Property is back!
Many investors have read the news recently about the increase in property values.
Suddenly property investment is the new hot topic.
If you have any disposable income the chances are it’s in the bank or in shares.
In Shares? Well you’ve probably lost between 15%-40% on them over the last 18 months and can see no end in sight. Even if the market recovers it’s unlikely your shares will return to their previous levels for a few years yet.
In the Bank? Thats even worse, your probably getting a measely 3% interest per annum of which the bank is using your money to invest in various property funds returning 6%-8%.
Many investors do so for the long term, property investors are the same.
That’s not to say that purchasing and re-selling in a short space of time is wrong, in my mind that is a long term investment as you will more than likely use the profits to invest in further property.
If a stock market investor purchases some shares then sells a few weeks later after making a profit, we do not accuse him of investing for the short term. So why is flipping property sometimes frowned upon?
It’s “a means to an end” the “means” is to accrue as much capital as possible, the “end” is a target of a high yielding property portfolio.
Don’t get me wrong, this is not without it’s risks but smart investing in low density developments with proven values can be profitable.
Essentially it’s the same as developing, when you refurb a house you do so as quickly as possible. Why?
Because you want to sell your property in the same market conditions you bought it in.
Let me explain, you buy a 2 bed house that needs work and you have faith that at the time you bought it for a good price and that you can sell for more after some work.
The only way to make sure of that is to sell in the same market, if you wait too long and the market drops, thats eating away at your profit.
This is the same when purchasing property to flip, you want to know that the “bargain” that you bought last week you can sell straight away for a profit.
There’s one problem, have you seen it?
Why would a developer sell you a propeerty for less than he can sell it himself?
It seems unrealistic but it does happen.
The simple truth is that by marketing ALL of their properties at discounted prices they lose the option of returning to their previous prices if the market picks up.
I normally wait until it’s the developers year or half year end, if you can complete quickly and they have stock lying around you will normally get a good deal.
Then after their year end is passed they can carry on selling at market value safe in the knowledge that their units were not marketed at a discount.
This is the reason for the Fresh Invest client login, it allows developers to market certain properties that they do not want advertised to the public.
For further information on developers year ends and investing in property please contact us.
Invest In UK farmland for financial security!
Farmland as an alternative investment is a relatively “untapped” market at present.
Why is this? Well investing in farmland often means that you will have to be of a high net worth so unless you can scrape together a few million pounds it is… I’m afraid to say out of most individuals reach.
This is because farmland is currently selling at around £5,000 per acre. This doesn’t sound too bad but farms are normally sold in massive lot sizes.
Why would you want to invest in farmland?
Firstly let’s look at what the prices of agricultural farmland are governed by:
- Increasing demand from house builders as the population of the world increases.
- Increasing demand from farmers that need to provide food for this growing population.
- Increasing demand from power stations that need to decrease their non renewable resource consumption to help the UK stay in Line with the Kyoto Protocol.
- Decreasing resources as more and more planning permission is granted for new homes, renewable power stations and renewable energy projects such as wind farms. The supply of bare agricultural land is running out and one thing is for sure we cannot create more!
The cumulative result of this has been values increasing by 15% year upon year.
Farmland is something which every human being needs to live. In its purest form it provides us with a means to grow food and rear cattle therefore providing the means to eat for the whole population.
A quote from H.R.H Prince Charles recently in the Richard Dimbleby lecture read “That which sustains us must itself, also be sustained” This means that the whole ecosystem of this world needs to be restored at the same or at a faster rate than it is diminished. The Amazonian rainforest alone releases 50 billion tonnes of water vapour into the atmosphere every day! This makes our climate cool and makes this planet inhabitable. Deforestation is currently operating at a rate of; the size of a football pitch every 4 seconds! One of the great problems with deforestation is the rate at which it impacts on our environment. Not only does all of the CO2 sunk by the trees get released into the atmosphere when they are burnt. But there are now less natural CO2 sinkers in the environment and when trees are not sinking CO2, they are not producing oxygen, the very air we breathe.
Our reliance upon nature’s non-renewable resources is 25% greater than nature can self sustain. Fossil fuels such as coal, petroleum and natural gas are being used at too fast a rate. The sustainability of these fossil fuels is something which is being tackled by the Kyoto Protocol.
The Kyoto Protocol is an obligation made by all countries to cut their use of non renewable resources by 80% by 2050. Here is where we can come back to farmland and the growing market that is renewable crops and the land underpinning it. As Power stations throughout the UK start to follow the trend and invest heavily in harnessing the power of renewable resources, this may well drive up the prices of green energy crops such as Miscanthus grass which is a co-burner to be used with coal in the production of electricity. Now this may well increase your annual yield through higher revenues, but with this, the land itself should increase in value as it is now worth more to the investor.
So let’s recap
- The price of farmland is steadily increasing as demand increases and supply decreases.
- Farmland value has increased on average by 15% year on year.
- It is a diminishing resource that needs to be sustained.
- It will help the UK contribute to their Kyoto protocol obligations.
- More and more people are starting to see the benefits of being “Armchair Farmers”.
- There is around £11 billion of borrowing secured on assets worth over £170 billion, excluding stocks and growing crops.
- It is the foundation of the built environment!
Remember the secret to success is to balance your portfolio. Where better than UK farmland?
Could you live on £500 a month?
Is your pension working for you?
With the recent drop in shares values, do you know the real value of your pension?
A combined state and private pension amounts to an average monthly income of just £500, so if you don’t want to live your retirement in poverty it’s time to do something about it!
The situation is down to many factors. Few people know exactly how much they need in their pension to achieve a comfortable standard of living.
Pension values have dropped by as much as 40% over the last 2 years, the result of the recession is that many people have not increased their contributions in order to offset this drop. In many cases they have actually scaled back in order to pay for important every day goods.
In order to draw the most basic of incomes we need to accumulate a fund of at least £184,704 which would provide a monthly income of roughly £1,000 gross.
Want to know what the average private pension size is at the moment….just £25,000! That will pay roughly £125 per month. Add state benefit of £90 per week and you have a monthly total of less than £500 gross to live on.
To give you an idea of how little this is, most individuals need a retirement income of two thirds of their pre retirement income after they retire. To calculate what you need take your current monthly income and times it by 0.75. More than £500 isn’t it!
If we take a basic income of £1,000 per month, so £12,000 per year, times this by 25 (the average amount of years we are currently living after retirement) that’s £300,000!
If you aren’t already investing in a pension or you have sat back and ignored this problem, perhaps now is the time to take note and do something about it?
To make up the deficit pension providers normally ask you to divide your age in half and invest that amount of your salary into your pension, so a 40 year old will be expected to invest 20% of his salary into a pension.
So what are your options?
We have already discounted stocks and shares, only the most high risk share dealing we enable you to obtain the funds you need by retirement.
The answer in my opinion is property.
By purchasing a property and putting it in your Sipp you will gain all the advantages of high capital growth and rental income and be able to do so without dipping into your existing savings or re-mortgaging any properties you own.
Our properties on Dunas Beach Resort start at just £82,000, you would need a pension value of about £55,000 to purchase it outright or alternatively you can use part of your pension and top up the rest via cash or a loan.
We have calculated that it would take just 10 years for the value of an £82,000 property at Dunas Beach to increase to over £300,000!
That’s on an initial investment of just £55,000.
This is based on very pessimistic figures including:
- A 10% increase in prices per annum (15% for the last 3 years)
- A room cost of €110 per day (currently €150)
- An occupancy rate of 68% (currently 95% in 5* hotels)
As you can see Dunas Beach offers an incredible opportunity to get the run on your current pension plan and boost it to more realistic figures!
Transferring your pension:
Many of you will have a few pensions with different companies and moving all of these into a SIPP can be a long term project. Our IFA can take care of that for you; all you need to do is fill in some information on your current pension plans and they do the rest!
When this is complete (average time is 6 weeks) you are free to purchase a unit of your choice dependent on money available.
For more information on funding your investment with a SIPP click here.
If you have a pension and are interested in seeing how this works, e-mail us for more information.
Balance your portfolio with alternative investments!
Here at Fresh Invest we have been working hard, attempting to provide our investors with the means to build and prosper from a balanced portfolio.
Why is it so important to build a balanced portfolio?
A balanced portfolio will perform well in every market. You need to prepare yourself for every eventuality, for example. If there is another fall in house prices, people are likely to look elsewhere for places to hedge their savings or pensions and hopefully provide them with an income. This will therefore push prices up in the relative sectors, as demand increases people will look to charge more of a premium.
As markets become more volatile than ever, you should be looking to put your hard earned savings and pensions into a range of products where the value is governed by an increasing demand and a decreasing supply, during varying economic climates.
How about UK farmland? Well let’s get one thing straight we cannot create more land, neither can we build upwards, agriculturally. UK Farmland has been growing in value by 15% pa over the past 3 years where other investments have been decreasing in value.
We always need land
Another point is that if the UK housing market was to recover there will be uplift in demand for farmland yet again as housing developers start to look for land to build on. Putting further pressure on price rises as resources are diminished. Now if this happened and you were lucky enough to purchase in an area where planning gain is possible for further housing, this could greatly increase the value of your land!
Not only can alternative investments provide safe returns in uncertain economic times, many of them can provide great taxation benefits such as capital gains and inheritance tax relief.
There is a vast array of alternative investments on the market at the moment and without specialist advice you may not end up with a balanced portfolio at all.
So speak to the experts www.freshinvest.co.uk
Economies of scale
One thing you will notice a lot in terms of property investment is the economies of scale that are involved.
What I mean is the bigger the purchase the bigger the discount. So essentially the best discounts are only available to those investors of a high net worth.
However here at Fresh Invest we like to try and please everyone. So we will aim to use the larger purchasing power of our Bulk Investors and filter the discounts obtained through to our investors that are only looking for individual buy to let properties.
So any of our investors can register an interest in our bulk deals, then once a Fund has secured the properties we can start to sell to the single investor on behalf of the fund, this will be at a greatly reduced from list price.
This is good for the bulk buyers, as often they can get an almost instant return on their investment with the added choice of a great profit or an income stream from whichever properties they chose to hold and let privately.
A typical example is one of our current Opportunities in London. The developer is offering these to the single investor at 10% discount. However we have now secured these apartments at a larger discount with the use of a fund and can now offer these to the single investor at a discount of 20% leading to an average saving of around £20,000 to the single investor.
At the moment we have an opportunity in Boscombe. Now if you purchase 3 units in Boscombe and the developer would entertain a 25% discount however for one property the developer would only give a 15% discount. If we can get a bulk buyer to negotiate a very feasible discount of 30% for 10 units then sell back to the individual investor at a rate of 20% or 25% off of list price, the individual investor has saved 5-10%
For more information on this register with fresh invest here
