For instance, whilst it is advisable not to buy off-plan if it will take years to complete (and therefore could fall in value); investing in these types of properties can prove beneficial after they are completed.

Let me explain…

The fact is property owners and tenants alike will always want to live in quality housing – property developments which have been built to a high standard.

And luckily for us property investors, property developers are now making more of an effort to meet these standards.

The fact that hundreds of property developers apply for the Building for Life award every year is a testament that they are trying to improving housing quality.

For instance of the 92 who entered this year, 55 new housing schemes qualified for the award – 50% more than last year.

And should property prices continue to remain affordable, these properties could present an appetising opportunity for investors.

Anyways, it is always a good idea to keep a watchful eye on this area of the market. You never know what opportunities will be presented to you on a silver platter.

Wendy xx

Not only is this increase going to cost property investors at least an extra £10,000 in taxes (on top of the existing £40,000), but the Land Registry is already predicting that this new stamp duty is going to affect 10,000-15,000 more buyers every year.

Now as you already know from reading this blog, I am not one to give up easily which is why over the last few weeks I have been researching into various methods to take the edge of this stamp duty fee. And luckily I think I have found a solution…

I was reading an article in the Telegraph, which revealed that many property developers are currently finding legal loopholes to help property owners, such as you and me, to save thousands of pounds on our property investments. And they are pretty nifty loopholes too:

1. Special Purpose Vehicles (SPV) – here property developers are proposing to set up companies or trusts where your potential property development becomes its sole asset. By doing so, when homeowners come to buy – instead of invest traditionally – they will instead be able to buy shares in the company that are only liable to a tax rate of 0.5%.

   NOTE: Not only are the Treasury now looking for methods to close this loophole, but it is important to remember that should your property rise in value after it has been put into a SPV, you will be liable to capital gains tax.

2. Buy land – another clever alternative that property developers are offering to homeowners is the opportunity to buy land and build their own homes. By doing so, you will only have to pay tax on the land, which if it is below the £250,000 threshold will mean you don’t have to pay anything.

   Some property developers are even going as far as to let property owners invest in their land, before entering into a contract with them to build their property. Under this scheme, property owners will still be classed as self-builders and will be taxed as such.

Of course for each of these schemes, you will have to heavily rely on a property developer to help you achieve it. But still, with proper research you can ensure that you work alongside a quality property developer who will help you to take full advantage of these loopholes.

They definitely are inventive! And for those of you who haven’t got an extra £10,000 spare to pay in stamp duties, these loopholes will be a blessing in disguise.

Wendy xx

Aside from only producing 100,000 of the 400,000 new property developments they promised last year, the government is now also choosing to overlook 500,000 properties which have currently spent the last 6 months lying empty!

In a study by the Guardian, they discovered that across 75% of local authorities in the UK, more than a half a million properties are lying empty. 500,000 properties which could easily cut the growing 1.8 million social housing list by up to 25%.

Yet what shocks me more is the variety of reasons being given for why these properties are being left empty:

Alongside keeping a large proportion of private sector property developments empty to avoid incurring council tax; many local authorities have also been found to be purposefully keeping these properties empty as it guarantees them a decent government grant. Put these properties into use, and local authorities will receive a smaller grant and a less reliable council tax income!

Now I am no genius, but even I can see that these 500,000 empty properties could easily be put into better use by helping to alleviate the escalating property shortage, not just sitting there barren.

Yet in the eyes of the government this need to ‘not lose out on funding’ apparently appears to be a perfectly reasonable explanation for not pressurising local authorities into taking action. It’s ridiculous!

Wendy xx

In his story, he revealed that after securing 90% LTV loans from his bank in 2007, he decided to invest in 2 off-plan properties (1 worth £415,000, the other worth £375,000). However, after Berkeley’s property prices fell by 40% in 2008, banks would no longer loan him this sum offering him a maximum 75% LTV. Faced with either having to fulfil the shortfall himself or abandon his deposit, Dowd tried to default on his deposit only to be confronted with court action from the property developers.

It is a sad reality when a man has to pay over £100,000 in damages, because the economy has turned against him.

But the thing is he is not alone… A further 300 legal claims – in London alone – have been taken against homeowners wishing to default on their off-plan properties.

Who is in the right?

Now on the one hand I can understand that as homeowners have signed a contract on these properties they are legally obligated to complete the deal. BUT when statistics state that property prices in London have fallen by only 14%, not 40% like on these property developments it really begs the question of: what has happened?

The truth is, back in 2007 property developers were seriously overestimating the value of their properties – by a lot. As a result they are now experiencing greater property price drops of an extra 26%.

And it is this 26% that is really biting homeowners such as Dowd…

I imagine, many homeowners may have easily been able to work around property price drops of 14%, but 40% is ridiculous! Who has got an extra £100,000+ spare to cover such a shortfall? Not many and that is my point… It is not completely homeowners fault. Property developers have got equal responsibility for creating this situation after valuing their properties too high in the first place.

It is undeniable that some sort of comprise has got to be met before this situation escalates any further. In London alone, Berkeley signed over 3,300 contracts in 2007 with homeowners, 85% of which were off-plan.

Fortunately many homeowners are forming collectives to help find alternative routes for resolving this issue, and so far they have come up with 13 options. However, with many having signed contracts on these prospective properties, it is going to be a long road ahead before this situation is completely resolved.

Wendy xx

For me, my favourite episode had to be when they introduced property expert Andreas Panayiotou. Leaving school at 15 with no qualifications to his name, by 2006 he had managed to build a property portfolio worth £700m which he subsequently sold before the recession hit.

He is proof that it is possible to build a credible property portfolio without having to use your own money; that you can invest without being an experienced property investor.

Then there were their other episodes.

For those of you who were crazy enough to miss Property Watch, here is a quick run down of what they discussed:

Episode 1: Asked the question of whether now was the right time to buy and if property prices would fall further.
Episode 2: Examined mortgage and interest rates, whilst speaking to homeowners who had found bargains.
Episode 3: Discussed the pros and cons of renting, and the UK’s obessession with property.
Episode 4: Looked at property trends and the impact rising house prices will have on the market.

They are definitely worth watching

Wendy xx

This week I will cover investing in property off plan from a property developer.  You can find a lot of opportunities when you find local property developments to invest in.

I have used this type of investment property a lot in the past.  My first property from a property development was an inner city apartment with two bedrooms and a parking space, I was hesitant at first as this was outside my comfort zone really as usually my preferred investment type is for a first time buyer or a small renovation project.  The apartment wasn’t built it was an off plan property when I decided to go ahead with it but I had spent a lot of time researching the area, it was near a large national company that was due to expand taking on more staff by the end of the year and fairly close to a major university.  This would mean I would either get an employed worker or a fairly well off student either were ok by me for the investment as I had worked out how much I would need in rent to cover my monthly mortgage payments.  I had negotiated the price down on the apartment as it was one of the last ones in that phase of the development. I contacted a couple of local agents and they gave me a guide price for the rent on the property.

I was all set I had my potential rental market in mind, the amount that I could charge in rent and the mortgage I needed.  I bought the apartment in the summer of 2004, I have a professional couple living there at the minute and have had no problems renting it out.

The most important thing I found out about this type of investment property is that you can be left with your flat empty, choosing in the right area can make all the difference and have a long term plan, at the end of your investment will you be able to sell the flat on.  I purchased this property with the intention to keep it for 5 years, I think by the time next summer comes round I will keep this investment as the couple that currently rent are happy with the arrangement.