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March 23 2016


5 Reasons Why Committing to Property in Hull Can create Wealth

Titwala properties
This article aims to coach the reader on the 5 fundamentals of professional property investing specifically centered on the city of Hull within the East Riding of Yorkshire

properties in titwala
The topics covered

 Return on Investment
 Rental Demand
 Stress Testing
 Exit Strategy


When purchasing property you can benefit by borrowing in the bank using the power of leverage. Typically, a buy to let mortgage requires you to definitely put a 25% deposit down and also the bank will provide the residual 75% of the purchase price of the property. Where else is it possible to get them to do that? Banks will lend you cash to buy property. They're less likely to lend serious cash to grow your business plus they definitely will not lend you money to buy stocks and shares. They are aware of that property is still a good secure asset despite what are the media says. To inform you the power of leverage lets explain to you an illustration. You have 100,000 to shell out on an investment property. The next scenarios show ways to spend that money

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

Buying 1 house with out a mortgage. Put down 100K and purchase the property outright. The following year inflation raises the tariff of that property by 5%. The house is now worth 105K. You now have a property worth 105K with an equity of 5K for the reason that property.

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

You put a 25K deposit documented on each property plus a mortgage for the remaining 75K, spending all of your 100K across 4 properties not just 1 property this time. The following year inflation enhances the prices of that property by 5%, similar to scenario 1. Each rentals are now worth 105K. However, now you have 4 of them so enjoy the 5K equity in each one. So that you now have 20K equity as opposed to the 5K in scenario 1. You might have still spent the same amount of money but have took advantage of leverage of money in the Bank.

2-3 bedroom properties in Hull can be obtained for between 40-100K. They provide a superb opportunity to leverage your cash

Return on Investment

The return is defined below

Return on your investment = Gain of Investment - Cost of Investment / Price of Investment

In basic terms, how hard can be your money working for you. You can pick to invest in a new business, shares on the stock market or property. Each wealth creation channel features its own return on investment together with its potential risk. As a professional investor you have to weigh up your appetite for risk and potential bang for your buck. Lets revisit the 2 main leverage scenarios and examine the return on investment

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

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

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

Return on investment (ROI) is 20% e.g. 20K/100K Hull is a good place to start your professional property investing career due to great return on investment. This is because property prices in Hull are among a few 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 each of those properties will go up in price if you've leveraged your investment funds with mortgages your return will be even greater.

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

Rental Demand

Of course, an investment property only becomes an asset if you are able to rent out. If you can't, that asset quickly becomes a liability. A quick reminder on the meaning of an asset and liability

Asset = Puts take advantage your pocket

Liability = Takes money out of your pocket

So, to be sure your investment property remains a good thing you need to be confident that it's in an area of high rental demand. Hull is really a hidden gem of your city. It is the gateway to Europe via ABP ports and P&O Ferries and thus has a thriving export/import industry. Siemens are going to locate a large windmill manufacturing plant there cementing it's status being a centre of excellence for Alternative energy technology. It is well connected through the M62 and has a broad manufacturing base. The Deep, the UKs only submarium has generated 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 the area, affordability to buy a property is low. This consequently has resulted in a high demand for rental property.

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

Financing Deals

In case your aim is to own 10, 20 or 30 properties and still provide the deposits for every one you would soon exhaust your own cash so, just how do the Professionals undertake it? Well, the answer is Other companies Money (OPM). They buy their properties at the right price. Cash in property is made when you buy the property NOT when you sell it. Buying on the right price i.e. below market price or BMV as it's called enables you to refinance with the mortgage lender at the Open Monatary amount and pull out much of your deposit cash. This enables you to recycle your pot of funding to purchase another property. However, in this market, the Council of Banks have imposed a Six month rule that prevents you remortgaging unless the house has been held for at least 6 months. If you can demonstrate added value then you have a better chance of achieving the valuation you desire. Normally Property Prices double every 11 years. Therefore a 100K property is worth 200K in 11 years time. Once you sell this property you make payment for off the original 100K mortgage and then have approximately 100K profit. What this means is if you bought 2 properties you can sell one and remove the mortgage on the other and have 1 cash flowing property without any mortgage on it. Using this principle it can be scaled up to any number of properties you would like to buy. Getting a mortgage can be tough in this current economic climate although not impossible. The money hasn't disappeared. It is in different places. The trick is to find the people using the cash.

Buy for cash

Some properties looking for refurbishment in Hull can be bought for as little as 20K. Which means you need to buy them with cash as mortgage providers generally don't lend below 40K. It also means you can move quickly and not have to involve Banks and Valuers in the purchase. When you have refurbished the property after that you can get a surveyor to value the house with a view to putting a mortgage on it and have most if not all of the cash returned.

Deposit Finance

You are able to help people with cash earn more than they are getting in the lender by offering them a higher interest rate for borrowing their money to fund a deposit. After that you can return their money after refinancing.

Mortgage Host

Folks who wants get a mortgage arehorrified to find that someone else who can and give to share the cash flow from the property. Get a lawyer to draw in up an agreement between anyone with a host. Because property cost is relatively low in Hull, there exists more chance of finding investors who're willing to lend you 10-15K to get a deposit. Risks are reduced as the amounts on loan are less. When you've done 1 deal with an investor and made them more cash they will be happy to do another deal with you.

Hull property cost is low which leads to lower risk for money Investors when funding an arrangement.

Stress Testing

With all of your investments we advise stress testing your savings at higher interest levels. Whilst we enjoy historically low interest it's tempting to buy lots of property deals. However, rates have only 1 strategy to use and that is up. Test that the investment still produces cash flows at higher interest levels so it remains a property and not a liability.

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

Exit Strategy

With any investment it is essential you know your exit strategies. By having an aeroplane knowing in which the exits are is vital in case of an emergency. Similarly, with investing you should know where your exits are for getting out of the investment supply an emergency.

Selling forget about the

If for any reason you should come out of an investment you can sell a property. The properties that will be easiest to sell could be the most popular type in that area. Should you own an expensive, executive detached house in a desirable area the quantity 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 no less than 2 exits when entering an investment deal. There are lots of investors in Hull and because of low prices they are reasonable to residential buyers too.

Don't be the product, buy the product!