Bring It Back!

Have you ever thought about a TV programme from the past and wished someone would bring it back again? Well in Sweden, you can do something about it.

Through website Reupp, you can search a database of old shows which have stopped running and pledge money to bring them back again. If nothing happens the campaign just keeps running, but if a decision is made to bring the show back, the crowdfunded cash is donated to the producers. The idea isn’t to fund a whole series, which would be impossible, but rather to provide a platform for a display of strength of support.

It’s an interesting idea and one with wider applications. Could you set up a site to crowdfund the reformation of bands or for  inactive (but popular) authors to write new books or songwriters to write new songs? Perhaps something to think about.

Streetwise Property Alert 20th August 2013

Most property investors make their money from buy-to-let (BTL). Rents cover outgoings and they profit from capital appreciation over 10 years or more. Answer these questions, posed by correspondent Alan, who also sources property for us, before investing…

What’s The Yield?

If you are looking to buy a property to rent out then, clearly, it needs to pay its way month-on-month. A decent rental yield is attractive. The basic figure used to calculate yield is to take the annual rent and divide it by the buying price.

So, if you can rent the property out for £500 a month that would be a gross rent of £6,000 a year. And if the property is £100,000 then the rental yield is 6 per cent. As a rule of thumb, aim for a minimum of a 7 per cent yield. You need to have a little profit in the mix.

Of course, yield is linked closely to the price you pay for the property. Some investors say the discount to market value is the most important part of buying. It is significant although the yield is more relevant if you are looking to buy-to-let. Savvy investors will sometimes pay full market value for property because of the local rental rates and affordability being attractive.

What’s The Local Affordability?

Look for a low ratio between income and house prices in the area. This ratio gives you an idea of where prices are likely to go over the next five years. If it’s low, it also gives you confidence that there will be local buyers to buy from you in the future.

In the UK, look closely at areas that have houses at around three to five times the local salaries. As you build a portfolio, you may find some properties that fall outside of this that are still good investments as they meet other criteria. But, as a rule of thumb, aim for this ratio to start with.

As an aside, this affordability is a factor for many London buyers who purchase second home in attractive ‘weekend getaway’ locations. Prices are pushed up locally because of this demand to the point where locals cannot afford property; and when it comes to re-selling, second-home owners don’t have such a ready-made market of buyers.

Any Finance?

What finance is available? Consider the relevance of readily-available finance and competitive borrowing rates. When property was last ‘hot’ and off-plan deals were on offer, many developments came with ready-made finance from lenders keen to lend.

It’s much harder these days although BTL mortgage deals have been increasing in numbers and there is a little loosening of criteria. Loan to value (LTV) – how much you can borrow in relation to the property’s price – is the key. If lenders are willing to lend a high loan-to-value this gives a good idea that they are pleased with the area and the security they have.

As a rough and ready rule, if you can get borrowing rates of 2 per cent below the rental yields you’ll be achieving then this is clearly an attractive option – more attractive than if the borrowing rates are the same as the rental yields.

What’s The Exit Strategy?

To profit from buy-to-let, you need to cover your costs as you go along and then see capital appreciation over 10 years or more. It’s then – when you sell – that you make your money. And, to make your money, you need to sell to someone.

Never forget the local market – they are your tenants now and your future buyers in 10 years. It’s sensible to aim for areas where there are relatively few other rental properties as of now. Not only does this mean you have less competition but, if there are, say, 70 per cent or more owner-occupiers, it’s a good sign when it comes to reselling. It shows locals want to live here.

Your local buyers are your exit strategy. If you don’t have a local market, because they have been priced out, you can only really sell to other investors who, buying in purely on numbers, will want to get the best possible deal – and that’s at your expense.

All for now. We are currently looking to pull together various BTL articles we have to produce a short, BTL investing course. Free to members! Let us know if this might interest you.

admin@streetwisenews.com

Free Documents And Templates

When you start out in business, you’re often doing lots of things for the first time…creating forms, writing standard letters, producing contracts… that kind of thing. It can take a lot of time and effort. A trip to a site I discovered last week could cut out a lot of the work. www.freeprintable.net is a site featuring thousands of free printable documents and templates.

The site is American based, so not everything will be applicable to the UK, but there’s certainly plenty that are.  Examples of what you’ll find on the site include:

* Business Cards
* Fax Cover Sheets
* Stationery
* Cash Receipts
* Time Sheets
* Invoice Templates
* Business Form Templates
* Fax Cover Sheets
* CV Templates
* Sample Resignation Letters
* Sample Cover Letters
* Thank You Letters
* Letters of Recommendation
* Contract Templates

Definitely worth a look for anyone in business.

Streetwise Property Alert 15th August 2013

Welcome to today’s email…

Risk-Reward Alert

Our friend David Burgess at The Hotel Investment Company makes some interesting comments about risks and rewards. Here’s what he says, ‘Many investors want the biggest possible yield; 15 per cent, 20 per cent or more. Fewer want the 5 per cents and 6 per cents that are often offered in the UK; from buy-to-let, student accommodation and hotels etc. It’s just not enough!’

‘The problem is that, to generate yields of close to 20 per cent or more, the investments – however well they are dressed up and presented as safe and secure – have to have an element of higher-risk about them. Perhaps developers are paying over-the-top for seed capital. Maybe a ‘guarantee’ is added to make the deal even more attractive.’

‘You need to look closely at these higher figures, do your due diligence and take professional advice before investing and accept that, by and large, these are speculative investments where you might lose all of your money. That’s what higher-risk means!’ More to come.

Insurance Cover Reminder

Make certain you have sufficient contents insurance cover – do a room-by-room survey for yourself. According to Sainsbury Home Insurance’s analysis of loss adjusters’ data, the cost of replacing the contents of the average British home, in the event of a fire or other major disaster, is £44,500.

Sainsbury Home Insurance advises totting up, on a room-by-room basis, what it would cost to replace belongings. Always consider accidental damage cover and make sure it extends to soft furnishings. Note: not all polices cover damage made by pets – it’s important to check you are covered if relevant.

Flat screen televisions, DVD players, computers and laptops are high-risk items that are easy targets for thieves. Mark them with your name and postcode using an invisible ink pen that shows up under ultra-violet light. Reminder: one of the most common causes of disappointment with insurance is to find that you’re not covered for something you thought was in your policy. Check. Not all policies provide accidental cover for soft furnishings, including carpets, as standard.

Council Tax Tip

This one’s worth an occasional mention given the steady-ish stream of emails received on the topic. Check whether your property is in the correct council tax band – go to voa.gov.uk (or saa.gov.uk in Scotland). It’s a little-known fact that some neighbouring properties are often in different bands. It’s worth checking as you could get repayments for as long as you have owned the property.

In 1991, properties were given ‘drive-by’ valuations – i.e. valuers just drove by in a car – and, as such, some properties have ended up in the wrong bands and home-owners may be paying more than they should. (But note, there is a vice versa too – you may be paying less).

You can compare your property’s banding with neighbouring properties via the council tax list at the Valuation Office Agency’s website at voa.gov.uk or, for Scotland, the Scottish Assessors Association on saa.gov.uk. Just enter your postcode and house number for the banding; then do the same with neighbouring property numbers. See what the properties were worth 1991; go to nationwide.co.uk/hpi and use the house price calculator. If relevant, then contact the Valuation Office etc.

All for now, see you tomorrow.

Taking Sides

In a crowded market, you often need and angle – or to appeal to a particular niche – to prosper. In the United States, many law firms turn their back on women in divorce cases, and instead specialise in catering for men who fear getting a bad deal.

These firms have sports magazines in the waiting room, and place adverts promising to put men first. They say that their specialisation gives them the knowledge to prevail where other firms might fail. That may of may not be true, but it’s bound to be a compelling argument when a man stands to lose his house his money and his kids.

Now I know you’re not a lawyer, but could the concept of ‘taking sides’ have marketing applications in your business. Could you become the champion in your market for men, women, young people, old people, an ethnic or religious minority…or whatever? If you could, you could easily become the ‘go to’ choice for anyone in that group looking for a great deal.

Streetwise Property Alert 14th August 2013

Taking out a mortgage on an overseas property? Be warned, one of the most common themes amongst members writing in is this. I can’t pay the mortgage! Our friend Peter Esders at Judicare offers some ideas…

First Things First

Invest cautiously – don’t take too high a loan-to-value (LTV) mortgage. Many people have bought properties abroad as an investment – both to rent out for some income and to get some profit from the appreciation of the property. Most took out mortgages when they bought. However, whilst this can be a good investment proposition it has always been important to make sure that the figures work out.

Some people, in their excitement, fail to realise that, the more of a mortgage they take, the more difficult it will be to cover that mortgage with the rental income.

I know the salesman said that you will ‘easily’ cover the 80 per cent mortgage with the rental income but, in fact, this is often not the case. Some people find that the rental doesn’t cover the mortgage. They then have to find the mortgage money elsewhere and what was supposed to be a source of income is actually a drain on resources. Prudent investors should be looking at less than 50 per cent LTV,
making it easier to cover the mortgage from rental (but obviously, please note, this depends on the property, the area and the terms of the mortgage).

What Goes Wrong

Mortgages in other countries generally work in the same way as they do over here. If you do not pay the mortgage, the bank will ultimately repossess your property. They will then probably decide to sell the property to recover the money due to them. There is no mystery about that – after all, it is the classic small print at the bottom of each mortgage advert.

In times of panic, it is probably worth remembering this basic principle. If you don’t pay your mortgage it will be repossessed by the bank.

I am assuming that the person has taken out a mortgage in the country where they bought the property. If, in fact, they remortgaged their own home to buy the property abroad then the consequences are different as the bank that they have to deal with is the one that has a mortgage over their own home. They can end up in the strange situation where they lose their own home but still own a property abroad. This has always been one of the dangers of mortgaging a property in your own home country to buy a property abroad.

Repossession Basics

If the bank sells your property and doesn’t recover enough money to cover the money that you owe the bank then, in theory (depending on the terms and conditions), the bank could come after you for the balance. How likely this is will depend on a number of factors. If the amount is relatively small then the bank may take the view that it is not economical to do this (after all it costs them money to pursue you).

Even if the amount is larger, the bank may decide that it is not worth it if you are based in a different country because the bank may not know how to proceed with chasing you in that country. We had an Italian bank contact us about chasing a number of people who owed them money in the UK. When we talked to them about the procedures and the costs they decided that, even though the total amount due was quite large, the effort of chasing meant that it wasn’t worth it for them because the debt was owed by lots of different people and therefore was more complicated and expensive.

The Side Effects

One question I am asked regularly is whether not paying the mortgage in another country will affect the person’s credit rating in their own home country. The honest answer is that how credit ratings work is a mystery to me as I am a humble lawyer. However, most of the banks are internationally owned – think Santander etc – and modern day computer systems make it much easier for information to flow between countries. I therefore suspect that such activity
will affect your credit rating in some way or another.

Another question is whether you will ever be able to return to the country. That will obviously depend on the country. Most countries do not consider debt a criminal offence. There should be no reason why you cannot continue to go on holiday in that country. It is worth checking this with a lawyer who understands the law of that country before making arrangements though. Of course, you would expect your credit rating to be affected in that country.

The Bottom Line

In summary, the best thing to do is to do your sums before you buy. The less you borrow, the better your chances of getting a property that ‘washes its face’, i.e. rents cover costs etc. The bigger the mortgage the more difficult it is to cover. Note: the more difficult it is for the bank and the smaller the amount the less likely they are to try and recover the rest of the money. But! The more money is due to them and the easier and cheaper it is for them to recover this the more likely they are to do it.

Many banks, such as Santander, have a presence in many different countries these days. Read the small print. Of course, all of my comments also depend on the country that the mortgage was taken out in and also the terms of the mortgage. Therefore, each person may have a slightly different scenario and circumstances which will affect what will happen in those circumstances. If it does all go wrong, the best advice is to consult your lawyer and financial adviser as to what the next stage is and, please note carefully, to do this earlier rather than later.

Peter Esders is a solicitor at Judicare. He can be contacted on 01438 840258 or via peteresders@judicaregroup.com.

The Convenient Dog Wash

I live right by the woods and often get ‘attacked’ by dogs that look like they’ve been bathing in mud. As mucky as their paw marks make my clothes, I can’t help wondering what kind of mess they make once they get home. Perhaps their owners would appreciate a German idea I recently came across.

Lars Schutze has located Germany’s first Dog Wash right next to the car wash he already owns. For less than five euros, owners can foam, shower and dry their pets while they’re waiting for their car to be cleaned. Given that bathing a dog usually involves a huge amount of mess and inconvenience that seems like a good deal.

I can see no reason why something like this wouldn’t work here. Taking the dog for a walk and then arriving back home with a pristine car and a spotless dog seems a pretty good combination to me. Time for someone to reach a mutually beneficial deal with a car wash owner.

Streetwise Property Alert 12th August 2013

I was talking recently to a member who got mixed up with a property con-artist in ‘Emerging Europe’. Here are some thoughts based on his experiences…

Check Local Prices

Compare prices with what else is available locally. This particular scam started with an agent’s presentation in an upmarket hotel. It was for an off-plan, modern apartment development sited outside of one of the leading capital cities in Emerging Europe. The development was to be erected on a cheap plot of land which had been purpose-bought by the developer.

What the foreign investors did not know was that these apartments, despite their remote location, were being sold at city-centre prices and even higher; in fact, at almost twice the price a local would contemplate paying in that part of the city.

It is not unknown for agents and developers to take full advantage of inexperienced foreigners’ lack of knowledge of local market prices to fleece them. Part of your due diligence for any overseas property purchase is to; take what an agent or developer tells you and get a second opinion; to look at prices for similar properties in the area; and get professional advice before making any commitment.

‘Guaranteed’ Guarantees?

Be cautious of ‘guaranteed rental incomes’, especially if they are above the norm. With this con, these three magical words were used to capture many foreign investors. The agent showed a so-called agreement with an educational establishment which supposedly confirmed that their students would be accommodated in these properties, thus securing a guaranteed rental income for the nest two years, with an extra enticement of an extension for a further period of time.

Sadly, this agreement was completed without the knowledge of the educational establishment itself. Guaranteed rental incomes require additional due diligence to check the validity of any agreements. It is not uncommon for developers and agents to claim deals are to be put in place that never actually come to fruition. The other commonplace con regarding guaranteed rental incomes is based on the investor overpaying for the initial purchase. Their own (overpaid) money is then effectively given back to them over time.

Are There Conflicting Interests?

Beware of conflicting interests. This scam was interesting – albeit far from unusual – in that the developers and agents were one and the same, albeit trading under different names. It is not uncommon for a developer to carry out both functions but in this instance the con was carried out so that the ‘agent’ could charge the investors additional commission for sourcing property from the ‘developer’. Again, not unusually, the developer employed a top city centre lawyer to give a veneer of respectability which many naïve investors fell for.

The lawyer produced a contract which, as is often the case, was loaded in the developer’s favour. Most investors were duped because they simply did not employ common sense; doing some basic research on the developer and agent and the lawyer, not getting second opinions, and not employing their own lawyer to talk contracts. Many investors were foolish enough to simply use the lawyer recommended by the developer, placing their confidence and trust in the lawyer on just the strength of the developer’s introduction.

The Bottom Line

Harsh though it is to say, most foreign buyers who are scammed only have themselves to blame. They take what they are told at face value, when they should always get as many other independent opinions as they can. They are ‘advised’ by the developer’s or the agent’s contacts when, at best, that is likely to be biased. They do not do even the most basic research – talking to other local agents, walking the streets, viewing comparable properties, speaking to other buyers, listening to the advice of a lawyer and other professionals.

Some simply want to put in as little money as they can, do as little research as possible (if any) and leave everything to be done by the developer or agent. No wonder so many get ripped off. And resolving disputes overseas is not easy – this scam artist’s standard line of defence is “you’ll have to take me to court”, knowing full well that it will be a long-drawn-out two year process which few people have the stamina to endure not to mention having to overcome the logistical problem doing it from so far away.

Do you have a story to share? We would like to share members’ success and not-so-successful stories with fellow members. Anon, of course!

Vintage Clothing Trading

Vintage Clothing Trading

If my daughter and her friends are anything to go by, vintage clothing is in vogue at the moment. A combination of environmental concern and the desire to have something you won’t find on the High Street is leading many young people to seek out vintage items. It seems to me that there is money to be made here.

One persons old tat is another persons vintage. By scouring charity shops and jumble sales for bargains, cleaning them up and then selling them on via eBay or  a concession in an existing shop, it should be possible to make some interesting profits.

The key here is that you need to have an eye for fashion and  a firm idea what’s likely to appeal to vintage clothes lovers. Not one for me then, but certainly an opportunity for the right person.

The Payment Protection Insurance

The Payment Protection Insurance, PPI, scandal rumbles on. Fact is, most policies have been mis-sold. About 80 per cent of cases that go to the Financial Ombudsman, FOS, go in the clients’ favour. Here’s a quick, can-I-get-a-refund guide for you…

Was It Mis-sold?

Decide whether you were mis-sold the policy. To make a successful PPI claim, you just need to show that you were ‘mis-sold’ the policy – in short, you should not have been sold the policy. Whoever sold the policy has certain responsibilities towards you. They needed to ensure that you understood what you were buying. They should also have made sure it was appropriate for your needs.

As an example, you should have had the exclusions pointed out to you. And, if the policy would be null and void if you had certain pre-existing medical conditions, such as a history of heart trouble, the seller should have checked to see if that was the case.

As another example, if you pointed out that you already had cover via your job but the seller said you should have this PPI anyway, that’s mis-selling. If the seller didn’t ask you any relevant questions, perhaps about how many hours you worked, that could be mis-selling as well if you don’t work enough to qualify.

Did You Understand?

Did they make you understand what you were buying? First things first, did you know exactly what PPI was when you took out the policy? You should have done if you were buying it and the seller had a responsibility to make sure that you did. You should have been aware of what you had to do – pay the premiums etc. You should also have been made aware of what the seller would do in return – if you fell ill, your payments would be covered by the policy etc (at least in theory).

Of course, there is a wider context to this – all of those ‘ifs, buts and maybes’. If you had a pre-existing medical condition, you’d probably not get that payout, and so on. If you had, say, cancer one would expect that you would be excluded if you needed to claim as a result of something relating to that. The seller should have covered those ifs, buts and maybes – in effect, gone over the small print with you – before you took out the policy. You should have known what you were getting yourself into with this policy.

Was It Appropriate?

Did they make sure it was appropriate to your needs? Generally speaking, PPI is a product that should really be sold only to those people who are working, can afford repayments and want PPI just in case they become ill or unemployed and can’t maintain the repayments. So the seller should really make sure you are working when you took out the policy.

Note though that the definition of ‘working’ can vary. Typically, it may be that you are working ‘more than 16 hours per week’. If, or example, you worked less than that and took out a policy, you’ve probably been mis-sold as, in the event of a claim, they would normally not pay out as you did not work 16 hours or more a week. They should have asked you.

If you were self employed, you need to check to see if the PPI covered you and would pay out if you were taken ill, had an accident or your business failed. Often, PPI does not cover the self-employed so if you took out such a policy it’s not appropriate to your needs. The seller should have checked that and not sold PPI to you.

Anything Underhand?

Did they do anything underhand? A common complaint is that the seller stated that you must take out PPI through them to get the mortgage, the loan, the credit card or whatever. According to the Banking Code (replaced in November 2009 by the wider-reaching Lending Code), a lender will not insist that you purchase insurance from them.

Even though the seller may not have actually stated that their PPI was compulsory, you can still pursue a refund using this angle if; it wasn’t stated that the PPI was optional (i.e. the unspoken implication being that it was compulsory); it was implied that your application would be more likely to succeed if you took out the policy; it was suggested that the mortgage, loan or other borrowings would be more costly if you did not agree to the PPI. You could even pursue this line if you felt pressured into agreeing to the PPI against your wishes.

Sometimes, you may have taken out PPI without actually realising it. Not so long ago, some agreements had boxes which you had to tick to opt out of the PPI whereas nowadays you need to tick a box to opt in.

What To Do

Know how to complain. If you have, or have had, PPI, it’s worth complaining. Even if you were happy with it (most likely because it gave you a sense of security and you never put it to the test by claiming on it), have a go anyway. After all, you could get all your money back. Reminder: But, please note, if you have or have had PPI and have received a payout from it, you cannot claim your money back as you can’t say the policy was mis-sold!

The ‘how to’ of reclaiming is fairly simple. To start, you need to get all your paperwork and facts and figures together. Once you know how much you have paid out and have decided why you think you should get your money back, you write to the PPI provider. Ultimately, you can go to the Financial Ombudsman Service who, you’ll recall, favours the clients in 80 per cent of cases. The Financial Ombudsman Service is at Financial-ombudsman.org.uk.

As always, we welcome your feedbacks and comments especially if we can re-use them, anon of course, to benefit other members.

admin@streetwisenews.com