Help needed for the UK landlord?

What a time to be a UK landlord! The Great Credit Crunch of 2008! I feel like I'm stuck in the midst of a badly directed horror movie. The theme is Doom & Gloom - backed up with some great newspaper selling headlines - House Prices Crashing! UK Recession Looming! Unemployment rising! Soaring Oil & Food Prices! Inflation skyrocketing! Companies are beginning to lay strewn across the economic landscape like a scene from Saving Private Ryan...

Taking a look at the current economic climate - mortgage lenders are running for the hills, and those that are brave enough to stay are hiking their prices and fees! I read on forums how landlords can't get decent re-mortgages because their Loan To Value's (LTV's) are too high (what about in a years time when house prices have dropped even more - how many landlords will be sinking then?), their rents are too low, or the Standard Variable Rates they are switching to are too high.

Then their is one of the reasons we are in the mess in the first place - the two largest US mortgage guarantors (Fanny something or other) who between them have about half the value of the US mortgage market, have had their share price free-falling because of fears that they might need to be bailed out by the government! You could not have written a book with this much bad news! I wonder if Arnold Schwarzenegger has anything to do with this?

Why all the focus on the problems? That's my point exactly!

I'm a landlord and my goal has always been to own property for the long haul and part of that commitment is dealing with ups and downs. So what, should I lie down and admit defeat? NO!

I decided to find ways to ensure I could get through this difficult time and meet my long term goals! I got advice from solicitors, mortgage brokers, property professionals, estate agents, lettings agents and anyone else who spoke sense that could ultimately help me. The end result is 6 months of writing and a book titled - The Landlords Guide to Surviving the Credit Crunch!

If you are interested in getting practical advice on how to survive the credit crunch then visit my site http://www.the-home-place.co.uk/ and take a pro-active step to ensuring you survive - but if not, then I wish you all the best - we're all going to need it!

Hasta la vista - Baby! (you said it Arnie!)

Property investment capitulation draws near

Its exciting time for investors in commercial property shares. Why? Because we are reaching the capitulation point. This is the mythical stage where investors are so sickened by their financial losses that they give up, walk away and vow never to invest in commercial property or shares again. CAPITULATION!

At that point so the theory goes the last of the force sellers exit the market and from that point on the share price and company values start to rebuild.

We are getting close to that point, but no quite yet. Confidence in bank shares is starting to stabilise, housebuilding stocks have probably hit the bottom. The next sector to stage a recouvery is likely to be commercial property shares and this is why.

1. commercial property shares have been obviously hit by a huge slump in commercial property values. However, shares have fallen faster and further than values of their underlying assets leading to massive discounts of share price to underlying asset values. Whilst this can be explained by the fact that investors are pricing in further falls, some time soon probably towards the end of the year real values will start to stabalise and these discounts will be revealed as ludicrously large
2. sentiment - the share market is all about sentiment at the moment. Fear has taken hold and many investors battered by massive and often inexplicable falls have bolted for the door. Once this sentiment changes as a result of capitulation investors will awake to the fundamentals.
3. fundamentals - share prices for commercial property stocks are pricing in an apocolyptic scenario. Things are bad and going to get worse. Fundamentally though alot of occupiers will continue to need property and accommodation. The market is full of property shares yielding over 10% and I have checked out there consolidated income statement to show that these yields are sustainable unless the property companies suddenly start having massive voids. A year ago no body would have believed that these kind of figures would have been achievable. How quickly a market changes from greed to fear!

What stocks should I be buying?

As I said landlords and investors should be looking out for tell tail signs of capitulation, but here is a property investment share to buy, more tips in subsequent posts

Mapeley

Share price £10
NAV £17.32
dividend £1.27

Mapeley is a classic case of the City not understanding a company. Mapeley is a hybrid which has confused the City. It is partly property investment company but mainly an outsourcing company deriving much of its income from managing other companies property requirements. The result is that it generates much greater levels of income than traditional property investment companies.

In its unaudited quarterly results for the three months ended 31 March 2008 it announced that it owns and manages a commercial property portfolio of over £2.0 billion covering some 2.4 million square metres throughout the UK.

Highlights

• FFO* the key measure of operating performance up 226% to £45.0 million,
equating to 153 pence per share** (31 March 2007: £13.8 million, equating
to 47 pence per share)
• Excluding the effect of above average asset management receipts in the
quarter, FFO remains stable at 48 pence per share (31 March 2007: 47 pence
per share)
• EBITDA*** increased by 8.9% to £35.6 million (31 March 2007: £32.7
million)
• Revenue down 4.3% to £99.6 million (31 March 2007: £104.1 million)
• Loss before tax of £27.4 million (31 March 2007: profit before tax of
£11.4 million) due to non-cash revaluation losses in the quarter of £39.2
million in line with market trends
• Total asset value of £2,253.9 million (31 December 2007: £2,317.6
million)
• NAV per share decreased to £17.32 per share (31 December 2007: £18.62)
• Dividends to be paid at the half year and full year rather than
quarterly
• Over 90% of our income is derived from government and investment grade corporates, with low vacancy rates and a 10 year average lease length across the
portfolio.

The current price is at a discount to asset value of 43%. However as Citi property analyst Harry Stokes observes Mapeley should not be valued as an investment company

"We use enterprise value/EBITDA because we consider property outsourcing an earning play, not a property play" he said.

This all means that you have a company with a cast iron and rising income stream, most of its properties are let to government or the Santander Bank (formerly Abbey). The company is paying a whopping and rising dividend and trading at a discount to underlying asset values into the bargain.

Landlords - Viewing the Future of Property Investment is a Complex Thing

As a landlord and property investor I try to filter in news and the potential impact that news will have on my property investments and letting business.

I read the news that the housebuilder Barratt is cutting 1200 construction jobs today.

The chief executive Mark Clare has also predicted that as many as 60,000 jobs could go in the construction industry as a whole.
Now how could this impact on me financially?

Well, with lots of unemployed builders and tradesmen kicking their heels and wondering how to feed their luxury car and clothing budgets, they will be forced to look for work. So this will potentially fill the shortfall of free-lance tradesmen.

This might mean a leveling off of the previously rising cost of tradesmen. That to me will be a welcome relief because maintenance cost were starting to really get on top of me. Good news for my rental profit.

However then I was thinking about all those foreign workers that are holed up in the country who will see far greater competition for work when the British builders roll back into town.

This will potentially eat into their levels of income and tip them back to Poland or wherever.

Will this mean a mass exodus of foreign workers, reducing demand for housing and consequently adding to the house price falls and knocking down rental values.

Think back to the German boom of the Eighties it will be Auf Wiedersehen Pet in reverse.

This current economic situation is a complex reality that might not be able to be read and predicted by a few simple charts. As most things in life it's more complicated than we'd hoped.

Remember there are always two sides to every story.

Landlords and property investors, your predictions here, please.

Love and kisses , Margo.

Landlord Associations - should I join them?

The stories of the on / off relationship between the National Landlords Association and the National Federation of Residential Landlords, and the Residential Landlords Association sitting in the corner throwing daggered glances at the National Landlords Association made me chuckle.

It also made me raise the question -

Why am I not a member of any landlords associations?

Why am I not a part of one of these official landlord bodies, campaigning for the voice of landlord to be heard up in that London village? Whispering into the ears of the political giants, the powerful and the great of Westminster.

Then I pondered on the comments made by the vice chair of the NFRL, Ruth Kerslake,

“But our final choice of partner requires a quorate meeting of board directors – and this has not yet taken place. Our solicitors have confirmed, therefore, that this premature announcement is invalid."

And it came to me in a sequence of words and labels - words that sum up the nature of an association or any organisation or body that relates or affiliates with a government, words that to be honest fill me with distrust and a feeling of apathy.

These are the kind of words I'm talking about.
political, authority, constitution, regulation, official, agenda, policy.

In many ways it the avoidance of these words that made me become a landlord in the first place.

Seeking other words instead, to replace them, such as.
autonomy, freedom, flexibility, independence, relaxed

So will I go and join whatever enlarged landlords association comes out from their merry tea dance?

In a word - NO!

Hassle free buy-to-let?

Sounds like a dream doesn't it?

The thought of no tenants nagging you, no maintenance issues, no voids. Just 5 years of uninterrupted rental bliss!

Where do professional landlords go for their landlord insurance?

Well not according to the Telegraph

The story highlights the concept of private sector leasing. Property Hawk did highlight this concept back in 2006

In essence the managing company, in this case Orchard & Shipman manages on behalf of their local authority client the letting of the property. The investment property is let effectively to the council for anywhere between 2-5 years. The downside for the landlord is that the property is effectively tied up for this period and therefore cannot be sold or used by them. The positives is that landlords pass the responsibilites to the managing agent and they get paid whether the council puts in tenants or not. Orchard and Shipman currently run schemes in London and Edinburgh and landlords interested in the scheme should visit their website.

FREE LETTINGS SOFTWARE to enable landlords to manage their residential investment property more effectively

Struggling to get a buy-to-let mortgage?

I don't usually do promotional posts on landlord products because it's not really what this blog and Property Hawk is all about.

However, I had an e-mail from one of the brokers at Trustguard who specialise in providing finance for more difficult or specialist investment properties or landlords with more demanding requirements.

It seems selfish to keep the info to myself when I know how difficult it is for many of us property investors to get funds.

Trustguard have a panel of 16 buy-to-let lenders who offer mortgages that can meet the following criteria:


Ø Self employed self cert of income to 90% LTV

Ø Employed self cert of income to 80% LTV

Ø BTL to 85% LTV

Ø Flats above commercial premises

Ø Sub prime to 90% LTV

Ø FTB’s with adverse credit

Ø Holiday lets and second homes

Ø RTB with adverse to 85% LTV

Ø Residential new build flats to 90% LTV

Ø Shared equity schemes to 70% LTV (100% borrowing)

Ø Guarantor schemes to 95% LTV


If landlords want to know more visit the mortgage section