Resale :
The most common method we associate with property investment is resale. When you purchase a property either through an agent or privately, by scouting out potential boom areas, carrying out any DIY facelifts, renovations or just waiting for the property price to rise naturally, this is the most common way investors move up the property ladder.
Retirement
Everyone approaches retirement from a different point of view. Some just like to kick back, relax and watch the days go by, going for walks in the day and sipping gin and tonics on the veranda in the evening. Others grab the opportunity to make the most of the free time, and have a very active retirement.
Sometimes a property might meet several requirements at once, acting as a holiday home, retirement home and investment simultaneously. If not quite ready for retirement, you might be better investing a sure-fire letting property in an area that may not necessarily be where you want to retire in, but fulfills your holiday needs over the next few years and gives you a solid income. Later you can always sell and move to the precise area where you want to retire.
Second home / family holiday home
If you are looking for an investment property that doubles up as a holiday home, try and get the right balance between enjoying your time there, but at the same time maximizing your income by letting it for a bigger chunk of the year as possible.
Rental / Buy to let
see rental and buy to let mortgage see mortgages
Pure investment
If you are buying somewhere purely for investment, try to forget your own personal preferences. This is not somewhere for you to live in, it's somewhere to make you money! You may find that buying a flat in a foreign city to rent out to permanent tenants makes more sense than buying a holiday home, where frequent changeovers mean the running costs can go sky-high.
Off plan:
An increasingly popular method of purchasing an investment property is buying a property off plan. This is where the property is not yet finished or not even started.
You would be expected to pay up to 40% of the price as a deposit, which may be broken down like this: 10% straight away then 20-30% 4-6 weeks later.
When you sign the title deeds the rest has to be paid in full.
There can be variations on this. For an apartment in a block you may not have to pay the bulk of it until completion, where as a detached villa maybe something similar to below.
Reservation fee £5000
28 days after reservation fee 20% of property price minus reservation fee
30% on completion of roof
30% on completion of painting / plastering
15% on actual completion
5% upon signing the DEED
The completion date if you purchase at phase one (see below), can be anything up to three years, but more likely to be only two.
When buying off plan, the properties are released in phases; phase 1 being the first. The number of phases there are before the whole development is finished is purely up to the developer, which is normally between three and six.
Getting in on phase 1 will inevitably save money on your purchase. It is purely specific to the development and developer but it is not uncommon to see rises of up to 20% between each phase release, even if they may only be a few months apart.
People who are solely interested in making money and buying off plan for purely investment reasons, can make a healthy sum just buying and selling between phases. Often the developer or agent will aid you with this process, taking out the need to do anything apart from a few signatures.
Although this can be a profitable and low hassle way method of making money, make sure you do your research. If there isn't the demand you may find yourself lumbered with a property you do not want for longer than expected.
Co-ownership
If you can't afford to buy a holiday / investment home outright it might be worth considering a co-ownership, where you establish a consortium of owners, who each buy a share of the property.
For example with four of you, everyone puts in £50,000. All details would have to be decided before hand, i.e. who can stay there when, and what would happen if someone wants to sell their share. Having everything detailed before hand will save any unpleasantness between co-owners.
Auction & Repossessed properties
One of the main attractions that drive people to buy at an auction is the potential of finding a real bargain. Many of the properties being sold at an auction are being sold for reasons other than the vendor wanting to move. It may be that a home is being sold due to debts, bankruptcy or repossession by a housing association that no longer needs it. The property could originally have been bought with ill-gotten gains and the police have finally caught up with the perpetrator and claimed back the property, or perhaps it has been empty for a period of time, since the former inhabitant passed away leaving no next of kin.
There are many reasons why a property might be sold at auction and a good proportion of them result in the properties being offered for less than their potential value.
The important word here is 'potential'. Most auction catalogues contain properties that are best suited to buyers who wish to renovate or do some serious improvement works. You will be very lucky to find a home that you can move straight in to. They do pop up now and again, but they are few and far between.
A further benefit of auction properties is that they are almost universally offered with vacant possession. This means that there are no chains to break and the sale can go through quickly. It is perhaps for this reason that the Institute of Surveyors and Valuers advises you not to bid for a property if you are relying on the proceeds of the sale and have not yet exchanged contracts.
You may get the feeling that an auction is a place of spontaneity and mad impulsive purchases, but this should definitely not be the case when it is property that is falling under the hammer. Preparation is a vital component in successful purchases at auction. You need to research the properties, sort out your finances and be ready to quickly progress with the sale.
It is worth getting on the mailing list of any auctioneers who regularly hold sales in your area as this helps to maximize the length of time between you becoming aware of a property and the date of the actual auction.
The auction houses will send you a catalogue covering the properties that are coming up in forthcoming auctions. The catalogues do not go into great detail - they will show some pictures of the property - perhaps give a floor plan and provide some details of the type of tenure and an indication of the guide price. The guide price is nothing more than an estimate of the eventual sale price. The reserve (or lowest selling price) will often be set much lower, though the eventual sale price is just as likely to be higher. It is worth pointing out that it can sometimes be worth making a private offer in advance of the auction. It is not uncommon for a vendor to accept a bid in this way if they think it is good enough for them not to bother with the costs of putting it through the auction - around 15% of properties put up for auction are said to be sold before auction day actually arrives.
Auction rules are purely country specific. As a guideline, English rules require you to pay 10% on the day of auction in cash or bankers draught and the remainder in 30days. People who can't manage to raise their mortgage in that short period sometimes get a bridging loan (higher rate short term loan) to tie them over until the mortgage is arranged. Remember never dive in headfirst at an auction; carry out all the necessary arrangements of viewing and surveys, also looking into any extra arrangement for owning a property in that country.
Buying land & Renovations
A building plot for sale can take up to 35 percent of the total budget of a self build. And beyond planning, locating and buying a building plot for sale is the first step in realising a self build home - and arguably the hardest and most important.
Building plots for sale with planning permission can be very expensive, however plots for sale available without planning permission can offer a big saving, but there are no guarantees that it will be granted.
Plots for sale next to an existing development may increase the likelihood of planning permission being granted. You may also benefit from already established communications and have easier access to services including electricity and water.
When searching for building plots for sale, try searching on the Internet which contains a wealth of information on locating plots for sale. Services such as subscription newsletters, email alerts when plots come onto the market, will help and keep you up to date with information on availability.
A building plot is a large purchase yet some companies charge a fee simply for looking at their land database. Others offer plots for sale without a house in sight and may be unlikely to gain planning permission.
Land Agents can provide a valuable service, sometimes dealing with several land sellers they often have the contacts and the access to land from many sources. The Land Agent will be taking a cut of the price you pay though, so the more direct the route to buying land the better.
Picking up the telephone and speaking with Land Agents, Estate Agents and any contacts you may have is often the best route. By showing you are keen they may give you first refusal on new plots of land in your chosen area.
When choosing what type of building plot of land to purchase there are a number of considerations, one of them being setting a realistic timescale for your project.
One way to minimize planning permission issues with your self build home is to buy land that already has a house built. This could be demolished before or after your self build home is complete. Planning permission for this residence will (probably) have already been obtained. If you do plan to demolish and build on the land you may be restricted to building to the same blueprint as the previous dwelling.
It is possible to obtain further information about a property on the Internet. The Land Registry is online, and for a small fee of £2, providing you have an address or title number, you can search detailed histories and ownership of properties that include information on the land, planning permission and rights of way.
Foreign building
When considering building work abroad, be careful not to underestimate the cost of the building work. In many parts of Europe , Tuscany being a classic example - there are strict rules about building techniques and materials, which means you cannot economise, even if you wanted to.
Building work is not cheap, and it may be particularly hard to keep a lid on costs if you are trying to manage it from hundreds of miles away. Many experts recommend entrusting the project management to and experienced local architect or similar professional (see architects). This may seem expensive, but along with any potential language barriers and other headaches, it could save you a lot more money in the long run.
Where possible, get several quotes and check all professional credentials carefully. These will differ from country to country..more details.
