Do you really want to buy an “Off Plan” property with a gifted deposit?? Many new clients approach us saying “I need a mortgage to help me buy this fantastic property “Oh well, its in Northblackshireset and it is really nice, and the rental market is very good there – but we need to move really fast to get it - so what’s the best deal you can do for us to put down as little as possible?!” We ask a few more questions & go on listening. Whilst we ask questions, we make a few calculations. We say… … “Do you realise it’s going to cost you £2,000 - £3,000 every year and it may not go up in value” “How on earth do you make that out?” they say. Well – the purchase price is £199,995 (£200,000 to us!) Gross return may therefore be 4.2% - 4.5% (Really? Is that all? How do you work that out?) However, we know that area moderately well, and 2 bedroom flats generally struggle to be let for more than £650 pm So the Gross return may actually be 3.9% On top of that, as a professional landlord we have to make allowances for
As well as the fact that NEW PROPERTY sells at a premium. As soon as it is sold, it goes down in value because it is no longer new. In addition, many developers only discount because they cannot sell at the full price. When the mortgage company’s valuer goes round, he will find out what similar properties have sold for. If all have sold for £162,000 – guess how much his valuation will be!! Should it really be worth only say £162,000, the gross return will be 4.8% - but only if you buy at £162,000! He will also assess the rental from “direct comparables” in the area. So beware. Please do not get “taken in” by the £38,000 “instant equity” sales pitch. But it is not always like that!! Having gently pointed out how gullible the client has been (and we have all fallen for an excellent sales pitch haven’t we?) We go through the figures in more detail and point out the necessary “Due diligence” checks to be made independently of the Developer and perhaps the Internet seller to check out the deal. There are still good deals out there from people you know and trust and where your independent objective research shows that you are going to make money on the property both in the short and long term – otherwise is it really worth bothering?? Generally the 1 and 2 bed new flats are not good value – there are too many out there to be absorbed by the market and too few buyers or renters to take up the demand – so Caveat Emptor again! We have personally bought many “Off Plan” properties and can help you to find good deals on which to make money. But if the Developer or seller says:- “You have to use Joe Bloggs (Lawyer) and Fred Smith (Mortgage Broker) to get this deal” - walk away quickly. It is against the law society rules and is almost certainly because they want to “Stitch you up!!” © Peter Willingham 2007 |
Your home and indeed your investment property may be repossessed if you do not keep up payments on your mortgage or any other loan taken out on it.  |
Copyright Accelerated Mortgages 2007 Home | Mortgages | Services | Contact | Downloads | Opportunities | Privacy Policy | Disclaimer
|