The basics of acquiring banking property in the UK

The concept of ‘banking property’ includes all the property that was confiscated, arrested or bailed. Bank property in London forms a self-sufficient segment, which is intermediate between the secondary and primary housing market (new buildings). The investors who know what’s what in this practice, take the opportunity to invest in this type of facilities and oftentimes succeed due to beneficial terms of deals. The city of London is chosen due to its economic stability and rapid development (the city generates around 24% of the national GDP), which is characterised by constant price growth in the cost of housing and high demand for residential premises. All this serves as a guarantee for almost risk-free, profitable purchases.

By the present moment the British banks are among the largest owners of real estate, who are ready to provide the investors with a variety of proposals. Virtually all the major banks in London work with real estate companies, whose task is the sale of all the objects in the possession of the banks. Importantly, bank offers are sold at a price lower than the average market rates.

To clarify the prospects of the potential profitability of the affair, having a comprehensive understanding of the advantages and disadvantages of a potential deal is absolutely essential. Thus, confiscated, seized or planted banking property in many cases could represent a promising deal in relation to the purchase of new or resale property. The main advantage of this segment is costs – the purchase of real estate from bank is mostly a prerogative of investors who are limited in the size of their own capital allocated for investment. In practice, implementing the sale of bank property, is below the average pricing level by 30-40% on average. However, the price difference in some cases can reach up to 80%. Factors that affect such a large fall in prices will be announced later.

Another advantage that awaits investors seeking to buy property in the UK bank is financing. The funding comes from the banks, who control the object. London banks are interested in attracting customers not only for real estate at affordable price, but also for associated with property investment project. First of all, it is an opportunity to implement a property that is listed on the bank’s balance sheet. Secondly, the ability to provide mortgage to customers who purchase the object. And thirdly, providing loans at low interest rates to eliminate the risk of non-payment of a mortgage loan. The main recommendation when choosing a bank is to review the bank’s portfolio and real estate conditions as for mortgage lending. These conditions will be largely impacted by the area where the object is located and its total cost. As a rule, the maximum amount of a mortgage for non-residents of the United Kingdom reaches 70%. The client will incur costs that accompany the procedure of registration of the transaction for the sale, as well as cover the associated legal expenses; mainly the services of conveyance solicitors.

Student property in the UK: the basic things an investor should be aware of

students-property-investingInvesting in student property in major university towns in England is a highly profitable direction, so by now a strong demand for residential properties in the student residential sector has formed already. The fact is that in cities such as Liverpool, Oxford, Manchester, Cambridge and Sheffield a constant influx of foreign students is observed who need a place to stay. This provokes a strong demand and increased competition between buyers. The demand for real estate in cities often exceeds the market average competition in London (12.1 buyers for the object). As a consequence, the market sales prices, as well as rental prices are rising fast.

A group of analysts from Knight Frank investigated the growth of rental rates in such cities as Oxford and Cambridge, and it was found that the rent has increased by 170% and 160%, respectively. These figures are considered in comparison with the growth in rentals in other cities out of a radius of top universities.

Thus, the main prospects of investment in student property lies in the steady demand due to the influx of students globalisation; intense price growth in sales, which is higher than the average market value growth rates have equivalent objects; minimal risk and a quick return of capital. The average investment in student property sector will pay for themselves within 1-2 years, the net profit can be obtained from both the rental and transactions on the resale.

The procedure to conclude the agreement with developers

When buying student property investor should enter into a contract with the developer. To reserve object investor pays a deposit in the initial phase of construction of real estate. This would require a £5,000 on deposit – this would amount to a part of the total price of the object. After the expiry of 21 days the buyer and the developer exchange contracts. In parallel to this, the investor contributes an additional 50% of the project cost. After this operation, the buyer becomes the rightful owner of the property, and completes the payment of remaining 50% by the end of construction time.

Investors are thus reliably protected from construction freezing. If the complex is not launched on time (the delays of more than 6 months), the client is compensated for their investments. Development company will pay the full amount of investment, namely, the initial payment of 50%. This condition is spelled out in the regulatory legislation of Great Britain. The legal services are covered separately by the investor – the work of conveyance solicitors will cost you up to 0.6% of the total cost of the premises.

How operation management companies function

Once the complex is put into operation, the apartment owner signs a contract with the management company. The competence of the manager will be to search for tenants with stable solvency. Also, the management company will follow the property status, terms of payment of utility bills, etc. The potential annual yield of the owner will vary between 6% – 9% in this case. The contract with the management company is typically reissued on an annual basis.

The average yield of apartments handed over to rental use, is exceeding 6% per annum (according to a typical contract investor receives net income at the end of each quarter). Due to intensive growth in the long term lease the investor’s annual yield is expected to increase.