It pays to be cynical about property

A recent article in the Mail made me snigger - call me cynical, but I've have absolutely zero respect for these daft industry award ceremonies that have sprung up throughout every industry. From sandwich manufacture, to plumbers and florists. To me it's always appeared to be a bribery game, whether financial or emotional or both. Who wins is not about whose best but whose wants to win most. 

A finalist in our landlord version of these; a candidate for 'Landlord of The Year' in 2009 ( sorry the title even makes me snigger ) is now facing jail after he was caught running a brothel. Ironically, ex landlord Parminder Janagle was described as a new breed of ‘socially-aware’ landlords who had supposedly turned around a struggling portfolio of 12 buy-to-let properties, which have since been sold following the collapse of his property empire. Not what you'd call 'Landlord of the Year' material in most people eyes.

Now, I don't feel that I want to character bash Parminder anymore, he is reported as saying he took ‘full responsibility’. In many ways I feel sorry for him. He has lost everything - bankrupt, separated from his wife and facing a prison sentence. Happy new year! I hope he sorts himself out, and good luck. 

You see, Parminder was yet another victim of this property investment industry of ours. After falling into the trap of believing the hype. Apparently, he bought the 12 properties in Hull, Halifax, Sheffield and Grimsby in 2006 after going to a seminar run by the now defunct Investors Club, which boasted that it negotiated 20 per cent discounts from developers by buying in bulk.

Despite all his award winning efforts to reduce the £3,500 monthly rental shortfalls on the flats which  were valued at less than the cost of the loans secured on them - he lost them all, and desperation lead him to go on and do what he did. 

I guess what I'm actually trying to say is, when it comes to most things in life, whether it's award ceremonies or property investing - it pays to be cynical.

Be cynical of industry awards, sharp suits, smooth talkers, someone else's figures, Estate Agents, Letting Agents, in fact any agents, tenants, certificates, plumbers, builders, inventory clerks, solicitors, surveyors, banks, brokers, financial advisors .....

Read full story in Daily Mail

Agent Forecasts Property Price Increases Shock

To be taken with a good pinch

London focused Estate Agent Savills have predicted a surge in London property prices over the next five years. Well,  I'm sure their statistical department have minced the figures, jumped them over hurdles and then whipped them with a birch twig until they complied.

For what they're worth, here's the top 20 areas, and Savills forecast for their five year growth... they might be right.

1. Westminster - 25.6%
2. Kensington and Chelsea - 25.6%
3. Hammersmith and Fulham - 23.7%
4. Camden - 23.5%
5. Islington - 23%
6. Hackney - 21.9%
7. Wandsworth - 21.9%
8. Southwark - 21.5%
9. Lambeth - 21.4%
10. Richmond - 21.1%
11. Haringey - 21.1%
12. Brent - 20.8%
13. Barnet - 20.7%
14. Merton - 20.6%
15. Harrow - 20.2%
16. Ealing - 20.2%
17. Lewisham - 20%
18. Kingston upon Thames - 19.8%
19. Greenwich - 19.4%
20. Hounslow - 19.4%

European Gloom - Britain's Boom?

I'm taking a well earned break this week on the Algarve in Portugal to get away from the rain & the post New Year Blues.  Well the good news is that if you think the UK is in a bad way then a trip to Portugal shows that it's far worse in Europe.  I was talking to a waitress in one of the local bars in Lagos and it appears that whilst an average salary might be 600 euros a month, rents for a small apartment are running at 400 euros making living almost impossible.  After an economic miracle fueled by excessive lending from governments and banks for property development, particularly holiday apartments the local economy has woken up to the fact that this alone won't sustain a vibrant local economy.

With Europe heading for austerity it makes me think that the UK outside the Euro has a sporting chance of fighting it's way out of the debt fueled mess.  Look at the way another small island country Iceland has managed to resurrect itself from it's banking crisis.

Threat to landlords

The big threat to landlords is that tenants hit by austerity and job loss struggle to pay their rent.  One way of potentially protecting a landlords cash flow is to take up rental insurance.  Personally, I have preferred to go down the route of carefully vetting my tenants first and then when in doubt obtaining a tenant guarantor.  If my portfolio remains fully let this will give me some fantastic positive cash flows.  Who knows with the gloom in Europe continuing to deepen and the likelihood that holiday apartment prices will keep on falling in holiday destinations I could well be writing my blog article next year from my newly purchased European holiday apartment.  European gloom could well be Britain's boom if we play our cards right.

Mortgage Search - whole of market

Expanding your property portfolio

Expanding your property portfolio has tremendous rewards. If you get all the houses on a single street for example you then build a hotel to collect even higher rent when people pass through.

In all seriousness though, there are several reasons why you would want to expand your property portfolio. The two most significant reasons are fairly obvious:

1) Increased profits – More property at least in theory means more rent coming in each month after all.

2) Spreading risk – If one of your properties stays empty for a period of time or a set of tenants stop paying rent, this is much less of an issue if it’s not the only property that you’re relying on.

If life were simple, that would be all you needed to worry about when deciding whether or not to expand your portfolio and I could wrap up this post early and go for my lunch, but sadly it’s not.

The Risk analogy
Lets gun for board-game reference number two. If you’ve played Risk, you know how hard it is to expand quickly. If you cover a lot of ground in a short space of time, you can’t keep it stable for very long and it all implodes in on itself, which is why you quickly learn Australia is small and manageable and Asia is massive and impossible.

This can also happen with your property portfolio. If you’re not careful, you might find that the rental income is not enough to cover mortgage repayments as well as the extra costs of having more to manage. The slightest hiccup and you’ll find everything coming crashing down around you.

Having a larger property could begin to eat up too much of your time to be financially viable. You might find that keeping on top of property issues becomes closer to a full time job and may require you taking on additional staff.

In addition to general expansion risks, investing in property is of course always a risk by itself. Having a rough idea of what the market is up to is invaluable and buying at the wrong time could easily spell disaster. Several professionals far more steeped in property issues than myself claim that the buy-to-let boom has long drawn to a close, so it is worth reiterating that one should approach this sort of investment with caution.

What you don’t need to worry about
There are however plus sides to not starting from scratch. Having already successfully managed your first property (and if it’s not successful then no, expanding is definitely not a good idea), you will have not only learnt a lot of lessons that are applicable to your second, but you will have even done some of the leg work. For example, you will most likely have already built up a relationship with a network of tradesmen that you can rely on for maintenance, you might have had some experience working with letting and estate agents and you will have already researched landlord insurance options.

Summary
Expanding your portfolio is a risk, but buying your first property was exactly the same. The rewards can be great and it can even boost your financial security. So long as you go in knowing what to expect, you could find taking steps to build your property empire to be hugely rewarding.

Written by YOUR Insurance, a broker specialising in small business insurance and landlords insurance.

Update for 2013 from Property Hawk Mortgages

Property Hawk Mortgages says: 

“The buy-to-let mortgage market has expanded considerably over the last 12 months and there are now more lenders and products for landlords to choose from. This means that Property Hawk Mortgages can provide an even wider choice to landlords, with up to 400 mortgage products available at any given time.

For standard buy-to-let investment – flats and houses rented to families and professionals – there is a wide selection of lenders and products currently available. The level of competition in the marketplace and low bank interest rates has resulted in some good deals being offered to landlords.

Lenders have also started providing special deals to landlords which are available exclusively through selected brokers only. These products are often highly competitive, designed for specific customer lending requirements and may only be offered for a limited time. The provider of Property Hawk Mortgages has been chosen by a number of lenders to distribute this type of targeted product and currently has a range of special deals on offer. These include buy-to-let mortgages with Hinckley & Rugby Building Society, Leeds Building Society, Accord Mortgages, Kent Reliance, Skipton Building Society and Mortgage Trust.

For landlords who would like to release equity from existing buy-to-let properties to expand their portfolios or move on to a more competitive interest rate, there is a good choice of remortgage products available. There is a wide selection of fixed and variable rates on offer, including deals with incentives such as free valuations and no legal fees. With high rental yields and strong tenant demand, it could be a good time for landlords to consider expanding their portfolios with further buy-to-let properties.

Professional landlords often consider houses in multiple occupation (HMOs) as viable investment properties and with good reason. Property Hawk Mortgages’ latest
Property Investor Profile showed that terraced houses with student tenants (often HMO properties) command the highest average rental yields – 8.23% compared with 6.60% for an average buy-to-let property. Purchasing an HMO property can make real financial sense for landlords.

For larger HMO properties, Paragon Mortgages has a dedicated range of products offering a degree of flexibility on up to 20 units. Products are available up to 75% LTV.

Kent Reliance is perhaps the most innovative lender in the HMO segment, also offering a multi-let range of products. Kent Reliance is currently the only lender in the buy-to-let mortgage market offering loans up to 85% LTV, and this includes their HMO range. So for landlords looking for a higher gearing, Kent Reliance is the go-to lender. It will consider properties with up to 8 bedrooms and with multiple ASTs, although there is a limitation on the minimum property value of £250,000.

The outlook for 2013 is positive for residential property investors as it is expected that the buy-to-let sector will remain in good shape during the next year. Average rents are still strong (over £1000 per month according the PTM’s Property Investor Profile for Q3 2012) and tenant demand is high. Good rental income and flat house prices means that landlords are currently experiencing excellent average rental yields (6.60% during Q3 2012 according to the PTM Profile) and this is likely to continue in 2013.

However, investors looking for a new buy-to-let property should carry out their research carefully first, as rental yields can vary considerably according to property type, tenant type and region. For example the PTM Profile shows that terraced houses provide the highest rental yields at 7.28%. Students in terraced houses on average provide a rental yield of 8.34%. Given that the average rental yield overall was 6.60%, landlords may look to the student segment of the rental market to maximise their returns. As with HMO properties, Paragon Mortgages and Kent Reliance are the leading lenders for student lets.

It is likely that the general availability of buy-to-let finance will continue to improve over the next few years. We are expecting total new buy-to-let lending in the UK to be circa £15.5bn in 2012 and this could increase to as much as £18bn during 2013, perhaps reaching £20bn by 2015.

It is possible that some new lenders will enter the buy-to-let mortgage market in 2013, bringing more competition and greater product innovation. Also, the government ‘funding for lending’ initiative could give banks and building societies further scope to provide more buy-to-let mortgages as their total overall level of lending increases.

High tenant demand, affordable properties and good rental yields means that buy-to-let property is currently an attractive prospect for landlords looking for a medium to long term investment. The availability for buy-to-let finance is improving and the general outlook for residential property investors in 2013 is encouraging.

Email: info@propertyhawkbtlmortgages.co.uk 

Tel: 029 2069 5446 

IMPORTANT! Due to current market conditions, lenders are withdrawing and replacing products with little or no notice. Please check our website regularly to see the most up-to-date products available.

Your home may be repossessed if you do not keep up repayments on your mortgages.The Financial Services Authority does not regulate some forms of mortgage.

Most popular BTL mortgages

Max LTV	Initial Rate	Term	Completion fee	Booking fee	Incentives	Overall Cost for Comparison
85%	5.49% Discount	2 Years	2.5%	£130.00	No	6.9% APR
80%	5.79% Fixed	Feb 29 2016	1.5% (min £595)	£0.00	No	5.6% APR
80%	4.98% Fixed	2 Years	£1999	£0.00	Free legal fees for remortgage	5.9% APR
75%	3.99% Fixed	Mar 31 2015	0%	£195.00	£500 Cashback	5.8% APR
75%	4.99% Fixed	Jan 31 2018	£1499	£250.00	Free valuation up to £700 for purchases and remortgages and free legals on remortgages only.	5% APR
75%	4.85% Tracker	5 Years	1.75%	£150.00	Free valuation on all applications received by the 31st December.	5.5% APR
65%	3.99% Fixed	Mar 31 2016	£995	£0.00	Free valuation and free legals for remortgages (properties valued up to £500,000).	5.6% APR
60%	3.44% Fixed	Feb 28 2015	2%	£0.00	£500 cashback on completion	5% APR
60%	3.89% Fixed	Feb 1 2016	2.5%	£0.00	£500 cashback	4.9% APR

Email: info@propertyhawkbtlmortgages.co.uk 

Tel: 029 2069 5446 

IMPORTANT! Due to current market conditions, lenders are withdrawing and replacing products with little or no notice. Please check our website regularly to see the most up-to-date products available.

Your home may be repossessed if you do not keep up repayments on your mortgages.The Financial Services Authority does not regulate some forms of mortgage.

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