The basic idea behind investing in buy to let, is buying a property that you will be able to rent out, to either get an income from or pay off any borrowing taken out against the property when you buy it, and then enjoy the mid-term capital growth.

So where are the best places to invest in the UK for buy to let?

Well as with any investment, you are looking for the strongest return on investment. So with rental property you will generally be looking for highest rental return based on the property value i.e. the yield.

Let’s look at 2 examples…

Hartlepool

Average 2 bed house – £70,000 and rent is £425pcm i.e. a rental yield of 5100 per annum divided by 70000 i.e. 7.3%.

Cheltenham

Average value of a 2 bed house here is £180,000 and rent is £700pcm i.e. 8400 per annum divided by 180,000 i.e. 4.7%.

So based on rental return I will get 50% more return in Hartlepool than Cheltenham if I buy the average 2 bed house in the area.

Whether I am taking out a mortgage or not this rental return is very important clearly when defining your return on investment.

So in general we would recommend areas where you can get a rental yield of over 7%. Over 10 properties 2% difference makes a huge difference to your return.

E.g. on a 500k portfolio an extra 2% is £10,000 a year extra income.

This rules out quite a few parts of the UK, when deciding where to invest in Buy to Let even with prices dropping in some of these areas – unless you go for HMOs which come with plenty of headaches and voids and more hands on management.

We prefer 2 and 3 bed houses or tenement flats in Scotland often giving us 8-10% yield – they put far more money in your bank account every month than a couple of 200k houses in Cheltenham.

Click here to find out more

Spotlight on Hull

Another city that ourselves and many of our investors, either buying individual properties or as part of our Portfolio Building Programme (for more info in this click here) have seen some good returns in is Hull.

Hull has a lot going for it right now.

The city, with a population of around 250,000 and on the east coast of England, remains a busy port, handling 13 million tonnes of cargo per year. Freight handling at the port is projected to rise following Network Rail’s investment of £14.5 million in the rail link, which was completed in mid-2008. The port operations run by Associated British Ports and other companies in the port employ 5,000 people. A further 18,000 are employed as a direct result of the port’s activities. The port area of the city has diversified to compensate for the decline in fishing by the introduction of Roll-on Roll-off ferry services to the continent of Europe. These ferries now handle over a million passengers each year.

Hull has exploited the leisure industry by creating a marina from the old Humber Street Dock in the centre of the city. It opened in 1983 and has 270 berths for yachts and small sailing craft.

Industry in the city is focused on the chemical and health care sectors. Several well-known British companies, including BP, Smith & Nephew, Seven Seas, and Reckitt Benckiser, have facilities in Hull.  The health care sector is further enhanced by the research facilities provided by the University of Hull through the Institute of Woundcare and the Hull York Medical School partnerships. In August 2010 a 110% increase was reported in tourism enquiries to the city, with Hull becoming an increasingly popular destination for “staycation” short breaks.

Overlooking the Humber, the new £165 million Humber Quays development, which has now gained World Trade Centre status, is adding new high-quality office space to Hull’s waterfront.  Kingston upon Hull is also home to the University of Hull, which was founded in 1927 and received its Royal Charter in 1954. It now has a total student population of around 20,000 across its main campuses in Hull and Scarborough.

Click here to find out more

2011 has Continued to see strong Investment

Siemens’ decision to build an £80 million turbine factory in Hull marks a major milestone in the city’s history.  Industry on this scale has not been seen in the city for decades.

Full news article here.

The Siemens factory could generate up to 10,000 new jobs in the region and will feed into the biggest wind farms the world has ever seen.

It will be built on 130 acres of Associated British Ports (ABP) land at Alexandra Dock.

As part of this project ABP are to construct a £100 million riverside berth at the dock which represents the biggest investment by the company since they built the docks.

Siemens’ factory and export facility will supply the Dogger Bank, Hornsea and Norfolk Bank wind farms which all lie within 12 hours steaming time of Hull.

These round three North sea wind farms are set to be the biggest in the world with a combined total of 5000 wind turbines – more than the rest of the world put together.

Under the government’s targets for 20 per cent of energy to come from renewable sources by 2020 these wind farms will need to be up and running in less than ten years.

Several hundred construction jobs will be created during this period.

About 700 jobs will be available in the factory once it is up and running and it is thought that another 9000 could be created within supply chain and servicing industries.

It is hoped that with the world’s leading turbine manufacturer moving to the city, other related industries could follow transforming Hull and the Humber into a hub for renewable energy.

So we feel Hull is a good sized city to target, and has plenty of economic opportunities that can allow further growth from a very affordable starting point.

One of the concerns clients have investing out with their area is, who will manage the property?

And what if repairs need to be carried out?

Well here we have the perfect solution.

How about securing property at a minimum of 7% rental return, at a 20% discount to a current RICs valuation, fully refurbished including:

• New double glazing
• New central heating
• Replastered
• New bathroom
• New Kitchen
• New carpets or tiling

So maintenance issues are a minimum, for the foreseeable future.

Then the rental concern, what if no one moves into my property?

How about we also cover the mortgage payments until a tenant moves in? This should only take 4-6 weeks but gives you that extra confidence as well.

So you can build up a portfolio with confidence of properties providing a healthy monthly positive cashflow, below current market value and fully refurbished!

Hull provides us with some of the best value properties of any city in the UK, and with the ongoing investment going into the city this is expected to continue.

To find out more on our Portfolio Building Programme, with 10 new places becoming available in June, to book a Viewing Trip in Hull or to see all our Property Investment Deals Register your details here.

Article provided by Alan Forsyth

Article by Lisa Orme – This  article is actually a favour to myself!

A chance comment on a forum turned into another business opportunity. Rob Hubbard of Walker Fox is a deal finder; he posted on a forum a while ago saying that he was finding great deals but didn’t have a database of investors to pass deals onto furthermore it seemed that most people who he did speak to wanted No Money Down deals which he wouldn’t do and that usually meant they had little to no money and he was sure many deals would never come to completion letting down his sellers. I suggested that he partner with a mortgage broker; brokers have a ready list of clients wanting to buy, they have already been vetted by the mortgage broker so are mortgagable, and if you partner with the right one you can be assured there will be no NMD shenanigans.

So unsurprisingly a few weeks later Rob and I decided to JV together and a number of others have followed since! It certainly wasn’t my intention to partner with deal finders. Deal packaging is nothing new and to be honest I’ve never really been an advocate of them in the past as so many of the so-called deals offered simply aren’t. So therein lay a great opportunity. I am regularly being approached by property investors who are getting great deals but are not in a position to buy themselves or can’t buy as many as they would like and I have clients wanting deals.

The great thing is I get to sit in the middle to:-

• Ensure the deal is genuine
• Get to know the finder/packager and be able to recommend them to my clients
• Know the investor is mortgagable and can complete on the deal
• My clients get to do more deals and make more money meaning we all get more business

Brilliant!

The only issue I have at the moment is that a lot of the new finders/packagers I’m working with haven’t done it before and are unsure of what constitutes a deal that others will buy and how to package them up. So I thought I’d use this month’s article to create a bit of a how to guide to deal packaging that I can simply send to the finders. I’m sure readers will find it useful too and if you want to become a finder I highly recommend partnering up with a mortgage adviser who can match you up with suitable buyers just like we are doing.

So what constitutes a deal?

This is a major issue I’ve always had with deal packaging because what suits one person doesn’t necessarily suit another. But in general terms given current mortgage availability and the marketplace most investors are going to be seeking 20-40% discounts on a genuine open market value (OMV).

Most investors want to keep the property to let out but others want to buy to sell and some want to refurb to let out to try to recoup some of their invested monies.

You will need to understand your investor’s requirements before going out and finding deals. Or conversely have enough investors to offer deals to that you can offer out a variety of deals that will likely appeal to at least one of them.

What is genuine OMV?

I’ve seen all sorts of descriptions of what constitutes genuine OMV and the fact is it isn’t a set figure and certainly can’t be quantified. It isn’t even a figure determined by the valuer because if the valuer happens to find out your purchase price most times that’s what they value it at! Furthermore court cases demonstrate that it is not unheard of for valuers to be a party to overinflated valuations.

Your job is to provide a plethora of information to the investor that gives them confidence that they are buying a genuinely discounted property. After all if they are buying the property at the agreed purchase price and not trying to use smoke screens to create a perceived market value it doesn’t really matter. It’s only when you’re trying to con investors, valuers and lenders alike that this becomes an issue.

For approximately £150 you can arrange for an independent valuation by a RICS surveyor. This should be done when your seller has agreed to sell at a discounted price but that price has not yet been determined. The RICS valuation can not only be used to determine that purchase price but also to provide your investor with a current market valuation.

Please note that this is nothing more than the valuers opinion; it is not a scientific calculation! You should never only use a valuer’s valuation to determine the value of a property. After all when you go to the lender and state your actual purchase price the very same valuer will value the property at that price not the likely higher price he previously valued it at!

This exercise is to ensure your investor is confident of the valuation and that they are getting a discount worthy of your fee.

What Information Should You Provide?

I recommend that you provide your investors with an emailable pdf document comprising most or all of the following:-

• Independent RICS valuation
• Comparable sold prices
• Comparable for sale prices from a variety of sources
• Estate agents confirmation of current value
• Comparable rental prices
• Letter from a reputable letting agent confirming the rental valuation and demand
• An overview of the property including a full description of the interior and exterior
• An overview of the surrounding area
• Interior and exterior photographs
• Schedule of any works and likely costs

You can provide an illustration of the likely mortgage payments, cashflow etc but I recommend asking a mortgage adviser to draw this information up for you as publishing mortgage terms, rates and payments is highly regulated especially if it constitutes any form of advertising.

What Should You Charge?

The fee you charge is often down to negotiation with the investor and also whether there are other ways you earn out of the deal. For example you could arrange for the refurbishment and resale of a buy to sell and split the profits instead of taking a fee. Several finders I work with run estate or letting agencies so are happy to deal with the resale or management of the property as all or part of their fee. If however you are simply packaging up the deal and can prove a genuine minimum 25% discount then a fee in the region of £5,000 is usually acceptable. Significantly higher discounts could attract higher fees especially on higher value properties in areas where deals are harder to come by such as London and the SE. Conversely you may be able to pass on more marginally discounted deals for lower fees to some investors.

This is why it’s so important to get to know your investors requirements beforehand. When I work with the finder’s part of this fact finding mission is to determine their mortgagabilty and a strategy. It’s quite common for investors to approach me with a set plan in mind only to discover its not realistic or doesn’t suit their needs and had they have pursued that course may have found themselves in trouble or unable to buy more properties. Once we talk about their goals and financing options and develop a plan then it is much easier for the finder to work to – again we all win.

Article Provided by Lisa Orme

Mortgage Broker and Property Investor

The above is for information purposes only; rates can change and may not be applicable at the time of publication.

Please consult appropriate professionals and contact us for up to date quotations.

Keys (UK) Limited is an Appointed Representative of Julian Harris Mortgages Ltd. Authorised and regulated by the Financial Services Authority in the conduct of mortgage and general insurance business with FSA No. 304155.

Your home may be repossessed if you do not keep up repayments on a mortgage or other loan secured on it.

Think carefully before securing other debts against your home.

Buy to let (pure) and commercial mortgages are not regulated by the FSA.

For full details of our terms, fees and disclosures please go to our website at www.keys-mortgages.com

I often get asked by prospective new investor clients or novice investors the question “What constitutes a good ready made deal?” Therefore, this month I’m going to share with you some of the reasoning that I employ when seeking out potential deals.

The thing is with property, each property is different, there is no such thing as “one size fit’s all” and it’s looking for the hidden potential that can make a deal good or even great.

Why should you look at a ready made deal?

Some investors have plenty of time on their hands although choose to invest in an area that is either not local to them or they are unfamiliar with. Other investors are ‘time poor’. Occasionally, Investors just choose to outsource the investigation works as they have no interest is finding property only owning or managing it.

Therefore, unless you can answer positively to all or at least the majority of the following issues then I would suggest that a ready-made deal would be beneficial to you.

• Provide a detailed overview of the property
• Obtain local knowledge of the area
• Identify and advise the probably target market for re-sale or let’s as well as current demand.
• Commission an Independent RICS valuation
• Compare recent sold prices from a variety of different sources
• Obtain comparable re-sale or lettings prices
• Letter from a reputable letting agent confirming the rental valuation and demand
• An overview of the property including a full description of the interior and exterior
• Advise on any refurbishment works and likely costs

By providing this level of information (which is significantly more than you would expect to be provided by an Estate Agent) this allows the prospective investor to make an informed decision on whether to purchase. However, I must stress that it is vitally important that you undertake your own due diligence when investing a property and make sure that the information supplied by the deal provider actually stacks up

Why are you passing the deal on? If it’s such a good deal then surely you would keep it for yourself?

This question almost always gets asks by a new client or investor. A few years ago in the days when ‘No Money Down’ was a legitimate everyday tool and Mortgage Express were offering their same day re-mortgaging package It would have been ‘possible’ to keep the majority if not all of the deals for oneself. If I had done this however and constantly re-mortgaged it is unlikely that I would be sat here typing this now. As due to the property slump It is likely that a portfolio that has a high level of borrowing using these techniques could well be in a severe negative equity situation and only surviving due to the low Bank of England base rate.

An issue that is often overlooked when investing in property is that all investments cost money, property is no different.

By using a reasonable deposit a sustainable portfolio can be built up over a number of years this allows a ‘buffer’ to be built into the property to allow for downward fluctuations in the relative property values. I prefer therefore to continue with this method of acquisition and to trade deals with other investors whilst I steadily build my own cash reserves from small commissions earned on each property deal.

Providing quality deals on a regular basis allows my investor database to grow and to build trust and rapport with my clients. People soon get wise to being ‘ripped off’ and bad news always travels faster than good! As the property industry is quite insular in many ways it is much more sustainable and of course morally and ethically correct to behave in a professional manner and sharing deals in order to maintain mutual healthy growth of our portfolios.

Another reason for passing deals on is to provide help and assistance to the First Time Buyer market. Often, mainly younger people want to get on the housing ladder however may struggle to afford the required deposit in order to fund a purchase via the Estate Agents window.

By approaching a Ready Made Deal Provider, they can often find the sort of property that they could only dream of purchasing in their chosen area at an affordable price and within their budget.

In my next article, I will be going through the process of demonstrating how you can easily check how and if a deal stacks up.

This really depends on the strategy of the individual. Sourcing companies can free up your time immensely so that you can get on with the day job, they are for some investors a necessity, especially for those who are just starting out and rely on these companies for advice and guidance.

Sourcing companies are also needed for investors who live out of the area and have no intention of carrying out high levels of due diligence. If you want high yielding, low priced properties then the North tends to be the place to look and for some southern investors they would rather rely on the experience and knowledge of experts in that area.

There has been a lot of bad press recently about sourcing companies and the services (or lack of them) that they offer, however as with all unregulated business’s you will find that there will be a small minority that have the cowboy attitude and don’t care who they rip off, but I must say that most do have integrity and work with the investor to find their preferred outcome. I would strongly recommend that you carry out due diligence on the sourcing company as you would with any property deal. Ask other investors, have they used them before, did they deliver on what they promised, have they got a refund policy and ALWAYS read their terms and conditions and then read them again. Too many times when something goes wrong with the deal for whatever reason, the investor demands his money back and the sourcing companies refuses. You need to be clear on the options you have should a deal not go the way you planned – Do I get a refund or is the fee re-credited to another deal? This promotes bad feeling amongst investors and sourcing companies and let’s faces it, this industry needs all the help we can get right now.

Why not use an estate agent instead?

An estate agent acts in the best interest of the seller regardless of what they might tell you. Their job is to get the highest prices possible as most charge a percentage as a commission.

Most Estate Agents are not aware of the creative finance that investors use these days and I have had many debates myself with agents as to the legal status of these deals. A little bit of knowledge is a dangerous thing and this is true with Estate agents. They are not investors and mostly deal with residential properties so therefore have no need for creative financing.

By going direct to estate agents you also have the problem of trying to get the property valued as high as possible. We all know that private sales are easier to get valued higher which is the point of the creative financing system.

Have they sourced the deal themselves?

There have been too many investors who have had their fingers burnt by companies who have not sourced the deals themselves and given what they thought was true information as to the letting potential, valuation, area etc but in actual fact the figures were highly exaggerated and they were left with poor properties in areas they knew nothing about.

How the deal was sourced? Was it from you directly? Do you have approved sourcers? How long has the deal been available? All these questions should be asked and can build up a clearer picture as to the people you’re dealing with and to the quality of properties they offer.

Does the sourcing company provide a letting service?

If the sourcing company provides a letting service or works in conjunction with a local letting agent then they are obviously backing up what they promote. It also takes away the potential problem of the sourcing company being able to wash their hands of the deal after it has gone through. There are sourcers who are motivated by the size of the fee they will receive and do not have the best interest of the investor. By offering a letting service this reduces that risk; it also offers the complete service for the investor, one less thing to worry about.

Be aware of the sourcing companies who think of quantity over quality and continually bombard you with properties. As every one knows sourcing is not a quick or easy process. In order to find the property, carry out due diligence, negotiate the price, package the property it can take quite a considerable time. So don’t be sucked in by sourcing companies who have different deals from all corners of the UK on a weekly basis, it would be impossible to carry out all the due diligence required even if there were more than one approved party involved.

10 Questions to ask

1. How long have you been in trading as a sourcing company? (Search on Companies house)
2. Do you source the properties yourselves, if not who do you use?
3. How long have you used them and what is your relationship with them?
4. What sort of due diligence have you carried out?
5. Is there a RICS valuation?
6. Do you have any local knowledge of the area?
7. What are your terms and conditions?
8. What is your refund policy?
9. Do you provide a lettings service?
10. How long has the deal been on the market for?

By choosing the right sourcing company it can make property investing so much easier and dare I say it, enjoyable even in these uncertain times. By following the above advice, you are more likely to achieve your property investing goals; sourcing companies will work for you if you are willing to work with them.

If you would like to ask John a question click here

When I started property investing 5 years ago I did it the old fashioned way, released money from my home, bought a couple of terraced properties, waited for them to increase in value and then remortgage. Then around 2 ½ years ago I stumbled on No Money Down or NMD. I thought all my Christmas’s had come at once. I couldn’t believe that you could buy property this way. There had to be a catch! But there wasn’t, I just kept buying and before you knew it I’d bought 35 houses within a year.

Then the unthinkable happened, the credit crunch and the demise of Mortgage Express, I was devastated. What I thought was my god given right to buy properties in this way, was snatched away from me, just as I was planning my early retirement (I was only 29 at the time)

Saint

There’s a saying up North, “Owt for Nowt” and not a truer word can be said of NMD. Its only human nature that if we can gain a lot, by not putting much in, we’ll take it.

Myself and my family have done pretty well from NMD so I have to support the idea. Although most of my NMD were done through Mortgage Express and not through creative financing that may or not be ethical.

Sinner

For me NMD has caused a lot of problems for investors. I feel that it has brainwashed investors into thinking this is the only way to purchase investment property and that putting partial or full deposits into a deal is a sin. However for new investors, this is all they know.

My concern is that investors are missing out on great deals because of the mentality that is forced upon us by the property media.

I recently had an investor turn down a deal that produced £305 positive cash flow per month because he had to put 5k into the deal (including ALL fees).

He was a wealthy investor and cash rich, he was just of the opinion that if NMD exist then he’s not going to buy properties any other way.

Now 3 or 4 years ago before NMD, if you were offered a 14.7% yielding property at 15 – 20 % below market value, you would have snapped their hand off and paid the full deposit. Now investors have the mindset that if in order to purchase property all they are prepared to spend is a few hundred pounds or even want cash back.

Don’t get me wrong, if you haven’t got the money you simply haven’t got it, and NMD is the only option you have to purchase properties. However if you haven’t got any cash, should you really be in property investing?

What happens if major repairs are needed or if the tenant decides not to pay? How will you cash flow the situation if you have no savings, you can’t just say ‘I’ll cross that bridge when I come to it’ that’s not responsible investing.

Is it Ethical?

This really is a grey area and I can’t reach a definitive conclusion on this topic in only a few short paragraphs, but I’ll certainly try my best.

Ethics is defined as ‘being in accordance with the accepted principles of right and wrong that govern the conduct of a profession’

Now your solicitor or conveyancer might agree with what your doing, your accountant say its okay and you obviously think its fine, but does your mortgage company? Of course not, hence having to use designated solicitors and all this cloak and dagger stuff. Has any one been totally upfront and honest with the mortgage companies and still been allowed to buy properties in this way? I doubt it. Therefore how can we claim we are being completely ethical if we’re not being honest?

Now before you all start calling me Judas or traitor, I must re-iterate I’m a fan of NMD and as long as it’s legal, I’ll continue to purchase properties in this way. I’m just open minded and not blinded by the media.

I am of the opinion that NMD was good while it lasted and have certainly served its purpose over the last few years, but like all good things it must come to an end. Over the next few years we will see a clamp down, in various forms on the NMD and the return to deposit purchasing. We just need to be more open to the concept that our cash might not go as far as it once did.

“The secret of success in life is for a man to be ready for his opportunity when it comes.”

Benjamin Disraeli

If you would like to ask John a question click here