Chris Davidson's Blog

A general comparison of new investment types available on the market versus the traditional investment types such as off-plan property. More in-depth comparisons will follow in the coming weeks.

Top Property Investment Tips For 2009

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Thursday, January 22, 2009

Well we are marching through January at quite a pace, and things are looking up right now. I'd like to report that a few estate agent friends of mine have had a much improved few weeks as prices start to show real value and are now more accessible for first time buyers and investors. Contrary to the constant barrage of fear mongering by the media, most people are still in work and many still have a decent amount of money to invest. Most will also be aware that now is the best time to buy just about everything, judging by the deals that are out there. Property therefore is no different.

With this in mind, I thought I would offer some of my top tips when assessing property investments:

Decide what you want – it is important you get your strategy right from the start. Do you want income or capital growth for example? Do you want short-term or long-term? Once you know what you want, it is easier to decide which type of deals to enquire about. If you're unsure ask yourself if you want to have cash now, or cash later? In a down market, many investors wish to generate income now rather than speculate on getting it in 2 year's time, mainly because they need it now. In an upmarket, many tend to do the opposite and speculate as immediate income is less important.

Be prepared for ups and downs! As good as an investment may sound when you are looking at it, do understand that, barring extremely secure guarantees, it may not work out. Is this an amount of money you are prepared to lose? If not, you may wish to go for something more secure like bonds, or lower the amount you wish to put into a property deal.

Do your own research – this is critical, not just for your peace of mind, but so you become better at investing. Don't just take your broker's word for it, check the deal out. Are the rental comparables offered correct for the area? Is there plenty of independent evidence to support the perceived investment case? What other developments has the supplier built before and were they delivered as promised?

Ask for evidence to back everything up that is said – following on from conducting your own research, make sure any claim made is backed with evidence. Ask for title and building permits if it is an off-plan deal and get them checked out. If the product involves insurance, ask for a copy of the policy and check for loopholes. If you are buying off-plan, make sure you have copies of all contracts you will be signing so you don't have any nasty surprises further down the line. It takes some extra time and effort it is worth it in the long run. If someone does not want to supply evidence, you have to question why that is!

View the property if possible – many, many investors have bought property over the phone, which may or may not be a good thing to do. If the deal is off-plan there is nothing to see but land, but going reassures you that the location is a good one. If the property is already built, go and view it if you can. Check out the condition and satisfy yourself.

Big is not always good – when using service partners (i.e. rental management companies, lawyers, accountants, etc.) using the most well known brand might not be the best move. Quite often the bigger companies have less time for you or are less willing to bend their rules. Local family run companies can quite often offer the decent, thorough and personal service you will be looking for. Again it is important to spend time checking these companies out.

Consider different styles of property deals – there are a number of different types of deals on the table today, such as off-plan, below market value (BMV) deals, Developer Joint Venture schemes, or in different sectors such as student lets, short business lets and nursing homes. Have a good hunt around to find the type of deal that suits or diversify your risk by investing in a variety.

Value a good broker – as much as many critise the role of the middleman, he or she quite often is the one putting the deal together, not the developer or supplier. As a broker myself I may be biased, but a lot of work goes into structuring the deals and bringing them to market, as well as assessing which companies to work with. Quite often the broker has a better overall knowledge of the market place than the supplier does so use and value their service!

Good luck !

Chris Davidson - Discover And Invest

http://www.discoverandinvest.com

Off Plan Property Versus Alternative Investments - The Result Is In ...

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Thursday, December 18, 2008

So what has happened - we all know the major reasons for the current situation, but I am convinced that the over-pricing of completing properties and the lack of reliable valuations in emerging markets has contributed massively to the withdrawal of worldwide credit. This is mainly to be seen in the holiday home or tourist buy-to-let market, where a number of new coastal areas where sold at one price by a developer and valued at a much lower one by the banks. It is why in my years of sourcing and packaging property investments in 20 different countries, I mainly stuck to city buy-to-lets or land subdivisions.

On top of this, people's disposable incomes have dropped. This means that for investors, the type of return sought has changed, from speculative and long-term returns (in the case of off-plan) to more secure and preferably short-term.

What are alternative investments? - it is noticeable therefore that a new type, the alternative investment has been on the rise in the last 12 months. From stamps to forestry, renewable energy to ambulance trading....

Essentially alternative investments are products we've not heard of before or are just different to traditional routes such as property and the stock market. The major problem we have had is so much attention has been concentrated on property that we understand very little of the new types of investments that can be created and are available. Who would have thought you could get a 110% return in 90 days from buying, refurbishing and selling an ambulance through a reliable stockist? Who knew a simple change in law would mean you could create an income from an electricity company by providing them with excess electricity from renewable sources? Why weren't investment grade stamps more popular considering they have the highest compound interest rate over the last 20 years at least, better than property?

The answers are many and varied and will be covered in further blogs. However, culture, media, emotional attachment and social proof no doubt play their parts.

So how do alternative investments compare to off-plan? Admittedly, the question is a bit too general considering the different types of alternative investments out there. We will consider individual comparisons in future blogs. However, the following can be said:

Off-plan is a great product in a booming market. Investors have more income and can afford to make more speculative, long-term choices when it comes to returns. However, off-plans are not income generating for at least 2 years (the typical development cycle) and can end up costing more than previously thought. This idea of "securitisation", to buy a product that you receive in the future, opens up all sorts of potential issues. Examples include changes in market conditions, changes in lending and large currency movements against you. Of course all of these 3 factors can move for you or against you, but that is the inherent risk in the product.

Some alternatives can be fantastic in a down-market. Many investors don't know where to put their money right now, and all they know is they want to be safe and preferably generate returns fairly quickly. Products have to be much stronger from a security point of view and provable to the investor. If a product is secure, and can demonstrate provable income beginning in a time-frame of 1-3 months rather than 2 years, it has a much better chance of take-up. At the moment, the days of long-term speculation are over.

So a general overview of the current situation. Secure, income producing investments are the way forward. In time we will evaluate some of the individual products available, and also ask can Property still be an investment in the current climate.

www.discoverandinvest.com

Chris Davidson

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Chris Davidson's Blog

Top Property Investment Tips For 2009

Off Plan Property Versus Alternative Investments - The Result Is In ...

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