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3 posts from December 2006

December 17, 2006

Making your investment financially viable...

This is interesting, not only does it confirm "Cyprus" as an investment hotspot, it also confirms the number crunching exersise that I keep harping on about..

Source:- Holiday rentals.

"With Cyprus earmarked as one of the investment hotspots for 2007, leading ‘for rent by owner’ holiday home site, www.holiday-rentals.co.uk surveyed its owners in order to quantify the actual rental return on investment potential buyers can expect. According to the results, owners manage to rent out their Cyprus holiday homes for 18 weeks per year on average, providing a 6.3% RoI, based on the average purchase price of £134,000 and the average rental rate of £470 per week*.

Cyprus has long been an investment favourite with Brits and its imminent adoption of the Euro in 2008 could make it an even more attractive choice, as interest rates fall to align it with the eurozone and make borrowing cheaper. Offering higher gains than France or Spain and more stability than Bulgaria, Cyprus could provide a safe and lucrative alternative for those looking to buy foreign property in 2007.

Ross McGowan, sales director, www.holiday-rentals.co.uk commented, “The number of properties in Cyprus listed has increased by over 40% since 2005 and by nearly 240% when compared to 2004. The site now lists 795 properties in Cyprus, including 72 in the Turkish North. With tourism booming and a reputation for attracting repeat visitors, a buy-to-let investment in Cyprus is still a great bet as rental demand continues to outstrip supply.”

He continued, “Advertising on the Internet is the most cost-effective way to rent your property and ensure you get the maximum return on your investment. In the past, you would have needed to employ a management company, who can take up to 30% of profits. By advertising online and managing rentals yourself, you can cut out the middleman and keep all of that 6.3% return for yourself!”

The results of the survey by www.holiday-rentals.co.uk also support the fact that capital growth in Cyprus has been high. The majority of owners bought between two to four years ago and of those who said they knew the current value of their property, 40% said it had increased between 30-60% and 30% said it had increased between 10-20%. The factors believed to have played the most significant role in the rise were Cyprus’ imminent adoption of the Euro and the fact that tourism is growing by around 7% per year.

The average purchase price respondents had paid was £134,000, with 40% having personally financed the purchase, 33% taking mortgages against their main residence and 27% holding a mortgage in Cyprus. The vast majority said the rental potential in Cyprus was one of the most significant factors in their decision to buy there, with 16% saying it was the most influential factor. The reasonable cost of property and economic performance were also significant influences.

In terms of owner profiles in Cyprus, 36% are between 41-50, 32% between 51-60 and 15% between 31-40 years old. The over 60s represented 13% of owners. The vast majority are married and either employed full time, or self-employed, managing the rental of their property themselves in their spare time. Over a third have a total household income of less than £50,000 per year, however a fifth earned £61-£80,000 and another fifth £100,000 or more per year.

Over and above the financial merits of investing in Cyprus, there are numerous other reasons why it’s a great place to buy a holiday home. With over 340 days of sunshine per year, it’s a year-round destination and English is widely spoken on the island. There is lots of development going on, including new golf courses and marinas, which will further improve facilities on the island in the coming years. Cyprus also has a high standard, but relatively low cost of living, low taxation and low crime rates. Is it any wonder the Brits are in love with Aphrodite’s Isle?"

Nick Says:-

Fantastic!!! All this is telling me that Cyprus is now mathmatically and scientifically worth investing in.

Let me give you a personal example.

As you know (from my first blog) I've bought a penthouse in Larnaca for £121,800 and I've borrowed the money in swiss francs. So if you take off the 10% I put into the deal and add the banks comission (further 2%) that works out that it's going to cost me just short of £400 per month to mortgage the property.

Based on the above info even if you gave an economic incentive to your Clients (because you can by buying the property when the maths work in your favour) and only charged £300 per week, you would only have to rent the property for 16 weeks of a year for it to cover the mortgage.... Thats only 4 months of the year. Now bearing in mind all the amenities/attractions that are coming and/or are already there I would suggest that you have a strong fighting chance to have a successful investment.

So the bottom line is this.

1. Buy your property in an area that you can get some good capital growth out of such as Larnaca.
2. Buy your property with good/strong financial reasons and exit stratergies in place to cover yourself from the un-forseen.
3. Mathematically put yourself in a position that, should you need to, you can give financial incentives to your Clients to make sure it's let (by choosing better borrowing products and/or putting in more of a deposit).
4. Never sit back on you laurels, get up and tenaciously market your property. Get hold of all the local letting agents and/or market the property yourself in the UK.... but keep marketing it.

No-one said you don't need to work at this... you do and hard, however, the rewards are sweet.

With capital growth on the island at around 20%-ish, and my flat is completing in early 2008. I should stand to make £50 grand or so (not including my deposit) over the next 2 years with a property that will pay for itself.

For any other information on buying in Cyprus, please e-mail me at nicktadd@mac.com and I will be happy to oblige.

December 09, 2006

Cypriot property market.

Thought for the day...more reasons to buy in Cyprus.

Source: Assetz

"The Cypriot market is well-placed to be one of Europe's top performers in 2007. A major factor in future of the Cyrprus property market is its accession to the eurozone on January 1st next year.

Adopting the euro means that the republic's government will surrender interest rate control to the European Central Bank, which has set rates for the eurozone at a much lower level than Cyprus'.

This will mean that borrowing on the island is cheaper and so those financing their property purchase with money from Cypriot lenders should be able to fix their loan at a more favourable rate.

Indeed, politically things seem to be looking up for an island that has been divided between the Turkish north and the Greek south since 1974.

Earlier this week, Turkey offered to open a port and an airport to sea and air traffic from Cyprus. Although this may seem like a small compromise, the move has massive political implications as Turkey's relationship with the country has been one of the major sticking points over its proposed entry to the EU.

If the Turks continue to dance to the EU's tune then property investors may have a burgeoning market on their hands in one of the UK's top holiday destinations. Assetz says that capital growth in the country is strong at 20 per cent and there is a high demand for property due to a strong internal demand."

Nick Says...

All good stuff, however, as an investor just "buying in Cyprus" is a bit vague. What you need is laser vision, you don`t want to buy where it has all been done, or is at the height of it`s growth otherwise there is no economic factors as to why it`s going to be a good investment.

What you therefore need to pay attention to is the mathematical factors.

Focus on areas that are on the way up, such as Larnaca. Don`t buy with your eyes straight away, do the number crunching first. If an area is on the way up then property is going to be more affordable so your cash flow, on a monthly basis, is more likely to be easily controllable.

Make sure of the economic driver that will be fueling your investment. There is no point owning a great property with a fantastic financial product that hardly cost you a thing to buy if there is no economic reason as to why it is going to go up in value!!

Like I have said before 3 years ago Vanessa (wife) and I spotted Highbury, London, for these very same reasons. No body liked it because it was next to a dump (Islington council made their money by dealing with London's rubbish on what is now the site of the new Arsenal football stadium) so property prices were that much cheaper. The economic driver was the new football stadium. Millions of pounds were and are being spent on that area and all that is doing is grabbing property prices and dragging them up by the collar!! Therefore, we had some investments in an area that was cheaper so the rents covered the mortgage and we could safely know they were going to make us some money due to the economic driver that was Arsenal football stadium. If you want to know the figures we have made, in capital growth, over £400K in 3 years.

Nowadays you will find it very difficult to get the mathematics to work in that part of London. That is why we turned and applied the same knowledge to Cyprus and more importantly Larnaca. Property prices are 30% (ish) cheaper than most of the other towns (so the maths works) and the economic driver is the amount of money being thrown at the area by the government due to the dismantling of the oil terminal (please refer to my other blogs for more info on Larnaca).

Hope this has been informative, please let me know. If you need any other info on Cyprus and/or Larnaca please contact me nicktadd@mac.com

December 01, 2006

Young investors going abroad...

Young property investors buying abroad.

Source: Real Estate TV

"Many young investors are co-buying property abroad with their parents, it emerged today.

Following research from MRI Overseas Property, which showed that 3.8 million first-time buyers would consider buying property abroad, the group has said that many young clients are buying with their family or workmates before investing in their own.

Lucy Hill, spokesperson for MRI Overseas Property, said: "We see a lot of clients under the age of 30 join their parents who are purchasing and then they follow on with a purchase themselves.

"Alternatively they might buy with their parents as a co-buy. Many young people that are trying to build up a portfolio will get together, colleagues or siblings, and buy together to increase their portfolio."

Research released by the group this week showed that 20 per cent of 18 to 29-year-old see overseas property as a financial investment.

Meanwhile, a study conducted by Mintel this week revealed that the number of investors in overseas property has increased by 45 per cent since 2004."

Nick says...

What this article doesn`t allude to is that young people may be investing abroad to build equity for a UK property deposit to get them on the first rung of the ladder at home.

Taking Cyprus as an example, a 1 bed flat can be purchased for around £10K deposit as property prices are so much lower. More importantly huge salaries are not needed either and there is no requirement for a UK residential mortgage in order to get funding from a Cypriot bank. With 30% capital growth over a period of a couple of years this property would accrue significant equity. In Cyprus the banking system is similar to the UK and it is therefore possible to release equity from a Cypriot property and then bring it back to the UK to fund a UK deposit.

This is a viable strategy for first time buyers to give serious consideration to as property in such countries as Cyprus is much more affordable. Furthermore with the current level of capital growth in Cyprus, this is a unique window of oppotunity for any investor, whatever their strategy, to take advantage of.

For any other information in investing in Cyprus, even the first time buyer, please give me a call or drop me an e-mail. 07833 500903