In regards to profiting from rental property, the most important thing is to buy the RIGHT property at the RIGHT price.
However strong the local local rental demand and general availability of good quality tenants, it will all be to little use if your investment property is usually poorly located or unattractive and/or of the wrong type for the local market. So time spent surfing the internet, building relationships with good local agents and actually viewing properties yourself, will be time well spent! Concentrating on give in For years, property investors have been concentrating on potential capital growth and being prepared to accept fairly unimpressive net produces of 3% or 4%. Obviously in a property market where there is little inflation, this will no longer do and additionally investors must look at what sort of yield a property might realise, while still of course regarding the property as a long term funds investment. The problem will be that you will need fairly serious amounts of capital to capitalise on this developing situation. There it's still mortgages available, but only to people who are regarded as a reasonably good credit risk. The days of the 90% and 100% mortgages are generally over for the foreseeable future, and in the end that will not be a bad thing. When the current boom began back the 'gold rush days of the late nineties it was relatively easy to profit from buy to let. Landlords along with the right properties could achieve as much as 15% yield along with phenomenal capital growth and even a 'so-so' property may be profitable. That is no longer the case. With the huge increase in property prices and the increasing competition between landlords for tenants, it's become hard to get more than a 5. 5% Net Yield, so more than ever it's very important to buy the 'right' home. Buying investment property Do's and Don'ts I suppose these do's and don'ts are not really hard and fast 'rules', and there are always exceptions, but you would do well to follow these guidelines where practical in order to profit from your residences. 1 . Don't get too personal Don't buy an investment property just because you personally would like to live in it. Constantly look at it from potential tenants' points of view. Also, try to avoid spending too much refurbishing the property. You may fall in love with an awesome £20, 000. 00 kitchen and a £10, 000. 00 bathroom with taps costing over £200. 00 just about every, but unless yours is an extremely up-market apartment, you will be wasting your money, as there tends to be a 'ceiling' purchase for a given size flat or house in any given location. 2 . Do research the market. Who will be ones own tenants? Where and who are your potential tenants? Are there businesses and organisations locally with an ever changing labourforce, such as hospitals, universities, even TV studios where people are usually employed on short-term contracts? Flats and property conveniently located for these kind of places should usually let easily. 3. Do be well connected The aged adage, 'Location, Location, Location' is paramount when it comes to suitable buy-to-let property. It is always helpful for the property to be no more than quarter-hour walk from a station if in a city like London, or at least close to other travel links such as freeways, bus routes etc . Also, look for handy shopping facilities, bars and restaurants, as these are always attractive to tenants. 4. Don't fool yourself! If you're buying a leasehold property, always remember to factor in ALL the costs. Here is a useful check list: Check the Service Charges Check the Ground Rent Check the Buildings Insurance (usually included in the service charge) Take into account that you may well have void periods, possibly up to two months in every 12 during change of tenants etc . Don't forget repairs and renewal costs Gas and possibly electricity safety checks can cost up to £150. 00 a year, nevertheless if you shop around you can probably spend less. 5. Do pay attention to things you can't control If you are buying a flat, pay for particular attention to the common parts, it's no use ending up with your very own 'palace' set in a 'slum'! This can quite often be an issue in converted property, where there can sometimes be no formal or at best an ill-defined duty for the maintenance and cleaning of common parts such as hallways, drives and gardens. Finding the 'right' property So what on earth is the 'right' property? Although it may be blindingly obvious, first of all, the right property is one you pay the right charge for! Successful buying to let is all about return on investment, whether that be capital appreciation over the long term or apartment return. If you pay too much, no one is going to pay you more rent to compensate you. This does not mean that it is wise to opt for the cheapest property. I once saw a two bedroomed terraced property in Manchester on the market for about £12000. 00. I mentioned it to someone who knows that city very well and she asked me that name of the street. When I told her, she said the house was overpriced! As a general rule, it's better to look for good buy-to-let property in urban or suburban areas, rather than rural ones, simply because there are likely to be far more people looking for hired accommodation in urban and suburban areas. The countryside and the shires are more attractive for people nesting, older people who ? re settling down or retiring - these folk usually choose to purchase rather than rent. For example , someone I know useful to rent a two bed-roomed property that was worth around £270, 000. 00 in a semi-rural location and has been paying around £800. 00 per month in rent. Many properties at that time that were costing less than this within intrinsic London were returning over £1200. 00 per month in rent. What about Ex-Local Authority Property? Ex-local authority residence, originally purchased under the right to buy scheme, can be a good investment, but you must do your homework, and a lot of legwork. Several council estates are run down, poorly managed and have significant problems of anti-social behaviour, but most are OK and get no more problems than other private inner city areas. Check out the property, walk around the estate a bit. Is there considerably graffiti? Is the place generally litter-free? How does it feel? If it's a high rise block, what are the lifts like? Typically it's best to be a bit flexible. Offer the property furnished or part furnished and be prepared to accommodate the wishes on the tenant you feel is worth it. New Build or Old Build? Be careful when buying brand new. Bright shiny town centre apartments are so seductive, with their designer kitchens and bathrooms, but they are not always good value for money. Fairly often the developer will have set a price that is not really a true market price. Property Clubs City centre developments are also most liked of 'Property Clubs', who profess to negotiate bulk deals with developers and pass on a so-called discount on their members. No doubt there are bargains to be had occasionally by buying in this way but I personally would avoid them like the plague! If you happen to must buy new, it's sometimes best to buy the last flat in the block as the developer wants to move on to another project and may be open to lower offers. Where is the best place to look for suitable investment property? As I have already said, to your advantage rental yield and minimum void periods it's usually best to purchase in urban areas, cities, places with educational institutions, hospitals, good employment opportunities etc . But should you consider buying a property a long way away, in another part of the UK. Which is true that some cities and areas of the UK are better than others when it comes to renting out property. For several historical, cultural and employment security reasons, apart from London, many northern and midlands cities offer good options for rental investment, with very healthy rental yields. Local can be best If you already live in or in close proximity to a good investment area it is in my opinion, best to research your local area first because you know it best. Also, you can easily revisit several times to check that you are making the right decision, whereas this is often very difficult if you're faced with a long journey to go back and out to make these necessary checks. Again, investing locally was the policy followed by Judith and Fergus Wilson any time building their buy to let empire around Ashford in Kent. Is it worth buying at auction? A lot of people tend to buy property in the traditional way. They see a suitable property put in an offer subject to contract (in England & Wales), once accepted they proceed to arrange a mortgage and employ a solicitor, surveyor etc to deal with conveyancing and surveys that may be required. This process can take up to three months and purchasing leasehold property is a particularly drawn-out approach. But there is a quicker way. Buy at auction. You can usually buy property at auction for less than in the standard way, but there are some very important limitations to bear in mind. Your bid is NOT 'subject to contract', as the hammer falls you must pay the 10% deposit plus any auctioneer's fees, and within 28 days you must complete the pay for. So , auctions are really for people with available funds, and you are also strongly advised to have checked through the legal pack in addition to carried out a survey before bidding - so you really need to know what you're doing. In times of high real estate demand, auctions are usually best left to professional developers and builders as they have the available funds and fully understand pretty clearly how much they will have to spend refurbishing the property. And in the case of builders of course the refurbishments are an interior cost. Buying investment property in Scotland Also, please bear in mind that even Scotland's property law is quite different from England's. In England and Wales a purchaser's offer is always 'subject to contract', which means that either party can distance themself at any time without penalty right up to Exchange of Contracts. In Scotland, people are usually required to put in sealed offers, based on 'offers over' a given price. Confusingly, these offers can sometimes be up to 20% over the 'asking price'. Once a sealed bid is formally accepted by the vendor you are locked into a contract and both parties risk large penalties for withdrawal. So... it's important to do necessary legal searches and surveys before putting in the offer. However the English system does have the problem of gazumping and gazundering and people just withdrawing, I still think that the Scottish system is a bit too rigid and 'clunky'. Personally, I believe that the English system could easily be better by each party placing say £1000. 00 not returnable deposit with a stakeholder once a purchaser's make available is formally accepted. Don't be an 'armchair investor' Over the past few years many people have believed that all they need to do so as to invest in property was to browse a few websites, maybe join a property club and let the club select attributes from which they then select. When it comes to successful property investment, whether you're buying to let or looking to develop, there is absolutely no alternative to 'getting your hands dirty'. You have to actually view property yourself - no one is going to be as careful with your profit as you. It can be pretty hard and tedious work but unfortunately, as in slimming where the only thing that really will work is eating less and exercising more... there is no simple substitute. Yield or Capital Growth? A very important consideration when ever buying any investment property is to decide what is more important to you, YIELD or CAPITAL GROWTH, or a good blend of the two? The way to work out the yield on a Parc Canberra is to take the annual gross rent, subtract ALL fees (ie service charges, ground rent, buildings insurance, repairs and renewals) and divide it into the TOTAL charge price and multiply by 100 - this will give you the Gross Yield in percent. In order to determine the just about all important Net Yield you must subtract any letting agent commission. Here is an example: Total cost of leasehold fat-free: £200, 000. 00 including fees, stamp duty etc . Annual Gross Rent: £11, 000. 00 Annual Product Charge, Buildings Insurance, Ground Rent: £1140. 00 Letting Agent's Commission (8% Let Only): £880. 00 and VAT = £1034. 00 Gross Yield = £11000. 00 - £1140 = £9860. 00 ÷ £200, 000. 00 x 100 = 4. 93% Gross Yield Net Yield = £9860. 00 - £1034. 00* = £8826. 00 ÷ £200, 000. 00 x 100 = 4. 41% Net Yield *agent's commission Remember that this is the TRUE way to work out whether a property offers a good yield. Don't just add up all your price ranges, including the mortgage repayments, subtract them from the rent and say, 'that's how much I'm making'. Of course this calculation is important, but only for your own personal circumstances. In other words, can YOU afford it, can you pay the mortgage, service charges etc at the time of void periods, but it will not tell you the actual investment potential. Barring major disasters, I would say that good building well located in the UK will usually be a superb long-term and probably medium term investment. But, assuming you are not occupied with capital growth, or believe there will be non-e in the short term and need to know whether you should buy to let or simply stuff everything in the bank then, as the Americans say, 'just do the math'. Work out the Net Yield and see how the idea compares with current savings rates. When it comes to buy to let properties, yield or capital growth, you can't get everything Generally speaking, there is usually a trade-off between yield and capital growth - you may get a good yield, people usually have to sacrifice some capital growth. Often very up-market properties tend not to give such a good yield nevertheless do return good capital growth. I personally believe that unless you are very wealthy or desperately in need of the rent since income, it's best to settle for a good balance - average yield with average capital growth. A better yield As long as you buy within a major city like London, you will usually get a far better rate of rental return from a council place, although you will not get quite the same amount of capital appreciation. But of course, in the unlikely event that the market falls (shock horror! ) then you will get correspondingly less capital depreciation! In this respect, the purchase of a good ex-local authority property is actually a lower risk option than buying a more up-market one.
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Coupon Enforcement Departments for Counties and Municipalities across the United States have been grappling with the increased workload issues created by a rising number of vacant and abandoned properties due to the continuous pursuit of foreclosures by mortgagees (banks, lenders, and lien-holders). ForeclosureListings. com, confirmed that the "national foreclosure rate in January 2010 was one foreclosure filing for every 466 U. S. households; the most severe problems continue in the West and in Florida. Unemployment, economic hardship, poor equity, and credit availability are driving the foreclosures. " If a property owner was in default with their mortgage payments and will not satisfy the outstanding debt or bring the mortgage and any outstanding penalties current during the pre-foreclosure period, they were surely going to be faced with having to leave their home. In some cases, property owners that were upside down in their mortgage or as a result of financial hardship found themselves in a position where expenses were just too overwhelming may have chosen to just vanish from their homes, no matter how difficult it was for them and their families. In a time when most jurisdictions, especially, small to medium sized local governments are also dealing with the difficulties created by financial dilemmas and hardships that are reducing the workforce and options, the rising foreclosures have taken its toll on code enforcement departments that are tasked with trying to keep local communities and communities from becoming blighted, unsafe, and depreciated in value.
The problems that were created by sitting vacant commercial properties, such as vandalism, unsafe open structures, stagnant swimming pools, just to name a few, created immense expense as towns where tasked with securing and abating these problems without the assistance from any property owners or residents. Often , the home owners who were responsible for maintaining their homes during this difficult time felt it unfair that they were still had to provide for regular upkeep of their properties or face code enforcement penalties while the abandoned foreclosed homes next door have been neglected and left to bring down the value of their homes and detract from their neighborhoods. According to the latest report with RealtyTrac, a company that monitors the trends of foreclosures across each state, "Florida posted the nation's second optimum state foreclosure rate in November 2009 with one in every 165 housing units receiving a foreclosure filing in the month. Florida took the No . 2 spot from California, which posted the nation's third highest foreclosure charge. " It became common for community members and leaders around the State of Florida to feel that all the mortgagees were slow to take responsibility for these assets and started to put pressure on county and nearby governments to address these properties, without using their tax dollars to do so. Foreclosure Procedure in the State of Florida Usually there are some different types of foreclosure procedures in the United States. According to Erate. com, "One common type of foreclosure is the 'deed in lieu of foreclosure' deal. Often called 'strict foreclosure, ' the bank claims the title and possession of the property back to satisfy the debt. Additional most common type is the proceeding known simply as 'foreclosure' or 'judicial foreclosure. ' Here the property is confronted with auction by a county or court official. The winning bidder receives a deed to the property. Banks and also other lenders usually bid on the property in the amount of the owed debt, and if no other buyers step out they will receive the title to the property. Other states employ yet another type of foreclosure, called ' nonjudicial ' and 'statutory' foreclosure. In this case, when a borrower fails to make payments, the lender may be issued a notice of default in addition to intent to sell. If the borrower does not solve the default with payments or other means, the property will be available at public auction. " In the State of Florida, foreclosures are handled as judicial procedures that are highly refined through the court system. This process can take a bit of time, 5 months or more, beginning with the lender advising a mortgagor quite possibly in default and subsequently recording a notice of Lis Pendens. The homeowner will be served notice associated with complaint, which basically provides notice of intent to foreclose and contains the total debt. The property owner gets to receive an opportunity to appear in court to answer the complaint, however , if the court rules against the property owner, a judgment from foreclosure will be issued. After the judgment has been entered, a writ will be issued by the court authorizing a sheriff's sale. Usually, if the property owners remain inside the home, they would be considered as trespassing. If the property is sold by judicial sale, Certificate of Title will be issued to the new property owner or returned to mortgagee. Challenges for coupon compliance Code enforcement officers typically have to address code violations on occupied properties where the residents are either unacquainted with the code requirements, neglectful, financially distressed, or possibly violating code requirements intentionally, however , in the case of abandoned or nonincome producing homes, these residents have either walked away or have been required to vacate the properties leaving the property protection and violations for another responsible party who have control over the properties which in most cases are the holders of the house loan notes. This becomes a difficult task as property owners were often required to vacate the premises before the property had been either sold or taken back by the mortgagee through completion of the foreclosure process leaving the ownership notes unchanged. Code enforcement officers were now faced with dealing with code violations on vacant properties where tracking down the actual responsible parties for these properties was extremely difficult. Even when a mortgagee's name was located from looking into foreclosure filing papers, there would only be large corporate bank or financial institution name and an home address that would not lead you directly to someone who was responsible for the property and would get lost in the maze. Using strapped resources and increasing demands from community members, local governments started to adopt various vacant property sign up programs that required mortgagees to become more involved with these foreclosure properties either from the time the property owners ended up being going into default or when a property became vacant and abandoned. Although some registration programs may only consists of giving you information such as responsible party name and contact information, some programs have required significant steps be taken to get a vacant, abandoned property including providing electronic security systems. Sample Registration Program, Broward County Florida Local government authorities have had to take steps to bolster local communities against the negative effects of vacant and abandoned properties and obtain non-reflex compliance with property maintenance and building code violations. For example , in Broward County Florida, Building Code Inspectors and Code Compliance Officers respond to numerous complaints and concerns regarding single-family homes, condominiums, townhouses and duplexes that are being vandalized, in severe states of blight, lack of maintenance, security, hazardous conditions, and other health and safety conditions these properties present. Requiring mortgagees and absentee owners of vacant and abandoned properties to correct such infractions presents significant challenges to the Code Enforcement process. Additionally , when these properties are abandoned and vacant meant for extended periods of time, there may be unexpected problems for purchasers of these properties such as property maintenance issues, outstanding building enables, and code enforcement liens and/or assessments. In response to recent events in the housing market which have led to a serious rise in the number of foreclosed homes located within the unincorporated areas of Broward County, the Abandoned/Vacant Real Property Sign up and Certification ordinance was created to protect unincorporated residential neighborhoods from becoming blighted through the lack of adequate maintenance along with security of abandoned and vacant properties. The program is intended to address those properties that are vacant and abandoned which happen to have come under the control of a mortgagee or beneficiary as a result of the default of the borrower and/or the foreclosure approach. The program also applies to properties that were obtained under a deed in lieu of foreclosure. The program requires mortgage lenders to examine defaulted properties to confirm that they are occupied. If a property is found to be vacant, the program requires that the lender exercise any abandonment clause within their mortgage contract, register the property with the County and immediately begin to secure and maintain the property to help program standards. The ordinance also requires that a local property management company be contracted to perform bi-weekly examinations to verify compliance with the requirements of the ordinance, if the owner of the property is a corporation, partnership, and/or using area mortgagee/owner. The property must also be posted with the name and 24-hour contact number for the property manager that can respond to problems or concerns. The inspections and certification portion of this program offers added protection for buyers about foreclosed residential properties in the unincorporated areas of Broward County by requiring all title holders of these properties that happens to be acquired through a Certificate of Title (Foreclosures and Judgments), in accordance with Chapter 45, Florida Statutes or under some sort of deed in lieu of foreclosure/sale to obtain a Certificate of Foreclosure Inspection prior to offering the property for sale, transfer, or other alienation. This requirement allows for the performance of a cursory visual inspection of the property and an inspection report by the code enforcement officer to provide a disclosure of any noncompliance with property maintenance codes, outstanding County liens and/or special assessments encumbering the property and to also identify any outstanding building permits. Steps taken to address issues with foreclosures As the federal, state, and local governments look for ways to assist distressed homeowner's in keeping their homes in order to assist purchaser's and investors to acquire foreclosed homes to get them repaired, maintained and occupied, the banks also have focused on addressing the concerns of local governments in regards to the problems associated with vacant and abandoned properties. Mortgagees may well utilize their own staff or obtain the services of companies such as asset managers or mortgage servicers to handle several functions and responsibilities related to foreclosed properties from pre-foreclosure thru property preservation ultimately to sale or send to a new owner. The companies employ a variety of staff to handle such broad areas such as property management, real estate and even title services and have started to place a greater emphasis on property preservation and code compliance. These companies employed by the bankers that utilize their services have recently focused their attention on the ordinance requirements for properties under their own management, at the same time, promoting a partnership with local jurisdiction code enforcement staff to help alleviate the problems with vacant and abandoned properties and create a better method of communication when problems are not being addressed with property upkeep issues. According to information provided on the website for The Mortgage Bankers Association, this organization promotes the utilization of the MERS ® Mortgage Electronic Registration System database to obtain a list of property preservation contacts to assist local jurisdictions in their efforts, certainly in the case of securing open and unguarded, vacant properties. Conclusion Properties that continue to be abandoned, neglected, and unsecured to get extended period of times, which may include years, work against the mortgagees, as these conditions continue to force property principles continue to decline, costs for repairs to increase due to vandalism and deterioration and liability for the mortgagees remain since squatters and children get access inside unsecured residences. In order for code enforcement to be truly proactive, it ought to take steps to prevent problems not address them after the fact. Even though most jurisdictions charge a fee for process these properties, the fees are usually intended to offset the operating costs for the program which includes all administrative job involved, as well as the increased field investigations work that these vacant and abandoned properties require. The proactive nature these programs to seek out the responsible property preservation and servicers work to reduce the costs for the mortgagees as well as the local legal system. Fines and liens that are placed on these properties due to daily running penalties and costs for abatement operate such as performing board-ups, stagnant pool abatement, lot mowing, and junk, trash removal may reach in the scores and even thousands. Because many of these properties remain in the name of the previous owner until the property is transferred along with the new owner is properly recorded in the county records, most jurisdictions are only required to cite the owner shown on the tax assessor's records or deeds in order to address violations. The property registration programs have accomplished numerous goals such as increased responsibility and accountability by the mortgagees in regards to these assets, adherence to local property maintenance and protection building codes, and increased attention towards making these properties viable again for ownership and heightened measures toward re-occupancy. The more properties remain occupied and less are bank owned or abandoned, the less for any need for these types of vacant property ordinances and registration programs. |
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