Property and economic update

House price inflation remained static during September further reducing the prospect of a market crash. With values expected to remain stagnant for the remainder of the year it could be well into next year before we start to see an increase of any kind. This can only be viewed as good news by property investors as a stabilizing market will result in less volatility and enable more sustainable increases when prices do start to increase again.

Both Hometrack and Nationwide have reported a tiny drop do just 0.1% and 0.2% respectively for September. Only the Halifax house price index showed an increase with a figure of 1.2% nationally, bringing their reported average house price to £168,299, slightly higher that Hometrack's £160,900 and Nationwide's £156,517.

Of the 57 Hometrack regions only 4 saw price increase, with 21 remaining static and 32 experiencing falls. However, the figures are tiny with the largest increase recorded to be just 0.1% in Central London and Gloucestershire.

John Wriglesworth, Hometrack's housing economist, comments: "Hometrack believes the present trend of house price falls will end before the end of this year. While house price falls are on track to meet our -5% forcast for the year, we expect a reasonably strong rebound for 2006. While another boom in house prices is not in prospect, a house price crash can clearly be ruled out.

Ways to increase your yield

Many investors are concerned that their properties are not currently going up in value and wondering how to increase their return. With capital growth currently running in the low single figures we advise them to try and improve the cash flow on their properties.

To do this you have to do one of three things:

1. Increase your rental income
2. Decrease your expenses
3. Decrease the length of your vacancies.

So, how do you go about doing these? Let's have a look at a couple of ways.

1. Increase your rent
   In the current climate of lower purchase demand we are seeing an increase in rental demand. In general when demand increases prices tend to increase and so we currently have a situation of rising rental values. Good news if you want to increase your rent.
2. Decrease the rent
   It sounds almost frivolous to say this after the previous point, but we see many landlords having long vacancy periods because they are asking unrealistic rents. Any gains they would make by charging a higher rental are soon lost by the few extra weeks of vacancy. Tenants are currently very aware of market rentals and we will often suggest that landlords set their rental say £10 below the market just to get a choice of tenants quickly.
3. Consider pets
   With more than half the population interested in having a pet you will broaden your market by allowing your tenants to have pets. If you consider this option it is important to inserting a special pet clause in the lease to protect your interests.
4. Make you property more attractive
   During periods of vacancy take the opportunity to spruce up your property. A quick coat of paint inside is probably the most cost effective improvement you can make in order to attract tenants and to increase your rent. Stick to neutral colours, off whites or creams which will appeal to the majority of tenants. If your carpets are getting tired, update your carpet or pull it up and polish the floorboards.
5. Install a dishwasher:
   While a dishwasher may only cost you £250 it will probably increase your rent and make your property more attractive to potential renters. Having a dishwasher or other luxury fittings will always attract a tenant to your property before another similar property without these.
6. Keep your property looking smart:
   Every 5 years you should give your investment properties a good overhaul and every 10 years you should give them a full refurbishment. This keeps them attractive to tenants and means you minimise your vacancies.

As you can see most of these suggestions will cost you little but will ensure that your property remains tenanted at the optimal rent, therefore increasing your investment return. This will keep you and your tenant happy.

A great way to dramatically improve your offers

Making an offer to buy an investment property is a 'heart in your mouth' experience. There really is an art to making successful offers. Sadly though, many investors are preoccupied with submitting low-ball (i.e. well below asking or market price) offers that don't meet the needs of the vendor and therefore have next to no chance of being accepted.

After many years we have discovered that there are certain critical success factors that distinguish a good offer from a bad offer. One in particular is especially important. It is to include a sunset clause in all offers.

One of the frustrations of making offers is that agent's are sometimes quite bad in getting back to you with a timely response. This was particularly so during the recent boom when there were more buyers than sellers which allowed lazy agents to get away with sub-standard service.

While the market is now more competitive, sluggish agents still need to be prompted into action, and this can be nicely done through a sunset clause.

A sunset clause is a short statement that you include in your offer that states that the offer will lapse at an identified time on an identified date. For example, the wording I use is: "This offer, unless earlier withdrawn, will lapse at (time) on (date)."

Without such a clause you run the risk that your offer is open-ended, meaning that it remains current and valid until accepted or rejected by the vendor. This can be quite dangerous as you lose some degree of control over your offer, especially if you are making multiple offers.

So, how much time should you allow in a sunset clause? Unless there are unusual circumstances (such as the vendor being overseas or otherwise hard to contact), an hour prior to the close of business on the second working day is sufficient. For example, if you make an offer at 11am on a Monday, then the sunset clause should lapse at 4pm on Wednesday.

The only exception to this rule is that generally you shouldn't leave your offer open over a weekend. This is because the weekend is the main time for potential homebuyers who tend to buy on emotion rather than price, meaning that your offer may be vulnerable to being beaten by non-investors.

Therefore, for offers made on a Thursday or Friday, you should have the deadline as 4:30pm on the Friday. This is not a hard and fast rule though and it is important to remember that the key to making successful offers is to meet the vendors need for selling. The sunset clause is designed to add pressure to the agent to submit the offer rather than making or breaking the actual deal.

Finally, if you use the same agent regularly and this agent advises that the vendor has accepted the offer after the sunset clause has lapsed, then you should not agree to proceed. While it would be easy just to accept and move on, it is a matter of principle that you need to train the agent into understanding that your word is your word.

In stead you should counter offer again on slightly different terms. For example, you could ask for a few hundred pounds off. Should you do this on every occasion? Yes, even if it seems to shoot you in the foot as the strength of your investing system will determine the strength of your investment portfolio.

There really is an art to making offers, and if you're not currently experiencing much success then you should change the way you're operating. Only ever make an offer if you believe it has the realistic chance of being accepted. Otherwise, your time is too valuable to be wasted on submitting low-ball offers.

"Obstacles can't stop you. Problems can't stop you. Most of all, other people can't stop you. Only you can stop you."
- Jeffrey Gitomer, Author and Sales Trainer

"You can learn new things at any time in your life if you're willing to be a beginner. If you actually learn to like being a beginner, the whole world opens up to you."
- Barbara Sher, Author

The cure for procrastination

Have you ever noticed that the longer you look at something you should be doing, the more difficult it seems to appear? That the longer you put off something you should do, the more difficult it is to get started? A good deal of frustration and unhappiness could be avoided if people would just do what they know they should do.

A well known newspaper editor once wrote, "Don't exaggerate your own importance, your own size, or your own miseries. You are an ant in a human anthill. Be a working ant - not a ridiculous insect pitying yourself." Strong language, maybe, but there's a lot of sense in it.

A person carrying a heavy weight is all right as long as he keeps moving. The minute he stops, puts the weight on the ground, and sits down to rest, the weight seems to become heavier; the distance to be traveled, greater; and the work, just that much more unpleasant.

Sometimes it must seem to everyone that things have piled up so high that there's just no way of digging out. But there is. Pick the thing that's most important to do, and simply begin doing it. Just by digging in, you'll feel better, and you'll find that it's not nearly as bad as you thought it would be. Keep at it, and before long, that pile of things to do that seemed so overwhelming is behind you - finished.

What overwhelms us is not the work itself. It's thinking how hard it's going to be. It's seeing it get larger every day. It's putting it off and hoping that somehow, through some miracle, it will disappear.

The Chinese have a saying that a journey of a thousand miles begins with but a single step. And that step accomplishes two things. First, it automatically shortens the distance we still have to travel, and, second, and just as important, it makes us feel better, more hopeful - it strengthens our faith. If a person will just keep putting one foot in front of the other, he will be taken into new and exciting places, see new and interesting things, and think thoughts that never would have come to him if he'd remained at the starting point. Then the journey is finished. He wonders how or why he could ever have sat so long and worried and stewed about the time and trouble it would involve to do what he knew he should do.

If you'll think back, you'll remember that you've always been happiest, most contented, after having finished a difficult project or faced up to a responsibility you were worried about. It's never as bad as you think it's going to be, and the joy that will come with its accomplishment makes it more than worthwhile. Work never killed anyone. It's worry that does the damage. And the worry would disappear if we'd just settle down and do the work.

"Our goals can only be reached through a vehicle of a plan, in which we must fervently believe, and upon which we must vigorously act. There is no other route to success."
- Stephen A. Brennan, American Basketball Coach

"The goal you set must be challenging. At the same time, it should be realistic and attainable, not impossible to reach. It should be challenging enough to make you stretch, but not so far that you break."
- Rick Hansen, Wheelchair Athlete and Speaker

Secrets of property investment

Buy property below market value
Sounds good doesn't it? Because you have bought below the market your gross rental yield increases. So if you hold your property long term, you'll increase your yield by X amount per annum and that can turn a negative geared property into one that puts pounds into your pocket. Here is your guide to buying well.

Know your market!
The asking price is not necessarily the market price. It is almost certainly optimistic. Find out what has sold in the street and area. Be careful to compare like with like. Spend a minimum of 3 months just comparing prices, so that when a deal comes up you can act immediately - because a good deal won't last long. There are a number of online databases that you can use for this.

Have an 'escape' clause in your offer
Always have a condition in the offer to let you pull out if you need to. This may be "subject to a structural inspection satisfactory to the purchaser…" or "subject to inspection by…" (ask your solicitor for an appropriate clause.)

Buy in a good area
If you buy in an area that is in demand you'll find it easier to sell. Mind you, deals may be harder to come by. You will need to act quickly. You must know your value and be prepared when the deal appears.

Check out the location. The attributes of a good rental property are:

• Handy to transport, preferably bus/train; shops; schools etc.
• Respected area / desirable suburb.
• Near café society.

Watch out for property that is:

• Too close to the train line.
• On a busy / main road
• Adjacent to schools, factories, sports centres, shopping centres, public toilets, hospitals and car parks etc.

These properties can give you great initial returns but often you find the tenants will 'move on' because of the noise or pollution or disruption. They will then be often harder to rent than a 'well located' property. The key with these properties is to negotiate hard and don't pay too much.

Short completion period
If your vendor really needs the money, the shorter the completion period, the more attractive the offer. Give yourself time to do the necessary searches. Check with your solicitor how quickly you can get the clearance. I've offered 14 days but have found 21 days more practical. Make sure you have your finance set up if offering short completion periods and cash offers. Banks might not be able to meet your contract time which could put your deposit 'at risk'.

Establish a relationship with a number of agents
If you are making offers through agents, establish a relationship with a number of agents. Call or fax them regularly. Let them know you are looking. When a deal comes up, look at it straight away. Give the agent feedback on what you are after. What did the Seller pay? Find out how much the vendor paid. If the vendor has paid more than your offer, he is less likely to accept it. You can find this from a number of web sites if the property was purchased in the last 5 years. If he still makes a substantial profit on his original buying price, he may be more likely to accept your offer. Especially if he can cover his costs and make a small profit. In the end, it will come down to whether he needs the money and how urgently. What is the Motivation of the Seller? Keep asking questions. Find out why the property is being sold. Is the money needed in a hurry? Has the seller bought elsewhere? Meet the seller's needs (e.g. a quick settlement) and you will buy well.

Make offers
If you never make an offer, you will never know if the seller would have accepted. Don't be embarrassed. You can't force anyone to accept an offer if they don't want to. What do you have to lose? (First be sure of your market price. Some of these are highly inflated). Make lots of offers. The likelihood is you will pick up one at least. If you buy only two of these in a whole year you will do well. You will also know the market very, very well.

"It is better to be prepared for an opportunity and not have one than to have an opportunity and not be prepared."
- Whitney Young, Jr.

"Failure is a part of success. There is no such thing as a bed of roses all your life. But failure will never stand in the way of success if you learn from it."
- Hank Aaron Baseball Player

Need mortgage advice?

Maybe you're thinking of buying an investment property, or you need to release funds tied up as equity in your house. Perhaps you just want to find the best mortgage rate for your own individual circumstances and cut your mortgage payments. Why not call our mortgage department today? Our resident mortgage advisers will give you the best possible advice to suit your requirements. Call them today on 01252 737575.

What's available?

We currently have the following investment opportunities.

• Equity Chambers (Phase 2), Bradford
• Southside, Hurst Road, Birmingham
• Marco Island, Huntingdon Street, Nottingham
• Mill Hill Gardens, Budapest, Hungary
• Sun Palace, Budapest, Hungary
• Caicos Beach Club, Turks & Caicos Islands, Caribbean

Please go to www.propertyforlife.com/discount_prop.php for full details and look out for more great opportunities coming soon!

Make some extra money?

The 'Property for Life' referral programme is a great way to make extra money. Take a look at the table below to see just how much. If you know of anyone who is interested in purchasing investment property why not refer them to us. It's simple, if they buy you make money, and the more they buy the more money you make. Take a look at our website for full details www.propertyforlife.com/tellafriend.htm

Back issues

Remember, you can read any of our back issues by following this link to our web site www.propertyforlife.com. If you missed one, or you want to read that really interesting article but can't remember where you put it, you will find it all here.