Posts Tagged ‘Investment Properties’

If you want to invest in property, but perhaps can’t afford to make the full financial commitment yet on your own, one option is to invest with friends or family. It’s not an option that appeals to everyone, and can have its ups and down’s, but as long as you’re all clear of what’s involved and where you stand, it can work out successfully. If it’s a choice you’re exploring, then here’s a look at the key pros and cons of choosing to invest in property with friends or family.

The pros of investing with friends or family

* Being able to buy a better property than you could afford on your own. And hopefully making a good profit on it if you decide to sell!
* The extra financial support is good, but it’s also useful to be able to share other expertise too. For example, one of you might have good investing knowledge, whilst the other might have experience with letting properties.
* For first-time property investors, it can be beneficial to be able to share the responsibility, especially with big decisions.
* When things are tough, or you’re having a difficult period with letting the property, it’s good to have someone in the know to talk things through with and brainstorm new ideas with.
* It can help to able to be able to split the tasks between you, rather than one person having to do everything.

The cons of investing with friends or family

* Business doesn’t always mix well with friendship or families. It may put an extra strain on your relationship to enter into a business arrangement together.
* Any emotional attachments you have with the other investor can affect your business judgement.
* If they don’t have exactly the same property investing objectives as you from the outset, things could get tricky further down the line.
* Difficulties can occur when one investor wants to sell a property and the other doesn’t (and can’t afford to buy them out).
* Tension can be created if one partner owns a greater share than the other.
* If the other person defaults on payments, or suddenly pulls out of the deal, you’re left in the lurch.
* If anything goes wrong, or the property investing venture doesn’t work out, then you could end up losing a friend as well as a business.

Going into a business partnership like property investing, with a friend or family member, isn’t a decision to be taking lightly. You need to be clear from the outset as to what is expected from each of you, what your views are on managing the property and on long-term expectations. For some people, it can work well; for others, it’s disastrous.

What do you think? Would you go into business and buy a property with a friend or relation?

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Most lenders to the UK’s investment property market will be unable to shrink troublesome loan books for the foreseeable future, despite much of this debt being under water, analysts claim.

Some £50 billion out of £280 million of loans arranged in the markets during the 2004 to 2007 boom are now worth more than the underlying properties, according to property consultants Savills.

‘My guess is that at least 75% of all loans are in breach of at least the LTV (loan to value) covenant,’ warned William Newsom, head of valuation at Savills UK.

He added that around half of existing lenders also plan to decrease their loans to the sector this year so foreclosing on the debts of property owners may not be an option because the lack of financing makes it difficult to find new buyers. Banks are also reluctant to sell into a falling market.

As an alternative to calling in the debt, most lenders are extending repayment periods, in some cases by as much as eight years, while renegotiating loan terms at higher margins, Newsom said.

He believes that the next five to ten years will be about managing existing loans for the banks who are effectively the new property owners, in partnership with their borrowers.

However banks in Germany and the UK in particular are willing to lend. Of 22 banks willing to originate loans of above £10 million in value, 10 are German lenders and eight are from the UK, including Barclays, Lloyds, and HSBC. Just two German banks, DG Hyp and Eurohypo are willing to make loans of above £100 million pounds.

Mat Oakley, head of commercial property research at Savills, expects UK investment sales for the first six months of 2009 to be higher than in the second half of last year, and reckoned this signals the property market has turned the corner.

While buyers have so far concentrated on top-end buildings with long leases and strong tenants, he expects to see a new wave of risk-loving investors, keen to take advantage of the massive discounts currently available.

‘We will start to see the opportunistic deals coming in, and the best deals will be done before the herd returns in 2010, 2011,’ he said.

source – property wire