Mortgage Fraud Danger in Below Market Value (BMV) says LettingFocus

Is making money in property as easy as some people say?
Well, it’s not hard, that’s for sure, providing you know what you are doing.
On a scale of 1 to 10, where 10 is very hard (e.g. running a kids football team as I do and having to deal with some of the parents) and 1 is very easy, I would rate buy to let as a 4.
To keep it simple, it is really just about doing a few things right.
First, you find a property in an area where there is currently strong and ongoing future strong tenant demand for that property.
Second, you buy the property at a good lowish price and third, you find good tenants who will look after it and pay the rent on time.
Sounds simple – and yet so many people try to overcomplicate it.
Usually the companies who overcomplicate it are trying to sell property that is supposedly dirt cheap and which does not require you to put any or much money in.

Too Good to Be True
If you see a deal that looks too good to be true, it usually is.
Very often you will see such companies trying to promote “no money down deals.”
But please keep in mind these important facts……
Mortgage lenders will ALWAYS want to see that you have put some money into the property you are buying. They want to see that you have a stake in it.
And this cannot be funny money – it has to be YOUR money – not money you have borrowed from someone else or from another company.
It has to be YOUR money and you have to tell the mortgage company where it has come from – i.e. the source of the funds.
If you don’t tell the truth about where the money comes from, you have committed mortgage fraud and if you don’t tell the mortgage company the true price you are paying for the property – with all the kickbacks made clear – then you are again liable to be done for mortgage fraud.

Use Your Own Solicitors
Lots of companies specialising in marketing no money down deals will require you to use that company’s own finance arm and legal advisers.
This is because they will make some money from the legal team and finance co. Nothing wrong with that, of course.
But you should check out the cost first as it is often not cheap – and always make sure you have the deal and the property checked by your own solicitors and valuers.
Finally, if you are paying someone to source leads you ought to check out their track record very carefully indeed. Look at the Internet and ask for references.
There are some good firms sourcing below market value property -and we can help with that too - but there are some whose leads have proved to be not so much “below value” as “very poor value.”

Final Thought
It is important to have a mix of investments.
I always laugh when I see how people who manage equity and bond funds are very keen that investors avoid direct property investments like buy to let.
And many who promote buy to let often gloss over the risks and hard work involved to make it work.

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Realted article: BMV or Below Market Value

Copyright of Blog: David Lawrenson 2009. This blog is updated roughly once a week usually on a Monday or Tuesday.

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Sale and rent back operators question need for regulation says Lawrenson at LettingFocus.com

Following on from yesterday’s lettingfocus.com blog calling for the need for more regulation of sale and leaseback, I thought I should just balance out the debate by putting the view of one landlord who contacted me.
So here goes. And thanks to Mr. P for this one.
“Buy and rent back regulation. Hmm are people that daft that they need protection from their own stupidity. I would agree that some of the promises are ludicrous, but if there was not a market for this kind of deal then it would not happen
This week I agreed with two other landlords to do exactly this, the first adverts go in the paper this weekend, with the idea of putting portfolios of 5-10 properties and then selling the portfolio on. We have contacts who supposedly want to buy them, but time will tell
The scenario is the same as those put to us through mortgage advisors/estate agents when someone is facing repossession. If someone has spent more than they can afford they need someone to dig them out of the mess of their on making.
They can always turn down our offer, but I suspect they need the money quickly to stave off repossession/bankruptcy proceedings.
I had one last week, he is in debt to the tune of 120K, all secured against a property worth max 90K (if perfect, which it wasn’t), and was 7 days away from repossession and bankruptcy court hearing. However he and his family went on a nice cruise recently - so I guess it is obvious where his priorities lay.
However he turned down our offer (of 10%ish below true price), but I suspect now has nowhere to live and will be phoning our rental adverts, but with his record of not paying his interest only mortgage of £500, what makes us think he will pay rent of the same amount.
Or am I being too hard nosed on poor unfortunate people who obviously are not responsible for their own lives &r the mess they make of them.”
At lettingfocus.com, I have some sympathy with that position.

Our View at LettingFocus
Looking at it this way, by selling to a landlord and becoming a tenant, the vendor turned tenant cuts out some costs - he saves on estate agency fees and also HIPs (because as the property is not marketed it should not need one) and he gets to stay in his own home too (at least for a time) Maybe at the bottom line, what’s really needed is for the government to provide some sound financial education for people as part of the core curriculum at school, so they would not make a mess of things in such ways.
If you need more advice on buying property below market value or buy to let investment in general please ask me. I’m David Lawrenson from property investment advisors http://www.lettingfocus.com/
I’m the author of the buy to let book “Successful Property Letting - How to Make Money in Buy to Let” the UK’s top selling property title.
I’m an expert on property investing for profit and a well known property freelance writer and I contribute to newspapers and a host of property websites, write a property investment blog and run a landlords advice service.
I also work as a consultant helping banks, building societies, housing associations and web portals with their buy to let and property products and services.
You can read more of my property investment blog and details of my networking, advice, property networking programme at my website http://www.lettingfocus.com/My next London landlords networking meeting is coming soon.
Click here for details: Property Investment Advice
What’s unique about lettingfocus.com is that we offer independent property mentoring because unlike most people in the buy to let and property “advice” business we are not linked to a property company, developer, agent or bridging loan financier and do not receive commissions from any of these sources.If a property investment is lousy – We’ll tell you straight and we will tell you all about buy to let and property investment - the good and the bad and we won’t make silly promises that you’ll become a millionaire overnight.
Copyright: David Lawrenson. This blog is updated at least twice a week. Permission must be sought before using the material in the blog.

SALE AND RENT BACK - CALLS FOR REGULATION

Leading organisations are calling for the regulation of ‘sale and rent back’ schemes.
Citizens’ Advice, Shelter and the Council of Mortgage Lenders have written an open letter to the Treasury calling on it to allow the Financial Services Authority to implement regulation in order to provide protection for consumers.
This all follows exposure of the ‘mortgage rescue’ practice on television and in the press.
In one case, a woman sold her home for under market value to a sale and rent back company which then went bust, leaving her homeless and the house unoccupied.
The programme also showed a novice landlord hawking leaflets around a neighbourhood, offering to buy and rent back properties.

SARB
Under Sale and rent back schemes firms or individual landlords buy property from ‘distressed’ sellers at a substantial discount, with the former owners remaining in situ - but as tenants.
I know quite a few “good guys” who do this for a living and they always have the Home owner’s interest in mind.
These guys point out the drawbacks – one of which is that the owner turned tenant has no security of tenure beyond six months – and another is the fact that by doing this they may not qualify for housing benefit in the future.
However, I know that lots of below market value operators who are not do kind.

Speak to Mortgage Company First
For most people in mortgage arrears the best advice is to speak about their difficulties to the lender, who has a duty of care first.
The Residential Landlords Association adds that it is unfair and unethical to buy a property without an independent valuation.
In another subject, I hosted a great seminar yesterday. We had Paul Grimaldi the author of the top selling book on employing builders called “Getting the Builders In” Paul’s book is the UK’s top selling title on this topic.
You can buy this book from Amazon. Just click on the link to my book here.

ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
We are LettingFocus.com - the experts on buy to let and I’m David Lawrenson, the author of “Successful Property Letting” - the UK’s top selling property and buy to let book for the last 3 years.
At LettingFocus I offer independent unbiased advice for property investors covering all aspects of being a landlord and investing in let property.
Buy to let is largely unregulated and there are many sharks in the business of “advising” would be investors.
Unlike most other firms, I am not linked to a property company, developer, estate agency or bridging loan provider. I advise where to buy (which areas), what type of property to buy, when to buy, how to buy property at a low price, how to eliminate the risk of getting a bad tenant and more. I have been a landlord and property investor myself for over 25 years.


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There are GREAT DEALS we have arranged for landlords by clicking here: Services and Products for Landlords and seeing our Landlords’ Resources (Useful Links) page.
If you sell products to landlords and property investors and you have national coverage and would like to be on this page as a partner, please get in touch!
For general info on our SEMINARS AND CONSULTING click here: Property Seminars, Networking Evenings and Consulting
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Copyright: David Lawrenson 2007. This blog is updated at least twice a week. Permission must be sought before using the material in the blog.

Below Market Value Properties and Sale and Rent Back

There is a huge growth in people selling their homes at well below market value to landlords and then renting them back and an industry has grown up where investors buy properties directly from “distressed sellers” in this way.
This is a real human interest story because where someone sells their own property and then rents back under a standard assured shorthold tenancy; the “seller turned renter” usually has no security of tenure.
Also, the seller will usually have sold their property at a low price to give themselves cash and resolve their debt problems.
This explains why there is so much interest from investors, not least because they can acquire a property with “no money down” using what’s called a “closed bridging loan”
I expect the number of people offloading their homes in this way to grow in the coming months as home owners come off fixed rate deals taken out 18 -24 months ago and face remortgaging at higher interest rates.
The investors find the dis

How Below Market Value Investors Find "Motivated Sellers"
These investors find distressed sellers in a number of ways.
One way is by leafleting. The message of these leaflets will be simple and along the lines of: “Do You Own Your Own Home? Do you need to Sell Quickly? Contact 0800 XXX XXX. Another way is by advertising on the internet - many of the 1.9 million sites that are returned when you key in “below market value property” are targeted at people who may be motivated sellers.
In recent years, many companies have been set up which use automated systems featuring call centres to field enquiries and filter out the genuine distressed sellers. They may then charge investors for each “lead” or an affiliate could “buy” the rights to all the leads that come onto his patch.
These leads cost the investor money but it means the person who is not a full time property investor - who has another job – can be “in the game” too.
It will usually be the investor’s job to negotiate with the seller and try to secure a deal to buy the property at a big discount from its market value. Once the deal is agreed the investor sets up a bridging loan for the discounted price and a mortgage for 100% (i.e. for the true value on the same day) – hence generating “instant equity”

Sale and Rent Back (SARB)
The seller now becomes a tenant of the landlord, can stay in his own home and his neighbours are none the wiser as to his change of status. However, he will usually have no security of tenure beyond the initial 6 months term under the standard tenancy agreement.
Clearly there are a few moral issues with the whole process - a process which has been pretty much ignored by the national press.
Many investors I know who do this, say they turn down some deals if they believe the seller could do better by doing something else – say remortgaging, talking to their lender, getting citizens advice help or by selling the property.
However, the question is how many others are as altruistic.
I forecast that in a few years the press and finally the Government will legislate against some of the worst practices in this rather murky business.

To find out more about buying property below market value and the truth about no money down deals ask me.

ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
We are LettingFocus.com - the landlords’ expert and I’m David Lawrenson, the author of “Successful Property Letting” - the UK’s top selling property and buy to let book for the last 3 years.
I have been a landlord and property investor myself for over 25 years.
At LettingFocus we offer independent unbiased advice for landlords and property investors on a one to one mentoring and coaching basis as well as occasional group seminars.
Unlike many in the still largely unregulated buy to let and property “advice” business I am not linked to a property company, developer, estate agency or bridging loan provider.
So I can give unbiased independent advice on where to buy (which areas), what type of property to buy, when to buy and how to buy property at a low price. I can also explain how to reduce the risk of getting a bad tenant.
We help you make money in property by showing you the ways that work and which are of minimal risk to you.

CHECK OUT THESE PAGES AT OUR SITE LETTINGFOCUS.COM:
Our Events only take place twice a year.
For our NEXT SEMINAR AND NETWORKING EVENT for Landlords and Property Investors click here:
Next Property Investing Seminar and Networking Event
We have GREAT OFFERS for landlords too.
Click here: Services and Products for Landlords to see our Landlords Resources (Useful Links) page.
If you are selling services to landlords and property investors and have a national coverage? You could be a partner, please get in touch!

For general info on our SEMINARS AND CONSULTING click here: Property Seminars, Networking Evenings and Consulting
ONE TO ONE CONSULTING click here: Property Consulting
CLIENT TESTIMONIALS. What past customers say about us: Testimonials

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