Below Market Value (BMV) Pricing For Your Buy To Let Property

The single most important value that Axis brings to investors is our focus on sourcing Buy To Let properties and negotiating a price which is genuinely below market value.

Let's discuss:

• Why buying BMV property is so important and valuable
• Why Axis is able to negotiate below market value pricing on Buy To Let investments
• What level of discount on your below market value property you should expect

The five reasons that buying BMV property is so important and valuable

Reason One: The first and most important benefit is the reduced cost. This delivers immediate equity to you and means that you don't have to rely on growth in the capital value of your Buy To Let property to make your first part of the profit.

Example: Let's say that Axis negotiated a 30% discount on a £150,000 investment property. You would immediately benefit from a £45,000 saving - an equity 'profit' which goes straight in your pocket.

Reason Two: The reduced cost of your property investment automatically increases your rental yield which can make a considerable difference to your Buy To Let annual profit.

Example: Take the same investment property above with a £1,000 per month gross rent. On the price without discount the gross rental yield is 8%. On your reduced investor price the gross rental yield is now 11.4%, increasing your rental profit and cashflow by 42%! That's an astonishing difference on a single BTL property.

Reason Three: The reduced cost means you borrow less against your Buy to Let investment, increasing your annual net rental profit.

Example: On the same property you would borrow (say) 75% of your reduced price of £105,000 which is £78,750 instead of £112,500 on the full price. The reduced interest would increase your profit here by around £1,700 pa.

Reason Four: The reduced price means your risk is lower when you invest in Buy To Let property

Example: If you needed to sell in a hurry, most investors would lose money on a BTL property purchased at full market price, but if you had paid 30% less you could afford to reduce the price for a quick sale.

Reason Five: You need less cash to invest because you are paying less for your property investment

Example: With the same property you would need a 25% deposit on the reduced investor price of £105,000 which is £26,250. On the full price your deposit would need to be £37,500, more than £10,000 extra!

So in every way we believe that buying Below Market Value is critical to a profitable investment strategy - and this is the cornerstone of what Axis delivers to clients.

Why Axis is able to negotiate below market value pricing

Here is the big question. Why can't you go and negotiate the same discounts that Axis is about to find for clients? And why would vendors be willing to sell their Buy To Let property to Axis clients at a cheap price?

Remember that Axis is dealing with vendors in distress, or where properties have been repossessed and are under the control of receivers and liquidators. We are not dealing in the 'retail market'.

Axis can negotiate below market value pricing because we offer the BTL property vendor four very important benefits:

• Speed - typically we find clients for our Buy To Let property within days, not weeks or months.
• Volume - sales through the retail market can be very slow. Axis has the reach, with tens of thousands of registered investors, to find clients for multiple investment properties easily.
• Certainty - up to 40% of 'retail' property transactions fail to complete. Because we work with investors who are buying to let, we have an excellent track record of delivering sales that stick.
• Off-Market Sales - many vendors only allow us a proportion of their property, selling the rest through the retail market. We can do this without upsetting their pricing structure.

In return for these four benefits Axis demands significant pricing concessions for Buy To Let property which we pass on to you, our investor clients. Even given all these benefits we frequently fail to reach agreement which is why as many as 19 out of 20 possible Buy To Let property deals fail to cross the finishing line!

What level of discount on your below market value property should you expect?

Discounts vary considerable across the country according to:

• Location (as you might expect, BMV London property carries less discount)
• Type and value of the Buy To Let property
• Level of distress of the seller
• Condition of the property
• Volume that needs to be sold
• Desirability

The level of discount also varies through the property cycle. We are coming out of the time when the biggest discounts were available and can anticipate, over the next 24 months, discounts below market value to reduce by 5-10%. This is an important reason for moving quickly to acquire Buy To Let property as waiting will cost you money!

Axis balances all these elements in coming to a decision about what level of discount is appropriate for a particular Buy To Let investment opportunity.

Here is a rough guide that is valid at the current time. We always focus on maximum discount so that on occasion we may have property with higher discount than is shown. In the same way sometimes we are offered superbly located and constructed property which we take at a lower discount. It's a matter of judgement, which over the last five years we have become expert in making.

Read this blog article on The Principles of Profitable Buy to Let Investment

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