Below Market Value (BMV) deals are so often talked about by buyers and sellers. All of us want to believe or feel that the deal we have purchased is BMV and is a better than what our mates have done. It is partly this enthusiasm and gullibility of buyers that helps perpetuate the BMV sharks.
If the property you are thinking of buying hasn’t sold at the asking price and sells to you or anyone else at a lower price isn’t this really the market value?
There are 100’s of so called businesses offering to help you find BMV property deals and guess what, they want to charge you for their creativity in making a deal look like it is BMV. I urge you to investigate the local market very carefully. Visit the area; spend a day looking at alternatives, speak to estate and letting agents and I am sure you will drive a coach and horses through the BMV financial claims and forecasts. Try hard not to get lost in the excitement created by the BMV selling businesses – they are really good at creating misleading environments and carrying buyers into a zone where they stop looking for the negatives or should I say the real values.
It should be remembered that it was the creative or inflated over valuation of assets and loans that got us into the financial mess we have been in since late 2008.
What to buy?
Of course it is nice to feel that we are helping regenerate the housing stock in the UK by buying a property in need of refurbishment. But remember you are investing in property because it offers the opportunity of annual income and an asset that will increase in value in the future unlike current bank or building society deposit accounts that whilst very safe will not even keep up with inflation.
Hopefully you are really buying property because of its long term potential for capital value growth. In which case isn’t it fair to say the more investment properties you have the greater your capital gain will be. Therefore buying a property in need of a serious capital spend on improvements is going to reduce the number of properties you can buy. Currently it is a buyers market in most parts of the UK so be patient and find a nice property in a high demand rental area which needs little or no work that isn’t going to be a maintenance money pit in the future.
Properties that need £’000s of refurbishment eat away at your capital and with current lending rules in addition to static house prices you will struggle to remortgage or even justify the costs of remortgaging within the early years. It is important to note that money spent on improvements can only be offset against capital gains tax at the point you sell the asset. If you are unsure I urge you to get advice from a chartered accountant.
Take care to ensure you get advice from a professional letting agent in the selection, marketing and management of your investments. Check that the lettings agent is a member of the Safe Agent scheme or a member of ARLA (Association of Residential Lettings Agents). It is a requirement for a member of Safe Agent and ARLA to have Client Money Protection and have their accounts audited annually.
If you are considering using an agent that isn’t a member of Safe Agent or ARLA ask yourself a question – would you think would have an operation carried out by an unqualified surgeon?
Terry Lucking is Managing Director of Belvoir Property Lettings the leading residential property lettings agents in Cambridge, offering a range of houses to let in Cambridge. In addition to lettings he offers comprehensive Buy To Let Landlords Services. He can be contacted on +44 (0) 1223 352225, email, terry.lucking@belvoirlettings.com
