The UK has been greeted on its return to work today with the news that mortgage approvals rose 4% in the month from January to February this year.  Good news most will say.  However, the question that remains is is the UK market beginning its recovery, or is this simply a blip in an otherwise continuing downward spiral?

A number of property indicators in 2009 have suggested some form of recovery is under way.  From my own network of contacts in the property industry, January and February were certainly upbeat months.  So who is buying?  It seems it is a combination of first time buyers and property investors keen to take advantage of what they see as value in the market. There is certainly an increased level of demand from first time buyers who, having previously not been able to get on the ladder and have saved in the meantime, and now in position to take advantage of lower prices.

Many property investors, who will abide by the “buy low, sell high” philosophy, see an opportunity to buy up stock previously out of their reach.  Due to the increased numbers of repossessions, the Below Market Value (BMV) industry has certainly exploded in the last 3 months, with investors looking to buy at anywhere between 20% and 30% below market value on second hand property, and as much as 60% below market value for unsold developer stock.  These factors, combined with a stabilising in mortgage rates and products has led to increased enquiries, sales, and therefore the improvement in nationwide data released by various bodies.

In addition to this, lower interest rates have meant homeowners, specifically on tracker mortgages, have in some cases more than halved their monthly outgoings.  The government can therefore argue that lowering rates has put more money back in some people’s pockets.  However, it has been well documented that rate cuts have not, in the main, been passed on, so the financial easing has not affected the whole homeowner market.

So where are we?  Well general economic data would suggest the bottom has not quite arrived.  Job cuts are still being made and mainstream lending does not appear to have improved much.  Coupled with the facts that repossessions are still rising and general transactions between homeowners are still low would suggest that there is a blip in the market.  However, supply and demand are still fundamental when looking at the property market.  As prices fall, demand generally increases, and there is no doubt that demand has increased in 2009.  One could take a further view that if property prices continue to fall, the demand will continue to increase from both increased levels of first time buyers and investors looking for even better deals.  Therefore, it is my opinion that the property market will find a natural recovery point in the not too distant future.

As soon as I finish this blog, it will take its place in history. Admittedly, it won’t be up there with world wars, births of monarchs and world cup winning football teams, but it will indeed have its own place in history.

A funny subject for an investment related blog? Probably, but as an investor, history plays a massive part in the way we invest, but is it always an accurate version of what really happened. Yesterday will almost always define how we approach tomorrow.

Let’s roll back to a week last Wednesday. I tend to play a few arrows with a good mate down my local pub (this really is going somewhere, I promise). It was one of those nights where every dart I threw was a winner and for once I walked away the darts champion of the 7th of January 2009, for my local pub and our game anyway. All said and done, I won, that is history, it is there for both me and my friend to reminisce to the grandkids about if we achieve nothing else as life moves forward.

This is not a rant I promise, but as we prepare for another massive match tomorrow, we had a quick chat about times and venues, then nothing more than a passing comment was motioned into the conversation, he said I won 3 – 1, whereas I think I won 3 – 0. He is sure, I am sure, there was no cheering audience or passing local to back either of our opinions up. The fact I won is there, we both agree, but as to the score, we both have different opinions. So this one piece of history is covered in doubt, possibly controversy, and although history dictates that I won the game, the score is still up for debate, even though it happened only 6 days ago.

Moving back to the investment topic, as we all sit down and plan and prepare for our investments for the next few years, how will we look back at the history of our previous investments?

Some will say its been a terrible year with house prices crashing, but the houses they owned all had tenants and the rent covered the mortgage, so does the history of 2008 define a bad year because of the house price drop, or does it indicate a good year as all the houses had tenants and we are not out of pocket in the physical sense, only in the paper value of what the houses might be worth today. If the reverse was true and they had no tenants for 6 months but their house price rose by 5%, would this indicate a good year or bad year, with a big loss of physical money, but a rise on the value of their houses?

This is where history, although it does indeed happen, can be taken and interpreted in many different ways. England winning the football world cup in 1966 did indeed happen, but for some people it was the greatest game they ever saw, for others in the crowd that day it was an immense disappointment.

Even though history may indeed make 2008 look like a terrible year for investors, we must as investors and individuals look back and look at it from a balanced point of view. If we are still standing and investing, it couldn’t have been that bad, could it?

Selling properties, especially investment properties and buy to let properties used to be quite easy. Sorry to all the sales people out there, but it did.

Having previously worked for a property investment company, I know that it was plausible to push through 4 – 5 deals a week, very rarely without any lending problems and mortgage approvals tended to be easier than finding a Manchester United fan in London. Those were the glory days of lending and up until a year ago the level of lending was at a record high and the amount of buy-to-let mortgages that were being approved was staggering, also accompanied by some of the best rates investors had ever seen.

Some would say this is the reason we are in the midst of a recession and struggling, but that is another blog, one of which we have covered and will cover elsewhere.

Recently, I brought a couple of stunning BMV deals to the table, as we felt that after a year in which we would not touch property, we now had a couple of deals that really did make sense to the investor. This was due to better discounts, newer and an increased amount of decent mortgage rates and just the general feeling that property had hit its lowest level and was now starting to recover, according to reports from leading lenders and banking institutions.

We sold Penn Lane within a couple of days and currently have offers on the further two properties that we have on our books, but we kept hitting a common discussion with some of our investors – “would love to buy it, I am just too old, I wont get the mortgage”.

As with anything, previous misconceptions had started to creep back in to investors minds. Some of our investors tried to get a mortgage just as things were starting to look really bad and were hit with many reasons why they would not be approved, one of them being age which is in fact in relation to risk. This had then been indented into their investment strategy and they were probably now missing out on deals that they really wanted to get involved with.

We work with one mortgage broker and a quick call to them to inform them of this supposed age issue and we were met with they reply that this indeed was not really the case anymore, and in fact we could offer mortgages to people in their late 50’s and beyond. Chris then went back to the investor, forms went in, and he is now waiting to complete on the deal next week, which is a bonus not only for us, but also for the investor that a year ago was simply not able to go through with these deals any more.

In April last year mortgage lenders got edgy, they were panicking, they knew trouble was ahead and they were refusing mortgages for many reasons. In fact, I can not mention the name, but I knew of one mortgage that would not go through this time last year because the property had decking!!

With mortgage lending now recovering, new criteria are in coming into play and some old reasons to refuse are falling away.

Are you too old for a mortgage on an investment property? Ask us, you might just be surprised.

£130 per month profit from month 1, guaranteed for 12 months?  It’s Discover and Invest of course!

Following on from our ambulance and renewable energy offers, Discover and Invest is pleased to announce yet another income generating opportunity that is sure to deliver.

Chris Davidson, Managing Director for Discover and Invest tells us that “whilst sourcing for 2009, and although we usually get involved in alternative income generators, we noticed that the UK property market was starting to show real value.  Prices had fallen, yields had risen, and a good quantity of cheap stock was available to the market.”  Therefore as usual the problem is separating good deals from bad.

Davidson continues: “there are various problems facing would-be  property investment buyers today: lots of stock without tenants resulting in poor cashflow forecasts, problems getting finance because the rental valuation coverage is too low (125% minimum these days), valuations getting downgraded too often meaning valuation funds are risked time and time again only to find the deal falls through.  Finally, in a market where the value is good and the immediate bonus is strong cashflow from rentals, how do you secure the rental income?”

We’ve finally come up with a deal that knocks the socks off just about all property deals at the moment.  Firstly, our deals guarantee a 20% discount from today’s RICS valuation, with only a 5% net deposit down.  The properties we are sourcing are rentbacks, so you have quality tenants in your property from day 1, paying from day 1…so no worries about finding tenants, how long it will take to get them in, and whether they will look after your property!  Remember the property used to be the new tenant’s home, so it will be filled with their own furniture, etc.  This is much more likely to mean you have stable cashflow and good quality tenants.  The new tenants also sign 12 month contracts on premium rent, meaning excellent cashflow and low hassle for you as the rental management company is in place.  Furthermore we have teamed up with Endsleigh Insurance to provide their rent guarantee scheme.  This secures your rental income for a period of 6-12 months.

We are also so confident that the valuations are accurate, we will pay for the buyer’s valuation, means no funds are risked.  If the valuation is downgraded, the seller will have to downgrade proportionately.  If they physically cannot, all parties walk away from the deal and no funds have been risked!  Furthermore, lenders need to see 125% minimum rental valuation coverage, so we will only supply properties that stick up unless the buyers pays in full with cash.

Our first property is being released on Tuesday in Cheshire.  Valued in the last few weeks at £115,000, the property is available for £92,000.  Monthly cashflow after mortgage, rental management and insurance comes to a whopping £134 per month!  Total net buying costs are £8,450 so this gives a return on capital employed of around 19%.  With £23,000 of built in equity as of today, there is sufficient leeway if the markets falls, and also built in profit for when the market recovers.  If you were to sell your property in a year’s time for the same price plus your rental income, you would have made a return of 250% on capital employed!

Chris Davidson Managing Director of Discover and Invest states that: “many analysts believe we are in a U curve recession now.  Property prices are nearing the bottom in a similar way to what has happened in Florida.  The bottom may take a while to turn but it also gives strong investor signals to buy up stock at value prices.  We are all taught to “buy low, sell high” and the first part of this equation is nearing the right point for many.  Now it is about finding the right deal.”

So yet again, Discover and Invest has hunted out the right deal for this market: accurate discounts, low risk, strong cashflow and secure income.  If you take the view that we are nearing the bottom, why not check out the deal at www.discoverandinvest.com

For more than three years now I have often cast a very watchful eye over the property portal industry. Whilst working within it I would always keep tabs on what the competitors were doing and now I have stepped outside the circle I am moreso keeping tabs on new developments.

I started out working for one of the smaller independent portals in the UK side of the market and we were operating out side of the top five yet trying to build market share. We always had a firm belief that through hard work we could achieve a standing close to or even above those situated in second place and below, but the top dog was always perceived as untouchable. Never say never I know, but they were a bridge too far.

So as the economic times continue to constrain the budgets of estate agents all over the country, how do they survive? Cutting costs is the obvious answer. The aforementioned portals aggressive business model of demanding considerable amounts per month is one such reduction that can be done away with virtually immediately, especially if on a rolling contract, so it came as little surprise that of the 22 agents in Hereford an astonishing 70% have chosen to withdraw their subscriptions [Source: Global Edge]. So if Hereford serves as an example, what of the rest of the nation?

Whilst I have yet to research the response of various competitors this has heightened a perspective that I have held for a few months now in that the portal market is set for a radical change. It has always been such a fragmented market, but now, in line with other industries, it will whittle down to the industrious few. I personally believe that smaller sites will unfortunately now cease to exist over the course of 2009 and that the market leader will not be the only one to face reductions in subscriptions. In fact, they’ll all face it. If the best performer faces reductions, any other portal believing there is market share to seize has, quite frankly, delusions of grandeur.

In the oncoming weeks I shall further analyse competitor reactions to this and intend to make a few phone calls to that effect. Watch this space.