Thursday, October 30, 2008
Like a hibernating animal they have gorged themselves during the previous months on big fat commissions.
However this year is different and going into their hibernation period they are looking fairly gaunt already.
Estate agents will look to cut costs and one outcome of this will be that many of them will avoid paying out subscriptions to multiple search engines. The logic will dictate that they will continue with the largest and most popular site, Rightmove.co.uk , and cut back on the others, such as Prime Location.
For landlords and property investors, all properties under one site would be helpful and save the time involved in going from site to site.
Is this a rare time when a monopoly is beneficial to a customer?
I never subscribed to the concept of luxury apartments.
To my mind luxury really means "over priced" just in the same way "NEW" really means - the same old rubbish repackaged.
With this in mind and with the harsh winds of global recession blowing all around landlords need to cut their cloth. I have a come across a couple of websites that offer landlords some real bargains in fixtures and fittings and a fraction of the price of so called luxury brands.
There is the world famous purveyor of designer Scandinavian thrift IKEA that have recently expanded into online retailing. There is also the Norths greatest kept secret Wilkinsons. This is a place where every self respecting landlord should be well acquainted with. Good old Wilkos has now moved their retail operations into the virtual cyberspace inter web world.
With these potential bargains all available at a click of a mouse. Landlords should be able to shave a few valuable pennys of their costs.
Wednesday, October 29, 2008
Bitwix recommended Renter Girl’s blog back in May 2008.
Property Sparrow wants to add that Renter Girl’s recent posts about her landlord, William, are particularly poignant. A close reflection of a number of comments made on these pages in the last month or so, particularly those about the problems in city centre apartments.
See today’s post, also published in The Guardian and her recent entries earlier this month.
I read with interest this blog in the Mail
It implied that the so called king and queen of buy-to-let Judith and Fergus Wilson both maths teachers were falling on hard times because of the credit crunch and were having to sell up their portfolio of over 900 houses worth at one stage as much as £250m.
However, on closer inspection of the original article
it appears that they are not forced sellers at all. They are both in their 60's and have identified 18 properties who's 5 year fixed rate mortgages of 4.5% have come to an end and are looking at benefiting from the recent reduction in capital gains tax from a maximum rate of 40 to a flat rate of 18%.
It appears that the Wilsons are far from being on 'their uppers' having a personal fortune estimated at £90m. They very sensibly bought new houses in a growth area and avoided investing in city centre apartments.
'All our properties are houses, with a bit of grass and parking,' says Fergus. The starter home market was always their exit strategy and first-timers would overwhelmingly prefer a house to a flat. 'You cannot get people to buy jam tarts if they want cream doughnuts,' adds Fergus with a Forrest Gump flourish.
Wise advice Fergus! Despite the credit crunch and maybe a downsizing of their £90m fortune as house prices continue to dive. One suspects that the king and queen of buy-to-let will be able to afford to buy the best quality cream doughnuts and what ever fondant they fancy for a long time to come!
Tuesday, October 28, 2008
The National Landlords Association (NLA) and the Association of Residential Letting Agents (ARLA) which represent over 23,500 landlords and letting agent offices - a little less than Property Hawk's membership of over 25,000 we would point out; have apparently joined together to roundly condemn any practices which ridicule and humiliate tenants.
How 'Nice' we say at Property Hawk.
The NLA seems to be joining up with everybody these days including the NFRL. Unfortunately, in this case they forgot to ask the 6,000 membership of the NFRL and infact tell the unsuspecting President Mike Stimpson of their plans.
Their most recent joint wheeze is apparently lambasting a letting agent who has started erecting signs on the properties of tenants who have failed to pay their rent.
We rather like the idea. What do you think any interesting suggestions on encouraging tenants to pay the rent? How about putting them in the stocks and giving them a good flogging!
Monday, October 27, 2008
Is it me, or are people happier post credit crunch?
It seems as if the onset of a recession has cheered everybody up.
Society seems to be wallowing in it's new found poverty.
Bring on full on financial depression, and let's have a street party.
Landlords are breaking out in song and raising glasses to property price falls.
The British relish hardship.
Sheltering landlords, whilst the cold credit winds blow.
Your darling Margo
Struggling landlords need to cut down on costs like BTL mortgage payments and landlord insurance.
Property Sparrow is delighted to report that this morning the hedge that she has been so bothered about for months has been pruned. Delighted and not in the slightest bit bothered about how trivial some readers may find this piece of news.
The whole building, an Edwardian villa that would have been stunning in its heyday, looks so much better and as if someone cares about it.
It turns out that there has been a change of freeholder and Property Sparrow was flabbergasted to receive a phonecall from him introducing himself and phoning her to say that the hedge has been cut down, that there are photos of it and were there any other problems with the building that he could help with?
Another little problem solved. The secret of getting things done is to act, as you might say.
This to me makes sense - when you can't trust the banks, valuations on stock markets no longer make sense and billions can be wiped off the value of companies because a trader manages to spread rumours about the financial strength of a particular sector- who do you trust? Shares in some companies will inevitably end up the hands of vulture funds leaving many investors out of pocket whilst banks will know doubt seize the undervalued assets in many of these companies at an opportune time.
This brings me back to the real value of residential investment property. Whilst values are falling and will do so for some time, the facts remains that once a landlord has secured a good investment their destiny is in their hands. They are not in the hands of crooked bankers, incompetent and ineffectual politicians and regulators. As long as a landlord services their buy-to-let mortgage then lenders will keep their distance and allow a landlord to carry out running their business in good times and bad.
This probably explains why estate agents have identified a growth in interest from cash buyers, who want something tangible for their money rather than depositing it with banks they no longer trust. The trend is emerging in all corners of the property market, according to one nationwide agent, from high-end mews houses in Knightsbridge to dilapidated two-up two-downs in the East Midlands. Lindsay Cuthill, head of the southwest London office of Savills estate agents, said:
“Ten days ago a wealthy, well-known businessman seeking to buy a mews in Chelsea told me, ‘I feel my money is safer here than in the banks’.”
Robert Billson, head of Savills in Nottingham, said: “There are people with £50,000 who would rather buy a derelict house and board it up for a while than put their money in an Icelandic bank right now.”
Buyers with cash are in a stronger position to negotiate price reductions than those who need mortgages.
Mark Dampier, head of research at Hargreaves Lansdown, an independent financial adviser, said: “With property, you can feel it, touch it, see it and live in it – you know it cannot be taken, so there is some degree of logic to buying now as opposed to depositing in banks if you have the money, although it might all end in tears.”
I agree with Mark's sentiment. Sometimes the only person you can trust is yourself!
Sunday, October 26, 2008
Landlords could be expected to have a license if the government follows the recommendations of a recently published report by Julie Rugg and David Rhodes of the University of York, commissioned by the government in January 2008.
The report suggests that all private residential landlords should acquire a 'landlord license' before renting to tenants.
This government loves regulations, statistics ( usually incorrect - see yesterdays violent creme stats ) and Id cards.
We've already suffered the implementation of the tenancy deposit scheme, the pointless Energy Performance Certificates ( even an EPC inspector said to me ' well to you there just another piece of paper ') and now we need a license.
What will be the next great idea?
How about a 'landlord test'?
"Can you just show me how you would place an advert in the local paper. Very good. Could you now proceed to the sink and show me how you would look to unblock the plug hole. Very good! Now can you explain to me how you would deal with a tenant who plays his guitar too loud and annoys the other tenants. Very good!"
" Well you'll be glad to hear that you've past. Can you just make sure you where this 'Provisional landlord' sign on your back for the next twelve months whenever you are dealing with a tenant."
"And repeat after me. I swear my allegiance to Private Sector Renting, and will uphold the honour of landlords at all times, I will treat all tenants in a professional manner."
Friday, October 24, 2008
I am a great believer in order, patterns, symmetry. If one looks around nature is full of the most wonderful balance structures and you know it comes down to figures. One of my favourite is 10.
More specifically 10%. Why?
If somebody presents me an investment opportunity yielding 10% then instinctively I know that this is a good deal. It is not ridiculously high. If somebody offers to make you 30% in a year, I think straight away - high return yes, but this must come with a high risk. 10% is neither massively high return but it is also a good return given the opportunity cost of capital.
Where do professional landlords go for landlord insurance?
The heartening thing about the turmoil in the capital and property markets is that we are rapidly approaching a time when a 10% yield on residential investment property is achievable. One only has to look at website such as www.propertysnake.co.uk to see that the speed of fall of property prices could see a 10% gross yield on some investment property.
I have myself been awoken from my investment slumber by an opportunity in my manor. Priced at £67500 this 2 bed house should be able to generate £450 month rent or £5400 pa. Therefore, if I can knock just over £10k of the asking price, I'll be in sight of the mythical 10%. If the vendor doesn't play ball.........I can wait, no rush. So landlords and investors keep your eye open for the 10% yield, then you can be certain you've got a nice stable long-term property investment.
Thursday, October 23, 2008
Following on from all the negative news on Buy-to-let for landlords finally there is a chink of light in the distance.
This article from Reuters starts to see a glimmer in the darkness. The truth is that Buy-to-Let as we've known it over the past five years is dead. But the return of the original rental business models built on yield is coming back.
For the last few years ( I will call these the "Bubble time" the business model has been based of glitter and fairy dust.
As property prices continue to fall, and rents potentially start to push forward then real investment opportunities could be presented to landlords.
My advice to landlords is, that it soon might be time to start digging for an opportunity, but as before the "Bubble time", it will involve some hard graft and not a sprinkle of fairy dust.
Being a landlord was never supposed to be easy.
The likes of Grant Bovey and the fairy dust landlords have poofed into thin air.
Read Reuters article
Bringing landlords warmth in a cold climate
Your darling Margo
In fact the other night I was filling out the LOANS details on Property Hawks FREE property manager inputting the latest buy-to-let mortgage reductions notified by my various buy-to-let lenders. It bought a rare uplift after all the bad news in the financial and property markets to see that my rental profits will be going up before Xmas.
The following day I was greeted by an interview on BBC Radio 4
Andrew Bell of Rensburg Sheppards who was talking about rates of 3% during next year.
Roger Bootle of Capital Economics known for his slightly headline catching predictions has suggested rates need to fall as low as 1%.
This made me salivate at the thought of further falls on my interest rate charges on my base rate tracker mortgages.
The only fly in the ointment for landlords looking for a new buy-to-let mortgage is that money market rates, LIBOR remains stubbornly high at over 2% way way above the long term average of 0.09%. Until this comes down borrowing rates on new buy-to-let mortgages will remain high.
Find out how the under cover landlord found his buy-to-let mortgage.
Wednesday, October 22, 2008
1) The speed they are getting is nowhere near the promised 8mb - in fact it's terribly slow. Worse, sometimes they have just paid for an "upgrade" and not only is it now not any faster, the connection keeps dropping!
2)They are a landlord with houses in multiple occupation and the connection seems terribly unstable - especially when more than one user is online at the same time.
Luckily there are some simple things which they can do to improve things.
No1 - the speed issue
This problem relates directly to how far away you are from your telephone exchange - the further away it is the slower the speed that your line can take. Changing your broadband supplier will have no effect on this and what is more there is absolutely nothing either you or they can do about it. To make matters worse, if your line speed is less than 2mb it quite often causes stability problems if you try to push an ADSL Max 8mb service down it. The reason people tend to get so frustrated is that the customer rep on the end of the line is extremely unlikely to explain this to you when telling you about the new super dooper high speed service they are trying to sell you.
So what can you do about it?
The truth of the matter is that human reactions aren't anywhere near as fast as computers so if you are able to get over 2 mb then for most things you would actually notice very little difference even if your connection speed improved. Given that the problem is with the physical lines into your house the best advice is just to check your line speed and make sure that you are not paying over the odds for anything more than you can actually get. NSP Utility Consultants will conduct a basic line test free of charge - just contact us and ask click here for contact details
It is also possible that some of the problem relates to your own hardware. Interference on the line can dramatically reduce your perceived speed and stability regardless of what a basic line speed test will tell you. A common problem is not having filters on every BT socket - you need one on every socket in the house even if you don't normally use them! You should also bear in mind that the filter supplied by your ISP is not necessarily of the highest quality. Sometimes simply changing to a better one can make a significant difference.
No 2 - multiple users causing the system to crash
This problem is unfortunately widespread. Domestic broadband is normally supplied using fairly high contention ratios - ie lots of subscribers share the same line/equipment etc. This is why almost all services seem to slow down at certain times of the day. AOL users for example can always tell when America wakes up! If, in addition to this, you have 4 or more users in a single house using the internet at the same time then the problem is multiplied and it is not uncommon for people to experience either very slow speeds or the connection dropping completely. For those HMO landlords wanting to offer broadband access as part of an executive or student let the administrational problems caused by unstable or very slow broadband can be extremely stressful. I spoke to one landlord whose tenants had got together and were ALL withholding the rent until she had the problem sorted!
So what can you do about it?
Traditionally multi user customers like businesses subscribe to dedicated business broadband services which have much lower contention ratios and are designed to handle high traffic volumes for a single address. Until recently the problem with this for very small businesses(or high volume domestic users, like landlords with multiple tenants) has been that these services come with a high price tag and cannot be connected to a domestic rated phone line.
Fortunately, Pipex, one of the first broadband supplier to specialise in the business market is now offering cost effective wireless business broadband which can be connected to domestic phone lines. This package is primarily designed for very small businesses running from home but can be equally useful for the high volume domestic user such as HMO's. In fact for domestic users it has the additional advantage that the time of heaviest traffic is 9am-5pm rather than in the evening when you are at home and wanting to get online.
Check it out at www.broadband4bis.co.uk
Even better they are now offering a very inexpensive set up service - which could be a real bonus if you don't happen to be a technical whizz yourself :)
Tuesday, October 21, 2008
In Part 2, we're going to be looking at areas that we need to maintain.
- Rents. Its crucial to ensure that all of your properties are full in time for Christmas. There are very few people who move in December unless they have to so start thinking today about what may become vacant and get marketing! I know some landlords who have empty properties and have done so for months on end! It just isn't sound business practice to keep them empty and by having them lived in, you will also prolong the lifespan of the building (there's nothing worse than a cold damp house). So, focus on keeping your properties rented - if you are not getting the calls, drop the rent. If you are getting the viewings but no takers, do a quick decoration, put some pictures up, make it homely - get it rented! After all, its better to get £50 a month less rent than have it empty for just one month.
- Structure. When the winter months come, its time to make sure your properties are sound and any maintenance issues are resolved. Check things such as central heating system, radiators, pipes, roof, guttering and facia boards. Make sure you have a rolling programme to tackle any issues and get them fixed fast. You can never account for everything but at least if you plan ahead, you won't have as many surprises. This is also an excellent time for inside jobs, redecoration, fixing those little things that never work etc.
- Marketing. This is the time when a lot of investors who previously have done lots of marketing for properties stop. And by marketing, I don't just mean leaflets and newspaper advertising; I'm also covering the wider schemes of estate agents, direct mail, property sourcers, personal contacts, property portals and such like. You should never stop marketing for either new property or new tenants. Build a waiting list of deals to look at or tenants to show around and you will quickly find that you have more than enough to take up your time on a daily basis. If marketing is a cost that is becoming too much, try doing co-operative ventures with other investors but don't stop. The cost is far greater than you will realise and you'll need to spend double to get back to where you where before you stopped.
Next time, I'll focus on the next three steps which is all about Growing.
For more strategies and guides to building a cashflow positive portfolio, visit my website at www.yourhmoexpert.com
My concern is many small landlords are putting their heads in the sand hoping this crisis will blow away. But it wont!
Struggling landlords need to cut down on costs like BTL mortgage payments and landlord insurance.
Don't be an ostrich. Landlords should look to sort out their finances before its too late.
Your darling Margo
This has lead many southern landlords and property investors North.
These landlords have been encouraged up the M1, to invest in towns and areas that many of them had never previously visited, or in some occasions never actually heard of.
It was like a summer migration for property investors lead by property agents pushing supposed BMV property deals. Some of these landlords and investors have done well on capital growth. But for those who got in late there could be a nasty sting in the tail.
Historically, those areas and properties that are most resistance to initial property price increases are often the ones that react most negatively to property crashes. ie, They drop the most and recover last.
It makes simple logic. If a property only goes up because people were unable to afford other properties or more desirable areas because of high house prices, it's probably not the most charming of properties or prosperous of areas.
When house prices fall, demand drops and those less desirable areas suffer the most with house price falls.
As the better areas become more affordable with falling house prices, those neglected areas will be pushed further and further down a home-buyers shopping list.
Some places are cheap for a reason, and over the coming years some unfortunate Southern investors might find that their 'cheap bricks and mortar' investment might not be such a bargain.
If the recession bites hard, which it could do, and I mean very hard, we could see the return of the 'buy a street ' for £500.
"It's grim up north!"
PS As a northerner - don't start.
Where do professional landlords go for landlords insurance?
Monday, October 20, 2008
In basic terms landlords who have bought property investments in the last few years at 75% or above LTV have their backs against the wall.
Good luck landlords.
Your darling Margo
It strikes me as a very fair assessment of the current situation in city centre apartment analysis.
As we have warned landlords all along, city centre apartments did not make sense as an investment opportunity. Firstly because traditional rental yields were way too low and secondly because supply was out-stripping demand.
We have real sympathy here at Property Hawk for poor landlords and investors who have fallen into this investment scam ( see more in Spectator article. )
Further analysis and an update on BTL mortgages in this citywire article.
Landlords should note the image of a stack of playing cards, how metaphorical. Yaawwwwnnn!
Landlords can manage! For those landlords struggling - "better to have tried and failed to not of tried at all".
If the 'gloaters' are getting you down - I'm here to help you through the bad times. Share your thoughts and vent your frustrations.
Landlords are in this together - the good times and the bad.
Your darling Margo.
Try our BTL multi enquiry form that goes to four of the major BTL mortgage brokers.
Last week I talked about the !)% rule to save some tax. This week i'm going to touch on the "RENEWALS BASIS" method.
'What is the 'renewals basis' method?'
The renewals method allows you to offset the cost of 'renewing' or 'replacing' an item in a property.
This replacement method can be used for a fully furnished property, an unfurnished property' or even a partly furnished property.
Unlike the 10% wear and tear allowance, there are no restrictions as to when this rule can be used.
However, there are some important points of which you should be aware if you decide to use this method.
a) You cannot offset the initial cost of an item! This is a VERY IMPORTANT point, which many landlords get caught out with.
If you purchase a property and decide to fully furnish it with new or even second-hand items, then you CANNOT offset the cost of providing these furnishings.
You can only offset the costs of these furnishings when you come to RENEW them!
b) If you use this allowance, then it MUST be used for the duration of the property ownership.
You cannot move to the 10% wear and tear allowance at a later date.
How to decide which method to use?
There are a number of factors you should consider before deciding whether to use the 'renewals basis' or the '10% wear and tear' allowance.
These are outlined below.
a) Furnished, unfurnished, or partly furnished? Remember, you can only use the 10% wear and tear rule for a fully furnished property! The 'renewals basis' can be used for an unfurnished, partly furnished, or even a fully furnished property.
b) Consider the cost of fully furnishing a property! If you are buying a property and are going to let it out fully furnished, then you MUST consider the costs you are going to incur in initially furnishing it.
If the cost is going to be high, then it may be better use the 10% wear and tear allowance.
This is because of the following.
You will be providing high-quality furnishings and will not expect to replace them for a good few years, i.e., 5-7 years.Therefore you will have to wait this period of time before you can claim the 'renewals' basis.
If you decide to sell the property before you renew the furnishings, then by using the 'renewal basis,' you will not have managed to offset any renewals cost at all against your property. However, if you use the '10% wear and tear allowance,' then you can claim this from the date you purchased the property.
c) Consider how often you will need to replace the furnishings.
If you believe that you will need to renew them on a regular basis, i.e., 2-3 years, then it may well be beneficial to use the 'renewals basis.'
This may particularly be the case if you are providing accommodation to students.
If you don't expect to replace it for at least 5 years, then the '10% wear and tear' rule may be more suited.
d) Consider when you plan to sell.
If you plan to sell the property quickly, i.e., in less than five years, then it is extremely unlikely that you will want to by new furniture.
Again, you might be best suited to opt for the 10% wear and tear method.
I hope you found this brief outline useful.
Saving tax could not be easier!
So, happy investing, and watch this space for some more interesting property tax-related services coming soon.
If you have any questions on this or any other tax-savings methods, please email me at firstname.lastname@example.org
Have you got your EPC yet?
Have you got it in your hot little hand? Safely filed until 2018? Property Sparrow is embarrassed to say that she hasn’t.
She ordered one on 17 September in time for a new tenancy, duly sent off her cheque and filled in the company’s form with all the details of the address and told them to borrow the key from her Lettings Agent. A month later she is still waiting to receive the certificate.
Without thinking about it very hard, she ordered an EPC from a company who describe themselves as ‘providing a local solution’ and who have received ‘excellent customer feedback.’ She should have realised that these claims were not quite right when she received a letter from the company asking her to forward a cheque in advance of the survey. She rang to tell them that she’d already sent one but had not received a receipt. Their letter contained spelling mistakes in the first two lines of her home address and, more importantly, another spelling mistake in the first line of the address to be surveyed.
Three days later she got home from work to a message on 1571 at 11.09AM from Richard: ‘I am standing outside your property. Are you coming round with the key? It’s your EPC.’ Property Sparrow finds this sort of thing very irritating.
Property Sparrow’s Lettings Agency has told her that in the end Richard did turn up at their office and as far as they are concerned the EPC survey has been done.
She then expected to receive a couple of copies of the certificate in the post and would have been quite happy filing one and sending the other off to her Lettings Agency to give to the new tenant. Perhaps she expects too much.
On 13 October she rang the EPC company again to find out where it is. She enjoyed an argument with Christine who insisted on using Property Sparrow’s first name over and over again. Christine attempted to explain that the company has an online system and so what Property Sparrow should have done is accessed the system and printed off her own certificate. Property Sparrow told her that she hadn’t been told how and when to do this, that she couldn’t be bothered to get the certificate this way and even if she wanted to print it off herself she had no idea what password to use. She asked Christine to simply print off a couple of copies and post them. Christine said she couldn’t possibly do this as if clients want ‘hard copies of the certificate’ their arrangements are to send them off to be printed and bound and this would cost Property Sparrow £15.75, payable in advance.
She is still waiting for the post and the password.
Property Sparrow’s solution: bring back pigeon post and use it in your little battles. In 1815 Nathan Rothschild made a killing on the stockmarket when a pigeon brought him early news of Napoleon’s defeat. Used for centuries as an efficient, cheap, environmentally friendly and reliable means of sending documents from one person to another. Ideal for EPCs.
I was in Canary Wharf at the weekend staying at a friends apartment. The site of the banking collapse and the ex - home of Lehmann Brothers.
I haven't been there for a number of years. I was shocked by the enormous amount of apartment towers in the process of been built. Gigantic structures waiting to be purchased by unsuspecting foreign investors.
These enormous glass towers were set to be filled by the growing influx of bankers and financial professionals set to inhabit the ever more successful global financial centre. Sorry, stop giggling at the back!
I guess you would call them 'yuppies.' As with the last property crash many investors lost their shirts, especially in Canary Wharf, which stayed pitiful and crest fallen for a number of years.
OOOPS! We've done it again.
I remember Canary Wharf falling on hard times in the last property crash. The post modern yuppie pads were left empty, the black leather settees and black ash cabinets were re-possessed and re-loaded onto vans.
The party came to a end.
But this time it's different!
The settees are in brown leather and the cabinets are in a light beech veneer. Society moves on - but maybe not as much as we think.
As a property investor I will be doing my research and waiting for the property market to hit bottom in Canary Wharf. I think it potentially has a very long way to fall due to the over supply.
However when the economy recovers, it could potentially be a great opportunity for capital growth.
But for now, what do they say ' don't try to catch a falling knife', because as with the last property bubble Canary Wharf could face the biggest pop.
Saturday, October 18, 2008
Surely though, if they slash their prices by this much it'll have this effect...
- Property prices on average will fall...
- More people will fall in to negative equity...
- More people will have their homes reposessed which will then be put back on to the market and bought by investors for a lower value seeing the money lenders make a loss...
- They'll then try and buy one of these lower value homes but won't be able to buy because those very banks are too scared to lend the money and prices continue to fall...
- Erm? Am I right/wrong?
Surely the answer needs to come from higher powers such as the Chancellor/Priminister so that businesses like Bellway don't need to cut their prices by this much? (Although I do agree that the government have tried and the banks aren't passing on the good will...)
I know it sounds like i'm supporting capitalism but Bellway are just one firm. I know they make ridiculous profits but hey, they are a successful, reputable firm and they are merely providing what people demand, like any successful business. If they weren't, they wouldn't be in business.
But if prices are slashed by this much, the equity that everyone uses to leverage more transactions will slump and we'll end up in a deep recession as the value of all products & services slump drops and no money is changing hands.
Can prices can only go so low before everything becomes worthless?
My rents keep been chipped away. Each new tenancy seems to bring a reduction in the rental amount.
I have a two bed apartment in one of the few, nice suburbs of Nottingham.
This two bed apartment is in a victorian conversion and in a great location. ( not a city centre shoebox)
When I originally refurbished it 9-10 years ago I got a rental amount of £495. Yes at this time it was shiny and new and looked very smart, admittedly.
I had only payed about £40,000 for it so the yield was very healthy ( remember the days fellow landlords - ahhhh bliss - anyway back to the post ) .
The rental amount on this flat rose to £550 over the following years.
However in the past four years I have seen a gradual chipping away with each new tenancy to meet the market demand.
You see I'm a landlord who doesn't like an empty flat - you know "a tenant in the hand is worth more than two tenants in the bush ", sorry I'm blushing. Moving on!
As a landlord the word 'void' is like a dagger in the heart and to be avoided at all cost, a landlord could wait forever for the tenant that lays the golden egg. Unlike this lucky landlord.
So I always try to 'get them filled' as quickly as possible.
I've just received an email from the letting agent suggesting a reduction in advertised rent down to £475 to secure a tenant, as it has sat empty for the past few weeks.
This decline in rent has been caused by the over supply in new build apartments largely focused in the city centre, but the ripple effect seems to be spreading to the suburbs, and could soon be spreading to other property types and not just two and one bed apartments.
As recession hits house renters will be looking for a bargain to save cash and with all those cheap apartments to rent it could bring the whole rental market down.
Your darling Margo
Landlords look at a ever shrinking buy-to-let mortgage market place.Try our multi buy-to-let mortgage enquiry form to get 4 major brokers to help secure you the best BTL mortgage product in difficult times.
I asked if I could blog for Property Hawk and Hawkeye asked me to first post an introduction. So here it is...
I'm 24 from Warrington, Cheshire and I currently own 5 buy-to-lets and work as an Estate & Letting Agent in Liverpool.
I bought my first house in the summer of 2004 for £80k as I didn't like paying rent as a student. I took out a 97% LTV residential mortgage with my parents as guarantors, used £2,400 from my student loan for the deposit, and then got a full-time bar job to pay for the renovations. 3 months later I moved in and rented two of the rooms out which, in the beginning, meant I was actually making money after the mortgage and living for free! Awesome! That quickly changed however when interest rates went up but still...
I didn't buy another house until October 2006 after my first house had gone up £30k in value and remortgaged to realise some of the equity. By this time, although i'd graduated with a 2:1 in Business, I couldn't find a better job than being a barman! So that got rented out and I continued to work until January 2007 when I told everyone I was retiring to become a property mogul! Didn't quite pan out but hey!
So I then renovated that house, rented it out for more money and then used some of the left over equity left over from the first house to buy another one. Whilst undertaking a full renovation of that one I bought nextdoor-but-one too. They both got rented out and then I remortgaged the third one to buy the fifth for a steal.
During the buying of the 5th, I took a job at a small estate agents in Liverpool (forgive me if I refrain from giving the name...) and the Managing Director and I have gone from having less than 10 houses in November 2007 to over 60 sales & lettings today.
That's pretty much it for the past. Hopefully the future will hold some rapid growth through buying more houses against the ones I already have. When the market bottoms out (however we can tell!), I hope to buy up houses like they are going out of fashion and get them rented out quick sharp.
I'm sure i'm not alone with that plan...
Friday, October 17, 2008
The true size of the monster is unclear, and is difficult to calculate. But be sure, it exists.
We see glimpses of it through emails from landlord users, looking for help on what to do next. We hear glimpses in the press, and logic determines that it is out there.
But will we ever feel it's full force, or will this buy-to-let monster be kept submerged in the darkness?
The buy-to-let monster I talk of is the many landlords who are struggling to 'make ends meet'.
These shy animals are embarrassed and shameful of their situation. These landlords do not like to come forward into the light because they feel inadequate and daft.
They are currently funding rental losses using savings or other income. This may or may not be able to be sustained by many landlords. But for some landlords this house of cards will come crashing down and these monsters will lurch towards the light.
With an individual bankruptcy, a single residential property will land on the repossession pile. But with landlords it could be 3, 4 or 10 or 20 properties monster that is dropped onto the banks lap as the keys are posted back and the monster is unleashed.
Repossession could be swelled rapidly if numbers of landlords with property portfolios start giving up.
As recession rises on the horizon, many landlords 'other incomes' could be reduced or even halted thanks to the prospects of mass redundancies in the jobs market.
As house prices continue to fall then so could the tipping point for other landlords come to pass, adding to the repossessions, onwards it could spiral down. Euuugghhhh!!! Further house price crashes!
The more positive outlook for landlords is the possibly of another 1.5% cut in interest rates over the coming months which could help reduce rental losses. This might end up as the monster's saviour and keep it hidden in the depths.
Too late for Grant Bovey and his Imagine Homes property investment company.
My advice to landlords suffering rental loss is to stand tall, seek advice, cut costs on loans and try to save on lettings costs by self - managing property.
"Whats that coming over the hill?"
Landlords look at a ever shrinking buy-to-let mortgage market place.Try our multi buy-to-let mortgage enquiry form to get 4 major brokers to help secure you the best BTL mortgage product in difficult times.
Landlords are having a hard time of it at the moment.
Rents are struggling, property values are plummeting, BTL mortgage products are high and limited, tenants are losing their jobs, and the winters coming and its getting cold and rainy.
Fellow landlords, it could be worse. You could be an estate agent.
Figures have been released by RICS ( Royal Institute of Chartered Surveyors ) this week saying that UK estate agents are selling on average less than one property per week.
These depressing figures were re-enforced by an estate agent I saw chatting on BBC Working Lunch.
He suggested that the true figures might be even lower, saying that he had sold only one property in the past month.
With the cold and rain of winter coming, estate agents face a harsh few months.
As we all know winter is a quiet time for property sales.
Anyway, lets look on the bright side, with gas and oil prices set to come down they may be able to afford to keep their offices warm this winter.
With warmth as always
Your darling Margo
Property Hawk is a site aimed directly at UK Landlords. The site incorporates free property management software that enables landlords to track all their financial data relating to their portfolio. It allows users to print tenancy agreements and other forms FREE FOREVER. The site generates a real time rent book for each property as well as calculating a landlords tax liabilty.
I have had concerns over the issue of falling rents on my rental flats, I read this article today in the Times which echoes my experience of falling rental amounts over the last few years.
Compounding my concerns that city rents are falling due to over supply of rental property.
The landlords savior amidst the credit crunch was supposedly going to be the rise of rental amounts but unfortunately the opposite seems to be happening.
Now all we can hope for is the lowering of inflation to ease btl mortgage repayments.
Tenants have never had it so good.
Thursday, October 16, 2008
It provides me with a wry smile. This whole buy-to-let phenomenon now debacle.
I'm just a simple landlord and proud to be so.
Where do professional landlords go for landlords insurance?
For decades us landlords have scavenged a living. Letting property, getting our hands dirty by cleaning, dusting, painting, bodging and listening to winging tenants.
Then the buy-to-let phenomenon arrived. Suddenly being called a landlord was not good enough. I was supposed to trade in my slipover for a slick suit and a stripey shirt!
Then buy-to-let investor wasn't 'high brow' enough. The media wanted to brand us property investors. The cavalry of property investors were seen buying huge swathes of inner city real estate making a small fortune without seeming to do more than signing the odd deposit cheque.
Now the buy-to-let bust. Who wants to admit to be a property investor now? Only if you are looking at drumming up business on your 'big issue' pitch.
Lets face it landlords. It's time to go back to the basics of cleaning, dusting, painting, bodging and listening to winging tenants. Remember landlords.
Say it loud - 'I'm a landlord and proud!'
Where do professional landlord go for their landlord insurance?
Some of the practices being employed by letting agents are currently being investigated by the Office for Fair Trading OFT. They have taken out a test case against central London estate agents Foxtons.
The details of the case are:
The OFT has asked the High Court to decide whether the way Foxtons continues to charge some landlords commission after a tenancy agreement has come to an end is in breach of the Unfair Terms and Consumer Contract Regulations 1999 — the same regulations that the watchdog is using to challenge high street banks' overdraft charges.
The OFT believes the practices used by Foxtons are “widespread” in the lettings industry. If its case is successful, the OFT has said it will pursue other agents that use the same terms. But it is likely that other agents would voluntarily change their terms and conditions to avoid legal action.
Foxtons continues to charge commission on a property rental after a fixed tenancy period has come to an end, regardless of whether it helped persuade the tenants to stay or is still actively involved with the property. That means if a landlord keeps the same tenants but switches to another estate agent to manage the property — or decides to do without an agent at all — he or she would still pay commission to Foxtons.
The OFT claims that is unfair. It is also challenging the agent's requirement that a landlord pay commission if he or she sells a property to tenants introduced by Foxtons once the tenancy has finished, regardless of whether the agency was involved in negotiating the sale.
Mark Horne director of Property Hawk the UK's leading website for landlord's comments:
"These charging practices are antiquated and grossly unfair. Many landlords are caught out by these kind of charging regimes."
He advises landlords to check thoroughly any agreement with their letting agent before agreeing to use them.
A judgement is expected from the OFT by the end of the year.
Have you been unfairly charged by your letting agent. Post your views here
Here is a list of points provided by the NFRL to look out for when going through a letting agents contract that should be clarified and agreed before a landlord signs.
• Look for a clear statement outlining how the contract may be ended by either party. I would not recommend that landlords enter into an agreement that locks them into paying the agent for as long as the tenant stays.
• Marketing of the property. Is there a limit to the amount of advertising undertaken?
• Fee structure, including any extra charges.
• Tenancy deposits; how will they be held (in a separate account?) and returned and who will the interest be paid to?
• What is their procedure for tenant selection and referencing? Will the landlord be able to have a copy of these
• How and when will the property be inspected?
• How and when will the agent provide a report and/or a statement of accounts.
• Procedure and time scale for transfer of rental receipts – watch out for delays.
• How quickly will you be notified if the tenant does not pay the rent, or if a large sum of money will be deducted for a
repair? Even a slight delay may have a knock on effect causing the landlord to fall into mortgage arrears.
• Tax Payments for overseas landlords.
• Procedure for dealing with minor repairs and limits on expenditure allowed with further authority.
• Arrangements for inventory checking.
• Arrangements for forwarding mail.
• Procedure for dealing with Rent Assessment committee hearings.
• Procedure for dealing with local authority notices, including registration of houses in multiple occupation.
• Procedure for dealing with gas inspections.
• Measures to ensure electrical safety.
• Arrangements for cleaning and redecorating when necessary between lets.
• Procedure for arranging transfer of utilities, telephones and council tax liabilities.
• Agents involvement in any litigation that might arise between landlords and tenant (recovery of rent arrears or possession).
This Financial Times article spells out some of the current dilemmas facing the Buy-to-Let industry and landlords.
To be honest it doesn't really shine any fresh light on the subjects, and it has a lot of gloating regards foolish landlords and property investors who came too late to the party.
What kind of annoys me about the 'told you so' attitude of the majority of the financial press is that they were the pushers of poor property investments and investment schemes through adverts and advertorial property porn, that have resulted in many new landlords in truly 'Dire Straits' ( see FT article to get the pun).
PropertyHawk unlike the rest of the press has never carried an advert for dodgy offplan investments , or new build apartments, or get rich schemes.
The reason for this, because we knew they would be a bad choice for our landlord users. Landlords can go back to our earliest articles and see that we have been warning landlords of the perils of city centre apartments from the start.
Please don't get me started on BMV property. Here's the line that I carry as regards supposed Below Market Property.
"Why would anyone let you have something for less than its worth?"
Avoid BMV agents at all costs - they are sharks and opportunists. If the deal is as good as they say why would they let it go. Common sense is ' if it sounds to good to be true - then it .......' sorry I'll stop nagging.
Landlords have been warned , again!
Your darling Margo.
PS: Warning no.2 - Don't invest in Dubai. Deserts are for camels. Cutting edge architecture, such as spinning towers of glass tend to grind to a halt and then what? Whose going to pay to fix them? That's one big bubble that's going to pop under excessive maintenance and repair costs. Trust me - I'm a retired sitcom character.
Wednesday, October 15, 2008
Where do professional landlords go for landlord insurance?
A desperate property developer Cliff Rawlinson is giving away all four in the UK’s biggest ever property competition and the first launched by a developer to give away the development £1.7m development.
The UK property slump has forced a Devon developer into extreme measures to recoup the costs of building four luxury apartments worth £1.7 million.
45,000 tickets are being sold at £50 each in the competition which has just launched at WinADevelopment.com.
Lucky landlords might just want to give it ago. Less lucky landlords might save the cash and put it towards the cost of an EPC!
Tuesday, October 14, 2008
House prices are very much driven by SUPPLY and DEMAND.
The Future is impossible to predict but there was an adopted perception of the future of property prices driven by DEMAND and SUPPLY.
This perceived future saw house prices inflated by that UK obsession with property and fueled by the relaxed credit available.
The UK unlike the States would also have the added pressure of population growth and limited space.
Another adopted perception was the UK's very crowded little island, was all set to get even more crowded.
We also saw the UK as one that was free to set up single occupancy dwellings, because we could afford to. ( sorry my wifes getting on my nerves - I'm off to get my own flat and then I can watch whatever I want on my big 42" widescreen!)
The UK had lots of jobs and not enough people who wanted to do them, so we asked people from other countries to do them for us, so they did. This put added pressure on SUPPLY.
All this made you think that house prices would keep going up because of - SUPPLY and DEMAND.
However let's go back and have a look at an alternative future.
People go off property programmes - they have lost so much money on property and they don't want to keep been reminded of it,so people become fed up of property.(imagine - the love affair with property and the UK public is over)
Credit becomes tight - people just can't get any decent loan rate or LTV.
People start sharing more, couples start putting up with each others bad habits, because they can't afford not to, and instead single occupancy levels reduce.
We don't have enough jobs to go round, immigration laws tighten and the population doesn't grow to 70 million but instead remains static. ( why would you move here if there were no jobs?).
Property prices are all about SUPPLY and DEMAND.
Now Back to the Future.
Landlords who have got shares in banks will obviously be breathing a sigh of relief that at least their shareholdings will be worth something, if no where near what they were probably when they bought them.
1 SIMPLE FORM - 4 leading mortgage brokers
The effective part nationalisation of some of the big clearing banks may turn out to be good news for buy-to-let landlords looking to refinance their portfolio. This is because one of the preconditions that the Government has injected this new capital is that banks need to continue to lend to businesses and provide mortgages at the same level as 2007. If this applies to buy-to-let mortgages too then this will be great news for landlords and ease some of the pain that many landlords stuck on expensive standard variable rates are experiencing.
Come on DARLING don't forget us landlords!
Monday, October 13, 2008
10% Wear and Tear or Renewals - Choosing the RIGHT
method can save you tax!
In this short blog I want to bring your attention to a couple of 'little-known' methods of setting losses against profits.
These two methods are known as:
· the 10% wear and tear rule;
· the renewals basis method.
They are relatively simple strategies to understand, and they both relate to the furnishings provided in a property. However, so many investors get confused by not knowing which method they can use and how it will affect their annual property income tax bill.
Choosing the right one can have a significant bearing on your tax liability.
So, let's crack on and start to learn more about both methods so that YOU can decide which one is best suited to your situation.
Q1 'What is the 10% wear and tear allowance?'
It is an allowance that the Inland Revenue has introduced to make the lives of property investors easier when they are completing their annual tax returns. In a nutshell, it allows you to offset 10% of your annual rental income against your property income tax bill. This sounds straightforward, and in principle, it is.
However, there are some important points to note.
a) If your rental income includes charges that would normally be borne by a tenant, then these have to be deducted before you calculate your allowance.
b) It does not matter how much YOU spend on furnishing your property.
You can only offset 10% of your RENTAL INCOME.
c) If you use this allowance, then it MUST be used for the duration of the property ownership (unless it becomes a partly furnished or unfurnished property).
Q2 'When can the 10% wear and tear allowance be used?'
This allowance can ONLY be used for a FURNISHED property.
It cannot be used for an unfurnished or even a partly furnished property.
A fully furnished property is one that a tenant can start living out of as soon as they move in.
In such a property, there will be no need for the tenant to go and buy any items such as furniture, electrical appliances, bedding, or even crockery.
The only accessories that the tenant needs to provide are his/her own personal belongings!
If you'd like a couple of example (case studies) then email email@example.com and put TAXFAX 2 as the subject matter.
In the next blog I will expalin how the "RENEWALS METHOD" can be used.
Landlords have you ever arrived at your rental property at the time of the tenant check out to be confronted by an oven that is like a scene from one of Gordon Ramsays kitchen nightmares?
Where do professional landlords go for their landlord insurance?
Grease upon grease, charred and baked, black and generally yuk. That was me the other week. I have overlooked the marks on the walls and the slightly grimey carpets. I have put this all down to fair wear and tear. However, when the tenants moved in three years ago the oven was brand new so I new it was spotlessly clean. They clearly hadn't cleaned it at all since they moved in.
I clearly needed to get a professional oven clean done to try and restore the oven to its former glory and for this I would get a professional oven cleaner in to do the job. I told them that I would obtain a quote from a business such as ovenu. I told them if it wasn't exceptable then they were free to get an alternative quote and if equivalent and cheaper I'd go with them.
Phone & email tennis
Then started the email and phone tennis. I texted the tenant the cost. They said it was more than they had expected. I'm sorry that's how much it costs! Lets face it, who wants to clean an oven, it's a horrible job. Certainly not them, that's why it was in such a state in the first place. Having text them the figures for the landlord oven clean. The tenant then phoned me to ask for an invoice to prove the cost. I duly emailed them the invoice. They replied to my e-mail, although I didn't receive it. So the tenant phoned me to see why I hadn't replied to their email. I said I hadn't received their email. They said they would resend. I checked - no email. I phoned them to say "no email received". They would print the email by recorded delivery. I suggested they resend by hotmail. The email said that the cleaning costs were more than they expected. The cost being £57.50 for the oven, £20 for the hob, £20 for the extractor. Then a phone message from the tenant asking me if I had received the resent email, he would phone me tomorrow to find out if I had.
Then I glanced at the tenants employer. He works for East Midlands Regional Assembly. This explains it all. A regional eurocrat!!! The tennis will no doubt continue for some time. Unfortunately for him the cleans booked in for this week so he is running out of time.....
As a landlord it is important to keep fit. In these turbulent days you may find that physical exercise will help you. Property Sparrow recommends cleaning as a way of keeping calm, losing pounds and saving pennies.
Here are her top ten cleaning tips:-
1. You need a bucket: Somewhere in your own home you should keep a small corner for your landlord’s bucket. Don’t buy one: your bucket will be an empty large plastic paint or timber preservative pot with a handle attached. If you haven’t got one take one out of a skip. Cut your old sheets and shirts into large squares. These are your cleaning cloths. 100% cotton works best on windows and mirrors. All of your old toothbrushes should go in your bucket, even the little heads from electric toothbrushes. These are for cleaning your taps. Whenever you have a vacant property, pick up your bucket and off you go.
2. Do it yourself: It’s your property and no one cares about it as much as you do. Think very hard before employing a cleaning company. They could charge well over £100 per property. If you pay yourself the minimum wage, you could save over £50 on a 7 hour day. With a cleaning company there is bound to be something about their work that disappoints you. And, how many calories are you burning sitting at your desk all day?
3. Set a date: This should be the day after your last tenant has moved out. The quicker your property is clean the quicker it will be relet. Book a day off work. Ring your tenant or Lettings Agent to check that the property is empty; that’s your cleaning date.
4. Think things through: Have you got the key? If you haven’t, who has? Check with your Lettings Agent – have they really got the key in their hand or is it in someone’s car, lost, not returned by the tenant, in the post, at another branch office three miles away? Is there a door entry system? Have you got a key to it? Is there an alarm and do you know what the code is? Check the key arrangements again the day before. If you are collecting it from your Lettings Agent, ring them to tell them when you will be arriving, you don’t want to be standing around in the office while someone tries to find the key.
Do you know what the refuse collection arrangements are at your property? If it’s a block of flats, where are the bins?
Do you know about the hot water system? Hot soapy water will make a big difference. If you can turn it on and off yourself this will save you time.
Do you know if the water is hard or soft? If it’s hard, it’s worth taking something that can remove limescale.
What are you really going to do if there is a lot of rubbish or old furniture left inside? You may not be able to deal with this yourself. Do you need the phone number of a house clearance company? Find out how quickly they can respond.
The night before: look up train times or fill up your car with petrol, check your bucket, charge up your phone, make your sandwiches and try and get a good night’s sleep.
5. An early bird: It may be tempting to wait for off peak rail fares to kick in but that’s false economy on cleaning days. By car, you need to try and get there before the rush hour starts at your destination. Aim for four good cleaning hours in the morning. You may start to flag in the afternoon but you will have done the worst parts by then. Use the daylight hours.
6. Essential items: a roll of black bin bags, two pairs of rubber gloves, supermarket own cream cleaner, toilet cleaner, toilet roll, your bucket, Stardrops. You should be able to get these at the market for less than £2.00. Don’t waste money on expensive bathroom foamy mousse or packs of disinfectant wipes.
Stardrops. Available from Asda, Morrisons and Wilkinsons. 67p for 600ml. It cleans everything a landlord could ever want to clean: baths, carpets, melamine, china, floors, fridges, cars, glassware, hobs, mirrors, paintwork, sinks, tiles, upholstery, UPVC windows and doors. Stardrops and a cream cleaner make an effective combination. The thing about Stardrops is that it makes everything shiny and shiny is what you want. Shiny taps, shiny bathtub, shiny windows.
7. Think about the floors: Consult your inventory Is there supposed to be a vacuum cleaner? Is it still there? When did you last see it? Does it work? Put your own vacuum cleaner in your car anyway but if you are not going by car, take a dustpan and brush. Do your best with whatever you’ve got to clean the carpets and you will be able to make a noticeable improvement. In an unfurnished property, clean floors make the rooms look bigger. But, be prepared to make a decision on whether your carpets need to be professionally cleaned.
8. Take a small alarm clock or pocket timer with you: Set the alarm to go off once an hour. That’s one hour per room. £5.73 per hour. In the bedrooms you may only need to wash down the paintwork (with Stardrops and one of your cloths) and clean the windows and you’ll be able to move to the next room before the alarm goes off. Use the time you have saved in the kitchen and the bathroom. Most properties will need straightforward cleaning and so it’s about getting your sleeves rolled up and your heart beat going. Do some light stretches if you feel you have to. If you are taking longer than an hour in a room you are not working quickly enough. Concentrate. Get your heart rate up. Start at the top of a house and work down. In a flat, do the bathroom and kitchen first.
Remember, this is a free aerobics class and far more motivating than any personal trainer. You want to let this house quickly again, don’t you?
9. Be brave but don’t take too many risks: When you first go in, check every room for human beings, furry animals, birds and a smell of gas. If in any doubt, leave it and get help. Make a quick decision on whether you can cope with the level of rubbish. Nine times out of ten you will be able to.
Introduce yourself to the neighbours; they may have some useful information.
Force yourself to deal with someone else’s hair in the plugholes. If there’s a toilet brush left behind, throw it away.
Open a window to let some fresh air in but be careful. You may forget to close it when you leave and, worse, the catch might be broken and you won’t be able to.
It’s your house or flat but you may not know it very well. It will have its own idiosyncrasies. Don’t fall down the stairs, don’t get locked out when you are going in and out to the wheelie bin (wear the key around your neck), don’t get up on a stepladder if there is no need to, keep your rubber gloves on all day and use the spare pair as soon as a hole appears.
10. When you have finished: Take pride in buffing up the taps and the light switches with one of your cloths that you have kept clean and dry. Take some photos.
Write down any little decisions you have made about repairs or renewing items. You are now the sole expert on the condition of your property and all of its fixtures and fittings. You have just spent 7-8 hours wiping every square inch of it with your own fair hands. No one can tell you that you need to buy a new shower – you will know whether you need to or not. This may save you hundreds of pounds in the next few months.
Make a note of what you have spent on your cleaning and travel. Work out how many calories you have used.
At home, enjoy a long hot bath and a bar of chocolate. Use your most expensive bubblebath and lashings of handcream.