Happy 18th birthday Buy to Let mortgages

and thank you for our present… “a predicted 11% profit for the next decade” according to a recent report.

The findings from the report published in an article by The Guardian identified that with average annual returns of 16.3% (£13,000 profit) on each investment of £1,000 since buy-to-let mortgages were launched in 1996, landlords have earned more than they would have done with every other type of investment. These are clearly superb returns.

The report has been timed to coincide with the new affordability rules requiring lenders to carry out detailed checks on potential mortgagee spending and ability to pay if interest rates go up, but buy-to-let investors will be exempt from these rules.

Landlords take one in seven mortgages, and since 1996, lenders have granted 1.5m mortgages worth £174bn to buy-to-let investors.

You can read the full article here: http://www.theguardian.com/business/2014/apr/26/returns-for-buy-to-let-landlords-dwarf-other-investments

The Misery That Banks Cause

Following on from the reports in the press last week about Chris and Denise Tudor-Whelan, I have coincidentally met five separate people recently who have been ruined by the banks for no good reason.

These people once had very successful solid property businesses – all of them worth tens of millions and all of them keeping up payments on the loans they had secured against the properties.  And yet these people were all destroyed by the small print in their loan documents; three of them being made bankrupt and two still fighting to avoid it.

What most people do not know is that the small print in their mortgage documents allows the banks to call in the loans if the borrower breaches the “Loan To Value Covenants”.

Essentially, what this means is the banks can have your property portfolio valued periodically by a surveyor (of their choosing) and if that surveyor decides the value has dropped below a certain threshold the bank can call in the loan immediately or massively increase the interest rate because of the perceived extra risk, thus making the investment unsustainable. They are allowed to do this even if you have never missed a payment.

There is little doubt in my mind, after speaking with these people that some if not all the banks have actively pursued a policy of using this small print to destroy property investment businesses and seize their assets at a vastly reduced level.

Yes it’s immoral, unethical and corrupt, but what can be done about it? There is certainly a groundswell of public opinion against the bankers. And the internet abounds with the self proclaimed “free men movement” seeking to remove themselves from the shackles of HMRC and the “banksters”. They have some interesting arguments and I would love for them to be successful. Unfortunately the whole system is stacked against them so it is incredibly unlikely.

To my mind the best solution is to avoid using banks wherever you can. Give them as little power over your life as possible. Its why we set up The House Crowd so you have the choice of dealing with an ethical, transparent and fair organisation that will also give you a much better return on your money.

Read more about the Tudor Whelan’s story

Read more about the how the banks operate illegally and cheat people out of their homes

Read Cartmel Butlers Report to the Parliamentary Select Committee on how banks sell on the benefit of your mortgages to privately owned offshore companies but then seek to reclaim the debt from you and repossess your property (even though you no longer owe them the money).


Who Moved My Cheese? …Different Strategies For Changing Market Conditions

I have been reading quite a few forecasts of the property market of late. As usual, I regard these reports with a healthy degree of scepticism as nobody really knows what the future holds, however, much of an expert they like to portray themselves. And clearly, some of them have their own agenda to promote.

Money Week, for example, has always been extremely pessimistic about property investment as a vehicle to build wealth as anyone who has read their panic-inducing ads will know.

Could this possibly be because a) they don’t understand it or b) they want to sell you their ‘Special Reports’ on Gold, Oil, Timbuktu Stocks (or whatever) so you can learn about the imminent disaster about to afflict the whole world, apart from, of course, those with the inside scoop.

I used to subscribe to Money Week as it has much worth reading – but the continual drip drip of articles designed largely to create a sense of fear and panic (and sell Special Reports) was, in the end, just too much. I had to stop before I slashed my wrists. One thing I do remember though before cancelling my subscription 3 or 4 years ago was its editor, Merryn Somerset-Webb, writing about how financially stupid it was for us English to own our own homes. Apparently, she had just sold her house in Battersea and was going to rent from then on. Hmmm I wonder how she feels about that now. Not so smug, I wager.

Probably the two most reliable property forecasts I have read are Savills where you can see likely growth region by region:

Savills five-year forecast

and The Centre For Business and Economics Research which reports: a typical house in the UK is expected to cost £227,000 in 2014, surpassing the 2007 pre-crisis peak for the first time. By 2018, we expect a typical UK home will cost £267,000, as house prices rise by 4.6% over that year. In 2018, we predict UK house prices will be 20.4% higher than this year.

In short, both forecast that growth in areas outside London and its environs are expected to be steady and moderate (between 2-5% a year on average) over the next 5 years. That, to me, seems about right.

As those of you who have attended our investor evenings know from my talks house prices are set to rise faster than rents and, as prices rise, yields will fall. At The House Crowd, we have had a good run at buying properties at rock bottom prices but it is becoming tougher to find the deals. Rather than sitting round moaning about ‘Who Moved My Cheese’ (Google it if you don’t know what I’m on about) we have to adapt to changing market conditions. We have been discussing this and have several potential strategies to accommodate changes in the market. We will be developing these in 2014 and will, of course, keep you informed.

House Crowd Passes £2,000,000 Mark

We are pleased to report that we recently passed the £2M investment point, proving the popularity of our investment model among investors. This represents a significant milestone for us as we created an entirely new way of investing in property and made it accessible to small investors.

This ability to invest as little as £1000 and gain greater returns than most savings accounts and pensions (not tom mention being better than the returns most private landlords get) has been central to take-up among investors. The focus on cash flow rather than speculating on capital growth has seen us concentrate on purchasing traditional housing stock in areas of high rental demand in Manchester.

In the last first 18 months,of trading we have purchased 31 properties, predominantly two bed terraces, and we have offers on a further two houses.

Frazer Fearnhead, founder of the company, said:

“I am very pleased with the progress so far. The company is growing steadily, which is especially pleasing when you consider investors had no reference point before for a company like this.

We are happy they have seen the validity of this as an investment vehicle, and to be repaying their trust in us. It is a testament to what we do that many of our investors are now investing in every project we do and bringing in friends and family.

The only problem is that we are now getting oversubscribed very quickly for each project, and are sometimes having to return people’s money. But as problems go, it’s a good one to have.”

“We generally need around £63,000 to purchase and refurbish a property,” said Mr Fearnhead. “It used to take us 10-14 days to raise that amount each time, but now it is taking just a few days.  In fact, the last project took just four hours to raise £70,000.”

Pensions vs. The House Crowd

According to recent reports in the press, annuity rates are at an all time low. In fact they are so low, you would have to live to 90 to get value for money. And low interest rates and rising life expectancy are pushing rates down even further.

The BBC reported that a man aged 65 living with £30,000 to invest in an annuity would receive £1,719 a year gross for their rest of his life. Put another way, after 17 and a half years the original will have been paid back, so if he had died before then he would have lost out financially.

Compare that with The House Crowd where you would get £2,250 for the rest of your life (with our income only product). That’s a whopping 30% more PLUS you still have your original £30,000 capital which can be accessed when you like or passed on to your heirs (unlike with an annuity which will stay with the insurance company).

And yet, amazingly, pension companies promote themselves as being low risk. I wholeheartedly agree with former Downing Street pensions adviser Ros Altmann who stated that pensioners are not properly warned about the risks involved in buying annuities. She added  ‘If you buy a financial product that can lose more than three quarters of your money, it would usually be considered “high risk” – and those selling it to you would surely have to give you a proper risk warning.’

‘Pensioners take ‘the biggest gamble’ of their lives when they buy an annuity to provide for their retirement. They would have to live until the age of 90 before their annuity became ‘good value’, warned Altmann.

Where we disagree with her is when she said:  ‘Most pensioners, have little option but to buy an annuity if they want a guaranteed income in retirement, will lose much of their nest egg if they die young, become ill or if inflation rises…’ We know people do have an option, but she clearly hasn’t heard about The House Crowd.

Is It Spring Time For Property Investment?

It is worth bearing in mind that, despite the property market being in the doldrums for the last 5 years, property investment as with all other markets, goes in cycles.

If you think of the property investment cycle as seasons in the year, we have been in winter for the last few years.  But the daffodils are starting to bloom and it looks like we may now be in spring – at least in terms of property investment. It may still be chilly, but it’s definitely getting warmer.

Pent up demand from first time buyers, low interest rates on savings and the banking crisis in Cyprus mean more people are turning to property as a safe haven. And this is particularly true of the British property market.

Britain is one of the most established property markets in the world, especially in terms of property investment financing. It is very different in terms of property supply and demand from other countries such as USA, Cyprus, Bulgaria and Dubai where the property prices were inflated because of demand caused by the perceived profits to be made (greed) and the sudden availability of easier borrowing rather than actual demand for accommodation to live in.

The UK market is very different.  I do not think there is any doubt more housing is required for the UK population. Without boring you with stats, for well over a decade, every survey I’ve seen has reported there is a massive shortfall in the amount of housing required to keep up with demand.  Further, the rate at which new houses are being built falls far, far short of predicted requirements. So the gap is widening every year.

It is interesting to note that every time The House Crowd buys a property – typically for about £50,000 – the rebuild costs for insurance purposes are upwards of £80,000 and often closer to £120,000. What that tells me is that if the cost of building new property is considerably more than existing stock (land values aren’t even taken into account in the example above).  Common sense suggests that few people will buy a new build property, when they can get a similar sized property for half the amount.  It is equally clear that developers aren’t going to build property unless they believe people will buy what they have to sell. And just to reiterate it: there is a shortage of housing which increases demand for available property.

It’s a complex relationship and there are differing viewpoints on how it works, but I believe that fairly soon builders will start building again in earnest. Once they start doing so, the price of old stock will be pulled up by the price of new builds as sellers realize they can achieve higher selling prices whilst still pricing their property competitively against new builds.

There are tentative signs that the property market is already beginning to warm up – you may well have seen the news headlines about average property prices now increasing at £25 a day. One factor for this is new investors putting their money into property as they are tired of the woeful returns provided by the banks and pension companies. We have noticed buy to let lending is becoming more readily accessible in the last 6 months.

But that is nothing compared to what will happen next year when the new government incentives kick in, giving buyers the ability to get on the housing ladder without raising a 20% deposit.

One thing I have learned throughout my time in property is not so much the price of a property but the affordability factor that is the biggest influence.  People’s income, the deposit required, the ratio income to borrowing permitted and interest rates all play a much bigger role than the actual price tag.

The government incentives coupled with low interest rates will have a massive affect and greatly increase the demand for property pushing prices higher (although salary levels will keep the increase in check to a degree)

That may be good bad or dangerous depending on your point of view. Some argue that it will create another bubble – and they may well be right. But in terms of achieving capital growth over a relatively short space of time (say the next 5 years), I believe 2013 will prove to be the ideal time to invest into property.  So get your sun cream and your sunglasses out.  A bright hot summer for property investment is on its way… Shame we can’t say the same for the British weather.

FSA gives green light to online crowdfunding platform

The Financial Services Authority (FSA) has for the first time approved a crowdfunding website facilitating direct investment in small businesses. It means investors using the website, Crowdcube, will now be able to claim compensation from the Financial Services Compensation Scheme and access the Financial Ombudsman Service if they have a complaint.

The opinion here at The House Crowd is that it’s good to see a regulator starting to approve dynamic forms of financing like crowdfunding. As demonstrated by our unique business model, crowdfunding can provide great returns for all, in a safe, transparent way.

Currently, as The House Crowd doesn’t fall under the definition of either a CIS (Collective Investment Schemes) or OEIC (Open Ended Investment Companies), we do not require the FSA’s authorisation to operate.  However, even though we are not FSA regulated, we do everything we can to ensure that all our dealings are as transparent as possible and that investors are made fully aware of the risks as well as the rewards in any investment. We also ensure your money is protected as far as possible – you never pay money directly to us, all investment monies are paid to a solicitor’s client account and held there until the property is purchased and your shares are issued.

The House Crowd is a brand new concept in property investment which allows people to invest small amounts via crowdfunding (for more information on the process, visit www.http://thehousecrowd.com/thehousecrowd//how-it-works/). We are committed to breathing life into empty, rundown properties whilst giving investors great returns on their investments (for more information about us, visit www.http://thehousecrowd.com/thehousecrowd//about/our-manifesto/). If you’ve read enough and want to invest now, visit www.http://thehousecrowd.com/thehousecrowd//invest-in-property/).

The Kitchen Deal Breaker

Many people dream of installing a new kitchen, complete with granite worktops, an island unit and an AGA cooker, but how many people know the true value of making sure your kitchen is up to scratch?

Those in the know often say that a kitchen is the deal breaker room when selling a house, it can literally make or break a sale. It is therefore worth carefully planning any kitchen upgrades you undertake. Here are The House Crowd’s top tips to help you get it right:

-          People are too quick to gut their entire kitchen, often they’ll end up refitting units in exactly the same place. This is because the initial design of the kitchen is likely to be the most practical design. Take time to consider what your new layout would be, will it work?  What do you not like about the practical design of your current kitchen, and how can you solve those problems with your new kitchen?

-          Instead of spending a lot of money replacing everything, why not consider quick-fixes? Modernising unit doors and relaying the floor can save a lot of time and money. Large DIY stores have a good range of upgrade solutions and materials.

-          A common complaint people have is a lack of worktop space. Think about how you can make what you have go further, as unless you’re extending a kitchen, a re-design won’t necessarily give you more space. Solutions like microwave brackets, floating shelves, and flat-folding hinged tables can provide more workable space; there are also amazing new space saving idea available with new kitchens, including pull out work tops that can be put away when not in use.

The House Crowd is a brand new concept in property investment which allows people to invest small amounts via crowdfunding (for more information on the process, visit www.http://thehousecrowd.com/thehousecrowd//how-it-works/). We are committed to breathing life into empty, rundown properties whilst giving investors great returns on their investments (for more information about us, visit www.http://thehousecrowd.com/thehousecrowd//about/our-manifesto/). If you’ve read enough and want to invest now, visit www.http://thehousecrowd.com/thehousecrowd//invest-in-property/).

Higher or Lower – Getting your asking price right

There are various factors influencing the value of a property, from location, age and size, through to things like heating, windows and appliances. In short, it is fair to say each property is wholly individual. With this in mind, the valuation system used by Estate Agents, usually calculated from recent sale prices of similar properties in the area, is not an exact science and can also be subject to Estate Agent “inflation”.

Sellers, who genuinely believe their property has been incorrectly valued, at either end of the scale, should consider the following points before approaching their estate agent:

-          The recent sale prices of similar properties in your area don’t always tell the full story. Your property may be on a corner with a bigger garden, have newer double-glazing or more modern appliances within, equally, the recently sold properties may have these advantages. Ask yourself objectively, does the current value give a fair assessment of these factors?

-          If you believe your property is undervalued, as is quite often the case, consider that sometimes beginning with a below market price could generate more interest and result in a higher sale price, than if the asking price was higher to begin with.

-          It is widely speculated that setting your property price just below a round number will attract more potential buyers than setting the asking price at the round number itself. Think £199,950, instead of £200,000, this may explain an Estate Agents valuation of your property.

-          Costs involved with buying a property include Chartered Surveyor fees and stamp duty fees amongst others. Bear in mind the percentage of stamp duty that must be paid increases with property prices, so you may attract more buyers by setting your asking price below a stamp duty threshold – for example at £249,950 rather than £250,000.

The House Crowd is a brand new concept in property investment which allows people to invest small amounts via crowdfunding (for more information on the process, visit www.http://thehousecrowd.com/thehousecrowd//how-it-works/). We are committed to breathing life into empty, rundown properties whilst giving investors great returns on their investments (for more information about us, visit www.http://thehousecrowd.com/thehousecrowd//about/our-manifesto/). If you’ve read enough and want to invest now, visit www.http://thehousecrowd.com/thehousecrowd//invest-in-property/).

Prize Draw: Introduce A Friend And Win A £1000 Share In The House Crowd

Prize Draw: Introduce A Friend And Win A £1000 Share In The House Crowd

We are pleased to announce the launch of our prize draw, where you can win a £1,000 share in a House Crowd project, including the annual 6% dividend and 50% share of profits on sale. It is quite literally the prize that keeps on giving!

Entry to the prize draw is completely free of charge. To be eligible, all you have to do is recommend The House Crowd to a friend or family member, send us the names of those people, and if they invest you will automatically be entered into the prize draw!

Alternatively, if you prefer, just copy us on the emails you send out to your prospective crowd funders. Please do not send out hundreds of emails to every Tom, Dick and Harry. Only invite people you know well and think might be interested in what The House Crowd offers. We will conduct a draw every six months and announce the winner in The House Crowd newsletter. The first prize draw will take place in April 2013… Ready, Set, Recommend!

Please ensure all correspondence for the competition and requests for the friends and family email template are directed to [email protected]

Property crowdfunding is now taking the investment world by storm, following our brave debut onto the scene in 2012. We were the first (and continue to be the best) platform for property crowdfunding.

We are proud to offer better returns on investment than many other investment models, and allow people previously locked out of the property market to benefit from the lucrative world of property investment. What’s more, we’re helping bring much-needed new homes across the Greater Manchester area.

For more information on the process of getting involved with property crowdfunding, visit our Crowdfunding Process page.

We are committed to breathing life into empty, rundown properties whilst giving investors great returns on their investments.

To find out more about getting great returns on investment with The House Crowd, start by getting to know us here.