Before investing in property, it is fundamental to set out a strategy congruent with your financial objectives. These aims depend on your individual circumstances. If you are looking to consolidate your income, cashflow is essential (rental income – costs). If your primary aim is to profit from the re-sale of property, then the key will be to invest in areas with good capital growth prospects and buying at prices below that of local comparable properties.

Here is a breakdown of the two elements which invariably form the cornerstone of any investment strategy:

Buying at a Discount

The discount on a property is the difference between the purchase price and the value of the property, usually based on a Royal Institute of Chartered Surveyors (RICS) valuation. The discount is an essential factor as it represents instant equity and, crucially, enables to drastically reduce the capital input when the right deal structure is in place. In current market conditions discounts typically range between 15 and 30%, depending on the number of units for sale and the motivation of the vendor.

Using Appropriate Finance

Finance is the backbone of the great majority of property deals. The most important components of a mortgage are the loan-to-value (LTV) ratio and the type and level of its interest rate (tracker, fixed…etc). A higher LTV reduces capital input (thanks to a larger loan amount) but decreases the cashflow (due to higher mortgage repayments). A lower LTV boosts the cashflow but raises the initial capital input.

Result: A High Return on Investment

• Low capital input
• Ongoing positive cashflow
• Instant equity
• Long-term capital growth prospects

A successful investment strategy generally entails buying properties below market value using financing options striking the right balance between initial capital input and ongoing cashflow. A well-structured portfolio provides a constant income stream as well as long-term capital growth prospects.

We wish you successful investing in 2009!

Alpha Property Investment Ltd

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Going forward into 2010 I expect to see more products, less stringent criteria and an ease of LTV’s. Enquiries for buy-to-let mortgages have increased by nearly 50% since August 2008, whilst available products have diminished, but lenders realise this demand and we are starting to move forward.

As an experienced broker I have some very good internal contacts within the industry and I’m certainly hearing good things from many of my business development managers. Many of whom have been helping brokers like myself for 30 years or more. Lenders like The Mortgage Works, I expect to see them return to niche areas of the market in 2010 such as House in Multiple Occupation and 75% LTV lending. Their motto has always been ‘common sense lending’ and it certainly would be good business sense to carry out these changes as it will increase the much-needed competition in the market place.

Interest Rates 2010

We get many lender reports at this time of year from senior economists. A Nationwide report this month has revealed that most senior economists expect the Bank of England base rate to remain low throughout the majority of 2010 until Q3 when we should expect interest rates to reach 1.0%. You can read more about how interest rates will move into 2011 and 2012 by visiting our website.

BTL rental demand to rise

The residential rental market is beginning to stabilise with property oversupply decreasing across the UK and the number of new tenancies increasing, according to the Association of Residential Letting Agents (ARLA). It says that the historical decline in numbers of tenants, which led to a surplus of properties to rent, is coming to an end.

The research also showed that the average void period of a rental home has dropped for the first time in more than a year, indicating that properties are being rented more quickly (ARLA 29/9)

All in all, very positive news and a good outlook for investors. I firmly believe we have only a timescale of 6 months left to secure decent below market value property before the market starts to rise again. Successful investors will take advantage of this, buy now and sell when the market rises.

from mortgagebtl.co.uk

Northern Rock has released an exclusive new mortgage which enables investors to purchase new build flats with up to 70% financing. Recently the maximum loan-to-value on new build had been 65%, which undermined the entire sector for investors as well as the already struggling developers.