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LettingFocus

Unbiased buy to let, property investment and letting coaching, mentoring, advice and seminars for landlords from top selling property author and media commentator.

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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I have been a landlord and property investor myself for over 25 years.
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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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Fraud on Below Market Value BMV property by Lawrenson of LettingFocus.com

Further to last weeks’ post about mortgage lenders, I see the Chelsea Building Society is the latest lender who was so dopey in buy to let lending that they got hit for a big fraud.
In the case of the Chelsea, a loss of about £41m has been taken as a result of mortgage frauds involving some of its buy-to-let loans. Ouch!
The frauds appear to have involved professionals colluding to inflate the value of buy-to-let properties. Crikey, Imagine that! (Excuse the cynicism.)
A team of people are now going through these cases individually to see if fraud has been committed.
“This could take some time,” said one of their spokesmen (in what must be the understatement of the year.)
Too bad the Chelsea did not read or bother to respond to my consulting letter of a few years ago offering to help them make a better fist of their buy to let mortgage lending.

New Scam – Duff Leads for Below Market Value Deals
Talking of scams, in property fraud is a bit like the poor …….always with us!
The combination of lack of FSA regulation, rapacious entrepenuers and gullible punters wanting to get rich quick makes for a deadly cocktail.
So no surprise that my friend Paul Shamplina at Landlord Action has recently reported that their debt recovery department has never been busier due to pursuing rogue property sourcing and investment companies.
Here is the scam.
What happens is that a Dodgy Property Entrepeneur asks for up an upfront fee to source Below Market Value deals.
The Punter hands over his cash and the leads are duly delivered.
The trouble is once surveyed for mortgage purposes the value of these properties is a whole lot less - making them not so much “Below Market Value” deals as “About Market Value” deals.
The Dodgy Property Entrepeneur then refuses to refund the fee the punter paid.
Pretty simple hey and it’s the latest scam in the world of property, so let’s think of a name for it. Let’s call it “The Bogus Discount Deal Scam.”
So remember, always do your own research into property values and rental levels and check the level of demand in the area.
And for goodness sake, research the sourcing company - how long have they been operating and what does it say on the Internet about them? Always read the terms and conditions and get a signed contract.
Not all property sourcing companies are bad. Just make sure you don’t hand money over to a duffer.
In next week’s blog, I promise I’ll get round to look at studentification and the latest barmy government plans to make student areas, nicer!
ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
We are LettingFocus.com - the property experts.
I’m, David Lawrenson, the author of “Successful Property Letting” which for the last 3 years has been the UK’s top selling property book.
What’s unique about LettingFocus is that I offer independent unbiased
property seminars covering property investment and letting because unlike most people in the buy to let and property “advice” business I am not linked to a property company, developer, agent or bridging loan financier.
I can tell you where to buy (which areas), what type of property to buy, when to buy, how to buy property at a low price, how to make sure you get tenants who are going to pay the rent and how to manage a rental property to make £s at my one to one consulting service.
I can also comment on “No Money Down” Schemes and “Buying Below Market Value” methods too.
I can answer all your questions on letting property too because I have been a landlord and property investor for over 25 years.
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Why I like houses more than flats by Lawrenson of LettingFocus.com

Ah, us British and Irish we just love those lovely Victorian and early Edwardian houses don’t we.
We love them so much so that we are happy to chop them up into “conversions” and make little flats out of them.
Our love affair for the converted flat can be seen in the fact that many people are prepared to pay as much if not more for a two bed converted Victorian flat than they would for an equivalent two bedroom ex local authority freehold house with a garden on a nice estate in a similar area.
As a property investing landlord who has owned both types of property, I’m not convinced by these Victorian conversions.
In the long run, properties that are freehold and have gardens will always keep their price – just as long as they are in decent areas.
If I had to choose between a converted Victoriana flat with no garden and a freehold two bed modern house with a garden I would always tend to go for the house.
Why?

CONVERSIONS CAN BE A PAIN IN THE NECK
Well, it’s more than just money, it’s time too.
You see, if you have a problem with a flat, you may also get problems with neighbours too. Think leaks and how leaks tend to damage anywhere below where the leak occurs and you’ll know here I am coming from.
Often, conversions also seem to have poor plumbing and heating systems – another consequence of the fact that they were not built to be separate dwellings.
Think about noise and inconsiderate neighbours. In converted flats, noise is always a real problem because the properties were never built to be soundproofed in the first place.
And too many converted flats have problem leases too which make it really hard to get a freeholder to do anything, like fix the building.
Recently I looked after a property for some friends who had gone overseas.
What a nightmare! I constantly had noise issues, leaks, endless plumbing issues and antisocial neghbours to deal with.
A good pal of mine in the trade, who I can’t name, has a business where he helps people extend leases and buy freeholds. He knows how hard it is to enforce your rights as a leaseholder or get agreement on a shared freehold and he says he would never buy a flat. He should know!
If I really had to buy a converted leasehold flat, I would only buy where there was just one other leaseholder in the block – and even then I would want to see a rental yield at least 2% higher than on an equivalent freehold to make up for all the extra work involved.

BELOW MARKET VALUE SHOW GOES ON
At our recent networking event Simon Taylor, the founder of GetAnOffer.co.uk told us that serious buyers with cash or access to lending are still using the downturn to their advantage to buy below market value properties.
Simon has accepted that with legislation imminent, the party is over as far as Sale and Rent Back is concerned but is still confident that on his site where sellers pay to advertise their properties below market value deals can still be had.
His site has some interesting features and is worth checking out.

INFLATION NOT DOWN MUCH – SHOCK HORROR
I see that the commentators were a bit surprised that the latest inflation numbers were not as low as expected. Goodness gracious, where did they study economics.
I would have thought it pretty obvious that with the pound so low, the impact of “imported inflation” for anything made abroad (which these days is pretty well most things) was always going to be pretty significant.
The scribes were also surpised that yesterday’s mortgage numbers were the highest since way back in the autumn.
More proof that the doomsayers who forecast further huge falls in the price of property will be proved wrong.

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ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
I’m David Lawrenson of LettingFocus.com - the property letting experts. Read Articles for Landlords.
I’m the author of “Successful Property Letting” which for the last 3 years has been the UK’s top selling property book - buy Landlords Book.
The new edition is for accidental and experienced landlords and is fully up to date with all the recent changes to tenancy deposit schemes, HMOs, licensing, capital gains taxes and it has new sections on sale and rent back.
I’m an expert property writer and property speaker - and I run the well known landlords blog that you are reading now.
I contribute to newspapers and a host of property websites, write a number of columns in the press and I provide general property letting advice and consulting to anyone looking to buy property for themselves or to let out. I can help private individuals with any aspect of buying property or buy to let.
What’s unique about lettingfocus.com is that we are independent property investment advisors 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 these sources.
We simply give one to one unbiased advice and are often asked to evaluate other property investments.
Find out about some great deals we have arranged at our Landlords Resources page.
Copyright: David Lawrenson 2009. This blog is updated roughly once a week.
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“WHAT ARE WE FIGHTING FOR? FINANCIAL FREEDOM” SAYS LAWRENSON OF LETTING FOCUS. PLUS, GOING UNDERCOVER TO CHECK OUT THE PROPERTY SCAMS.

One of my favourite TV comedy skits is the one of “Braveheart” by Jennifer Saunder and Dawn French.
In it Jennifer Saunders does a great immitation of Mel Gibson in the film “Braveheart” by mumbling numerous times “We’re fighting for freedom” in a curious part Scottish part Aussie accent.
Well, if I see another property company advertising a “Get Rich Quick in Property” deal with a byline containing something about people “Achieving their Financial Freedom” I think I might explode.
On the subject of property scammers, I’ve just been contacted by a journalist who has been going undercover to expose the property scamsters for a big piece soon to appear in one of the national papers.
Interestingly she came incognito to one of my own London seminars but I’m pleased to say she quickly found out I’m one of the guys in the white hats.
So, she called me to own up for that and to ask my profesional opinion on some of the scams for the article, which of course I am delighted to do. They will appear when the piece is published in a week or so - and we will bring it to you here.
Sadly, she observed that the majority of the people who went to the various seminars she attended did not own their own house and few seemed to have much money to scrape together. Mixing with other attendees round the coffee pot at these seminars she found that most had a low level of education and were financially quite naive.
However, lots of them bought into the guff about “Achieving Their Financial Freedom” and were prepared to hand over what little cash they had for a seminar to a firm that would probably buy them a duff flat that would prove hard to rent out and show little capital gain.
Meanwhile the promoters will earn a nice slice from the various fees -for mortgages, leads, introducing solicitors and the like – and in some cases get a nice cut from a developer.
It is high time this was stopped by regulation.

CRISIS WHAT CRISIS ASK THE PEOPLE OF CARDIFF
Just back from a few days staying on a farmhouse near my old stamping ground at Cardiff where I was at University many moons ago.
I see that in the last few days the financial clouds have lifted which is interesting because I sometimes think the reality does not fit the facts.
Clearly, the finanical sevices sector has taken a bash and London is looking a wee bit sad. Fair enough.
But no one has told the good people of South Wales that we are facing economic armageddon.
You see, I love to walk around the sites of my old uni town - have my pic taken outside my old house in Woodville Road where I nearly froze to death in 1981, get the security guard to let me and my mates into my old hall to have my pic taken outside my old room etc.
But in the end we left the city centre early. The reason – it was just too full, too jammed with shoppers.
Business is booming there which gets me wondering if our London-centric press is all too downhearted about the grimness in the capital to bother to look at what’s happening in the rest of the UK?
The Welsh have always had a party streak about them and some of them really do “live for today”
But on the evidence of Cardiff last weekend, we are definitely not about to drop to our knees in depression and cut back our spending.
So don’t be too downhearted - the South Walians are certainly not.
ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
I’m David Lawrenson of LettingFocus.com - landlord experts.
I’m the author of “Successful Property Letting” which for the last 3 years has been the UK’s top selling property title - Buy Successful Property Letting - How to Make Money in Buy to Let.
The new edition is fully up to date with all the recent changes to tenancy deposit schemes, HMOs, licensing, capital gains taxes and it has new sections on sale and rent back.
I’m an expert freelance property journalist, property speaker and a well known buy to let blogger
I contribute to newspapers and a host of property websites, write a number of columns in the press and I provide general property education, training & advice for anyone looking to buy property for themselves or to let out.
In my work as a consultant I help private individuals with any aspect of buying property or buy to let. What’s unique about lettingfocus.com is that we are independent property mentors 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.
We simply give one to one unbiased advice and are often asked to evaluate other property investments.
In my corporate consulting role, I also advise banks, building societies, housing associations and web portals with their buy to let and property products and services.
You can read more of my blog & find details of my networking, advice and property training programme at my website.Copyright: David Lawrenson 2008. This blog is updated once a week.
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Buying Below Market Value Property with No Money Down - Does it Work asks Lawrenson of Letting Focus?

The answer is yes, of course it can.
But to buy with “No Money Down” you have to find someone desparate and willing to sell you their property for at least 20% below its true market value so you can make the financing work. And that’s the hard bit, of course!
The fact is it’s really hard to find a seller willing to sell you property at 15% below market value (or BMV as it’s called in the trade!) let alone more that that.
OK, the credit crunch has meant it has got a bit easier but its still very hard work to find these deals.
Sure, professional investors can find ‘em at 25% BMV if they spend many hours a week and lots of marketing costs ……and if property investing is their full time job too… but even for them, their own time has to be factored into the equation.
For some property investors it IS definitely worth it and I personally know of a few property millionaires who do this type of investing for a living & many of them read this column. Some have been to my seminars. Many are friends.
But for every one of these, there are many other people who buy with no money down, because they are stretched financially and they think that buy to let is somehow going to be their financial salvation and route to fast riches.
Many of these people have no other siginificant assets and they don’t understand what being a landlord is all about - the hassles, the costs, the laws.
For these people, I’d really question whether they should be in property anyway, because for many new investors who don’t have spare accessible capital, I’d argue the risks of property investment with no money down are just too high.
The fact is that professional BMV investors I know have lots of equity in existing properties or in shares, just ready to pounce in the credit freeze – they don’t have to go No Money Down.
OK, they sometimes do No Money Down deals to buy property when cash flow is tight but the fact is they can access cash, if things get hard and stuff goes wrong – the roof falls in, tenants default -that kind of thing.
For the newbie investor I would say unless you have got £20,000 stashed away for a rainy day or a very kind Uncle who can help you out if things get tough, I would be wary of buying No Money Down.
If you do, you could end up with a house on a very high loan relative to value and if your “Sale and rent back tenant” defaults on the rent you or the boiler needs replacing, you are really going to have hard times indeed।
We are away for a week’s holidays -see you in 2 weeks!
ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
I’m David Lawrenson of landlord experts lettingfocus.com.
I’m the author of “Successful Property Letting - How to Make Money in Buy to Let” which for the last 2 years has been the UK’s top selling property title - buy the UK's top selling property investment book.
It is fully up to date with all the recent changes to tenancy deposit schemes, HMOs, licensing, capital gains taxes and it has new sections on buying property below market value.
I’m an expert property journalist , property speaker and a well known buy to let blogger
I contribute to newspapers and a host of property websites, write a number of columns in the press and I can provide landlords advice
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 and am a regular speaker at property shows.
You can read more of my blog & find details of my networking, advice, property mentor programme at my website.What’s unique about lettingfocus.com is that we offer you help as an independent property coach because unlike most people in the buy to let and property “advice” business we are not linked to a property company, a developer, an 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 2008. This blog is updated once a week.
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DID MORTGAGE EXPRESS AND BRADFORD & BINGLEY CATCH A COLD WITH BACK TO BACK RE-MORTGAGING asks LAWRENSON OF LETTINGFOCUS.COM

For a long time the only lender that did re-mortgage loans back to back against bridging finance was the B&B buy to let lender, the Mortgage Express. I wonder if this could explain some part of their current travails.
As I said in an earlier blog, at a recent property trade show where I was speaking I heard a few scare stories about buying Below Market Value (BMV) with No Money Down (NMD).
It seems some of the novice investors have got themselves in a bit of a mess with below market value purchases from distressed sellers - and here is how they did it.
I’ll just explain for those who don’t know that buying BMV can sometimes involve buying from indebted (and hence motivated) sellers who are about to be repossessed by the mortgage company.
Some BMV buyers will seek out and then buy from these kinds of “motivated distressed sellers” at a discount sometimes using bridging loans to buy with “No money down” which they then sometimes rent back the property to the seller who becomes their tenant.
So far so good!
But one of the big dangers is that the kind of property seller who is prepared to do this type of deal - and sell their home at below its true price- will by definition have what we could call “a bad credit history” In other words, they have defaulted on their mortgage already, so the chances are arguably higher that they will default on their new tenancy too than a normal tenant would.
Most BMV investors would say that if they do, well it is bad for them but by doing so, it will allow the investor to evict if the arrears are bad enough.
And that is true, though some will have ethical issues with all this – but let’s leave that aside for now
The only trouble with eviction because of arrears is that it typically takes about 5 months to go through if you have to ultimately enforce the eviction notice with a bailiff.
First, you need there to be 2 months of no rent before you can even start a possession action and it takes another 3 months for the court processes to slowly grind through.
Oh and don’t expect an evicted tenant to leave the property spotless – chances are very high that they wont. And we won’t even mention the stress that comes with having to evict someone.
Whilst most investors are careful to give themselves a financial cushion in the event that things go wrong, I have heard reports of cases of some property investors who are in difficulties with their mortgages because they are struggling with many of these types of properties where they are receiving nil rent.
There a a tiny minority of the less reputable operators in the property market who say you can “become a property millionaire overnight” with “nil (of your own money) down” using bridging loans and other smart financial techniques.
By definition many of the investors who do this will have a very high mortgage loan to value and for those with nothing in reserve, the affect of tenant default can be crippling.
And that’s why we hear stories of some less experienced investors being repossessed themselves - leaving their tenants homeless.
And with the Bradford and Bingley buy to let arm, the Mortgage Express being the last player left in this market, until they too pulled out back in March, one wonders how much bad debt they took on by being an active player in this rather curious re-mortgage market where many investors were novices?
Could this explain some of their current problems?
Who knows - but one thing is for sure and that is that for now the Mortgage Express’s problems will considerably reduce the finance options available for landlords.
The fact is that getting rich in property is very doable, but if you try it with no money down and no spare cash in reserve, you are taking big risks.
Many who bought off plan new build flats through property syndicates like "You Know Who" -you know the ones who have now collapsed and like taking legal action against their critics - have already learnt that you cannot get rich quick in property unless you have learnt what you are doing first.
And please, whatever you do, always have some spare cash put buy, just in case your first deal turns out to be a bad one.
ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
I’m David Lawrenson a landlord experts lettingfocus.com.
I’m the author of “Successful Property Letting - How to Make Money in Buy to Let” which for the last 2 years has been the UK’s top selling property title: buy the UK's top selling property investment book
It is fully up to date with all the recent changes to tenancy deposit schemes, HMOs, licensing, capital gains taxes and it has new sections on buying property below market value.
I’m an expert property speaker and a well known property blogger and I contribute to newspapers and a host of property websites, write a number of columns in the press and I can provide help for landlords
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 and am a regular speaker at property shows.
You can read more of my blog & find details of my networking, advice, property investors networking programme at my website.What’s unique about lettingfocus.com is that we offer property investment mentoring because unlike most people in the buy to let and property “advice” business we are not linked to a property company, a developer, an 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 2008. This blog is updated once a week. Permission must be sought before using the material in the blog.

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NO MONEY DOWN DEALS AND BELOW MARKET VALUE, BMV THREATENED says LAWRENSON OF LETTINGFOCUS.COM

Another casualty of the credit crunch is the “NO Money Down BELOW MARKET VALUE Deals.
I have written about how this works before but in essence how it works is that you buy a property at say 20% below market value from a motivated or distressed seller using a bridging loan and get a remortgage next day for the full market value.
That way you can buy the property with No Money Down.
The problem is that the only mortgage lender prepared to do these types of deals, the Mortgage Express, has I hear, pulled out of doing this business.
No doubt they have been spooked by the credit crunch and the fact that such deals look ever more risky as long as property prices remain shaky.
Also, lenders must have got increasingly nervous about the rental income potential from “sellers turned tenants” on the sale and rent back version of these deals (as that person will by definition probably have some history of not paying their financial obligations)
In the light of the banks new found timidity to lend, Mortgage Express would recently have also become scared of the fact that so many novices (and hence inexperienced landlord investors) were so keen to get in on this kind of deal. This is not surprising as these routes to wealth are heavily promoted at trade shows.
But I understand from one experienced Below Market Value Operator that the doors are also now closed to experienced BMV players too.
According to my contact, this now means the only way to proceed is to hold the property for 6 months on a bridging loan and then re-mortgage. And that ain’t cheap!
It is a shame because Buying Below Market Value or BMV using a bridging loan has it merits.
I will be interested to see what the promoters of seminars on BMV at the Property Investor Show in Manchester next week make of all this and how they will proceed.
ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
I’m David Lawrenson a property expert from lettingfocus.com.
I’m the author of “Successful Property Letting - How to Make Money in Buy to Let” the UK’s top selling property title buy the UK's top selling buy to let book
It is fully up to date with all the recent changes to tenancy deposit schemes, HMOs, licensing, capital gains taxes and it has new sections on buying property below market value. I’m an expert public speaker on property and a well known property investment blogger and I contribute to newspapers and a host of property websites, write a property investment blog, a number of columns in the press and I can provide advice for landlords
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 and am a regular speaker at property shows.
You can read more of my blog & find details of my networking, advice, property investors networking programme at my website.What’s unique about lettingfocus.com is that we offer independent property coaching because unlike most people in the buy to let and property “advice” business we are not linked to a property company, a developer, an 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 2008. This blog is updated once a week. Permission must be sought before using the material in the blog.

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Buying Below Market Value from Distressed Sellers and Sale and Rent Back by Lawrenson of LettingFocus.com

RISK OF BIG PROPERTY CRASH IS LOW
Last week I was speaking at the Birmingham leg of the Property Investors show at the NEC.
It was pretty quiet there and much less active than last year reflecting, I guess, all the negative news about the property market.
As you’ll know if you have read previous blogs, I don’t believe all the doom and gloom and whilst I think that property prices could fall up this year by up to 10%, I think that falls will be limited for properties and areas that are not oversupplied already or where serious local social and / or unemployment problems exist.
And since rents are rising strongly and unemployment has so far stubbornly refused to go up, there are indeed still many green shoots for the investor or brave property buyer.
In other words, this is a year when you can buy property cheaply, just as long as you have access to credit and can put in at least 20% of a property’s value as equity.

DANGERS IN BUYING BELOW MARKET VALUE
Whilst at the show I heard a few scare stories about Below Market Value (BMV). It seems some investors have got themselves in a bit of a mess with below market value purchases from distressed sellers - and here is how they did it.
I’ll just explain for those who don’t know that buying BMV can sometimes involve buying from indebted (and hence motivated) sellers who are about to be repossessed by the mortgage company.
BMV buyers will seek out and then buy from these kinds of “motivated distressed sellers” at a discount, sometimes using bridging loans to buy with “No money down” and then they rent back the property to the seller who becomes their tenant.
So far so good!
But one of the big dangers is that the kind of property seller who is prepared to do this type of deal - and sell their home at below its true price- will by definition have what we could call “a bad credit history”
In other words, they have defaulted on their mortgage already, so the chances are arguably higher that they will default on their new tenancy too than a normal tenant would.
Most BMV investors would say that if they do, well it is bad for them but by doing so, it will allow the investor to evict if the arrears are bad enough.
And that is true, though some will have ethical issues with all this – but let’s leave that aside for now

TROUBLE IS.....EVICTION IS NOT FAST
The only trouble with eviction because of arrears is that it typically takes about 5 months to go through if you have to ultimately enforce the eviction notice with a bailiff.
First, you need there to be 2 months before you can even start a possession action and it takes another 3 months for the court processes to slowly grind through.
Oh and don’t expect an evicted tenant to leave the property spotless – chances are very high that they wont. And we won’t even mention the stress that comes with having to evict someone
Property Investor News in one of their articles in their current edition, anecdotally report the cases of some BMV operators who are in difficulties because the investor is struggling with a many of these types of properties where he is receiving nil rent.
Some of the less reputable operators in the market sell BMV deals on the basis of “becoming a property millionaire overnight” with “nil (of your own money) down” using bridging loans and as by definition many of the investors who do this have a very high loan to value, the affect of tenant default can be crippling.
And that’s why we hear stories of BMV investors being repossessed themselves - leaving their tenants homeless.
This, of course, does nothing for the reputation of the Below Market Value business which is already being looked at by the regulatory bodies who would like to see codes of practice drawn up.
So, my message is, if you buy Below Market Value be aware of the risks, especially in sale and rent back type deals and don’t borrow too much.
Sure, you can do it using a closed bridge loan and hence with No Money Down but only do this only you have a stack of cash elsewhere to pay the mortgage - just in case your tenants default.
Pretty much all the more realistic advisors on BMV at the property shows do, to their credit, advise their investors of the risks and they caution having a pot of money aside for a rainy day.
However, there are some who don’t. You have been warned.

BEING A GOOD LANDLORD
I was quoted in the Mail on Friday and the Telegraph on Saturday. Here is the link to the Telegraph story which is all about how to be a good landlord: http://propertyclub.telegraph.co.uk/Page/View/222

ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
I’m David Lawrenson from property consultants lettingfocus.com.
I’m the author of “Successful Property Letting - How to Make Money in Buy to Let” the UK’s top selling property title buy the book
It is fully up to date with all the recent changes to tenancy deposit schemes, HMOs, licensing, capital gains taxes and it has new sections on buying below market value. I’m an expert on buying property below market value and a well known property investment blogger and I contribute to newspapers and a host of property websites, write a property investment blog, a number of columns in the press and I run a landlords help 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 and am a regular speaker at property shows.
You can read more of my blog & find details of my networking, advice, property investors networking programme at my website.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, a developer, an 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 2008. This blog is updated once a week. Permission must be sought before using the material in the blog.

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Below market value property, BMV - One good tip from LettingFocus.com

What is the best way to get a good deal when buying property?
Well there are many ways to get good deals.
However, in today’s blog, I just thought I’d highlight one particular technique that always works well when you are viewing a property and the vendor is showing you around.
As you go around, the key thing of course is not to give much away, whilst also trying to find out in a non pushy way as much as you can about the vendor’s circumstances in order to gauge if they will accept a hard offer. (It is also worth finding out what you can about the seller’s circumstances are in advance from the agent too.)
Then just as you are about to leave, you whip out the estate agents blurb on the property, pause for a few seconds and then just slowly say the price as if you were contemplating the meaning of life. Then allow the silence to hold for a few seconds. If the seller really wants to sell for less, they won’t be able to resist filling the gap by indicating what price they will accept.
It’s a great technique and it works most times. Try it.

FLOOD RISK
Now, a quick word about flood risk.
The property I am in the process of buying is close to a flood risk area.
To find out the extent of flood risk, all you need to do is look at the environment agency maps (at their website) and put in the postcode of the property.
This will bring up a general map of the area showing the extent of the flood risk – but this can actually vary a lot depending exactly where in the road the property is.
To find out the risk for a specific house you then have to click on the spot on the map at exactly where the property is. This will then bring up another more detailed statement which will state if the flood risk is “significant”, “moderate” or “low”. It is this which is the thing you really need.
Also, use Norwich Union too. They have among the most sophisticated flood maps in the UK which use other data which are laid on top of the environment agency maps – so if you are buying in an area that could be at flood risk, always call them for an insurance quote.
If they won’t cover you or charge a very high premium then you need to think about buying that property very carefully.

MORTGAGES
Out in the mortgage market mortgages are being withdrawn almost as soon as they show up and lending by the building societies continues to be restricted to certain areas and types of property. I continue to enjoy your stories about how hopeless the banks and building societies are at mortgage lending.
My friend Andy in Lancashire told me that “Despite being approved for a further £500,000 from the Woolwich in March for refinancing/new purchases, it seems I am not solvent enough for a 4,000k limit on a new capital one Cash Back credit card.”
I have had similar experiences too and I am also finding that the processing of mortgage applications by the lenders is still painfully slow. In my case, after having been approved for a mortgage from a subsidiary of one of our biggest banks I am still waiting after 4 working days to receive the application form. So, no change there then!
The same correspondent also says he accepts tenants on benefits and has noted that the rates for the new Local Housing Allowance were published yesterday by his local council for his area and they are pretty much 15-20% extra to tenants here when compared to the current HB system. The only downside is of course, that the money is usually going to be paid direct to tenants, so we lose the guarantee that we had when it was paid direct. So, we will have to see how this all works out.
If you need more advice on investment property or buy to let investments in general please ask me.
I’m David Lawrenson from property investment mentors 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.
Buy the new edition here: http://www.amazon.co.uk/Successful-Property-Letting-Right-Plus/dp/0716030195/ref=sr_1_1?ie=UTF8&s=books&qid=1203933977&sr=1-1
It is fully up to date with all the recent changes to tenancy deposit schemes, HMOs, licensing, capital gains taxes and it has new sections on buying below market value. I’m an expert on the UK property market and a well known property investment blogger and I contribute to newspapers and a host of property websites, write a property investment blog, a number of columns in the press 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, buy to let networking programme at my website http://www.lettingfocus.com/My next London property investors networking meeting is coming soon. Click here for details: Property Investment Advice
I am also speaking at the Property Investor show in Birmingham in April http://www.propertyinvestor.co.uk/birmingham/
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 2008. This blog is updated once a week. Permission must be sought before using the material in the blog.

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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.

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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.

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Using a Property Company to Source Property Deals? Ask Them If They Have an Open Forum Where You Can Assess Past Investors Experience

If you are investing through a property company or other third party who sources deals, why not ask if they have an open internet forum where past investors / members can freely post comments - and which you can read up on before deciding to invest.
Most property companies do not have one, so the would be investor has no way of knowing what other investors experience has been - apart from looking them up on the net to see if any negative press exists. And for some of the big property companies, there is a lot of negative press in the press and out there on the net.
Please let us know if you know of any companies that have an open forum for members -and we can post them up here. email [email protected]

MORE ABOUT LETTINGFOCUS

LettingFocus.com is the home of landlord information.
Hello, I’m David Lawrenson.
I’ve been a landlord and property investor myself for over 25 years and am author of “Successful Property Letting” – the UK’s top selling commercially published property book for the last 3 years.
Primarily, I work as a consultant to banks, local authorities, social housing providers and other organisations – helping them with their landlord facing or buy to let product strategies and services.
I also write for property websites and am regularly quoted by the media.
I have written articles, guides and documents on letting property and property investing for numerous publications including The Independent, The Telegraph and for quality landlord and property websites.

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For private landlords and other investors in the private rented sector, we do two London seminars each year.
We also find some spare time to help landlords and property investors by coaching them in how to make money in the private rented sector using ways that work, which are ethical, fair to tenants and which involve minimal risk to the investor.
We pride ourselves on giving independent unbiased buy to let advice on either a one to one mentoring / coaching basis or through our occasional group seminars.
With no links to property firms, developers or bridging loan providers we can advise on where and what type of property to buy for investment and when to buy it. We also show you how to manage tenants properly.

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Home Buyers Show – More “Below Market Value”, Less UK Off Plan, Lots of Overseas Off Plan

I’m just back from the home buyers show at London’s Excel. Great fun superbly organised and as usual I met some great people.
Unsurprisingly, the number of stands offering customers the secrets to buying property “below market value” (or BMV) was up quite a bit on last year. And given the huge interest in this area that’s hardly surprising.
Meanwhile, the number of vendors offering off plan in the UK has now got ever smaller – the few still doing it are only offering really up-market apartments -the sort that may have some unique value for tenants.
The current “big thing” - other than BMV, that is - is in now off plan overseas and the number of vendors selling off plan overseas is well up (except for Coastal Bulgaria where the number of stands dropped dramatically as tales of non existing tenants and huge void periods have now hit home.)
As I said at my seminar, if you went back about 5 years ago, the show was full of vendors selling off plan flats mainly in the north of England. (Unfortunately, only two out of the 200 people who saw me speak over the three days had been at the shows 5 years ago!)
The clever investors 5 years ago usually avoided the heavy marketing of UK off plan flats and went for existing terraces - and they made far more money by doing so.
Sadly, many people at the show last weekend will have bought off plan overseas and may struggle to get any tenants – yields in many places are very low and tenants hard to find.
You can do well overseas and many of the investments on offer were good - but you must do your own research or you could end up with an asset far away that’s costing you lots of time and money.
And if you go down the BMV route you’ve got to be prepared to do quite a lot of work too to find the really good deals.
Sorry, to say, but whilst there is still very good money to be made in property there’s no easy road or quick path to millions for the armchair investor.

MORE ABOUT LETTINGFOCUS AND WHAT WE DO

LettingFocus.com is the home of landlord information.

I’m David Lawrenson, a landlord and property investor myself for over 25 years and author of “Successful Property Letting” – the UK’s top selling commercially published property book for the last 3 years.


Services to Businesses and the Public Sector


Primarily I am a consultant to banks, local authorities, social housing providers and other organisations – helping them with their landlord facing or buy to let product strategies and services.

For example, I help banks improve their buy to let mortgage lending practices and I help housing association / local authorities find private landlords (private rented access schemes, local letting agency models etc.)
I also write for property websites and am regularly quoted by the broadcast media.


Services for Private Landlords


We also find some spare time to help landlords and property investors by coaching them in how to make money in the private rented sector using ways that work, which are ethical, fair to tenants and which involve minimal risk to the investor.
We pride ourselves on giving independent unbiased buy to let advice on either a one-to-one mentoring / coaching basis or through our occasional group seminars. With no links to property firms, developers or bridging loan providers we can advise on where and what type of property to buy for investment and when to buy it. We also show you how to manage tenants properly.

AT OUR WEBSITE LETTINGFOCUS.COM:

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Copyright of Blog:
David Lawrenson 2007. This blog is updated roughly once a week usually on a Monday or Tuesday.

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