Streetwise Property Alert 6th February 2014

Welcome to Thursday’s email of news and views…

US Distressed Properties News

It’s often said that, for a market to be truly rising, it should not have ‘too many’ distressed properties, i.e. those in foreclosure, available to buyers. Quite simply, the more there are, the likelier it is that prices are kept down at or close to distressed levels. ‘Too many’ or ‘not too many’ is open to debate but some pundits say that 2 per cent is about the norm in a healthy market.

On that basis, some markets in the US, although they are often receiving good press, are not as healthy as they might be. According to Core Logic, Michigan had the largest share of distressed sales of any state in December at 34.3 per cent. Nevada at 32.2 per cent, Illinois at 27.4 per cent, Florida at 25.8 per cent and Georgia at 24.6 per cent came next.

Note though that the 2 per cent figure we gave is a percentage of the total properties currently on sale whereas these 34.3 per cent and other figures are a percentage of the total sales. It is also worth mentioning that these high percentages are falling steadily. More to come.

Algarve – An Update

Meravista, a website selling properties on the Algarve, says Portugal is a buyers’ market for both investment and lifestyle purchases. The site compared prices on its 24,000 units database with 2013 bank valuations from Statistics Portugal (INE). Prices on the Algarve are now only 5 per cent higher than bank valuations on average.

Anita van Huson at Meravista says, ‘Algarve property was experiencing inflated growth in advance of the recession, so it was hit particularly hard when the markets crashed. I don’t think we’ll see valuations as low as these for a long time to come, which makes the Algarve an ideal place for property investment.’ We have more to follow.

Dubai – It’s Cooling

Knight Frank’s latest Dubai Prime Residential Review suggests that market cooling measures in Dubai are having some effect; having seen prices rise, in some locations, by 20 to 30 per cent in 2013, the rate is expected to slow closer to 10 per cent in 2014.

Their Khjawar Khan says, ‘Given that prime residential prices are still almost a third below their previous peak, and the fact that there is little in the way of new apartments due to be delivered over the next 12 to 18 months, we think there is decent scope for prices to play catch-up. We anticipate that prime residential prices in Dubai could rise by 10 to 15 per cent this year.’ We have members out there to report back shortly.

All for now, as ever, feel free to email back.

admin@streetwisenews.com

Hardly Chicken Feed

Just had  an interesting conversation with our printer who has a friend who’s a chicken farmer. He supplies the big supermarkets, and I’ve often wondered how the farmers make any money given that you a can often buy a chicken in Tesco and their competitors for just a couple of pounds.  Well it turns out margins on chickens are indeed tight, and the farmer makes most of his money from a surprising source – chicken manure. Apparently, chicken poo is a rich source of nitrogen and he’s able to sell both the solid manure and (sorry to be so graphic here) the liquid remnants that are left when the sheds are hosed down.

I’ve asked this question before, but it’s worth thinking about again. Is there some waste product associated with your business which could be sold at a profit? Most people would see chicken poo as something which needs to be disposed of, and there may be a waste product in your business which isn’t getting the attention it deserves. Don’t think too literally here. For example, in our own business a ‘waste product’ might be enquirers who don’t ever buy from use. But perhaps they could be valuable to someone else. Think about what you have.

Streetwise Property Alert 5th February 2014

Heads up! We have some buy-to-let news and a new service for you today…

BTL News

The latest Mortgages for Business Complex Buy to Let Index throws up some interesting figures. The headlines are all about mortgages – there are more and more of them. ‘At the end of 2013, landlords could choose between more than 500 mortgage products and the figure today now tops 550. But that choice isn’t just delivering cheaper deals as there are now even more imaginative and flexible financing options out there too, many of which offer some of the best yields.’

‘With demand for tenancies as strong as ever, landlords are making use of a more buoyant situation to boost their portfolios. As we move into 2014, capital accumulation is accelerating, and joining solid rental income to make buy to let consistently attractive to investors.’

We note that, in Q4 2013, yields have slipped a little across all types of property. Vanilla buy to let yields are down from 6.3 per cent in Q3 to 5.9 per cent in Q4. HMO yields have slipped slightly too, down from 11.8 per cent in Q3 to 10.4 per cent in Q4. More to come on BTL mortgage products and yields and how they interact – we are currently at work on articles for the February PDF.

The Commercial Service

Another new service for 2014…The Commercial Service!

Two separate Kwik Fit tyre depot investments

Bristol – lease until 2029 – Freehold £640,000 – gross yield of 7.3 per cent.

Yorkshire – lease until 2030 – Freehold £1.15 Million – gross yield of 7.1 per cent.

These are armchair investments for the next 15 years!

1 per cent fee.

Sippable.

Email for details of these and other commercial investments; more to come in 2014.

admin@streetwisenews.com

BTL Tips

Up in Scotland, David Alexander of DJ Alexander, the letting and estate agency, at DJAlexander.co.uk, offers advice on BTL budgeting. Let’s quote. ‘The rental yield is the net sum you will receive annually in rental income after all expenses. Expenses include one-off payments such as legal and surveying fees and ongoing costs for mortgage repayments (if applicable), insurance, maintenance and so on. The rental yield is calculated by dividing the cost of the property by the annual net income – e.g. rental income of £9,600 a year from a flat costing £200,000 equates to an annual return of 4.8 per cent. Rental income is subject to income tax, although certain costs can be set against this.’

‘Yields of the type mentioned are the main reason why more people with large amounts of cash in banks and building societies have been moving into buy-to-let, given the current low returns from savings accounts. Some opt to buy a property outright while others prefer to keep their options open by paying with, say, a 50/50 split – half in cash and half through a mortgage. Anyone funding the venture partly with borrowed money should make allowances for any rise in interest rates at some time in the future.’

‘Careful budgeting should also apply to any spending on the interior. A property should be comfortable, well equipped and attractively presented, but try to resist the temptation to add peripheral items that might be costly yet add little to the amount of rent obtainable. Also, avoid decorating or furnishing the property to your own particular tastes; an attractive but neutral interior will appeal to the widest range of potential tenants, hence by implication lessening any rental voids (periods when the property is lying vacant).’

‘Location, location, location. It’s an old adage but as true as it ever was. A property will provide good letting income only if located in a neighbourhood that appeals to the market in mainstream tenants. For this reason, having determined how much you can afford to pay, it is best to spend the same sum of money on a mediocre property in the best area than the best property in a mediocre area. This strategy will pay dividends not just in terms of income but is likely to enhance the property’s overall return – i.e. a combination of rental income plus capital growth in the years to come.’ Food for thought.

By the by, we have the latest currencies review in from PureFX. Email back if you’d like to receive that.

admin@streetwisenews.com

Write Your Book…Now!

I couldn’t write a novel, but I’ve written several business related books, and I suspect you could do it too. Over 11,000 business books are published each year, all from a slightly different angle or perspective. Hidden within your knowledge and experience is the basis of a useful and informative book. However, you can’t expect to make a fortune from sales, but that isn’t the point.

The vast majority of books published sell less than a couple of thousand copies – and many sell significantly less than that – so why go to the trouble? Well being a published author sets you apart from the crowd in your market or arena. It puts you forward as an expert in your field and can lead to all manner of opportunities – invitations to write in trade journals, invitations to public speaking engagements, and invitations to participate in radio and TV shows. Your book also becomes your calling card, and one that won’t be hastily thrown in a drawer. It helps build your personal brand.

So give some thought to what kind of book you could write. It doesn’t have to be a 500 page epic, and printing technology is such these days that you can print in very low numbers until you’re sure how well it’s going to sell. You can even enlist the help of a ghost writer if you really don’t have the time or inclination.

Supply The Government

I used to know a bloke who gave his telephone answering staff a very simple instruction. No matter what  product a customer asked whether they sold, the answer was always ‘yes’. He would then start searching around to see where he could buy what they wanted, and still make a profit. I was thinking about him when I read about New York based Nicole Corey. Corey runs a two person business, but supplies government agencies with latex gloves, safety vests, watches and disposable smocks. She doesn’t  manufacture or stock any of these things, but rather makes a profit by procuring them at a good price and then selling them on to the government.

Does this give you a little inspiration? You don’t need to be a big business to do big business – provided you act as a middleman. The skill here is to be able to negotiate excellent deals. A tiny slice of a huge deal can make you rich.

Streetwise Property Alert 4th February 2014

Welcome to Tuesday’s property news and views – overseas today!

Caribbean News

Having spent some time in Antigua last summer and formed some links with various property specialists there and across the Caribbean, I was interested in the latest Caribbean Prime Residential Insight report from Knight Frank. It suggests prime real estate in Barbados and the British Virgin Islands is on the rise – at least in terms of sales volumes anyway.

What caught my eye most of all was the statement that the weaker dollar has generated rising interest from Euro denominated buyers. ‘Currency fluctuations have helped buyers from Europe. In 2010, a French buyer looking at purchasing a $2 million property in Barbados would have paid
€1.53 million. In 2013, due to currency rates and price movements, the same property would cost the buyer closer to €1.26 million.’ If you are a would-be buyer of prime real estate in the Caribbean, do drop us a line and we can send you more details of the new service we are developing, with affiliates, in 2014.

Florida – Come & Visit!

Our correspondent, a developer of Disney villas, writes to me, and therefore, members, ‘I am writing to let you know about the excellent opportunities that currently exist in the Florida market as the economy continues to recover. We had a very successful inspection trip to Florida in December with a number of clients. As a result of this, together with the fact that some clients could not make this trip, we are running another trip towards the end of February.’

‘I would like to invite you personally to come on this trip as our guests. You will only pay for your own flights; all other costs will be met by the developer. We have made a short video about Florida which profiles our current project and provides a lot of detail about the inspection trip.’ If you’d be interested in joining me on this trip – again, you just pay for your flight – please let me know. I’d be happy to show you around over, say, two to three days.

France – A Buyer’s Guide

Patrick at My-French-House.com has a buyer’s guide for you. Over to Patrick…

‘With so many diverse regions to choose from France attracts buyers from all walks of life, young families looking for open space, couples seeking warmer climate in retirement or professionals seeking a ‘lock up & go’ holiday home in a lively location. The country’s health system is ranked as one of the best in the world making it a sensible choice at any stage in life.’

‘For most of our clients, buying their French property is about securing a sound investment with a safe buying process, while enjoying their new lifestyle for years to come. Whatever your motivation for buying property in France, this essential guide contains all the important information you need plus useful insider tips from our team of French property experts.’

‘This guide is designed to give you all the information you need to help your property buying adventure run as smoothly and successfully as possible. Our five top tips? Work out your preferred area and budget. Do your homework. Be realistic about your requirements and expectations. Properties do sell, secure yours by making an offer. Don’t forget to use this guide!

Email back and we will direct you towards Patrick and your freebie! admin@streetwisenews.com

All for now, see you tomorrow.

Streetwise Property Alert 3rd Febraury 2014

On Saturday, we ran the Investing In 2014 seminar in London. Many members who could not attend have asked for some notes on the event. Here are my introductory notes. If you’d like to receive fuller notes from what my colleagues Jeannie, David and Colin had to say; along with details of a UK investment and a European investment that tick all the boxes, email back. admin@streetwisenews.com

Investing In 2014 – An Introduction

What we might describe as ‘armchair property investing’ has, to date, been largely unregulated. Anyone, from granny with £10,000 life savings to the multi-millionaire with a £10 million portfolio can invest in the same products.

They have equally been able to invest in armchair investments such as hotel rooms, student housing and other passive investments.

I would stress that we are not here talking about what we might call ‘vanilla’ property investments, straightforward buy-to-lets through to houses in multiple occupation, HMOs. We are talking about passive, or armchair, investments where you, as an investor, effectively put money into a pooled scheme and someone else manages everything and gives you, typically, a set annual return.

That sector ‘all changed’ on 1 January 2014.

Policy Statment PS13/3

Back in June 2013, the FCA, Financial Conduct Authority, previously FSA, Financial Services Authority, issued the policy statement, PS13/3, a.k.a, The Unregulated Collective Investment Schemes And Close Substitutes Instrument 2013. Close substitutes are collectively known as non-mainstream pooled investments – NMPIs.

In essence, this bans the promotion of ‘non-mainstream pooled investments’, NMPIs, to ‘ordinary investors’.

If you are a certified high net worth and/or a certified sophisticated investor or even a self-certified sophisticated investor, you can still invest. More on these investors in a moment.

If you are an ordinary investor, you, by and large, cannot.

The policy is in place from 1 January 2014.

What Are NMPIs?

These have been described, variously, as ‘broadly’ defined and as ‘vaguely’ defined.

The keys are in the words ‘non-mainstream’ and ‘pooled’

In essence, the FCA does not want Joe Public to put money into complicated and high-risk collective investments they either do not understand and/or where they do not understand the risks.

We’ve talked often of low-risk and low-reward investments and high-risk and high-reward investments. You do not get low-risk and high-reward investments however much developers, agents, investors and members of the public wish they do.

The FCA defines NMPIs as including:

Unregulated collective investment schemes, i.e. they have not been approved by the FCA.

Special purpose vehicles, SPVs, which attempt to disguise NMPIs. Typically, a limited company is what we are talking about.

Pooled investments characterised by unusual, speculative or complex assets, product structures, investment strategies and/or terms and features.

These include units in UCIS, unregulated collective investment schemes

Securities issued by SPVs, special purpose vehicles.

Traded life policy investments, TLPIs.

Confusion

There is A LOT of confusion – it’s not easy to get a clear and well-defined answer from the FCA when you present a scheme to them.

We’ve had conflicting advice from solicitors.

Developers and agents don’t know, or say they don’t know, what’s happening.

We’ve been told, ‘on good authority’:

Car parks, student housing, hotel rooms may be included depending on how they are owned and managed!

Other investments that fall outside collective investment criteria may be included! Crops and timber, as examples, appear to be lower risk, higher reward but are often higher risk because these investments are often illiquid, difficult to value and prices can be volatile.

Real estate investment trusts, REITs, and Exchange Traded Funds, are not covered.

Before moving on, we still feel the ‘too good to be true’ measure is worth applying. If you do not understand an investment – its complexity, how it is structured and how it profits, who is controlling matters – do not invest. That applies if you are a HNMW or S Investor too.

HNW & SI Investors

A high net worth investor is one who:

Has an annual income of £100,000 or more.

And/Or

Holds net assets of £250,000 or more.

Some assets may not be included, such as the residential home, a pension or the proceeds of life assurance contracts.

A sophisticated investor is someone who meets at least one of the following criteria:

Has been a member of a network or syndicate of business angels for at least the last six months.

Has made more than one investment in an unlisted company in the previous two years.

Has worked, in the previous two years, in a professional capacity in the private equity sector, or in the provision of finance for small and medium enterprises.

Has been, in the previous two years, a director of a company with an annual turnover of at least £1 million

Generally, for such investments, the investor will be asked to self-certify as a High Net Worth or as a Sophisticated Investor.

See attached handout.

Joe Public

So, as a rule of thumb, Joe Public investors – i.e. not high net worth and not sophisticated – cannot buy into many of these armchair investments; hotel rooms, student units etc. You can still buy into straightforward property investments such as buy-to-let where you own a unit and it is up to you how you run it and profit from it.

Of course, many investors feel that it is much easier to invest in a student unit, say, and let someone with know-how and experience run the show than, say, to live in London and try and handle a BTL portfolio in, for example, Durham, York and Bristol. But ‘rules is rules’.

The FCA advises Joe Public to distinguish the difference between direct property investments (where an investor buys a whole property, for instance a buy-to-let) or indirect or pooled investment in properties. This is the key, they suggest. Who controls?

Indirect or pooled investment includes arrangements where more than one investor buy stakes in the same property, for instance, investment in hotels. It may even include some types of one-investor, one-property where the investment is managed for the investor together with other investors’ properties, each of which is one unit in a bigger development (this might be the case, for instance, where people buy ‘holiday homes’ that are part of a resort development and rented out for income that is shared out among all other ‘holiday home’ owners in the same development).

Any such indirect investments can potentially amount to a financial product (or ‘controlled investment’) of some sort: primarily units in unregulated collective investment schemes (UCIS), though some can be other forms of investment such as securities issued by special purpose vehicles (SPVs), where the properties are owned by a corporate vehicle and investors invest in the properties indirectly by buying a stake in the corporate vehicle (or bonds issued by the corporate vehicle).

The safest approach would be to invest in direct, non-group investment in property (e.g. the same kind of sales a real estate agent would intermediate), as these are generally outside the scope of this financial regulation.

But they are not always as easy and as profitable as some of the armchair investments. Over to Jeannie and David who will tell you more…

Those are my introductory notes – I hope they make sense on their own. Obviously, I talked around these in more detail on the day. Email back if anything is unclear or you want to know more. Also, as mentioned, if you’d like to receive fuller notes from what my colleagues Jeannie, David and Colin had to say; along with details of a UK investment and a European investment that tick all the boxes, email back…

Anti-biotic Detectives

Known  antibiotics are becoming less effective in fighting infections and there’s a need to find new ones. That’s the premise behind  The ILIAD Project which has recognised the need for greater research into this area, and is employing citizens to help out by using pre-packed kits to perform their own trials at home.

The kits involve three steps that can be performed by anyone. Firstly, ‘citizen scientists’ collect a piece of organic material — this can be anything, such as a leaf found on the ground, although the kits offer suggestions of what might work well.  There are over 3,000 different plant species for example, which may or may not be effective

Using the provided pestle and mortar, the sample is then ground up and placed onto an ajar plate along with the included control sample. If the user’s sample is ineffective, bacteria will then grow around it. If it has antibacterial properties, a clear ring will form around it. In either case, participants can upload the details of their experiment onto the ILIAD database.

I mention it for three reasons; firstly because it’s interesting, secondly because you might wish to participate, and thirdly because the you may wish to ‘invest’. The whole project is being financed by crowd-funding. There’s some more information here.

http://www.indiegogo.com/projects/help-identify-new-antibiotics-at-home-with-the-iliad-project