Saturday, February 28, 2009
Friday, February 27, 2009
The NLA are urging landlords to maintain friendly relationships with their tenants after 74% of calls to their help line related to landlords concerned that their tenants would not be able to pay their rent.
I have to agree with this sentiment. Over the years I have got on with the majority of my tenants, I like to see myself as a charming, helpful kind of fox who will try to do what I can to help my tenants out.
Each tenant is different and some need more support and guidance than others.
I remember I had one youngish tenant who had been 'infrequent' with his rental payments.
After a number of missed and late payments I thought I better get to the bottom of it before it got out of hand.
I met up with him and put my concerned parent face on, softly, softly with sympathetic eyes tinged with a touch of dissapointment and hurt.
I offered my help and support, if he was having any problems, he opened up, explained he was badly in debt and was struggling to make ends meet each month.
Now as a landlord this isn't great news but there is no point in hitting the roof. The best thing to do is to try and get your tenant back on track before it all ends in court and you are left with an empty property and a repayment scheme of £ 2 a week for the next 10 years.
So I helped him find the number of the local Citizens Advice Bureau, encouraged him to make an appointment and patted him on the back and told him that he could sort it out.
I checked in with him to make sure that he went to the appointment, and checked that he could follow there guidance in getting his finance sorted out.
I also agreed with him some more flexible ways to meet his rental payments.
Six months later he left the flat, having paid all the rent that was owed to me.
He came round to thank me for my help and support, gave me a bottle of wine and told me he'd learned vital lessons in managing his personal finances ( largely to avoid credit cards ).
Sometimes tenants need a little support.
Thursday, February 26, 2009
Peter Williams, executive director of IMLA, says the government needs to start giving buy-to-let lenders support so that the rental market can make up for the downward trend in home ownership.
He says: “If we are to see a genuine contraction in homeownership in the UK, the government must put its money where its mouth is.
“They must promote non-banks to the bank bailout premiership.
“Currently, broker-facing lenders who traditionally serve the buy-to-let market are being frozen out by the government.
“Without support helping lenders to free up cash, the buy-to-let market will suffer further retrenchment.”
Williams adds: “This is a vital component of the UK housing market and the government are currently ignoring its need.”
I found this site, that is for tenants to post reviews about their landlords.
The site is called Loveyourlandlord.co.uk.
Im sure there are already some x-rated versions of all of the above on the internet, so be careful before posting a Google search.
I can't see it taking off, but landlords should be on their best behaviour and be prepared to be marked out of 10 for their performance.
"That was fabulous! Fabulous! Fabulous, darling!"
Wednesday, February 25, 2009
The announcement that Northern Rock is to resume mortgage lending (£14Bn by the end of 2010) is welcome for the mortgage market as a whole but will probably only drive indirect benefit for the Buy To Let sector.
The gov't announcement on Monday that Northern Rock will resume lending on homeowner mortgages with £5Bn this year and £9Bn in 2010 came after weekend speculation that NR would be lending £15Bn - funny how the press always seem to know what happens at NR before any real announcement.
The fact that only £5Bn will be lent in this year is acknowledgement that it will take time to build a pipeline from which to complete the loans. Given that we are approaching the 3rd month of the year this is a pragmatic figure for the remainder of 2009. They have been doing some lending over the past few months so it won't be difficult for then to gear up their operations.
That aside it is good news for the market for the following reasons...................
More money supply and improved lending criteria will help to ease the credit crunch and provide some competition in the residential mortgage market. As a consequence real lending margins may reduce slightly.
Whilst NR are unlikely to promote Buy to Let mortgage lending (they do actually have a couple of pricey Buy to Let products) the element of competition may encorage other lenders to switch some resources from residentail to Buy to Let lending.
Additional funding for personal residential mortgages is a pre-requisite for stabilising the housing market as a whole and much of the Buy to Let property is First Time Buyer or Second Mover property which will receive an uplift if homeowner borrowers start to re-emerge at the Estate Agents !
All in all a welcome development.
Police are advising landlords to check out their tenanted properties for cannabis farms.
We advise landlords to go out and get a sniffer dog and do a thorough sweep of rental properties every couple of weeks.
And look how cute they are.
Landlords love dogs, just not in their rental properties.
I'm sure you all already know this but I saw this article and thought Id post it for any new 'accidental landlords' as a reminder.
New landlords should understand that if they let out a property to tenants it cannot be on a standard residential mortgage without first notifying the lender of the change of circumstances, as the lender bases the contract on 'owner occupation'.
Neither can it be without specialist landlord insurance for the property to be covered.
Plus you may not be exempt from capital gains tax.
Read the warnings in This is Money
Love to all landlords - accidental or not.
'Sisters are doing it for themselves.'
This is Money looks back at last years winners of the now defunct Bradford and Bingley 'Property Woman of the Year'.
It turns out these landladies / landlords are fairing a lot better than the competition sponsors a year on.
'Go sisters' ( literally as one of them is an ex-nurse)
Your darling Margo is loving the lady landlords.
Tuesday, February 24, 2009
Landlords should tread with caution before heading back into the property market.
Recent reports have whispered at potential house price recovery, but it is still too early to call.
This article in the Times adds an air of caution to any perceived ideas that house price falls are nearly at an end.
The property market remains best suited to landlords and property investors of the brave / reckless type only.
More cautious landlords may still be advised to lie on their beds surrounded by notes as if re-enacting a scene from a bank heist film.
Have fun. Recklessly or not.
Just in case you missed the magazine article, Landlord Reminder System, we'll mention it here in the Blog as well.
We have set our landlord reminder system live in Property Manager 2.0,our free property management software.
The Reminder system enables landlords to set up a regular email reminder containing a list of management tasks, approaching tenancy end dates, BTL mortgage expiry of conditions, insurance renewals and a current rent balance.
The system works alongside an upgraded Tasks system that allows landlords to set repeat tasks on various periods of Frequency, so for example a landlord can set a yearly frequency for Gas Safety Checks on a particular property.
We hope the improvements will help landlords to further reduce the headache of managing their rental properties.
Monday, February 23, 2009
Will the property market be stabilised by the re-structured Northern Rock?
After repaying 18 billion last year, the government has eased back on its demands to see the remainder of the £27 billion loan paid back by Northern Rock straight away and has sank a further £10 billion to fund new lending.
This might see Northern Rock starting to lend again and bring buyers back to the property market after a year of lenders trying not to lend.
Robert Peston reports that it will offer mortgages worth 80% or 90% of the value of properties, compared to the 75% loans that are now the industry norm.
See Robert Pestons post
Could this mean a leveling off for property prices.
Top of the Political Landlords, Scots Pops is Alistair Darling with " I'm a Twisted Money Grabbing Self Interested Politician Like all the Rest of .."
This article reports on the four senior Scottish politicians, including Darling, who are claiming tens of thousands of pounds of public money for designated "second homes" despite renting out other flats in London.
The politician landlords have been accused of claiming the taxpayer-funded perk at the same time as having their own personal property portfolio.
Now as we all know landlords are perceived as been one of the most disliked groups of 2009, but a landlord politician who optimizes their expenses - wow.
Even I don't like them.
Love to all landlords in a cold climate ( except the snivelling, self interested, corrupt, slimey politican landlords - I can't even find any sympathy for that landlord class - sorry)
Your darling Margo
Saturday, February 21, 2009
Friday, February 20, 2009
Many buy-to-let investors were attracted into the sector by the prospect of high returns and a safe investment for their future.
Where do professional landlord go for landlord insurance?
This view was propergated by a media obsessed with demonstrating to the public how they too could make a fortune by investing in property.
The result a feeding frenzy as banks lent with apparent abandon, a plethora of companies established to show nieve investors how they too could make a fortune from property and at the same time enriching themselves and not their clients.
Could all of this have been avoided with proper regulation?
Could all this pain in the buy-to-let sector have been avoided by some kind of regulation by the Financial Services Authority (FSA)? Or would have regulation just have hampered serious and experienced landlords building up their residential investment portfolios?
What sort of regulation is needed? Would it just be more paper work, more tick boxes and hoops to jump through? How would that help protect landlords and investors.
It's a debate we need to have but I'm not sure there are any easy answers.
Thursday, February 19, 2009
Media and politicians focus on residential mortgages when Bank Base Rate (BBR) is cut as that is the point of maximum impact on individuals and ultimately where votes in the next general election will be won or lost.
Much media focus over the last 5 months has focused not only on how much lenders reduced their SVR but also on the date at which it will be implemented. This is monitored very effectively by the BBC on http://news.bbc.co.uk/1/hi/business/7872344.stm and you can see who passes on what amount and how quickly they do, or don't, apply it. You can also see our own graph below.
Many residential mortgages are on fixed rate mortgages of 2, 3 or 5 year duration. These borrowers will generally be paying mortgages between 4.75% and 6.75% and will be looking carefully at the clause that identifies what price they will pay after the initial fixed rate period. The majority will revert to the lender's standard variable rate (SVR) which is at the lender's discretion and currently varies from 3% to 5.79% (ignoring one lender with an eye watering 8.44%). Several have already stated their intent to pass on the latest rate cut in full (Nationwide, LLoyds, HBOS and Woolwich) but this will still mostly be on a margin greater than Base + 2%. Borrowers should also check that their mortgage doesn't include a "collar" that would impose a minimum interest rate - for example 3%. The most fortunate borrowers are those who have a Bank of England Base Rate (BBR) linked mortgage where the 0.5% cut is applied with immediate effect !
For the very small group of borrowers who have a mortgage headline rate with a discount of 1% or more to BBR , there is the delightful prospect of a negative interest rate. In reality this simply won't happen but there doesn't yet seem to be an industry wide solution to this conundrum. Even when this is agreed, I doubt whether most lenders computer systems will cope !!
Buy To Let borrowers mostly benefit from mortgages that are linked to BBR or LIBOR rate and will have enjoyed ever improving cashflow in recent months. We have not identified any "collar" clauses in the Buy to Let mortgage sector. Some borrowers will be on SVR with a lender and if that lender is no longer actively supplying new mortgages they may not be passing on BBR cuts in full to borrowers - 4.84% SVR doesn't seem expensive until you equate it to BBR + 3.84%. Refinancing these mortgages to other lenders can sometimes also release equity for further purchases if gearing is relatively low.
Business borrowers are invariably funded to BBR or LIBOR rate - sometimes lenders will stipulate that loans above £1M, must be funded to LIBOR to mitigate risk. A few banks will offer "dual pricing on each transaction - BBR + 2.75% or LIBOR + 2% ie the differential between the LIBOR and BBR in the money markets. For these borrowers the issue isn't so much price as the availability of credit !!
The Government will maintain its focus on BBR and cite any lender as irresponsible who doesn't match the BBR reductions regardless of the real funding cost either from wholesale funds or from retail deposits. And of course this portrays them as the consumer's champion which will be important as a general election approaches; but now that they (and us as taxpayers) have significant stakes in both RBOS and Lloyds HBOS and full ownership of Northern Rock and Bradford and Bingley, they need to be mindful of their investment in these institutions when they issue headline grabbing statements.
Bits of clothing, furniture, books, cd's, letters, electronics, hair and scabs.
I've not yet been left a pet, thankfully. Unlike the American landlord who on arriving at a vacated property to clean up before the new tenants arrived, found a surprising bit of unwanted tenant property.
The landlord from the Wisconsin town of Beloit arrived a month after the tenant had vacated the rental property, only to discover a hungry two-year-old alligator in one of the rooms.
The animal charity said alligators made bad pets. "They are going to look at you as food at some point," he said.
A further incident of tenants trying to take a bite out of their landlord.
The question is would this be covered under landlord insurance policy.
See our landlord insurance special rates.
Wednesday, February 18, 2009
I know in some parts of the country at auction it is possible to purchase property with double digit rental yields, but this is still unusual.
Landlord insurance - professional rates and discounts
How about an average rental yield of 14.2%?
Unfortunately, this type of yield is not available in the UK. According to research carried out by Global Property Guide, this is the highest of the international investment yields and is available in Chisinau the capital of Moldova. Property in Cairo and Jakarta also saw gross yields at over 11%. This compares to about 6-7% in the UK.
The study also reveals that the most expensive property market in the world is Monte Carlo. An apartment of 120 square metres cost an average of $47,600 for each square metre in 2008, over double the rate in Moscow, the next most expensive city. Prime property in the Russian capital fetched a shade more than in London, where prices fell for most of the year. Cairo is not only the cheapest for buyers, but it may even be a good prospect for buy-to-let investors with a gross double digit yield.
It is now possible for existing RBS buy-let-borrowers looking to remortgage to access a fixed rate starting 3.39% fixed for 2 years.
Other part nationalised banks are also reducing their rates. See below for the latest developments over the last week. Information provided by emoneyfacts.
LENDING AREA for VARIABLE RATE MORTGAGE of 5.84% for term increased to England & Wales w.e.f. 9.2.09....more
17 Feb 2009
Buy-to-let VARIABLE RATE MORTGAGE of 5.44% for 3 years withdrawn & replaced with new rate of 5.94% for 3 years (SVR + 0.75%), w.e.f. 16.2.09....more
17 Feb 2009
NatWest Mortgage Services
Buy-to-let STANDARD VARIABLE RATE reduced by 0.19% to 4.50% w.e.f. 16.2.09....more
17 Feb 2009
Royal Bk of Scot Mtges Direct
Buy-to-let STANDARD VARIABLE RATE reduced by 0.19% to 4.00% w.e.f. 16.2.09....more
17 Feb 2009
NatWest Int Personal Banking
Buy-to-let STANDARD VARIABLE MORTGAGE RATE reduced by 0.25% to 4.19% w.e.f. 2.2.09. All products withdrawn & replaced with NEW TRACKER RATE MORTGAGES of 3.79% & 3.99% to 30.4.11 and NEW FIXED RATE MORTGAGES of 5.09% & 5.29% to 30.4.11, 5.39% & 5.59% to 30.4.12 and 5.99% & 6.19% to 30.4.14, w.e.f. 13.2.09....more
16 Feb 2009
RBS IP NatWest
Buy-to-let STANDARD VARIABLE MORTGAGE RATE reduced by 0.19% to 4.50%, w.e.f. 16.2.09....more
16 Feb 2009
Royal Bank of Scotland Int Ltd
Buy-to-let STANDARD VARIABLE RATE reduced to 4.19% w.e.f. 2.2.09. All products withdrawn and replaced with NEW VARIABLE TRACKER RATES of 3.79% & 3.99% to 30.4.11 & NEW FIXED RATES of 5.09% & 5.29% to 30.4.11, 5.39% & 5.59% to 30.4.12 and 5.99% & 6.19% to 30.4.14, w.e.f. 13.2.09. ...more
16 Feb 2009
Lloyds TSB Scotland
NEW buy-to-let VARIABLE BASE RATE TRACKERS for advances of £5K to £999,999 of 4.59% & 4.89% to 30.6.12 and for advances of £1m to £1,999,999, 5.19% to 30.6.12 launched, 5 year FIXED RATES increased by 0.20% and END DATES on all FIXED RATES extended to 30 June, w.e.f. 16.2.09. ...more
16 Feb 2009
Cheltenham & Gloucester
NEW buy-to-let VARIABLE BASE RATE TRACKERS for advances of £5K to £999,999 of 4.59% & 4.89% to 30.6.12 and for advances of £1m to £1,999,999, 5.19% to 30.6.12 launched, 5 year FIXED RATES increased by 0.20% and END DATES on all FIXED RATES extended to 30 June, w.e.f. 16.2.09. ...more
16 Feb 2009
Buy-to-let STANDARD VARIABLE MORTGAGE RATE reduced by 0.46% to 4.99% w.e.f 12.2.09....more
13 Feb 2009
Lloyds TSB Scotland
Buy-to-let STANDARD VARIABLE RATE reduced by 0.50% to 3.00%, w.e.f. 1.3.09....more
12 Feb 2009
END DATES on buy-to-let FIXED RATES extended to 1 April, w.e.f. 12.2.09....more
12 Feb 2009
Buy-to-let STANDARD VARIABLE RATE reduced by 0.75% to 5.74%, w.e.f. 1.2.09. MAXIMUM LOAN-TO-VALUE reduced to 65% & LENDING AREA restricted to selected counties....more
12 Feb 2009
Buy-to-let STANDARD VARIABLE RATE reduced by 0.30% to 4.79%, w.e.f. 11.2.09....more
11 Feb 2009
Newbury Mortgage Services
Buy-to-let STANDARD VARIABLE RATE reduced by 0.25% to 5.00%, w.e.f. 10.2.09....more
10 Feb 2009
Buy-to-ket FIXED RATE of 7.09% to 1.9.11 withdrawn & replaced with product of 6.49% to 30.4.12 and MINIMUM RENTAL REQUIREMENT amended to 125% calculated at BBR + 5% with a minimum income requirement of £30K, w.e.f. 10.2.09....more
10 Feb 2009
NEW buy-to-let VARIABLE BASE RATE TRACKER of 4.99% for 2 years, DISCOUNTED VARIABLE RATE of 5.29% for term and FIXED RATE of 5.95% for 2 years launched, w.e.f. 9.2.09....more
10 Feb 2009
Tuesday, February 17, 2009
A sample taken from four of the major property portals identified a total of 146 properties repeated on the same website, and 323 that were no longer available to be let.
Landlords get your property on Rightmove for less
James Davis, founder of upad, commented: “Hunting for somewhere new to live is stressful enough, so it is worrying to see that anyone doing an online search in the UK has a one in three chance of receiving details of a property that has already been let. This wastes time and causes disappointment and frustration – it is also completely unnecessary.
“Agents are clearly uploading their entire stock to the portals, and this is giving users a bad experience.
When it comes to finding property to rent, people often identify with websites that display out-of-date information, and offer a poor online experience. Research shows that 83 percent of UK internet users are unhappy with their property search experience (FindsYou.com 2008 research), and 39 percent of renters state that out-of-date information has been the biggest problem when looking for rental property (rentright.co.uk 2007 survey).
upad is a free online rentals service, to help renters find available properties both quickly and easily. With over 82,000 listings, it has the largest selection of rental property available in London today.
I went to have a look at a repossession last week. Reasonable area. Infact, very good area historically but a little bit on the wain as families move out and houses get subdivided into flats. It's slowly becoming a little bit of a bedsit land.
All said and done not a bad area. The 1st floor maisonette was being marketed at £77500 but has just been market down to £73,950. Checking out the historic data using UKValuation's online valuation package showed that properties were valued at £130,000 and similar properties had sold for £100,000 in the last couple of years. On the face of it a bit of a bargain.
The property did need gutting: new windows, central heating, kitchen, bathroom, etc to bring it up to a good standard.
The cost of all this work? Probably in the order of £15,000. I reckon I could get the property for £70k making an all in cost of £85k assuming no financing required. Financing costs on top could easily add another £2k.
What would be my returns on this? Conservatively rents for a nice two bed in the area should be able to achieve £450 pcm. So annually £5000 allowing for just under a month of void each year. This would give me a gross yield of just under 6%. Not bad, certainly better than in recent years where 5% was tops.
What are my risks? My big concern is rental demand. Ten,Twenty years ago good quality rental accommodation would fly out the door. Now, theres alot of new build apartments alot of competition.
Keeping my powder dry
6% yield, potential void, a 35% drop in house prices would suggest a price of £65,000 for this apartment.
So on the face of it a bargain and probably will be in the long-term. But for me these figures are not compelling. I'm looking for at least an 8% yield. To me whilst it seems cheap that property is not worth more than £50k.
Landlords and investors need to be wary of jumping in because prices seem cheap. Cheap is a relative measure. Cheap compared to a historic high does not make it a bargain.
Were landlords greedy or were we just exploited? Is buy-to-let dead or is now the time with the froth being rapidly skimmed of the market be the time to buy?
Monday, February 16, 2009
When the analogue signal is switched off there are things you will need to check. Even if you just want to carry on watching Coronation Street you may need a new aerial, those owning or managing blocks of flats will need to organise a check of the communal aerial (with consultation and a service charge to leaseholders) and you will need a set top box or even a new telly.
In return we will all be able to watch Coronation Street again on ITV2. There is the option to set up a communal aerial so that it can deliver internet access and information on local services to each flat and apparently it may be cheaper to do this at the time of the switchover rather than later on.
On Digital UK you can put your postcode in to check what date the switchover is due in your area. There are several areas due in 2009. There’s a section for property managers, tenants and leaseholders to remind us what we need to think about. Landlords and tenants from Whitehaven and the Scottish Borders have already gone through this process and it would be useful to hear from anyone there on how they found it.
The site includes a checklist for landlords and the ‘frequently asked questions’ section answers standard questions reasonably well. Property Sparrow’s chief concerns are not covered and these are, of course, ‘What will the new aerials look like and will they be safe and easy to use?’
She doesn’t want to be perched on some ugly monstrosity.
One of the key factors affecting house prices is affordability. Affordability is frequently assessed by measuring the proportion of a new borrowers gross earnings required to pay their mortgage. Affordability is impacted by overall house prices and the level of interest rates.
Need landlord insurance - online quotes
The big cuts in interest rates have meant that lower interest rates have had a significant impact on affordability, with the average mortgage payment standing at an estimated 21 per cent of the average new borrower's gross earnings in January, down from 31 per cent in the first half of 2008.
And although the house price to earnings ratio edged up to 4.55 from December's 4.48, it is still closer to its long term average of 4.0, and significantly lower than its peak of 5.84 in July 2007 according to research conducted by the Halifax.
This means with house prices continuing to fall along with a further cut in interest rates expected the long term average earning ratio of 4.0 could be reached this year.
However, despite this rebalancing of the market and restoration of the long-term trend, there are several reasons why activity in the market may stay subdued for some time to come.
Firstly, the banking crisis continues to restrict credit. The result of this is that many purchasers may be able to afford to buy and their subsequent mortgage payments however, the deposit required by banks and the willingness of them to lend will prevent many potential purchasers being able to progress a transaction.
Secondly, unemployment and the threat of it is likely to deter many potential purchasers from buying until conditions in the economy start to improve.
Property Hawks conclusion
Whilst we are seeing some positive movement towards re-establishing the long term trend in affordability, other negative factors are likely to weigh down on the housing market and house prices for some time. This makes it likely that affordability could actually dip below trend as it has done in previous recessions before then making a recovery. After the last slump in the early 1990s affordability slumped to just above 3 in the last quarter of 95 before making a slow and gradual recovery.
Saturday, February 14, 2009
We have discovered who really loves landlords.
Apparently her name is BOO BOO
She might look like a bit of a dog, but she promises to, keep her kennel clean, not to get her muddy paws on the sofa and to pay her rent on time.
The only drawback. Rent will be paid in dog biscuits
Friday, February 13, 2009
the majority of landlords in the private rental sector are highly experienced, with over two thirds (66.5%) having been a landlord for 11 or more years. On average, residential landlords’ portfolios consist of 13.2 properties, with the average portfolio worth £1.52m. The average level of borrowing across a landlord’s portfolio is less than 50% of the portfolio’s value.
Flats, apartments and maisonettes comprise 43% of the average portfolio, with terraced property being the next most popular property type (38%). Semi-detached property accounts for 11%, followed by detached houses at 3%.
Does this sound like you? Or is there no such thing as an average landlord....
Sometimes I know how he feels.
Bringing warmth to landlords in a cold economic climate
Your darling Margo
Thursday, February 12, 2009
Here's the quickest way that I've found to calculate cashflow return on investment:
Yield, loan and costs are expressed as percentages of the purchase price or property value. The result of this formula is cashflow return on investment. That is, what return on your initial capital investment you can achieve based on the net cashflow from the property. It does not account for returns arising from capital appreciation.
No rocket science here, just gross yield. If your property achieves 12,000 in rental income per year and it's valued at 100,000, then your yield is 12%.
Simply the interest rate payable on your mortgage financing. The calculation assumes an interest only mortgage. If your rate is 5% then that's the number to use.
Loan (or loan-to-value)
This is the amount of your loan, expressed as a percentage of the property value. If you've borrowed 75,000 on a 100,000 property, then your loan is 75%.
This may be a little different from typical calculations. Here costs are expressed as a percentage of property value. It's actually remarkably simple to calculate. Here's a quick scenario: you pay management fees of 10% of your gross rent, you set aside a further 10% of gross rent as a maintenance budget and you incur further admin costs of 5% of gross rent. In total that's 25% of your gross rent incurred as costs.
Your gross rent is the same as your yield. So if you pay 25% of gross rent as costs and your yield is 12%, then you're paying 12% x 25% = 3.0% of the property value in costs. The great thing about this calculation is that it can remain pretty constant - expressing amounts as percentages means they scale according to property value. Choose numbers that work for you once and you can use the same numbers as a general rule for quick calculations.
Here's a quick look at the formula in action. Say you're looking at a potential deal and you want to quickly work out your potential investment returns from the net cashflow it generates. Notice that you do not need to plug in the price into the calcuation (see note below on what this formula should not be used for).
Scenario: a property yields 12%, it can be 75% loan financed at a rate of 5%. Running costs for the property amount to 3.0% (as in the costs example above). What is the cashflow return on investment?
Just plug in the numbers:
And calculate. The answer is 21%.
Without a calculator
You can do this in your head or on paper pretty easily. Loan percentages tend to stay fairly constant and it seems that many investors know ahead of time what percentage they're working with. Rates don't move around all that much, certainly if you're comparing returns across a range of deals at the same point in time, then the rate is likely to be the same for all of them. So, 5% x 75% = 3.75% and dividing by (1 - 75%) is the same as dividing by 25%... or multiplying by four.
The whole formula then becomes: ( 12% - 3.75% - 3% ) x 4 = 5.25% x 4 = 21%. Beats plugging numbers into a spreadsheet to work out return on investment.
What you should not do with this formula
This formula must be kept in context. The fact that the purchase price does not directly appear in the calculations does not mean the price is irrelevant! If you keep all the numbers fixed and double the price, then the formula would show the same return on investment number - this is clearly not true!
The trick is that yield and property price are inversely related. If you double the price then you'll halve your yield - so update the numbers accordingly. This formula should therefore not be used to determine what price you should pay for a property. If you want to try different price scenarios, just remember to adjust the yield and cost numbers accordingly.
What you should do with this formula...
... is take a snapshot of investment performance. The formula answers the question "Taking property price as given, what are my investment returns?".
* Propable has a range of online deal analysis tools that works out all these statistics (and more) for you. Propable is the easiest way to make more money from your property.
The last few months has seen a dramatic change in the buy-to-let mortgage market as many of the giants of the buy-to-let market have made a sharp exit. This includes Northern Rock and Mortgage Express, both now nationalised. Also other big lenders such as Paragon and the the Mortgage Works have stopped lending.
The result is that bizarrely some of the biggest players left are paradoxically the small building societies. A quick skim through the best buy pages of Moneyfacts highlights the top deals all being provided apart from Cheltenham Gloucester who are part of Barclays by traditional building societies. Many of which, such as the Shepshed BS and the Leek BS are hardly household names in the buy-to-let lending world.
So who's offering the best deal at this moment:
The best of the bunch is the Shepshed who make a welcome return to the buy-to-let market.
They are offering a 4.99% 2 year base rate tracker. LTV is 75%, the fee is £999 but £849 can be added to the loan. There are no limits on portfolio size but Shepshed will only lend in England and Wales outside of the M25.
Other lenders worth looking at are the Leeds BS, National Counties BS and The Leek BS.
For more of the best deals have a look at Moneyfacts best buys
Theres been a number of article in PropertyHawk about the new requirements landlords have to commit to regarding a risk assessment of fire risks within their tenanted property .
There is a downloadable Fire Risk Assessment form - word.doc here.
If you haven't already done one, then I advise landlords to do it as soon as possible.
Care and concern for landlords - your darling Margo.
Home owners have sat waiting for a year wanting to move from a property.
"It's too small, wrong location, not enough light, we want somewhere with better access to the garden, I want a quieter street, somewhere more rural, my neighbours are driving me mad ........"
The problem is not many of them have been ready to drop their prices to meet the economic shift.
As another year ticks by people frustrations will rise and asking prices will drop to achievable levels as homeowners decide they need to get on with their lives.
The Halifax price increases seen last month will be seen as a blip as prices drop as more and more sellers come to terms with the 'new values' of their properties.
The Bank of England’s Governor admitted yesterday that Britain is now in “deep recession” and signalled that it is ready to start “printing money” as soon as next month in aggressive, last-ditch moves to limit the slump. - Read Times article
Is it a good time to be building a property portflolio or should landlords be sitting on their hands?
Wednesday, February 11, 2009
Says Leaders’ managing director, Paul Weller: “We are currently seeing high demand for rented accommodation along with a good choice of quality properties available. The start of the year is a traditionally busy time for lettings as many people move home, and we often find that January can be a good indicator of the year to come.
“Last January was exceptionally busy, as many were priced out of the property market and opted to rent until they could afford to buy – a trend that continued well into the latter part of the year. This January – following the onset of the economic crisis and significant house price falls – was even busier, with an average increase in lets of 7% across our regions. Our figures demonstrate that as the economy and housing market continue to struggle, renting has become more popular because of the flexibility it offers.”
There has also been a significant increase in landlord instructions, with Leaders taking on 35% more properties in January than the same time last year.
Of course, the lettings market is not immune to the wider economy. Tenants are currently very cost-conscious and looking for a bargain so landlords need to be aware of the importance of marketing their property at a realistic rent.
At the same time, because of exceptionally high demand for good quality flats and houses at the lower to middle end of the market, rents have held firm for these types of properties which are letting quickly.
Leaders’ advice to landlords at this time is to be realistic about the rent they are asking, particularly in the case of high value properties, and to ensure their property is of a good standard. Their advice to tenants looking for a flat or 2/3 bedroom house is to act quickly if they find a property they like because it is not likely to be available for long in the current market.
Leaders point out that, boom or bust, the letting market has the capacity to thrive: when the economy is doing well, people want the flexibility to move for work opportunities; when it is doing badly they prefer not to commit to a mortgage and the additional expenses of home ownership. Throw in the current issues of a credit crunch and falling house prices and it is clear why the lettings market is doing so well.
Says Paul: “Overall, we are very positive about 2009 as we expect the high demand for rented accommodation to continue in the face of both the slow sales market and the wider economic uncertainty.”
A further tiny glimmer of hope for the property market.
Grainger, the Uk's largest residential property owner said it has seen an increase in property viewings.
The company believes that there is a 'pent up' demand to move but buyers are finding restricted mortgage availabilty hampering the market, which they hoped would be helped by the introduction of better mortgage deals in the past few weeks.
Love to landlords in a cold climate.
When it comes to footballing landlords its been a game of too halves.
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Some of the footballing mega rich and mega star have been piling their fortunes into property investments. However, some have experienced more success than others.
Former Liverpool hotshot Robbie Fowler poured his money into low priced Liverpool terraced properties, that often could be picked up for less than ten grand, meaning that property investors could pick up a street of houses for the same price of a luxury London pad. Whilst Robbie's fortune has no doubt taken a hit his portfolio of 100 or so properties probably means that his rental income keeps a smile on his face despite falling capital values.
Less shrewd footballing investors have fallen fowl of the property bust by being lured into some of the high profile buy-to-let schemes in the UK and abroad.
One such player hit by the slump in property is Wayne Rooney.
With wages of more than £120,000 a week and a fortune estimated at £35m, you might think the recession would have little effect on Wayne Rooney, but the Manchester United striker is already counting the cost of expensive forays into the property market.
And he is not alone. For the past five years, dressing-room banter among the Premier League stars has centred on how to jump on the bandwagon of rising house prices and emulate the fortune amassed by shrewd soccer veteran Robbie Fowler from unglamorous investments which include a street of cheap terraced houses in Oldham.
But now the talk is of tumbling values, collapsing development firms, the fallout of the Icelandic banking system and failed deals.
To find out which footballer has lost the most in the property slump, have a read of this article
Tuesday, February 10, 2009
Another tiny glimmer of positivity regarding the property market, although drawn up from a site trying to sell property.
Benjamib Williamson, an economist at CEBR quotes "Prices and interest rates are now at levels whereby any improvement in lending is likely to lead to substantially increased activity and at the very least a bottoming out in housing prices."
- Read more
Not really enough to get the estate agents up and dancing.
The place where landlords can buy a property at tomorrows price today are property auctions. Here there is no stand off. Real sellers that want to sell, real buyers who can finance their purchase and are prepared to buy.
PROPERTY AUCTION DATES FEBRUARY
To find out more
Monday, February 09, 2009
Property Sparrow has finally come to her senses at the estate agents. She has left.
For more months than she wants to tell you, her salary has been on a wing and a prayer. She was told ‘let’s hope things pick up in the new year.’ Then, a slow realisation that her weekend salary was in a long queue and it was behind the Rightmove fee, the VAT bill, the HIPS provider, the telephone bill, the newspaper advertiser, the poor man who puts up the For Sale boards.
Exasperated and aware that there are many employees waiting in this situation across the UK, Property Sparrow decided to cut her losses. She didn’t want to be there when the bailiff turns up.
She feels sorry for anyone involved in property who is facing irretrievable losses, even Estate Agents. She will miss the banter and the direct insight into what people are buying, or not as the case may be.
Still, she has more time now to do something else and time is precious.
Onward and upward.
They have major concerns as to how companies in this sector market their offering to increasing numbers of struggling homeowners.
The sector has been greatly criticised following a number of highly publicised evictions of tenants and cases of excessive rents been charged .
The Office of Fair Trading has launched an investigation, asking companies to justify their advertising claims or face prosecution.
Hear a radio interview on Radio Four here
Landlord insurance - by professionals - for professional landlords
Do you have an idea that you want putting forward as a petition? Post your idea below and we will look at setting up our own campaign/s
1. We the undersigned petition the Prime Minister to Introduce legislation so that all 'buy to let properties' with mortgage arrears to nationalised banks are transferred to social housing landlords, a fair rent assessed and tenancies secured. More details
Submitted by Robert Skedgell – Deadline to sign up by: 07 October 2009 – Signatures: 10
2. We the undersigned petition the Prime Minister to Make it a civil offence for landlords to allow tenants to behave in an antisocial manner. More details
Submitted by Paul Blake – Deadline to sign up by: 28 May 2009 – Signatures: 8
3. We the undersigned petition the Prime Minister to Campaign against the 'watering down' os Section 21 of the Housing Act . More details
Submitted by Landlords – Deadline to sign up by: 03 September 2009 – Signatures: 19
4.We the undersigned petition the Prime Minister to Make it a requirement that private housing landlords must accept housing benefit if the tenant or prospective tenant is entitled to receive it. More details
Submitted by Andrew Oliver – Deadline to sign up by: 04 June 2009 – Signatures: 85
5.We the undersigned petition the Prime Minister to Stop grants on Warmfront Heating Systems going to Fat Cat landlords . More details
Submitted by James McMahon – Deadline to sign up by: 06 April 2009 – Signatures: 6
6.We the undersigned petition the Prime Minister to Limit the number of properties a landlord can own to no more than five(5). More details
Submitted by Richard Gale – Deadline to sign up by: 20 January 2010 – Signatures: 7
7.We the undersigned petition the Prime Minister to Limit the number of properties a landlord can own (max 10) therefore ensuring more housing is made available on the open market. More details
Submitted by Lynda Lewis – Deadline to sign up by: 22 April 2009 – Signatures: 16
8. We the undersigned petition the Prime Minister to Protect the rights of landlords from tenants refusing to pay rent. More details
Submitted by Stewart Tudgay – Deadline to sign up by: 04 November 2009 – Signatures: 39
9.We the undersigned petition the Prime Minister to help landlords to reduce the number of empty homes in the UK, which is rising sharply at a time when demand for social housing is growing ever more acute. More details
Submitted by Tom Lloyd of Inside Housing – Deadline to sign up by: 03 April 2009 – Signatures: 26
10.We the undersigned petition the Prime Minister to Criminalise Retaliatory Eviction by landlords. More details
Submitted by Trevor Perry – Deadline to sign up by: 15 December 2009 – Signatures: 6
Or more importantly get your digital pens out for this one -
We the undersigned petition the Prime Minister to Bring back letting our children sit on santas knee. More details
Saturday, February 07, 2009
Thursday, February 05, 2009
Despite the snow, landlords could be forgiven that yesterdays dual announcement that interest rates down at 1% and house prices rising in January by 1.9% according to the Halifax could herald the first green shoots of a housing revival.
Landlord insurance - professional rates available for all landlords
Not according to a recent article in Moneyweek by the Associate Editor David Stevenson.
He has no doubt that the rise in prices recorded by Halifax was a pause before an inexorable continuation of the downward trend. The reasons?
1. Affordability whist improving is still above long run trend house price to average earning in December despite falling from a record high of 5.84 was still at 4.5, above the long term average of 4.
2. Prices don't drop in a straight line - during the last big property downswing almost 20 years ago, prices fell for seven months in 1989, then rose in three of the first ten months of 1990. That didn’t stop a subsequent two-year 15% price slide.
3. The low levels of transactions in the market make the latest figures far from reliable. For example these figures from the Halifax ignore cash purchases at auction where prices are likely to have shown far steeper falls.
4. Unemployment currently at 6.1% could double in the coming years to just under 4 million.
With all these grey clouds on the horizon, it may be too soon to call the bottom of the market.
As they say, 'one swallow doesn't make a summer!'
Our free property management software froze up between 9.50am and 10.00am today.
It took us 10 minutes to clear the snow away from the re-boot switch.
All is fine now and for those landlords and letting agents who were able to fight through the blizzards, we must apologise for any delays getting it back up again.
The team now has it sorted and will be throwing snowballs at each other for the next hour.
Love to landlords and letting agent from your darling Margo.
Ian Potter, Operations Manager of ARLA, said, "The state of the market demands that recognised minimum standards be introduced for all lettings agents. Historically, a light regulatory touch has undermined confidence in private renting and with an increase in rental properties there is no better time for radical reform."
At this present time anyone with a laptop and registration to our Free property management software can set themselves up as a letting agent.
"ARLA is wholly committed to not only the regulation but also the licensing of all lettings agents and we will be launching our own licence in May this year."
Landlords who might consider taking on celebrity tenants might take a word of warning from the experience of the landlord of one of rocks wildest childs Pete Doherty, former front man of the Libertines and crooner with the band Babyshambles.
Where do professional landlords go for their landlord insurance?
Apparently Doherty has been threatened with eviction by his landlord after the rocker failed to look after the country mansion he resides in. The singer pays £3,200 a month to rent the 9 bed pile in Wiltshire.
Photos published in the press last month (Jan 09) indicated that Doherty was far from being the ideal tenant. In fact it seem to indicate that property was in a fairly shambolic state fitting in with the singers new band name and lifestyle. The pictures showed graffiti scribble on the walls and stray cats roaming the rubbish strewn floor.
Doherty's landlord the Lord of Cardigan is fed up with his troublesome tenant. He tells the Sun:
"its high time Mr Doherty found somewhere else to live. Enough is enough. We have had quite a few problems with Mr Doherty."
Have any of you had brushes with celebrity tenants? We'd love to know.
Pete Doherty tenancy falls outside the usual provisions of the assured shorthold tenancy because the rent is more than £25,000 pa. This means that the mechanisms under the Housing Act such as a section 21 notice for gaining possession are not available to his landlord.
Wednesday, February 04, 2009
"It's a lot harder to sell a property now than this time last year."
According to FindaProperty.com, it now takes 45 percent longer for the average British landlord or homeowner to sell his or her property than it did only a year ago.
The report also indicates that landlords yields have increased, with the average yield now at 6.1%, up from 5.7% in Q1 2008.
John Heron, managing director of Paragon Mortgages, said: "There are opportunities for residential property investors with cash to spend to expand their portfolios in the current market and maybe we are starting to see evidence of this.
"This doesn't necessarily mean that investors think that we have reached the bottom of the housing market. It is more likely that they are spotting bargains in local markets and are purchasing with a long-term view."
Tuesday, February 03, 2009
The Daily Mail reports on Caprice ( the underwear model turned business woman) struggles with her property investment portfolio.
The global downturn in the property market has left her with 'falling assets' and 'vacant' property.
The glamourous model is unable to let some of her property portfolio and is seeing her rents fall in others.
Let's all hope the girl can keep the shirt on her back as she struggles with 'her plunging assets.'
Many other landlords are in a similar situation as once plump property investments start to droop and hang heavy around landlords necks.
Many landlords are now screaming out for Government backed 'artificial enhancements.'
The house in question was one owned by landlord Ken Bean. His tenant was Steve Wright the serial prostitute murderer. Wright lived in the house on London Road, Ipswich while carrying out his killing spree. The house according to neighbours is to be fixed up and rented out.
The ex-forklift truck driver is serving life behind bars for murdering five prostitutes in and around Ipswich in the days leading up to Christmas 2006.
And since his arrest and conviction, his old home at 79 London Road in the town has been boarded up.
Neighbours say the refurbishments are good news and a sign the street is "getting back to normal".
Julie Hyland, from the London Road Neighbourhood Watch Group, said she was "pleased as punch".
"I don't think it should be knocked down. It looks a lot better now. No one knows if the girls were killed there. All we know is that he (Wright) lived there," she said.
She explained: "They're in there decorating at the moment getting it ready to rent out.
"We're pleased that things are getting back to normal. I'd love to see someone living there," she added.
Ken Bean, the landlord of the masionette, has refused to comment on what he will do with the property.
Monday, February 02, 2009
With the fall of house prices by 13.5% in 2008 and valuations set to continue to slide throughout 2009 it’s not surprising that more and more people are looking to rent out their homes rather than sell.
While it’s not been unusual for the rental market to be flooded with two-bedroomed houses available to let, the current credit crisis now means that many larger homes and country piles have also been added to the rental mix.
“There has been a sudden increase in larger properties to rent mainly due to the sales market collapsing,” says Proprietor of Belvoir Camberley Craig Walker. “People still have to relocate, move or downsize and upsize despite having a large property therefore they have to make it work for them rather than leave it empty, thus renting is often the only option - in the market they are known as ‘accidental landlords’.”
Proprietor of Belvoir Peterborough and Corby Terry Lucking agrees. He says, “lack of sale demand, sellers not being prepared to accept a low sale value, valuations coming in below mortgaged value and therefore the vendor is unable to sell, plus many sellers believing values will increase so they want to hold on to their properties mean that there’s been a rise in larger rental properties available.”
The good news for landlords with larger properties to let is the increased tenant awareness that larger homes are often cheaper to rent than buy. But, with more large houses available to rent than ever before, competition for the right tenants is stiff.
“There are too many larger properties and simply not enough tenants,” says Craig Walker. “Tenants can easily be put off by larger fuel bills, running costs and council tax etc.”
“There are certainly more large properties available than there are renters,” agrees Terry. “The market will balance one day but until then you have to take action to make your property more attractive than the others available.
“Many default landlords (non buy-to-let) do not believe a tenant should enjoy the home in better condition than they lived in,” he continues. “But, wake up! It is a competitive market and action is needed if you want yours to be in the top 20% of any short list.”
So, how can landlords give their large property appeal in an already saturated lettings market?
“Be realistic with your rental figure, be open-minded to the tenants’ position (ie pets) and have a flexible attitude, wherever possible, to long-term renting,” advises Proprietor of Belvoir Bourne Gary Legge. “Alternatively, you could even turn it into an HMO (House of Multiple Occupancy) or divide it up into two or more smaller properties,” adds Craig Walker.
Proprietor of Belvoir Peterborough and Corby Terry Lucking agrees. Plus, he says that investments need to be made to ensure a speedy rental return.
“Most larger properties are not BTL (buy-to-let) or were ever planned to be retained as a BTL so often are very personal and many are dated when compared to purpose-purchased modern or new BTL properties,” he says.
“Invest and make the property neutral and bright. Lose old-fashioned light fittings how ever much you may love them and fit plain soft colour curtains - lose those heavy curtains that might have cost thousands. Fully redecorate in soft beige/magnolia emulsion and fill in all the holes left by your family prints. Remove large trees and hedges that obscure vision and block natural light too.
“Also, look at what else is available in your area and make sure your property is more attractive to look at from the road, more attractive when you walk in and the price is attractive or lower than the others.”
“Meet the viewers with the agents and talk to them about schooling and the neighbours,” continues Terry. “Demonstrate a helpful attitude now and it will help win them over. Ensure the house communicates a message you care about it and no obvious maintenance issues are left outstanding too.”
So, what type of tenant is a landlord with a large property likely to attract?
“If you set the standards right from the start and make the rent level realistic but also high enough as a barrier to those below a certain income you should attract company lets, job re-locators getting to know the area, and professional types, such as doctors and engineers,” says Gary Legge of Belvoir Bourne.
Terry agrees. “If presented to a high standard you will attract a higher income-type tenant. However, if you leave the property too personal or dated, with poor routine maintenance, you’re most likely to attract sharers or mums with kids claiming Local Housing Allowance.”
“To ensure you attract the right tenant for your property go through a reputable property management agent, such as Belvoir,” advises Craig Walker.
• To find your nearest Belvoir office, visit their website at http://www.belvoirlettings.com/
Top tips for letting a large property...
• Be realistic about your rental figure
• Stay open-minded to a tenant’s position (ie pets)
• Have a flexible attitude to long-term rental
• Update and modernise throughout
• Make the property neutral and bright
• Offer to visit for garden and swimming pool maintenance throughout the tenancy
• Lose old-fashioned light fittings and curtains – how ever much you may love them
• Turn your property into a HMO (House of Multiple Occupancy)
• Consider dividing the property up into several smaller properties
• Fill all the holes left by your family prints
• Redecorate in soft beige/magnolia emulsion
• Research the competition and make sure your property is a more attractive option
• Remove large trees and hedges that obscure vision and block natural light
• Sell a lifestyle by meeting the viewers with the agents and talking to them about schooling, neighbours and the surrounding area
• Leave no obvious maintenance issues outstanding
• Ensure the house communicates the message that you care about it
• Get a reputable property management agency, such as Belvoir, to market the property for you
Landlord Insurance Could be Voided if a Tenant Has a Criminal Conviction that is not Declared to the Insurer
The article states that many landlord insurance policies could be found to be void with certain landlord insurers if it turns out the tenant has a criminal conviction.
Any thoughts, comments or information would be much appreciated.
'Loving landlords instead' - Margo
Try Landlord Insurance Special Rates with Alan Boswell.
We have posted some of the comments from landlords and letting agents in a new Testimonials page and we will try to keep these updated over the coming year.
As always please let us have any more thoughts, ideas and observations to help us improve on the free property management software.
The 'Property Manager project' is only as good as the feedback of its users.
Our aim is to make the FREE property management software better than any of the expensive packages out their by the end of 2009.
Heres to helping landlords in a difficult 2009.
For anyone interested in refurbishment projects and bringing empty properties back to life it sounds as if there are some interesting seminars and exhibitors at this event.
Don't worry, by then daffodils will be out, there will be blossom on the trees, birds will be singing and trains and buses will be running again.