Friday, March 16, 2018

Home Based Business Ideas UK: 10 Money Tips That Could Save You From Financial R...

Home Based Business Ideas UK: 10 Money Tips That Could Save You From Financial R...: Welcome to Money Tips Daily this is Money Kelly bringing you money tips to help you save and make more money! A few days ago, I said th...

10 Money Tips That Could Save You From Financial Ruin

Welcome to Money Tips Daily this is Money Kelly bringing you money tips to help you save and make more money!

A few days ago, I said that becoming financially aware and astute is not just about making money, it is also about watching your back for potential threats to your bank balance and financial well being.




Tony Robbins used to run a ‘wealth protection’ service for people with large sums of money, and Jim Rohn advised us to build a financial wall around our family so strong that nobody could knock it down.

The wealthy don’t only concentrate on making money, they also focus on keeping it (probably the two most important basic components of being wealthy) and protecting themselves against liabilities and threats, but you don’t have to be rich to protect yourself too. After all, the less money you have, the more a loss will hurt you.

Businesses do regular S.W. O.T. (Strengths, Weaknesses, Opportunities and Threats) analysis exercises and risk assessments as a matter of policy, and so should you.

You are your greatest asset, so look after you! Act as if you are the CEO of your own corporation and start thinking of yourself as if you are a business.
   
More than at any time in history, we are surrounded by potential threats to our wealth and liabilities which could bankrupt us or worse still, send us to prison.

I’m not scaremongering or exaggerating the threats to your wealth so do not ignore this message – ignorance of the rules of the game will not offer you any defence.

Some threats are relatively small, like the increased likelihood of receiving a fine for speeding, parking or unwittingly drifting into a bus lane whenever you drive into a major city.

Others are far more serious, for instance:

  • keeping all your money in one bank (this would particularly apply to those holding more than £85,000/£170,000 for joint accounts amount protected by the government Deposit Guarantee Scheme) 
  • having your money devalued by a government (Greece, Cyprus, Latin America) 
  • currency swings or economic downturns
  • changes in legislation, which could hit your business or that of your employer
  • changes in the business environment or technology 
  • changes to your agreements by financial or utility providers
  • an unscrupulous freeholder landlord gaining control of the freehold and management of your leasehold property
  • For some, Brexit is a threat, although for others it may be an opportunity.

If you have assets and investments you should carry out regular reviews with an independent financial adviser who is not dependent on the commission from selling you insurance-linked products.

Forgetting to pay any small bill these days can quickly lead to a CCJ (County Court Judgement), bailiffs banging on your door at enormous cost or a default, which will completely ruin your credit history for up to six years.

I have discussed this earlier in relation to credit cards, as people often pay their bills a few days later than the due date (which is not the date you think) and find that the trigger happy banks have been reporting you as a late payer or in arrears.

This equally applies to utility bills, mortgage payments and especially parking fines, which can quickly escalate into thousands of pounds once courts and bailiffs can their sticky hands on you.

Liabilities include being sued by an increasingly litigious society and ‘no win no fee’ ambulance chasing lawyers. In a recent case, a mother is being sued by the mother of a boy who was accidentally hit in the eye when standing behind another child swinging golf club at a mini-golf kids party.

10 Tips that could save you from financial ruin

1. Pay recurring bills by Direct Debit, or standing order, so you do not overlook the due date.

2. Pay bills on time, especially tax, or inform your creditors that you need more time. 

3. Never ignore a legal letter, especially one concerning a debt or tax liability, and don’t bury your head in the sand hoping it will all go away like a bad dream.

4. Pay and keep your taxes up-to-date and fully compliant! In my book, Yes, Money Can Buy You Happiness, I have written about “The Stars Who Lost It All”, and one of the biggest reasons big stars who have earned millions went bankrupt was their failure to pay their taxes.

5. Check your credit rating and file at least once a year for errors registered against you. This is really easy to do online and I have written about tips to improve your credit rating in an earlier episode.

6. Never sign Personal Guarantees or be a guarantor for a friend or relative without taking legal advice, and never sign anything you have not read and understood – even those boring terms we all agree to online.

7. Avoid litigation and suing people, which are still the preserve of the rich and famous. Wherever possible, try to mediate and sort things out without going to court and use legal action as a last resort. Be a mediator, not a litigator!

8. Insure yourself against liabilities, for instance by adding public liability to your home insurance. You can also take out very inexpensive liability insurance to cover yourself when you run an event or children’s party. In my experience as a financial adviser, smart people insure themselves, their property and cover themselves against potential public or employer liability claims.

9. Take legal advice and be very wary of leasehold properties and signing any leases for business premises or shops. Leasehold properties are a legal minefield and are covered in more detail in an earlier episode. In business, I use a limited liability company, rather than acting as a 'sole trader'.

10. Review your financial circumstances regularly with an adviser or with your family, partner or spouse. The importance of this tip cannot be overstated. You must review at least once a year.  

Finally, watch your back! Keep your eyes and ears open and be alert to any potential threats. Carry out a regular S.W.O.T. and annual risk assessment as part of your financial review - this risk isn't always external, it could come from something you are doing.

Check out my Podcast, Money Tips Daily by Charles Kelly, former IFA and author of Yes, Money Can Buy You Happiness., on Anchor! https://anchor.fm/charles-kelly

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Thursday, March 15, 2018

Home Based Business Ideas UK: Leasehold Flats Are A Legal Minefield, Read This B...

Home Based Business Ideas UK: Leasehold Flats Are A Legal Minefield, Read This B...: Are Leasehold Flats A Ripoff Or A Good Investment? Welcome to Money Tips Daily this is Money Kelly bringing you money tips to help yo...

Leasehold Flats Are A Legal Minefield, Read This Before You Buy


Are Leasehold Flats A Ripoff Or A Good Investment?

Welcome to Money Tips Daily this is Money Kelly bringing you money tips to help you save and make more money!

Leaseholds properties are a legal landmine for the hundreds of thousands of uninitiated buyers purchasing leasehold flats every year.


Leasehold flats can be a legal minefield for the unwary buyer

Like me, the majority of first time buyers, as well as buy-to-let landlords, will buy a leasehold flat under rules which exist in very few countries outside the UK.

When you buy most flats in the UK, you are a tenant under a long lease which usually runs for more than 99 years, but diminishes in value as the lease gets shorter.

You pay ‘rent’, known as ground rent, to the ‘landlord’ or freeholder, which used to be a peppercorn rent but on new developments is increasingly running into several hundred pounds with sharp increases in the future.

You will also pay a service charge for insurance and upkeep of common areas. In blocks which have lifts, pools and concierge desks, expect to pay from £2,000 pa upwards.

In my experience of smaller blocks, the charge starts at a minimum of £100 per month for doing almost nothing apart from maybe a bit of cleaning or grass cutting, with larger maintenance being charged on top.

Management companies choose their own contractors to carry out works, which always cost about 5 times what you could get the job done for! 

Have you actually read your lease and if so, do you understand it?

The answer to both questions is invariably “no” because most of us give up after the first few pages because the ancient legal language is virtually impossible to understand unless you’re in the legal profession.

Who writes the laws? Lawyers of course! Of course we need Solicitors when buying a property, but ask them to explain everything and don’t be embarrassed to ask ‘silly’ questions!

Following the Grenfell fire, thousands of leaseholders are facing huge costs to remove unsafe cladding from their blocks of flats following a recent court judgement in Croydon.

Tenants will have to pay thousands of pounds to replace cladding on a recently built Barratt Homes development, despite buying their properties in good faith and presumably being reassured by a survey and NHBC 10 year guarantee against defects.

The London Mayor said the ‘government’ should pay, in other words, taxpayers who don’t even own a leasehold flat!

Did you know that forgetting to pay ground rent or service charges, or complying with maintenance orders could result in your lease being forfeited? That’s right, the freeholder can take your property back like some feudal landlord.

Leases are written in favour of the freeholder granting the lease, not the leaseholder paying hundreds of thousands of pounds.

Charity spends £114,000 to defeat a leaseholder over £6,000 disputed charge

Don’t take my word for it, just Google ‘leasehold problems’ and read some of the cases where leaseholders have tried to take on landlords.

In a recent case, a well known charity spent £114,000 to defeat a leaseholder in Onslow Square in Kensington over a £6,000 dispute – which came down from £8,247 originally demanded. The huge legal cost bill means that the woman leaseholder will have to sell her home.

I had a similar problem with a landlord, who I later discovered owned 12,000 freeholds, which I fortunately won thanks to a brilliant barrister and an understanding judge. Had I lost this David vs Goliath case, I would have had to pay out £20,000 in so-called legal costs over a £500 dispute!

I now prefer to buy freehold for obvious reasons, but realise that it is not always possible.

3 Tips when buying a leasehold property

If you must buy a leasehold flat, make sure you:

  1. fully understand the lease terms and
  2. try to buy flats where you have a share of the freehold and
  3. the tenants/leaseholders have control of the management.

Leasehold tenants can take back control of management subject to the ‘right to manage’ rules, but the law still doesn’t go far enough in protecting vulnerable leaseholders and a proper leasehold reform Act is long overdue.

As always, take legal and financial advice before entering into an agreement, and make sure you READ and UNDERSTAND that lease.

Education is key to investment success

If you would like to learn more about property investment and attend a seminar, I have a limited supply of complimentary tickets for an event with a leading training provider - email me charles@charleskelly.net.

Check out my Podcast episode "Leasehold Property Is A Legal Landmine, Read This Before You Buy" on Anchor! https://anchor.fm/charles-kelly/episodes/Leasehold-Property-Is-A-Legal-Landmine-So-Be-Wary-e16oof

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Wednesday, March 14, 2018

Home Based Business Ideas UK: Your Health Is Your Real Wealth, So If You Want To...

Home Based Business Ideas UK: Your Health Is Your Real Wealth, So If You Want To...: We know that we need good health to enjoy happy and fulfilled life, but do we need to be fit and healthy in order to become successful or...

Your Health Is Your Real Wealth, So If You Want To Be Truly Rich, Keep Fit

Welcome to Money Tips Daily this is Money Kelly bringing you money tips to help you save and make more money!

We know that we need good health to enjoy happy and fulfilled life, but do we need to be fit and healthy in order to become successful or wealthy?




Whilst there are always exceptions to the rule, 95% of successful people I have met and observed over the last 30 years in business have all kept fit and looked after their health.

The other 5% are invariably either burned-out, had a heart attack or are sadly no longer with us.

If you think of the wealthy and successful people you know, you generally find that they do something to keep themselves fit. It could be golf, going to the gym, swimming, hiking or playing a sport.

They are active physically and mentally, and often do something for their community.

I personally know several multi-millionaires who volunteer, give their time and donate their money to charitable causes and service clubs like Rotary.

Unfortunately, people at the lower end of the pay scale are more likely to be obese and suffer from more health problems, even though it costs nothing to take a 30 minute walk and less money to give up smoking and drinking. We know this from studies done in poorer parts of the country.

You might say, “well it’s alright for the rich, they have the time and money to go to the gym, hire personal trainers and pamper themselves”. But I would say the opposite is true. 

Wealthy people who run businesses have less time. They have hectic schedules and work longer hours than the average person, just like I did when I did when I was in business. They have the same problems as the rest of us, but the difference is they manage their time and life.




Saying that you have no time to take part in physical activity is just as illogical as saying you have no time to eat or sleep. In other words, it’s a false economy and you will end up paying the ultimate price. In all of the above cases you will eventually get sick, burn out or die.

Make the time to do at least 30 minutes a day of some physical activity which increases your heart rate or makes you sweat. If you make the time to do this you will find that you have more time and energy to do the other things in your life.

You have to move to groove! 

It takes a lot of energy and focus to be successful in any endeavour, so build up your store of energy by eating the right foods, getting a good night's sleep and exercising.

I was guilty of neglecting my health when I was running a business. I stopped exercising and eating properly and justified my behaviour by convincing myself that I was so busy with important work. But what’s more important than your health?



  I now MAKE time to go to the gym or exercise

Eating late at night with a glass of wine, or two, didn’t help either. Over time, I started to put on weight and my clothes mysteriously started to shrink! I became less fit and had less energy to cope with the trials of the day.

How can you be motivated when your body feels tired or unhealthy? You can look in the mirror and try and convince yourself with affirmations like "I feel terrific", but if your body is answering you back with "I feel like crap", you're not fooling anyone!

Eventually, I saw that what I was doing was foolish and changed my habits. It takes at least 4 - 6 weeks to change a habit by daily actions, but after that it becomes easier.

I now MAKE time to go to the gym and whenever possible I walk and climb stairs rather than taking the lift. I have also cut back on drinking and try to eat a balanced diet.

As a result, I’ve lost around 5 kilos; I feel a lot more energetic and can even get back into my old Levis again!

And when I feel better, guess what? I have more motivation to do the things I want to do and finish those ‘projects’ we all have, like my forthcoming book, Yes, Money Can Buy You Happiness, which will be published soon after many years as a 'work in progress'.  

Your health is your real wealth, don’t neglect it, because when it’s gone you seldom get it back.

Check out my Podcast episode "Your Health Is Your Real Wealth So Look After It!" on Anchor! https://anchor.fm/charles-kelly/episodes/Your-Health-Is-Your-Real-Wealth-So-Look-After-It-e16jia

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Tuesday, March 13, 2018

Home Based Business Ideas UK: How To Get Cashback When You Switch Bank Accounts

Home Based Business Ideas UK: How To Get Cashback When You Switch Bank Accounts: Welcome to Money Tips Daily this is Money Kelly bringing you money tips to help you save and make more money! Get A Cashback When You...

How To Get Cashback When You Switch Bank Accounts

Welcome to Money Tips Daily this is Money Kelly bringing you money tips to help you save and make more money!

Get A Cashback When You Switch Bank Accounts.

Better interest rates on your savings and a cashback are not the only the reasons to switch your bank account.

Thanks to competition regulations, switching a current account isn't as difficult as it used to be. Your new bank will take care of transferring Direct Debits and regular payments for you, usually within seven working days. However, if anything go wrong, your new bank will take care of any costs or penalty charges.

Here are just some of the offers available right now:

HSBC Advance Current Account offers a “Switch, stay and earn up to £200 cashback”

First Direct 1st Account offers up to £125 subject to you paying in at least £1,000 in the first 3 months when you apply via moneysupermarket.com.

TSB Classic Plus Account offers an interest rate of 3% AER on balances of  up to £1,500 monthly provided you pay in a minimum of £500 each month, register for internet banking, paperless statements & correspondence.

Additional benefits

Some premier accounts will also offer you annual travel insurance and other benefits, such as competitive credit cards, but may charge a monthly account fee.

These are just a few of the banking deals out there and most of the high street banks will offer you something to entice you to switch accounts. I'm not giving you financial advice, just information so you can decide which account is right for you.

You can check out all the deals on one of the many online comparison sites.

Of course, there are usually conditions attached to offers, and some are exclusive to their affiliate partner comparison websites, but they are still worthwhile if you're stuck in an old account paying low rates.

Higher savings rates

Don’t forget, there are also better rates to be had by switching your savings and tax free ISA accounts. Even if you go from receiving 1% pa to 2% pa that means you’ve doubled the return on your money.

Banks have a habit of making old savings accounts obsolete by dropping the interest rates, so loyalty does not always pay.

I found this out on an ISA account a few years ago. When I opened the account the rate was one of the best on the market, but three years later it was one of the worst!

A word of warning  

One of the questions you’ll find on many loan application forms is, “how long have you been with your bank?” 

Length of time with your bank, as well as current address or employer, does seem to affect your credit score as is points to your stability.

Also, every time you switch to new bank they will probably carry out a credit search which also leaves a footprint on your credit file.

By all means switch banks, but I wouldn’t be switching every few months just to get a cashback!
You can also ask your own bank for a more competitive account. Just tell them you’re thinking about moving!

I also look for the convenience factor of having a branch near my work or home. Whilst we do most things through Internet banking nowadays, there are still times when I need to visit the branch, for instance banking cash or sorting things out when the internet banking or my phone app goes wrong!

Keeping shopping around. Loyalty may not always pay, financial education always does!

Check out my Podcast episode "Get A Cashback When You Switch Banks" on Anchor! https://anchor.fm/charles-kelly/episodes/Get-A-Cashback-When-You-Switch-Banks-e16fk6

Monday, March 12, 2018

Home Based Business Ideas UK: How To Avoid Unnecessary Mobile Internet Data Roam...

Home Based Business Ideas UK: How To Avoid Unnecessary Mobile Internet Data Roam...: Welcome to Money Tips Daily this is Money Kelly bringing you money tips to help you save and make more money! Read this if you w...

How To Avoid Unnecessary Mobile Internet Data Roaming Charges And A Shock On Your Next Iphone Bill Due To A Little Known Feature Called Wifi Assist

Welcome to Money Tips Daily this is Money Kelly bringing you money tips to help you save and make more money!






Read this if you want to avoid unnecessary mobile internet data roaming usage and a nasty surprise on your next bill due to 'Wifi Assist'.

Do you ever find yourself running out or running low on your mobile internet data halfway through your monthly billing period?

Perhaps you’re wondering why you keep using up your allowance when you are nearly always within a wifi coverage area?

The Metro reports that people using the new iPhone or iOS9 could be in for a shock when they receive their next bill. This is due to a little known new feature called ‘WiFi Assist’ that could be eating into your data allowance while you are totally unaware that your money is being spent.

The setting is designed to switch your phone to 4G if your WiFi connection is weak. For instance, if you move away from your house or office while on the web or Facebook, but you still have a weak connection to your home wireless, Wifi Assist will automatically switch to your data to strengthen the connection.

Whilst this is a helpful way to avoid a loss of connection or buffering, fine if you have plenty of data in your plan, it could cost you a lot money.

Here’s how to solve the problem and switch it off:

1. Go into ‘Settings’ from your home screen
2. Click on ‘Mobile Data’ (Or ‘Cellular’ if you’re in the US)
3. Scroll right down to the bottom, and underneath your apps you’ll find the ‘WiFi Assist’ setting. Switch it off using the toggle.

Apple offers advice to how to save data, so check out their website.

When cellular data is on, apps and services use your cellular connection when Wi-Fi isn't available. As a result, you might be charged for using certain features and services with cellular data.

To turn cellular data on or off, go to Settings, then tap Cellular or Mobile Data. If you're using an iPad, you might see Settings > Cellular Data.
Turn Data Roaming on or off: 

When you're travelling internationally, you can turn off data roaming to avoid roaming charges. If you have an international data plan, you may need to keep it on.

Depending on your carrier, data roaming might be used if you travel domestically. Contact your carrier for more information about your data roaming policy or other cellular data settings.

Even if you’re not using an iphone, you should check with your mobile provider if your phone has similar features and ask for their advice on how to keep your bill to a minimum.  

Before I upgraded my phone and plan recently, I was going through my data two weeks into the month and then having to ‘buy more data’. This only happened in the last few months and I couldn't figure out why.

When I go abroad outside the EU, I switch off data roaming and use wifi, but then purchase some data in case I was out of wifi coverage or I need to book an Uber.

Although I use it sparingly, the data seems to run out faster than box of Jaffa Cakes! We all need to keep on top of things and this is one way of saving a lot of money.

Becoming financially aware and astute is not just about making money, it is also watching your back for potential threats to your bank balance and financial well-being.


Sunday, March 11, 2018

Home Based Business Ideas UK: The Rich Don't Need You To Be Poor For Them To Be ...

Home Based Business Ideas UK: The Rich Don't Need You To Be Poor For Them To Be ...: Welcome to Money Tips Daily this is Money Kelly bringing you money tips to help you save and make more money! The rich don't need...

The Rich Don't Need You To Be Poor For Them To Be Rich


Welcome to Money Tips Daily this is Money Kelly bringing you money tips to help you save and make more money!

The rich don't need you to be poor for them to be rich. There is not a finite amount of money to go round because wealth and economies expand. Henry Ford understood this 100 years ago when he mass-produced (using assembly lines and division of labour methods) the famous low-priced model T Ford – the car for ordinary people.

People from all over America and Europe flocked to Detroit to work for Ford because he paid his factory workers very high wages, thus creating a middle class of people that could afford to buy his cars. 

Ford, who left school at 14, famously said that his customers could have the car in any colour they wanted, as long as it’s black!

Entrepreneurs like Ford helped make the U.S. the world’s largest economy, and it still is today, closely followed by China!

We are now living in a technological, rather than an industrial revolution and entering a new digital age. Twenty five years ago, did we all have mobile phones and laptops? No, as these were expensive luxury items.

Today almost everybody has a mobile phone, or smart phone, a tablet and laptop. Our monthly mobile phone bill is more than we used to pay every quarter for a landline. 

Where did all this extra money come from to pay for all this stuff? The answer is the economy has expanded and people today have higher living standards and more things then we have ever had.

The availability of credit and innovative leasing schemes plays its part of course, but mass production brings down the cost of luxury items making them available to everyone, just like it did in Henry Ford’s day when only the rich could afford a car. 

Bill Gates, Mark Zuckerberg, and Steve Jobs didn't need us to become poor in order for them to get rich. In fact, they enriched our lives, created wealth, employment and thousands of millionaires.

The wealthy are often referred to as "greedy" or "fat cat businessmen" who should pay "their fair share", when the top earners and companies actually pay most of the taxes the government receives.

I'm telling you this because there is an abundance of money in the world and for those that provide value and service to the marketplace. The rich are not taking your slice of the cake, they are creating their own bigger cake, and you can do the same.



The store with no name

Talking about the late Steve Jobs, I was in a London shopping mall today and visited an Apple store. It was packed with fans, and especial families and young kids on mini iPads having fun and joining tutorials. Which computers and phones do you think these kids are going to buy when they get older?

It reminded me of how MacDonald's took over inexpensive kids birthday parties and created a generation of people who had a warm fuzzy feeling whenever the passed by one of their restaurants.

Apple are so confident of their brand they don’t even put a sign on the front of the store, just a discreet logo on the side.

Nowadays, iPhones and other smart phones are even used in third world countries, where they don't even have a full network coverage of landlines.

We can literally run our lives and businesses from our smart phones, access the web, write a book and we have more songs at our finger tips then we ever did in a record and CD collection!

I’ll be giving you some tips on how to save data usage and money, so keep tuning into Money Tips Daily.


Saturday, March 10, 2018

Home Based Business Ideas UK: Avoid Litigation Be A Mediator Not A Litigator

Home Based Business Ideas UK: Avoid Litigation Be A Mediator Not A Litigator: Welcome to Money Tips Daily this is Money Kelly bringing you money tips to help you save and make more money! Avoid litigation. The wel...

Litigation Can Bankrupt You So Be A Mediator Not A Litigator

Welcome to Money Tips Daily this is Money Kelly bringing you money tips to help you save and make more money!

Avoid litigation. The well-known phrase "I'll see you in court" often ends in the bankruptcy court or losing your house to pay legal costs, which can run into millions.  Not only is litigation costly in terms of legal fees, but it can also take up an awful lot of time and energy, and literally drain you emotionally.

I once got involved in a dispute over a £500 unfair charge by a freeholder on a leasehold flat I owned. To cut a long story short, they kept escalating to so-called ‘costs’, like a game of poker, and we ended up going to court, but by this time they were claiming £14,000! 

The case took two years of my life fighting this small dispute. In the end, with the help of a great city barrister, who charged me £2000 upfront, I won the case and got my legal costs back. However, in reality I had lost hundreds of hours of my time, energy and sleepless nights.

At all costs, avoid going to court and use arbitration services, ombudsman or just common sense to settle disputes. Sometimes you just need to talk! 

Courts and Judges are notoriously fickle and you can never guarantee which way a case will go. Barristers know that if you upset a Judge, for instance by arguing or not submitting papers on time, the case could go against you. 

In the case of smaller disputes over charges you think you are incorrect, it is sometimes better to pay the charge and dispute it after (obviously not in the case of a dodgy builder who has just messed up your kitchen) . This especially applies to utility companies, banks and credit card companies, who have an unfair advantage over us in that they can register a late payment or default against us which will damage or credit rating, without even going to court.  

Bonus tip. Add legal expenses insurance to your household and motor insurance. It is usually very inexpensive and could save you a lot of money.

Action...Be a mediator not a litigator.

Check out my Podcast episode "Avoid Litigation Be A Mediator Not A Litigator " on Anchor! https://anchor.fm/charles-kelly/episodes/Avoid-Litigation-Be-A-Mediator-Not-A-Litigator-e1632k


The Reason Why Property Is The Best Investment

Over the last couple of days, we have talked about property and why falling prices can have an adverse effect on the whole economy.




Despite the recent fall in prices, I still think property is one of the best long term investments an ordinary investor can put his or her money into. Bricks and mortar, as my mum used to say!

Let me tell you why.

Firstly, you can enjoy an income from your residential buy-to-let or commercial property.

Secondly, you can also benefit from capital growth in the value of the property over the longer term, as it has done in the past, although this is by no means guaranteed. You do not capital appreciation in a bank deposit account, other than reinvesting your interest, which means you no longer receive income. 

Lastly, there is another reason why property has proved so popular and why I think it has the edge over the vast majority of investment schemes that a financial advisor or bank will try and sell you.

Leverage

Leverage, or the ability to borrow money not only to help purchase the asset, but also secured against the asset you are buying with no other security required.

Investors often take it for granted that you can buy a property with a mortgage or loan and repay it over 20 or 30 years.

In the case of investment properties (as opposed to a residential mortgage), the tenant pays the mortgage for you and in most cases there will be a residual income over and above the mortgage repayments.

You can also rent out a room in your own home, tax free, which could also pay your mortgage for you.

Okay, you need a deposit, which can range from 25 to 35% of the property value depending on where you are and market conditions.

You can’t blame the banks for wanting you to put some skin in the game. The deposit, or equity in the property, protects the bank’s interests in case you should default on the loan or market conditions take a turn for the worst.

Buy a £100,000 for £25,000

Even if you have to find a deposit of 25%, it is still an amazing deal. As one investor put it to me in simple terms:

“I can buy a £100,000 house for £25,000 and the tenants will pay the rest”.

She and her builder husband bought a string of houses in the 1990's, when you could buy a house for £60,000 in East London, and made a fortune.

Compare property with other forms of investments, such as stocks and shares, unit trusts or mutual funds, which the average financial adviser will usually recommend as "sound investments".

Just for fun, ask the advisor if you can obtain a loan from the bank in order to purchase these sound investments. Of course they will tell you that this is not possible and if you dig a bit further you discover that these investments are not considered as suitable security (or too risky) for a bank loan or mortgage. The bank would probably consider this to be speculation and would not give you a loan to buy them.

On the other hand, banks are happy sell you these products, many of them managed by their own fund managers, as a medium risk investment to help secure your future. They are happy for you to risk your money, but they would not risk their own money.

Most pension schemes invest in similar funds, the value of which can go up or down depending on the markets. An increasing number of younger people are placing their retirement in the hands of a fund manager and the whim of the markets when they retire.

Unlike property, you have little or no control over these investments, which will also be depleted by management charges and some upfront commissions.

Inflation reduces the real value of your mortgage but increases the value of you house

I have purchased most of my investment properties on interest only loans where I do not pay any capital back on a month-to-month basis.

I allow inflation in property values to take care of the loan, which will be much smaller in real terms by the time I get to the end of the mortgage.

In other words, if you borrow £500,000 today, the value and purchasing power of that amount of money will be much smaller in 25 years time. You may even be able to pay it from your savings or pension.

Over the past few centuries, inflation has increased the value of assets like property, but decreased and eroded the buying power of the money in your pocket.

Think about it. If the Duke of Westminster's great, great, great grandfather had stuck his money in a bank instead of buying and developing most of the freehold land in London's Belgravia (Harrods, Knightsbridge, etc) would they be as wealthy today? Of course not! The family would have nowhere near the £10 billion or so the current Duke has inherited from his late father.

I also have the options of making lump-sum repayments or even selling the property further down the line. If you bought two similar houses bought with same sized interest only mortgages and sold one 10 years later, the chances are you would now one of them outright. In the meantime, you have enjoyed two lots of income and had 'double bubble' in growth.

This is just my preference and you may wish to pay down your loan more quickly by taking a repayment mortgage, which also has advantages. As always, take advice from an independent financial advisor and a solicitor.

Build wealth from nothing

Getting back to leverage, the ability to use other people’s money allows you to build a portfolio or buy far more than you would otherwise be able to do.

When I bought my first residential flat in Ilford, East London many years ago, I could barely scrap together a 10% deposit, or just under £2000 with fees etc, let alone save the entire amount to buy the property outright. The loan from the Nationwide Building Society helped me get my foot on the ladder and out of rented accommodation at the age of 20.

In the six months it took from offer to completion, interest rates jumped from 12.25% to 15.25%, almost doubling my repayments! It was killing me! I had just got married and we had a baby girl, so went down to one income. 

When I sold the property two or three years later during a tough recession we made a tax free gain of £10,000.

I used the money to put down a deposit on a 3 bed terraced house, which also went up in value over the following four or five years.

Later, I released some equity from my property and used the money to buy a second property which was rented out.

To cut a long story short, I have repeated this process throughout my investment journey and by using other people’s money (OPM) I was able to create substantial equity and wealth from none of my own money. Remember, I started with just £2000 used to buy a tiny 2 bed residential flat.

Many other investors I know have done this far more aggressively and built up portfolios of hundreds of properties after starting with almost nothing.

I can hear some of you saying, well that’s alright in rising market, but there are many other strategies you can learn which do not require the property to go up in value so quickly.

Contrary to popular belief, you don't need 'money to make money'. You do need education and a little imagination - if you haven't got imagination, just copy other successful investors!

If you would like to learn more about property investment and attend a seminar, I have a limited supply of complimentary tickets for an event with a leading training provider - email me charles@charleskelly.net.

Check out my Podcast episode, "The Reason Why Property Is The Best Investment" on Anchor! https://anchor.fm/charles-kelly/episodes/The-Reason-Why-Property-Is-The-Best-Investment-e15ubk



Thursday, March 8, 2018

Does It Matter If Property Prices Fall? Find Out Why You Should Care

Welcome to Money Tips Daily this is Money Kelly bringing you money tips to help you save and make more money!

Yesterday, I talked about falling house prices in the UK, and some of you asked why this matters. 




There are a number of aspects to consider. The recent price drop might be good news for buyers but bad news for sellers. For people who already own property the news of small fluctuations in values might not be good or bad, as they will still be sitting on an asset whether the value is increasing or decreasing. 

If you own a buy to let property let to a tenant, the rent is not going to change month on month even if the value increases or decreases.

But if prices continued to fall and or there was a crash, the banks might start getting nervous and could ‘call in’ (ask for their money back) loans for borrowers who are highly geared – mortgaged up to a high loan-to-value (LTV), e.g. you owe £90,000 on a property valued at £100,000 or 90% LTV.

This happened during the last property crash in 2008 when some banks decided to ask the borrowers to repay the loan because it was too close to the value of the property based on their reassessment in light of the downturn. 

In most cases, the borrower (like many I knew personally) were still making the monthly payments without any problems, but the lender had to reduce their exposure and demanded the money back. 

Quite a few investors lost everything, because they could not find another lender to give the money to repay the first bank in time. Banks want to give you an umbrella when the sun is shining and trying to arrange a remortgage in 30 days during a financial crisis in not easy!

You may not be aware that mortgages can be ‘called in’, so take time to read mortgage conditions and take legal advice. Also, look for fees and early repayment charges. As always, take legal and financial advice, as this article is not designed to give you financial advice.

Some of you may be wondering what all the fuss is about on property prices or saying, “who the hell cares, what’s it got to do with me?”.

The reason is that property and house building are very important to the UK economy. The building industry employs millions of people (directly and indirectly) and the property market is a reflection of the health of the economy, especially in terms of consumer confidence.

When property prices are increasing, consumers are confident and will spend their money on stuff, which further boosts output (GDP) and creates more jobs and employment in other sectors of the economy.  

Consumer confidence tends to be higher when people think, “Hey my property value has gone up by hundred thousand pounds this year, I feel great so I’m going to spend money on a new car or an extension, especially when I can borrow against my property at low interest rates”.

This consumer confidence keeps the economy moving, but too much spending can lead to overheating and higher inflation, which makes central banks nervous.

The Bank of England and the government do not like to see some new people having a good time, as later down the road the country could wake up with a bad hangover!

Another aspect to consider is that when property prices are falling builders will be less wiling to build more houses, even if the Prime Ministers tells them to do so, as they might not be able to sell them when they are completed. 

Builders and developers have to do look ahead sometimes three or five years time and project whether or not the market conditions will be right to sell those properties. The government wants builders to put up houses as fast as possible or within a couple of years of obtaining planning permission, however the builder must carefully consider the financial aspects in order to make a profit and survive in the industry.

In previous property crashes in the 1980s and 1990s many developers got caught with their pants down and were stuck with thousands of properties they could not sell. This also happened in Ireland and United States.  Developers went bust, banks could not their money back and some even failed.

The UK government had to bail out banks like Northern Rock and RBS during the financial crash to steady the markets.

If everyone today went to the bank and asked to withdraw their money, known as a run on the banks, they would quickly run out of cash and would close their doors. Bank lend your money out and do not not have it sitting in the vaults. 

As you can see, economy is often balanced on a knife edge and everybody has to keep their nerve, especially during crisis, or it can all come crashing down like a deck of cards as happened in 2008.

During crashes, some of my friends everything, but others make a killing, snapping up bargain shares, assets and houses from motivated sellers at pennies on the pound.

We are not in that situation today. I think we all know that over the long term property rises in value and has been a great investment for centuries.
 
Many of the wealthiest people on the Sunday Times Rich list have either made their money in property or invest in property to shelter their capital. There are many more property investors who keep a low profile and prefer not to appear in these rich list!

Staying on the property theme, tomorrow, I’ll give you my number one reason why I believe property is a superior investment compared to almost every other form of investment.

Finally, commenting on women in business on international women’s day, Dr Liam Fox, Secretary of State for International Trade and President of the Board of Trade since 2016, told an audience on BBC Question Time that women in developing nations need more help to set up e-commerce businesses. 

He added, “four out of five off-line physical businesses are owned by men, whereas four out of five online e-commerce businesses are owned by women”.