Spring Into 2011 With Five Simple Steps For Five Star Investment Success

At Axis, we launched 2011 with an exceptional Hull portfolio which offers rental yields of 9% to 15%. This, we are sure you will agree, is remarkable for UK investment. Indeed, there has never been a better time to be a landlord than in today's unique market climate. In this article we take a quick look back over 2010, share industry opinion and predictions for 2011 and summarise with a five step plan for your own personal success throughout the coming year.

If you would like to skip straight to our superb new deals, you can download the decision packs here. Otherwise, read on to find out how you can make 2011 work for you and your portfolio.

The year of record rents

2010 was an exciting year for investors. Continued uncertainty in the market and the economy, coupled with a recession-fuelled increase in renters over home buyers, provided excellent opportunities in the Buy To Let (BTL) sector. The UK bounced along at the bottom of the market, with property prices remaining low and generous Below Market Value (BMV) deals available.

Rents were incrementally pushed up to a record high over the course of the year, as an increasing number of tenants chased for each property. Leases typically became longer, more tenants chose to renew and remain in their rented homes at the end of their leases. Research by LSL Property Services reported void periods to have fallen by 15% through 2010.

The return of 80% LTV lending

We also saw Paragon, the specialist BTL lender, re-enter the market with a £200 million credit facility from Macquarie Bank and offering up to 75% Loan To Value (LTV). While The Mortgage Works offered up to 80%. Further new lenders included: Aldermore, Precise and Kensington; and Abbey for Intermediaries also revealed it is looking at entering the BTL market in 2012.

If you would like to catch up on the highlights of 2010, our blog has articles such as Flawed Property Valuations and How You Can Check Real Market Value, Dos and Don'ts In The Buy To Let Boom and Turn £25,000 Into £100,000 In Less Than Five Years.

So, how does this all affect us moving forward? First, let's take a look at general industry opinion and then we shall assess our strategy for success through 2011.

Keep it clean

Alan Forsyth of Property Secrets cites lender confidence as the highlight of 2010. He says: "There is no better sign to indicate a growing market (however slow or month by month variant) than the sign of lenders re-entering or newly entering the mortgage market."

Forsyth's top tip, going forward, would be to ensure you look after your credit file, in order to ensure you can obtain the best LTV and rates available. Oversights as simple as a missed or late payment on a utility bill can be enough to cause you potential problems.

So, how about springing into a prosperous 2011 with a little ‘spring cleaning' of your credit files?

Take the low road to high yields

Kevin Green predicts a change to regional variations in property prices and demand, due to the Government's capping of benefit payments to tenants. This is most likely to affect landlords with properties in the highest rent areas, such as London. However, areas with rents at or below the national average look set to benefit in the medium to long term.

Green explains: "It is my strong feeling that this massive change in Government policy will remain and cause tenants to migrate from the high price city centre locations, to the more affordable lower rent level areas of the UK. This may have an effect in reducing property values in the high priced areas, yet strengthening property values in the low price areas."

At Axis, we have always recommended investing in high demand rental areas, where property prices remain low and you can buy distressed portfolios very cheaply. Our Hull and Darlington portfolios are both desirable examples of these kinds of deals, where you can invest in tenanted houses for under £13,000 including fees* and enjoy rental yields of 9.6% to 15.2%. These kinds of yields are exceptional for the UK and bring in around £250 to £425 positive cashflow (that's profit after loan payments) per month.

Check out all the facts and figures by downloading the portfolio decision packs here.

"Never a better time to be a landlord"

Lisa Orme is optimistic all round, commenting: "I'd go so far as to say there's never been a better time to be a landlord."
All the Q3 2010 figures and 2011 predictions agree that the UK has become a renters nation and Capital Economics predicts that by 2015, one in five households will live in private rented accommodation. This will continue to push rents up. As long as property prices remain in the bottom half of the cycle and rates stay low, yields will rise and this in turn will encourage more lenders into the market.

With housing starts at their lowest since the 1920s and a rising population, Orme predicts the tipping point will no doubt arise and we could see another property boom. She says: "Tenants will realise they're better off buying than renting, the economy will be on the road to recovery and house prices will start to rise again. I estimate this will be in about five years and we could see an even bigger boom than the last one!"

Exceptional returns on exit

If Orme is correct, then this situation will provide exit strategy options for investors who are looking to sell in that timescale and, of course, the record-high rents continue in the meantime.

As an investor, whether you are looking to hold your property for a short time, or an indefinite number of years, it is always wise to consider exit strategies for the future.

At Axis, we estimate capital growth at 5% per annum, from the market value and we analyse our clients' profit and return over a five to ten year timescale. Buying BMV gives you instant equity in your investment property, so if you add this to your net rental profit and capital growth, you are looking at returns which could be up to 600%, for UK property, over a ten year timescale.

Now consider that traditional savings accounts provide 32% in the same ten year timescale. Also, consider pension pot fees can ‘steal' as much as 80% of your savings. You can see how property is a far better way to invest in your own financial freedom and security.

You can find out more about using property as your pension here.

Savvy strategies made simple

Mark Jackson of Lease Options Made Simple, believes the biggest change from 2010 to 2011 is the decline in popularity of No Money Down (NMD) deals. He also predicts house prices to "fly upwards" from 2013.

At Axis, we moved away from NMD deals last year, introducing Low Money Down (LMD) as a more workable option.
NMD can create confusion and hurdles. Changing regulations raised questions about legality and the high level of borrowing makes investor risk much greater. At Axis, we like to keep things simple and clear.

A workable example

To explain - a NMD deal is when the investor obtains a mortgage on the market value of the property, while buying BMV. The ‘no money' part is in the ‘equity' between the investor price and the loan amount.

For example - you buy a £100,000 property at 30% BMV. This is a typical discount for Axis clients. With a NMD deal, you might obtain an 80% LTV mortgage on the market value of £100,000 (£80,000), but you are only paying £70,000 for the property as you are purchasing 30% BMV.

With Low Money Down (LMD) you would obtain a mortgage on the investor price of £70,000. This could be up to 80%, so you still get a major leverage advantage, but your positive cashflow and yields will be greater as you are investing more of your own cash into the deal.

Now, consider that you can invest from under £13,000, including all fees, using this LMD method and you can see why we at Axis are fans of this option.

See our website pages for more on our strategies and how we can assist you create your own, bespoke portfolios with The Axis Advantage, The Freedom Plan and SystemZERO.

The key is ...

According to Simon Zutshi, founder of the Property Investor's Network: "Uncertainty means there is a massive buying opportunity for the educated investor who does not mind short term prices fluctuations."

Zutshi continues: "As long as you buy property that gives a positive cashflow now, in an area with strong rental demand, with a long term view and at the right price, then it is a good time to buy. The key is to know what you are doing."

We at Axis couldn't agree more. It is absolutely essential to understand the market and how best to navigate the changing tides. Axis clients receive the benefit of our 40 plus years of industry experience, extensive due diligence checklist and ‘insider' expertise.

It is difficult for anyone to accurately predict what is going to happen throughout 2011, but opinions all tend to agree that the next twelve months, at least, will continue to offer a stream of super investment opportunities for smart investors.

Five steps to five star success

So, start the year as you mean to continue, with a well thought out and workable plan for investment success.

Clean up your act. Remember, the better your credit reports the better your chance of obtaining the best mortgage rates and terms.
Take the low road to high yields. Seemingly ‘poorer' areas can offer high, consistent rental yields and greater than average capital growth.
Invest while the market is hot. Act now to take full advantage of today's unique market position, before property prices start to climb again.
Choose Low Money Down over No Money Down. Low Money Down is safe, secure, provides good cashflow and there is no question about its legality.
Gain The Axis Advantage. Work with us to gain a market advantage, with the best possible returns and yields, in the shortest space of time, with as little time and financial input on your own part as possible.

To find out more about our currently available deals, or to simply have a no obligation chat about your portfolio requirements and the excellent strategies we offer, call our UK portfolio manager, Russell Bonner, on the UK hotline 0333 444 0034, or email him at russell@axiscontact.com

*Subject to status and availability of finance.

Live with Abundance

Rod Thomas sig