I’ve done it again!

If you remember i blogged in september regarding a lack of supply leading to increased prices, well it seems mortgage solutions agrees……better late than never! See their article here.

I personally i think they missed the biggest point which is the slow down in new build development. But you get the same result.

We still have a few new build developments with discounts available, if you are looking for a property investment click the link!

Another option is to buy a student property, some of our wealthiest investors specialise totally in student accommodation investment. A couple of them have yields close to 20% on massive portfolio’s!

Some investors don’t like the hassle of student property but if you have a management company set up all you need to do is collect the profits!

2009 – A year when then the smart investor used their time to set them up for 2010.

I think you will be in the minority if you haven’t suffered some kind of hardship this year, many investors have seen thier dreams of retirement severely set back.

This has not been confined to property, if you had shares or your money in some banks you could be in a worse situation!

So what should this year have taught the average investor?

1. The only way to build a profitable portfolio for the long term is by investing smart.

For me that means keeping at least 20% worth of equity in any property so you build yourself a buffer to combat any drop in values.

Investors have been stung by dropping loan to value rates, an unwillingness by lenders to remortgage on to rates previously offered has seen investors have to increase the equity in their properties, leaving them severely stretched.

Over the last 2 years i have seen investors with portfolio’s worth in excess of £100m go bankrupt, how can this be i hear you say.

What some property investors seem to misunderstand is that if you have a portfolio worth £100m, with lending on it of £90m. You actually have a portfolio worth £10m. If property prices drop 10%, what is the worth of your portfolio…Nothing!

If this happens you are entirely reliant on the income that your portfolio brings in, investors too highly geared normally cannot withstand more than a couple of months of empty properties.

2. Property Investment is not a get rich quick scheme – investors that use it as such usually find they have leveraged too high.

I am one of the biggest exponents of flipping property, i think that if you have the time and the know how it is possible to make decent profit this way but it is entirely dependent on a couple of factors.

Firstly, you need a massive amount of knowledge of the local market, this is not something that can be learnt quickly, so for this reason either keep to one area or find yourself a property specialist that you trust completely.

Secondly, always have another exit strategy, so if you are buying to re-sell, make sure that if worst case you can’t do this immediately, you can let the property out and pay your mortgage that way.

I have refurbed properties for over 6 years and we are also in the middle of developing apartments, i value every property investment opportunity by the number of exit strategies it provides.

3. The good times will come again, use times like these to research the market and decide where the best profits will be made next year and in the future.

If i could focus on the single most important factor i have taken from 2009 it’s that within the next month or so the vast majority of new build developers will completely run out of stock.

At Fresh Invest we are in contact with all major new build developers and 9 months ago all of them decided to stop all build that wasn’t already past footings. This decision was made because the last thing the market needed at that point was more new build stock. They are all building again now but this has created a back log where all finished sites have been sold and the next tranche of stock is still around 6 months away.

We have seen average discounts reduced from 40% 9 months ago, to 15%-20% now, and thats if you can find any stock. We have 2 developments left on our books which are selling at around 2 a day.

The first 6 months of 2010 will see property prices increase due to a lack of supply and increased demand as more confidence seeps back into the market.

I would take the first few months of 2010 to pick up the last pieces of good quality discount property around, there is only 1 way values are going to go in 2010.

New Opportunities through Fresh Invest:

1. We are launching a scheme that should give clients access to lender stock, for property investors looking to pick up great quality buy to let property in a particular area this is the one!

2. We are working hard on some student schemes, these should yield over 8%, have really low interest rates and start at around £80,000. With massive demand and industry professionals flocking to this market this is definitely one for the future!

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

Kingsoak, Jennings Homes, Gleeson Homes, Crosby Homes, Bewley Homes, Antler Homes, Barratt Homes, Redrow Homes and last but not least Bellway Homes.

What do all of these developers have in common?

Their year ends are in either june or july!

So why does this make a difference to you and i?

Because most, if not all of these developers have debt to service.

They have share holders that expect a certain return from the compani9es they have chosen to invest with.

If these companies cannot make the necesary sales then there will be no dividend payouts. This will reduce their share price.

So, when May comes around many of the developers that have been telling you throughout the winter that they do not need to make sales, laughing off your offers of 30% discount, will probably take a very different tack!

Now don’t expect discounts to be at the levels that they were at the tail end of last year, they won’t be.

The property market is a strange animal, when the general economy seems to be worse than ever, developers will be telling you that they are doing plenty of sales.

Because of the shoring up of the banks by the Government, many will not be chasing developers at the same rate as they were last year so ultra enormous discounts will probably not be available.

This however may be a blessing, many of the developers have brought their pricing in line with RICS valuations, so although there are not massive discounts, there are real discounts! Hopefully over the next few months a sense of realism will return to the property investment market.

Personally i think that the much reported 40%-50% discount deals are long gone and to be honest, were only done by a handfull of developers selling whole developments on what would probably be classed as a bad site.

Investors should get used to the fact that the no money down deal is by in large gone, and even if they were available, anyone gearing their property at 100% in this market needs a straight jacket, not a property portfolio.

Anyway, lets see what the rest of May holds, im expecting some great opportunities.