Perpetual property FAQ

As you can imagine, we get asked many questions and because many of these come up time and time again we have decided to reproduce both the questions and the answers for you.

Believe me, if you read through these your property knowledge WILL increase dramatically!

A: A good question and one we get asked a lot - surely this seems like a good idea? In the industrial age this was very much considered to be the way to live: Work hard, earn money to feed your family, stay with the same company for life safe in the knowledge that you will be looked after for the duration of your retirement. This is certainly how our parents used to think.

Times change and now, at the heart of the information/technology age their life is very much different. Many people move careers many times over, can earn huge sums in shorter time frames and know that their retirement is not as secure as it used to be.

Leveraging your time and money is the ONLY way to secure your financial freedom. If you are paying off your mortgage then you are NOT leveraging your time or your money.

A: Having spent much time researching, selling and investing in new build property alongside our existing portfolio, we took many essential lessons that we have been fortunate enough to pass on to you.

New build property is usually sold at a premium. Just like buying a new car, as soon as it comes from the forecourt it is immediately worth considerably less. New houses and flats are the same. Developers have margins that they need to meet and are in the business of profit just like any other company. In our experience the premium on new build properties can be as much as 15%, and so the ‘discounts’ that you are sold end up being imaginary much of the time.

We tell you this from direct experience having been directors of a new build property company. In our personal portfolios every single existing or older property outperforms the new one every time, without fail.

It will take you nearly 3 years at 5% growth for a new build property to realise the same ‘real ‘equity’ as a genuine discounted existing property.

When you buy an existing property on a street you know what your property is worth: you generally have a row or many types of exactly the same property to which you can realistically compare values. When a block of new build flats go up, most of the time they are in an existing [or brand new re-development area] and as such there is nothing of like to compare the values to, making it much more speculative and open to ‘exaggeration.’

A new build property will very often be considerably ‘upside down.’ When all costs such as mortgage and agents fees and voids and maintenance is factored in we used to regularly see investors buying property that shocked them. They didn't do their homework and where left with having to pay upwards of £200 per month per property, instead of putting money INTO their pockets.

With the right property, in the right area with the right people buying for you your yields will be considerably better with existing property, and we look at consistently achieving a yield of 6%

A: Off plan property is, in our opinion, even more speculative than new build. In a 20% rising market you might make the growth often sold or predicted, but in our experience and the experience of so many investors that we have spoken to, this never ends up being the reality. This is mainly because the people selling the property have a vested interest on quoting the largest average growth price which might have nothing to do with the area they are selling to you.

Many investors have experienced the following scenario. Once their builds have been completed, the value of the property was much less than ‘predicted’ and the rents achievable were also much less than ‘predicted.’ The result: a property with little equity in it despite having had time to grow and as if that weren't enough, a property which they need to subsidise on a monthly basis instead of the other way around.

A: Some areas of London such as Chelsea and Kensington have grown considerably over the last 2 years, and were you lucky enough to own property there then you have done well.

The higher the value of a property, the more money you need to fund it. Property prices in London are as high as anywhere in the UK and we can get a three bedroom house in our area for the same price that you can get a one bedroom flat in a poor area of London.

For risk assessment purposes breaking your portfolio fund up into smaller chunks [we recommend 100,000 or so] is a strategy that is much more able to take any potential market correction and your liability is spread with minimum capital outlay, tax etc.

A: Starting in 2008 the master plan redevelopment of The City of Peterborough will see £1bn of regeneration and redevelopment over a five year period. With such a huge investment the city is going to be considerably improved in all areas and attract business and residential interest on a large scale. Many people are calling the plan ‘The New Leeds.’ We grew up here so we know exactly what, where how and when and we are looking forward to it.

25,000 new homes will be built as part of the £1bn redevelopment of the city and 20,000 new jobs will also be created.

There are 7,000 new homes being built in one area, making it the biggest housing development of its kind in Europe.

There will be a new train station linking the city to London, which is barely 50 minutes away on the GNER service, and then on to Paris

Peterborough is the cheapest city in terms of property average prices within a 75 mile radius of London. Many people and businesses are relocating to Peterborough because of affordability compared to London. London prices have skyrocketed in many areas and could well continue to do so with the arrival of the Olympics, and we believe that Peterborough should benefit from a ripple effect from this.

A: Very carefully indeed! :-) If you look at some of our software, spreadsheets and projections you will see how we construct our key performance indicators and research. If you go to our news and links page there are links to sites and bodies that offer up to date news on the property and economic markets, as well as trends, demographics and business news.

If you want to see how we do our diligence to buy you your property then click here:

A: Good question and the first we used to ask people. We are buying heavily for ourselves and have a constant stream of property being sourced by our many contacts but as individuals, there is a finite amount of property that we can buy based on the amount of cash flow we have.

We will always be able to source far more property than we can afford to buy, no matter how much cash flow we generate. Having helped friends and family invest and still having a greater supply, we decided to help as many people as we could achieve the same level of success that we have achieved.

In order to keep continuity with supply, we need to keep buying properties from our sources. We think that this is a great win-win-win situation for all of us. So in a way by helping you we are helping ourselves. This business is perfect for us because it enables us to grow our own portfolios as well as helping you and it helps the suppliers. So forget win-win this is better: win-win-win all the way. Call us naive but we believe this is the best way to do good business over the long term.

A: Our property buying system ensures fairness by placing buyers in a queue based on the time in which you joined. This means that you have the right to either accept or decline a property when it is your turn.

A: As a ‘powerful buying machine’ in Peterborough the supply of genuinely discounted existing stock of properties is self perpetuating (hence the name, Perpetual); the more we purchase, the more we are offered. We've built a great rapport with our large network of agents and property introducers and have created an efficient marketing system over time, which ‘pull’ in properties to us at a rate well in advance of demand at present. Properties can be purchased considerably under market value for many reasons: probate, divorce, sellers moving or emigrating, increasing debt and over spending, upsizing or downsizing, lack of market movement.

We genuinely believe that we help the above people by buying their property from them quickly and efficiently and helping them solve their problems in the least possible time; offering fast exchanges and repairing chains. So for example, if someone has one of the above challenges and it impacts their finances temporarily, then we help them by buying their property AND allowing them to stay in the property. Since they still consider it their own, they will look after it as well as before.

A: At every stage of your property purchases and this includes the refurbishment, you will be kept up to date with the progress. Perpetual property will send you a pack on the progress of your purchases at each stage, keeping you up to date at all times. A copy of the invoices for the work completed will be sent to you so that you can track the costs and progress should you wish.

Because of the volume of refurbishments we undertake and contacts we have with various different tradesmen, we we can refurbish your property at a hugely competitive rate, well below what a member of the public would pay. We aim to save you both time and money.

A: This is one of the most frequent questions that we get asked, and I can well understand why! Everyone wants to have their properties rented out 100% of the time. They want the peace of mind that thy don't have to pay any more money themselves and that their mortgage will be paid, leaving their assets to grow. That is indeed the ideal scenario.

Rental voids are not as much of a problem as people seem to think. Our experience for ourselves and for our clients certainly bears this out. This comes with knowledge, experience, and rapport with contacts.

Our average void time for a property is 6 weeks but this includes the initial refurbishment. Once a property is up and running this reduces to around two weeks per annum on averatge. This is across a very large portfolio and this is a figure that we will be constantly updating and trying to improve as we go. We think this is a very competitive figure.

You'll be glad to hear that we have even factored this into our figures. We will only source you properties that fit within our system and one of the factors is to fit in within that short void time.

The reputation and contact list we have built has enabled us to get first choice among many agents and we are now able to pull in tenants on a consistent basis.

A: Absolutely. You have the choice of receiving a monthly or quarterly statement from us with your figures, latest news and performance of your portfolio. Some people actually prefer quarterly statements - while they want to be kept informed they really want to focus on things that are more important to them

A: You hold your portfolio bank account with Barclays bank. The account will be held by you to which we are signatories.

A: We wish :-) All of the properties are owned by you and in your name. We just look after them for you for the length of the term. All mortgages, tenancies and bank accounts are all in your name. So you are in control at all times.

A: It's best for you to allow us to have the fund for anywhere between 6-9 months in any 12 month period. Because your fund will be used to purchase your 5 properties in 6 years we strongly recommend that you leave the money in your designated deposit account for that timeframe.

A. There are a multitude of reasons why we believe that there will not be another crash like there was in the 1980’s. We feel that it is very important to look at things realistically and make a risk assessment based on all of the knowledge, experience and history that you can find.

Here are the contingencies that we have in place to avoid a potential market correction or downturn:

We are sourcing you a property at 15% discount. This means that you have a 15% buffer in your property and you are protected from a correction. It would take something catastrophic for you to be in negative equity.

Never sell your property. We will never sell our own properties, and we strongly recommend that you hold onto yours for life. As long as you do not sell it, even if the market is not moving or moving downwards, you will never lose money.

History looks after property. History for the last 60 years has looked bright in property. House prices have risen at an average of 11.74% since after the war. With this history and knowledge in mind, we should be able to assume that in the long term property will double every 7-10 years and any potential correction will be ironed out over time.

As well as believing that risk assessments should be thoroughly researched and planned, there is a certain amount of "Just do it" that is essential in any decision making process. We have spoken to so many people who wished that they had got into property when the market doubled in 3 years. Aparently we were 'lucky' to have gotten in when we did and they didn't. These people will wish the same thing in 3 years and the 3 years after that. We both had the same facts but we decided to act on them as soon as we discovered them. If that is 'luck' then we are the 'luckiest' people around.

A. 1. Your mortgages can be placed on a fixed rate [3-10 years] and therefore any interest rate rise will not affect your rate of repayments.

2. We can begin to rent your properties out by the room. This is something that we may do for some of your portfolios and is an avenue that can be gone down should rates rise significantly.

If there are any terms that you do not fully understand here please click here for the Jargon busting dictionary

Or go to our blog where the question may already be answered and where you can interact both with Perpetual and other investors: Perpetual Blog

SECRET BOOK LAUNCH:

Some people want to know how we do it, so we wrote the book. but we are not just allowing everyone to have this information. We decided to have what is called a secret book launch.

The result?

There are only a few copies left! They'll be on sale for 3 days only and will not be for sale on the open market again until some time in 2008: If you Buy now for only £15.97 you will get your FREE Bonuses worth £147 Now

"The 44 Most Closely Guarded Property Secrets"