The Property Rollercoaster

The Property Rollercoaster

 

Last week’s blog was a swift update on everything going on with Nichol Smith Investments. We’ve managed to catch up on ourselves and thought we’d take a moment to summarise what we like to call ‘The Property Rollercoaster”, which we feel has been going on for a few weeks.

 

The property market where we invest (Edinburgh), and I’m sure true to many UK cities, have been through many changes in recent months. The market got off to a flying start at the beginning of 2020. Properties were coming on the market and attracting a lot of interest. We saw many offers for every property, with practically every property on the market going to closing dates.

 

We’ve gone from a very strong property market to a very variable market. Some properties are still flying off the shelf, and some properties have had no interest whatsoever.

 

In the space of two weeks, we’ve seen dramatic changes.

 

We’ve even experienced properties gaining a lot of interest and notes of interest, and going to closing dates. At the closing date, there are no offers from the interested parties. This is unheard of!

 

We recently picked up a property as all the other interested parties pulled out. We were due to collect the keys tomorrow but the Registers of Scotland (where the title deeds are held and updated) are temporarily closed. Again, this is completely unheard of.

 

We also submitted a very low offer on a property at a closing date. We were notified on Friday that our offer was successful as the other eight parties interested dropped out. We’re delighted with our purchase and can’t wait to get working on it. It’s really a wild roller coaster ride at the moment.

 

As Warren Buffett rightly says “Be fearful when others are greedy, and be greedy when others are fearful”. It’s in times like this where we really leverage our buying power, as these are the times when wealth is created.

 

Many things in the property world can be out of our control. We like to plan out strategy A, B and C to cover all eventualities. I feel we may only be at the start of this new rollercoaster ride due to the difficulties facing the stock market and the global pandemic.

 

With every challenge comes an opportunity, and this current market is filled with opportunity.

 

Now is a great opportunity to create wealth for yourself through property. 

 

We’ll be holding investor days, or possibly webinars (depending on social distancing), in the near future. We’ll keep you updated.

 

We’re always delighted to hear from you if you’re interested in investing in property with Nichol Smith Investments. Click the button below to book a call with me, or drop me an email.

 

Until next week’s blog, stay safe and be kind where you can.


Joint Venture Contracts

Joint Venture Contracts

 

This week’s blog is going to take a closer look at the joint venture partnership and what exactly should be discussed before entering into a joint venture. This will ultimately shape the contract you make legally binding between joint venture partners.

 

In case you missed it, last week’s blog discussed some basic principles of joint ventures and their place in the property world. It’s a good starting point if you’re completely new to joint ventures, so head back to the blog on the website and give it a quick read.

 

A joint venture contract doesn’t need to be a large, complicated, lengthy document, but it’s essential to take the time to get it right before you get going. It protects all the individuals in the joint venture to ensure all possible eventualities are covered, including profit split, responsibilities in the project, the exit strategy, and the backup plan.

 

First things first, you need to consider who will be involved in the partnership. Usually, the partners are the property professional who will bring their time, skills and knowledge of the industry, and the other partner will provide the funding and oversee payments throughout the project.

 

Have you considered who will own the property during the renovation?

 

Typically it will be the individual who provides the finance for the joint venture who will legally own the property. The individual who is not part of funding the property purchase may take out a legal charge on the property (for example an RX1 form) or a legal contract (deed of trust) to ensure the property cannot be sold or transferred without their permission.

 

Another important point to consider about a joint venture partnership is sharing profits. Here at Nichol Smith Investments, we like to see it as two or more parties coming together as equals, bringing equivalent skill or monetary value to the table, and therefore profits split evenly. However, that’s how we feel about joint ventures, and not all property professionals are willing to split profits equally. 

 

We have discussed buying, renovating and selling properties in joint ventures. This is the traditional way individuals can work together in property to share profits. However, there are plenty of people out there who are keen to work on all different types of property projects. For example, joint venturing on HMOs; where one partner is responsible for project managing the renovation of the property to be suitable for HMO licensing and usage, and the other funds the purchase and renovation. The rent income (after all expenses) is split 50/50. This type of joint venture partnership is a longer-term commitment. Deciding an exit strategy is vital when considering a joint venture partnership.

 

What about when things don’t go to plan…

 

If you decide on an exit strategy, for example, buy to sell, but you can’t sell the property or don’t receive an offer that you (or your joint venture partner) see as acceptable, what do you do? It’s essential to document the plan for the ‘what ifs’ in your joint venture contract before starting out. Discussing these things early on will make decisions easier down the line if the worst is to happen, and you both have it written down in black and white. Say the market changes during a buy to sell project, consider what price you are happy to accept for the property to break even. Consider how long you’re comfortable leaving the property on the market, whether you’d consider an auction sale after a specified period of time, and what you would do if you made a loss.

 

It’s not always plane sailing. There is always an element of risk in the property market, just like any other investment method. One of our fond property friends comes to mind when we write up joint venture contracts, as they always say ‘cover the five D’s’. The five D’s are: departure, disaster, death, divorce, and disagreement. Discussing the five D’s and acknowledging what to do in worst-case scenarios will put you in good stead for a successful joint venture. 

 

If you’ve considered joint venturing on a property project, we hope you’ve found this blog useful in covering all aspects of a joint venture contract. Joint ventures can be a great way for individuals to work together to share profits, particularly for those who are looking to invest in property but would like to lean on the expertise of a property professional. If you’d like to find out more about joint venture partnerships with Nichol Smith Investments, please click the button below.


Joint Ventures: Basic Principles

Joint Ventures: Basic Principles

 

Joint ventures are well known in the business world, but many are a little unsure about what joint ventures involve when it comes to property investing. Today I am going to outline some basic principles of joint ventures in property, including what makes a joint venture successful and how to cover all eventualities.

In the property market, a joint venture is a temporary but formalised partnership of two or more individuals, which contract with each other for a particular development project, such as a buy-to-sell project, often through the creation of a temporary subsidiary company called a Special Purpose Vehicle (SPV).

Creating a joint venture partnership for a specific property project can be a great way to work with other professionals or investors in the industry. Joint ventures, in our opinion, work best when two (or more) parties come together to work on a project where their skills complement each other. The way we like to think of it is: you don’t want two (or more) investors working on the same project with little experience of project managing, and likewise, you don’t want two hands-on individuals coming together with no way of funding the project.

A successful joint venture partnership works well in property when the individuals involved have skills that complement each other. This could be where one individual organises the funding for the project and oversees payments, while the other finds the project and manages the refurbishment from start to finish. Alternatively, it could be a partnership between an individual who can oversee the project and fund it, partnering with a builder or other tradesperson who will complete the refurbishment.

Not only can joint partnerships work well with two parties coming together with complementary skills to one another, but joint ventures can work well with more than two parties. We have met professionals in the industry that have multiple parties involved in a property project, where skills and expertise are brought from a wide range of professionals like architects, accountants, quantity surveyors and engineers.

You might be thinking “this all sounds great, but why would we consider joint venturing”. Let me explain some of the benefits.

For many individuals who want to invest in property, joint ventures can be a great way to get involved in a renovation project without going it alone. You can keep up to date with progress, be as hands-on or hands-off as you like depending on your workload and geographical location, and gain experience of what’s involved in a renovation project while working alongside someone with more expertise (and time) than yourself.

For property professionals, working in a joint venture partnership can be a way to expand their knowledge of different aspects of property, and allow working with new professionals in the industry. In certain circumstances, it can be a great way to work with an investor who can fully fund the renovation to get a project off the ground.

Depending on the joint venture partnership agreement, investors can often achieve higher returns on their investment than loaning money to a property company for a fixed return. At Nichol Smith Investments, we believe that joint venture partnerships are where each partner is equal. With this in mind, previous joint venture partnerships we have worked on with investors or other property professionals have resulted in a 50/50 split of profits. This allows us to work on more projects throughout the year while achieving great returns for our investors. And of course, having fun at the same time.

We hope this blog has helped explain the basic principles of what a joint venture partnership can involve in property, and why they can be a great way to gain experience in property and achieve good returns at the same time. Last week we touched on the recent changes the Financial Conduct Authority made to investors working in property. If you missed this article, it’s well worth a read if you’re considering joint ventures in property.

Next week we are continuing the theme of joint ventures, and we will take a more in-depth look into what a joint venture agreement should include. 

The property market is always changing, but we think there are lots of interesting and exciting things to come. If you’re interested in getting into property but don’t have the time, knowledge or know-how, click the button below to book a call with me.


FCA Regulation Changes & Property: What You Need to Know

FCA Regulation Changes & Property: What You Need to Know

We thought it would be important to highlight recent regulations changes made by the FCA to protect investors looking to get involved in property.

The FCA issued new guidance for investors and property professionals alike in November 2019 following a large seller of ‘mini-bonds’ in the property industry going into administration (London Capital and Finance), which caused investors to lose millions. 

The number of individuals investing in property-related companies for so-called guaranteed returns is on the rise, with many falling foul to the risks involved in this market.

For this reason, from 1st January until 31st December 2020, the FCA has placed restrictions on individuals looking to invest in speculative illiquid securities. Speculative illiquid securities include unlisted bonds and preference shares where the issuer uses the funds raised to lend to a third party; invest in other companies, or purchase or develop property.

Therefore any company you may consider working with for property-related financial returns will need to ensure they comply with the new FCA regulations. 

The FCA outline some of the areas where investors may potentially need to be wary:

  • The promise of high annual returns, often presented as ‘fixed’, often starting at 6- 8% – well above rates offered by traditional cash-savings products
  • Exposure to high-risk, speculative assets that are difficult for an investor to value or verify
  • Complex legal structure to a product, or between a promoter and issuer
  • High upfront or embedded costs and charges
  • Often misleading financial promotions that:
    • Focus on attractive headline returns
    • Imply capital protection or other features (diversification, asset-backed) as reducing risk, which may not be effective protections in practice
    • Do not disclose costs and charges to the investor or embed them in the arranging or structuring of the product, with fees of 20% or more of funds raised in some cases
    • Advertise that the investment is eligible to be held in a tax-incentivised ‘wrapper’ (e.g., an IF ISA or SIPP) when it does not meet the qualifying criteria
    • Use the role of HMRC in overseeing tax wrappers (e.g., IF ISAs or SIPPs) to imply oversight or endorsement by the government

If you have any concerns about investing in property for ‘fixed’ returns on your investment, or working in partnership with a property professional in a joint venture type profit share, please consult FCA guidance (see the link at the end of this article).

Individuals who wish to invest in property-related businesses may still be able to so in certain circumstances. The FCA will still allow property-related businesses to promote their products or services to a niche retail market for whom they are likely to be suitable but remove the ability to ‘mass market’ specific products to the public.

To comply with FCA regulations, any property-related business may work with investors so long as they fall into one of two categories:

  • Classed as a high net worth individual (simply put: either a salary of £100,000 per annum or more or £250,000 in assets – excluding family home or pension)
  • Classed as a sophisticated investor

If you would like to find out more about risks involved in property-related investments and whether you are suitable to invest in property-related businesses, please click the links below to be taken to the FCA regulations.

www.fca.org.uk/link1

www.fca.org.uk/link2

The property market is always changing, but we think there are lots of interesting and exciting things to come. If you’re interested in getting into property but don’t have the time, knowledge or know-how, click the button below to book a call with me.


HMOs: What Does the Future Hold?

HMOs: What Does the Future Hold?

 

Many of you will be thinking HMOs, what’s interesting about student accommodation? Today’s blog will take a look at why HMOs are becoming more popular in the market place, and why property investors maybe adding them to their portfolios.

 

For those of you who may not know, HMO stands for House of Multiple Occupancy (or Occupation) and is a term used to describe when three or more unrelated individuals live together in a home with shared facilities such as kitchen, living space and sometimes bathrooms. They’re most commonly used for students, and often get bad reputations for being lower quality accommodation and troublesome for neighbours due to student antics. Each local Council will have policies relating to the regulation of HMOs within neighbourhoods, and for your property to be used as an HMO, you will need to apply for a license from your local Council and ensure particular safety standards are met. Because of the specific requirements needed to set up an HMO, the setup cost can be far higher than a traditional single let.

 

So, why would you want to set up an HMO? 

 

Typically properties that are let out to multiple occupants tend to attract a higher rent than if the property was let out to a couple or a family (a single let). Here’s an example: a property may rent out for say £800 per month as a three-bedroom family home, but you might be able to charge say £500 per room (one tenant per room) totalling £1,500 per month. As you can see, you almost double the rent you collect each month. 

 

Another advantage of using a property as an HMO over a single-let is minimising risk. The risk to your income comes from void periods. With a standard single let property when a tenant moves out, you risk of the property sitting empty and therefore not bringing in any income. On the flip side, when you own a property with multiple occupants, even if one tenant moves out and you struggle to replace them, you’ll still receive rent from the remaining tenants. Risk also comes into play with non-payment of rent. If you rent your property to one tenant (whether it’s to an individual, a family or a couple) and they stop paying rent for whatever reason, you lose the full rental amount. On the flip side, if one of your HMO tenants stops paying rent, you only lose a smaller portion of your total rent. Both reducing void periods and risk of non-payment ultimately reduce the risk to your income as a landlord.

 

HMO’s are an attractive way for landlords to make profits from their properties, but is now a good time to look at setting up new HMOs?

 

The answer to this is yes. We’ve all read about the shortage of housing in the UK, and HMOs can help relieve a small amount of this burden. HMOs effectively maximise the living space in rental properties, therefore helping with some of the need for more housing, particularly in cities. HMOs are becoming more popular with demographics other than students, such as young professionals or individuals on lower incomes. In many cities, renting an apartment alone or as a flatshare with one other person is still way beyond what the average young professional can afford. With the average age of first-time buyers creeping up in the UK, HMOs can be an affordable place for professionals to live while saving for a deposit for their first home. 

 

If you decide to consider setting up an HMO for professionals, the best place to start is looking at competition in your local area. HMOs that cater to young professionals are usually of an excellent standard, often with higher spec kitchens and luxurious bathrooms (or possibly even all en-suite rooms). There’s definitely a market for this sort of living, so it’s perhaps a great time to look into HMOs in your local area. Please ensure you check with your local Council for restrictions and regulations in your specific neighbourhood before you get going.

 

There are some negatives to owning properties as HMOs. I won’t go into the full details, but some of the issues can include: higher turnover of occupants, larger management fees if you use a letting agent to manage the property, more wear and tear on the property, bigger initial set up costs and cost to furnish (and renew/replace furniture) the property. Obtaining a license for an HMO from your local Council also comes at a price.

 

The property market is always changing, but we think there are lots of interesting and exciting things to come. If you’re interested in getting into property but don’t have the time, knowledge or know-how, click the button below to book a call with me.


Maximise Profits from your Property Portfolio

Maximise Profits from your Property Portfolio

 

With many news articles like ‘the buy-to-let market is dead’ hitting the headlines over the past few years, we think it’s important to discuss ways to maximise the profitability of your property portfolio. Changes to legislation, such as Section 24, have hit landlords hard. But all is not lost. If you’re one of many landlords that have held on to your portfolio, this article is for you. 

 

Renovate

Could your properties do with an update? Most rental properties could do with a lick of paint or even updated kitchens or bathrooms. Spending a little on bringing your property up to a good standard can go along way to boosting the rental income you’ll receive every month.

Have a look at property portals like RightMove or Zoopla for other properties in the same area as your rental property to ensure your property is in similar condition (or ideally better than) the competition.  

 

Change the use

Would your property make you higher returns if it was used for an alternative purpose than buy-to-let?  For example Serviced Accommodation (also referred to as Airbnb.

Serviced Accommodation has become ever more popular with property owners due to the higher returns achieved. Something to bear in mind with this strategy is consulting your lender to ensure your mortgage product is still suitable for serviced accommodation, and finding a good Airbnb management company to manage your property is highly recommended. 

If your property has three bedrooms or more, would you consider changing the use to an 

HMO (House of Multiple Occupancy)? HMOs are popular for students and are becoming popular for young professionals. Quite often, property owners can make significantly higher returns when using their property as an HMO rather than a single-let property. Consult your local planning department for guidance on restrictions and necessary safety alterations.

 

Review your lending

It seems very obvious, but check out your mortgage product (if you have one) and ensure you’re on a low-interest rate. You’d be amazed at the number of landlords who leave their properties on the same mortgage for years on end when switching could save them hundreds of pounds every year. Interest rates are at an all-time low, and with some mortgage providers offering a ten-year fixed-rate mortgage, now could be the time to switch lenders. Give your mortgage lender a call to see what’s available, and if there are no savings to be made with them, look into switching lenders.

 

Increase your rent

When did you last increase your rent? Many landlords shy away from raising the rent on their properties, particularly if they’ve had tenants in their property for some time. I’m not recommending charging in and doubling your tenants’ rent, but it may be worth reviewing other similar properties nearby to get a feel for a fair rental price. If the rent your charging is behind other similar properties, it’s time to increase your rent. On average, the amount you charge for rent should go up by roughly 3-5% per year to account for inflation and increased costs. This will help increase the profitability of your portfolio.

 

Still not making the yields you feel you should be? If you review the above methods to maximise profitability from your portfolio and are still wondering why your portfolio yield is lower than expected, it could be time to sell. Sometimes it’s worth cutting your loss and selling any properties that are performing poorly. We like to think of it as removing the driftwood. If you sell properties that perform poorly, the cash pot you gain could be used to buy properties with higher yields. 

 

We hope you’ve enjoyed this article on maximising profit from your property portfolio. If you’re keen to sell any properties in your portfolio or would like advice on growing your property portfolio, click the button below to book a call with me. 


Buy, Renovate and Refinance

Buy, Renovate and Refinance

 

Some of you may be familiar with the concept of buy, renovate and refinance. Today’s blog is going to walk you through the concept and give you some example figures.

 

The idea of buying a property and renovating it isn’t a new concept. When considering refinancing following a renovation, there can be a real light bulb moment for individuals who have not come across this before.

 

When a property is purchased that requires a lot of work; the property purchase price tends to reflect this. In comparison to other properties in the local area, you should definitely feel like you’ve picked up the property for a great price. 

 

Now, this is when your number-crunching becomes essential. You should have a good idea exactly how much your renovation work is going to cost, plus all other associated fees with buying a property such as legal fees and stamp duty. We also put around 10% of renovation costs aside for an additional safety net, as renovation costs often creep up. Many property investors will put down a small deposit and take out a mortgage to pay for the rest of the property, say a 25% deposit and 75% mortgage (75% loan to value). 

 

When you initially bought the property, you’ll have spent some time looking at other properties on the same street or same area to get an estimated end market value, i.e. what the property will be worth once renovated. From here we have an idea of:

 

  • All fees included with buying the property 
  • Renovation costs
  • End market value once renovated

  

If you’ve spent time crunching the numbers before diving in and purchasing the property, you should have a good margin between all the money spent purchasing and renovating the property, and what it will be valued at once renovated. This is your profit.

 

Where experienced investors can use their skills and make their money work harder for them, is when they buy a property, renovate it, and refinance the property at the higher value once the renovation is complete. If a property is purchased at a very low price, for example, if the property is in extremely poor condition, or where there can be a huge uplift in value by, for example converting the loft or extending sideways/into the garden, when the property is refinanced the investor can occasionally pull out all the capital that was initially invested.

 

Here’s an example:

 

A 2 bedroom bungalow purchased for £175,000.

Fees, stamp duty and renovation add up to £75,000.

Initial 25% deposit put down – £43,750 (therefore borrowing £131,250 from the lender)

Total money invested from our pocket into the deal: deposit plus fees plus renovation costs: £43,750+£75,000 = £118,750

 

Once renovated, the bungalow has three bedrooms and a large living room/kitchen extension. 

 

It is now valued at £375,000.

Property is refinanced at the higher valuation of £375,000…

So borrowing 75% of £375,000 is £281,250.

 

The mortgage provider will, therefore, increase your borrowings to £281,250 for the renovated property. 

New mortgage – old mortgage: £281,250-£131,250 = £150,000 of additional capital borrowed from the bank.

With this additional £150,000 of borrowed money from the bank, we can pay-off our initial investment costs of £118,750, and walk away with a small profit.

 

This example deal hopefully highlights the power of buying properties in need of significant renovation works or properties where ‘value’ can be added (extensions, loft conversions, etc.). If the difference between purchase price plus all costs associated, and the estimated end value are high enough, if we decide to refinance a property once the renovation work is completed, we can potentially pull all of our initial costs out of the property. Now that’s what I call making your money work hard for you.

 

We always need to bear in mind that not all lenders will allow you to refinance a property following renovations, and while it may seem financially smart to look for these sorts of projects, they come with additional risks. Before undertaking a project of this scale, we would recommend speaking to your local estate agent, local tradespeople, and your financial advisor to ensure you are knowledgeable and financially safe to complete this sort of undertaking.

 

We hope you’ve enjoyed this short article on buying, renovating and refinancing a property. If you’re interested in investing in property but don’t have the time, knowledge or know-how, click the button below to book a call with me.


Our Plan for Property in 2020

Our Plan for Property in 2020

 

I often get asked by my investors and potential investors what my plans are for property. While we help our clients grow their wealth through property, we’re also active investors ourselves. This article outlines our plans for 2020.

 

When planning the year ahead, we need to consider our 18-month cash flow for the business. As I’m sure you can calculate, our plans for 2020 were formulated during the summer months of 2019. That means we’re now looking at plans for early to mid-2021 too! Outwith the services we provide to our investors, we strive to generate strong cash flow for the business both from regular monthly income from rental properties and also lump sums of cash from buy-to-sell projects.

 

This year we plan to grow our portfolio of buy-to-let properties. Ideally, this will be spread evenly across the four quarters of the year, but depending on the properties sourced off-market, there can be particularly busy spells throughout the year. We aim to buy properties at or below market value, to ensure we make money when we buy, protecting the investment should the market take a dip. If we needed to sell a property rather than to hold and rent, the equity gained on purchase is essential to allow flexibility in the sale price. We ensure our rental properties are in the top 25% of rental properties on the market in terms of standards of living, therefore every property we purchase we renovate to a high standard before moving tenants in. This ensures we have minimal gaps in tenancy and our tenants enjoy living in our properties. 

 

We have a small number of buy-to-sell projects planned for this year. The type of properties we focus on renovating are older properties with period features, and these tend to be flats or houses within Edinburgh. We find the key to a successful buy-to-sell project is targeting the customer who is going to purchase the property once renovated. For example, if we decide to purchase a two-bedroom property in a popular area for young professionals and university students, the renovation is going to be quite different to renovating a 3 or 4 bedroom terraced home or large apartment that we plan to sell to a family. Always tailor your renovation to what your potential buyer wants. If you know your local area well, start looking through homes sold recently in the area that have achieved a sale price higher than expected. If you can identify any special touches that made the property so popular with buyers, you’ll do well in a renovation project.

 

We would love to hear from you if you are interested in investing in property. We offer a fixed return on investment for investors who want strong returns from property without owning property personally. We also enjoy working with investors in joint ventures.

 

If you would like more information about investing with us, please click the button below to book a call with me.


Mortgage Changes for 2020

Mortgage Changes for 2020

 

Whether you’re a first-time buyer, a homeowner looking to remortgage or a buy-to-let landlord, 2020 is sure to be another rollercoaster ride in the world of mortgages.

 

There have been a few big changes in the mortgage world for different groups of buyers.

 

First-time buyers will definitely be happy with some of the recent changes. We have seen 95% LTV mortgages re-emerge on the market place. Barclay’s paved the way for more relaxed borrowing rules, allowing individuals to borrow five times their salary as first-time buyers (so long as their salary was above £30,000). This is very interesting for investors looking to flip properties, as first-time buyers often look to purchase properties that have recently been renovated that are ‘walk-in’ condition.

 

Rates look set to stay low for now, with many homeowners capitalising on fixing their mortgage for five years at a low rate. Two year fixed rate mortgages still have a little wiggle room to give in comparison to the five year fixed rate deals, so we will have to wait and see if the banks adjust the two year fixed rates.

 

Your age can play a part in how much you can borrow and for how long. Recent changes in the market have made borrowing easier in later years, with some lenders removing their maximum age for buy-to-let mortgages. We also saw the introduction of 40-year term mortgages, which is likely a reflection of the increase in the number of first-time buyers in the housing market.

 

For those of us who own our own homes, now could be a good time to remortgage. With rates so low and some lenders offering a very competitive ten year fixed rate mortgage, many homeowners will look to remortgage. As rates are low, and stamp duty costly on higher-end properties, it’s likely we will see an increase in borrowing for those remortgaging to renovate their homes or add extensions, as an alternative to moving home.

 

Landlords will undoubtedly need to have their wits about them in 2020. 2019 saw many lenders offering fantastic rates with cashback, but landlords have been caught out with upfront fees of up to £1,995. Two year fixed deals are becoming ever more popular with landlords who are uncertain about the long term profitability of owning properties affected by the mortgage relief tax cuts. 

 

As you can see, 2020 will be an interesting year for lending across the mortgage spectrum. It’s good news if you are due to remortgage, and also great if you are a first-time buyer. It’s potentially less exciting for landlords, however, using a mortgage broker who has access to the whole market may help with profitability from your portfolio. 

 

If you’re interested in investing in property but don’t have the time, knowledge or know-how, then click the button below to book a call with me.


Are Your Savings a Thing of the Past?

Are Your Savings a Thing of the Past?

 

From a young age, most of us are taught by our parents or teachers to save part of our earnings. Save for a rainy day, a deposit for a house, a special occasion, or an emergency. Saving our money is ingrained in us. 

 

But is saving money in the bank a smart thing to do, both now and for future generations?

 

Putting money into a savings account is a smart thing to do for a percentage of your wealth, to ensure you have money set aside in case of emergency. But for many parts of Europe, individuals are being charged to do this.

 

The European Central Bank lowered its interest rates below zero during 2019. Negative interest rates mean it costs you money to keep your savings in the bank and was introduced as a last resort to stimulate growth in the economy in Europe. The plan was to lower interest rates below zero to encourage banks with significant cash holdings to get capital out to work.

 

We’ve all heard the phrases “the rich are getting richer” and “it takes money to make money” but many of us would assume this relates to the rich earning high salaries and accumulating savings in the bank. When we think about our savings account, for example in an ISA, you’d be lucky to make 1% of interest per year on your savings. Considering it costs you money to have your savings in the bank in Europe, this begs the question; how do the rich grow their wealth if their savings are not growing in the bank.

 

Many individuals who are growing their wealth faster than the average individual are doing so by investing their capital in assets. We can accumulate wealth by the rising value of assets, such as property and shares. The wealthier have more assets and more capital gains. These are banked, not consumed, explaining why the so-called rich get richer. Property, in particular, has been very profitable for investors in the UK since the 1990s.

 

Could it be time to challenge our beliefs of putting a portion of your salary every month into savings? I’d say it’s time to reassess what part of earned income is saved, and increase the portion that’s invested in assets. The start of a new decade could be the perfect time for you to assess your current wealth and consider investing a portion of your savings in assets. 

 

If you’d like to get into property investing but don’t have the time or knowledge, book a call with me using the button below to discuss how I could help you on your journey.