Investors: Northern England best place for repossessed property
05-05-2014
Strategic property purchases can help boost an investment business – and repossessions offer a great opportunity.
Repossession rates are on the increase, especially in the north
How do you grow an investment business from a nominally profitable money-maker into a powerhouse? By purchasing additional cheap properties in the right markets. And as any smart investor knows, repossessed houses represent a great opportunity for cheap property in the right location. It turns out that northern England is the best place in the UK to find repossessed property right now.
Data from the Charlbury Group shows that through the first quarter of 2014, more than a third of the repossessions across the UK were located in northern England. The region accounted for about 36 per cent on the total. In second place, at 15 per cent, were Wales and the West Midlands. On the other end of the scale, Scotland and the South-East made up only 10 per cent of the total repossessions during the first quarter.
For the investor, this is telling. Where repossessions are high it's easier to find attractive investment properties that banks are willing to let go of at prices substantially lower than retail. That is not always the case, but the chances are fairly good. This is especially true with houses that remain on the market for quite a while. Banks and building societies get to a point where they just want to clear the properties off their books. These represent the types of deals that really turn into money makers for investors.
How it works
As a part-time property investor, you may own one or two properties that you are using just to pad your pension and savings. If you would like to actually grow your portfolio into something so much more than that, you can do so with repossessed property. We will explain how it works.
First of all, it helps to work with a property investment company with an established reputation. Fruitful Property is an example of one such company. What do these companies do? They help locate off-market properties you are not likely to see through standard retail channels. They send out inquiries on all properties in a given area, and then choose from among those that meet all of the client's criteria.
After you locate a property, the next step is to do your due diligence so you are not caught off guard by legal issues, structural problems and so on. Then you make your offer, secure your financing, and finish the deal. The financing issue is the one thing that confuses many new investors to the extent of keeping them from growing their property businesses.
Understand that you can purchase repossessed property using a buy-to-let mortgage or a bridge loan. You do not need to have the full purchase price available in cash. Both kinds of loans are more commonly available from both banks and building societies these days, as these are all now competing to get their piece of the buy-to-let market. Interest rates and terms have never been better for investors than they are right now.
Building your business through value
The successful business owner knows that true financial success is measured by the value built into your business, in addition to the short-term profit you realise. This is true whether you are talking about retail or property. Value is what carries your business through short-term fluctuations and provides stable returns for as long as you own your business. Property investing is one of the most dependable ways to create value.
Buy-to-let property builds value by the simple relationship between increasing rental payments and decreasing mortgage payments. With every monthly rental payment you receive, you are paying down your mortgage accordingly. If you set your rental rates appropriately, you are also putting profit in your pocket at the same time. This profit can be used to further reduce your mortgage or to build up the down payment for your next property purchase. As soon as a mortgage is paid off, monthly rental payments become nearly all profit with the exception of maintenance costs. That profit can then be turned into purchasing another property.
You can see how this multiplies with every property you add to your portfolio. And remember, even if property values fall you are largely insulated because you have no intention of selling. You will just keep renting and building value. Moreover, if housing prices do fall, you will be able to purchase new properties at even better prices.
You can use repossessed property to grow your investment business over the long term. Right now, the hot market is northern England. That is where you want to go for the greatest opportunities in buy-to-let housing.