Britain is a nation of property investors, the appetite we have for property is not shared with the rest of Europe. Some countries have a really low number of owner occupiers, for example in Germany only 40% of occupiers own their own properties, and Switzerland ranks even further below. In the UK the statistics show over 65% of the population are owner occupiers.
It seems the government wish to quell this hunger for property ownership, primarily because they need to raise more and more money to fill a hole which cannot be filled; property is the obvious choice.
The changes the government is implementing in the housing sector are twofold, one is to increase stamp duty and the other is a reduction of the amount of interest you can offset against your rental income. Unless you are geared up to purchase a property in a corporate structure owning the odd one or two properties could become a little challenging in times to come, depending on your circumstances.
Buying in a corporate structure allows you to still benefit by having the interest relief on the mortgage.
This of course may have its own problems. You will need to take into consideration the cost of setting up and maintaining a company which means accounts to be filed every year. The main issue will be the funding aspect. There are only a handful of lenders who lend to limited companies and there is the added due diligence that goes with this.
Therefore the rates offered by lenders who lend to companies are not as competitive as purchasing in your own individual name where the market is a lot more fluid; and though the due diligence has increased it is not as cumbersome as purchasing in a company.
What I expect to see in the BTL sector as time goes on is the growth of crowd funding for property transactions. This means instead of buying the whole cake you can chose to take a slice, and also you get to choose how big this slice can be.
This is a big sector in the US and in the UK the momentum is growing, the main players in the market at the moment do not offer any great deals, their USP seems to be just that you can purchase a piece of the property rather than the whole lump. As this market develops lucrative deals will start to appear on this platform.
When the changes in stamp duty and interest relief start to erode investment in property the average landlord will turn to syndicated deals via crowd funding which will allow them to evade stamp duty and get the full mortgage relief on their investment not to mention they do not have to go through the hassle of applying for a mortgage, which many may not qualify for in the first place. There is no income proof required and credit history is irrelevant.
Any investment in property done now has to take the above framework into consideration to prepare for the future.
Purchasing shares in a company which owns the property gets rid of a couple of problems with one stroke.
The above lays the foundation for a great deal we have just agreed to purchase. The property is a freehold block of flats, in Brent Cross. The property comes ready completed, tenanted and producing income.
The purchase price equates to only £630 per sq. ft., all properties come with parking and are well maintained. The block has been constructed in the last ten years, and therefore there is little due in terms of maintenance.
The property is minutes away from Brent Cross station, and will benefit directly from the massive regeneration which is taking place in this location. The regeneration aims to make this area of Cricklewood and Brent cross into a town, this will act as a centre of gravity. Brent Cross is one of the capital’s major regeneration schemes and among the most significant planned new developments in Europe.
The regeneration scheme aims to deliver a new town centre for Barnet and North West London, creating up to 27,000 jobs and acting as a catalyst for future economic growth.
Brent Cross will be a great place for existing and new communities with 7,500 new homes delivered as well as new buildings for three local schools, new health facilities, high quality parks and open spaces.
It will provide all the elements of a thriving town centre with a transformed Brent Cross Shopping Centre forming the heart of a new retail and leisure district.
More than £400m will be invested in transport infrastructure including new roads, increased capacity at key junctions and the creation of a new station on the Midland Mainline and Thameslink lines.
These are not pie in the sky claims, in late 2015 there have been many contracts which have been executed so this vision will be manifesting.
This investment will be lifted off the back of this regeneration already taking place.
This will be a long term hold where the investor will own shares in a company which will own the freehold of this block. The investment will insulate the investor from the proposed changes which are due to be implemented, allowing them to benefit from the upside in anticipated growth.
There is no development risk as the property is ready and occupied. There is however a possibility of going up another floor which requires further exploration.
This will be a cherry on the pie but the pie is a good one.
This deal is live and is taking in investment. Call the office now to find out more.
!Tips of the Week
It is essential to determine what you want from your property investment – quick gains (buy and sell) or a consistent second income (buy to let). If you are not sure consult an expert to know what would suit you best.
Discounts are not the only means to make money in property, at times you need to see an angle which no one else sees.