase price and its associated rental figures will stack up?
1. View past sale prices in the area using a site like ourproperty.co.uk
2. Check current rental asking prices and demand through websites such as Rightmove.co.uk
3. Confirm your findings by speaking to a local estate agent and rental agent. It is always a good idea to build relationships with a letting agent and local estate agent for advice and assistance in the areas you are choosing to invest in. Cultivate this relationship so that you are not calling again and again just to probe for information, as they will soon become useless!
Beware of developers’ prices, often a developer near you will offer you a great deal with a discount of up to 25%. It will happen in most cases that the market price quoted by the developer is their own estimate rather than a fair valuation and the discount becomes irrelevant. You can buy a newly constructed property for the actual appraisal figure when you were expecting some equity in the property. To avoid this do some research on previous completed sites by the developer and find out if these sites have been affected by these devaluations and extremes.
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