Whether it is investing in commercial or residential property in the UK, the more popular reasons for it, particularly in London, are the UK’s stable economy, multicultural environment and wonderful shopping facilities. Needless to say, there are other financial prospects that you could benefit from.

Commercial Property

Depending on the type of commercial property you are thinking of buying, or have bought, you can receive cuts in taxes. So, be sure to verify what tax cuts you might get from the medium you are buying through, like a limited company or a partnership, or even through an individual.

Also, the stability of house prices in the UK is not always predictable, making it difficult to anticipate the kind of returns you might get. However, having a diversified spread of commercial property investments means that you can expect some modest returns through a growth of capital. If you are renting out a property, then it will probably be on a fixed-term lease, where the periodic reviews of rents usually lead to an increase in the rent paid by the tenants.

So, for example, if you bought an office and you have signed a contract to rent it out for a period of eight years, this contract is called a lease. The types of commercial property available for investment in the UK are offices, shops, restaurants, leisure centres and industrial workshop units.

Residential Property

Some investors are seen to purchase residential property for their children coming to the UK for higher education. Once the courses, hence the purpose of the property, comes to an end, the investors either sell the property or rent it out, to derive some modest returns.

In fact, investing on residential property just to rent it out to tenants is more favoured than selling it, particularly when the market for house prices becomes unstable.

As with commercial property, if you spread your investments, i.e, if you buy different types of residential property, you can benefit from less risks and more returns.

Needless to say, buying houses is perceived to be easier, as most people are familiar with how mortgages work and can manage the property themselves, as opposed to hiring an intermediary source. Furthermore, if you are renting out your own property, you can claim tax relief on the basis of the interest you pay on any loans you take out from the bank, to purchase your property. You may also claim tax relief from any furniture that needs replacing.

If you are a married couple and consider owning the property jointly, then your overall income tax can reduce, because of the two sets of personal allowances and basic rate of taxes.

Luxury Developments

Investing in a luxury development is considered to mean that you have reached the top of the property ladder, i.e, you have had experience of investing in residential and commercial property.

In recent times, London, in particular has made more progress in catering for luxury developments. What are known as ‘high-rise’ buildings, or tall, palatial residential property, are seen to become a part of the landscape, especially in Canary Wharf and the Docklands. More such developments are being planned near King’s Cross (Regent Quarter), London Bridge, Elephant & Castle and Paddington.

Moreover, while luxury developments are usually purchased for the investors to reside in themselves, these can also be rented out to tenants, creating another source of income. This brings out a fact that investing in property often brings more returns, as opposed to investing in the stock market! You could also invest in a luxury development as a holiday home, where your friends, relatives, or even tenants could rent it. Alternatively, you could invest in it as a retirement home for you and your immediate family to spend time in.

If you are considering investing in a development that has not been built yet, you could be in for more profits. This is because the development will be worth much more when it is built, then when you had paid for it to be built. The types of luxury developments available are: penthouses, luxury apartments and mansions.

Building Your Dream House

While getting a house built in the UK, particularly in London, does seem difficult to imagine, in reality, it is not.

Investors often plan to build a house in the countryside, or outside London, as it is easier because there is more land available for plots to be invested in and houses to be built on. While the whole process of getting your dream house built can take up to a few years, with the cooperation of the Local District Council and the Local Planning Authority, things should run smoother.

If you have already invested, or are thinking of investing in a commercial or residential property in the UK, this will make it easier for you to get your dream house built.

This is because banks, building societies and Local Planning Authorities look for proof of a regular income, a strong credit history and the types of property you have made investments on in the UK.

A good reason for you to get a house built, as opposed to extending or renovating the house you currently reside in, is because you will not have to pay any Value Added Tax (VAT) on all the building work done. However, if you buy the building materials yourself and you are managing the project, instead of hiring a building contractor, you will have to pay the VAT. Yet, once the building is completed, you can apply to your local Customs and Excise VAT office to claim back the VAT you had paid.

If you are thinking of generating some or all the funds for your dream home from the profits you make by selling a house you own in the UK, you may not have to pay the Capital Gains Tax. This is usually the situation, when your house has been resided in for 12 months or more, formalising it as a residential property and not a commercial one.

Buy-to-Let Properties

Letting a property means renting a property, or parts of it, to tenants. Investing in a property to rent it out, or ‘buying-to-let’ has become very popular, as it has been seen that investors yield much more returns from it, then they would from shares in the stock market, or pension schemes.

The returns will be high and could even grow stronger, if the property has been let or rented out on a fixed-term lease- this is a contract of renting a property.

So, the periodic reviews of rents usually lead to an increase in the rent paid by the tenants. Furthermore, the chances of getting potential tenants to let your property becomes higher, if your residential or commercial property is in a city, or near shops in a city centre, or is situated in or near a place where employability is high, or in places to access various modes of public transport.

In London, some investors experiment a bit by investing in property in or near places where there is redevelopment or where a new shopping site, or landmark is being constructed. This is because tenants may want to relocate there and might therefore be looking for accommodation.

So, it is best to invest in a property which can bring in both high capital gains and rental income. However, in London, it can get a bit difficult to find both of these in one area. While some areas yield higher income from renting, other areas yield higher capital gains.

Has the saying the “Englishman’s home is his castle” come to an end? Since the days of Maggie Thatcher, the British public have slowly become householders and at the last UK census, as much as 65% of the people in UK lived in their own homes. But has this trend started to reverse?

As UK house prices have escalated out of the reach of the first time buyer many people have had to resort to moving into rented accommodation to get a roof over their heads. With the average UK mortgages now being £197,000 the house is now an extremely expensive commodity and the dream of owning your home is looking bleaker for the first time buyer.

* But is it all too late?
* Maybe not!
* Hurry before it is!

Finding the right mortgage when buying a home is a very important financial decision in life as it is more often than not the largest single expenditure in people’s lives! People will often search the supermarkets shelves for bargains choosing products for the sake of a 1p or 2p saving per item and there’s nothing wrong with that; I do it all the time.

Our parents teach us to be frugal with money in our up bringing and we sometimes become animals of habit throughout our lives. Through the generations, inflation has seen prices increase ten fold and who would have thought years ago that the price of a loaf would touch the £1 figure.

The same can be said about UK property, as the housing market has exploded and the average cost of buying a home is nearing the £200,000 figure and this is before we align our currency and interest rate to the euro. Southern Ireland has seen a massive explosion in property prices in the post years of joining the euro and it is now an extremely expensive place to buy property.

By comparison to Eire the UK property market is still cheap and I dread to think what will happen to property prices when the UK eventually aligns itself to the euro and interest rates are reduced to 3.5%. Will we see average UK mortgages at the £250,000 figure? I think so! The truth is that house prices have outstripped incomes and as a result, affordability has become a big, big problem. All is not lost, so, what are the alternatives and how could you become that UK homeowner?

Let us look at some alternatives that could be considered from the unconventional UK mortgages list below,

* Self Certification Mortgages
* Shared ownership
* Parent guarantee schemes
* Buying with friends
* Shared equity schemes
Self-Certification Mortgages:
The term self-certification was introduced over a decade ago to help the self-employed to self certify their incomes. Today this same concept exists in the for sole proprietors, the employed, partnerships and a Limited Company.

Self-Certification has limits: most lenders will only allow you to prove your income in this way if you want to borrow up to 75% loan to value, so you will need to put down a substantial deposit. However, some lenders may allow the self-employed and employed to borrow up to 95% on a self-certification basis, without the need for accounts, an accountant’s letter or a check on salary.

Shared Ownership
If you are unable to buy a property outright on the open market, then shared ownership is the ideal solution for you. Shared Ownership is a part buy, part rent scheme, which enables purchasers to buy a home in stages. Purchasers can buy an initial share between 25% and 75% of the value of the property and pay a subsidised rent on the remaining value of the property. Shared ownership properties can be provided by housing associations, housing trusts and local authorities. These organisations try be as flexible as possible with regards to the initial share purchased, but this may be as much as 50% of the market value at some of their developments.

A service charge will normally be payable to cover the cost of communal maintenance. The service charges payable can remain the same whatever percentage you own of your home and continues to be payable should you purchase your home outright where possible. You will need to have sufficient savings to cover the initial cost of home ownership: legal fees and stamp duty for example. You will need to be able to meet the costs of rent, mortgage, service charges and other associated outgoings.

As your income increases, you can buy further shares of your home until you could own 100% of the value and no longer share the ownership with the housing association or trust. The greater the percentage you own, the lower the percentage on which you pay rent. However, if you do not wish to buy more shares in the property, you do not have to. Obviously, the more you own, the less you pay in rent. And, if you can buy your home outright in the future, then no rent will be payable.

Having found the property or shared ownership house of your dreams a good whole of market mortgage broker should then be employed to find the best and cheapest mortgage. Careful searches can reveal 100% shared ownership mortgages that will not require a deposit, even if you have an adverse credit history, 95% self certification mortgages and further information about parent guarantee schemes, buying with friends and shared equity schemes should also be sought.

But hurry before it’s all too late!

MORE PEOPLE COULD BENEFIT FROM AN OFFSHORE MORTGAGE THAN YOU WOULD THINK!

If you fall into any of the following categories and are considering buying or remortgaging a residential property in the UK for investment or buy to let purposes, you could be one of them:

(a) Non-UK residents (UK expatriates and Nationals of another country) wishing to purchase/remortgage a property in the UK for investment/buy to let purposes

(b) UK residents (Non-UK domiciled) wishing to purchase/remortgage a property in the UK for investment/buy to let purposes

(c) UK residents but deemed Not Ordinarily Resident in the UK for tax purposes, wishing to purchase/remortgage a property in the UK for investment/buy to let purposes during the period of their UK residency

Properties may be purchased via a UK Regulated Mortgage Contract for any applicants wishing to use a property as their main residence.

Properties can be purchased using an Offshore Company or Trust.

The applicant(s) may instruct their own solicitor for mortgages up to £2.5m. or currency equivalent when the borrowing is in personal names and up to £1m. when it is in company/trust name. For mortgages above these thresholds, the lender will instruct an approved solicitor to act on its behalf.

A RANGE OF OFFSHORE MORTGAGES IS AVAILABLE:

Residential Mortgage
Residential Currency Mortgage
Buy to Let Mortgage
Buy to Let Currency Mortgage

A PROFESSIONAL ADVISER SHOULD PROVIDE:

Tax efficient mortgage products for Foreign National & Overseas clients Foreign Currency or Sterling Mortgages
Individual or Trust or Company Borrowing
Attractive Interest Rates
Experienced staff who will provide you with an efficient, friendly and knowledgeable service A simple, easy to use application process backed up with quick decisions

Whatever your circumstances and requirements, an Offshore Mortgage Service should provide a mortgage product that is designed to suit your situation. It should also support you throughout the process of buying the property, whether the application is in a personal name(s) or an Offshore Company/Trust.

There is no maximum amount of borrowing but loans are limited by being subject to a maximum of 80% of the lender’s professional valuation of the property.

For Investment/Buy to Let properties, the rental income must equate to a minimum of 125% of the annual (interest-only) borrowing costs and the tenancy must conform to Assured Shorthold Tenancy (AST) and Company Lets will also be considered.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE. CHANGES IN THE EXCHANGE RATE MAY INCREASE THE STERLING EQUIVALENT OF YOUR DEBT.

Copyright 2006 Nigel Osgood

Buying Right In A Changing Market

Recently a Property locator contacted me about a lead in Grant Park, one of the better known neighborhoods in the city of Atlanta. This lead came through someone who was acting as a wholesaler. The Property locator reported the following details to me based on information given them by the wholesaler.

Asking price $157,000
Repairs and renovations $40,000
After repair value (supposedly) $350,000
Gross profit well over $100,000

The subject property is a 2 bedroom 1 bath that has 1000 square feet. The rehab would require the addition of a master bedroom and bath of approximately 200 square feet in order to bring it up to the standards of the other houses in the immediate area.

I instructed the Property locator to have a local sales agent do a comparable market analysis and find the properties that have sold during 2006. Grant Park is a diverse area, so I instructed the Property locator to only pull those sales that had occurred on the same street as the subject property. This is because prices can vary widely from street to street and even block to block in inner-city areas. There is a diverse range of housing and prices in this general area and in such cases it is very important to find comparable sales that are the most recent and are located as close as possible to the subject property.

I received a comparable market analysis with the following information:

Sale number one occurred on March 31, 2006 and went for $307,000.
Sale number two occurred on April 20, 2006 for $305,000.
Sale number three occurred on June 26, 2006 for $286,000.

All three of these properties have 3 bedrooms and 2 baths. I took each sales price and divided it by the square footage of the property. Then I averaged all 3 together. The result was $200 per square foot. This means that while each sales price varied somewhat, on the average each house sold for about $200 per square foot. Looking at the closing sales prices, it appears that there is a downward trend. On a dollars per square foot basis it appears that prices are flat, with no real appreciation for the year.

I make this point because as an investor it’s important to note which way the sales are going in a given neighborhood. Over the past 10 years prices have generally trended upward at a steady, healthy pace. This type of “sellers market” appreciation makes it easier to buy because price appreciation helps add to bottom line profitability.

But as of this writing, in September of 2006, it is becoming clear from sales data all around the country that the real estate markets are slowing and therefore prices are tending to remain flat and in many areas they are beginning to fall.

From the standpoint of an investor, with an exit strategy calling for a sale to an owner occupant it is important to know whether prices are rising or falling. This is because falling prices must be taken into account on the buy side or you will pay too much going in. And, the longer the renovation and marketing process takes the more likely it is that the price will have to be discounted to get a faster sale.

Taking the sales data provided and looking at our subject property we can do some quick math:
Current square footage = 1000 We anticipate adding an additional 200 square feet in the form of a new master bedroom and bath. This will bring the total square footage of the subject property to 1200 after renovations are completed. Keep this number in mind. Using the sales data provided, we can make a quick assessment as to whether or not our wholesaler friend is correct about the after repair value on this property being something in the range of $350,000. First I want to point out that none of the comparable sales listed above sold for $350,000. In fact, they were not even close. Secondly, let’s look at this in terms of the average dollars per square foot. We have already established that each of the three comparables sold for an average of $200 per square foot. A 1200 sq. ft. property selling at $200 per square foot would equal $240,000. A whopping $110,000 below what the wholesaler is telling us the property will be worth. But why such a dramatic discrepancy? Assuming that the wholesaler is not attempting to perpetrate an outright fraud, the most likely explanation for this discrepancy is the fact that Grant Park does contain houses that sell in the $300,000 to $400,000 price range. However the houses at this price point tend to be larger Victorian style two-story houses built around the turn of the 20th century. These houses are not comparable to our subject property because our subject property was built in 1952 and is a ranch, so it is a completely different style from the higher priced properties even though they are both in the same neighborhood. (But NOT on the same street) This is the main reason that I instructed the Property locator to pull sales data from the same street that the subject property is located on. It would not be difficult to imply a higher market value for the subject property simply by mixing these larger houses into the market analysis. This is a common mistake that new investors make when buying a property in a neighborhood with a wide variety of housing styles built over a long period of time. So let’s review the circumstances and make a decision. We know that the repairs will be at least $40,000 because it’s very difficult to add a bedroom and bath and update the rest of the house without spending something in this price range on the renovations. There is not much wiggle room in this repair estimate. Also, taking into account the current slowing sales in the real estate market, it is reasonable to assume that our selling price could go below the estimated $200 per square foot . We need to make some allowance for this so that we don’t accidently pay too much in a market where prices could go down. So for purposes of this example I’m going to lower my anticipated selling price to $195 per square foot. 1200 sq. ft. * $195 = $234,000 If I budget this deal based on an anticipated selling price of $234,000 I am well below the wholesalers claims of market value but hopefully I will be right in line with what I call “Real Time Market Value”â„¢. This is the amount I feel I can reasonably expect to sell this property for given realistic comparable sales numbers and overall market conditions in the neighborhood. So here’s how this would break down – My rule of thumb when selling to an owner occupant is that I want to be in this deal for no more than 80 cents on the dollar when all is said and done. This should give me a 20 percent net profit margin. Of course I would try to get more than 20 percent, but this is a realistic target in the current market. $234,000 * .80 – $40,000 repairs – $15,000 for financing and carrying costs = $132,200 Assuming I feel comfortable with a 20% potential profit margin I can structure my buy price based on the formula shown. If I wanted to pad that a little bit I might change the formula from .80 to .75 for a little extra breathing room. If my numbers are correct the deal should cost about $187,200 and sell for $234,000 for a net profit of $46,800 if I sell the house myself. If I have to list the property and pay a 6 percent commission, it will cost an additional $14,000. The smart thing would be to lower the offer price to about 119,000 to cover the cost of paying a sales commission. Of course the question is whether or not the seller can or will accept my offer at that price. If he does, I can feel pretty good about my chances with this deal. This research gives me the ability to “nail” the price range in which I will have to buy in order to ensure that this deal will be profitable.

The moral of this story is you can make money in any market but it is critical to do an accurate market analysis and make adjustments to your buy price accordingly.

Donna Robinson is a real estate investor, Author, Market Analyst and Consultant in Atlanta, GA. Her clients range from successful investment companies, to beginning investors. Get her free newsletter, listen to her audio teleconferences, watch free video samples on her website: www.RealEstateInvestorUniversity.com Article Source: http://EzineArticles.com/?expert=Donna_Robinson

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