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Thursday, May 29, 2008

Margo Leadbetter says hello!!!

I have been asked by the nice men at Property Hawk to introduce myself with my first post.

Well hello landlords and property investors here I go.

I have been investing in property for over 10 years.

Initially I was a sleeves rolled up decorator / dogs-body / refurbishing nut who went on to build up a self-managed portfolio of rental property. Over the years I became weary of the day to day drudge of property management, the blocked toilet phone calls, the re-letting, re-painting, re-furbing grind of property management.

I had a landlord melt-down, moved to the country and handed my keys to a letting agent to fully manage.

Bliss............'You lucky b********* " I hear you shout.

Well yes, in the sense that property management is a lot less hassle if you don't have to do any ( I never see a tenant from moving in - to moving out - all they mean to me are number on a bank statement).

Far from bliss in terms of my bank balance and how much rental profit I make after the letting agent has failed to rent it, charged me the management fees and got an over priced electrician in to change a light bulb.

I will be reflecting on property management from both sides of the fence - with my pink marigolds on and off in as honest a way as possible.

Darling Margo

Wednesday, May 28, 2008


With yet another new piece of legislation looming and so many special offers the EPC (Energy Performance Certificate) is closing in on landlords. From October 1st 2008 all serious prospective tenants must be given a copy of the EPC either prior to or at the viewing of the property.

As a student landlord the logistics of handing out this piece of paper to any student who wants to view or is viewing a property could be potentially challenging.

Once properties are released around January 1st each year in our neck of the woods, students charge through available properties seeking the best accommodation in the area. Nearly all viewings by students are unaccompanied. The whole process from telephoning the landlord, contacting the existing tenants and viewing the property is pretty quick, often involving only a few hours or, in one case this year, a few minutes.

Student property details are published by letting agents and on County Council accreditation lists, so many students are now cold calling and missing out the contact with agent or private landlord. What if a student cold calls, without the landlord's knowledge and they didn't get an EPC?

The Government has not thought through very carefully the practicalities of this legislation. A better solution would be if an EPC were available for viewing only at the property by prospective tenants. They cannot take away a copy of the Landlord's Gas Certificate, Student Accreditation Certificate, PAT Certificate, 5 Year Electrical Certificate, Insurance Certificate etc, so why the need to take away an EPC?

When new tenants view their tenancy agreement and before signing, it is at this point that the EPC could be attached to the tenancy agreement. If the detail of the EPC, when viewed again, is a major priority for the student then it is not too late to back out before signing the contract.

Do you remember when school reports became more sophisticated? No longer just a grade C, but a long explanation on targets, ways to improve and progress. Despite this improvement to the report the parent usually looks at the grade first, not the comment. The EPC will go the same way. A much simpler solution would be to include an EPC rating in all written tenancy contracts. No written contract? Then provide a copy of the EPC before the tenancy begins.

EPC ratings are appearing in adverts - not yet compulsory. It's difficult to understand why a landlord would want to advertise that their property has an EPC rating of F, however a recent advert voluntarily displayed this information to all prospective tenants!

My solution is to leave a pile of certificates in the property and to ask the existing  tenants to offer serious prospective tenants a copy of the EPC at the time of viewing. Scanning the certificate, as an email attachment to prospective tenants is another way to be explored. Any other ideas out there?

Are landlords rushing out to upgrade their old gas boiler to improve their EPC rating? The EPC could potentially discourage landlords from making upgrades to their property. The certificate lasts for 10 years, however landlords will need a new certificate and further expense, every time they make a significant energy improvement.

The location of the property - nearness to shops, pubs, nightlife, bus stops and quality of furnishings and furniture will probably feature more highly in the student's list of priorities, rather than an EPC, for a long time to come.

Special offers? My Energy Assessor charges £75 including VAT for an EPC. Can anybody beat that?

Tuesday, May 27, 2008

Commercial Property Shares

Landlords of both residential and commercial property have been hit by a raft of bad news following the recent 'credit crunch'. Suddenly, after a decade long love afair with everything 'brick & mortars' investors have fallen out of love with this asset class.

Fall in commercial property
The fall in commercial property values has been particularly sharp as tightening credit conditions and a sudden loss of confidence has caused many investors and institutions to reappraise the market and resond by cutting their property holdings. Some property companies have been caught out having over paid during the 'boom' in commercial property values in the last couple of years. This boom ironically was fueled by investor demand and investment advisers readily 'pushed' property investments funds on the back of unrepeatable impressive past performance figures.

Property Leper funds
Now the same advisers with these funds and investment companies standing at often less than half their values at the peek of the boom are often cautioning their clients about going anywhere near these same investments. This to me as an investor seems strange, particularly when the fundementals of these investments are examined. At their peak many property investment funds were selling at a premium to the value of their underlying asset values and perhaps yielding a gross dividend yield (but unlike direct property ownership such as buy-to-let, net of management costs) of 4-5%. Now these same funds and companies are trading at significant discounts to their underlying asset values of 30-40% and have near or double digit yields.

Why the fall?
Property values have been falling there is no doubt about that. Commercial property is down about 20% since the 'credit crunch' and are likely to fall further. But values in property shares have fallen faster and more dramatically than the underlying value of their property assets. The reason for this is sentiment. Investors have fallen out of love with property and expect more falls and have priced these into the share price.

Is it time to invest in commercial property shares?
By instinct i am a counter intuitive investor. When the herd is going one way, i like to go the other. I did this very successfully in the early 90's when the whole world expected that the UK was going to be in for a decade of falling house prices. I ignored the crowd and pre buy-to-let started buying residential investment property. This proved to be a good long-term call. Now i am doing the same with commercial property shares.

Commercial property has some very attractive qualities for investors which i like. They have a constant revenue stream from rent. In the UK this generally rises because most commercial property is let on upward only leases which means rents can only rise, even during the bad times. Therefore, providing that these rents cover finance costs and dividends an investors income is fairly safe. Property shares also obviously have a strong asset backing.

Should a landlord be buying commercial property shares or residential invesment property?
A landlord who is considering whether to buy further residential property investments or shares in property companies may want to consider the current relative valuations. Buying a residential investment property the gross yield if they are lucky would be likely to be 6% and the net yield 5% and an investor is paying the full asset value unless they obtain a BMV property Landlords investing in commercial property shares could be buying shares at 30-40% discounts to net asset value and with dividend yields net of any management costs of 10%. Which is the more attractive investment?

I will be looking at some commercial property shares that might be worth a look over the forthcoming months. Mean while if landlords have any observations or ideas feel free to post them to the blog.

In the meantime landlords may want to look at the Income Monkey blog for previous suggestions

Saturday, May 24, 2008

What tenants want

Landlords need to understand what tenants want.
To this end I heartily recommend Rentergirl's blog at This award-winning blog chronicles the ups and (mainly) downs of renting in a new build development in Manchester.
A recent posting included the following insights into the mind of the tenant.

  • Kitchen/diners are logical, but could we have a separate lounge?

  • Could utility rooms be decreed compulsory?

  • A few inbuilt cupboards would change my life and rock my world.

  • Improved soundproofing, an end to communal post-rooms and secure main doors would be splendid

If I was looking at a buy-to-let property, especially in a new development, I'd think about those wishes. I'd rather have happy tenants who stay.