UK Property Investment Forum & Blog

March 28, 2010

How each exit strategy works toward wealth creation?

Filed under: General — Tags: , , , , , — sudeshnac @ 9:17 pm

Last time, we discussed why it was important to have exit strategies before we had even considered buying a property and hopefully you will now begin to realise just how it was very important to know this information because it was not only of immense practical necessity, but also because it would help you to avoid the worst pitfalls ot buying property which has plagued so many investors over the last few years and especially today’s property market.

We will now discuss each of these strategies and how it works towards that all important goal for every property investor i.e. wealth creation.

1)  Buy Investment Property and Hold

 The first step and priority towards your goal of wealth creation is to have your tenant pay off your mortgage. The property should continue
producing positive cash flow until the mortgage is paid off. Remember to ensure that the rent you charge your tenant also covers for expenses such as agents letting fees, service charges, repairs and tax, otherwise all you are doing is paying for this out of your own pocket and not really building any wealth at all!  Positive cash flow is the key here for sustaining this strategy so that, in the long term, the capital appreciation of the property increases in value, so you can then re-mortgage and enjoy the equity tax free or if desired, sell a few such properties from your overall portfolio and realise the profit less capital tax.

 
2)  Buy Investment Property, Refurbish and Sell for Cash.

The first step towards this kind of wealth creation and priority is to renovate the property quickly to reduce holding costs and re-sell for cash profit. It would be an extremely prudent idea to research and check out your building contractors’ costs by getting at least three quotes ahead of purchase, and work out your estimated calculations beforehand to see how much cash you have available to sustain the project while it is being renovated, as you will have to pay the mortgage for a few months, service charges, lighting , heating and water bills, leave alone paying for renovating and legal costs before and after sale of property. If you borrowed this cash, you will also need to take into account interest charges for the period of time it takes to do- up the distressed property. You can see why the sooner you finish the project, the more profit and more wealth you can realise. This strategy, by the way, is still a very viable option in today’s markets, as it is not dependent on the rising and falling nature of property prices, as there is real value in equity being created in the value of the property by renovating and improving it.

3)  Buy Investment Property and Sell on a Lease Option.

 The first step again towards this kind of wealth creation and priority is to receive a healthy positive monthly cash flow. Lease options is the best strategy, in my opinion, in maintaining this amazingly positive cashflow, with a lot less resistance and difficulty than the other strategies mentioned above. This will be expanded in more details in my next article, but suffice it to say that the payment of an option fee by the    tenant-buyer at the beginning of the contract, as well as the slightly higher rent for the privilege of having the option to buy the property at an agreed time later, are very positive cashflow for the landlord-seller/investor. (Of course, to be fair to the tenant-buyer, this option fee as well as the extra increased difference in the market rent all go as credits towards the purchase of the property by the tenant-buyer, but the key thing here is to remember this is ready cashflow for use by the landlord-seller at the beginning of the lease option deal and can be used to create even more wealth!)

 The second priority is to receive back-end profit, when your tenant-buyer exercises their option to buy. As the price of purchase has been mutually agreed before the lease option deal was signed by the tenant-buyer and landlord-seller, it offers an advantage to both parties i.e.which offers a fair price to the former in a fluctuating market and at a time convenient to when he/she is able to save up and afford to purchase the property, as well as offering to the latter a decent back-end profit as a result of agreeing a purchase price that takes into account the increased appreciation of capital value and equity in the property at the later time when the tenant buyer exercises his/her right to use the option to purchase the property. So in effect, you the property investor, or in this case, the landlord-seller, can continue to enjoy cashflow thoughout the deal, from beginning to the end of this period of the option, in both small and large amounts due to the option fee, rent and back-end profit -not bad at all for generating your wealth creation!

Next time, we will look more closely as to what exit strategies we should be considering within the exit strategyof lease options itself, which is itself a fascinating topic all of its own, and one which anyone thinking of using the lease options strategy would be wise to learn and apply!

Till next time then…

Sudeshna Choudhury

March 9, 2010

Wealth Creation Through The Right Exit Strategy

Filed under: General — Tags: , , , — sudeshnac @ 3:36 am

It is generally accepted, especially in the current property market conditions, that it is crucial to know your exit strategy before you buy a Property. “How will I make money with property?” This is the first thing many have in mind when they show their first interest in property investing. Rather than that, the first thing you need to start with is to determine, before you buy any investment property, how you plan to exit or sell the property.

A good question to ask oneself then is : -”What are possible exit strategies?” Well, these listed below are the tested and tried strategies most property investors have used so far:

1. Buy Investment Property and Hold
2. Buy investment property and have your tenant pay off the mortgage.
3. Buy Investment Property, Refurbish and Sell for Cash. You refurbish the property making cosmetic, mechanical and/or structural changes and sell for cash. Sometimes it’s called  ‘Buy-To-Sell’, or a ‘flip,’ if you hold it for a short length of time while making changes and then resell.
4. Buy Investment Property and Sell on a Lease Option. You then sell the property to your tenant/buyer using a lease option; they choose to exercise their option to purchase sometime in the future.

Of these, as the previous article in this blog demonstrated, Buy-to-Let options 1 or 2 were the favourites, and did appear to do so well, not so long ago! So why does this most common of exit strategies not work so well as before?

Well, think abut it this way…In recent years, the Buy-to-Let market in the UK has grown enormously, with the buy-and-hold strategy being the most popular. However, such has been the saturation level of Buy-To-Let in some areas resulting in an over-supply of investment properties and exposing investors with highly-geared portfolios to the inevitable fate of negative cashflow. Indeed, in the good times, capital growth was skyrocketing, rents were increasing for each tenancy renewal, and tenants were not always well treated. The landlord was definitely the king and property investing was so easy.

However, what happened when the market turned the other way? This is where every Buy-To-Let investor must ask himself/herself some very relevant questions such as:

Did you pay retail price when you bought your property?
 What happens if your property is empty for a couple of months?
 And your mortgage interest rates start rising again?
 And you are forced to accept a lower rent in order to tenant your property?

Remember, whatever the reason, you still have to come up with the money to maintain the mortgage payment each month! And worst still, what will you do if you have multiple properties where the above happens?  Despite how easy it all seemed in good times, do you know how to handle things when the market turns the other way? You could be forced to sell due to negative cashflow. In many instances you will lose money instead of breaking even or making a profit, as everyone bails out at the same time as you. You should never live or  believe in negative cashflow. It will give you stress, sleepless nights and fights with your partner. Such times will affect your health and that of your family’s too. This is why Positive Cash Flow Is a Must!

Therefore , exit strategy 3 and 4 are the best ones in the current market. Exit Option 4 using lease options is by far the most viable strategy for 2010 as we are all still very much in a period of  negative growth in the property market. It is interesting to see just how many so called ” traditional BTL or BMV” investors and poperty seminars are all turning to lease options as the saviour of the day! Therefore, it is imperative that every self-respecting property investor today owes it to himself to find out exactly what lease options is, and how to use it as an exit strategy. In the next article, you will learn more on this subject, but in the meantime, please check out the link below if you want to know more on lease options:

 http://www.ukpropertyladder.com/assured-positive-cashflow.

All for now.

Sudeshna Choudhury

 

February 8, 2010

From BMV to Lease Option Deals

Filed under: General — Tags: , , , , , — francis.emery @ 10:37 pm

From Below Market Value to Lease Option Deals

Introduction to a Mandatory Paradigm Shift for Property Investors

The reason why below market value deals were so successful with investors was because it was perceived an easy-to-understand way of making money out of UK residential properties, with minimalistic cash investments.

But in 2010, things are very different. Historically, the mortgage drought that started in mid-2007 in United States reached UK by the begining of 2008  then deteriorated throughout 2009.

The current 2010 situation in the mortgage market is just a mere reflection of the global financial crisis, which I believe, is more a crisis of trust between investments, financial institutions and their regulators rather than a financial crisis per se.

The implications in the UK property market are profound, touching every market players from first time buyers to vendors, from estate agents to letting agents, from mortgage lenders to mortgage brokers, and from property investors to tenants.

Up to very recently, among all market players, ’smart property investors‘ or sophisticated investors always managed to find ways to pull out deals at 20%, 25%, 30% or even - for those with insider knowledge -  50% below market value. But things are very different as we said. No one knows how the global financial crisis will unfold, despite the media wanting us to believe that a recovery could surprise us any time.

The smart property investor has become a mere mortal man, just like any one else, he is no longer guaranteed to get a mortgage, despite an impeccable credit rating.

No one is guaranteed a mortgage!

The smart property investor due dilligence is no longer around the profitability of a deal but around the ability to get a mortgage or bridging loan for an acquisition or a buy to let re-mortgage to convert equity into cash.

Many good property sourcers or deal packagers have dropped their standards

As if things were not complicated enough, many good property deal sourcers and packagers have dropped their standards. 25% off market value? The market value is guaranted by a RICS valuation? But what does it mean in a falling market? Uncertainty!

But the market never rests, that’s a good things. The newer trends has become to shift from BMV to Lease Options Deals. This is confirmed by the fact that recently a number of property sourcers have started to offer Lease Options Deals.


So if you’re a property investor looking for lease option deals in UK, how do you know your favorite property sourcer or deal packager has maintained his deal quality when shifting from Below Market Value to Lease Options?

If you want to continue making money during this recession/depression, it is important to know answer to this fundamental question. It is important if you are a sophisticated investors, to understand how you could optimise the overall financial performance of your residential property investment portfolio by having the right mix of Buy-to-let versus Lease Options properties.

Grab Our Free Report: How To Make Good Money Shifting  From Below Market Value To Lease Options Deals

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September 6, 2009

3 Easy Steps to Spot Bad Property Sourcing Companies

Filed under: General — Tags: , , , — craigk @ 12:02 am

I read a timely article about rogue property sourcing companies. What these rogue property sourcing companies don’t realise is that they give other good property sourcers a bad name. In the end, customers become wary, the below market value business model suffers, everybody loose out!
Luckily they are simple steps to help investors and property buyers separate the wheat from the chaff:
1) Ensure that discounts are off RICS valuation
2) Ask if the sourcing company is member of a redress scheme (new law).
3) Check the terms of service

We’ve just introduced a Lease Option Hands-off Service for Landlords & Investors.We only deal with reputable sourcing agents. Lease Options are the best way to invest and profit during the credit crunch times since this investment strategy not only guarantees you great cash-flow but also provides you a great exit strategy (guaranteed cash on the way out). However before you can enquire about our Lease Options Service, we strongly recommend that you read first the ebook Assured Positive Cashflow. The ebook explains Lease Options in an easy to understand manner so you gain a solid basis.

James Clark

PS: Article about rogue property sourcing companies  is from the LandlordZone.
http://www.landlordzone.co.uk/blog/news/landlord-action-warns-investors-about-rogue-property-sourcing-companies

In a nutshell, more companies have been asking for upfront fees to source below market value deals and marketing property deals that don’t stack up. Once surveyed for mortgage purposes, figures are far short of the original claim. Companies then refuse to refund fees so investors…

Rogue sourcing companies tend not to release enough information on the property so investors need to do additional research themselves into the property values, rental prices and the level of demand in the area. However, we’ve provided you 3 easy steps above on how to avoid falling victim.

June 5, 2009

Wealth Creation Through the Right Exit Strategy

Filed under: General — Tags: , — sudeshnac @ 7:42 pm

It is understandable when we property investors get excited at the idea that our hot property deals are going to make us wealthier, the sooner the better! But before we rush into deals, it is a good idea to plan our exit strategy first and then go for the deal, knowing we can have a way out if it does not go to plan, or a way out to the next deal, which would free up your cash flow and keep it moving in a positive energy cycle.

I’m sure you are all aware, as savvy property investors, that  there are several exit strategies, for example, flipping, renting out, doing  up distressed property and selling on etc. But as we are living in interesting  times, the number of profitable exit strategies are slowly being squeezed out.  However, there is one exit strategy template that I always get so excited about and thoroughly recommend to all of you which is…. lease options as your exit strategy! This really fits in with current property scene and will definitely move you massively towards your real exit strategy  which is naturally wealth creation ! Well, my friends, if you want to know more, just check out this link:-

http://www.ukpropertyladder.com/assured-positive-cashflow.html

 Watch this space for more exciting ideas but for now, watch your own exit strategies and make sure you get wealthy, not stuck!

Till then

Sudeshna

May 11, 2009

Protected: UK Residential Lease Options Could Be The Royal Way To Sustainable Wealth Creation

Filed under: General — Tags: , , , , , , , — craigk @ 7:51 pm

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January 14, 2009

How To Convert Your Buy-To-Let Into A Cashflow Positive Lease Option

Filed under: General — Tags: , , , , , , , , — craigk @ 10:49 pm

It is about time that property investors learn once for all that cashfow investing prevails over capital growth investing.

Many novice landlords and property investors have been persuaded by property consultants, agents, finance brokers etc to pursue capital growth investing rather than cashflow investing.

In a raising market, this strategy makes sense but still bears a great risk, as the investor or the landlord must plan his exit strategy to sell before the downturn arrives.

What distinguishes sophisticated investors from the rest is that their investment strategy always focuses on cashflow first, then capital growth. But the novices have been conditioned to do the contrary, they invests primarily for capital growth, and not so much for cash flow.

This is often why the novice will take such a long time, if ever, to achieve the financial freedom that they wanted from property in the first place.

If your investment property (buy to let) is in negative equity or negative cash flow, do not despair! Even during this economic downturn you still can turn things around and achieve positive cashflow. You can convert your assured shorthold tenancy into a lease option (rent-to-buy or rent-to-own).

Following are the steps on how to do it.

Establish why you shouldn’t sale

If you selling your property in the current market means you have you have to find funds to repay your mortgage then do not sale! Try instead to understand how to get more cash from your property by impleting a lease option agreement.

Determin the five key lease that make a lease options agreement

If you choose the lease option road, you have to determine the five key elements previously discussed:

  1. Your sale price
  2. The upfront option fee (the down payment that reduces the purchase price)
  3. The monthly rent
  4. The instalment option fees (that can also reduces the purchase price)
  5. The option period

You can learn how to determine these five elements and engineer a win win transaction between you and your tenant-buyer. To find out more visit http://www.assuredpositivecashflow.com

December 31, 2008

What are the problems around creative property investment strategies?

Filed under: General — Tags: — admin @ 12:57 am

I am trying to list various problems linked to creative property investment strategies.

  • If your strategy is quite different your market will show resistance

Most importantly how to resolve them…

  • Ask people what problem they are trying to resolve or what gaol they are trying to achieve then only then show them how your creative property investment stratgey fit the bill.

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