Aside from the rumoured change of swapping the 18% Capital Gains Tax charge for 20%, 40% and 50% income tax fees for profits made from selling property, I personally have heard little else.

Luckily whilst I was rooting around, I came across an article which highlighted 5 key areas that the budget may cover:

• Capital Gains Tax: like I mentioned above, the government is proposing swapping the 18% capital gains tax charge for one similar to that used for income tax bands. Should a property investor choose to sell a profit, any profits generated will be taxed under this new scheme.
• Private Residences Relief: in the past this enabled property owners to sell their only or main residence without incurring CGT. However, the government are supposedly tightening this definition to prevent property owners with multiple properties from swaying between which property is their main.
• VAT: if you are interested in renovating or investing in new property developments, these property types could soon be witnessing increased VAT costs.
• Capital Allowances: rumours are afoot that the government may reduce capital allowances to help cut corporation tax. The problem for property investors like me and you is this will reduce the amount we are able to recoup from property costs.
• Inheritance Tax: thankfully the threshold for this shouldn’t be changed from £325,000; however the government are planning to change the rules for nom-doms. They will now be brought under inheritance tax if they have lived in the UK for 7 out of the last 9 years, instead of 17 out of 20 years.

Hopefully, these 5 points have given you an insight into what may be coming in the next few months. We can only hope that they are not all passed…

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

That is why it is with great happiness that I reveal that leading lenders Santanders are increasing the maximum loan sizes of their mortgages.

Admittedly this news would have been better if these increases were applicable to everyone, but the point to take away from this particular story is the fact that competition is increasing amongst lenders. More importantly, the property market is becoming increasingly accessible to first time buyers again.

To sum up what has happened, Santanders have revealed plans to:

• Change the limit for first time buyers investing in new apartments from 70% LTV to 80% LTV
• Change the limit for investing in property from 80% LTV to 90% LTV

Whilst Santanders also divulged in their report that newly built property developments will remain at 70% LTV for apartments and 80% LTV for houses (for non-first time buyers), it is impossible to see the down side of this news. Especially as I imagine that it won’t be long before other leading lenders change their criteria to include existing property investors too.

All we can do is hope that the competition gets so hot that everyone benefits from deposit reductions and that buy to let mortgages get cut a break.

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

As part of their ‘Hidden Homes Scheme’, Wandsworth council and Notting Hill Housing have teamed up to help convert a disused car park in Putney into 10 spacious apartments. Their reasoning? To help first time buyers find an affordable route onto the property ladder.

And I have to admit, it is a rather clever idea.

Taking boarded up properties, shops and disused car parks – essentially properties that are just sitting there doing nothing – by converting them into attractive apartments/homes they could help to relieve the strain currently on the property market. Especially if more organisations choose to get involved.

Already the Empty Homes Agency is jumping on board with this scheme, as it will help transform wasted space into housing, plus will save on expenditures to knock these properties down and rebuild them. To put it more bluntly – renovating this way will help maximise the UK’s property space.

Now I know what you are probably thinking – for a single investor you can’t get involved in such a scheme. But I don’t think that is strictly true.

All these associations are actually doing is renovating. Yes, car parks may be out of your price range, but boarded up shops won’t be. Negotiate your deal wisely and the savings you make whilst investing could be directly transferred into the renovation itself, creating little costs for you.

I know there is much more to renovation than this, but the point I suppose I am making is that the potential is there. The potential for property investors – like you and me – to get a slice of this idea and use it to create new rental properties.

It’s definitely worth considering.

Wendy xx

PS. If you are interested in reading the full story, here it is: http://www.guardian.co.uk/money/2009/jun/28/empty-properties-converted-accommodation. Enjoy!

This is the latest property of the week curtsey of Property Mentor, the property investment experts. It’’s based in London and is a lovely 4 bedroom property.

Area – London
Property type – Split Level Maisonette
Number of Bedrooms – 4
Length on Market – 3 Months
Valuation – £340,000
Positive Cash Flow – £1,400 per Month

According to recent studies, bankruptcy has risen by 7% in the last quarter of this year. The second highest recorded figure since 1995 – yes over 13 years ago.

Spread across both England and Wales, over 13,653 people have petitioned for bankruptcy, whilst a further 3,184 wind-up petitions have been released by company’s.

And the cause for this sudden rise? The answer is simple. In light of the recession, unemployment and debt levels have been rising, bringing with it tighter credit conditions and more and more homeowners becoming trapped in negative equity.

Now we know this may all look negative, but there is a solution. And one that can solve all of the above and offer you more than financial balance; more than the chance to break even, but real, substantial profits – for life.

So what is this all inclusive answer? It is right in front of you: Buy-to-let.

It looks at the current climate of borrowing and getting started on property investment. Well worth a read if you have some spare time.

———-

Property Mentor has certainly let the property market know they mean business with their latest campaign.

In the wake of the nationalisation of Bradford & Bingley just one week ago, hundreds of buy-to-let mortgages have been withdrawn from the market. A cut that has had a profound effect on the property investment market:

• • As the leading lender of buy-to-let mortgages, the collapse of Bradford & Bingley has resulted in the loss of 20% of buy-to-let mortgages
  • UCB Home loans and The Mortgage Works have withdrawn all their buy-to-let range, leaving behind only inaccessible loans that no investor can access.
  • Bristol & West and BM Solutions have cut their lending options by 75%.

Yet despite these reports, Property Mentor is confident that their system will see them out throughout this market upheaval, and will keep their investments safe:

“What many investors forget is that history repeats itself and it will keep on repeating itself. Wasn’t it only 18 years ago that the market went through this very same transition? We know, we remember. That is why we are confident that if investors stick to their guns, they will come out of this credit crunch stronger then ever. It is only a matter of time before the market shifts again.” – Matthew Lauchlan, Property Mentor Director

With the launch of Property Mentor Finance just a few months ago, Property Mentor are now opening their doors to other investors – experienced and new – in a bid to help them beat the statistics and avoid having their homes placed under increased debt.

As Property Mentor Director, Matthew Lauchlan recently stated: “The last thing any investor wants to do is dip into the free equity in their own home. Not only does it increase your chances of losing your buy-to-let property, but can put your own home at risk too.”

Continuing on this topic: “At Property Mentor we understand that the temptation to sell – especially within an ever constricting financial market – can feel like the only choice you have got left, but it doesn’t have to be. Through our workshops we can help investors to safeguard their properties and actually achieve better deals – yes even when the press is saying otherwise.”

And their deal is simple. Anyone who attends their 2 day course will be given instant access to 20 mortgage lenders who will not only accept their unique system, but will also offer them better than the going rate. All investors will have to pay for is the extra legal expenses and stamp duties. Nothing else.

This is great news for many investors who are struggling to bring their buy-to-let mortgage down to 60% in order to break even. Instead, the Property Mentor system enables them to access low interest rates as well as a higher LTV on their mortgage.

And this is not all they have done.

In a bid to prove to investors that their system is the real deal, Property Mentor are inviting investors from all over the UK to come to their FREE 2 hour seminar, so that they can witness first hand that their system works.

Here in this workshop, real estate developers will be able to meet past Property Mentor delegates who have used the system, created the portfolio and have invested even though the media has told them that there is no market:

“The goal behind our courses is to promote confidence. To prove to investors that no matter their experience, or the state of their property portfolio, they too can continue to invest and make real sustainable profits from the buy-to-let market,” quoted Matthew Lauchlan, Director of Property Mentor.

As he continued to explain: “It’s true that many investors due to poor choices are now having to subsidise their properties in order to pay the 7.4% SVR, but we can provide them with the tools to turn this around and escape the pressures to sell. Investors can beat the statistics.”

And this new approach to their course has certainly left its mark.

During these 2 hours, investors will be given access to FREE expert advice from a team of trainers who have been in the property business for over 20 years. No strings. No catches. Just the exclusive opportunity to share their fears and doubts with a group of like-minded people.

“All it is takes is one action… one decision and we can turn this around. The buy-to-let market can survive.”- Matthew Lauchlan, Property Mentor Director

Some of the topics that will be covered are:

• How to structure your properties for long term success
• How to earn a guaranteed £500-£1,000 per property in just as little as 30 days
• How to invest in the right properties

For more information on Property Mentor’s forthcoming property investment workshops, visit www.propertymentor.co.uk