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articles > Year of the Bargain
Article> 2009 - Year of the Bargain
As we start a new year in property I think it’s always worth looking at what was happening this time last year. The credit crunch hadn’t taken control, Bank Base Rate was just starting to reduce from 5.75% and most mortgage rates were available on residential properties to 100% loan to value and Buy-to-let rates were available to 90% loan to value. Which is a big difference than today!
Really we’ve just come out of a time where the economy was very stable and lenders were willing to take risks. Such as 1 day re-mortgaging, this enabled investors the ability to purchase properties and take out cash from the day of purchase. Those days are sadly over but that doesn’t mean that investing in property is dead. In fact now is the best time to be buying smart.

A large number of investors we’re dealing with are still managing to purchase properties using little or no money, being able to take advantage of property purchases at a discounts between 10% and 60% below market value. These are mainly experienced landlords but if you’re thinking about investing in this type of market, my advice would be to set out your criteria or investment plan and stick to it.

One of the most important factors to take into account is what to expect in 2009. Most articles you read will state that it’s more of the same - all doom and gloom, we’re now reaching the lowest part of this downward cycle, which wasn’t caused by a down turn in the property market but due to the mortgage market grinding to halt.

However the government has now taken drastic actions to fix the economy. Bank base rate is now down to an all time low of 2%, lenders are now lending using new budgets and 2009 looks to be a year of low rates and cheap borrowing. Alongside with a long list of repossessions and distressed sales makes 2009 the year of the bargain.

You still need to make sure that you pick the right properties for the right reasons and don’t just buy based on large discounts or cash backs. The golden rule is always to do your homework, most property finders will charge a reservation fee, so you want to make sure you’ve researched your property before jumping in. A good idea is to try and concentrate your properties in one or two main counties or cities.
When looking at an area the first stage is to research property prices, see how hard the market has been hit, this will give you a good idea of how prices will fair in the future. You also need to ensure tenants will want to live there, you don’t want to be buying in an undesirable area. Plus what future plans are there, if a town is in the stages of development this can either be a positive or a negative i.e. buying close to where the Olympics is being held will mean your property will have a stronger chance of increasing in value, but care should be taken, not all buy-to-let properties are cash cows!

Once you’ve found your area and you’re confident with the type of properties you’re looking for, where can you find them? There are now a lot of forums available on-line and large number of private sale properties on the internet, all you have to do is type in BMV on Google and hundreds of property sites will show up all promising amazing properties at amazing discounts. With these again you must really do your homework and find yourself a reputable property finder. Too many times throughout 2008 I have spoken to investors who stated that they had already paid an upfront finder’s fee. The higher percentage of the time this is fine, as long as there is a contract in place which states that if the property purchase doesn’t go through due to no fault of your own that your deposit will be returned back to you.

You must be very careful that you read this agreement fully and I would always recommend finding yourself a solicitor to read through this before signing and sending any money across to any finder, most finders fee’s are around two thousand upwards, which is not pocket money, and the last thing you want is to pay a finder and never hear from them again.

That being said there are a large number of finders who will have some fantastic deals. My own personal criteria, is that properties must be around Oxford and Reading, there must a minimum of 30% discount off of a RICS Valuation that I have instructed, and the property must be in good condition. I want to purchase my properties and have them running successfully from day one.

Of course you don’t have to use a finder and pay high fee’s, you can always pay regular visits to your local estate agents and tell them your business plan. A lot of investors literally go into their agents of choice and offer 30% below estimated values on hundreds of properties per week. You won’t always have the deal agreed immediately, however more often the case you’ll find that, four to six weeks later the agent will call stating that the vendor is now desperate to move and is happy to accept your offer, so then you are in control of what properties are being put in front of you.

Lastly the team of people you use to purchase the property is vital, you need a good broker who understands BMV and can offer advice and guidance from their own experiences. You need a good solicitor who is fast and flexible, one that is accustom to this type of transaction, distressed sellers expect you to move quick and the quicker you move the better your reputation. If you need any help with this please contact me at Lycia. Once the ball starts rolling and people hear that you are fast moving investor who shows a good knowledge of the market, you’ll find yourself inundated with bargain investments!

I wish you all the best for your investments in 2009, and I hope that with good planning and the right team, you too, will find 2009 to be a very lucrative year.

David Pratley

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