« June 2007 | Main | August 2007 »

16 posts from July 2007

July 27, 2007

Lobby for Cyprus forces the closure of property exhibition

Lobby for Cyprus forces the closure of property exhibition

4wallsandaceiling.com Newsletter

Source ....?

Lobby for Cyprus in a recent press release has announced the successful lobbying of the Hilton hotel in Surrey to cancel a property expo selling properties in the occupied territories of the Republic of Cyprus. Nick Kounoupias a lawyer for Lobby for Cyprus spoke with the management of the hotel and explained to the management that by allowing the event to take place they were in effect complicit " criminal behaviour of Sea Terra, they would be guilty of conspiracy to defraud if they continued with allowing them to exhibit at their hotels."

The UK based "Sea Terra" held an exhibition at the Hilton hotel in Cobham, Surrey this weekend for two days exhibiting investment/residential property opportunities for Britons in the occupied territories.

The UK's leading lobbying group campaigning for the rights of Cypriots to have property returned to them stolen by Turkey following the illegal invasion of 1974 has scored a victory in the battle to outlaw British property companies advertising the sale of Greek Cypriot properties in the occupied territories of the Republic of Cyprus.

Lobby for Cyprus will be escalating its efforts to outlaw all property expo’s that market or sell stolen properties emanating from the Republic of Cyprus.

Nick Says...

Very interesting.

It has and always will be my opinion, and only my opinion, that it will always be a dangerous idea building or buying on land that has questionable ownership.... very much a tertiary market.

If you have ever been to Cyprus, or rather north Cyprus the occupied side, you will find a very beautiful land with very attractive deals, however, no matter how attractive the seller can "package" the deal up, if you are buying property on "occupied" land then that in itself is high risk...surely?

Turkey has been angling to get entry into the EU for a while now. Think about it, if they do get entry surely they will have to give back the land they took in 1974 from the Greek Cypriots? If this happens then all the original owners will want there land back... no matter who is on it!

Whether I'm right or wrong (I'm sure I'm going to get some flack for this from the sellers of land/properties in the north of the island) which ever way you flip it on it's head you cannot deny the high risk status of such an investment.

Stick to what you know works... southern Cyprus, Larnaca in particular, is where the sensible money is going and for all the right reasons.

What ever you do if you are going to invest in Cyprus, and you should, make sure you do your homework first and don't get sold to... the e-book below will help.

If you have any questions with reference to investing or moving to Cyprus, please drop me a line at nick.tadd@4wallsandaceiling.com


If you are interested in purchasing investment property or your own home in Cyprus, you should consider buying this book. It has 31 pages of the most concise information you could ever need when it come to buying property in Cyprus. From the Legal ramifications through to the Banking issues, all of which is complimented by some beautiful photographs of the island.

Available at 4wallsandaceiling.com for only £4.99.

July 25, 2007

Avoiding the pressure of the rate increase

4wallsandaceiling.com Newsletter

Source The Voice

Nick Says…

I’m not going to comment too much on this as it speaks for itself. Interest rate rises should concern us all, however, an understanding of why Is imperative… this piece gives you some of that understanding.

The Bank of England's fifth increase of interest rates since August last year is causing some concern among homeowners and investors.

The increase continues the record of being the highest interest rate for the last six years pushing up rates by a quarter of a point from 5.5 per cent to 5.75 per cent. It is a worrying trend and some are asking rightly if it is set to continue. With pressures on mortgages and other expenses, most are understandably concerned whether things will get worse before they get better.

Why were interest rates increased?

The Bank of England increased interest rates to tackle inflation which currently stands at 2.5 per cent. The last increase was essential because interest rates were over 3 per cent and the bank has a responsibility to meet the Government's target to keep inflation under 2 per cent to preserve the stability of our economy and maintain the value of our money.

Is another increase in rates likely?

Interest rates are likely to rise again in the near future because the bank is struggling to keep inflation in check. As low inflation keeps prices stable and preserves the strength of our economy, the bank cannot afford to let it spiral. Unfortunately, due to increased spending and borrowing, the bank has to take steps to correct these factors and increasing interest rates is the main tool it has available. As the rate increase continues to pinch, our spending habits will change and interest rates may stabilise. Presently, all the indicators suggest another rate rise in the future may be required to return inflation to the target of 2 per cent and curb our spending and borrowing.

What impact will this have on property prices?

If the rise helps stem the increase in property prices, then that would be one good thing to come out of it. However, I still believe that because of a shortage of properties then no matter how expensive they are, people will continue to stretch to buy because we all need a place to live and properties offer a sound investment for the future. Unfortunately, supply and demand have more of an impact on property prices than interest rates. Once there are more properties available then prices will stabilise; however, the current shortage is exacerbating matters. The impact of the increase is more likely to be felt on other household expenditures as homeowners struggle to meet the increase in their mortgage payments.

Should I wait for rates to go down before entering the market?

I believe that you should enter the market at any point when you can afford to do so. Rates are important but should not determine your timing because they go up and down, so whenever you enter they will change in future. The key thing for me is affordability and consistency. If you can afford to enter today and are worried about rates, then you may want to consider fixing the rate of your mortgage . If you are more pro risk, then you may want to consider going for a variable product where rates are determined by the movement of the market. In any scenario, you should definitely seek financial advice from a financial or mortgage adviser.

Is it better to rent?

I would always opt for ownership rather than rental because of the 'investor' in me who believes in the long- term performance of the property market . However, I think that renting offers a short term solution while you improve your earning capacity and build up savings for your deposit, so I would not rule it out.

How will this affect buy-to-let mortgages?

Property investors will know that the rental coverage on an investment property determines the loan-to-value ratio of buy-to-let mortgages. Generally speaking, this means that the higher the rent the greater the ratio of money you can borrow against the property's value. The standard ratios are between 80 to 90 per cent loan to value. As higher interest rates mean higher mortgage payments, investors are concerned that the deals will not stack up to allow them to access the maximum borrowing on their investment . While this is true, higher interest rates are stopping more people from investing, so it means they will have to consider renting and therefore higher rental demand should provide an opportunity for increased rent. If this is the case, then the rise in rates should correspond to a rise in rent which should still allow decent borrowing in the most desirable areas. This will not be true for all areas.

July 24, 2007

House price index July 2007

Click Here for House price index July 2007

Nick Says...

Click on the above for the latest House Price Index, courtesy of Rightmove.

IKEA Cyprus to open in September

IKEA Cyprus to open in September

4wallsandaceiling.com Newsletter

Source: Financial Mirror

The budget furniture store IKEA will open its first outlet in Cyprus on September 5 within the busiest commercial square mile on the outskirts of Nicosia, where other store openings are expected the same month in what is probably going to be the biggest shopping mall on the island.

Vassilis Fourlis, president of the operator of the furniture franchise that already has two IKEA stores in Greece, will be in Cyprus for the inauguration of the 22,000 sq.m. store strategically located within the ‘Mall of Cyprus’ at the Shacolas Emporium Park that will include retail stores, clothing shops and food outlets.

Fourlis will also be here next week for a media event and to introduce the IKEA catalogue that will be distributed in the wider market.

Although IKEA products can no longer be placed in the ‘low cost’ category, they are known for their functionality, simple designs and affordable prices.

The Fourlis group officially announced in October 2005 that it was to build the first IKEA store in Cyprus, through its House Market subsidiary. It was initially expected to commence operations by June this year, but has been recruiting local staff for training since last year.

Fourlis’ flagship store with a floor space of 20,000 sq.m. opened in Thessaloniki, followed by a second 25,000 sq.m. IKEA store near Athens airport last year. A second Athens outlet is expected to open in September and the Group also plans to open a new IKEA outlet in Bulgaria in 2008.

The cost of establishing the Cyprus and Athens stores is estimated at EUR 40 mln, while the annual turnover of House Market following the full operation of all three stores is expected to top EUR 300 mln.

IKEA Cyprus is expected to generate annual sales of EUR 40-50 mln, Vassilis Fourlis told Reuters in an interview last October 2006, while the sale of a 20% stake in Kotsovolos to Dixons Group is estimated at contribute EUR 32 mln to Fourlis Group earnings.

The IKEA opening is regarded as a welcome move in Cyprus, after the IKEA-owned Habitat franchise in Nicosia closed unceremoniously last December due to troubles at the Greek franchise operations.

At the time of closure a Habitat statement read: “It is with deepest regret that we confirm Habitat’s franchise partner Franco Import has come into financial difficulties leading to the closure of four stores – three in Athens and one in Cyprus – on December 11. This situation has been triggered by an external supplier to Franco Import, not by Habitat.”

The statement went on to say that Franco Import and Habitat UK Limited have been partners for almost ten years and that the company was, “saddened that Franco is facing challenging circumstances.”

Though the companies are owned by the same conglomerate, the opening of two IKEA superstores in Athens and Thessaloniki is said to have hit Habitat hard in Greece, with an Athenian newspaper reporting that it was only a matter of time before Habitat got into trouble.

Habitat is owned by the Ikano Group and operates as an independent commercial legal entity from the IKEA Group.

The Habitat store in Nicosia reopened its doors to the public briefly in March in an attempt to get rid of its outstanding stock and satisfy previous orders.

The store has since been taken over by the TAG Designer clothing company that already operates a store on Zena Gunther road.

Nick Says ... Great news all round for property investors in Cyprus!.  First of all, the fact that IKEA are responding to a demand for inexpensive furniture in Cyprus means that they believe it is worth investing in the island.  IKEA only build stores where their market research has indicated that there is going to be sustainable demand.  This is another indicator of the health of the Cypriot economy.

Secondly, as a seasoned U.K. investor, I find that IKEA furniture works extremely well for my rental properties as it is of excellent design quality, and is durable and practical as well as being extremely affordable.  I am really pleased that I can now access IKEA’s products for my Cypriot property when it completes next year.  Traditionally, furniture in Cyprus has been more expensive than in the U.K., so the introduction of IKEA will make the market more competitive and provide affordable furnishing solutions to both investors and people furnishing a holiday/retirement home.

IKEA’s investment in Cyprus is therefore positive for investors from both angles and I look forward to trudging the aisles there in search of a Bjorken shelf or two!


If you are interested in purchasing investment property or your own home in Cyprus, ypu should consider buying this book. It has 31 pages of the most concise information you could ever need when it come to buying property in Cyprus. From the Legal ramifications through to the Banking issues, all of which is complimented by some beautiful photographs of the island.

Available at 4wallsandaceiling.com for only £4.99.

July 23, 2007

Cyprus and Malta get go ahead to start using euro next year

Cyprus and Malta get go ahead to start using euro next year


Source: International Herald Tribune

BRUSSELS, Belgium: The European Union on Tuesday gave Cyprus and Malta final approval to start using the euro next year, taking to 15 the number of nations sharing the currency.

Finance ministers voted to allow the two Mediterranean nations to join the currency zone on Jan. 1.

They also set an exchange rate of one euro to 0.585274 Cypriot pounds and 0.4293 Maltese lira when the two countries swap their existing coins and banknotes for the euro.

Cyprus and Malta will bring just over 1 million people to the 318 million who now use the euro. Their economies account for only 0.2 percent of euro-zone gross domestic product.

Both joined the EU in May 2004. Only one other country that joined the EU at the same time — Slovenia — has so far adopted the euro.

The largest of the EU newcomers — Poland, Hungary, the Czech Republic, Romania and Bulgaria — have yet to set a date for euro entry. Estonia had originally planned to join next year but will delay membership as its growing economy sees inflation surge, a problem that has also slowed Latvian and Lithuanian plans. Slovakia is scheduled to join in 2009.

Cyprus and Malta worked hard to meet the strict EU economic standards for euro nations, with Cypriot workers agreeing to lower wage demands that could boost inflation while Malta paid off debt to cut its budget deficit below the EU maximum of 3 percent of gross domestic product.

EU Economic and Monetary Affairs Commissioner Joaquin Almunia said he recognized the effort they had made to fulfil the entrance criteria.

To keep their shared currency stable, euro nations are also supposed to keep overall public debt below 60 percent of gross domestic product.

However, even the largest euro economies have had trouble with these rules and euro candidates can be accepted if they can show that they are on track to meet these limits.

Cyprus became part of the EU a month after Greek Cypriots voted against a United Nations plan that would have led to reunification with the breakaway Turkish Cypriot state in the north of the island. EU officials have warned Turkish Cypriots against starting to use the euro as their currency without approval.

Nick Says...

Hold tight here we go... just look at Dublin as your bench-mark for what is going to happen.

It's all documented in the book below... read it if you are thinking about investing in Cyprus.


If you are interested in purchasing investment property or your own home in Cyprus, ypu should consider buying this book. It has 31 pages of the most concise information you could ever need when it come to buying property in Cyprus. From the Legal ramifications through to the Banking issues, all of which is complimented by some beautiful photographs of the island.

Available at 4wallsandaceiling.com for only £4.99.

July 21, 2007

A week of good news for Cyprus investment

A week of good news for Cyprus investment

4wallsandaceiling.com Newsletter

Source Assetz

Nick Says...

What with the weather we have been having, it's driving even more people to Cyprus, this can only be a good thing to us investors.

As you would know if you had been reading my blogs for a while, I bought a 3 bed penthouse near Larnaca last year for just over CYP £100k... it's mow valued at nearly CYP £145k... not bad.

If you are considering investing in Cyprus you must do it soon before you miss out on the real money... so get in there NOW.

All of the reasons, through maths and science not salesmanship, can be found in our e-book, this book is a must for prospective investors... after all you are just about to spend a large amount of money... I think a small amount of money on learning is in order...don't you?


If you are interested in purchasing investment property or your own home in Cyprus, ypu should consider buying this book. It has 31 pages of the most concise information you could ever need when it come to buying property in Cyprus. From the Legal ramifications through to the Banking issues, all of which is complimented by some beautiful photographs of the island.

Available at 4wallsandaceiling.com for only £4.99.

The past week has been especially good for Cyprus and the investor in Cypriot property. Perhaps the biggest news has been the announcement by the European Union that the island can enter the euro currency system from January next year.

Cyprus and Malta were chosen ahead of other contenders to enter the European single currency system, in what will surely prove a big boost for the island's economy. According to financial analyst's Moody's, the move "will all but eliminate the risk of a currency crisis" by putting the weight of the European Union's economy behind the island.

According to currency specialists HiFX, the Cypriot property market will see the benefits of adopting the Euro. The company believes that the strong economy will add to the lure of the good weather and local culture. A spokesman said the EU decision "confirms an economic maturity and the promise of a share in the spoils of the recently improved EU-wide growth story".

Mark Bodega, marketing director of HiFX, commented: "We predict the property market on both islands to continue to grow due thanks to a number of reasons. British purchasers like the legal system in Cyprus as it is easy to understand-being based on the English one. The Cypriot government also believes in looking after the environment - properties cannot exceed a certain height, density is monitored and green areas are planted within developments."

According to statistics collated by HiFX, the number of Britons that have made an enquiry about investing in a Cypriot property has more than doubled over the past 12 months. Perhaps the lure of the good weather is proving too much - it has certainly helped boost holiday bookings in this washout British summer.

London Greek News recently conducted a telephone survey of travel agents and tour operators in London. The newspaper wanted to determine if there had been any upturn in the number of holiday bookings being made to Greece and Cyprus in the past few weeks - and the answer was a resounding yes.

Mario Demetriou MD at EuroMed Travel said "I have seen a positive move up in bookings, people wanting to book anywhere hot especially Cyprus and Greece". With the weather showing no signs of making any improvement in the near future, it is a safe bet that there will be even more Brits booking their place in the sun.


If you are interested in purchasing investment property or your own home in Cyprus, ypu should consider buying this book. It has 31 pages of the most concise information you could ever need when it come to buying property in Cyprus. From the Legal ramifications through to the Banking issues, all of which is complimented by some beautiful photographs of the island.

Available at 4wallsandaceiling.com for only £4.99.


July 19, 2007

Buy to let market - Tougher conditions ahead in the UK

Buy to let market - Tougher conditions ahead in the UK

Source Profit from real estate

As property prices have been steadily increasing for many years, it has become more difficult to make buy to let mortgages fit the lenders criteria. The particular criteria that most investors try to honour is having a realistic and achievable rental 25% higher than the mortgage payment on any particular property. There are 3 prime factors affecting this criteria –

• The property value. Clearly, the higher the value of the property, the more money it will cost per month to service the mortgage.
• The achievable rent. This varies considerably across the UK, influenced by the demand and the ability of the tenant to pay
• The interest rate. Clearly, the lower interest rates make purchasing buy to let properties more achievable, because the monthly mortgage costs are less, therefore the rental requirement is less.

For 5 years the interest rates have been historically low, meaning that it was not too difficult to make the monthly rent fit the criteria. Over the last 5 years the UK has witnessed steady growth in property prices, which has been gradually making the achievement of a rent income of 25% more than the mortgage cost increasingly difficult to achieve. To compound an already difficult set of circumstances with rising property prices, and rentals not rising so quickly, we have also experienced 5 Bank of England base rate increases.

It has been possible to overcome these increasingly difficult conditions as a result of many lenders holding down their mortgage rates on a wide selection of mortgage products. As we all expected with the UK base rate now 5.75% and many buy to let mortgage products still available below 5%, it was inevitable that the lenders would start raising their mortgage rates. Since the last Bank of England base rate increase to 5.75%, we have seen almost all of the buy to let mortgage providers swift to increase their rates. As I write there are only 3 mortgages currently offered below 5%.

With all 3 factors now working against the investor, this will inevitably mean it will become very difficult and increasingly impossible to make the standard 85% loan to value mortgage stack up, particularly when there is total dependency on rental income. The consequence will be more ‘affordability’ buy to let mortgages, this is were the investors personal income can be included in the rental calculation. We will probably see over the course of the next 2 - 3 months see builders and private sellers reducing their prices to a level where the buy to let mortgage calculations fit.

Nick Says...

As you can see I have highlighted the last sequence of the text above. As much as the Author is correct it is, none the less, important to remember that all actions have a subsequence "re-action" soon after.

Builders stop doing the volume of business, therefore, they offer incentives to attract us and we benefit. The same can be said about lenders.

I think it's fair to say that shortly there will be a "blue cross sale" in the property market, but equally with that you will need to change your strategy to suit this form of aquisition to enable any form of positive cash flow.

This is where education comes in.

I have heard too often people/companies "slagging" of educational courses stating that the information can be found freely on the internet.... right, but how do you know what to look for if you don't know it exists?

No one ever stated that courses are the be-all and end-all of investment. However, it's a damn good grounding. I've done quite a few courses over the last few years and spent £1000's, the point is they all have done me good... you can never learn less. That is why I am in a position to benefit from any market condition... and so should you.

However, I'm also aware that there are certain companies who are, shall we say, lacking in moral fibre...why would you buy an off plan deal in the UK now!?!?! Bearing that in mind I can only endorse one as it is the only one that preaches positive cash flow from day one.

If you are going to get into this market, make sure you come at it with an abundance of information not a scarcity of it.

July 16, 2007

Wheels in motion

Wheels in motion

4wallsandaceiling.com Newsletter

Source BM Solutions

As the buy-to-let market evolves, landlords would do well to listen to the requirements of the new breed of tenants, says Tim Hague (BM)

The buy-to-let express has been running down the tracks at full steam for the last ten years, to the point where it is now a fully established market. Increasing house prices and the increasing appeal of renting for its flexibility are among the factors involved in its ascent. As a result of this growing tenant demand, more investors are entering the market, from large-scale property investors to those renting out their old house. Consequently, lenders have found themselves competing not only on rate, but also on criteria.

It is not so long ago that lenders were looking for rental income to cover 130% of the mortgage borrowing. Indeed, lenders consistently worked out the borrowing figures against a loaded Bank of England Base rate and not the pay rate on the landlord's mortgage.

In today's market, this is not suitable for everyone, and could impact on some investors growing their portfolios or getting involved in the market for the first time.

Rising property prices are well documented and rents have struggled to match the underlying increases seen in property values. In turn, this has created a plateau in the rental yields available to some landlords in the short term and made it more difficult to meet the required criteria to take on a mortgage.

Lenders have been quick to adapt to the changing market conditions, designing products for today's range of landlords, without having to risk the long-term viability of the venture.

A number of lenders now ro–utinely offer buy-to-let mortgages in scenarios where the rental income is only 100% of the monthly mortgage costs. Earlier this year, BM Solutions took the decision to introduce a number of products based on the product pay rate, alongside some products with a calculation linked to Bank base rate. Others in the market have proved keen to offer borrowers this option when working out how far the rental income has to stretch.

Some lenders have also decided that they will take a landlord's personal income into consideration alongside that from the property when it comes to a buy-to-let mortgage, and so made it more viable for some looking to invest. Criteria might also be developed with portfolio landlords in mind.

The amount of change that has taken place is immense and this is something the market must keep in mind as it moves into the future. Affordability calculations have been altered, loan-to-value criteria have been updated and the amount people are borrowing has increased dramatically.

Without the work that lenders have done to continually evolve and develop their product offering over the last decade, it is inconceivable that the buy-to-let market would now represent over 11% of the UK mortgage market.

It would simply not have been possible for lenders to grow their books of business as they have done. Last year, 330,000 buy-to-let mortgages – worth over £38bn – were arranged. This was an increase of 48% by volume and 57% by value on the previous year. In any language, these figures are staggering and it seems that there is still a good deal of growth left in the market.

The demand for rented property is still growing. As long as house prices continue to rise, there will be people who are renting for longer. With average property prices currently higher than ever before, some first-time buyers are likely to fall into that group in the immediate future.

There are also a large number of population groups that have always relied on rented accommodation and that are growing in size. Student numbers continue to expand and people in higher education want to rent. Often they are studying away from home and not only are they in a location where they do not want to live long term, but they are also not in a financial position to purchase a property. This is all good news for landlords.

Immigration boost

Along with students, new arrivals in the UK have given a huge boost to the buy-to-let market. Immigration from Eastern Europe in particular has been a significant feature in the social change this country has undergone over recent years and again it is likely that more people will come to the UK as new countries join the EU and as the working opportunities here continue to be attractive.

However, simply because there is strong and solid demand for rental accommodation and rising property values are underpinning the investment landlords are making, they should not become complacent. Indeed, research from BM Solutions has highlighted some changing trends in the rental market, which investors need to be aware of if they are to get the best returns possible.

It used to be the case that tenants were renting because they had to. It was not so much a choice, but a necessity. It seems that this attitude is now changing, and increasingly there is a growing number of people who are happy to rent and enjoy the greater flexibility it gives them.

Over 10% of those in rented accommodation have no desire to actually purchase a property and a growing number of Britons would rather rent in an area they really like, than buy in a location that they are not so keen on.

The point is that landlords need to match the type or properties they invest in with those that tenants are actually looking for. Tenants are not prepared just to take what is available and have specific priorities that must be met.

In BM Solutions' research, it was interesting to see a growing disparity between what landlords think is important and what those looking to rent their properties actually want.

Both tenants and landlords see proximity to local amenities and good public transport as the two most important factors in rented accommodation. Thereafter, landlords believe that access to good schools and nightlife also fall in the top five considerations.

However, for those looking to rent the picture is a little different, and neither of these two things makes their top five priorities. Instead, they are looking for access to the countryside or properties within green belt or conservation areas, and this is something that landlords need to consider. Any rental business will only do well if a high rate of occupancy can be achieved, and so it is imperative that landlords match what they have to offer with what the market wants.

There is no doubt that the future of the buy-to-let market looks very strong, but both lenders and landlords will need to keep a close eye on their activity and make sure they are delivering sustainable solutions in a changing environment.

Clearly the properties that landlords chose to invest in are crucial and for lenders, they must ensure they continue to act responsibly. Given the increasing competition in the market, it would be easy to relax criteria even further, but this must only be done if providers are happy with the extra level of risk that this entails. 

Lower arrears

Historically, buy-to-let books of business have performed very well and arrears levels are below those in the mainstream market. Last year, just 0.59% of buy-to-let mortgages were in arrears by three months or more, and this is down from 0.65% in 2005. By comparison, 0.89% of mortgages across the whole market were in three months' or more arrears in 2006.

This is a record that must be protected, and those in the market for the long haul cannot be swayed by new providers dipping in and out simply to take on volume. Long-term lenders cannot afford to play this game and whether they are securitising and selling on loans or putting them on the balance sheet they have to be economically viable. Certainly those selling on their loans will find it difficult to attract investors if they cannot stand up their books of business against potential changes to the market and while balance sheet lenders have provisions against a future downturn, all will want to see their buy-to-let operations continue to perform well.

Despite its humble beginnings, the buy-to-let sector is now a mainstream consideration for lenders and investors alike. It has built up a wonderful head of steam and gathered a momentum that should see it do well for the foreseeable future. Those who try to push things to far will be left regretting their decision and see their buy-to-let operation come off the tracks. n

Tim Hague is director of BM Solutions

Nick Says...

I can't really say too much about mortgages and/or financial products as the FSA would have something to say about it! However, I have always said to be successful within this arena you must have total control over financial products and how to use them. It is more prudent to understand financial products than go chasing low interest rates.

It's good to keep yourself aware of what other products are out there that you could consider.

July 14, 2007

Chancellor advocates mortgage changes – buy to let mortgages

Chancellor advocates mortgage changes – buy to let mortgages

4wallsandaceiling.com Newsletter

Source Guardian

Chancellor of the exchequer Alistair Darling has said that the government is to address problems within the housing system by concentrating the length of mortgages provided to borrowers.

Mr Darling spoke last week about his worries regarding consumers coming to the end of fixed-rate mortgage deals, and has now told the Guardian that he will seek to change such practices.

It is not known whether such policies will apply to those with Buy to Let Mortgages, but the chancellor is nonetheless looking to extend the length of time that fixed-rate deals last, he advised.

"In terms of mortgages, there has been a big expansion in fixed rate mortgages over the last two or three years, but they have all been short term, for a period of two or three years," Mr Darling told the newspaper.

When you look around the rest of Europe, it is more common to have longer-term fixed rates. We need to look at that. We need to reduce the volatility," he added.

Nick Says...

This can only benefit us investors as well. Finance is the key to this form of investment, so understanding how to use them is the answer. Last week in the Daily Mail there was an article stating that schools will now consider teaching pupils about finance, how to use it interest rates etc, this is not before time. None of us (or most of us) did not get taught finance or even how to buy a property at school, and yet houses are the most expensive item you will ever buy and finance is the key to it...I find the perplexing!

Still at least something is being done now.

July 13, 2007

Investor Blueprint

Nick Says...

I thought I would share this with you, I wrote this late last year but have been saying it for years.

Investor Blueprint


Getting Started:

First of all, understand the four most important concepts in property investment:

  • Leverage
  • Cash-flow
  • Mindset
  • Other people’s money

To use a small amount of money to control a large amount of money/asset.

The amounts of cash being received and spent by an investor during a defined period of time, sometimes tied to a specific project.  In property investment, cash-flow is king, as it will stop you moving forward if your cash-flow is not managed appropriately.  You should also aim to build up positive cash flow from your first investment onwards.  When your passive income is more than your monthly expenses, you have achieved financial freedom!

A fixed mental attitude or disposition that pre-determines a person’s responses to, and interpretations of, situations.  In property investment, you need to programme your mind for success by thinking outside the box, acting decisively, and networking with, and learning from, other like-minded individuals.  You also need to recognize opportunities when they arise, and constantly take action to drive things forward.

For recommended reading see our bookstore 
Click here

Other People’s Money
Banks are some of the wealthiest institutions in the world.  They take your money, lend in out to someone else, and charge them interest.  Why not do the same?!  Use the bank’s money (mortgage) to buy an investment property.  Other people’s money.  Use tenants’ money (rent) to pay the mortgage.  Other people’s money.  The true way to massive wealth is to use other people’s money to take control of appreciating assets and make you money!  It’s pure genius.

There are a number of ways you can start investing in property - it just depends on your current financial position, your personal goals, and your attitude to risk. You see what I recognised is that I had a secret financial weapon at my disposal - EQUITY. (Equity is the difference between the value of a property and the amount of the mortgage secured on it).  Let’s think about equity for a second. What does it do for us? We’re all aware that it’s a security blanket, and I’m of the same view myself.

The reality is it’s doing absolutely nothing. It’s a bit like sitting on a gold mine without mining the gold!  Your mortgage is like a shovel to get at this gold, so all those people who think it’s smart to pay off your mortgage are not making the most of their own home to use the equity in it to grow more assets.

You also have access to another powerful financial tool – LEVERAGE. I was sitting on a property that I bought 10 years ago for £70,000 and now it’s worth £260,000. That means I had equity worth £190,000. What I did was leverage money out of my own home by re-mortgaging and withdrawing tax free cash - money that went on to fund £3.5 million worth of property. 

With property, it only takes a small amount of money to control a large asset. Let me explain. I think it’s fair to say that if you buy £100,000 worth of stocks and shares, it will probably cost you around £100,000. It’s also fair to say that you could buy a £100,000 property with a £10,000 deposit.

Consider the maths. If your shares go up by £10,000 in a year you’ve made 10%. However, if your property goes up by £10,000, you’ve made 100%!   It’s not rocket science.

All I did was take a small amount of money out of my equity, and that’s now controlling £3.5 million worth of property. That’s the power of leverage!

Those who lack courage will always find a philosophy to justify it. I’m glad I didn’t listen to the doom-mongers, and there are plenty of them about!  On further questioning of these people, you invariably find that they do not actually own any property!  There’s been media hype about house prices leveling off or falling for the last decade. In 1995, The Guardian announced the housing market was in ‘a deep crisis.’ In 1997 the Daily Mail shouted ‘It’s official! The London house price boom is over.’

Yet here we are in 2007, and prices are still rising! Just recently the National Housing Federation issued a report suggesting that property prices were going to rise by 40% over the next six years.  Research from Halifax Building Society shows that property prices have doubled, or even tripled, in the past 10 years. Just consider where your investment could potentially be in 10 years time!

And the icing on the cake?  With escalating house prices pushing buyers out of the market and increasing numbers of singles and families looking to rent, the rental market is expected to grow by 40% by 2012.  Who are these people going to rent from?  It could be you!

You can’t buy property in the past, and you can’t buy property in the future. There’s only one time to buy it – NOW!

I’ve never been one to say that anything is written in stone or guaranteed. However, what I will say is that if you do intend to go down the route of using property as an investment vehicle, then the sensible thing to do is surround yourself with like-minded people and expertise to ensure you move forward successfully.  Get the right information from the right source, someone who is actually making a success of investing in property! That’s why we chose to come up with 4wallsandaceiling.com.

We appreciate the value of education and that investing in property is not about owning a second home, it’s a state of mind – it’s being successful.

A thousand mile journey starts with a first step. Your first step is to explore this site and find some inspiration..

To re-iterate Albert Einstein, ‘the only source of knowledge is experience.’ It’s the experience we’ve gained that we wish to pass onto you through this website.

I’ll leave you with this thought. This is singularly the best investor tip that I can give you – START!

Nick Tadd
Director – 4wallsandaceiling.com

Factual information gathered from: -
Halifax PLC, HBOS plc, Kate Barker report

What types of properties should I invest in?
4wallsandaceiling.com believes in building a diverse and balanced portfolio of both apartments and houses, and U.K. and international property. Before you decide what property investment strategy is right for you, you need to determine your own personal goals, as this will determine your own strategy, and will be based on your own financial situation, and attitude to risk. 

A fantastic way to start safely is to find out where there is a demand, and then create the supply!

And while the old adage “Location, location, location” is important, in more professional terms it’s “due diligence, due diligence, due diligence”.  In other words, research your chosen area thoroughly and understand the local market.

Generally speaking, if you are looking for capital growth you need to locate new, build complete properties or off-pan opportunities from reputable developers in areas of sustainable capital growth and high rental demand.  This could be anything from a one bedroom apartment in a city centre to a four bedroom townhouse in a leafy suburb, if that adds up to a sound investment.  Look for properties in areas of investment, communication, and infrastructure with a ready supply of tenants.  By its very nature, if investment is going into an area, property prices will rise.  If it has great communication/transport links, and infrastructure (shops, leisure facilities, etc) tenants will want to live there. 

For maximum rental yield, more experienced investors can utilise a very specific strategy, which is taught on our recommended property training course.

›› Click here for more information on training

Properties accommodating five or more people become a House of Multiple Occupation (HMO). Recently introduced legislation means that a licence from the local council may be required and you will need to adapt the house to conform to local regulations.  This type of investment may be suited to more experienced investors.

Bear in mind that flats over commercial premises and studio apartments are harder to get finance for and you do not have such a great choice of mortgage products.  Also remember, your flat might be over an estate agent when you buy it, but then a tattoo artist moves in a year later.  That would de-value your property overnight!  Keep away from properties on busy roads, under airport flight paths, or those close to railway lines or radio masts as these will not appreciate at such a high rate and tenants will find these environmental factors off-putting.  You also need to be wary if a property is located near water as it may be subject to flooding.  Also, if a property is located near industrial premises or sewage works, there may be off-putting smells and noise which downvalue a property and limit your market for potential tenants.  Properties in areas of high crime rates are also to be wary of.  We avoid the particular types of investments listed above.

Whichever type of property fits your strategy, we recommend that you visit it yourself and apply your own personal benchmark.  Would you live there yourself? If the answer is “no”, then why should you expect your tenants to live there?  Ask yourself if you would feel safe walking home at night.  If the answer is “no”, then you are cutting out potential female tenants which is half of your market

Parking is a very important consideration and will improve the rent-ability and value of your property.

Balconies are always popular with tenants in city centres, while low maintenance gardens are good for houses.  Tenants always like to have a lot of storage, so make sure you choose properties where there is built in storage, or plenty of space to put wardrobes.  Try and find properties with equal size bedrooms and en-suite bathrooms, as these will particularly appeal to sharers.

In a nutshell, if you buy the right property, in the right location, at the right price, with the right mortgage product, you minimise your risks as you will be able to charge a competitive rent, and so secure a tenant quickly.

It is worth noting that new build properties come with a ten year NHBC or similar guarantee. They are therefore also low-maintenance and conform to all building regulations.  As they are new, clean, and have all modern conveniences, they are a popular choice for tenants, especially in areas where a lot of the housing stock is older.

Finally, whatever type of property investment you choose, you must ALWAYS have an exit strategy in place.  In layman’s terms -  how are you going to realize your capital out of the property should the necessity arise in the future?   In other words, who are you going to sell it to if you need to?

If you are serious about long-term financial freedom, you should really be investing in property for the medium to long-term, as the goal is to accrue equity from capital appreciation of the property.

When you have accrued sufficient equity, and the rental income allows, you can re-mortgage the property and release cash, which is TAX FREE. You can then use this money to invest in more property.  Therefore, the business model we advocate is to hold all your stock for the long term, release equity when circumstances allow, and purchases more property. In other words, re-cycle your cash.  After a while, your portfolio will become self-funding.

If you do sell a property, you incur a capital gains tax liability.  Therefore, the true way to wealth creation in property is to hold onto your stock indefinitely, and just keep taking equity releases to fund further investment, finance your children’s education, allow you to retire, or fund your lifetime ambition.  It’s up to you!  View your properties as golden geese who lay a golden egg every few years.  You can use an equity release from your investment property to pay back the original equity release from your own home, which means you only borrowed the money from yourself for a few years to grow additional assets.

And on a final note, strangely enough, the more properties you have, the less the risk, and the easier it seems to get!  Treat your properties as a business.  Keep them well maintained to achieve the maximum rent.  If you follow our blueprint, you won’t go far wrong.

Building Blocks of Success
The key to being a successful property investor is down to being a successful landlord! After all, if no one wants to rent your property then you are paying the mortgage!

There are always acquisition costs with any property and having a budget for these is vital. A few such costs are mentioned below and they should be considered or dealt with leading up to, and after, completion. The list is not exhaustive but should give some ideas.

Start to liaise with letting agents 6 weeks prior to completion – get ideas from them as to what the demand is i.e. fully furnished, part furnished etc.  They can start marketing your property, and, with the permission of the Site Manager, start showing people around.

  • Keep in constant touch with your letting agent and encourage them to be pro-active and communicate with you regularly.  Ask for feedback after viewings, so that you can establish what prospective tenants think of the property.

  • You should already know what white goods (fridge/freezer, washer/dryer, dishwasher) are included by the developer – if you need to supply any, consider renting them.  That way there is no capital outlay and the rental money is 100% tax deductible.

  • You should have already ascertained what flooring covers are included by the developer – if no flooring is included, get quotes.  Consider laminate for the hallway and living areas, and carpet for the bedrooms.  It is worth spending a bit of extra money on tiling the bathroom and kitchen floors, as this is harder wearing than vinyl floor coverings, and also looks better.

  • Blinds/curtains are generally not included by the developer.  Therefore, get quotes or fit them yourself  -  don’t forget that tenants expect these to be done as standard.

  • Bathroom fittings e.g toilet roll holder, towel rail, shelving should be professionally fitted to avoid your tenant doing a `bodge` job. The same applies to light fittings, which must be fitted by a qualified electrician.

  • We recommend “dressing” your property with a few pictures, mirrors, shelves, etc as this will make it stand out from the crowd.  We are of the opinion that if you present your property in the best possible light, it will attract a tenant quickly, and hopefully the tenant will want to keep the property up to the standard you have set.

  • If your tenants require the property to be furnished, that furniture needs to comply with fire regulations.  There are many companies who provide “furniture packs” specially for Landlords and deliver and fit the furniture, taking away all the hassle.  We can recommend some companies to you, if required.

  • Obtain permission to sub let from the management company – usually a fee required.

  • Establish what the service charges are – consider monthly standing order

  • Make contact with the utility companies and inform them of your correspondence address

  • Obtain a set of keys for yourself

  • Apply to the local council tax office for an exemption notice - this is available on a new build for 6mths providing that it remains unfurnished.  Many Council Tax offices can now be contacted via email so look them up on the internet.

  • Obtain landlord’s insurance – if you have purchased an apartment, the buildings insurance is generally covered by your service charge.  Otherwise, with a house purchase, you should arrange buildings and contents insurance.  Also consider accidental damage cover, rent guarantee and legal expenses.

  • Consider having an emergency turnout service in place for your tenants if the letting agents don’t provide such a service. It can be cheaper to arrange such a policy at the same time as taking out the insurance.

  • Car parking – is it included in the purchase price? If not, then this is an extra cost that usually can’t be included in the mortgage. Usual cost for car park space is around £15-20k. Before buying a space, liaise with lettings agents to see if it is essential.

  • Conform with the new legislation re: the holding of tenant’s deposits

  • Get tenants properly checked out – there are companies out there that will do just that if the landlord intends to manage the property themselves

  • Ensure the property has the necessary gas and electricity landlord’ safety certificates.  If you have your property fully managed, the letting agent will arrange this.

  • We believe in protecting our investment by having our properties professionally snagged to rectify any defects that have arisen through the build - allow approx £250+VAT for the average 2 bed apartment.

  • Keep receipts for everything – you may be surprised at what can be offset against tax!.

  • Network – making contact with other landlords can be just as useful to a first-time landlord as well as to a more seasoned one! This can done via discussion forms, property magazines, local property network groups etc … the list is endless.

The great thing about property is people with properties love to talk! As a property investor you never stop learning. It is a fantastic business to be in and done wisely, the most profitable thing you can do. So if you are not already involved in property – START !!

Please visit our Lettings and Ready 4 Rent Sections for further information.

If you have any questions and would like to know more about how 4wallsandaceiling.com  can help you, please Contact us or Talk To The Wall.