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Hi Mark,

Hope are well and had a good weekend!

A quick look at the latest news in the property world and a reminder about Thursday in London!

Repossession Numbers down in last quarter

There was a slight drop in the number of properties taken over by lenders in the final quarter of 2008, with 10,400 people losing their homes during the period, compared with 11,100 in the previous quarter.

The CML said the total number of repossessions for 2008 had come in 11% below its forecast of 45,000.

It said for this to happen despite the worsening economy and rising unemployment, demonstrated that mortgage lenders were making "strenuous efforts" to ensure repossession was a last resort.

This also shows that the dropping of interest rates by the Bank of England has helped with many people seeing drops in their mortgage payments of over 50%.

Fresh Efforts to Improve Credit

The government are continuing to look at ways to improve the availability of credit in the markets.

The new measures include:

- Government insurance of banks' "toxic assets", with up to £400 billion of risky debts set to be put into a "bad bank".

- Permission for the Bank of England to begin £100 billion of "quantitative easing" — in effect printing money — to encourage banks to resume lending.

- A cash injection of up to £10 billion for Northern Rock, the nationalised bank, to issue new mortgages.

All these measures along with the low interest rates will continue to make borrowing more and more attractive and hopefully more available to all – to make the most of the bargains out there!

Bargains Galore!

It is safe to say that right now is one of the best opportunities to buy undervalued property in many parts of the world – and if you are cash rich or can get finance this is the time to buy as much as you can before prices in some areas bounce back as credit becomes more available.

With so many potential deals out there though, how do you decide on what is a truly undervalued deal, and what still is potentially overvalued?

The answer is the same way you should always value a property – by looking at the local affordability and the yield this property will give you.

Let’s look at a couple of examples:

If I am offered house A in an area where average salaries are £25,000 at £150,000 which I am told is 25% below true value of £200,000 and it will rent for £750 a month, how does this deal compare to house B at £75,000 – 25% below it’s true market value of £100,000 where the average salary is £20,000 and the rent is £450?

Well with house A, the affordability at the new “value” is 6 times local salary and the gross yield is 6% (£750 x 12/150000).

With house B, the affordability at the new “value” is 3.75 the local salary, and the gross yield is 7.2%.

So from this I would still be reluctant to buy house A as for me the rental yield and the affordability are still not very attractive. House B on the other hand has good scope for capital growth and will provide a positive cashflow so for me this is far more attractive. I would generally look for properties that are priced no more than 4 times the local salary and give a rental yield of no less than 7%. While last year this was getting hard to do, this year there are plenty of examples that fit this criteria!

Cash Buying

We also have seen a lot of investors looking to make the most of the high yields and the fact that they are getting such low rates on their savings now, to cash buy properties giving them over 10% gross yields!

I'll give you an example, an investor who had £100,000 in savings and was now getting just 1.5% interest from his bank, bought 3 properties from us - that were valuing to £150,000 for just £100,000 and is getting an 11% rental return!

So not only is he getting a very good cash return on his investment, he has managed to get some excellent built in equity from day one.

If you are keen to know about simialr cash buys, just add your details here Register for info on high yielding Cash buys!

Finally a quick reminder that myself and James are down in London this Thursday for One to One Consultations - we are getting pretty full, but if would like to meet for half an hour to discuss your strategy or portfolio, we would be delighted to meet!

Just drop us an email to info@property-investment-deals.com or call uss on 01159474155.

All the best and don't forget to book in your London One to One next Thursday!

Article Courtesy of Alan Forsyth @ Property Investment Deals

www.property-investment-deals.com