All forms of investment fall into three categories;
Paper – Bonds, Stocks
Property – commercial, residential, land
Business – new, old
There area numerous investment strategies available which an investor would implement dependent on their objective, most if not all would fall into another three categories
short term (0-18 months* also know as a flip strategy)
medium term (18-36 months* buy and hold)
long term (36 plus* buy and hold)
(* time scales can vary)
SHORT TERM
Short terms strategies are also known as flip strategies this is when you invest within a short period of time and make an impressive return such as purchasing at discount either off-plan or stock unit, then re-selling once entire development is built.
For example
Development XYZ in North England
Off plan is made at a purchase price if £160 000.00
Property growth rate in area of 5%
Unit price £160 000.00
15 % discount (Instant Equity) £ 24 000.00
Discounted unit price £136 000.00
In 24 months the property value will be £176 000.00
including property growth rate of 5 %
Therefore profit in 24 months £ 40 000.00
(Even shorter in cases of bulk buying stock units)
Another short term strategy involves buying, refurbishing and selling the property within the year and from the profits repeating this process. This is not only lucrative when things go well but also is very expensive if the property has hidden problems. In this strategy, time plays a major factor and only recommended for investors who have experience within this field and are self motivated.
Medium Term
Medium term investments are also known as buy and hold strategies. These are in the forms of buy to let, off plan purchasing, land purchasing, commercial unit lettings etc…
The time frame to exit could be from 36 months plus depending on the investor’s circumstances.
Long Term
Long term investments are also known as buy and hold strategies. These would be the property you reside in; a buy to let that will one day be your child’s first property.
Some investors may even start investing in a short term and decide to convert it into a medium/ long term.
There is no such thing as an ideal strategy however the strategy to be used is the one that meets your criteria and will fulfil your objective.
Risk
All strategies will come with some level of risk, in some cases the greater the risk the higher the gains although a high risk strategy will not be compatible with an over cautious personality. When selecting your investment strategy take your personality, personal circumstances and your time frame into account.
Finance
Most property when under construction cannot legally be registered, it will have to pass relevant planning directives and licensing requirements, as such will not provide sufficient security for lenders hence will not raise a mortgage on it.
The initial deposit or financing will have to be raised by the investor via personal funds, taking equity out of existing property or using a bridging company. There are numerous ways to raise finance Elite Intl Real Estate recommends sourcing information from lenders or your accountant.
Taxation
Taxation varies from country to country, even state to state always seeks expert advice. There is an obligation to declare all income and gains to relevant authorities, better to pay taxes than deal with the consequences.
Legal
Every country has its own legalities to conform to and Elite Intl Real Estate would recommend consulting an international property lawyer. Using an international property lawyer may be time consuming but the benefits far out weigh the time and cost. Having the knowledge of knowing your future property has passed all legal requirements, land & property ownership check will be priceless in the long term, remember if you are purchasing abroad it will not be cost effective to fly back and forth to check on progress.
Purchasing Abroad
When purchasing property abroad you do need to be clear on why you are buying, many confuse investing (by to let) with holiday home. During the vacation months is when you will receive maximum rental there is no point using this property during this time.
Returns abroad have been much higher than those of the UK it is possible to make anything between 20-40% in some countries.
Factors to consider when purchasing abroad
Owning property abroad has been a long time dream for many which is now achievable, before committing do consider the following factors;
· Political Stability
· Economic Condition
· Climate
· Accessibility
· Appreciation
· Taxation (Repatriation to the UK currently is 40%)
General
Here are few useful points to investing
· Never become emotionally attached to an investment
· Enter all investment with the outcome in mind
· Have realistic goals and be consistent in achieving them
· Keep informed (no such thing as too much information)
· Minimize your exposure to risk
· Stick to the plan
We are all investors in one form or another with correct knowledge and a realistic plan expect phenomenal returns over time, this Elite International Real Estate can guarantee.
Elite International Real Estate Ltd
2nd Floor Berkeley Square House, Berkeley Square, Mayfair, London W1J 6BD.
