I intend to update this list to reflect the majority of the questions I am asked. Initially it is more a list of questions that I guess may be asked. Please do contact me directly if you have questions not on this list, and I’ll be happy to answer them and if appropriate include them in future.

What are the risks?

Property Market fall: If this occurred the investment would lose money. Only invest if you think property prices will rise in the long term.  

Gingerbread Homes failure: If Gingerbread Homes Ltd became unable to manage its commitments and broke the rental agreement, the owner(s) would have to decide whether to sell the property, manage it themselves or contract a traditional management company. In this event, the rent payments guaranteed by Gingerbread Homes Ltd might not be met. On the other hand, if this occurred some time into the term of the agreement it is possible that rents would have increased meaning that a greater return could be achieved.

Partner investor unable to honour commitments: If another investor were to become bankrupt, this could have implications for the mortgage. However, the mortgage can be paid directly from Gingerbread Homes Ltd under the terms of the rental agreement so personal insolvency wouldn’t necessarily mean that the mortgage fell into arrears.

What if I only want part of the service?

No problem. If you want us to provide you with a fully refurbished house ready for letting, or if you have a house and want Gingerbread Homes Ltd to manage it you can take either part without the other.

What has happened in the past?

There are excellent resources available from Nationwide on historical house price data: http://www.nationwide.co.uk/hpi/historical.htm

and historical reports on the housing market:

http://www.nationwide.co.uk/hpi/archive.htm

Won’t I benefit from higher property prices in the future anyway as I own my own home?

Well, yes and no. Future rises in the property market means that our homes are worth more, but unless we sell them that doesn’t help much – it just means that the gap to move to a bigger home gets larger. If you think that property values will rise in the long term and want to benefit from that, owning additional property is one way to achieve that.

What if I leave it for now?

We intend to continue to offer this opportunity. If you decide that you might be interested in the future but not now that’s fine – just let us know when you are. We see this as a good time to buy, but there will undoubtedly be other good times as markets constantly change. We will constantly monitor and adjust it to make sure this offers the best return it can, so some of the details may change but expect it to continue for the foreseeable future.

Why is it good to own property personally?

If you borrow the money to fund this property investment, from any source, Income Tax relief is available on the interest payments you make on that loan. So for example, if you borrow £50,000 at a rate of 5% to invest in property, those payments (£2,500 per annum) are treated as an expense set against an income of, say, £3,000. So you only pay tax on £500 per year, not £3,000. Once again, we emphasise that this is illustrative, please speak to a suitably qualified Chartered Tax Advisor or Accountant for advice on your personal situation!

The Capital Gains Tax changes this year represent a reduction for all higher rate tax-paying investors, and for most basic rate tax-paying investors where the capital gain would push them into higher rate tax. Under the new rules, investors will pay just 18% on capital gains above their Annual Exemption.

Finally, you own a property – it can’t be spirited away! It cannot be sold without your signature, so you know you have a tangible, bricks-and-mortar asset. You know which house you own, and are not in danger of a manager in a company changing, and making poor purchasing decisions.

What if I need to get my money back during the 5 year agreement?

Property is a long term investment, and you should only commit to it if you are sure you want to make such an investment. In the event of unforeseen circumstances it may be possible to sell part or all of your property to another investor, but you should not rely on this.

But rent will go up – why won’t I get increased income then?

The management charges to Gingerbread Homes Ltd are calculated to ensure that the balance of the rent paid after costs, mortgage payments and fees averages out at a competitive level over the 5 years. This means that the management fees in the early years are very low, and if this were the case throughout the contract the company would be permanently loss-making! Gingerbread Homes relies on rents increasing over time to break even over the course of the 5 years, and the increased margins in the later years pay for the very low margins in earlier years.