OPP Weekly Newsletter: 15 May 2013
Experts back plans for Spain's 'Golden Visa' on home purchases of €500,000 - three times as much as suggested previously and prices of luxury homes in Asia rise one-third in a year
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| Title: | The 10 mistakes that property investors make |
| Author: | Vicky Wusche |
| Description: | The 10 mistakes that property investors make
By Vicki Wusche, author of ‘Property for the Next Generation’
Lots of people are attracted to the idea of property investing, and with some countries offering a much lower entry point than the UK, buying abroad can be very tempting.
Property can be a great investment if you get it right, but it is also easy to get it very wrong!
In my experience helping people realise their property investment dreams, there are 10 common mistakes that many investors make.
1. Not being clear about what they expect from their investments – capital or revenue
When you get the idea that property is a good investment it can easily get emotionally exciting. STOP! This is exactly when you need to understand what you can expect from investing in property. This is a business decision, not an emotional one. Just because you like the property or fancy having a place in Spain is not a reason to go ahead.
Most people will be investing with a view to making a profit in some form. Are you looking for a monthly return, something to supplement or replace your income/wages? Or do you think you can buy a property and sell it and make a large cash sum? Understanding this “goal” will help you evaluate whether a particular investment is right for you.
2. Not understanding what NET return they are getting for their money
Do you understand all the costs involved in making this purchase? Starting with buying the property – the buy costs – these include solicitors, surveys, certain certificates to enable you to let a property, what about Power of Attorney or translation costs – have these all been explained to you?
Then do you understand the on-going monthly costs and annual costs to keep your investment rent and making money. There is a big difference in having a “permanent” tenant to having holiday lets. What about utilities, change over costs, agent fees, leases and permissions? All these costs can eat into your profit.
Once you are sure you understand – do the maths. Take the rent you expect to receive over a year, minus all these costs and then divide it by the total amount of cash you are planning to invest. This will give you your return on investment (ROI) - a net percentage that enables you to compare deals and also compare them with savings in the bank. It is so important to understanding this crucial figure before you hand your money over.
3. Not stress testing affordability
What about interest rates? If you are investing using a mortgage as a tool to leverage your money then you need to understand the details of the mortgage offer. What interest rate are you being charged and how is that calculated? Is it linked to the base rate or a set amount? How long is that rate going to last and what happens after the term is over?
Understand at what point your investment will stop making you money – how high do interest rates have to go before you start making a loss? Then to the best of your ability (after all, your guess is as good as anybody’s) think how long it will be until interest rates rise to this level. So if you are being charged 4% and you break even at 5% you might want to consider how risky that deal is. If you are being charged 4% and break-even at 10% then you have a safer investment according to interest rate calculations and fluctuations.
4. Forgetting they are trading real cash for real debt liability
Remember, you are swopping real cash for a real debt. If you are offered a property that is discounted by the vendor in some way so that you only invest £1,000-£10,000 but the mortgage is going to be £200,000 or more – do you feel comfortable in the knowledge that this is a good deal.
Is the property “worth” the price you are told? Is the demand from buyers sufficient to maintain that value? Are you sure that demand from tenants is sufficient to maintain the rental value? What evidence do you have?
If a deal does not “stack up” the way you thought you will be responsible for the debt to the lender.
5. Not reading the contract or deal details properly
Read it and if you don’t understand it, ask and then still check with a British solicitor (or, if you are buying overseas a solicitor from that country). It is so easy to fall foul of small print and local nuances in the lease or the mortgage – understand every word that you are signing.
6. Not checking the local research about the area and tenant demand
This property may be a few hours away or half a day away – that does not matter, it is your responsibility to check the soundness of your investment. Have you been to the location, how do you know this is a good place to buy, who told you and how did you check?
If you know a local area well, still ask that “extra” question of another agent about the state of local demand. In the end all profit derives from demand – demand for purchases or demand for rent and this is the lynch pin of your investment.
7. Not thinking about what happens next year or when the initial offer ends
A lot of deals are offered with an initial guarantee on rent or buy back values. What happens after the term runs out. For example, if you are guaranteed a certain rental return for 2-3 years what happens at the end of that time? Will the builder or vendor continue to manage the properties or will you need to get a new agent on the open market?
If that’s the case make contact now and double check potential costs plus potential rental income. 2-3 years may seem a long way off right now, but when you are handed back a property some distance from your home and you need to find a local letting agent and tenants – the stress can mount quickly if you have not prepared in advance.
8. Not using a local letting expert – self managing
This is madness for any form of long distance investment. Even if the property is reasonably local to you, I’d still use a local expert - they know the area so much better than me and, of course, they know the law!
9. Not having a system to monitor income and respond immediately to late payments
Whether you make notes in pen in your paper diary, put a star on the calendar or do something clever with your phone – you must check your rent has been paid in to your bank account on the day it is due. Failure to do this will create a compounding problem that could cost you thousands of pounds.
You need the agents acting for you to know you are professional and you are systematic in your property investment vigilance. If rent is late email and call immediately. Do not allow debts and rent shortages to build up. Get yourself completely up to date with the situation and make informed choices. This does not have to involve evicting tenants and sacking agents – it’s about knowing as much about your property as if it was next door to you. BUT bear in mind it is someone else’s home.
10. Believing the hype – this is not get rich quick
Whatever the marketing brochure might say – double check it. For some reason buying a property invokes all sorts of strange emotions from fear in some (they usually don’t buy) to excitement and pride (they sometimes buy when they shouldn’t). Property investment, in my opinion, needs to be carried out with a clear business mindset.
Ask yourself - what will I get by investing my capital in this specific business unit (a flat or a house)? What is my return on investment and is this the best use of my money given the risk factors you have identified. And lastly what research have I personally carried out?
Over the years thousands of investors have bought properties, myself included, and believed the literature. In the most part vendors and builders are truthful and honest, but they don’t know your personal circumstances – your goal for investing, your need for security or a specific return. That is your responsibility and you need to do your homework.
Here are some of my personal lessons:
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Check what the vendor tells you about plans for local development yourself. I was told a new airport would bring new tenants – but then I discovered there was no new airport!
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Check demand for your property type. Yes the studio flat was cheaper but long term tenants want a separate bedroom, they don’t want to sleep on a sofa bed in the front room for months at a time. So I have a high tenant turnover – and this costs money.
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Check that you can afford the mortgage when interest rates go up. One of my flats is now costing me £150 per month from my own pocket because I hadn’t planned properly for interest rate changes.
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I recognised that I needed a permanent tenant and found that taking a lower rent but having them pay the utilities bills is cheaper than an empty property and I don’t have to pay the bills over the winter!
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One of my properties is in Parnu, Estonia – it’s not on the beach or the river where people want to buy or live. I know that one day the market will turn and the airport will be built or the harbour expanded. I know tenant demand will increase – but in the meantime I am subsidising this property with the profit from the rest of my UK portfolio to the tune of £150 per month! Ouch!
Why did I make these mistakes? Because I was not aware of the ten rules above. So make sure you are aware of them and consider them carefully before making your next purchase.
About Vicki Wusche
Vicki Wusche has gone from single mother on limited income, to financially free with a property portfolio worth £2million, in just 20 months.
Vicki runs successful businesses - The Property Sourcers, which helps busy people develop their own cashflowing property portfolios and The Sourcers Apprentice, which trains, coaches and mentors clients to develop their own property businesses. She also works directly with business owners and inspiring business entrepreneurs.
She is author of three property investment books and has helped her daughter buy her own property using the techniques she teaches in her book ‘Property for the Next Generation’, which , is currently available for the special offer price of £12.99. The normal price £15.99.
For more details, see: www.PropertyForTheNextGeneration.com and www.VickiWusche.com
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| Country: | Not country specific |
| Date of Article: | 2013-02-01 |
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| Title: | Reasons to invest in Wroclaw, Poland |
| Author: | Adrian Bishop |
| Description: | A new report has been produced outlining the reasons to invest in Wroclaw, Poland.
A high -quality labour force, well developed transportation system, office infrastructure, strong regional economy and cooperation between local institutions and global business all attract foreign investors to Wroc?aw, according to the Jones Lang LaSalle report.
Wroclaw is Poland’s largest research and development centre and was the most dynamically developing city in the business services sector from 2008-2010. It also has a booming rental sector, says the Wroc?aw City Report.
Julita Spychalska, National Director of the Tenant Representation Department at Jones Lang LaSalle, says, “A combination of assets including location, access to well-educated employees and transport infrastructure coupled with support from the municipal authorities and other institutions have already attracted leading global brands.
“Companies such as HP, IBM, Credit Suisse, Google, Nokia Siemens Network, to name but a few, located their service centres in Wroc?aw. Likewise, strong local economy and high purchasing power are a magnet for developers as well as companies involved in the retail and logistics sectors.”
The key asset of Wroc?aw for advanced business services investment is access to high-quality labour force – hardworking, ambitious and flexible employees with higher education and fluency in English and German.
The city is one of the major academic centres in Poland – with almost 150,000 studying in the 30 higher education institutions and 30,000 graduates a year, including 4,600 finance and 2,200 IT graduates.
Situated strategically between Prague, Warsaw and Berlin, Wroclaw boasts a well- developed transportation infrastructure that connects the metropolis with the entire European continent and beyond with direct access to the A4 and A18 motorways (to Germany and Ukraine) and the A8 Wroclaw Bypass. The Eastern Bypass and the S8 express road to Warsaw are both under construction.
Wroc?aw offers investors a broad range of assistance throughout the investment process and afterwards. The city’s local authorities and institutions, including the Wroclaw Agglomeration Development Agency are keen to cooperate with international businesses.
Foreign investors also point to the city’s unique atmosphere and high quality of life as important factors.
Wroc?aw is the third largest office market in Poland in terms of stock, after Warsaw and Kraków with around 428,000 square metres currently available.
At the end of Quarter 3 in 2012, there was around 128,000 square metres of new offices being constructed in 17 developments and another 24 office blocks (450,000 square metres) are at the planning stage. It is worth noting that 56% of the developments under construction are already pre-leased.
At the end of Quarter 3 2012, more than 24,000 square metres of office space in Wroc?aw was vacant, which is a vacancy rate of 5.7%.
Mateusz Polkowski, Senior Research Analyst, Jones Lang LaSalle, says, “High level of the pre-leased office space in the developments under construction in Wroc?aw clearly confirms strong demand generated by tenants.
“What is more, given the current construction activity, within the next year the capital of Lower Silesia may approach Kraków, which is the second largest office market in Poland, after Warsaw, in terms of total office stock.”
Up to autumn, 2012, tenants in Wroc?aw signed lease agreements for a record volume of 63,000 square metres, more than 17,000 square metres more than in the whole of 2011.
The largest lease agreements signed in 2012 in Wroc?aw include pre-let deals signed by a confidential IT firm in GreenTowers (14,400 square metres) and a company from the financial sector in Green Day (10,500 square metres).
Demand for office space comes mainly from companies which already operate in the city and wish to expand (e.g. UPS, Tieto and Capgemini) as well as from new players coming to the Wroc?aw market, such as BD Europe and the Qatar Airways European Contact Centre.
At the end of Quarter 3 2012, prime headline rents in Wroc?aw were €14.50-€15.50 per square metre per month for medium-size agreements, with the highest rents in the city centre.
Wroc?aw’s retail market is significantly well developed and has 15 shopping and shopping & leisure centres (68% of the total floorspace), four retail parks (18%), seven stand-alone retail warehouses (13%) and one outlet centre.
Currently, the amount of leasable space in shopping centres in Wroc?aw is 434,000 square metres, which is the highest shopping centre density ratio of all major Polish cities at 563 square metres per thousand inhabitants.
The development of the retail market is fuelled by one of the highest average purchasing powers of all cities in Poland: €7,647 annually per citizen, 133% of the national average.
The vast majority of shopping centres (88% of all floorspace) in Wroc?aw are modern, gallery-led projects. The remaining 12% is situated within hypermarket-driven centres which were delivered in the early stage of market development. However, two of such schemes have recently announced extension plans: the Tesco gallery in Bielany Park Handlowy and Auchan in Bielany.
By adding extra retail space to their premises and thus significantly improving their tenant mixes, the two projects will change their current status of foodstore-led centres to that of mall-driven projects.
Therefore, once these projects have been completed the share of mall-anchored centres in total floorspace will rise to 95%.
Prime rents, which in a 100 square metre unit in leading projects and earmarked for the fashion and accessories category, are €47-€53 per square metre per month.
Jan Barbasiewicz, Associate Director, Industrial Agency, Jones Lang LaSalle says, “The strong and prosperous local market and a well-developed road network, along with the strategic location in close proximity to the borders with Germany and the Czech Republic, are factors which make Wroc?aw one of the top industrial locations in Poland. With total space of 661,000 square metres, this is the fifth biggest regional market in terms of existing supply.”
The birthplace of the Lower Silesia industrial market is in Bielany Wroc?awskie, where the warehouses of Prologis and Panattoni were constructed. As the market has developed, new locations have emerged: D?ugo??ka, K?ty Wroc?awskie, Nowa Wie? Wroc?awska and ?órawina.
Currently, developers and tenants are focusing on sites situated near to the Wroc?aw Bypass and the A4 motorway.
All the major developers have secured sites and are ready to start construction work as soon as a tenant for a long-term lease appears (for example, the planned Prologis Park Wroc?aw V).
In 2012 (from Quarter 1 to Quarter 3) 151,000 square metres was leased, which amounted to 15% of total gross take-up in Poland.
Net take-up (new deals) in 2012 was 114,000 square metres. Among the top deals in Lower Silesia in 2012 were two BTS (built-to-suit) projects by Panattoni Europe (Lear in Legnica, 32,000 square metres and Syncreon in ?ary, 11,000 square metres), a renewal by Kuehne & Nagel at Prologis Park Wroc?aw I (12,000 square metres) and a new deal signed by Hi Logistics at Prologis Park Wroc?aw IV (11,000 square metres).
At three sites, 49,000 square metres of new warehouse space was under construction at the end of the autumn -a BTS project for Lear in Legnica (Panattoni, 32,000 square metres); an extension of Wroc?aw East Logistics Centre (Goodman, 10,000 square metres); and new space being developed at SEGRO Industrial Park Wroc?aw (7,000 square metres).
The slump which affected the Lower Silesia market in 2010 left a relatively high vacancy rate: 78,000 square metres, which was 11.9% of the existing space in Lower Silesia, was available. This rate was slightly higher than the average for the whole of Poland (11.2%), but was a reduction in the rate seen for the region in 2010 (18%).
Effective rents range between €2.50-€3.10 per square metre per month. For small business units tenants have to pay €3.50-€3.80 per square metre per month.
The Wroc?aw City Report was produced by Jones Lang LaSalle, with support from the Wroc?aw Agglomeration Development Agency, Hays Poland and REAS.
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| Country: | Poland |
| Date of Article: | 2012-11-30 |
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| Title: | Jennifer delighted by professionalism of Cypriot agents |
| Author: | Adrian Bishop |
| Description: | Jennifer Petridou Sharpe wanted an added challenge after 10 years as a property valuer, so she decided to take on agency work as well – and was pleasantly surprised by what she found
A Cypriot property valuer and agent has been delighted to find that far from being shady, the country’s estate agents are very professional.
Jennifer Petridou Sharpe, Executive Director of G&P Lazarou Valuation Services Ltd, in Nicosia, runs the valuation department, but also carries out work for its agency department.
She was impressed to find it has excellent back office systems, large client list, corporate feel and experienced, well-qualified staff.
Now Jennifer wants to prove that headline-grabbing stories about poor customer care by Cypriot agents are few and far between.
“Even though many ugly stories have made the headlines, especially in respect of foreign buyers, these agents are the exception rather than the rule.
“I had a perception that some agents were willing to make a sale at any cost,” but she says that is not the case and many agents are professional, ethical and well-qualified.
Everyone who now registers as an agent in Cyprus has to now have a degree or five years of training.
“I was pleasantly surprised when I discovered that my colleagues in the agency department were also university graduates in other fields of study, with many years of employment and experience at the same company and that others even had experience and a brokerage licence from the USA.”
Jennifer also appreciated that all her colleagues were registered trainee agents and that some even had their licence, that a back- office system was in place that had a very corporate feel and there was a 15,000-strong client list.
“Rules and procedures were in place and soon the idea that there are professional Real Estate Agencies in Cyprus was realised.
“My concept of a shady single estate agent on a bicycle with pad and paper were dismissed and the idea of a professional estate agency with a track record of 20 years, with iPads and a corporate back-office for 20 employees, of which five are qualified property valuers, became a reality.”
Jennifer, who is half British and half Cypriot, came to London in 1999 to complete a degree in Real Estate at Kingston University.
“This was an exciting time for me as well as confusing as I found myself explaining to my friends and relatives in Cyprus, each time I was asked exactly what I would be studying at university.
“Being half British and half Cypriot, I was aware of the real estate industry as a whole and remained confident that I had chosen to study in an area that was exciting and with many future prospects
“I remained confident in my choice and I was not hindered by the ignorance around the subject area that prevailed at the time in Cyprus.”
In 2002, she returned to Cyprus, confident that her knowledge and skills would be well received in the local market.
Jennifer was given a placement at Xenios Stephanou & Associates in Nicosia. “However, I immediately discovered that even though I had the academic qualifications, I would have to learn the local legal and planning system as well as local customs with regards to title deeds, codes of measurement etc.
“I was introduced to actual title deeds and topographical maps, which I had never seen at the university. Even more daunting was the process of locating a property from a topographical map.”
However, with the guidance of her then employer, Antonis Loizou and Associates, in Nicosia, she soon become a young confident surveyor. After completing the relevant training period, Jennifer qualified as a Chartered Surveyor in the field of valuation and embarked on a successful career.
In July, this year, after an interview process, she was chosen to be a Member of the Board of Royal Institution of Chartered Surveyors (RICS) Cyprus, for a term of three years.
But having worked in valuation for a decade, Jennifer felt she needed a change. While maintaining her professional codes of conduct and ethics, she wanted to explore the agency work of real estate at G&P Lazarou.
“Being a valuer, you are seen to be following the market. As an agent you are being involved in the process and have direct access to live valuations and transactions.
“As a valuer, you are only allowed to access land rental transactions every six months, so there is a six-month delay in getting market data.”
All ‘immovable property’ in Cyprus, including land, buildings, rivers and trees, is registered with the land registry system.
Title deeds or Certificates of Registration of Immovable Property, show evidence of property ownership, but the associated transfer fees to hold the deeds cost up to 8% on homes over €170,861. However, owners without deeds cannot legally sell their property.
The issue is a big problem in Cyprus. Jennifer says around one-third of people cannot afford to pay the fee to transfer the deeds, which limits the stock of saleable housing.
“I always deal with facts and do due diligence. I see what the situation is and give people any other options. Sometimes, I recommend they get a second opinion.”
Jennifer believes that being a surveyor gives her an advantage of being able to spot any problems or advantages of particular properties and point them out to clients.
She says Cyprus is a very small market, with around 20% of sales coming from overseas. “But if you persist and work correctly and ethically, you will be able to make it. There is always room for more people in the industry.”
Property prices in the capital Nicosia have not suffered too much in the global economic downturn, but in coastal area like Paphos, they have fallen dramatically, possibly 30-40%, she says.
But one good thing that has come out of any downturn is that people are facing up to the challenges it presents.
“Everyone has taken a hard look at the market and has questioned the status quo.”
Her role is roughly split 50/50 between the departments and the work is strictly separate. “My surveyor training is complementary. It included planning and law and other things. The valuation aspect was only one part.”
Jennifer clearly loves her work. “It is exciting going out to find properties with clients and negotiate over prices.”
She is very content with her career and what she has achieved so far, especially gaining a prestigious place on the RICS Cyprus board and now experiencing the challenges of agency work.
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| Country: | Cyprus |
| Date of Article: | 2012-11-23 |
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| Title: | Can this really be true? |
| Author: | John Howell |
| Description: |
Double your money in 12 months – completely legal and risk free. Are all the investment deals offered by email just junk or are some of the claims true? Should you investigate further or should you just press the ‘delete’ key? OPP asks the companies claiming the highly improbable to ‘stand it up’.
I am sure that you, like me, receive a few of these emails each month (if I am truthful, dozens). Does the old saying “if it sounds too good to be true it probably is” still hold good? Are these emails all scams or are some of them marketing really clever and innovative products that can deliver as claimed?
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| Country: | Not country specific |
| Date of Article: | 2012-07-02 |
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| Title: | Pool problem? |
| Author: | Stefano Lucatello |
| Description: |
What happens when you move a swimming pool? If you’re a developer with a construction problem, can you get around it by simply rearranging your site? What happens if the buyers later object?
Under Turkish Law, the relationship between the property owners of a building or site is regulated by Turkish Condominium Law No. 634 (“the Law”).
For further information or advice, please contact Francesca Pecego or Stefano Lucatello at Kobalt Law LLP on +44 02077391 700 or email francescap@kobaltlaw.co.uk or stefanol@kobaltlaw.co.uk |
| Country: | Turkey |
| Date of Article: | 2012-07-02 |
| View Article |
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