Buy Properties Below Market Value

Property investors have long been buying off plan â?? that is buying a property before it has even been built.

At the initial stage of a development project properties are sold at heavily reduced prices, far below market value, to attract early buyers. Developers use this income to help finance the project and as extra assurance to their creditors.

Investors stand to make a killing by reselling completed properties at market value, while others buy to rent, settle down or to use the property as a holiday home. Depending on the purpose of the investment, buyers need to take into consideration a number of factors. While an investor buying to resell will benefit from a low price, ensuring a certain quality standard is essential so as to make the finished property attractive to the end buyer, typically private people seeking a holiday home or a place to settle down.

When buying to rent, price is key to achieving the highest yearly return with quality much less important as rental properties tend to get damaged much quicker than private properties.

When  intending to live in the specific property, buying without having seen a finished property in the development can be a risky venture as dimensions and the look and feel of a property are hard to gauge from a piece of paper.  To avoid disappointment, it may viable to buy at a later stage and slightly increased cost when a sample property in the actual development can be viewed. Infrastructure and utility issues should also be taken into consideration.

Regardless of the purpose of an off plan purchase, buyers should always carefully assess the market and country in which they are planning on buying. Popular markets include Brazil, France, Italy, Morocco, Portugal, Spain, Brazil and Argentina. Turkey looks to be one of the most promising markets with Turkish banks eager to provide mortgages and property prices said to have hit rock bottom and expected to quickly start recovering.

Whether buying to resell, to rent, settle down or to have a holiday home, off plan property investment seems a great opportunity as long as the project is careful planned and researched.

Developing a property can be a worthwhile endeavour. You can depend on it for your main source of income (as many others do) or to supplement your income. The task of buying a plot and building a house on it or buying an existing property and refurbishing it may appear simple especially if you’re just beginning to immerse yourself in the business of developing properties. Therefore, you’ll do well to take several pointers from the experts. As a novice to property development, you need to know a number of essential things that will greatly influence your success in the field.
Getting started in property development
Property development can include the process of sub-dividing land as well as renovating properties for resale. The method can also mean tearing down a property and rebuilding it. If you want to develop properties for a living, the first crucial thing you need to spend a lot of time on is doing your homework. Embarking on property development necessitates educating yourself, talking to the right people, observing what others before you have done and taking note of the locations where they’re developing properties. It’s also crucial that you are able to determine the type of property you want to invest in and to be certain of the market you’ll be targeting.
To get the most from your investment, be sure to buy properties below market value as this technique lets you earn profits faster. You can find BMV properties at auction where you can pick them up at prices 30% below their market valuation. To be sure, look for distressed sellers – or those who have an urgent need to sell due to reasons such as divorce and repossession – as these homeowners are willing to accept offers significantly lower than what their houses are truly worth.
Where to develop properties
In determining where to target your property development plans, research again plays a vital role in the achievement of success. Remember to look for an area undergoing a growth stage, where a population expansion is being experienced and a location where rental homes are in demand. A good location would be one that’s in close proximity to learning institutions, shops and public transportation.
Obtaining finance for your project
Depending on the endeavour, property development finance can be taken out as either a residential or commercial loan. Each will be based on your circumstances which will then determine the amount you’ll be paying in terms of interest on your finance. There are several factors that will be considered when deciding on the rate. One is your background and experience in developing properties. The rate will also be based on the industry sector at the time you applied for finance and the loan proposal you have forwarded to the lender. If you’re just starting out, banks will most likely require a higher level of security. This means you have to put more of your own funds into the development.
You can also obtain 100% property development finance for your project. There are three ways to achieve this. First is by finding a property below market value and sourcing a lender willing to provide finance against its real market value. Second is to provide additional security – which can be in the form of another property – to lenders who require it prior to providing 100% finance. Third is through gross development lending which involves providing a forecast for the end sales value of your project after it has completed the build phase.
Property development is a venture that requires time, patience, research and the ability to take calculated risks – more so if you intend to make it your main source of revenue. As long as you have thoroughly learned the ins and outs of property development, taking on these risks can be greatly superseded by the benefits you’ll be earning once you have become a successful property developer.

There are rumours of greater buyer activity in the residential market but the messages are very mixed.  Some developments seem to be selling reasonably well whereas others, for whatever reason, have hardly seen a viewing for months.  Our view is that we are in classic early/mid recession “one step forward, two steps back” mode.   This is what happened in the last recession.  In spring 1991 everyone was expecting a significant upturn but it was not for another 18 months that the true recovery started.  This followed a prolonged period of lower interest rates. Let’s hope that the promised increase in new mortgage lending transpires and that one or two more development funders emerge.  These two factors should drive the market towards normality again. We also have the excellent news of an established lender returning to the market and who will consider lending on profitable small schemes. 

NEW LENDER 

If you are thinking about developing a single house scheme, or even two or three small houses then we may have a lender for you. The maximum advance is £300,000. The scheme works by providing up to 65% of the Gross Development Value.  As always, an example is the best way to illustrate this: 

Two Houses with a GDV = £400,000 Costs, including land = £300,000 Advance at 65% of GDV = £260,000  Developer contribution = £40,000 – own funds to be put in towards land purchase

If you have a scheme that fits this criteria then we can provide you with an illustration of costs and conditions

As always, your feedback and loan enquiries are most welcome. Chris Dowdeswell

Direct: 01428 684452

Email: chris@cdpropertyfinance.com

Web: http://www.cdpropertyfinance.com/