Investments

In this section, BIAAP give details of investments that are currently available in the UK market. We are not investment advisers nor analysts offering recommendations as to the way in which our clients should invest their money. We provide an overview to the UK market and if we receive any requests will endeavour to meet them by giving representative samples of what is available. We provide the information about Guaranteed Stock Market Bond (GSMB) which allows you to invest equally in three Indices - FTSE 100, Dow Jones Euro Stoxx 50 and the Nikkei 225. There are no management fees or expenses in relation to the share portfolio and the capital invested is guaranteed.

There are three factors which are relevant to a decision on the purchase of a property anywhere in the world. These are location, location and location. Property in Great Britain is no different, the area in which a property is situated will be the best cushion against falling prices and the best profits are made where a property can be purchased in an area that is up and coming. We are able to introduce potential investors to opportunities to invest in commercial, residential and industrial properties. Development schemes can share a profit of up to 50% over an 18 month period. Investment Property can provide an annual income of 8-12% together with capital appreciation if property values rise.

Purchase of houses and flats.

This page is prepared for those people interested in the possibility of purchasing a property in the United Kingdom. It must be stressed that owning a property does not give rights of residence or any preference under the immigration rules but in the long term it has been found to be a reasonable investment. The companies appearing on these pages are, as far as we know, of good standing and financially sound. Whilst we are happy to explain information provided by the companies, we cannot give guarantees as to the truth of what is stated. We are however happy to discuss options and availability but cannot advise or recommend a particular course of action for which we may be found liable.

Property in Great Britain

There are three factors which are relevant to a decision on the purchase of a property anywhere in the world. These are location, location and location. Property in Great Britain is no different, the area in which a property is situated will be the best cushion against falling prices and the best profits are made where a property can be purchased in an area that is up and coming. Property in England can be owned either leasehold or freehold. A freehold interest means that the land together with what any building constructed upon it is owned. A leasehold interest means that the land is owned by someone else with the lease entitling the owner to the property. This will involve either a market rent for leases of 25 years or less or a nominal ground rent (often a peppercorn) for leases of 99 years or more. Houses are usually freehold and flats are usually leasehold, although in many instances now one may have a share of the freehold in a flat through a management company. Historically, despite cyclical falls in the price of property, "bricks and mortar" have tended to out perform stocks and shares in the longer term.

Commercial property is governed by the same factors as residential property both as to ownership and the importance of location. Where a commercial property is rented out, the strength of the company renting is important as it will affect the value of the property as an investment. This is usually assessed by a chartered surveyor/valuer who will calculate the Years Purchase (YP) being a multiple of the rent. This will vary dependant upon both the user of the property and the occupier and will typically be 8-12 times the annual rent. Because of the comparatively small size of Great Britain, approximately 1,000 miles from north to south, there is a constant concern about over-development. The needs of the population both as to housing and workspace need to be constantly balanced against the desire to retain the countryside and green areas. Government policy currently favours the redevelopment of "brown field" (former industrial sites) in preference to green field sites in the open countryside. Depending upon the area where a development is proposed grants may be available for the clean up of the land.

In addition, environmental concerns have caused a requirement for environmental searches to be undertaken researching the history of a particular property and whether the land itself might be contaminated. This is of great importance as a current owner could find himself responsible for contamination that occurred sometime ago if the previous owner that caused the contamination cannot be found. Maximising development permitted on any particular site is therefore crucial importance and requires negotiations with the relevant local authority that indicate their priorities for planning in the area through a Unitary Development Plan and will normally control the grant of planning consent. Projects over a particular size or of a particular type may be referred to the Secretary of State for the Environment for approval but this is comparatively rare. If one is looking at residential property for rent, it is important to identify both the price one wishes to pay and the likely tenant that may occupy. It is also worth checking on transport links and in London underground, bus services and British Rail are important factors. In London for a one bedroom flat one can expect to pay up to £250,000 for a lease in the best areas (the West End, Mayfair, St. James`) or as little as £120,000-£145,000 in outlying regions. However, in other parts of England, £177,000-£480,000 would buy a 3 bedroom house.

Clearly, the purpose of the purchase needs to be defined. One would rarely recommend investment in property for a quick capital profit (12-18 months) unless a site has been identified where obtaining a new planning consent could significantly increase the value. However realistically, property is for a person or organisation looking at a longer term investment of 4-5 years. Residential property is usually let under a Shorthold Assured Tenancy which can guarantee that the tenant will leave at the end of the period. These can be renewed on an annual basis. Most property is now registered at HM Land Registry and there is therefore a central data base of properties and their owners. This can be useful when one is looking to assemble a site, owning one part and wishing to make contact with other adjoining owners.
With residential property, the rent achieved will usually cover the cost of any money borrowed to purchase but there is unlikely to be a great surplus above that. However, one is looking for a capital return in the longer term on the purchase price rather than simply a profit on the income in the shorter term. The rent will usually equate to 8-15% of the purchase price of the property per annum. Given the changing laws in respect of leasehold ownership and the rights to renew a lease, many properties with short leases are undervalued on the market and when the lease is renewed, which requires a capital sum payment calculated in accordance with a standard formula good gains can be made. As with other cities, a well located flat could be used both for he owners` trips to London and in the time when it is vacant, rented out for holiday lets.

In broad terms, the costs of purchasing, in addition to the purchase price, require the payment of stamp duty running at a maximum of 4% for properties above £500,000. On the sale of property commission will usually be paid to an estate agent if they have been used in the sale which is likely to be between 1.5 and 2.5% of the value of the property. Lawyers will charge up to 0.5% of the property value for buying or selling, although the conveyancing market has become very competitive in recent years. Conveyancing is simply the term used for the buying and selling of property. Unlike many other forms of contract or agreement, a contract for the sale of a property must be in writing, and executed by both parties as a deed. An oral contract will not suffice. Certain parameters need to be identified at the outset and include the following: is the property for occupation and/or investment; is a garden or balcony required; where is it desired to purchase the property; is a lease sufficient or is a freehold required; how much is there to be invested; is a completed property required or is the purchaser prepared to do some work or arrange for it to be done; is there a preference for modern/classical property; generally what is the character of the area? All of these are questions which need to be answered before even looking for a property.

When the search begins in earnest, one can identify particular areas and then look in estate agents` windows to see whether the type of property required is available and the price you are likely to pay for it. There are firms who will find properties for you at a cost of 3-4% of the value of the property. They will identify what is available, visit the properties and cut down a list so that only a few need to be examined by the prospective purchaser. This is particular good where people are busy and do not have the time to carry out their own investigations. There remains a current concern that the property market is likely to suffer a downturn as the stock markets have done, but historically these only occur approx. 1 year after a downturn in the equities market. The view in the City is that prices may simply be adjusting to move away from the high increases of 8-15% pa that have been seen over the past few years to a more realistic rate of growth. There can be no guarantees that one will make money though in the long term it is a safer bet to put money in property than anywhere else. With the right investigation and proper advice, an investment in property will be both worthwhile and profitable.

Purchase of houses and flats

This page is prepared for those people interested in the possibility of purchasing a property in the United Kingdom. It must be stressed that owning a property does not give rights of residence or any preference under the immigration rules but in the long term it has been found to be a reasonable investment.
Firstly, the type of property needs to be identified. Are you prepared to do work on it? This may involve re-plumbing and re-wiring or a complete refurbishment. Are you looking for a house or a flat? Is a garden important? How many bedrooms are required? Is a central location required? All of these criteria will effect the type of property you are going to purchase, it`s location and thereby the area in which you wish to search. Where properties are purchased for letting, it is sensible that they be located close to public transport routes as this increases their suitability for potential tenants.

Ownership

Property in the United Kingdom is either freehold where you own both the property and the land it stands on or leasehold. For residential property leaseholds usually apply to flats. This means that the landlord owns the ground on which the property stands and the owner pays "ground rent". This is usually a nominal sum of between GBP50-200. This is not a market price but simply a reflection of the fact that the property is standing on someone else`s land. In more recent times the freehold (the ownership of the land) has often been transferred to management companies in which people with a lease have a share (often described in agent`s particulars as "share of freehold"). These management companies will manage the estate, maintain the common parts (staircases, lifts, gardens etc) and in older Victorian blocks will supply hot water and central heating from a central boiler. The management company charges a service charge for this which is variable. In many central London blocks the service charge can be up to GBP2,500 - 3000 per annum.

Making an Offer

Once the property has been identified, an offer can be made for it. Depending on the market this may be at then full market price, the asking price of an estate agent, or it may be at a lesser price. If the price is accepted in principal matters will then be referred to solicitors.

The Contract

The solicitor will receive the contract, usually in standard form, from the seller`s solicitors and once this is received various steps require to be undertaken. Searches need to be done with the local authority and other authorities if development is proposed. For example, if you wish to extend the house or do other work to it it`s sensible to get plans of where the drains are and also electricity cables. Searches are submitted to the Local Authority to ask questions as to whether the road is public, whether there are any major developments in the area, whether the property complies with all of the relevant planning and building regulations rules etc these searches will cost up to GBP200. In addition, your solicitors will either request or be provided with information about the property from the seller. This refers to boundaries, whether it is connected to the main services, whether there have been any disputes and other similar matters. These replies are confirmed by a solicitor and can be relied on for the purposes of future action if false replies were given and loss is suffered as a result. There will also be a list of fixtures and fittings included with the property or in some instances agreement may be reached with the seller to buy things separately i.e. washing machine, furniture etc.

Structural survey

It is sensible for a structural survey or a homebuyers report (lesser survey) to be prepared. This will tell you whether there is anything obviously wrong with the property and what work needs to be done to get it into good condition. The price of such reports varies depending on the size of the property and for residential properties you are usually looking at a fee of between GBP600 - 1,500. This type of report is a requirement from any bank to ensure that the price being paid for the property is not excessive. It is however recommended for cash buyers as it gives some comfort that there are no major defects.

Exchange of Contracts

If everything in respect of the property is satisfactory, all searches and inquiries have come back (and in the case of a lease this will include confirmation that service charge and ground rent are paid up to date), your solicitor will then move forward to exchange of contracts. Upon exchange, the buyer usually pays 10% of the purchase price, occasionally lower figures (5%) can be agreed. The solicitors agree a time and date for exchange and the buyer`s solicitors will send the deposit money to the seller`s solicitor together with his signed copy of the contract and the seller`s solicitors will send his signed copy of the contract to the buyer`s solicitor. At this stage there is a legally binding contract in force.
On exchange of contracts a completion date will be included in the contract. The sale should complete on that date or there are various penalties not least of which is interest upon money outstanding and making the deposit up to 10% if less was paid. Upon exchange it is also usual for the buyer to insure the property unless there will be a long delay between exchange and completion when it is often agreed that the buyer will be noted as an interested party on the sellers insurance policy. The insurance of course relates to the structure of the building and not the contents.

Between exchange and completion

In this period, further enquiries will be sent out by the buyers solicitors together with a draft transfer document, it is this transfer document that provides evidence of the transfer of the property and it is this that is sent to the Land Registry for the ownership recorded therein to be changed. Completion occurs when the executed TR1 and other relevant documentation are sent by the sellers solicitor having received the completion monies by telegraphic transfer from the buyers solicitor. This is sent between solicitors client accounts. The Client Account is an account where client`s money is held. If there is a mortgage on the property, the seller`s solicitor will give an undertaking that the mortgage will be discharged. Once the mortgage is discharged the bank will issue a form DS1 as evidence of the discharge.

Registration of Transfer

All titles are registered at HM Land Registry. The stamp duty of between 1 - 4% needs to be paid on the TR1 to the Inland Revenue and the document is then stamped to show tax has been paid. It is this stamped document that is sent together with other supporting documentation to the Land Registry for registration. Between GBP60,000-250,000 1% stamp duty is payable, between GBP250,000 - 500,000 3% stamp duty is payable and over GBP500,000 4% stamp duty is payable. This is paid on the purchase price and not on the price of any contents purchased separately. There will be a further fee of between GBP60 - 500 for registration of the transfer at the Land Registry. Again this depends on the value of the property.

Should further information be required please document.write('e');document.write('mail');document.write(' us<');document.write('/a>'); email us and we would be happy to assist.

Property Market

In English property law, property may be held either freehold or leasehold.

Freehold

Freehold property means that the land on which the property stands is owned as well as the building itself. This usually only applies where the whole building and the land is in one title and owned by the freeholder. A Freeholder is entitled to a nominal rent from a leaseholder on a long lease or a market rent on a shorter lease, usually 1-25 years depending on the type of property.

Leasehold

Leasehold property is property that is held on a lease for a term of years. In some cases this is for a short term of, say 5 or 10 years up to a maximum of 999 years (known as a virtual freehold). Most flats/apartments are owned leasehold usually on leases of 99 to 125 years. There are provisions to extend the length of a lease, codified in English law, whereby using an established formula, an extension to a lease can be purchased. This is usually necessary where a lease for a property falls below 70 years as the value would be affected.

Commercial or Residential

In respect of the purchase of property for investment either a freehold or a long leasehold title is suitable. In Central London it is almost impossible to purchase properties for less than £150,000 which would buy a small studio flat, one room used as both a bedroom and living area with a bathroom and kitchen attached. Generally, prices decrease as one moves away from the centre.

When looking to buy property, it has almost become cliched that there are three criteria that are important - location, location and location. In order to rent residential property out it must be close to transport links and set up such that a person can move in with furniture etc already in place. In renting a property out, which cannot be guaranteed, one is likely to see a return on ones investment of between 8 and 12 percent in revenue terms. A standard charge of an estate agent for finding a tenant is 10% of the annual rent. Residential tenants usually occupy on the basis of a shorthold assured tenancy which is a contract for one year and guarantees that they can be removed from the property at the end of the term. It may be that such tenants wish to take a new contract at the end of the year but to ensure continued protection it is best to use a 6 or 12 month shorthold assured tenancy for renting out residential property. If one is looking to invest in commercial property, one will often purchase an investment whereby a property is purchased with a tenant in place on a long lease. There may be rent reviews by which, according to the terms of the lease, at particular intervals, usually 3, 4 or 5 years, the landlord may increase the rent. The value of such rented property depends on the type of tenant. A good blue chip company, ie. a well quoted company with a top credit rating, will command a greater price than a property rented by a less substantial firm. One would expect to purchase the property at a multiple of the rent achieved, ie. a property earning £100,000 is likely to cost between  £800,000 and £1.2m to purchase. Such properties can be purchased at auction and the key thing for such purchases is that one sets a limit in advance of what one is prepared to pay and does not exceed that limit.

In addition to the rental income, if the property market continues to improve as it has, and a good location is chosen, one would also expect to see an increase in the capital value of the property that would be realised on sale. The costs will be very much subject to agreement with the individual concerned although certain costs are standard and required by law in order to register a valid title. Approximately £500 will be spent on searches, legal fees will be between 0,5 and 1 percent of the value of the property depending on the services offered. Stamp duty must be paid at a maximum of 5% to the Inland Revenue as a tax on the purchase of the property and in addition a Land Registry fee of between £200 and  £1,000 is payable depending on the value of the property. In relation to costs, one is therefore looking at needing to have 15 and 20 percent of the value of the property in addition to the purchase price to cover registration fees and other matters.

How much?

The minimum investment would be £100,000 although this very much limits what can be purchased and it would be more sensible to look at a realistic minimum limit of £200,000 as this would give a greater choice for what is available in areas not too far from the centre. If you are interested in considering the purchase of a property to rent in the United Kingdom please contact us with the amount you are able to invest and any further information you might be able to give as to your requirements.

Guaranteed Stock Market Bonds

On this page we will provide details of Guaranteed Stock Market Bonds issued from time to time by well known high street banks in England. Investing in the stock market is always risky as prices can go up as well as down but the "guaranteed" bond lets you enjoy the potential gains of playing the Market, but reducing the risks.
This example of a Guaranteed Stock Market Bond (GSMB) allows you to invest equally in three Indices - FTSE 100, Dow Jones Euro Stoxx 50 and the Nikkei 225. You do not have the expense of managing a portfolio of shares and the capital you invest is guaranteed however, the return you achieve is more limited and is shared with the bank concerned.
You can invest any sum from a minimum of £2,500 over either a three or five year period. For both terms your original investment is secure however it can not be withdrawn during the term period chosen.

For the five year investment GSMB you could benefit from a potential return of up 70% gross of the improvement in value of the shares. Your funds will be split equally between the following Indices: FTSE 100, Dow Jones Euro Stoxx 50 and Nikkei 225. The returns for each Index/exchange are entirely independent of the performance of other exchanges and you will be entitled to receive at the end of the period 70% gross of the increase in value of the index during the bond period. If a three year GSMB is chosen, you could benefit from a potential return of up to 30% gross. Your funds will be divided into three equal amounts and invested in each of the indices: FTSE 100, Dow Jones Euro Stoxx 50 and Nikkei 225. The return on each amount, again independent of each other, will be the relevant percentage rise of each index, subject to a maximum of 30% gross.

The Main Benefits:

• The Bond is available to all individuals aged 18 or over, charities, limited companies and pension funds.
• Minimum deposit is £2,500.
• Deposits may be made in joint names or by sole traders, partnerships and companies.
• Subject to the initial 14 days right to withdraw period, once deposited, your money is "locked in" until maturity (five year term or three year term depending on your selection) therefore withdrawals or further deposits cannot be made. If you think you may need access to your money you should consider placing some of your savings in a Demand Deposit account.

What is Guaranteed?
In the past, investors always had to weigh the potential growth of a stock market against the potential risk to their capital. That`s where this Bond is different because if the various Markets fail to perform, or even if some or all of the fall, you will still get your original capital back.

How does the BIAAP work and how will Your Capital be Invested

5 year option
The initial capital will be split into three equal amounts and the return on each amount will be the percentage rise of each of the following Indices: FTSE 100, Dow Jones Euro Stoxx 50 and the Nikkei 225 over the five year term, subject to a maximum return of 70% gross of the original investment, (if each of the Indices achieves a return of 70% over the period, this is equivalent to an AER of 11.20%)
AER stands for Annual Equivalent Rate and illustrates what the interest rate would be if interest was paid and compounded each year.

Example: £9,000 invested:
(a) FTSE 100 Index rises by 60%
(b) Dow Jones Euro Stoxx 50 falls by 10%
(c) Nikkei 225 rises by 120%
The return on your investment would be:
(a) 60% rise = 60% return on £3,000 = £1,800
(b) 0% fall = nil return on £3,000 = nil
(d) 120 % rise = 70%(max) return on £3,000 = £2,100
Total gross return £3,900

3 year option
The initial capital will be split into three equal amounts and the return on each amount will be the percentage rise of each of the following indices: FTSE 100, Dow Jones Euro Stoxx50 and the Nikkei 225 over the three year term, subject to a maximum return of 30% gross of the original investment, ( if each of the Indices achieve a return of 30% over the period, this is equivalent to an AER of 9.14%).
Example: £9,000 invested
(a) FTSE 100 Index rises by 40%
(b) Dow Jones Euro Stoxx 50 Index falls by 5%
(c) Nikkei 225 rises by 40%
The return on your investment would be:
(a) 40% rise = 30%(max) return on £3,000 = £900
(b) 5% fall = nil return of £3,000 = nil
(c) 25% rise = 30%(max) return on £3,000 = £750
Total gross return £1,650

What are the FTSE 100, DOW JONES EURO STOXX 50 AND NIKKEI 225 Indices?

• 1.The FTSE 100 Index measures the performance (excluding dividends) of the shares of the top 100 companies quoted on the London Stock Market. These include companies such as Vodafone Airtouch, Glaxo Wellcome and BP Amoco.
• 2.The Dow Jones Euro Stoxx 50 Index measures the performance (excluding dividends) of the shares of the top 50 companies within the EMU. These include companies such as Nokia, Deutsche Bank, Philips, L`Oreal and Siemens.
• 3.The Nikkei 225 Index measures the performance (excluding dividends) of 225 leading Japanese companies such as Honda, Sony, Toyota and NTT.

 

The Proposal
Our expertise is the purchase of property at a reasonable price adding value either through site assembly and/or through change of permitted use through grant of a new planning permission thereafter selling the sites with such added value. By arrangement, projects can be built out to completion and/or refurbished but this causes uncertainties both as regards to time and therefore realisable value. The sale of residential or commercial units or a site with planning consent is of course dependent upon the property market at the time of disposal. Building out can create far greater returns on one`s investment but is subject to greater risk.

Investment Proposal

Investment of a minimum of £1m which may be increased by increments of up to £100,000. The maximum acceptable would be £10m unless specific schemes were discussed in advance. Due to the nature of the property market, money would need to be deposited in the UK or be available for draw-down within a short period. We would require proof of the availability of funds as we do not wish to waste time. It would be proposed that sites are identified, interest expressed by the joint venture vehicle and thereafter preliminary feasibilities produced. These would be provided to the potential investor who could then make a decision as to whether the project is something in which he is wishes to invest. Such decision must be made within seven days of provision of the details. This is because the market is currently very buoyant and a longer period could mean losing the opportunity. The properties/sites would focus on industrial properties in emerging areas, buildings requiring refurbishment, assembly of sites where by joining three or four planned holdings the total package with planning consent achieves a major increase in value.

The Term
BIAAP would work on open book accounting through the joint venture subsidiary. A separate company will be created for each project and/or fund of a client and CIBA as a sign of their commitment to the project could themselves invest 10%.
90% of the funds for any project would be provided by the investor who would achieve a rate of return in the region of .5% above Barclays base rate (currently 1%) on the monies invested interest would be rolled up and payable at the completion or sale of the development. In addition any investor would earn 50% of the net earnings on the development or refurbishment undertaken. It would be the intention of BIAAP to look at projects where returns could be achieved within a 12/18 month period or such other period as maybe agreed between the parties.

Aims of the Investor?
In terms of investment and/or development the different aims of any investor are of paramount importance in deciding which schemes to propose.

• If an investor is looking for an income as well as a capital return the intention would be to refurbish/develop and thereafter let at a market rate on long leases. The development element has some uncertainty but most proposals can be completed within an 8/12 month period depending upon complexity. On a worst case scenario no investment will be proposed showing an annual return of less than 6-8%.
• Development schemes can be proposed which would envisage a capital return within 12/18months. This would involve the onward sale of a development opportunity with an improved planning consent obtained.

If the refurbishment route is chosen together with obtaining of new or revised planning consent, the period for the investment may increase to 18/24 months but returns would be more dependent on the market.

Conclusion
The property market does vary and there can be no guarantee of a substantial return. The expertise of those people involved should ensure that properties were purchased at the right price and for large schemes opportunities for covering costs of money though alternative solutions are always identified. This "worst case" scenario would mean that if there is a proposal for an industrial complex, it would be expected that short term leasing could be put in place to ensure that the major costs of borrowing were covered pending the satisfactory outcome of any planning applications.