5 Reasons Why Purchasing Property in Hull Can provide Wealth
This article aims to coach the reader on the 5 fundamentals of professional property investing specifically focused on the city of Hull from the East Riding of Yorkshire
The topics covered
Return on Investment
When you buy property you can benefit by borrowing from the bank using the power of leverage. Typically, a buy to permit mortgage requires you to put a 25% deposit down and the bank will provide the remaining 75% of the purchase price in the property. Where else can you get them to do that? Banks will lend you lots of bucks to buy property. They are less likely to lend you cash to grow your business and they also definitely will not lend you lots of bucks to buy stocks and shares. They do know that property is still a secure secure asset despite what are the media says. To inform you the power of leverage lets show you an illustration. You have 100,000 to spend on an investment property. These scenarios show tips on how to spend that money
Scenario 1 - Buying 1 property worth 100K with the cash
Buying 1 house with no mortgage. Put down 100K and get the property outright. The next year inflation raises the price of that property by 5%. The home is now worth 105K. There are a property worth 105K plus an equity of 5K in that property.
Scenario 2 - Buying 4 properties each worth 100K which has a mortgage on each
You put a 25K deposit down on each property as well as a mortgage for the remaining 75K, spending all your 100K across 4 properties not simply 1 property on this occasion. The following year inflation adds to the prices of that property by 5%, exactly like scenario 1. Each property is now worth 105K. However, isn't it about time 4 of them so benefit from the 5K equity in each one. So you now have 20K equity rather than the 5K in scenario 1. You have still spent the identical amount of money but have taken advantage of leverage of money in the Bank.
2-3 bedroom properties in Hull can be obtained for between 40-100K. They have a superb opportunity to leverage your money
Return on Investment
The roi is defined below
Return = Gain of Investment - Price of Investment / Price of Investment
In basic terms, how hard is your money working for you. You can select 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 potential risk. As a professional investor you will need to weigh up your appetite for risk and potential roi. Lets revisit the 2 main leverage scenarios and examine the return on investment
Scenario 1 - Buying 1 property worth 100K with your cash
Return on investment (ROI) is 5% e.g. 5K/100K
Scenario 2 - Buying 4 properties each worth 100K which has a mortgage
Return on investment (ROI) is 20% e.g. 20K/100K Hull is a great place to start your professional property investing career due to the great return on investment. This is because property prices in Hull are among a number of the cheapest in the UK. So, the price of your investment is lower. This implies not only can your money go further ie. you could buy more properties but at the same time properties will go up in price if you've leveraged your savings with mortgages your return will be even greater.
Hull provides a better return on investment than more expensive cities in the UK because property costs are lower
Of course, an investment property only becomes an asset if you are able to rent out. If you can't, that asset rapidly becomes a liability. A simple reminder on the definition of an asset and liability
Asset = Puts take advantage your pocket
Liability = Takes money from the pocket
So, to ensure your investment property remains an asset you need to be confident that it really is in an area of high rental demand. Hull is often a hidden gem of the city. It is the gateway to Europe via ABP ports and P&O Ferries and therefore has a thriving export/import industry. Siemens will certainly locate a large wind mill manufacturing plant there cementing it's status as a centre of excellence for Alternative energy technology. It is well connected with the M62 and has a broad manufacturing base. The Deep, the UKs only submarium has produced itself as a tourist destination too. The University of Hull is growing and has a healthy student population around 25,000. However, due to relatively low salaries in your community, affordability to buy a house is low. This consequently has generated a high demand for accommodation.
The following post codes in Hull are excellent rental areas. HU5 is near the University for students. HU7 and HU9 are ideal for families.
In case your aim is to own 10, 20 or 30 properties and still provide the deposits per one you would soon uses up your own cash so, just how do the Professionals undertake it? Well, the answer is Other companies Money (OPM). They buy their properties on 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 rate or BMV as it's called allows you to refinance with the mortgage lender at the Open Monatary amount and pull out your main deposit cash. This allows you to recycle your pot of cash to purchase another property. However, with this market, the Council of Mortgage Lenders have imposed a Six month rule that prevents you remortgaging unless the house has been held not less than 6 months. If you can demonstrate added value then you've a better chance of experienceing the valuation you desire. On average Property Prices double every 11 years. What this means is a 100K property is worth 200K in 11 years time. Once you sell this property you make payment for off the original 100K mortgage and then have approximately 100K profit. This implies if you bought 2 properties you can sell one and pay off the mortgage on the other and get 1 cash flowing property without any mortgage on it. Employing this principle it can be scaled up to any number of properties you would like to buy. Getting a mortgage can be challenging in this current economic climate and not impossible. The money hasn't disappeared. It is just in different places. The secret to success is to find the people together with the cash.
Buy for cash
Some properties wanting refurbishment in Hull can be obtained for as little as 20K. And that means you need to buy them with cash as mortgage providers generally don't lend below 40K. Additionally, it means you can move quickly and not have to involve Mortgage brokers and Valuers in the purchase. After you have refurbished the property then you're able to get a surveyor to value the house with a view to putting a mortgage on it and have most if not all of your cash returned.
You are able to help people with cash earn greater than they are getting in the lending company by offering them an increased interest rate for borrowing their cash to fund a deposit. You can then return their money after refinancing.
If you cannot get a mortgage then look for someone else who can and gives to share the cash flow coming from a property. Get a lawyer to attract up an agreement between anyone with a host. Because property cost is relatively low in Hull, there is more chance of finding investors that are willing to lend you 10-15K for the deposit. Risks are reduced because amounts on loan are less. When you've done 1 deal with an investor and made them more cash they will be happy to do another handle you.
Hull property price is low which leads to lower risk for money Investors when funding an agreement.
With many investments we advise stress testing your investments at higher rates of interest. Whilst we enjoy historically low interest rates it's tempting to acquire lots of property deals. However, rates have only 1 strategy to use and that is up. Test that your particular investment still produces cash flows at higher rates so it remains an asset and not a liability.
Try out your investments at higher interest levels. Hull investment properties still positively earnings at 8-9% interest rates at current rental values.
With any investment it is crucial you know your exit strategies. Having an aeroplane knowing the place that the exits are is important in case of an emergency. Similarly, with investing you must know where your exits are for getting out of the investment supply an emergency.
Selling neglect the
If for any reason you'll want to come out of an investment marketing a property. The properties that will be easiest to sell may be the most popular type in that area. Should you own an expensive, executive detached house within a desirable area the volume 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 very important when considering your investment.
Know at the very least 2 exits when entering a smart investment deal. There are lots of investors in Hull websites as bad low prices they are reasonable to residential buyers too.