Out of the properties that you might find, which one(s) do you actually purchase? In short, the ones where the figures stack up.
To explain this further it is essential that you view your property investment as a business and not just some form of gambling, although the property market contains a number of elements of risk, as do most types of investment. Just like in any kind of business you need to know that you will be making money and not losing money, it is the bottom line that tells you if you are running a profitable business or not. However, there are at least two different high level categories of ways to profit from investment in property, these are explained here.
Investment Types
Capital Growth - Appreciation
This is the more common method than people think to make money from the property, mostly because it is the property they own and live in. This type of investment is through the act purchase a property at a price and sell it later at a higher price, the difference is often referred to as the gain. This method is usually to save time during which the value of the property increases. However, you can add value to the property, to a kind of work for the renewal or extension. In other cases, you might be lucky enough to buy something for less than it's worth and sell it the next day by market value, make a profit on the "back" or "flip". You usually have to pay tax asset value of the property increased when sold.
Positive Cashflow - Income
This type of benefit is usually made by the owners in the overhead of owning and renting a property is less than the income generated by itself. This means that if you add the mortgage payments, administrative expenses and total cost of repairs should be lower during the same period, the rent paid by the tenant. For example, if you pay £ 500 a month in expenses, which would remain in place for at least 550 pounds, to make a profit or positive cash flow. You may have to pay taxes on the profits of the lease.
Both types of prior investments are not the only and are not necessarily mutually exclusive, which means you can find a property that represents the two types of investment. In fact, most property will be a kind of satisfaction, but there are areas that have experienced zero growth in recent years and, in fact, some regions have experienced negative growth, this means that the value of goods actually declined.
Similarly, Positive Cashflow is variable and can rise and fall with market conditions, you can only make your best, informed decision on the day, for the day, with all the available information. Historical trends may point towards a potential future, but this is not any kind of guarantee.
Plan for Voids
Must generate gaps in their structure or overheads. Empty periods, called simply as Voids, are the times when your aircraft is not left, but you must continue to pay the mortgage and associated costs such as service charges, in the case of property transferred. This is why the most common Buy to let mortgage is made by a factor of 130%, the lender expects that the holes and incidentals and built a simple protection for their financial exposure for you. To anyone's standards factor 130% is a good rule of thumb, meaning that their real income should be 130% of your mortgage payments.
Many investors and owners were arrested for ignoring empty and suddenly run out of money when they have to pay their mortgage without rental income to balance the outflow. In highly competitive areas of your property may be empty for several months. It's a good idea to have about three months of mortgage payments for the purchase for the property when it is empty.
Other properties you have in your rental portfolio is less likely to run out of cash to pay the mortgage, juggling empty risk throughout the portfolio, not only in a single property. However, this assumes that has wisely allocate their rental properties different regions to prevent the loss of income if a certain area is affected for any reason. For example, if you have five apartments in a building, all suffer the same local market conditions. In periods of low demand and strong competition, you will not only five empty fighting. If you had five rental properties in various suburbs of the same city, then reduce your chances of having five empty houses at the same time. Better yet has five properties in different cities in total. As the old saying goes, do not have all your eggs in one basket.
It is important to remember that no matter how many properties you have and spread what they are, there is always a small chance that all of them may suffer periods of nowhere at the same time. You must have a plan in case it happens, but it can reduce the risk of this happening by spreading their rental periods so that has no beginning and end of the month. This will normally occur anyway, several tenants come and go, sometimes
Yields and Profits
There are many methods that people use to calculate what they call performance. Yields are essentially the proportion of the income generated by a property in relation to the initial capital contribution and the costs associated with obtaining and leave the property. Yields are generally represented as a percentage, depending on the area and the person requesting it, you get a different story about how performance is interesting. Some people estimate that the revenue potential of a property through a series of complex calculations and come to the percentage of return, they already know your personal limits and can accept a yield of 11%, but reject a yield of 10%.
But when you look at the bigger picture performance calculations are really a waste of time because the conditions in which they have based their calculations on change tomorrow. Moreover, the idea of business is to make money and not lose, so that, in general, any income is good income, even if it is only 5%. Obviously, there are practical considerations, but you have to remember that these figures can change from one day to another and depend entirely on how to calculate your return.
The preferred method for determining the feasibility of a kind of positive cash flow investment method is merely observing the amount of benefits it has its costs. If your course costs € 500 per month then execute an income of 490 € per month cash flow is negative, but an income of £ 550 positive cash flow. It comes down to what you are comfortable with and how much you need to establish a buffer zone Void as mentioned above.
Try not to tangle with the hair between the percentage is wrong when 10% and 11% is good, focus instead on real income and what it means for your business property.
One way to improve your income is to have an interest only mortgage, unlike a standard repayment mortgage. This can mean lower monthly payments, but beware, the end of the mortgage will repay the loan in full. This is often an ideal method when you are planning to have a property to say 5 to 10 years of a 25-year mortgage, as when hope is sold to pay the mortgage, in principle anyway, but meanwhile, you have to pay less each month. If the capital growth in property is good, then the end of the mortgage term, you may be able to refinance or sell and pay the principle back with enough left over to reinvest in something else. Much depends on what your long term plans are, but interest only mortgages can be a valuable tool for real estate investors and owners.
Different Deal Types
There are probably an infinite number of ways to structure a real estate transaction, in fact, there are very few rules and you can be as creative as you want, provided that operates in the forced lending criteria if using mortgage financing. So there is no way that we could list and define the various options, but chose to highlight some of them here to show the type of options that are out there and the pros and cons of each.
No Money Down
C'est le type le plus commun de la recherché pour les investisseurs immobiliers qui sont nouveaux sur le marché ou qui veulent investir aussi peu que possible de la capitale. Si vous considérez cette option avec prudence, devient bientôt méthode très appétissante de l'investissement immobilier. À l'avant, qui semble prêt à obtenir quelque chose pour rien, puisque nous savons tous que c'est une chose très rare dans la vie, surtout dans les affaires.
Pour commencer, le nom de ce type d'opération est un peu trompeur, car il implique que vous pouvez posséder une propriété de ne pas mettre tout l'argent dans l'affaire, si cela était vrai, alors tout le monde serait restituer les biens rien. Habituellement il y aura une sorte de dépôt pour garantir votre intérêt dans le domaine choisi. Transmissions de temps verseront des frais et éventuellement d'autres frais accessoires. Mais même si vous parvenez à obtenir les droits d'acheter des terres sans laisser un sou, si votre propriété est construite et prête à prendre sa valeur peut avoir considérablement changé. Cela peut être bon, mais c'est souvent le contraire.
When new developments are pre-evaluated (assessed before they are built) the developer often has little intention of selling the most properties for investors and press for a greater value to their assumptions seem very attractive discounts. But when the properties are on the market your investment may soon become a nightmare. This is because the standard purchase for the mortgage is based on the ratio of 130%, as explained above, which may result in the mortgage lender offering much smaller than expected. The end result is that you are contracted to buy something you do not have the money. At this point, you have some options:
Option 1: Try to find the money deposit and additional funds to complete the purchase, that often means taking a loan from somewhere or borrow money to cover the purchase and then find that you have to make mortgage payments on something that will not leave out either. This can lead to a downward spiral of Finance.
Option 2: Accept that you must pay the security deposit, but can not pay the balance to complete, so that the loss of property and your deposit.
Option 3: Try to find someone to buy your contract. Even if your contract is transferable, is like the blood of sharks, once someone is against the wall, attach it to an absolute minimum and you can always walk away from the box poorest few kilos.
Option 4: You may be lucky, given the short time to complete, to find a buyer before going according back-to-back, but it is unlikely and rare.
Back-To-Back
This type of operation has several variations, but the basic concept is where the line of a purchase of a property and the subsequent sale of the same property, and the purchase and sale of filled out the same day. The idea is to make a profit to buy low and sell high.
While operations back-to-back are more easily accomplished in new build properties, allowing a good time to find a buyer, in many cases, the properties set can be bought and sold in this way too. Sometimes it is due to good fortune and sometimes it is good management. If you can exchange early and take a long time to finish, you may have time to find a buyer, but you obviously need to have something that is in demand and bought cheap.
Cash Back
This type of operation is quite simple, however, still has some inherent dangers. The
basic concept is to find a property that has a market value higher than
the purchase price and you get a mortgage based on market value. For
example, if the property is valued at 100,000 pounds, but can be
purchased for £ 75,000, its 85% buy to let mortgage will result in a
loan of £ 85,000 £ 10,000 giving cash at the end of the purchase . Some
lawyers do not like this kind of operation, because I think it is
misleading the lender, make sure your lawyer is going to do before you
start. You must remember that your lawyer has a responsibility to ensure that there is no fraud mortgage lender.Most
lenders will not lend on the purchase price, it is called a loan to buy
(LTP), so you need to find a lender that will lend on value, this is
called a loan to value (LTV ). The other method is to find a lender to lend more than the value or purchase price of the property in the first place. Some lenders offer from time to time, up to 125% of the property value. Sometimes
they will release the funds to complete as part of the basic mortgage,
other times they will release the funds to pay for the work or
improvements to property. In
the case of improvements usually want to see the invoices or receipts
and can make the payment directly to the provider of goods and services.The
only point to note with respect to this type of mortgage is that the
real estate finance will be what is called "highly concentrated". This means that you have the maximum amount of shares evicted. The
problem with this is that usually means that your mortgage payments
will be higher which can cause problems for you to generate positive of
this particular property cash flows. It can also mean that it takes much longer to achieve capital growth in the property.Lea
Beven Property Expert has 14 years in the purchase and sale of goods
and exposes the secrets of both parties for his benefit.As described by the ITV Trevor? S Tonight with Trevor, property tycoon Lea Beven lost and made millions in real estate. She
shares openly the problems, difficulties and the deep secrets of real
estate investment with the public, including personal information about
your own business. He now works part-time with the regulars who really want to make money, she prefers to keep a small business and personal.
