“How do I Buy Property with No Money Down? [NMD]“

There are actually many ways to buy Property NMD, but most people focus their time and energy in the wrong place, and it can end up costing them a lot of money in expensive fees to bridging companies, high administration costs and  £10,000’s in lost deals because many of the strategies either don’t work, only work for a short period of time or rely on you having to create complex finance structures that vendors neither trust nor understand

So here is a brief list below of some of the areas you can focus on to raise cash for deposits to buy Property which is by far the safest, most time tested and cheapest way to buy Property

Of course, what you want to do is to buy significantly cheaply so that you can get all of your money bsck out of the deal.

You could potentially raise finance using the following methods:

Home equity:

We recommend this strategy as it is probably the cheapest way to borrow money outside of your family and utilises money that is otherwise sitting idle

You can release equity from your Property using the following types of mortgage products:
Draw-down/offset mortgages
Straight re-finance [remortgage]

You can also Offset the interest portion of your mortgage payments against your tax bill [to reduce it] because loaned money is not taxable

Personal loans

These are a fast but (can be) an expensive way to raise finance. This is not recommended over remortgaging but if you can make more in buying a property than the cost of the loan, then it is a strategy worth considering. We would only recommend using this strategy if many of the others here have been exhausted

Repayments on loans are generally ‘top-heavy.’ This means that you are paying off predominantly interest at the beginning of the term, ensuring that the bank makes maximum profit if you redeem early [pay back the loan before the agreed end of the term].

Credit cards

This is an even faster but can be a  more expensive way to raise finance if you do not know what you are doing.

Make sure you know the terms of the credit card, and when you are balance transferring 0% deals, make sure the ‘deal pays’ before even considering this kind of financing. It could possibly affect your lendability too. Banks recently changed the way you are credit scored, and outstanding balances can increase your risk to the bank and subsequently reduce your ‘lendability’. Nevertheless, if handled correctly it can be a very efficient way to finance your deals.

Overdrafts

An expensive but flexible way to borrow money because you only pay interest on what you borrow. If you run a company, have a good relationship with your bank or have good cashflow, a bank will very often give you a significant overdraft facility

If you are a Barclays Premier member, you can get a pre-approved loan for up to £25,000

Private investors

This is probably the most overlooked yet underused strategy for raising finance that we believe is one of the best for raising finance and making money from Property

One of the most frustrating things to happen in Property is for you to have a great 30% BMV deal and no way to finance it…

Private investors are a specific group of people who have cash that they want to lend and make money from. They can appear in the guise of family members, business men with spare cash, bridging loan agents, angel investors, people with cash but no time

The benefits of having a private investor to fund your Property purchasing are as follows:

-Experienced & knowledgeable
-Rich and want to make more money
-Not using your money lowers your risk
-Great way to build your contact base
-Will teach you about structuring contracts and legals

How private investors will want to structure a deal:

This is important, because if you do not know the legalities they will tie you in knots…

Property Title: your name, their name or joint names?
A good friend of ours buys properties in joint names as he knows the backer well. Another good  friend of ours has a rotating policy of ‘one for you, one for me’ using private investor funds

How do they protect their loan to you:

Charge or restriction on your Property or the properties you purchase? How they make their money:
Charge interest or profit share? Interest charged daily or monthly, arrangement fees, early redemption penalties or exit fees

Have a CV on previous deals that you’ve done:
You want them to take you seriously. They will want proof as it is their hard earned cash they are risking. Testimonials are king.
Think about it as serving as apprenticeship in the early days to people who have a portfolio, who are rich and successful and who would be happy to share what they know…

Business Angels

This takes the private investor one step further. People like James Caan, Richard Farleigh and the guys on Dragon’s Den have made a career out of lending people money to set up or expand businesses. Do you know how to structure a deal with a business angel? Equity share, interest payments on money they lend to you or profit share?

Where to find them:

1. Property networking events

2. Bank functions

3. Rotary club

4. Investment clubs

5. Business link

6. Charity functions

7. Fancy restaurants

8. Property investment forums

9. Business-minded friends and family

10. Any business owner in your town

Early inheritance

This one might sound a bit way out, cheeky, or even a little nuts, but stay with us for a second. Do you have a family member
who is a bit further down the road of life than you. If so there is a big chance that:
A) They stand to pay a massive amount of inheritance tax [or you do!]
B) They may want to help you to a better life and actually see it in their lifetime
C) They might be able to spend a bit of their own money they have protected before they go…

JV [Joint Venture] with family members

Do you have family and/or friends who have taken an interest in what you do? Perhaps you know people with money and no time.

Redeem a pension

Do you have an under-performing pension that you could make work for you more? Perhaps you could cash this in and use the money to build a better pension buying Property? There may be early redemption penalties that are worth paying for long term profits

Redeem endowment

Perhaps you also have an endowment policy that you could redeem

And for more details, visit the page below:

http://www.progressiveproperty.co.uk/event

Enter this special code to get a significant discount on the published price : 124068

I do blame the media for their insistence to the fact that the US property market and the UK follow the same trend. I’ve argued for a long time that they are different animals and I then altered my argument early on this year to say, how they are different but how they would follow the same trend because of the banking system.

The main difference is: -

In the US they have an over supply problem and a problem where they have the ability to continue to over supply.

Whereas…

In the UK we have an under supply problem and an inability to supply enough.

This is the most crucial fact in the property market today. This is the underlying intrinsic value of it and the weight of this fact cannot be underestimated.

Side note : -

Here is an article in The Times about how the Council House waiting list is now numbering nearly 1.6 million households. http://www.timesonline.co.uk/tol/news/politics/article5120032.ece

Now I’ve said this before but it bears repeating until everyone gets it. We as a country are not capable of building enough property to keep up with the demand.

The governments own predictions were for a target of 3 million new homes by 2020 ‘need’ to be built and that then the ‘under’ supply problem would be removed.

Ok so for the first few years we hadn’t got anywhere near the annual target to achieve this figure. They project household growths of 223,000 a year and looked to achieve 240,000 new homes built a year by 2016.

Now I don’t think their figure is accurate and given the recession we are in the demand will slow this year. But I think it is fair to guess that their figures are likely to be an underestimate in the same sort of way as when they spend public money on the Olympics did anyone actually believe their first estimate for the costs?

Well last year the housing stock grew at 156,400 and the households grew at 223,000. This year I’d be surprised if when the count is done that more than 100,000 will have been finished. And as for next year I think the figure of 100,000 new builds is exceptionally optimistic and will only actually happen if the government intervenes.

Now, back to basics of market forces…

What happens in a market where there is a shortfall to demand? Supply and demand kicks in doesn’t it?

Well mostly but not always, as there are the times when the figure is distorted when an external force is acting upon it. But what happens when that external force is removed? We see a rapid gain in the undervalued asset/goods. This is not rocket science or wishful thinking, this is just maths.

Now my maths are a little rusty, but here goes,

2007 = 223,000 (Demand) - 156,000 (Supply) = 67,000 shortfall = Upward Price Pressure

2008 = 223,000 (Demand) - 100,000 (Supply) = 123,000 shortfall = (well should equal upward price pressure) Downward Price Pressure

2009 = 223,000 (Demand) - 85,000 (Supply - my guess) = 138,000 Shortfall = Downward Price Pressure (Yet obviously should equal upward price pressure)

So a total shortfall of 338,000, not including what there was already. This is a supply and demand problem and it will return the property market to the correct trend again when the outside force is no longer there. It is what is called pent-up demand.

And the outside force is of course the lack of available credit in the market.

If this hasn’t gotten through then do some research into the US over supply and what’s more their ability to continue to over supply and you’ll see that our two markets are fundamentally different on this basic level.

US = Lots of Land and reasonably loose planning restrictions
UK = Shortage of land and very tight planning restrictions

This is not rocket science and hardly is even basic stuff and whenever I see media info that tries to prove contrary to this argument I reconsider it. There has nothing that has come out yet to disprove it in any way.

There’s always a ‘yeah but’ argument and frankly I don’t want to write a book on answering them all. So I’ll give one example of how information is creating a false picture.

Rents are falling in some areas as landlords who can’t sell rent their property are instead willing to rent them for cheaper rates. This will continue until landlords come to realise that the rate cuts will mean that their yields should soon be making profits in nearly all but the really foolish markets.

This is an inevitable consequence at the moment as they are in pain. Then what will be the inevitable consequence when job losses occur and the councils for example are forced to go to the private sector more and more for housing? Well as with all recessions the rents will rise…

So will this happen in the same way in the US, well yes of course but as they have an over supply problem then it will not be anywhere near as effective as it will be to producing a serious upward correction to the UK prices, and as with all corrections, they always over shoot both ways. Frankly there is a fortune to be made right now.

So what is the problem then?

People don’t (won’t) do their homework and establish what the true mark to market value of their purchase is, so they do not feel confident in buying. People ask me why am I confident in buying now, and the answer is simple, ‘I am buying an undervalued asset, why wouldn’t I be confident?’

I am a strong believer in cash is king, but when you can buy assets that are clearly worth a lot more, for a lot less - then it is madness not to be investing…if of course your cashflow can afford it.

Frankly these are unbelievable prices and I am astounded that there isn’t a flood of purchasers in the way that there was when everyone was getting in on the property game during 2004 to 2007. Trouble is that changing the human herd mentality is almost impossible and they move like a herd believing that there is safety in numbers. The human does not get a lot smarter even though there is a huge weight of evidence to help him get smarter.

When will other investors wake up to the fact that these are depressed prices and in my opinion it is better to be approximately right than be precisely wrong, and anyone can see that there are some real bargains around right now. Trouble is people are waiting for the bottom, but will not know it when they see it, and also people don’t realise that we are buying now at ‘below’ the bottom prices because we are able to invoke fear in the vendors…So as I said, ‘I am buying an undervalued asset, why wouldn’t I be confident?’

But What About The Near Future?

This next bit is powerful, but only if you act on it

What is going to change in the investors favour in the next few months?

Mortgages are a real pain right now as the banks who were forced into taking the governments punitive loans and so did not loan out the funds they were given. Instead they are interested in using profits they make to repay this high rate loan, as frankly they can’t make money on the money at a rate of 12%, this is just a logical response to a bad loan.

Then the banks who didn’t take the money (who weren’t forced to) have no funds to get lending, and the toxic assets are still there and as such are still affecting the value of the banks balance sheets. So who on earth would want to lend them money to lend out?

They (the government) are getting very angry that banks won’t lend, but the fact is that they have not done what is needed of them to provide the banks with the power to borrow at competitive rates and therefore lend out. In other words they haven’t yet solved the problem of lending

The government is now focusing on this and I believe they will do so now that they may have finally realised what the problem is, in truth I think they knew but that they just didn’t want to ‘ante up.’ The question is will Brown be brave enough to buy the toxic assets at mark to market prices. If he does then this £100 billion they are going to be investing in the UK economy will easily be covered with the profit he will make on buying undervalued assets and freeing up the banks balance sheets. If he doesn’t then he could just be throwing £100 Billion at the wall. As the banks balance sheets must be fixed if the UK is to get through this storm.

Until he does this it leaves him releasing his fiscal stimulus package and as I write this it hasn’t been released yet. It also leaves the Monetary policy Committee trying to release the pressure by cutting rates. Something I have said they should be doing for a long, long time. And I said that inflation would cut back deeply this time last year and that they would be left having to act fast to stop the recession pressures. Somehow being right is not good enough compensation for a dramatic turndown in the UK economy.

These people (The government and the Bank of England) work behind the curve, so they react too late (as I have said since starting to comment several years ago). When they finally react they have to use a lot more force than they would have had to if they had prevented the ship coming off course rather than trying to return it to course - as we have seen with the recent 40% cut in lending rates.

But you now knowing this means that you can be in the way of the curve and profit from their slow reactions when they do.

The toxic assets in my opinion have to be removed from the balance sheets to allow lending to banks to recommence (I think this is just a matter of time). Then property market needs to be stabilised by offering a tax break, such as saying any property purchased from Jan 1st 2008 to Dec 31st 2009 will have no capital gains tax when sold (Now this is stimulus that would make a real difference, however, this one will hurt so they will want to avoid it).

If he does one or the other of those two then the market will stabilise fast and be ready to recover when the external pressure is released.

The pressure is being released slowly and over the next three to six months there will be an upturn in available mortgages. Remember they are acting today and the changes they make take a while to come through, in property if you act today then your purchases take a while to come through. So you can be in the right place at the right time.

I read one report recently that said forecasting over the next two years was going to be more the work of a psychologist than an economist which I found very strange as I think that economics is largely a matter of psychology anyway and surely economists should know this.

We must not forget that it takes 2 years for rate cuts to really show their effects so the results of the recent and upcoming reductions will take a few years to really reveal the new landscape. Whatever it looks like at these rates we (property investors) will make money on yields and go on to make money on capital growth in the future. Frankly I have never seen a better time to get into property investment, yet the herd mentality is telling people to be fearful.

I’m going to finish with the well used quote of Warren Buffet, which is ‘When people get greedy, I get fearful and when people get fearful I get greedy.’ He thinks that assets are well undervalued right now and that is why he is buying all sorts of assets including a lot of property. In his own words the money to be made in 5 years on these assets is unbelievable.

And if you want to make unbelievable gains then all you have to do is:-

a) Do your home work
b) Be sure of the true value of what you are buying
c) Buy as much as you can
d) And…protect your cashflow.

The perfect storm has hit and continues to lay waste to the financial world, but property is built on concrete as long as you pay the right amount for it. You are not buying ‘IN’ the property market, you are buying ‘A’ property.

In 5 years time the stories will be, if only we had invested then, it was the perfect time to buy…

Only you can decide what route you want your life to take…

Best wishes

Andy

PS There’s a lot of talk about being optimistic at times like these. Frankly I don’t know why that’s necessary, it is obvious that the country and indeed the world will come through this downturn as it has with every other downturn.

So I just think that if we must live through it then we may as well profit very well from it. So optimism is nice but I prefer maths. As I think we make more money from logic backed with maths whilst only paying lip service to commentators who do not understand the property market let alone what is currently going on.

By Andy Shaw - www.andyshaw.com

I find it staggering that people actually are looking at property investment now as something to be scared of!

Frankly it is getting stronger all the time and hopefully this article will let a little common sense creep in to peoples minds so that they can take advantage of the opportunity.

How 99% of Property Investors Are Avoiding Making Future Gains And How You Can Avoid Being One Of Them

As we all know there is a LOT of talk about house prices falling and how they are going to continue to do so for the next year or so at best. I have said to my readers before that the market value rarely is the true value of the asset, it is merely the price you can get if you need to sell now.

So why is it that the vast majority of people are blind to real asset value in property?

What has changed in the UK economy is that landlords currently can’t buy and refinance their properties easily and this has led to a market downturn in the mark to market value of property. The true value of property hasn’t changed. It is more than reasonable to assume if everyone who is desperate to sell goes to a market where only a few can afford or are able to buy that the mark to market value of the asset will be much lower than it’s intrinsic value, is it not?

Surely I do not need to make that point as to me that is what’s called stating the bleeding obvious. Yet the commentators are talking about how the market is in a right state and will see drops of 60%.

Well some banks have been selling their assets for 22 cents on the dollar, so 60% appears to be more reasonable. But it is commonly accepted that the banks assets are worth a lot more than 22 cents on the dollar and it’s just they can’t sell them for more and need to raise cash.

This is obvious yes?

So why is it that people are scared to buy right now? I am a great believer in the phrase, ‘it’s always a good time to buy property,’ and there is no need to ‘market time’. Yet right now is the perfect storm for an asset that is being falsely undervalued. Is it just me or can’t everyone else see this too?

So the real answer is the question of defining whether the asset is undervalued or not. Afterall if people had confidence in the stock market and thought that we had reached a bottom in prices then some of the stocks are trading at unreal prices on companies that will come out of the other side of this recession in fantastic shape.

So why aren’t you all buying. Because you don’t trust the asset price and the true value of it at all. And you are judging it on information provided by people who do not know how to value it. You are therefore through laziness deciding to avoid one of the best buying opportunities there has ever been.

The problem is allowing the wrong media influences to dictate the direction of your life really is abdicating control of your future.

Side note :-
I remember when I was at school the class was asked by our English teacher to show him the most important story in the newspaper he had given us. It was full of political comment and all the headlines were about MP’s getting doused in some blue dye or similar.

I weighed up the evidence and concluded that as the paper was full of politics that this had to be the most important story, the rest of the class had agreed with me. When he asked for our results at the end he quickly pointed to a small story about a child being kidnapped and showed us that he thought that was the most important story, which of course it was.

I have thought about that a lot ever since as it was one of the most valuable lessons I learnt at school. We had all been blinded by the media and had all acted like a herd, I am careful now not to be blinded in the same way and to not follow the herd as the real truth is usually hidden in plain sight as was the most important story.

So I mainly blame the media for our herd mentality, but in truth it is our instinct to follow the path of least resistance.

by Andy Shaw - www.andyshaw.com

How can you be the next millionaire? Most people want to be millionaires and most are looking for a secret magic pill. If there were a magic pill, it’s this. In order to be wealthy and stay wealthy you need a mindset that is not available to the average person. You need a millionaire’s mindset. Millionaire’s live knowing their mind can take them beyond their wildest imaginations. They know they have an unlimited capacity to learn, develop clarity of thought, and, most importantly, change. If you want to be the next millionaire, you need to change.

Here are some tips on how to create a millionaire’s mindset.

Millionaire mindset tip #1

Rich people believe “I create my own life.”

Poor people believe “Life happens to me, regardless of what I do.”

Millionaire’s take full and total control of their lives. They accept responsibility for what they have and for where they want to go. They don’t blame or find fault with others. They don’t come from a negative place or associate with negative people. They stay totally focused on their path to success. The next time you find yourself having thoughts like “I can’t do anything to change this situation or “I’m just one person” stop and ask yourself how you can take control. Act as if you’re already a millionaire taking responsibility for the situation. After all, if you believe you create your own life, that means you create the circumstances, good and bad, that surround you. Stop and say “I am a powerful person. I create my own life.” Then make a plan and a decision to follow through. The power to change and make things happen is within you, no one else. You must decide that you will take charge today and create your own life. Stop leaving it to chance.

Millionaire mindset tip #2

Rich people believe “I think and act like a millionaire.”

Poor people believe “I have to work very hard to be a millionaire.”

Millionaires deliberately create an above average mindset for themselves. Their mindset becomes part of who they are, who they’re being. They associate with other successful people and they are constantly improving themselves through reading, watching positive things, attending seminars, giving to others. Try this. Watch your thoughts, actions and emotions daily for the next 10 days. Notice patterns that take you away from accomplishing your goals. What happens that distracts you from staying on your clear and present path. Then get rid of those things.

When your thoughts turn negative, stop and change them. When your actions are not focused on your top 2 priorities, stop and change them. When your emotions cause worry and stress instead of joy and confidence, stop and change them. You must actively participate in your own change.

Millionaire mindset tip #3

Rich people believe “I performed to my fullest potential today in an efficient manner and without a competitive spirit, as I do every day.”

Poor people believe “I’ll do better tomorrow.”

People talk about how wasteful it is to throw away recyclable products or to consume energy needlessly. But what about the time and energy they waste not living the lifestyle they desire, not performing to their peak potential. They say “tomorrow’s another day”…

Every day counts in a millionaire’s life. Millionaires do not separate mental power from personal action. They put all their power into every act, no matter how commonplace. This makes every act successful in itself and opens the way to other successes. They continue to progress toward their next million in an increasingly rapid manner. Try this. Every night before you go to sleep, ask yourself “Did I perform to my fullest possible potential today?” Whenever the answer is “No” for too many days in a row, you know you need to change something. Have the courage to always give your best no matter what problems or situations come up. Strive to always feel complete and satisfied with your performance. There are priceless benefits to developing the millionaire mindset. But it takes practice. You can choose to create it or not. If you do everything you can every day to create your millionaire’s mindset, your rewards will greatly exceed your best expectations. Just ask me!

Discover the mindset barriers holding you back, get rid of them, and create your ideal life with a business to support it. Since your inner game has a direct impact on your income, you must look at mindset and marketing both at the same time

Kathy Andrews

We have  all been told that the recession is in full swing and the economy is terrible and there’s just no way that we can save any money because the standard of living is diving down and the costs are so overwhelming for the consumer and citizen. All this doom and gloom is unfortunate and perhaps it is keeping you from building wealth.

Some of the greatest times in history for building wealth have been during recessions. When the stock market is slow it is also a good time to buy a stock on the cheap. Perhaps you have heard that little saying; buy low, sell high? Well, the worst time to invest in real estate would be at the top of the real estate bubble and the best time to buy real estate would be after it all collapses. That means NOW

Now is the time to accumulate wealth, to save your money and to invest it. It is a time to get tough and pay off any credit card debt that you might have and to work to be more frugal and invest that money you have saved. You should not hesitate or put off saving money or investing just because we are in a technical recession. Soon the recession will be completely over and you will have lost the opportunity to get a good deal on your investment purchases.

The market will go up and the market will go down and there are always business cycles to deal with, but you have to know that there is just so much opportunity in chaos. You should use this truth to your advantage and not let the media or all that doom and gloom destroy your psyche or get you to believe that somehow you should just wait until the market returns and invest your money at that point.

Take action NOW or you will regret it later !!

by Fern Alix LaRocca

1) Yield is king, nothing has changed [though most forgot in 2007]

2) Asking prices more irrelevant than ever, decide what you think property is worth based on rental

3) Focus on sourcing through estate agents: they are more motivated than ever and will bring you some of the best deals

4) Expect bank of England base rate to drop further, maybe to around 1- 2%. But remember they will be back to 5%+ in the future – so buy on this basis

5) Fix as many mortgages as you can for 5-10 years plus once LIBOR has relaxed

6) Mortgage deals will get vastly better as 2009 progresses

7) Focus on finding your areas within your area and don’t get lured out of your patch

Ignore the negative press it will probably be the best year in 20 years to buy

9) Try and pick tenants who work in industries unlikely to be making redundancies

10) Take DSS [Now LHA], it is great as the council will always pay [and sometimes over market rent]

11) Don’t think you can time the absolute bottom of the market because you will likely miss it, demand will increase and you will be paying 10% more immediately

12) Use a variety of mortgage brokers as lending will be tight for a while yet – you only have a small window for some products

13) Don’t expect growth for 24-36 months at the earliest and base your strategy around cashflow

14) Don’t let apparent lack of finance be an excuse: find the deal of the century [every week] and you will find a way [see our section on private finance]

Bonus 15) Enjoy the ride and keep a diary, you will want to tell your kids about 2009 and how crazy it was for buying Property!

The 44 Most Closely Guarded Property Secrets - Book

www.progressiveproperty.co.uk

“Make Cash in a Property Crash - Insider Secrets Proeprty Masterclass October 2008″

A select 50 people came to Berkshire with us this weekend to experience the first of a series of events where we have decided to run that exposes our Property Buying and Progressive Business Model

This is something we said we would never do…

but we have had over 300 emails asking us to teach our system as well as off the handsfree portfolio

If you are interested in learning the following for yourself & you want to be a part or full time property investor:

-How to Find Your Goldmine Area in 8 Minutes or Less
-The Market, The Economy & Why This Crash Can Make You £100,000’s
-32 Advanced Negotiation Techniques that have Bought 211 Properties
-How to Make £20K - £40K per Deal With no Cash Left in
-4 Case studies of ‘Ordinary’ People who have Bought 23 Properties in 6 Months with No Prior Knowledge [A Floor fitter, Doctor, Internet Marketer & someone who sacked their boss]

Then read below now…

**Brand New Event Just Launched:

“Make Cash in a Property Market Crash Series:
Insider Secrets Property Mastermind Event Feb 2009**

“Make Cash in a Property Market Crash ONE OFF Property Mastermind Event in London on Feb 7th 2009″

Important note: This is only for you if you want to become wealthy through investing in Property yourself [this is not our usual open Day or Handsfree Portfolio]

3 Events have been launched for next year and the lst event sold out in 11 days
[it might seem a little early to book, but you will want to get your place reserved now and book your diary ahead of time...]

YOU WILL NOT BE DISAPPOINTED

I will try and cut through the noise…

…sensationalism and general misinformation which I feel the media are responsible for. I have found the FT one of the only credible sources of information with the depth of journalist understanding to report things in an accurate way. A lot of the other publications seem to be written by people who have no direct experience of what they are writing about – not that this would even matter because I don’t think any of us are under the illusion that their main aim is to do anything but sell newspapers!

The government has been acting in a pretty reactive rather than planned way at the moment which shows me that many things have been taking them by surprise. Mandleson’s appointment is no doubt in part to help Brown manage the media, who it looks like he hasn’t done a great job with- Hence his current dire approval rating in the opinion polls

that we will shortly see a Conservative government, I think it would take something pretty big to change this course. If it’s not true that Brown is an uncharismatic leader that voters can’t connect with then the recent economic events (perceived high consumer inflation, falling house prices and banks going to the wall) are more than a mountain that he must climb

If David Cameron’s policies are better than Brown’s or not (they probably aren’t that different) his ability to communicate and position himself as the solution to people’s concerns over what’s in their pocket will likely create the outcome he wants. Brown cant Teflon coat himself against this, after all he has presided over the country’s finances for the last 11 years and the average voter will see him as partly responsible

My personal view…

is that there is not a lot he could have done, I do buy this as an international problem. However I believe that instead of whittling on about inflation and tinkering with the fire while it burns I think he should have put pressure on the MPC to cut rates earlier like the American’s did. Where is the inflationary pressure going to come from in a year or two when GDP is in reverse!?

Indeed, the bank of England is not necessarily too interested in inflation levels today (although a politically sensitive topic) but where their modelling systems tell them that it is likely to be in 2 years. Indeed, whilst the consumer price index is at 5.2% currently the central prediction is that it will settle to 2% now that oil, commodity and energy inflationary pressure is subsiding

The MPC and ECB are only now showing their resolve to drop interest rates with their coordinated 0.5% one day drop last week. It is looking increasingly likely that the MPC are now on course to drop the base rate to around 3 to 3.5% in 2009. It all seems 6-12 months too late in my opinion though, we could all see it coming so why not have acted earlier!!?

The recent news…

that the government is buying stakes in the banks in a move to part nationalisation (or dare I say it sort term socialism!) looks to have been received well by the markets. Weather Gordon did persuade the American’s and the rest of the world to follow this strategy like his office is suggesting I’m not sure. It could just be a stroke of genius though if he transforms his public image from the iron chancellor to the platinum prime minister!

The banking sector is in the midst of its biggest shock since the 1930s. You have probably seen how a crisis which steamed from the sins of American mortgage lenders writing loans imprudently to people who didn’t have the ability to repay. They then packaged them up into collateralised debt obligations and structured investment vehicles (basically big packets of loans good and bad) which are then sold on to other investors on the wholesale lending market

All sorts of people bought them…

(banks, pension funds, the state of California!!) because the promised returns were higher than other investments and the returns looked low risk because the credit agencies graded them as such

These investors have now been burned big time and it is not surprising that no one wants to buy mortgage debt on the wholesale markets. So it is effectively closed at the moment

It is the institutions that rely on the wholesale debt market to sell their mortgage assets that have run into the most trouble over the last few months. It is no coincidence that Northern Rock, Bradford and Bingley and HBOS are the banks which had the highest imbalance between the money that savers or depositors paid in and the amount they lent out (the balance coming from the wholesale debt market) are the ones that have run into trouble

Something really shocked me…

HBOS really shocked me though as they were doing around 40% of the nations mortgages at one point!). It is also interesting how Northern rock lent out about 7 times more than it had in savers capital, Bradford and Bingley about 1.6 and HBOS a bit less – note the order in which they got into trouble! – It was really the market that decided when it was going to stop dealing with them that killed them and most of it seems to have come from the degree to which each institution appeared to be approaching difficulty in financing their short to medium term debt.

They are probably not bad businesses…

and their loan books still seem to be holding up with a relatively low rate of arrears (with the possible exception of Bradford and Bingley). Counterparty liquidity concerns are creating a self fulfilling prophecy – if a bank looks like it can’t repay, people won’t trade with it and it is dead. This means that the cost of the money which banks lend to each other has gone up hugely (as measured by LIBOR), which they pass on to consumers.

This has so far resulted in increased mortgage lending rates (and the spread between the bank of England base rate of 5% and the mortgage rate which we are being charged, about 6% on most deals depending on loan to value).

So what does all this mean for those of us who are still investing in property?

Things were easing and we had a pretty nice situation with the lending about a month ago until Lehman went to the wall. Libor has soared and lending has been reigned in again. I guess the banks will probably be in this knee jerk phase for 3 months again like last time. They have to come back though, or they won’t make any money. I’m just glad we are in Peterborough because the figures work so we can still get the money even now as long as we borrow at 75% loan to value

The severity and speed in the change of direction in the property market took us all by surprise, it has certainly been faster than the late 80s (but maybe won’t be as deep) (according to some of the old boys with portfolios of 100+ properties that I talk to who were there). But the national statistics from the lenders point to around a 12% decline over the last year.

In terms of what we can buy properties for in Peterborough we have seen a 20% change, but maybe only a 5% lower figure on the revaluations! This is the critical point at the moment, take note!!: the DIFFERENTIAL between what you can achieve on a below market value deal and what the average property is selling for in the same street has widened dramatically. Vendors (sellers) are much much more flexible and I guess that we are pretty much buying for as low as we will be able to. Maybe we will be able to find them for 5% cheaper in a year 18 months, I’m not sure.

Most Investors base the price they will pay for an asset less on its supposed value today rather its expected value next year and the year after and so on which means that most of us are paying 2010 prices!

What about rents?

Well, they are still strengthening, our average time to let a property is down to about 4 days and we are on course for 10% rental growth this year in many areas. Property values and rents often have an inverse (or opposite) relationship. It could be said that they act like a see saw. When values are rising fast rents tend to stagnate as we saw from 2000-2007 but when values stabilise or fall rents tend to take off. Why is this?

Just like in the late 80s…

the following is happening: The first time buyers who aren’t buying at the moment because they can’t get a mortgage or are scared are renting. Many owners on the second or higher rung of the property ladder who want to move are resorting to renting their property out and becoming a tenant in the location where they move to

Which means rental price growth!

Mark Homer

http://www.progressiveproperty.co.uk/book

May we all be COFFEE!!!!!!!