Archive for the ‘Principles of Property Investing’ Category

Why remortgaging is a good investment strategy

Do you know that around a third of all home loans made in the UK are actually remortgages? Yes, they are. So…

What is remortgaging?

A remortgage is where you take out a new mortgage on a property you already own – either to replace your existing mortgage or to borrow money against your property.

Also known as refinancing in the United States, it is the process of paying off one mortgage with the proceeds from a new mortgage using the same property as security.

In the United Kingdom, the majority of remortgage rates track the Bank of England base rate which has been at a historic low of 0.5% since March 2009. 

A base rate is the interest rate set by the Bank of England for lending to other banks, used as the benchmark for interest rates generally

Now, that we are clear about what remortgaging is, the truth is that it isn’t right for everybody.

Who is it good for?

For instance, remortgaging is good for you if your home’s value has risen high since you took out your mortgage. This may put you in a lower loan-to-value band, and therefore make you eligible for much lower rates. 

Another situation that is good for remortgaging is if you’re worried about interest rates going up. Although you need to fact check your rates so that you do not just put yourself in panic mode. However, if it’s the Bank of England base rate that is predicted to go up, this may affect your mortgage payments directly, depending on the type of mortgage you have. 

Also if your current deal is about to end, remortgaging might be a good investment strategy to get on. Nevertheless, there are some reasons to choose to remortgage.

Remortgaging can help you borrow more.

If your current lender says no to lending you more money or the terms it’s offering aren’t very suitable, remortgaging to a new lender might enable you to raise money cheaply on low rates. Just remember to take all the fees into account to consider if it’s really worth it.

The most commonly accepted reasons to raise money are for home improvements and paying off other debts. However, be prepared for your lender to ask for evidence if you are borrowing a large amount, e.g. builder quotes, or proof that you have paid off the debts.

When you don’t need to remortgage

Stop rolling with the crowd on every strategy you hear is good, instead, make sure to be sure it’s the best for you. In the case of remortgaging, don’t do it if you’re already on a great interest rate because it is possible that you may already have the best deal in town. Again, it gets down to taking the time to cross-check and compare. 

In addition, when your mortgage debt has fallen below a certain amount – say around £50,000 – it may not be worth switching lenders, simply because you are less likely to make a saving if the fees are high. In fact, some lenders won’t even take on mortgages below £25,000.

The smaller your mortgage, the worse the effect of any fees you need to pay. Quite often, in this case, you’ll be better remaining on the higher interest rate.

Also, when your early repayment charge is large.

A large early repayment charge could mean that it’d be utter foolishness to move before the end of the incentive period. Do your calculations right to find out If it would cost too much to free yourself from your current deal. Whatever you discover will help you make the right decisions for your progress.  

Conclusion

Buying a house is awesome, and buying more than with this remortgaging strategy is great. But one thing is critical to achieving this, and that is being creditworthy and getting expert advice. Experts have experience doing these things and they can shorten the learning curve. 

Do you want to know more about remortgaging and how to be creditworthy for success in property investing? Check my calendar here to book a free 30 mins one-on-one call with me now

To your success!

 

 

 

The Many Cost of Buying a Home in the UK.

Buying a home is almost guaranteed to cost more than you think because it’s not just about getting a mortgage, grabbing the keys and, going straight to pack in, no, that’s not how it works. 

Aside from finding strategic ways to raise a mortgage deposit, there are some other costs to factor in to know the true cost, or at least, to have a better estimate of what it takes to buy a home. 

These are costs to factor in.

Mortgage arrangement fee

“An Arrangement Fee (sometimes called a Completion Fee or Booking Fee) is an administration charge made by lenders for arranging credit – usually for a mortgage or for a business loan and sometimes for car finance.”

You can expect to pay your lender an arrangement fee, although, it varies, £1,000 is typical. In some cases, this is non-refundable, even if the purchase falls through.

Valuation fee

“A valuation is an assessment of what your home is worth, calculated by a professional valuer. A valuation report is typically required whenever a property is bought, sold or refinanced. The valuation fee is paid to cover the cost of preparing a valuation report.”

The valuation fee offers sufficient security for the loan. Its cost varies according to lender and purchase price, but you can budget for £300.

Legal fees

Some lenders contribute to legal fees, especially with a condition of using a solicitor approved by them. If you’re paying for your conveyance, you’re looking at about £500-£800, depending on the purchase price.

Stamp duty

Stamp Duty Land Tax ( SDLT ) is what you pay when you buy a residential property or land above £125,00 in England and Northern Ireland. 

Unless you’re a first-time buyer when you pay zero stamp duty on the first £300,000 of any home costing up to £500,000. 

“As of April 2016, there is a 3% increase on top of current rates if you’re buying an additional residential property above £40,000 such as a second home or buy-to-let property.”

The easy way to find out how much is to use one of the many stamp duty calculators online, or contact me for direction with buying a home. 

Surveys

This is another costly aspect of purchasing a home, with a typical survey costing between  £400 to £700. Many people pay for surveys on purchases that do not end with a deal, so budget for two or three as it might sometimes be the case.

Before you buy a property, get it checked by a surveyor. This is vital so you understand if there are any problems before you buy it, as it could save you money on repairs in the long run.

Removal costs

“Unless you can pile your belongings into the back of a car, factor in a removal van. These start at £100 for small local moves, but can easily run to £1,000 for shifting a family’s worldly goods long distances.”

Home repairs, furniture, and extras

From paintwork to leaky sinks, put aside some cash for unexpected property maintenance. And if you have to buy everything from beds, sofas to lawnmowers and carpets, you figure that in too. 

There might also be the need for some essential extras like light bulbs, lampshades, toilet brush, washing up bowl, doormats, hooks and extension lead. 

Do you see that when you sit down and write out these things, you will discover that there are other costs of buying a home other than the mortgage deposit itself?

All of these when factored in, make the process of purchasing a house easier and achievable in record time.  

Do you have any more questions on this, need any kind of help in the property investing and your personal development? I’m here to help you, so click below to book a free 30 minutes call with me. 

Book a call with me here.

Sources: 

  1. https://www.checkmyfile.com/jargon/arrangement-fee.htm
  2. https://www.ratecity.com.au/home-loans/faqs/valuation-valuation-fee
  3. https://www.moneysavingexpert.com/mortgages/house-buying-guide/

7 Ways to Raise a Mortgage Deposit

A recent study by Santander Mortgages shows that 70% of young people now believe that the homeownership dream is over for them.

Miguel Sard, managing director of Santander Mortgages, said: “It’s clear that while the aspiration to own a home is just as strong as in previous generations, it’s a dream that is looking increasingly out of reach.

Although 91% of the young people interviewed still aspire to own a home, over two-thirds said it was unlikely to happen unless they received the deposit from their parents.

Let’s face it truly, saving up a mortgage deposit is one of the biggest hurdles to getting on the property ladder.

With house prices rising, first-time buyers often need to put down tens of thousands of pounds as a deposit.

According to MoneySuperMarket data from the first half of 2018, the average deposit put down by first-time buyers was £43,433. That was for an average property price of £217,200, giving a loan to value (LTV) average of 82%.

How much of a deposit do you need to save?

 

The average house price in the UK is around £232,554, according to Land Registry official data for October 2018. To buy a property worth that sum, you’d need to save at least £11,628 for the minimum 5% required by lenders.

Putting down 10% would give you access to cheaper deals, would require you to save £23,255, while a 25% deposit would mean getting together a whopping £58,139.

Unless you’re earning a fortune, or are lucky enough to have family stump up the cash on your behalf, making a mortgage deposit means saving hard.

But it doesn’t have to be that hard for you, and you don’t have to have fears for the future. So let’s look at

7 ways to raise your mortgage deposit.

 

1. Pay up your debts.

 

Anyone who is serious about getting a mortgage will know that credit card debt will directly affect the amount you can borrow. And it’s easy to let that debt spiral out of control, so it’s best to get on top of it as soon as possible. You so not debts increasing while you’re bootstrapping to save up.

2. Downsize your lifestyle

Do you really need to be renting a three-bedroom loft when it’s just the two of you? Could you cope with a larger house share where bills are split more ways and the rent is cheaper? The short-term pain may well be worth the long-term gain.

Weigh up how many bedrooms you need and look for cheaper accommodation closer to work, so you save on commuting costs.

Downsizing could also mean you save money on heating, council tax and other household bills, so you can put even more money in your deposit funds.

3. Work more jobs

you want a great idea on how to get a house deposit quickly then there is almost nothing better than creating a second income for yourself.

Almost everyone can create a second income for themselves. You could live off your primary income and then save all of your secondary income.

It is likely that you could be using your current skills outside of your workplace. If you work as a mechanic, then you may be able to fix your friends cars on the weekend.

If you work as a writer you could do freelance writing on the side. If you work as an accountant you could help people with their tax returns. Anyone can outsource themselves on sites like Odesk or Elance. Alternatively you could start a small business on the side. Get clients and do the work in your after work hours. Or build up passive income by starting a website and selling affiliate products. You are only limited by your imagination.

4. Sell unused belongings

Look through your belongings and think carefully about if you use or need them. If not, sell them.

Car boot sales and eBay are not your only options. Check out alternatives like Schpock and Depop too.

5. Take advantage of special programs.

If finding money for a deposit is holding you back from buying a property you may find a shared ownership home is a more affordable alternative.

Shared ownership and shared equity schemes involve purchasing part of a property and renting the rest, and although you would not own 100% of your home right away, you will have a foot on the property ladder.

Help to Buy scheme

Help to Buy is a government scheme offered by lenders in England on new build properties.

The scheme provides an equity loan that can be used towards buying a house, if you only have a 5% deposit saved.

You must be over 18 to qualify for Help to Buy, and it must be used to buy your own home on a repayment basis (not interest only).

6. Get assistance

If you’re lucky enough to have friends or family with money to spare, they might be able to help you raise a deposit, or help you get a guarantor mortgage.

7. Buy together

A deposit shared is a deposit halved, that’s the saying, right? Well, if you’re looking to purchase a property with a friend, family member or partner then you’ll definitely be at your savings goal in half the time if you both stick to the same pace of saving. Make sure you agree targets and you make the same level of effort to get there. If you’re determined to get on the property ladder, this could be a way for you to get there as quickly as you’d like.

These 7 ideas will help you save up your first home mortgage deposit, but there’s one more question.

Can you get a loan for a mortgage deposit?

No, taking out a loan to cover the cost of your mortgage may mean that lenders won’t accept your application.

This is because they will ask where your deposit has come from, and state that it needs to be from a non-repayable source, like savings or a gift.

Do you want to know more about how to raise the funds you need to a get a home as a first-time buyer?

Send me an email at mayowa(at)mayowaoluyede(dot)com

Five Ways to Turn Bad Credit Around, and Invest in Property

It is a well-known fact that real estate investment is one of the best ways to achieve financial independence and sustainable wealth.

However, one of the biggest challenges would-be investors face is that it usually takes good credit rating and a strong track record to buy properties with the best lending terms.

Having a good credit rating is not only morally right, but it is also essential for raising investment capital. Although, I understand that life happens and things sometimes go south.

Bad credit doesn’t mean you can’t buy property as an investment. Fortunately, there are several ways to get around raising capital regardless of credit barrier and get into property investing. In this short piece are some of the best tactics you can use for buying an investment property with bad or below-average credit.

Five ways to get around bad credit for investment in property

1. Find a co-signer.


If you’re buying an investment property for the first time and can’t get a loan, you might be able to find someone to co-sign.

A co-signer effectively acts as a guarantor of your loan, putting his or her credit up for you. If someone with better credit than yourself, such as a close friend or family member, is willing to co-sign on loan, you can take the opportunity to build your confidence as you repay it.

Of course, you want to be sure that you can repay, even if the property fails to generate a return right away. Failure to meet your monthly payment obligations will not only negatively affect your credit score, but that of your co-signer as well.

2. Form a partnership.


Even if you can’t find someone to co-sign your loan, it doesn’t mean you can’t still use another person’s credit to facilitate investment. Consider finding another person who would be interested in real estate investment and partnering with him or her. Although this approach will require splitting any profits with your partner, it’s an easy way to get your property investing career off the ground.

3. Start with a distressed property.


Borrowers with lower credit scores are usually ineligible for loans that would cover the average price of a single-family home. Despite this, you might still be able to qualify for a loan that would cover the cost of buying a distressed property that can then be renovated and flipped for a profit.

From there, you’ll have to put in the work of repairing the property and making it livable. Though this method certainly requires more labor than investing in properties in better condition, it offers a substantial upside of requiring much less capital up-front. If you find the right property to renovate, you can even turn a very significant profit on the time and effort you put in.

4. Save a sizeable down payment.


Borrowers with poor credit history can still sometimes secure loans by putting up a larger than average down payment. If you can pay 20 percent or more up front, you are likely to qualify for loans that are above what your credit score would generally justify.

Putting a large sum of money down shows lenders both financial stability and an ability to manage money by saving it over time. Though you might still have a higher-than-usual interest rate, a substantial down payment will usually get banks and other lending institutions to consider you for a loan seriously.

5. Invest in a Real Estate Investment Trust (REIT)


Even with these different tactics for buying an investment property with bad credit, there will still be some people who cannot afford to purchase real estate. For these people, though, there are still good options that involve real estate investment.

Rather than buying a property of your own, you can pool your money together with other investors in a real estate investment trust, or REIT.

These trusts combine investment money to collectively invest in real estate, particularly at the commercial level. Though your goal should still be to get into investment properties of your own, a REIT can help you earn money in the real estate market while you build up your credit or work toward using one of the other tactics described above.

Buying an investment property without at least a decent credit score is difficult, but not impossible. Use these tactics, and you should be able to start making money in the property market soon.

4 Things to Consider When Sourcing below market value (BMV) properties

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In a recent post titled What is BMV in Real Estate? I explained that Below the market value (BMV) is a collective term used by investors and property investment experts to mean any purchase or investment made below the market price.

Often, BMV properties are good deals that have the potential to be profitable because of the ability of the investor to get these properties at a cost that is lower than the supposed going rate.

Although, “there are two types of BMV properties: those that make you money, and those ignored because they are money-draining duds.

The truth is, it is not all properties that are buyable at below the market value price that are significant investments.

“Some of them are cheap as chips for a reason!”

In this article, I’d like to share four things to consider when sourcing BMV properties:

      1. Make sure that it is a cash-flowing property

“An excellent property investment needs to pay its way, so make sure that any property you consider purchasing is going to be cash-flowing.

For example, it is possible to pick up cheap, high-quality properties in remote parts of the UK. These could have the most enchanting views and most beautiful designs, but the likelihood of you selling them on or renting them out quick is unlikely.

Even properties in apparently desirable areas can cause unexpected selling problems, such as a lack of hungry tenants or low rental prices in the city failing to cover the mortgage.”

Remember – “No rental demand, no tenants. No tenants, no rent. No rent, no money.”

      2. Seek out hungry sellers

“Properties that have been on the market a long time is likely to have a willing seller.

On apps, such as Zoopla, check the “most recent” listing backward.
If you combine evidence that similar properties are available for rent in the local area with the fact that the property has been on the list for a long time, you are likely to find a motivated seller.

Any property not viewed on a property website or app for a month or more suggests that the seller is going to be more open to lower offers because the longer their property is on sale for, the more it will cost the seller.

A seller’s keenness – or even desperation – to sell their property offers you plenty of leverage.”

      3. Don’t buy homes that need too much work done

“Some property investors are so excited by a BMV price that they neglect to consider how much extra work the property is going to need before it can be rented or re-sold.

If you have great builder contacts, then a property that requires some work might be significant. However, there are risks involved when buying a run-down building, so make sure to hire a property investment consultant or a reliable surveyor to inspect the deal and detail any significant repairs or alterations needed.”

       4. Don’t buy in the wrong location

“Buying in the wrong area is one of the most common mistakes that first-time property investors are likely to make. Many areas may have a reputation for being “up and coming,” with plans for better transport, a new shopping center, more significant funding, and many other exciting possibilities.

However, unless plans such as these become concrete, they can easily fall through.

Every investment carries risks, of course, but it is your role to minimize the likelihood of loss and increase the possibility of profits.

For that reason, avoid buying property in the reputed “bad” areas of town simply because of their low price tag, unless you have some serious evidence that it is going to make a worthy investment.”

Conclusion

“Buying below market value is finding a property for a lower price than other property owners are selling similar properties. If you can find a distressed seller, or any property that has been overlooked by other buyers due to lack of advertising or some other neglect on the seller’s part, do your due diligence, and get ready to make some serious money.”

If you would like to learn more or ask questions about how to find BMV property deals, you can book a free 30 minutes strategic property investment session with me here.

5 Principles to Win Big in Property Investing

I do not mean to brag at all, but I have had a good share of success investing in properties and that’s why I want to share these 5 principles I use every time to win big when I invest in real estate.

These 5 principles can make the difference for you when investing properties. It will help you buy like a pro and accelerate your investment journey faster than you can imagine.

1st Principle

Cash flow. I always buy for cash flow. Every time I buy real estate I keep it in mind that it must give me cash flow because if I put my money in the bank I will get interest. Likewise, if I put my money in stocks and shares, I will get dividends. So when I invest in properties I also want returns and that is cash flow. Property to me is a cash machine; it gives me income every day, every month and every year. When you learn to invest wisely, your returns will be good cash flow from your portfolio every time.

2nd Principle

Add value. I like to buy properties that no one wants to touch, properties that smell. I call them the smelling ones – the kind of properties that I can put my own signature on. I don’t look for perfect properties that have a good kitchen, good toilet or the like; I want to put my own signature on the property. So, I look for properties that are run down, not with structural problems but property that can be refurbished or renovated, the ones that need a new kitchen, toilet or bath. You can even put a new painting, new floor, ceilings or double glazing. These are the things that will make it look wow.

When you do this, you are adding value to that property and because of that, you will be able to buy this property at around bottom price. Also when you look into those properties, the amenities that need to be fixed are what you will use to negotiate with the vendor. Often times, when you get a property that is not good and you add your own value to it; you might have increased the value of that property by £25,000 to £30,000.

3rd Principle

Leverage; I always look for ways to buy properties without any of my money. Yes – you heard me right. I use different strategies to raise funds for my investments. If I want to buy any property, I look for a way to make sure I use little or none of my money. How do I do this? I could refinance my existing property, I could borrow from friends and family, I could borrow from the bank or I could do joint ventures. There are so many strategies that you can use to be your own bank, but leverage is key.

Did you know that property is the only asset class that the bank will lend you almost 100% for if it’s commercial? That’s the truth. Another testament that leverage is key, it is the ability to print your own cheque and be your own bank, and importantly one of the things that could make you a winner especially if you know how to raise funds not just for properties but for any other business. Whoever knows how to turn this tap will be a winner because cash is king.

4th Principle

Appreciation; I invest in property for appreciation. When I say that, I mean two types of appreciation that you must look out for. First, you need to understand that a property is an asset that you will enjoy its yields after a long time, around 8 – 20 years. In fact, most properties double between 8 and 12 years. This means, when you are able to hold properties for a long time, you will enjoy the profits of a certain income in the future.

Therefore, you are able to enjoy both capital appreciation and rental appreciation. This is very important to hold on to, property investing is a journey. Always invest for a long journey, If you are able to hold properties for a long time you will create wealth that you can be passed on to your children and the generation after.

5th Principle

Discount; is a vital one for me. This is the centerpiece of my principles. I will not buy real estate or property if there is no discount in it. I always buy below market value because you make a profit from day 1 when you buy not when you sell.

If I’m able to buy below market price at a discounted value of 10% or 15%, and if that’s just £20,000, it does not matter.

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