I found a good deal on one of the property that offer BMV but with the market prices goes down + credit crunch and high interest rate from the banks. it has become difficult to borrow for properties investment, i was wondering if there are other option to borrow to invest in BMV properties?
Buy to Let investment
- Thread starter MoiMoi
- Start date
Below Market Value -perhaps?
If so, the OP seems to be asking how in the Credit Crunch, can the purchase of these (below value properties) be financed? However as I see it, if there was not a credit crunch, the question would not need to be asked, nor would there be any BMV properies to buy!
If so, the OP seems to be asking how in the Credit Crunch, can the purchase of these (below value properties) be financed? However as I see it, if there was not a credit crunch, the question would not need to be asked, nor would there be any BMV properies to buy!
BMV = "Below Market Value" - common term used in buy-to-let in UK.
The term is usually used in one of the following circumstances:
1. Property needs renovation, so cost of purchase + cost of renovation is less than the value of the house once renovation has been completed, hence it would have been purchased "BMV" with reference to its post renovation value.
2. Buyer intends to subdivide property - cost of a large house + cost of conversion into e.g. 4 apartments is less than the aggregate value of the 4 apartments post-conversion, hence the apartments have been purchased "BMV".
I have 2 issues with this phrase. First is the obvious one - whatever you pay for the property IS the market value.
And secondly, the buyers fail to cost the risk in their calculations. The classic example being in 2. above, they may not get planning permission to subdivide. They also may also find that renovations are more costly than anticipated - you never know what you'll find until you actually start construction work.
My opinion is that the difference between what the buy-to-let advocates call "BMV" price and the value post renovation/conversion is the risk price.
The term is usually used in one of the following circumstances:
1. Property needs renovation, so cost of purchase + cost of renovation is less than the value of the house once renovation has been completed, hence it would have been purchased "BMV" with reference to its post renovation value.
2. Buyer intends to subdivide property - cost of a large house + cost of conversion into e.g. 4 apartments is less than the aggregate value of the 4 apartments post-conversion, hence the apartments have been purchased "BMV".
I have 2 issues with this phrase. First is the obvious one - whatever you pay for the property IS the market value.
And secondly, the buyers fail to cost the risk in their calculations. The classic example being in 2. above, they may not get planning permission to subdivide. They also may also find that renovations are more costly than anticipated - you never know what you'll find until you actually start construction work.
My opinion is that the difference between what the buy-to-let advocates call "BMV" price and the value post renovation/conversion is the risk price.
Yeah - that's what I was thinking too!
Friend of mine who's worked in Buy-to-Let in UK (see post on overseas property thread) says there's one other usage of BMV.
Some unethical Buy-to-Let landlord checks the County Court lists for up and coming house repossession cases.
Shortly before a particular case, the landlord cold calls the owners, scares them with the usual "your reputation will be ruined if your house is repossessed" or "what will your neighbours think when you are booted out of your home - the shame of it" or other similar tactics. He then offers them the deal of a lifetime - a way to stop the house being repossessed and still be able to live in it for as long as they like so long as they pay him his rent - "neighbours etc. will never know you dont own it anymore".
The landlord, who conveniently has the draft paperwork to hand, says that he will buy the house of them allowing them to pay off the mortgage arrears and he'll lease the house back to them for a reasonable rent. The price offered is a lot lower than the market value for the house - landlord maintains that "repossessed houses sell for lower prices" (yeah right!) and the chances of them selling the house in the few days leading up to the repo hearing are very low, so he is their only option.
The owners, wanting to stay in the house and afraid of court proceedings, take the deal and dont concern themselves too much about the small print (landlord even allows them use his solicitor - isnt he kind!).
After a couple of years of modest rent, the rent review clause in the small print kicks in and, the rent is raised to way more than the tenants can pay so they are forced to move out. Landlord then subdivides house, which is what Buy-to-let is all about.
These repossessed houses are bought at below market value - BMV properties.
This is a very shady & dishonest practice in my opinion. The type of people who are targeted by these buy-to-let landlords are vulnerable people who know little about finance (hence in mortgage trouble in the first place) and dont have the knowledge or access to advice to figure out that the deal being offered is a bad one. All they are concerned about is avoiding court and staying in the house.
Some unethical Buy-to-Let landlord checks the County Court lists for up and coming house repossession cases.
Shortly before a particular case, the landlord cold calls the owners, scares them with the usual "your reputation will be ruined if your house is repossessed" or "what will your neighbours think when you are booted out of your home - the shame of it" or other similar tactics. He then offers them the deal of a lifetime - a way to stop the house being repossessed and still be able to live in it for as long as they like so long as they pay him his rent - "neighbours etc. will never know you dont own it anymore".
The landlord, who conveniently has the draft paperwork to hand, says that he will buy the house of them allowing them to pay off the mortgage arrears and he'll lease the house back to them for a reasonable rent. The price offered is a lot lower than the market value for the house - landlord maintains that "repossessed houses sell for lower prices" (yeah right!) and the chances of them selling the house in the few days leading up to the repo hearing are very low, so he is their only option.
The owners, wanting to stay in the house and afraid of court proceedings, take the deal and dont concern themselves too much about the small print (landlord even allows them use his solicitor - isnt he kind!).
After a couple of years of modest rent, the rent review clause in the small print kicks in and, the rent is raised to way more than the tenants can pay so they are forced to move out. Landlord then subdivides house, which is what Buy-to-let is all about.
These repossessed houses are bought at below market value - BMV properties.
This is a very shady & dishonest practice in my opinion. The type of people who are targeted by these buy-to-let landlords are vulnerable people who know little about finance (hence in mortgage trouble in the first place) and dont have the knowledge or access to advice to figure out that the deal being offered is a bad one. All they are concerned about is avoiding court and staying in the house.
markowitzman
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also would be interested to hear from professional buy to let investors in Dublin.
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What are yields and occupancy rates?
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Am interested in purchase in city centre.
Is there value?
What are yields and occupancy rates?
Many stressed buy to let sellers about and if so where?
Am interested in purchase in city centre.