One of the ideal ways to make money out of property is to cherry pick a house knowing that the surrounding area is going to go up in value as a result of its regeneration.
We have pulled in a deal in the vibrant and flourishing district of King’s Cross which is currently undergoing one of the most exciting regenerations anywhere in Europe. 67 acres of central London is being transformed into a holistic, cutting edge and highly desirable place in London to live, work and play.
Google have just committed to developing a major headquarters in the heart of this district with the capability of supporting 7,000 jobs. This is just one of many new buildings and investments in this historic quarter of London. The googleplex will be designed by Olympic cauldron designer, Heatherwick Studio, so it is likely to become a major landmark. Not only could you make money while you are sleeping as multiple developers transform the area close to the property we have secured, but the property itself is seriously under market value by today’s prices and has some exciting development potential to increase its rental yield.
It is rare to find a property with all this upside.
We started negotiating on the deal about several months ago, and in the end we have managed to secure the deal on our terms, at the price we are happy to pay which equates to just £780 per sq. ft.
To put this price into perspective you have undesirable areas in Wembley now selling for £600 per sq. ft. And properties in the vicinity of this house are fetching £1,100 to £1,200 plus a sq. ft.
And this does not even factor in the regeneration upside.
This is a freehold property which comes arranged as two separate dwellings. This reduces the stamp duty costs through multiple dwelling relief.
The prices per sq. ft. in this location are circa £1,100 per sq. ft. You’re coming in at a 20% discount from day one.
This is an area which is still rising. The plan for this property is to split it into several smaller units, our initial estimates are this property can be split into 8 smaller units.
The effect of this will be to increase the rental figures and to reduce the void periods as well as increase the price per sq. ft. these properties can be sold for in the long term.
The property comes in a rentable condition and therefore can be rented from the day of completion. The strategy would be to rent this property immediately for a 6 month period, this would ensure the mortgage is being paid, during this time the builders and permissions can be lined up so that the buildings work can be started as soon as the property has been vacated.
The price of this property is £1.5m and we would expect around £750k cash is required to close this deal. This is a buy and hold deal, rather than a buy and sell. Buy to hold ensures the investment will benefit from the local regeneration which is taking place.
This does not mean your money is trapped in the deal, as you can refinance the property post development to extract the original capital or at least a large chunk of this amount.
To recap, you will be purchasing a property which is as at least a 20% discount from current market value, the location is undergoing a major regeneration, which means the property will rise in value strongly, and thirdly there is the potential to increase the rental yield and decrease the voids.
The contract is with us now and there a deal to be done for the quick investor. Get in touch now, before it gets snapped up!
Money without the hassle
Crowdfunding has been around for a few years now. For the smart property investor, crowdfunding is a great tool for taking the hassle out of the investment, avoiding the aggressive tax changes being introduced and escaping the hidden fees charged by property funds.
Aside from the normal hassle of finding a tenant, making sure they pay and keeping a property in good order, the regulator (the FCA) and the government, seem to be working together to make the property investor work harder.
The FCA is introducing new rules due to start on 1st January 2017. The interest rate for calculating rental cover for BTL mortgages will be 5.5% instead of around 4% unless the product is a five year product in which case there is not a requirement for the lender to apply this new rate.
There is also a move to increase the rental cover from 125% to 145%. This means if your mortgage is £1,000pm your rental needs to be £1,250, with many lenders this will increase to £1,450pm.
What this means is that property investors will be able to borrow less and will need larger cash deposits in order to buy a property.
These changes have been introduced to ensure the landlords remain cash flow positive, in the light of the coming tax changes which will start to be introduced from 2017 in phases and will be fully implemented in 2020.
The changes will mean mortgage interest relief will be restricted to 20%, meaning higher rate tax payers will be affected.
This is an unfair and ridiculous tax. Landlords are almost being taxed on rental income and not profit. Yet again the government is dipping its hand into the property honey jar. It has done this too many times in recent years.
In the box there is an example of how this will work. It could raise your tax bill by 75%!
While the property market has proven resilient to the adverse changes in stamp duty, it remains to be seen whether it will withstand this new tax.
My feeling is it will evolve and keep moving forward in a different shape, after all we are talking about a 500 year old market. It’s certainly not going to disappear in a hurry.
This is where crowdfunding comes into play.
Crowdfunding provides you with the opportunity to invest directly into a single property from as little as a £1,000 investment and avoid this punishing tax regime. When crowdfunding you are usually investing directly into a single entity which owns the property. As this entity does not pay income tax, the mortgage interest can still be set off against income and taxation remains calculated on profit.
Unlike property funds, you also know which property you are investing in and this gives you more choice and feeling of control as to where your hard earned money is going.
This removes the hassle from direct property investment if you’re a high rate tax payer. It may also make you a higher net return.
Codeinvesting is a leading property crowdfunding site, www.codeinvesting.co.uk and it currently includes an opportunity for you to invest directly into a single property located in the heart of London with as little as £1,000. No hassle. And no crazy tax bills.
It is a rare opportunity to be able to participate in a property in a desirable location such as St John’s Wood, near Regent’s Park and with central London on your doorstep.
Example
You are a landlord paying a higher rate tax payer rate of 40% Currently your BTL property is rented out for £25,000 a year and the interest-only mortgage costs £15,000. Tax is due on the profit. You pay tax on £10,000, meaning £4,000 for HMRC and £6,000 for you.
From 2020 tax is due on your full rental income of £25,000, less a tax credit equivalent to basic-rate tax on the interest. You will pay 40% tax on £25,000 (£10,000), less the 20% credit (20% of £15,000 = £3,000). HMRC gets £7,000 and you get £3,000. Your tax bill has gone up by 75%.
