New to investing in South London? Here's some key questions you need to ask yourself

Investing in buy-to-let (BTL) properties has a storied history of delivering substantial, inflation-beating returns for investors. Over the years, average house prices have witnessed remarkable growth, with the potential for attractive rental incomes and robust yields on well-selected properties. While the market has seen some landlords exit due to increased taxes and regulatory changes, it remains a promising avenue for those willing to address its evolving challenges. If you're a new or early property investor in South London, it's crucial to start by asking the right questions to maximize your returns.

Is BTL a Good Investment?

Property, with thorough research and planning, has the potential to outperform many other asset classes over extended periods. Despite recent market adjustments, the fundamentals supporting property investment remain robust. Demand for housing remains high, while supply remains constrained. Additionally, forecasts suggest a potential reduction in inflation and interest rates, promising a brighter outlook for borrowing costs. Rental growth continues to exhibit strength.

Nonetheless, navigating the BTL landscape requires diligent consideration of factors such as tax implications, financing options, cash flow management, and legal obligations. Seeking expert advice in these areas is paramount for making informed decisions and ensuring the long-term viability of your investments.

Identifying the UK's Best Investment Markets

There's no one-size-fits-all answer to the question of the ideal location for property investment. It hinges on local market conditions, your investment goals, timeframes, and risk tolerance. However, when capital growth is a priority, historically, the UK's more affordable markets have shown strong performance, often coupled with higher yields.

Intriguingly, lesser-known markets in the outskirts of major cities are now gaining attention. These regions often benefit from significant investment, urban revitalization, and job creation, contributing to higher average earnings and heightened demand for housing. Indices report robust capital gains in the Midlands and the North of the UK. While established investment markets like Nottingham and Manchester shine, some smaller towns and communities in their vicinity exhibit even stronger growth potential. Thus, localized research is essential for making informed choices.

Choosing Property Types Wisely

The preference for newer, energy-efficient homes is on the rise among tenants. These properties tend to attract more demand, resulting in reduced void periods. Additionally, they often boast better Energy Performance Certificate (EPC) ratings, alleviating the need for costly energy-efficiency retrofits. While property type selection depends on your goals and the local market dynamics, considering new and energy-efficient homes can be advantageous.

Avoiding Common Investor Mistakes

Several pitfalls can hinder property investors, particularly newcomers. These include inadequate research, emotionally driven purchases without sound financial analysis, and underestimating the responsibilities that come with property ownership. To mitigate these risks, consulting with a specialist advisor before making investment decisions is crucial. Proper planning and strategy development can help avoid costly mistakes.

Property investment is not a path to quick riches; it thrives as a long-term endeavor. Its track record of success becomes apparent over extended periods, making patience and prudent decision-making essential attributes for investors.

In conclusion, the buy-to-let market remains a promising avenue for new and early property investors, provided they approach it with a well-informed and strategic mindset. If you have questions or need further guidance on property investment, don't hesitate to reach out. Your property investment journey can be a rewarding one with the right knowledge and support.

Contact me today to find out how you can benefit from the current market trends. Or if you would like to know the value of your home check out my online valuation tool.

Buying with friends or family? Consider this when buying your new home

The dynamics of property buying are shifting, with more than half of prospective buyers acknowledging the impact of the current economic situation on their home-buying plans, including who they plan to buy with. If you're contemplating the exciting venture of purchasing a property with a sibling or friend in South London, Ben Thompson, Deputy CEO at Mortgage Advice Bureau, offers invaluable insights to consider before taking the leap.

1. Check Affordability Together: Before embarking on your property search, have an open and honest discussion about your financial commitments. This includes the deposit, monthly mortgage repayments, and general living expenses. Pooling resources can often mean affording a larger property in a preferred location, splitting both the mortgage costs and regular bills, creating a win-win situation where your money contributes to your mortgage, not your landlord's pocket.
2. Honesty About Financial History: Money matters can be sensitive, but it's crucial to discuss your financial history and any potential issues that might affect your mortgage eligibility. Being aware of each other's financial backgrounds can prevent unpleasant surprises when applying for a mortgage.
3. Understanding Joint Mortgages: If your borrowing requirements exceed your individual income, a joint mortgage might be the solution. Some lenders permit up to four individuals on a mortgage agreement, although they typically consider the two highest incomes to determine the loan amount. It's important to note that everyone on the mortgage is jointly responsible for payments, and if one party can't pay, the lender can demand full payment from the others. Meeting individual lender requirements and credit criteria is essential for all named borrowers.
4. Tenants in Common: Consider owning your respective shares independently, proportionate to your contributions, by becoming tenants in common rather than joint tenants. This allows you to sell your share to receive a proportionate return on your investment. For example, if you contribute 40% of the house deposit and mortgage payments, your share will be 40% of the house's value, whether it appreciates or depreciates.
5. Draft Legal Agreements: Regardless of your relationship—whether siblings or friends—it's crucial to create legal documents, prepared by a professional solicitor, to protect both parties in case of a share sale, relocation, or financial difficulties. These documents may include a declaration of trust or a cohabitation agreement. While it may feel uncomfortable now, having these details in writing can prevent misunderstandings or disputes down the road.
6. Consult a Mortgage Adviser: Before selecting a property or exploring mortgage options, schedule a meeting with a mortgage adviser. They can not only address your queries but also help you calculate your potential borrowing capacity on a joint mortgage before applying. Moreover, they have access to rates and lending offers that might not be available on the high street, assisting you in finding a mortgage tailored to your unique circumstances.

Ben Thompson emphasizes the importance of informed decision-making in these challenging times, where high inflation levels are impacting finances. Buying with someone else can offer benefits like reduced living costs and shared deposits, but thorough preparation and communication are key to a successful joint property purchase. If you need further advice or have questions about buying a property with a sibling or friend, please feel free to comment below or send us a message. Your homeownership dreams are within reach with the right guidance and knowledge.

Contact me today to find out how you can benefit from the current market trends. Or if you would like to know the value of your home check out my online valuation tool.

Tenants faced high rents in South London during August

The temperature isn't the only thing soaring this summer; the South London rental market is experiencing a sizzling surge in prices. According to the latest Rental Index from Goodlord, the cost of rent across England has risen by a staggering 10% year-on-year. Even though average rents dipped slightly in August, following a record-breaking July, tenants are still grappling with high prices during the market's busiest season.

The Numbers Behind the Heat

The average rent in England experienced a marginal drop between July and August, slipping by 1.5% to an average of £1,347 per property. While it didn't surpass July's record-breaking index of £1,367, August 2023 still boasts a formidable 10% increase compared to the previous year. In fact, the average rental costs are a substantial 15% higher than the year-to-date average for 2023.

Summer typically witnesses a surge in student lets, but this year, that influx has coincided with other pressures on the rental market. The result? Prices have skyrocketed to unprecedented heights. Greater London and the South East witnessed the most significant increases in average rents, with the capital experiencing an 8% surge and the South East recording a remarkable 14% rise.

However, in the North West, a different pattern emerged, with average prices dropping by 20%. This trend mirrors last year's pattern in the region, marked by a considerable spike in rents during July, followed by a more subdued August. The North East and the South West also saw decreases in rents, with drops of 6% and 10%, respectively, after witnessing substantial increases in July.

Understanding Void Periods

Void periods, which indicate the time a property remains unoccupied between tenancies, experienced a slight uptick in August compared to the intensity of July. The average void periods rose from 9 days to 13 days. However, it's important to note that August still marked the second-lowest month for voids since July 2022.

The South West saw the most significant shift, with voids increasing from 6 days to 13. The North West followed suit, with averages jumping from 7 days to 14. Interestingly, both regions also recorded the most substantial declines in average rent costs. Conversely, Greater London and the South East, both witnessing a rise in rental costs, reported no change in average void periods.

The Bigger Picture

William Reeve, CEO of Goodlord, sheds light on the situation, stating, "There were so many records broken in July, it's not altogether surprising to see a slight dip in average rents and slightly longer void periods during August. However, when you look at the bigger picture, the market is clearly still running extremely hot."

Year-on-year averages for rental costs have seen significant increases, with the £1,300 per month barrier shattered for the second consecutive month. As September ushers in the annual peak in prices, it's likely we'll witness another month of elevated rents and brief void periods before any seasonal shift in pace occurs.

For South London homeowners contemplating renting out their properties, understanding these market dynamics is crucial. Whether you're navigating high rents or planning to enter the rental market, staying informed and adapting to market trends is the key to success in this 'red hot' environment.

Contact me today to find out how you can benefit from the current market trends. Or if you would like to know the value of your home check out my online valuation tool.

Do HMOs still work as a good investment in South London?

In recent years, the House in Multiple Occupation (HMO) market has undergone a remarkable transformation. Gone are the days when HMOs were primarily associated with student housing or budget-friendly accommodation. Today, many landlords offer upscale shared living spaces tailored to working professionals, reflecting a surge in their popularity. But what drives this trend, and is investing in HMOs still a lucrative venture for South London homeowners?

The Evolution of HMOs

Over the past 15 years, HMOs have evolved from modest student digs to boutique-style, shared accommodations. What sparked this transformation? Quite simply, HMOs proved to be highly profitable, outstripping the returns of traditional single-home lets. Despite the additional administrative burdens and maintenance demands, landlords found HMOs to be a lucrative investment. These properties commanded room rents that could be two to three times higher than those for family homes, resulting in substantial profits.

However, as the HMO market expanded, regulations tightened their grip. Alongside the general obligations, costs, and tax changes affecting all landlords, HMOs faced additional health and safety regulations, potential planning permission requirements, and mandatory licensing. In October 2018, HMO landlords encountered a 'double-whammy': the introduction of minimum bedroom sizes and the removal of the 'three storeys or more' criterion for licensing, encompassing any HMO housing five or more unrelated individuals.

Navigating the HMO Landscape Today

The HMO landscape has grown more complex, demanding more effort, time, and financial commitment from landlords. Rising interest rates, an obstacle faced by all landlords, further squeeze HMO profits. Adding to this, skyrocketing energy costs over recent years have left few landlords able to pass these expenses on to tenants.

So, are HMOs still a viable investment in South London? The answer lies in understanding the benefits and challenges they present.

Upsides of HMOs

1. Higher Profit Potential: HMOs generally yield greater profits than single-let properties. Tenants are willing to pay premium rates for well-maintained, high-standard private bedrooms in shared homes.
2. Reduced Void Periods: Unlike single-let homes, HMOs can help mitigate the impact of void periods. Even with one room unoccupied, income from other rooms may cover expenses until the vacant room is rented.
3. Value Addition: Larger HMO properties offer opportunities for value addition through extensions and refurbishments, potentially boosting capital value.

Considerations for Prospective HMO Investors

If you're contemplating HMO investments, here are five crucial factors to weigh:

1. Sufficient Capital: HMOs necessitate specialized mortgages with lower loan-to-value percentages, demanding a substantial deposit.
2. Market Demand: Research the local market to ensure robust demand for HMOs among your target tenant demographic.
3. Council Regulations: Local councils wield authority over licensing and planning rules, so consult with them to understand requirements and restrictions.
4. Quality Furnishing: Attract working professionals with upscale amenities, including fast and reliable WiFi, modern appliances, efficient laundry facilities, and ample storage.

Maintenance Planning: Establish a robust maintenance schedule and budget to preserve the property's value and attract high-quality tenants.

Investing in HMOs requires a long-term perspective and prudent planning. While challenges exist, a well-managed HMO can still offer attractive returns, making it a viable investment option for South London homeowners. Remember, the key lies in informed decision-making and diligent management to ensure success in this evolving property landscape.

Contact me today to find out how you can benefit from the current market trends. Or if you would like to know the value of your home check out my online valuation tool.

Bank of Bro and Sis helping fund South London Property Purchases

Research by Hamptons shows that siblings are increasingly chipping in to help brothers and sisters onto the property ladder. In 2023, siblings made up a record 11% of family members contributing to first-time buyer deposits, more than double the share recorded five years ago (5%).

There are a number of ways that South London homeowners can help their siblings get onto the property ladder. Here are a few ideas:

• Offer to gift money towards their deposit. This is the most straightforward way to help your sibling buy a home. However, it is important to make sure that you can afford to gift money without impacting your own financial situation.
• Co-sign a mortgage. This can help your sibling to qualify for a mortgage or to get a better interest rate. However, it is important to be aware of the risks involved in co-signing a mortgage, such as being liable for the debt if your sibling defaults on the loan.
• Help your sibling to save for a deposit. You could offer to help your sibling with their monthly budget or to set up a savings account for them. You could also offer to match their savings contributions up to a certain amount.
• Provide practical support. This could include helping your sibling to find a property, negotiate on price, or move house.

If you are considering helping your sibling to buy a home, it is important to talk to them about their needs and expectations. You should also discuss the financial implications of your support with them.

Here are some additional tips for South London homeowners who are helping their siblings to buy a home:

• Make sure that you are clear about the terms of your support. This includes things like whether the money you are giving your sibling is a gift or a loan, and whether there are any conditions attached to your support.
• Get legal advice. It is a good idea to get legal advice before you offer to gift money or co-sign a mortgage for your sibling. This will help you to understand the risks involved and to protect your own interests.
• Be realistic about your expectations. It is important to be realistic about your ability to help your sibling financially and to set realistic expectations for them.

By following these tips, South London homeowners can help their siblings to get onto the property ladder and achieve their dream of homeownership.

Contact me today to find out how you can benefit from the current market trends. Or if you would like to know the value of your home check out my online valuation tool.