What To Do If You Are Thinking Of Selling in 2014

The property market is starting to change. With renewed confidence in the market aided by the Help to Buy Scheme, whether people are taking part or not, more buyers are definitely out there than there have been for a long time.

And with demand for property on the up, from a sellers perspective, things are getting easier to move too. With property prices in some areas recovering to 2007 levels, it means less homeowners are in negative equity and with just a 5% deposit to have to find, its possible to contemplate moving on.

For those who tried to sell up during the credit crunch but couldn't, it's also worth thinking about trying again, especially if your property is in a price bracket which would appeal to first time buyers. First time buyers, according to CML, tend to spend up to £150,000, but bear in mind, this includes London, so it's likely to be £150,000 to £250,000 in London and Home Counties and under the £100,000 mark everywhere else.

So Who Should Sell in 2014?

If you want to trade up and you don't have a big deposit, as long as you can afford mortgage rates of 5-7% over the next five years, then it's definitely worth thinking about trading up and taking advantage of the Help to Buy Scheme.

You can typically secure mortgage rates of 3% for Help to Buy on an new build, whereas the scheme for existing homes rates are around 5%.

You need to check what's happening market wise to make sure the 'pick up' reported in the media and house price surveys is actually happening in your area. Look on sold property prices on the likes of Rightmove and Mouse Price to see if properties are selling near to or for more than 2007 levels. If they are still selling for a lot less, talk to local agents who have sold properties similar to yours and see what prices they have secured.

If you are looking at trading down, then the most important thing is to move when it suits you. It may be that you have been stuck in a property you can't sell but are getting divorced and are desperate to move on. It may be that you are in debt or a member of the family hasn't been well and when these life events happen, it's more important to try and move on to a better place than worry about maximising your property's price or rushing into buying something which isn't right.

It will be difficult to find somewhere to live in most areas, as you will probably be competing with first time buyers who are after one and two bed properties.

Key steps you need to take if you are thinking of selling in 2014 are:-

1. Check on sold property price data to see what similar properties have been selling for
2. Talk to local agents who have sold properties similar to yours as to what price they are getting
3. Make sure you speak to a broker about financing your move and a local Help to Buy agent

Then, work out whether you should sell your property as a 'show home' or just as it is. Since the credit crunch, with such good mortgage rates with high deposits, people don't have the money (or time) to do up properties as much as before. Those that do want a wreck to do up are typically after a bargain price, so it's a good idea to chat to local agents about whether you sell the property without any work doing to it, or spending say 1% of the asking price painting and decorating so someone could 'move in' and start living there from day one.

What To Do If You Are Thinking of Buy to Let in 2014

If you are thinking about buying your first property to let or expanding your portfolio in 2014, you need to consider the tax implications of adding property to your wealth, then you need to work out the risks and rewards of buy to let investment, and finally, know your exit strategy.

Tax Implications of Adding Property to Your Wealth

You need to know that any property you add to your 'wealth' will be taxed. And the tax you pay won't just be the net income on rent or the capital gains on the property. It may be that the property income or capital gains adds so much to your wealth you end up paying more tax because you lose benefits.

For example, if you earn £50,000 and have kids who receive child benefit, then adding rental income to your property may well mean you lose the benefit. If you earn over £100,000, then the rules on personal tax allowances may mean you end up losing tax relief rather than benefiting from it.

Only a property tax expert can help you, so get started by reading our Buy to Let Tax Checklist.

Risks of Buy to Let

Many people get excited at the thought of buying another property, and there are plenty of newspaper reports around telling you it's a great idea. However, there aren't enough reports explaining the downsides of buy to let, so here's a list to make sure you know what you are up against:-

• Property prices can fall by up to 20% - so make sure you have a back-up plan if this happens.
• Rents can fall by up to 20% too - so make sure you are still cash flow positive in this case.
• You might have a low interest rate of around 2.5 to 3.5% but when interest rates rise, rates are likely to be around 5% long term and could reach 7%.
• Tenants might not pay their rent - have you savings to cover costs if this happens?
• Tenants can cause serious malicious damage to your home - make sure you reference tenants carefully, don't go for cheap options.

To cover yourself from the risks of buy to let, read our Buy to Let Insurance Checklist.

Know that if you invest in a property with a 75% loan to value mortgage, at rates of 5%, properly maintain it, then with the average 5.5% yield, your net income is likely to be zero. This is fine if you are investing for capital growth, but means you need a 7% plus average to secure an income or a lower loan to value such as 50%.

Rewards of Buy to Let

Although there are downsides to buy to let, there are upsides too. Capital growth, on average, is around 4-5% per year in most areas over time, so ideally, you want to buy a property where you can 'force' capital growth through renovation or adding space to give you an immediate uplift in value. In addition, if your rental income is 7% plus, then you are likely to make enough money to cover all your costs and net some extra cash.

For the future, property price increases are expected to be from 4 to 8% for 2014 and the same for 2016, so use these figure to work out what your property investment is likely to deliver over the next couple of years. To make sure you analyse any deals by using our checklists.

Your Exit Strategy

Finally, it's essential NOT to buy a property without knowing when and how you will exit from it. Working out if you need to pay off the mortgage and secure the income by the time you exit or if you want to sell up. In this case, you need to know the right time to sell without incurring a huge tax bill.