The pros of buying cheap property:

* It’s cheap! You get a lot of bricks and mortar for the money. It offers good value, or at least appears to.

* Cheap property is perfect for cash investors. The price may be low enough to make a cash purchase possible, ie. no mortgage needed, no need for the property to meet lending criteria.

*  Minimises the Stamp Duty bill for investors.

* Low deposit, low repayments, low interest. Where bought with a mortgage the mortgage will be smaller meaning that the cost of financing the project will be smaller too.

* Low risk. Less money invested broadly means less risk for the investor.

* Less competition. Cheap property is often, by association, located in less prosperous areas – which means fewer people can afford to buy. So there is often plenty of property to choose from but less competition when buying.

* Good rental prospects. Less prosperous areas where few people can afford to buy often have very strong levels of rental demand.

But this is probably the most important advantage of buying cheap property:

* High and even super-high rental yields are possible. Since prices are much less than ‘expensive’ areas but rents are not comparatively much less (and may even be the same) yields can be excellent – sometimes double or even quadruple those in higher priced areas.

The cons of buying cheap property:

This is probably the most important disadvantage of cheap property:

* Property is always cheap for a reason.

Frequently property is cheap because the area in which it is located is economically disadvantaged, has high levels of deprivation, or may have social problems.

And that makes it a different investment proposition, on several levels:

* Property values in these kinds of areas can be volatile. They may appreciate slowly in good times (or maybe not at all), peak late, and then depreciate quickly in bad times.

* Property in these kinds of areas may be difficult to sell, or may even be impossible to sell in some circumstances.

* Property in these kinds of areas offers generally poor prospects for capital appreciation.

* Letting prospects may be limited to certain types of tenant demand, eg. Housing Benefit tenants, limiting the rent that may be charged.

* The area, type of property and tenants involved could require greater management time and expense.

* Scope to add value with renovation or development may be very limited. ie, improved or developed property may only increase in value by the cost of the work – or potentially even less than the cost of the work.

So what should you do if you are looking to invest in cheap property?

* Firstly, be aware of and/or investigate the drawbacks. Know why the property is cheap.

* Be realistic about prospects for future capital appreciation.

* Be realistic about future resale potential.

* Be realistic about the letting potential, and about the level of rent which can be charged.

* Calculate yields accurately. Also, where the possible yields make the property seem an attractive investment ensure that this far outweighs the drawbacks, such as a lack of capital appreciation. (Cheap property is often a proposition for income rather than profits.)

Most important of all, never confuse cheapness with value. Cheap property can offer an excellent opportunity to investors. However it can also offer the worst possible false economy. Before jumping in do your research, take advice and know what you are getting involved with.

You might also find this Insider report useful: Why The Worst Places Are Often The Best For Investors

The post The Pros and Cons of Investing in Cheap Property first appeared on Property Insider.

Here’s why: Property bought at under market value offers scope for higher yields, helping to neutralise the impact of the investors’ stamp duty premium and restricted tax allowances. Buying at under market value offers prospects for better capital appreciation in times when forecasts for property price rises are low. In this Insider report we will look at some of the main ways to source good value property, and at what you need to know about each method.

Property bought at auction. Property offered at auction frequently sells for less than comparable property offered for sale by private treaty on the open market.

Important to know: Property sold at auction is not guaranteed to be a ‘bargain’. Competitive bidding may push the sale price close to, or even above, the current open market value. Important to check: What the current open market value of the property is before bidding.

Property suitable for refurbishment. Buying a property for renovation is probably the most well known way of buying at below market value.

Important to know: Property sold as suitable for renovation often attracts additional buyer interest, and elevates the price close to that of similar property in good condition.

Important to check: Cost of purchase + cost of renovation = less than the renovated value of the property. Important to do: Estimate renovation costs accurately.

Property that has scope for extension. Adding space is one of the simplest and most fundamental ways of adding value to a property.

Important to check: What planning consent is required. What the value of the extended property might be. Important to do: Estimate building costs accurately. Important to know: In general terms the cost of extending is similar in all areas but the value added is greater in areas of higher property prices.

Property suitable for development or conversion. For example, converting a house into flats. It could well be that the total value of the developed property in its new use exceeds the value of the original property in its original use.

Important to check: What planning consent is required. What costs are involved. What the value of the converted properties might be. What the value and/or rent of the developed property is likely to be.

Important to do: Estimate conversion costs and other overheads accurately.

Consider the issues that this report raises: Could property development be the new buy to let?

Commercial property for conversion. Commercial properties are frequently significantly cheaper per square metre than residential properties.

Important to know: Commercial property offers the best potential for securing a bargain when it is no longer viable as a commercial property in its existing form.

Important to check: What planning consent is required for conversion. Likely value of the property as a residential property. Important to do: Check suitability of the property as a residential property.

Property bought off plan. Property up for sale off plan, ie. before it has been built can be a way to secure a low price, as developers seek to launch a new development or sell off the last remaining units, at a discount.

Important to know: Property sold off plan is not always sold at a discount – new build property may even be sold at a premium. Important to check: What the open market value of the property is likely to be once completed.

Ex- local authority property. Ex-local authority property often sells for less than comparable privately-owned property nearby. However, likely rents are at a similar level, offering good potential for yields.

Important to check: The letting potential, likely yield and rent of the property. Important to know: Ex-local authority property often has reduced potential for capital appreciation.

Property of non standard construction. Always sells for less than similar property of standard construction, yet the achievable rent will be similar.

This report look at the ins and outs of buying property on non standard construction: Finding value: Investing in properties of non standard construction

Property offered for sale through express estate agencies. Property is sometimes offered at below market value through so-called express estate agencies, ostensibly on the basis that the vendor requires a ‘quick sale’.

Important to check: That the advertised price is actually less than the current open market value. It may be similar, or it may even be higher.

Property in up and coming areas. Some property gurus will advise that buying a property in an up and coming area is the perfect way to secure a property bargain. However, this is something that is always very difficult to call and more so at the moment.

Important to know: Regeneration projects do not automatically result in rising property prices. Areas described as ‘up and coming’ often take a very long time to arrive, and often never do.

Important to check: How property prices in the so-called up and coming area have performed in the past. Important to do: Carefully examine the fundamentals underlying the local market and assess whether they tend to support future price rises or not?

The post Property Insider’s Top 10 Ways To Source Property Bargains first appeared on Property Insider.

1.Not knowing why you want to invest. Just because investing in property sounds like a good idea doesn’t necessarily mean it’s right for you. So first and foremost be clear about WHY you want to invest. For example, would you like a regular monthly income? To save for the future? Or provide yourself with a pension?

2.Not having an objective. Before you buy a property always have an objective in mind. For example, do you plan to let it, develop it, or perhaps flip it for a quick profit? Once you’ve decided you can then look for the properties that best fit your objective.

3.Forgetting the importance of location. The old adage of location, location, location is as true as ever. It affects how easy your property will be to rent or sell, and how much it will be worth in future. So take some time to check out the location. Aim to invest in up-and-coming locations if you can.

4.Overlooking the importance of yields. Yields are really important if you’re buying to let. They reveal exactly what return you’re getting on your money.

To calculate yield divide the likely annual rent by the purchase price x 100. For example, a property costing £150,000 and renting at £900 a month or £10,800 a year will give you a 7.2% yield (£900 x 12=£10,800/£150,000 x 100).

5.Failing to target your market. The rental market is made up of several different sub-markets and each is quite different. For example, professionals, families, students or short term rentals. Think about what sort of tenant you’re planning to attract and invest in a property that’s best suited for that market.

6.Buying where rental demand is weak. If demand is weak you might struggle to find a good (or any) tenant, might need to reduce the rent and even suffer costly void periods. On the other hand, buying where demand is strong means you’ll be able to rent your property easily, pick from the best tenants and even charge more rent.

7.Neglecting to take the best professional advice. No matter how much you try, you can’t be good at everything – and small errors can turn into costly mistakes. So don’t be afraid to take advice from legal, financial and property experts where you need it.

8.Not managing your property professionally. A professionally managed property will not only save you time, money and hassle …. but make you more money too. Think about whether you plan to manage your property yourself or use a professional agent to manage it.

9.Not planning your finances properly. Even in these days of low interest rates there can be a huge difference between the most expensive mortgage and the cheapest one. Financing your investment in the most cost effective way can add thousands of pounds to your bottom line every year.

10.Overlooking the tax implications. There are two important aspects to consider here: Buying investment property can involve extra tax liabilities. Yet it can also open the door to attractive tax allowances. Taking professional advice here is the best way to minimise your tax bill and take advantage of any tax breaks.

11.Not having an exit strategy. Every property investor should have an exit strategy. For example will you sell in 10 years? Twenty years? When you retire? Or when the value of your property peaks? At the end of the day it’s essential to know when and why you might exit the market …. before you even enter it.

The post 11 Ways Not To Make Money From Property first appeared on Property Insider.

According Knightsbridge estate agent, Plaza Estates “The UK is now more overcrowded than any other part of the EU or G8. With our population at an all-time high and expected to reach a staggering 70 million by 2039, the demand for housing is something that isn’t looking to go away any time soon.”

Along with shares, savings and bonds, property is one of the top four investment practices in the UK. It’s also widely recognised as one of the safest-as long as demand for housing continues to outweigh demand, there will always be opportunities for significant returns on investment.

Since 2000 the UK property market has outperformed the equities market by almost 50%. Add this to low interest rates and a volatile stock market and it’s not hard to see why so many astute investors are looking to put their money to work in property.

And it’s not just about buying and selling. With thousands of people unable to afford to get a foot on the property ladder, the demand for rental property has doubled in the past fourteen years- great news for those looking for a lucrative buy-to-let opportunity.

Many landlords are choosing to purchase large buildings, convert them and let them as HMOs (Houses in Multiple Occupation) and then rent the rooms out to students or other sharers. Rent guaranteed specialist, Assetgrove says “Renting out HMO properties is a sure fire way to make money quickly, so it’s becoming more and more popular with savvy investors.”

EU Referendum in June 2016 and the surprise election of Donald Trump has undoubtedly sent the UK and the rest of the western world into sending into a state of shock and chaos. The pound dropped, the markets went into flux and property prices plummeted as the financial world desperately tried to predict the consequences of the UK vote.

The good news is that investors have been able to take advantage of these low prices, buying properties for well below the normal market value and selling them for a significant profit.

Brexit hasn’t stopped people buying property- almost 50,000 houses were purchased during the month of June alone; the highest growth for almost a year. UK properties have also seen lots of interest from overseas investors, particularly China and India- Central London estate agent, LDG observes “Wealthy parents from abroad are buying homes in university towns for their student children, then selling up a few years later for a tidy profit.”

With an ever increasing population, one thing is for certain- people will always need houses. The UK’s demand for housing continues to grow, presenting investors with powerful opportunities to watch their money grow.

Guest post provided by Property Division.

The post Investing in property – Why it’s still as safe as houses first appeared on Property Insider.

“London’s property prices and popularity among overseas investors, are rarely out of the headlines,” said Denhan Guaranteed Rent. “However, prices have climbed so high and Brexit-related concerns remain untended, making London a less attractive option than it was.”

Indeed, many potential investors consider those high prices alone, enough reason to hold off saying yes to a new London-based property investment. A little look at some data show it’s easy to understand those who feel that way.

High street mortgage lender Nationwide’s data underscores the wide divergence between home prices in London and Leeds. The average price of a residential home in Yorkshire and Humberside (where Leeds is situated in West Yorkshire), between July and September, 2016, was £150,823. In London, during the same quarterly period, the average home price was £474,736, more than three times that of Yorkshire and Humberside.

When you begin to consider commercial property prices, you’re talking about even larger sums of money – in both regions. Again, London is the most expensive. But, while the price difference is a pretty big reason behind the rise in investment interest in Leeds, there are other details at play too.

HS2,the Government’s next highspeed train line project – which will improve train links from London to Birmingham, then to Manchester and on to Leeds – is also a driver behind that increased investment interest.

“Even though the highspeed trains from London to Leeds won’t be in operation until the early 2030’s – some 15 years from now, investment in the West Yorkshire city is looking more attractive,” said Proskips. “Getting into the area early could mean buying in at a low price and being well positioned for bigger profits further down the line.”

Nadeem, Ahmed, managing partner of Hentons told the Yorkshire Evening Post that there are some “significant developments with major office and retail schemes launching this year.” He added that HS2 is also proving interesting to some overseas investors who are considering moving money into residential developments around Leeds aimed at both students and young, city workers.

The UK Government’s current drive to increase home building and improve infrastructure provides an additional encouragement to overseas investors. After all, if the Government is going to invest in an area, it stands to reason that region should benefit and thrive under that investment.

“Leeds is a vibrant city that’s popular with students,” said You Chose Windows. “Combine that with HS2 and major commercial building projects and those opting to invest in the city are likely to be making a shrewd decision.”

Palace Capital, a property investment firm, told City A.M. that discussions with Middle Easter property investors is less surprising than it used to be. “We’ve had an approach from a Middle Eastern group, and two or three years ago, that would have been extremely unusual,” Palace Capital’s chief executive, Neil Sinclair said. He added that the returns currently available on similar London-based projects are only around 3-4%, which is lower than what’s on offer in Leeds.

Guest post provided by Property Division.

The post Where is the next big property investment hotspot? first appeared on Property Insider.

But let’s assume you’re one of those property investors who’s not going to be deterred by the current investment climate. And let’s assume you’re one of those property investors who actually sees opportunity in bucking the trend. What sort of properties and what sort of areas are best for buy to let right now?

Here’s are a few tips on how to spot the best properties for a buy to let investment:

* Lower priced properties. It’s almost always the case that the more you pay for a property the lower the rental yield will be. Lower priced properties often return the best yields, have the best potential for capital appreciation and, because their rental value is lower too, have the widest possible rental market.

* Smaller properties. Yes, maybe everyone dreams of a living in a house with five bedrooms and a swimming pool but in the scheme of things there’s relatively little demand for these kinds of properties – in addition to which the high purchase price means yields are low.

By and large most people (often, even if they have a healthy budget) are looking for small, compact, cheap to run properties so there’s more demand and they’re easier to let. Flats, terraced properties and small detached/semi-detached fit the bill perfectly.

* Properties in need of renovation and refurbishment. These offer scope to add value and earn yourself an instant capital gain before you’ve even put them onto the rental market.

Just be aware the renovations and improvements return you a profit by way of capital gain – the increased rental value of a renovated property will probably not be enough to justify the renovation costs in itself.

* Areas with good facilities. Yes, maybe many people dream of living in a quiet rural village with only passing sheep for company. But such locations aren’t practical for most people looking to rent property. Unless they’re easily commutable quiet rural areas don’t have many job vacancies and, in particular, have few well paid jobs.

When selecting a property for buy to let the following types of areas are usually best: Cities and towns. Areas that have a good selection of shops and ideally a supermarket. Good bus/train connections. Good road connections. Nearby schools and facilities for childcare. Decent social/entertainment facilities in close proximity.

* Areas that aren’t in the catchment areas of very desirable schools. While these are the object of many home buyers’ desires you’ll usually pay a high premium when buying these properties -yet won’t necessarily be able to charge a high premium on the rent.

See this article for more information on buying in school catchment areas.

* Low income areas. In these places few or even any people are able to afford to buy, so there’s more demand for rental property. These kinds of areas are also likely to offer the best potential for attracting long term tenants, rather than tenants who move every year or so.

Another good reason for targeting these areas – when you’re buying there’s less competition from owner-occupiers and so selling prices usually offer good value.

* Areas that attract temporary or contract workers, including workers from abroad. These areas normally have continual, brisk demand for rental property so properties are easier to let and voids are minimised.

Tip. Look for areas that have large business/industrial parks or warehouse units. Or areas where these are planned.

Areas that are popular with students can be good, for much the same reasons.

* Properties that have potential for letting uses other than a standard family or professional let. For example, potential to let as a shared property, holiday property or daily/weekly rental. These kinds of properties offer potential to earn enhanced yields.

You might find this article useful: 12 Ways To Improve Your Letting Yields

When you’re selecting a property for buy to let slip out of your own shoes – and put yourself in your prospective tenants! Ask yourself if the area has plenty of potential tenants. Ask yourself if the area and type of property is likely to be in demand with people who want and need to rent a home.

The post What makes the best buy for a buy to let? first appeared on Property Insider.