If you search the internet and go to any property event such as the Ideal
Home Exhibition you will have many people trying to sell you "investments" in
properties abroad, advising you how good the returns will be. But
is this "advice" more to help them sell their properties and gain commission
than just on any factual evidence. We have certainly heard it said
that most of the selling in the property market is based on enthusiasm
and aspirations "within their company" and education and advice. We
don't sell properties abroad or in the UK, hopefully therefore will fall
into the latter category.
Why buy a property abroad?
From our experience in the UK you need to know why you are buying the
property. Is it as a home or lifestyle property or is it as an
investment? in which case the investment will be looking at capital
growth or passive income. We will explain more about this later
in the website.
We found in our experience with people in the UK property market is that
they don't know whether they are considering buying the property as a
home or as an investment, and that they won't achieve the same returns
as a true investor.
Capital Growth - passive income explained
Capital growth is where you are looking for a net increase in the value
of the property, by net we mean once all costs have been taken off. For
example purchasing costs such as solicitors, valuations, mortgage arrangement
fees, house purchases if abroad and the selling costs such as estate agents
fees proving the kerb side appeal. The house/home staging costs
that you will need to carry out and any incentives and again transfer
of the currency if buying abroad, and finally your time at a reasonable
Passive income is where a rental income is achieved without any involvement
or you are only involved by choice. So again we are looking at
net costs. These will be monthly costs of repaying the mortgage,
less any management fees, maintenance fees, rates and energy bills if
your rent is inclusive of such bills, together with your time.
We would comment finally that although buying at the right price is important,
we feel selling at the right price is far more important. It is
only once you sell the property can you truly say you either made a capital
growth profit or a passive income profit.
Location, Location, Location
When looking at the property market we always think that people should
consider the location very carefully. By this we mean
something slightly different to the general concept of location, location,
This is the traditional where the property is located. If you
are looking for capital growth you should be near a growth area. This
may be because there is urban generation in the area, new facilities such
as a new port or harbour with pool etc. If you are looking for
rental income you should decide upon which market you should go in. For
example if you are looking for a family market then the location in relation
to a good school would be very important. If you are looking to
work as a professional then the location to places of work and town centres
are generally important. If you are looking to live as an older
working professional then the things we have just mentioned are important
This is location position that we are within the housing market as a
whole. For example when this was being dictated, April 2005, the
housing market is very stagnant and we are frequently coming across people
that have had their houses on the market for six months plus. Over
the proceeding five or so years the market has been rising and has therefore
been very good for capital growth and passive income. Unless you
are buying below market value (BMV) such as a property being a repossession,
probate (death) or divorce then there is very little capital growth in
the market in most areas (this is a very broad sweeping statement and
there is still some capital growth to be had, providing you find the right
areas at the right price).
We generally recommend to people they look for an average property in
an average area, as these will generally sell no matter what the market
is, sooner or later. The average average varies from area to area. For
example around a school area if you are looking for capital growth then
you should be looking for a property with three bedrooms and a garden
and anticipating that the market you sell to would be a family. If
you are looking for example in the centre of a city then an average average
maybe a two bedroom apartment/flat (however care should be taken in this
market - ring us up if you want to know more).
We would certainly avoid the starter homes (often known as cluster homes)
or bed-sits (although in Central London we have come across bed-sits that
have sold no matter what the property climate). It can now be argued
that people working from home means the old three bedroom requirement
has now moved up to four bedrooms, particularly with newer properties
where the rooms are not particularly large.
Research, Research, Research
When buying a property you can feel that you are not spending real money,
as the deposit is your only real cash down. This can be manipulated
(please phone us with regard to no cash down deposits and gifted deposits). The
remaining amount of money is used on a mortgage, although considerable
leverage is achieved when purchasing the property.
Unequalled in any other investment (for example if you went to your bank
manager asking to borrow a hundred thousand pounds and you are putting
down a 10% deposit for a new business, or to buy shares or lottery tickets!
they would not entertain the idea). However day in day out mortgages
are offered on such a basis.
Having dealt with repossessions, both when working for a bank and also
helping investors purchase property, it really hits home that it is real
money as the person being repossessed say that even after the house is
sold off they still have to pay their debts.
is a graph of property prices since 1962. These have been prepared
by the Halifax Bank which once was a Building Society (we will not go
into the various arguments with regard to how statistics are prepared
and how due to the location of the Halifax business and stipulation of
the figures as inaccurate). We will simply use them as a guide.
You can see there are many times on the market when even buying at the
right price and the right location you would have been taken with the
flow of the market, either upwards or downwards.
Many people consider that you buy investment property and do nothing
with it and present it back to the market and it will make money. This
may well have been true in the past few years. However, in general,
whilst they have been in the property market this is not correct. Properties
can be enhanced with extensions, makeovers (known as house or home staging),
divided into flats, parking added, they can be changed from a shop business
into a house or vice versa etc. etc. etc. It is adding value to
what you originally purchased that the real increases can be made.