Colour Investments Property Investment

We are very pleased to release our first seed capital investment opportunity, a new type of asset class from Colour Investments.

We all know that we are currently in a buyer’s market in the UK where investors have the ability to negotiate terms, which we have not seen for years. Having said that we at Colour Investments feel there is significant value to diversification within your property portfolios, which is why we are introducing more and more investment opportunities this year both in terms of product location but also of asset class.

This deal represents a strategy that allows you a quick and defined exit from your investment in only 12 months, this is hard to find in today’s market but we believe that shows how strong this investment opportunity really is.

We are offering a limited number of registered investors the opportunity to participate in this deal, we only have a set amount of £5m to raise, so this is open to our investors on a first come, first served basis.

The later sections of this document will outline all of the due diligence and structure of this investment so that you can make a fully informed decision. Then all you have to do is decide how much you would like to invest.

With the current state of the UK residential market, it is quite easy to heap a lot of the blame on apparently overpriced new build properties. However, there are a few things to consider.

Firstly, the government still has a target to build around 3,000,000 new homes in the UK before 2020 (as per the recommendations of the Barker Report). This target is only going to be reached from the creation of new builds.

Secondly, it would seem as though the era of cheap credit, buy-to-flips, and, generally short-term property investments is truly over. As a result, people need to start realising that property investments should be a long term investment and this is where most of your value will be added.

What to do? Investors need to start going back to basics:

Net rents (after management fees etc) should exceed your mortgage repayments and still provide a decent buffer. Do your own research on the rental levels in the particular area you want to invest in. Achieving favourable mortgage terms may mean putting more money down as a deposit, however, this is clearly going to have its advantages.

Capital growth: ask yourself – ‘why do I believe that house prices in this area will go up in the long-term’ – if you can’t give a good answer, it probably means the opportunity is poor.

Exit strategy: perhaps the most important consideration. This is the only way an investor will realise their capital gains, so make sure you have one that is specific to your portfolio.

Emotions: if you are investing, then you should purely think of a property as a source of income or a means to achieve capital gains. Mixing emotions into the equation may be detrimental to your investments and investment strategy.

This may seem like general common sense, however, it is amazing how many investors do not abide by these basic principles. This is not a secret – it is a way that investors, such as myself, have a balanced portfolio that is fairly resistant to short-term fluctuations. One thing that is certain is that you do not need to attend a property investing seminar and pay ridiculous amounts of money to know this.

If you follow these steps, you will still see some very good deals in the market. And remember, it is always the right time for a good opportunity and it is never the right time for a bad one.

For specific advice, please contact us and speak to one of our Portfolio Managers.

This is our second release this week. We have been working really hard to release this new products… I am personally very proud of offering this new scheme in exclusivity.

Our newest addition to the apart-hotel range comes with a renewable 10 year rent guarantee at 7% yield. Located on the shores of the Red Sea with its own private beach less than 5 minutes from Sharm El Sheikh international airport and with up to 8 weeks personal usage per year this is not only a great investment but also a fantastic holiday destination. With a diving and aqua sports centre onsite this resort offers easy access to a host of water sports and diving activities in one of the greatest diving locations in the world. For those who prefer dry land there are tennis and squash courts, a health club, gym, beauty salon and shopping arcade.
Located in Sharks Bay, the resort consists of 720 rooms, chalets and villas many with sea and pool views as it is on the seafront with its own 500m private sandy beach. It has Italian, Asian, sea-food and international a la Carte restaurants on-site. Two outdoor swimming pools with artificial waves and a temperature controlled indoor pool. The hotel also contains a convention centre with the capacity to facilitate for up to 1000 delegates.

to learn more… www.colourcapital.com/palmbay

We are releasing a new type of asset class from Colour Investments – our first apart-hotel investment opportunity.
We all know that we are currently in a buyer’s market in the UK where investors have the ability to negotiate terms, which we have not seen for years. Having said that we at Colour Investments feel there is significant value to diversification within your property portfolios, which is why we are introducing more and more investment opportunities this year both in terms of product location but also of asset class. The new apart hotels that we will be showing you represent a completely different proposition and will add a rather colourful feather to your portfolio’s bow!
This asset class is very low maintenance & low risk whilst maximising growth and income through guaranteed rentals

My goodness, it’s been at least a couple of weeks since we had a Colour Investments prize giveaway. Let’s correct that right this minute. Anyone who registers on the website from the 20/05/2008 to the 31/07/08
will have the chance to win an iPod touch 16GB. and it is absolutely free…

This is our latest French leaseback… and probably one of our personal favorite to date. This is a Zero stress investment with fully managed properties in the South of Paris 5% GUARANTEE FOR 11 YEARS

THE GOLF COURSE WAS DESIGNED BY JACK NICKLAUSS

Ideally overlooking a wonderfully designed by Marc Adam and Jack Nicklauss golf course, the development is within easy reach from the centre of Paris. Adjacent to an authentic 14th century castle that has recently completed an extensive renovation, the property will offer guests every luxury service.

WITH A PANORAMIC VIEW ON THE GOLF COURSE, ONE OF THE JEWELS OF THE FRENCH ROUTE…

It is a major new leaseback development that is to be constructed in the exceptional domain of Cely. The development offers a 10-year construction warranty. Also, as part of the leaseback scheme, your property will be fully maintained throughout the lease period by the management company, at their expense.

On the edge of the very famous Fontainebleau forest the Cély Golf & Country Club, is one of the most magnificent golf courses in France. Often welcoming the Women’s World Championships, the course surrounds a magnificent 14th Century castle.

The ban of the title deed act has now been lifted by a new court ruling on May 1st. The deed system change will be effective within the next few weeks once the official gazette will publish the news. What prompted this action was a constitutional rights contrary that affected article 35 of the Tapu title deed act.
The deed system change will be effective within the next few weeks once the official gazette will publish the news. What prompted this action was a constitutional rights contrary that affected article 35 of the Tapu title deed act.

The new legislation governs that non Turkish nationals can only purchase 10% of a total area covered by a local planning zone in any town. This differs from the original act which allowed foreigners to purchase 0.5% of the total land area of a province, opposed to a single town.
This is excellent news giving the booming potential of the Turkish market. More properties in Turkey will come available soon through Colour Investments.

The credit crunch has ushered in a new era of property investment. As little as 18 months ago, any sort of investor could take advantage of property deals such as ‘no-money in’ or buying to ‘flip’. These investment strategies took advantage of the fact that UK property had good short-term growth and credit was cheap.

However, in the current investment environment credit has dried up. Although we are on a decreasing interest rate trend, lenders are not so keen to pass on cheaper finance to borrowers – partly because they are keen to make up for the losses that many of them made as a result of the credit crunch.

Does this mean that it is a bad time to invest in the UK? On the contrary, it would seem that we are in a buyer’s market at the moment: it would appear that we are experiencing more supply than demand at the moment, putting the power into buyer’s hands. Buyers are in a position to negotiate the best terms for themselves, whereas 18 months ago, sellers were in a position where they could wait for a buyer to match or exceed their asking price.

Property investors could take advantage of our current environment by exploring the possibilities of purchasing off-plan. Off-plan has the advantage that you are buying at a discount from today’s prices, but, you are buying into tomorrow’s market (i.e. the market of when the property completes).

Looking back to the infamous house price crash of the early 1990s and the economic fundamentals: at the time interest rates were around 15%; inflation was around 10% and unemployment was approximately 4 million people. If we look at the situation today, interest rates are currently 5%, inflation is around 3% and unemployment is near record lows at approximately 1 million people.

It is interesting to see that house prices after the 1990s crash were higher than house prices before the crash. This shows us the value of looking at the long term. The important thing to note is that by taking a long term view, investors are mitigating themselves from short-term fluctuations in the market (such as the credit crunch). Combine this with the fact that it is a buyer’s market at the moment, it would seem that now is the ideal time for an investor to add to their property investment portfolio.

There has been a definitive change in the buy-to-let market conditions. This is due to the tapering of lending products caused by the turbulence of high-risk lending over the last five years. However, it is not a time to necessarily worry about property investment. In fact, if you are a scrupulous landlord and have balanced your portfolio correctly, this is exactly where an experienced investor has the opportunity to take advantage of a tumultuous market. Effectively there are two main concerns to consider firstly what considerations to take on board regarding your present portfolio and secondly how to add to that portfolio:

1) What to do with your present portfolio of properties (if you have any)
It is 100% a buyer’s market out there at the moment. On that basis it’s not a great time to sell and undoubtedly, bar a few isolated city centre areas, it is advisable to hold on to your property. As a long term appreciating asset property will always go up and as long as your properties are balancing in terms of mortgage payments vs. rental income it is the best idea do keep hold of them. However, if you are in a situation where it is necessary to re-mortgage and you really cannot find a rate to keep your books balanced it may be time to consider cutting certain losses and cashing in on investment in order to facilitate other acquisitions.

2) How to expand your property portfolio
Simply, ‘cash is king.’ The market is extremely edgy and many vendors that have been on the market for a while or new build developers are offering extremely good discounts. For instance take our BBC site which is due for official release by estate agents on the 24th April, 2008. We have a 8% pre-release discount which in a different market would be unheard of. On this basis if you are buying you have the leverage to buy with a good solid discount from market value.

Paragon Mortgages (who specialize in Buy-to-let mortgages) have quoted a 2.4% rise in rental income over the month of February. With lots of 1st time buyers renting instead, the demand is now outweighing the supply for properties and therefore rents are on the way up. Therefore hold onto your present portfolio and buy only reputable city centre areas that will rent easily and cover your repayments. This strategy will give the landlord the reigns in what some people may consider to be a unstable market .

In very simple terms we are very positive about the long term prospects of buying in the UK for investment purposes. The key is “strategy” and making sure you can ride out any slowdown in growth in the UK and still rent your property out meaning you can leave your asset to sit there and make you money over the next 10 years. We are currently in a “buyers market” in the UK and as buyers we are seeing some fantastic deals coming to the table from developers which we are now able to offer you.

Here are some of the main factors to look at when considering UK property as a long term investment at the moment, I have listed some positives and some negatives to give as informed view as possible so you can make your own minds up:

Positives:
• Supply vs Demand imbalance (50,000-80,000 homes shortfall per year and the situation is worsening)
• Increasing population & increasing number of immigrants from new EU nations
• Reducing unemployment & Increasing employment
• Shortage of building – reduced building in 2008 exemplified by the difficulty for developers to raise finance
• Land shortage especially in city center locations, most noticeable in London
• Planning back-log, time taken and costs for planning consent
• GDP remains a healthy 2% (3+% in London)
• Interest rates coming down - I predict another .25% drop by May time due to remarkable low inflation.
• Aspirations for owning a home coupled with massive overseas investment from the likes of UAE, Dubai, Russia e.t.c.
• HIPs (Home Information Packs) discourage people from moving causing supply shortage
• High stamp duty discourages people from moving causing supply shortage
• Lots of people buying a second home to live in and letting out their old home, causing further supply shortages
• Buy to let investors show no signs of slowing up and in fact are buying now more than ever in this buyers market
• Revised 18% capital gains tax down from 40% improves the incentive to purchase property for investors
• Rents rising by 10% per annum – rental property market remains firm so buy to let investors are enjoying low risk investments

Negatives:
• Price to earnings high at ca. 10 (long term average 6)
• Inflation remains an unknown quantity as interest rates could rise in the long term if oil prices increase dramatically
• Credit crunch reduces borrowing for people with poor credit rating effectively making the rich even richer
• Average wage earner finds it hard to borrow enough to buy a house
• Increase difficulty in getting mortgages and banks holding higher rates because of credit crunch

Most of the above bullet points that I have mentioned are some of the reasons why we don’t expect a “property crash”. A slow down in growth is certainly on the cards and apparent in some areas already in the UK, but as we are buyers acting for our investors we actually see this as an opportunity to get some great bargains this year as every other less sophisticated investors panic over what they read in the papers. There are no headlines like “Long term property investment is stable” that are going to sell newspapers, whereas “Property Crash” will sell millions of papers. So we also feel the frustrations that Gordon Brown has with the current media situation and feel they are partly to blame for the current market sentiment by all of the un-balanced headlines they keep printing. And as we all know people (sadly) believe things that they read.

The credit crunch will certainly make it harder for “sub prime”/less creditworthy buyers to enter the market as the mortgage companies are tightening up their criteria for lending. I think this is a good thing and could have come sooner as the banks have been lending to anyone and everyone. Going forward I think the mortgage products will start coming back to the market more and more this year albeit more cautiously and the long term effects on property will be minimal when we look back in 10 years time.

Concluding comments:

All of that being said we need to be diligent when investing at the moment by considering the best mortgage product and gearing situation as well as buying smart and BMV (Below Market Value) to gain an extra buffer to the market. We are looking forward to the remainder of 2008 and the types of deal we will be able to offer you as well as other excellent property investment opportunities overseas to give you some fantastic diversification to your property investment portfolios.

Nick Wallwork
- MD Colour Group

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