5 Reasons Why Investing in Property in Hull Will Create Wealth

This article aims to educate the reader on the 5 fundamentals of professional property investing specifically focused on the city of Hull in the East Riding of YorkshireThe topics covered
Return on Investment
Rental Demand
Stress Testing
Exit Strategy
Leverage When investing in property you can benefit by borrowing from the bank using the power of leverage. Typically, a buy to let mortgage requires you to put a 25% deposit down and the bank will provide the remaining 75% of the purchase price of the property. Where else can you get them to do that? Banks will lend you money to buy property. They are less likely to lend you money to grow your business and they definitely will not lend you money to buy stocks and shares. They understand that property is still a safe secure asset despite what the media says. To show you the power of leverage lets show you an illustration. You have 100,000 to spend on an investment property. The following scenarios show how you can spend that moneyScenario 1 – Buying 1 property worth 100K with all your cashBuying 1 house without a mortgage. Put down 100K and buy the property outright. The following year inflation raises the price of that property by 5%. The property is now worth 105K. You now have a property worth 105K and an equity of 5K in that property.Scenario 2 – Buying 4 properties each worth 100K with a mortgage on eachYou put a 25K deposit down on each property and a mortgage for the remaining 75K, spending all your 100K across 4 properties not just 1 property this time. The following year inflation raises the prices of that property by 5%, the same as scenario 1. Each property is now worth 105K. However, now you have 4 of them so benefit from the 5K equity in each one. So you now have 20K equity instead of the 5K in scenario 1. You have still spent the same amount of money but have benefited from leverage of money from the Bank.2-3 bedroom properties in Hull can be bought for between 40-100K. They offer a superb opportunity to leverage your cashReturn on Investment The return on investment is defined belowReturn on investment = Gain of Investment – Cost of Investment / Cost of InvestmentIn basic terms, how hard is your money working for you. You can choose to invest in a new business venture, shares on the stock market or property. Each wealth creation channel has its own return on investment together with its associated risk. As a professional investor you have to weigh up your appetite for risk and potential return on your investment. Lets revisit the 2 leverage scenarios and examine the return on investmentScenario 1 – Buying 1 property worth 100K with all your cashReturn on investment (ROI) is 5% e.g. 5K/100KScenario 2 – Buying 4 properties each worth 100K with a mortgageReturn on investment (ROI) is 20% e.g. 20K/100K Hull is a great place to start your professional property investing career because of the great return on investment. The reason is that property prices in Hull are among some of the cheapest in the UK. So, the cost of your investment is lower. This means not only can your money go further ie. you could buy more properties but each of those properties will go up in price and if you’ve leveraged your investments with mortgages your return on investment will be even greater.Hull gives a better return on investment than more expensive cities in the UK because property prices are lowerRental Demand Of course, an investment property only becomes an asset if you are able to rent it out. If you can’t, that asset very quickly becomes a liability. A quick reminder on the definition of an asset and liabilityAsset = Puts money in your pocketLiability = Takes money out of your pocketSo, to ensure your investment property remains an asset you need to be confident that it is in an area of high rental demand. Hull is a hidden gem of a city. It is the gateway to Europe via ABP ports and P&O Ferries and therefore has a thriving export/import industry. Siemens are going to locate a large wind turbine manufacturing plant there cementing it’s status as a centre of excellence for Renewable energy technology. It is well connected by the M62 and has a broad manufacturing base. The Deep, the UKs only submarium has established itself as a tourist destination too. The University of Hull continues to grow and has a healthy student population around 25,000. However, due to the relatively low salaries in the region, affordability to buy a house is low. This consequently has led to a high demand for rental property.The following post codes in Hull are great rental areas. HU5 is close to the University for students. HU7 and HU9 are great for families.Financing Deals If your aim is to own 10, 20 or 30 properties and supply the deposits for each one you would soon run out of your own cash so how do the Professionals do it? Well, the answer is Other Peoples Money (OPM). They buy their properties at the right price. Money in property is made when you buy the property NOT when you sell it. Buying at the right price i.e. below market value or BMV as it’s called enables you to refinance with the mortgage lender at the Open Market Value and pull out most of your deposit cash. This enables you to recycle your pot of cash to purchase another property. However, in this market, the Council of Mortgage Lenders have imposed a 6 month rule that prevents you remortgaging unless the property has been held for at least 6 months. If you can demonstrate added value then you have a better chance of achieving the valuation you desire. On average Property Prices double every 11 years. This means a 100K property is worth 200K in 11 years time. When you sell this property you pay off the original 100K mortgage and then have approximately 100K profit. This means if you bought 2 properties you can sell one and pay off the mortgage on the other and still have 1 cash flowing property with no mortgage on it. Using this principle it can be scaled up to any number of properties you wish to buy. Getting a mortgage can be difficult in this current economic climate but not impossible. The money hasn’t disappeared. It is just in different places. The trick is to find the people with the cash.Buy for cashSome properties in need of refurbishment in Hull can be bought for as little as 20K. This means you need to buy them with cash as mortgage providers generally do not lend below 40K. It also means you can move quickly and not have to involve Mortgage Lenders and Valuers in the purchase. Once you have refurbished the property you can then get a surveyor to value the property with a view to placing a mortgage on it and get most if not all of your cash returned.Deposit FinanceYou can help people with cash earn more than they are getting in the bank by offering them a higher interest rate for borrowing their money to fund a deposit. You can then return their money after refinancing.Mortgage HostIf you can’t get a mortgage then find someone else who can and offer to share the cash flow from a property. Get a lawyer to draw up an agreement between you and the host. Because property prices are relatively low in Hull, there is more chance of finding investors who are willing to lend you 10-15K for a deposit. Risks are reduced as the amounts on loan are less. Once you’ve done 1 deal with an investor and made them more money they will be happy to do another deal with you.Hull property prices are low which leads to lower risk for Cash Investors when funding a deal.Stress Testing With any of your investments we advise stress testing your investments at higher interest rates. Whilst we enjoy historically low interest rates it’s tempting to buy lots of property deals. However, interest rates have only 1 way to go and that is up. Test that your investment still produces cash flows at higher interest rates so it remains an asset and not a liability.Test your investments at higher interest rates. Hull investment properties still positively cash flow at 8-9% interest rates at current rental values.Exit Strategy With any investment it is vital you know your exit strategies. With an aeroplane knowing where the exits are is vital in case of an emergency. Similarly, with investing you need to know where your exits are for getting out of the investment deal in an emergency.Selling your investmentIf for any reason you need to come out of an investment you can sell a property. The properties that will be easiest to sell will be the most popular type in that area. If you own an expensive, executive detached house in a desirable area the number of buyers is reduced and constrained to residential buyers. However, if you have a cheaper, investment property you can sell to both investors or residential buyers. This is important when considering your investment.Know at least 2 exits when entering an investment deal. There are lots of investors in Hull and because of low prices they are affordable to residential buyers too.

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Why You Should Plan Your Next Vacation Online

One of the easiest and best ways to plan any type of trip, is to do so online. You have endless resources and a wealth of information at your disposal, 24 hours of the day. Whether you are researching train routes in Spain or need to find a vegetarian restaurant in Italy, you can be your own travel agent and find it all online.  The internet itself is a technology marvel — so there aren’t even words to describe how the integration of certain websites and search engines put the power of planning a 21 day trek across Europe at your fingertips.  The internet not only provides you with the convenience and ease of planning and, of course, customizing any type of trip from start to finish, but it also saves you money. There are dozens of “trip booking” websites out there that offer sales, specials and discounts at any given time. For example, for quite some time one well known travel website has been offering a no strings attached and no black out dates $200 off coupon for any 6 night trip booked through them. That’s $200 right off the top of your trip by booking it online. Other sites are currently running anywhere from 10% – 25% off specials so if you are booking a particularly expensive trip, that 10% – 25% can be huge savings. Online travel planning sites also offer discounts for booking your hotel and your flight together versus separately. Imagine a discount for doing something that already provides a super convenient service to you.  How can you beat that?  Planning your vacation online also allows you to do as much, nor as little, research as you like on any aspect of your trip. It also easily allows you to comparison shop to see where and how you can get the best deal. You may have wanted to go to Aruba for your summer vacation but after some online research you discover that several hotels in Anguilla are having huge sales during that time, and you would save 50% by going to that particular Caribbean island versus the other.  Online travel planning also allows you to find out government travel requirements and restrictions as well as very specific, local information about your intended destination(s). You can even renew your passport online! From checking out pictures of your hotel’s bathrooms to booking a private driver for an excursion in Jamaica, you can do it all from the comfort of your own home, with a simple click of the mouse. Happy travels!

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Capital Gains Tax on Property in Australia – Your Quick Guide

Capital Gains Tax on Property in Australia

Capital Gains Tax (CGT) was introduced in Australia on 20th September 1985. The tax applies only to assets acquired on or after that date. Gains (or losses) on earlier assets called pre-CGT assets are ignored.

CGT was introduced to reduce the inconsistency between the taxing of wealth and the taxing of income. The CGT system works by including the assessable gain on the disposal of a CGT asset in the assessable income of the entity disposing of it.

What is a Capital Gains Tax (CGT)?

Put simply, Capital Gains Tax is not a separate tax; it is part of your income tax liability. CGT is the tax you pay on the difference between the amount you sell an asset for and the amount you paid for it.

Capital Gains Tax in the context of the Australian taxation system applies to the capital gain made on the disposal of an asset, except for specific exemptions (e.g. the most significant exemption is the family home).

What is a Capital Gain?

A capital gain will occur when a capital asset is sold at a higher price than it cost you. For example:

When you sell an asset for more than what you paid for, this is referred to as a “capital gain”, and

If you sell an asset for less than what you paid for, this is referred to as a “capital loss”

Whether you make a capital gain or not depends on the purchase price of an asset compared to its selling price.

A capital gain usually has a different meaning for the tax department, the economists and the accountant.

Is a Capital Gain Treated as Taxable Income?

Yes, Capital Gains Tax operates by having net capital gains treated as taxable income in the tax year an asset is sold or otherwise disposed of.

It is important to note, that a Net loss in a tax year cannot be offset against any income. But, the net loss can be carried forward to be deducted against any capital gains in future years.

What is a Capital Gain Discount?

If the asset is held for at 1 year and you have determined the total capital gain, the CGT discount can then be applied. The total gain on the assessable income is first discounted by:

50% for individuals taxpayers, or

33.3% for self-managed superannuation funds

Note: Companies and other trusts are not entitled to a CGT discount.

What is a CGT Event?

A taxpayer can only make a capital gain or a capital loss if a CGT Event happens. The CGT events is the disposal of a CGT asset, which covers a change of ownership (e.g. by sale or giving away) of assets.

Why you seek help from an Accountant

Use this informative as a guide only and employ the services of an Accountant as every financial decision requires time and expertise, even a small mistake can harm you terribly. So, it is wise to seek expert advice from your accountant.

If you require funding to pay the ATO out a tax debt contact an expert mortgage broker who has a thorough knowledge of Capital Gains Tax (CGT).

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How Does Off The Plan Property Purchase Work in Australia

Off The Plan Purchasing of Property in Australia

Australia is currently experiencing a massive boom in apartment developments, and the boom is anticipated to continue for a number of years. Where once off-the-plan apartments were only considered by investors, the massive boom has now opened the door for first-time home buyers as well.

Off-the-Plan Property Purchase – Meaning

You are purchasing “off-the-plan” when you are buying strata units and retirement village homes before the construction of the buildings are completed. The design of the building and sketches of its final appearance maybe included in advertising material and the property is also advertised for sale well before occupation is possible.

Off-the-Plan Property Purchase – Benefits

There are a number of benefits that you should consider when buying off-the-plan, such as:

Lock in a price – You will pay the current market price, even if the property is being completed in the future

Increase in property value – If you purchase the property off-the-plan today you may experience an increase in the property value when you settle 2 years later

Tax Advantage – If you are purchasing for investment purposes, it is important to speak to your accountant as you may be able to claim depreciation on your tax

Stamp Duty – Over the last 5 years, various stamp duty concessions have been offered in certain states and territories

Time to Save – If the construction of the property has not started you will have more time to save, and you will not need to borrow as much

More Affordable – If you buy early, it can be more affordable, because developers are keen to secure sales to enable the development project to go ahead

More time to shop around – You will have more time to shop around to find the best home mortgage that suits your budget

Off-the-Plan Property Purchase – Risks

There are a number of risks that you should consider when purchasing off-the-plan, such as:

Market Viability – If the market drops and you have paid too much for a property, you may find it difficult to obtain finance for the full amount

Rising Interest Rates – Interest rates can increase before you settle on the property

Occupancy – You will not be able to move in until the property is finished being built

Developer Bankruptcy – There is always the risk that the developer can go into bankruptcy before the project is being completed. You will need to ask: 1. will you get your money back, and 2. what guarantees do you have

Failed Expectations – You will not know who your neighbours are until you move in, and there is a risk that the quality of work does not meet your standards (i.e. buying property on paper without having seen the property is a significant risk)

Questions to help you make a Profitable Property Purchase

Before you sign a contract, you should ask questions to the property developer or builder. Here are some questions for you to consider when deciding to buy off-the-plan:

Is the contract complete? (i.e. the conditions of the contract should be closely checked)

Are there any penalties if you withdraw from the contract?

Can you visit the property site during construction? (i.e. you want to be able to check the location and see if other constructions in the area affect your view)

Can you make changes to finishes and fixtures?

What happens to your deposit if the developer runs into financial problems?

What does the purchase price cover? for example, are any of the following items part of the package and what is additional:

Floor Coverings, and

Painting and Decorating

What happens if you identify any faults post-completion?

Important Reminder – You must exercise caution and seek appropriate legal and accountant advice before signing any documents or paying any money.

Seek Expert Help from an experienced Mortgage Broker

Most brokerage firms recommend that if you are purchasing off-the-plan property, you must think carefully before entering into a contract. It is always advisable to take help of property finance experts because:

They can determine your overall serviceability position

They can calculate how much you can borrow

They know what the standard requirements are to buy off-the-plan

They can provide a much faster credit decision for you, provided they receive from you all the required documents, as soon as possible

They know numerous credit policies and procedures as they deal with lenders/credit providers on a regular daily basis.

Truly, property finance experts can help you in getting fast approval on your loan application. I hope this comprehensive manual has served its purpose of giving you complete knowledge of off-the-plan property purchase.

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