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February 7, 2010
The Experts Guide To Invest £100,000 In Property
The FT, interviewed 10 property industry insiders and asked them:
“How they would spend £100,000, if they had it. Where in the world and into what kind of property would they invest for the best likely return?”
Here is what they had to say:
Originally from Ireland, Gary McCausland is a London-based property developer, TV presenter and author of the book How To Make A Million From Property.
“£100,000 doesn’t stretch very far these days. My objective would be to buy a property that gives you “the biggest bang for your buck”. This essentially means two things: a good return in terms of rental income and strong capital growth. I would be looking towards the commuter belts in and around London. For example, somewhere like Chafford Hundred in Essex. It’s a new town, right next to Lakeside shopping centre, and has good facilities including hotels and leisure complexes. Most importantly, it has strong transport links to central London. This area is cheap, up-and-coming and will appeal to anyone who works in the city and is on a limited budget.”
Ella Sherman is Asia-Pacific manager of Worldwide Investments.
“Based in Singapore, she has a background in banking and has built up her own global property portfolio.
Asian buyers are currently buying property investments in the US and UK. The dollar and pound are weak against many Asian currencies so the exchange rate means their money goes further.
The recession in the US is as bad as the Great Depression. Such bad downturns don’t come round that often so clients are seeing this as an opportune time to buy good-quality rentable properties at rock-bottom prices. Among the best selling investments is a repossessed properties rental scheme in Detroit, Michigan. Three and four-bedroom detached houses cost around $45,000 and $47,000, which is cheaper than the cost of building them. This price is 40 per cent below the market value, which is already low. The scheme is achieving 21.5 per cent gross rental yields on properties fully managed by an experienced, locally based agency. Some Asian buyers have bought entire streets.”
Richard Cotton, former senior partner at UK estate agency Cluttons, is an active investor in the residential and Middle Eastern property markets.
“Property-wise, I’d stick to the UK right now for its high level of regulation, safety and security. I’d put the £100,000 into a residential property fund such as London Central Portfolio (LCP). They have a credit line at 1 per cent above the bank base rate whereas the best I could do on my own is 2-3 per cent. Plus, I can put my SIPP (self-investment pension plan) into a fund, which I can’t do with an individual property. By investing in a fund I have both the traditional capital growth in a property and an income stream without having to bother about managing it in any way.”
Mark Stucklin is head of property website www.spanishpropertyinsight.com.
“I believe that, for prime property on the Spanish coast, we are on the threshold of the best buying opportunity of a decade. Take Mallorca. You have plenty of choice and, if you do your research, you can now find deals at prices of 7-10 years ago. A recent example on the market was a four-bedroom flat in a good area for €200,000. With £100,000 you would only need a mortgage of 50 per cent, which you would have not trouble getting, even today. It’s a punt, of course, but the Germans are coming back and Mallorca will always be popular with affluent European buyers. Prices will rise as the economic situation brightens.
|From left: Shanghai, China; Chafford Hundred in England;downtown Austin in Texas, US|
David Cox is director of Property Frontiers, an international investment property specialist.
The obvious place to invest £100,000 right now is the US market. I’d put the money into completed property that can be rented to local Americans. The US property boom was nowhere as big as the UK’s but its crash has been much more dramatic. Its fundamentals don’t justify such a crash, so I think that the US housing market is undervalued. I’d go into an area where there’s still a good employment base. I’d look at southern California and parts of Texas, such as Austin, where there’s lots of oil business. Washington, DC, also represents an opportunity because of the government jobs there. I’d also look at Brazil, whose economy is really strong. I wouldn’t go for tourist property but housing for local people in cities such as São Paulo or Brasília, where there is a shortage of housing for the emerging middle class.
Lucian Cook of estate agency Savills’ research department in London.
Given current exchange rates, I’d be minded to continue to invest on these shores, taking a medium-term view. Geographically, we expect the south-east and London to be the most robust markets in the short term and see the best growth in the early part of the next housing upswing. I would want to stretch my £100,000 equity as much as possible but ensure that I could meet mortgage repayments. Data suggest that a £300,000 house in Brighton could deliver a gross yield of 4.9 per cent, while putting in 33 per cent equity should not give too many problems in getting a mortgage. It has always been a strong London relocation market, added to which I’ve always wanted to buy something on the coast.
Richard Donnell, director of Hometrack, a housing information business.
I would buy a flat in a period house just south of the Euston Road [in London], opposite King’s Cross station for the regeneration effect that will continue to grow and grow. Clearly it would cost much more than £100,000 so I would put that in to fund a mortgage. Central parts of London are likely to outperform regeneration areas that are further afield and King’s Cross has an established infrastructure already and transport has become even better.”
Graham Norwood, a property journalist, is the author of Profiting from Property in a Recession. He also writes a blog on www.propertynewshound.com
“I would look to London, Paris, New York or Shanghai with my £100,000, to buy one or two mid-quality second-hand apartments in classic student enclaves. Even cash-strapped governments remain committed to ambitious education targets for their young citizens. When the going gets tough, the jobless increase their skills or learn new professions, so education stays a strong driver for renters. The big cities in particular attract lucrative international students renting year-round, not just term time, pushing up yields and reducing voids.
Steve Carmichael is director of the Vikare property fund as well as a developer with a personal property portfolio.
I would do two very extreme things with the £100,000. I’d put half of it into the Candy Brothers’ Smith & Williamson residential investment fund because when the market picks up again I think that people will jump in at the highest level they can. The rest I’d use to buy £15,000 and £20,000 houses in Manchester, Sheffield and Glasgow. There is still a housing shortage in the UK and you’d be guaranteed the [UK government’s] minimum rent of £330 per month. That is a fairly good yield.
Peter Conti of the Mentor Financial Group in Colorado, US, is a real estate millionaire and author of the books Multiple Strings of Income and Commercial Real Estate Investing for Dummies (with Peter Harris).
I would buy short sales, turn them round and resell them rather quickly. A short sale is when the property is going into foreclosure and the lender is in the process of taking it back to release an existing mortgage. I would find someone in the process of doing that and then get in touch with their lender and offer to buy it from them now. It depends upon when you catch them but we’ve been successful at getting a low enough price – about 60-70 per cent of value – and selling again on the open market. This is the best market I’ve seen in my 20 years of investing because there is so much worry, fear and disbelief around real estate. But most people, if they just picked up one or two rental properties right now in this market, would be better off in retirement than 90 per cent of the population of the US.
Stuart Pearce is former chief executive of the Qatar Financial Centre Authority. He has a portfolio of properties in different parts of the world.
One option would be to invest in The Hideaways Club [a luxury property investment fund]. This allows you to have access to various properties during the year but you also have part ownership of them. As they’re located all over the world, your risk is diversified. Another area that would be interesting to think about is the Middle East: both Bahrain and Qatar are relatively untapped, strategically important markets. Lots of firms are setting up operations there now and that growing workforce needs to be housed.”