We work alongside many developers, house builders, banks and receivers. When they have a large amount of property to sell quickly we negotiate a substantial discount exclusively for our investors.
Both yield and capital growth should be taken into consideration with investing in property. A strong yield is important because it indicates the amount of income you are making from the investment in relation the purchase price. Most investors choose to invest in property because it gives them a higher and more secure yield than can be found elsewhere. Capital growth is also extremely important because it indicates the price at which you can potentially later sell or re-mortgage the property.
We recommend that our investors purchase the property using a mortgage because this allows for your capital to be spread across multiple properties leading to a greater return in both the short and long term. Our consultants will go through this in detail and can provide worked examples to assist in decision making.
On every property deal we assess the best letting agent in the area using a strict criteria. This is based on a combination of our previous experience of working with the agent, their performance on past deals and the level of service they have offered.
The letting agent can take care of as much or as little as our investors would like. For example they can just find a tenant for the property for you or they can provide a full management service whereby they collect the rent and send it to you on a monthly basis whilst also taking care of any issues that might arise. All letting fees are discounted exclusively for our investors. In some of our deals the properties are already tenanted so everything has already been taken care of.
If you do not have your own solicitor then we have a panel of solicitors that can carry out the legal purchase process for you. The solicitor’s fees will be heavily discounted due to the large number of transactions they perform for our clients. You can still use your own solicitor if you would prefer.
As little as £50,000 (500,000 RMB) with an un-limited maximum and subject to loan gearing/level of borrowing
The risks are great. Versus other financial investments, property is a medium to high risk investment. The difference between property and other financial investments is if it goes wrong it can go very wrong – as we have seen in 2008. Unlike stocks/shares/pensions if your property investment falls in value or you aren’t able to cover the costs of holding your property investment you have to find MORE money to put in, if you don’t you could lose everything and potentially go bankrupt.
The main benefit that investors see is the opportunity to ‘gear’ the investment through borrowing money, so if you have £50,000 to invest and gain a 10% return, you’ll receive £5,000 gross profit. If you invest £50,000 in a property worth £200,000 and it grows by 10%, you’ll get £20,000 back. However this only works when property prices are rising, you buy at a substantial (real) discount and/or you wait until the property has grown in value.
These figures relate to notional capital appreciation that crystallise only on a sale of a property. The figures do not take into account rental income return [income yield]. Adding together rental income yield and capital appreciation on a yearly basis equates to a total return on investment for that year.
The pros of investing in property is that your choice of what you invest in are typically yours. You can also “touch and feel” your investment, giving you the feeling of more ‘control’. If done well, property investment can deliver some great returns. However property investment isn’t easy and increasingly requires professional assistance from people/companies that have been investing successfully since the early 1990s.
The downsides of property investment is having to ‘top up’ your investments with cash if they don’t perform and that you are to some extent at the mercy of macro and micro economic conditions. Finally property investment is complex and not every property, fund, syndicate will deliver. The research required can take weeks and months and the amount of money now required in the UK to invest is in excess of £30k for just one property. Property investment from 2008 really requires professional expertise, rather than just anyone investing in any property or area.
The returns on property development can be very high, however, the process is often complex and depending on a number of aspects, both internal and external, the project from start to finish can be lengthy, sometimes taking several years. The potentially high returns should reflect the risks and time scales of real estate development.
Land investments vary so much that it’s quite difficult to give an estimate. Land prices typically follow property prices, but can sometimes perform better if demand particularly for farmland is on the rise. One of the key benefits of investing in land is that there are some inheritance tax benefits, so if you want to pass your investment onto your children it may be tax efficient to buy land. Seek professional advice and NEVER buy land without professional, independent help or a land survey.
The cost of investing in overseas real estate differs from country to country, but in the UK the costs associated with the purchase of property would include Stamp Duty Land Tax (SDLT), legal fees, building survey fees and acquisition fees. Typically the fees paid on an acquisition price of in excess of £500,000 (5,000,000 RMB) would be approximately 5.75% of the purchase price. Properties priced at between £251,000 and £500,000 (2,510,000 RMB and 5,000,000 RMB) would typically have an associated cost of about 3.75% of the purchase price. Value Added Tax (VAT) may be payable at the prevailing rate (currently 20%) on some commercial real estate acquisitions but can normally be reclaimed in full thus making it a neutral tax. Certain high value residential properties held in the name of foreign incorporated companies may be subject to additional taxation.
Returns from investing in UK real estate are generally related directly to the risks involved. Prime located modern high quality property let on fully repairing and insuring terms with upward only rent reviews each fifth anniversary to a blue chip company with more than twenty years left on the lease would be considered to have a very low risk profile and an investor might accept a net initial yield (return) of about 4%. At the other end of the spectrum an old multi let industrial estate with a mixture of small company tenants with short leases might only be of interest to an investor at a net initial yield in the order of 15%. There are exception with yields less and greater that these examples but the majority of investments will fall between those two levels and the actual yield will largely be a product of the perceived risks and opportunities.
It is possible to loose money when investing in UK real estate. It is essential to minimise risks by taking professional advice from experienced experts and to ensure proper due diligence is completed along with an economic trend review. The level of borrowing to fund real estate investments should be subjected to a sensitivity analysis that would provide what if scenarios in the event of falling rents and or increasing loan interest rates. Property capital values can fall in certain economic conditions.
Gibbs Investment is delighted to announce that our Chinese client, Chongqing Jinstar Real Estate Development Company has formed an alliance with Manchester & Cheshire Construction.
Gibbs Investment first introduced Jinstar to Manchester & Cheshire Construction in the summer and then helped to arrange a meeting with Deborah McLaughlin, chief executive of Manchester Place, on a recent trade mission to China led by Chancellor George Osborne.
Philip Gibbs, Chairman of Gibbs Investment, said: “looking after the best interests of our clients, we provide professional and comprehensive service to assist Jinstar’s UK investment strategy. We believe that the launch of the joint venture will help the companies to bid for sites focused on helping Manchester Place achieve its target of 55,000 new homes by 2027.”
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