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23 Mar 2016
Titwala properties
This article aims to coach the reader on the 5 fundamentals of professional property investing specifically devoted to the city of Hull from the East Riding of Yorkshire

titwala property
The themes covered

 Leverage
 Return on Investment
 Rental Demand
 Stress Testing
 Exit Strategy

Leverage

When you buy property you can benefit by borrowing through the bank using the power of leverage. Typically, a buy permit mortgage requires one to put a 25% deposit down as well as the bank will provide the remainder 75% of the purchase price of the property. Where else are you able to get them to do that? Banks will lend you lots of bucks to buy property. They're less likely to lend you cash to grow your business plus they definitely will not lend serious cash to buy stocks and shares. They understand that property is still a good secure asset despite exactly what the media says. To tell you the power of leverage lets demonstrate an illustration. You have 100,000 to invest on an investment property. These scenarios show the best way to spend that money

Scenario 1 - Buying 1 property worth 100K with all your cash

Buying 1 house with no mortgage. Put down 100K and buying the property outright. The following year inflation raises the expense of that property by 5%. The exact property is now worth 105K. An individual has a property worth 105K with an equity of 5K for the reason that property.

Scenario 2 - Buying 4 properties each worth 100K using a mortgage on each

You set a 25K deposit down on each property and a mortgage for the remaining 75K, spending all of your 100K across 4 properties not only 1 property now. The following year inflation adds to the prices of that property by 5%, exactly like scenario 1. Each property is now worth 105K. However, isn't it about time 4 of them so benefit from the 5K equity in each one. So you now have 20K equity rather than 5K in scenario 1. You've got still spent exactly the same amount of money but have taken advantage of leverage of money through the Bank.

2-3 bedroom properties in Hull can be bought for between 40-100K. They have a superb opportunity to leverage your money

Return on Investment

The roi is defined below

Roi = Gain of Investment - Price of Investment / Cost of Investment

In basic terms, how hard will be your money working for you. You may choose to invest in a new business, shares on the stock exchange or property. Each wealth creation channel possesses his own return on investment together with its potential risk. As a professional investor you need to weigh up your appetite for risk and potential bang for your buck. Lets revisit both the leverage scenarios and consider the return on investment

Scenario 1 - Buying 1 property worth 100K with your cash

Return on investment (ROI) is 5% e.g. 5K/100K

Scenario 2 - Buying 4 properties each worth 100K with a mortgage

Return on investment (ROI) is 20% e.g. 20K/100K Hull is a superb place to start your professional property investing career as a result of great return on investment. The reason is that property prices in Hull are among a number of the cheapest in the UK. So, the price tag on your investment is lower. Therefore not only can your money go further ie. you can buy more properties but at the same time properties will go up in price and when you've leveraged your investing with mortgages your roi will be even greater.

Hull provides a better return on investment than costlier cities in the UK because property prices are lower

Rental Demand

Naturally, an investment property only becomes a good point if you are able to rent it out. If you can't, that asset in a short time becomes a liability. A quick reminder on the concept of an asset and liability

Asset = Puts take advantage your pocket

Liability = Takes money through your pocket

So, to make certain your investment property remains a property you need to be confident that it really is in an area of high rental demand. Hull can be a hidden gem of your city. It is the gateway to Europe via ABP ports and P&O Ferries and for that reason has a thriving export/import industry. Siemens will locate a large wind mill manufacturing plant there cementing it's status being a centre of excellence for Renewable energy technology. It is well connected by the M62 and has a broad manufacturing base. The Deep, the UKs only submarium has established itself as a tourist destination too. The University of Hull continues to grow and has a healthy student population around 25,000. However, because of the relatively low salaries in your neighborhood, affordability to buy a house is low. This consequently has triggered a high demand for accommodation.

The following post codes in Hull are fantastic rental areas. HU5 is near the University for students. HU7 and HU9 are perfect for families.

Financing Deals

Should your aim is to own 10, 20 or 30 properties and still provide the deposits for each and every one you would soon use up all your your own cash so, just how do the Professionals undertake it? Well, the answer is Other artists Money (OPM). They buy their properties in the right price. Cash in property is made when you purchase the property NOT if you sell it. Buying in the right price i.e. below rate or BMV as it's called enables you to refinance with the mortgage company at the Open Market Value and pull out much of your deposit cash. This enables you to recycle your pot of cash to purchase another property. However, in this market, the Council of Banks have imposed a 180 day rule that prevents you remortgaging unless the property has been held not less than 6 months. If you can demonstrate added value then you need a better chance of experienceing the valuation you desire. Normally Property Prices double every 11 years. Therefore a 100K property is worth 200K in 11 years time. When you sell this property you have to pay off the original 100K mortgage then have approximately 100K profit. This implies if you bought 2 properties you can sell one and remove the mortgage on the other and now have 1 cash flowing property without having mortgage on it. Using this principle it can be scaled around any number of properties you want to buy. Getting a mortgage can be challenging in this current economic climate and not impossible. The money hasn't disappeared. It is just in different places. The trick is to find the people with all the cash.

Buy for cash

Some properties in need of refurbishment in Hull can be obtained for as little as 20K. Which means you need to buy them with cash as mortgage providers generally don't lend below 40K. Additionally, it means you can move quickly and not have to involve Mortgage brokers and Valuers in the purchase. After you have refurbished the property you may then get a surveyor to value the house with a view to placing a mortgage on it and acquire most if not all of one's cash returned.

Deposit Finance

You can help people with cash earn over they are getting in the lending company by offering them a greater interest rate for borrowing their to fund a deposit. After that you can return their money after refinancing.

Mortgage Host

If you can't get a mortgage arehorrified to find that someone else who can and provide to share the cash flow coming from a property. Get a lawyer to draw in up an agreement between you and the host. Because property costs are relatively low in Hull, there exists more chance of finding investors who're willing to lend you 10-15K for any deposit. Risks are reduced because amounts on loan are less. Once you've done 1 handle an investor and made them more income they will be happy to do another handle you.

Hull property costs are low which leads to lower risk for money Investors when funding an offer.

Stress Testing

With all of your investments we advise stress testing your investment funds at higher rates. Whilst we enjoy historically low interest rates it's tempting to purchase lots of property deals. However, interest levels have only 1 best option and that is up. Test that your particular investment still produces cash flows at higher rates of interest so it remains an asset and not a liability.

Try your investments at higher interest rates. Hull investment properties still positively cash flow at 8-9% interest rates at current rental values.

Exit Strategy

With any investment it is vital you know your exit strategies. With the aeroplane knowing the location where the exits are is critical in case of an emergency. Similarly, with investing you have to know where your exits are suitable for getting out of the investment supply an emergency.

Selling forget about the

If for any reason you need to come out of an investment you can sell a property. The properties that will be easiest to sell may be the most popular type in that area. If you own an expensive, executive detached house in a desirable area the amount of buyers is reduced and constrained to residential buyers. However, for those who have a cheaper, investment property you can sell to both investors or residential buyers. This is important when considering your investment.

Know at the very least 2 exits when entering a smart investment deal. There are lots of investors in Hull and due to low prices they are affordable to residential buyers too.


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