Thursday 29 December 2016

Transfer your Pension into Clapham Property!

We are about to embark on a busy year of investing in Clapham, Brixton and perhaps slightly further afield. Hopefully you have your finance ready and are waiting for the right deal to land in your inbox. But did you know that you could also invest your pension into property? This has the added bonus of many tax benefits.

Together with my esteemed co-host Trevor Cutmore I will be delighted to present the Clapham Property Meet on Tuesday, 31st January at the Bread & Roses, 68 Clapham Manor Street, SW4 6DZ. This month's guest speaker is Mike Holt, active investor for over a decade. Having negotiated over 350 purchases, and continuing to do so, he now specialises in unlocking pensions and allowing investors to access previously locked away funds. Pensions allow access to commercial property but a whole lot more. Mike will run through the options of this very tax-efficient way of investing.

Whether you are an experienced property investor, just starting out, or perhaps have cash sitting on the side lines, I am here to help members to network effectively and find win-win solutions by helping individuals to pursue fresh property investment opportunities. 

Do join us if you are interested in property investments, be it local or further afield.  

Registration and early networking is between 6-7pm with a top quality speaker as well as the latest on current issues from your hosts between 7-8:30pm. Drinks and further socialising/networking to follow the main event.

I look forward to seeing you there. Do get in touch via email me: if you have any questions beforehand. Hope to help you soon to boost your Clapham property investment returns!

Friday 23 December 2016

Rents are slowing in London. Time of year or the start of rents falling in Clapham?

Rent growth in London has slowed with annual growth of just 1.6% compared to 3.1% year on year in the rest of the UK, the latest index data shows. This comes to me as somewhat a surprise as London has always bucked the trends when it comes to housing - recovering quicker from crashes and outperforming other parts of the country. Latest data however shows otherwise. Let's look at some factors that could be causing this.

Are landlords selling up to feed the first time buyer market? 

It may appear so. After various tax changes (stamp duty and the reduction of mortgage interest relief on rental income it may be a sign that "generation rent" is now slowly becoming "generation FTB" and taking advantage of various incentives to get on the ladder, slowing rental demand. Slowly and steadily though, while buy-to-let transactions have slowed in recent months, there is no evidence of a widespread sell-off by investors associated with the softening of the market. The National Landlords Agency (NLA) had predicted a major sell-off of 500,000 homes by landlords earlier this year due to imminent unfavourable tax changes. More signs that the attack on landlords is nothing more than a tax as it's not quite the "opening of the floodgates" that the media portrayed.

Seasonal trend

It could very well be that we are experiencing a lower ebb than usual, this simply because there wasn't the usual peak of rental prices in the summer time this year. Reason for that was the significant oversupply caused by the stamp duty increase on 1st April, so many investors moved rather quickly to beat this deadline and save a significant amount of money on stamp duty.

There is continuous talk of "rents can't go any higher" and "when will it stop" but the truth is that there are still plenty of people that are NOT spending a lot of money on rents. There are plenty of tenants that pay under the market rate because their landlord isn't treating their rental property as a business and set a lower than market rent because "they are good tenants." As landlords are facing increased tax bills, increased regulatory compliance costs, and now with the banning of agency fees for tenants on the horizon there will certainly be no other option but to put rents up. I feel that there is still a very long way to go before "rents are unaffordable."

All in all it would appear that London has taken the brunt of the tax changes, especially stamp duty, causing a little bit of disruption in the market. Although concerning as a London investor would expect rents to outperform the rest of the country I feel it's not a cause for concern. 

How can I ensure I get the best rents?
A question I get asked rather frequently as you can imagine. Below a few pointers to make sure that you are able to make your letting as profitable as you can - and this doesn't always mean spending the most money on the best property in the best location.

  • Make sure you are on top of repairs. It would amaze you to be a fly on the wall, but often tenants do think you are psychic. You should instantly feel it in your bones when something goes wrong in the property. Alas this isn't the case so the best thing to do is to draw out the repair requests. This will benefit you because the tenants will spend less time moaning among themselves that the places is crumbling around them and you will appear to be a responsive landlord.
  • Winter - condensation issues. I have lost count the number of times I've been in a property and the tenants don't draw the curtains to let in some light or open the doors to improve ventilation. A condensation/mould no-no for sure. Sunlight kills mould, don't you know! You will have to explain that it's in the tenants' best interest to make sure that air is moving in the property to ensure their lungs stay healthy (and of course you don't want to have to redecorate every year). Heating is another key issue. I always recommend they change utility supplier to a more cost effective one once they come off the "standard rate." so they pay less for their utilities and can afford to heat the property effectively, again to reduce/eliminate damp/mould/smell.
  • Ensure that you are firm but fair. Rent late? ask for standing order payments a specified number of days before the rent due date to allow for bank holidays, weekends and so forth. The contract should stipulate it's paid on the rent due date (i.e. it reaches you, the landlord, on the rent due date) so it's not unreasonable for them to make arrangements to get it to you on time, if this means it leaving their account a little earlier.
  • Damages midway through the tenancy - it can happen that something gets broken during the tenancy. Remember that the tenants are your customers and pay you handsomely for the privilege of living in your property. If something happens accidentally it's important not to allow emotions to take hold. You can't, after all, expect the tenants to treat the property as well as you would yourself, you have to take some rough with the smooth. A football through the window will however require you to explain that although you'll organise the replacement the cost will be down to them.
  • Refinance the property - if you have not remortgaged for some years it's likely that you will have reverted on to a "standard variable" <ahem ripoff> rate. To ensure you are paying the lowest monthly repayments for the amount borrowed you would be wise to see your broker. You may, as I found, be able to release money for reinvestment and STILL be paying less monthly!
  • Make sure you have funds for repairs. Agents that manage residential properties are bound by their code of practice to keep a kitty for emergency repairs. Although there is no requirement for you as a landlord to do this, it does make sense. Of course the properties you let are a commercial enterprise, but don't forget to keep some money aside in order to pay for an emergency repair. Especially in the winter those expensive emergency <ahem boiler> repairs will rear their ugly heads!
  • Make sure it suits. If your tenants are moving out you may be wise to offer them a slightly discounted rent in order to do some improvements around them (if possible). It's a good time of year to have a planned void, so if it's something like a kitchen or a bathroom that you want to replace it's probably best to leave the property empty. Winter is always the worst time of the year to be letting a property (demand is the lowest, see my previous article about seasonal rents here) so when you bring the property back to market the demand will be picking up, especially thanks to your improvements. Remember not to go cheap, go good value. White gloss kitchens, neutral tiles in the bathroom, etc etc.

In summary - offer the best product you can to command the best price. Repairs are costly. You can't eliminate them but you can reduce their cost by communicating with your tenants. This will reduce the number of hours and pound notes you spend on repairs and in turn increase their length of stay. Changeovers and repairs are costs. Reduce them in numbers for increased returns!

I hope of course that was useful, so I'll leave you with that to mull over.  I have helped many investor landlords build profitable investments, so if you  are interested in learning more about growing your investments wisely then do get in touch via email me: or come down to the Clapham Property Meet and learn more about getting the best returns in the London property market.

Tuesday 6 December 2016

First time buyers are still buying! What does this mean for the Clapham Property Market in the long run?

But what does that mean?
In a nutshell, it's great news! The continued demand from first time buyers will mean that properties at the lower end of the spectrum (starter homes - one and two bedroom flats, anything up to £500k) - will continue to rise in value sharply. A good proportion of these will be former starter homes belonging to now "accidental landlords" (those that couldn't sell at the time so reluctantly held) or couples who perhaps were able to trade up using the old "let to buy" system (letting out their flat whilst remortgaging to release equity for a deposit for the next property). A lot of these non-professional landlords will be selling up due to tax changes, increased regulation and increasing costs in the PRS, making the money made every month (probably not more than a few hundred pounds, dwindling to nothing after a few repairs and a void) not worth their time.

So what happens next?
There are, in my opinion three or four stages to a London purchaser's life. Naturally this is wildly generalised of course, but here is my take:
1. First time buyer, purchases small one or two bedroom flat (50-60sqm)
2. Trades up to bigger flat or even house, perhaps due to growing family (95-110sqm)
2a. Extends existing home
3. Trades up again or 
4. Downsizes or leaves London for better value

We now find ourselves in a market where any property £950k plus is disproportionately more expensive due to the increase in stamp duty - a £million purchase would now set you back 73k in SDLT, prior 1/4/2016 this was 30k cheaper. As a result we've seen sales in this segment of the market dwindle some 10-15% depending on which tracker you look at. More people in that segment are therefore staying put; they are finding it difficult to sell. So the top end staying stagnant means that buyers that would have been (3) above now revert to either 2a or 4, skipping a trade up to a nice house in Old Town (but let's face it £1,000,000) can be paid quite easily outside of Old Town too these days).

Let's go back to the bottom of the market. The lion's share of the stock that first time buyers are purchasing right now is stock being offloaded by aforementioned small-time investors, for whatever reason. An equilibrium of supply and demand? Perhaps not because prices are still rising, and pretty sharpish too! A year ago you could find a decent 1bed apartment in Clapham North/Brixton for £400-450k, now you're talking £450-500k for the same thing. For a "woe is Britain, the market is rubbish" market, that's a pretty sharp increase! So not so rubbish after all, FTBs galore chasing limited stock, prices going up. Simple Keynesian economics. I predict that, over time, small-time landlords that haven't sold up yet may do so when they realise their tax bill will increase substantially, further feeding the demand at the bottom of the ladder. However the problem is this: people at the (3) stage, so looking to buy a bigger property than they have, don't move as often, or as quickly. They take a lot more time to deliberate a move. There may be children involved, commutes to important jobs - they are older and therefore have more specific requirements. What they want may not be readily available on the market. So they wait. Patiently. After all they are not in a hurry to move, they are comfortable where they are, they are homeowners, their property is going up in value whilst they wait. Unlike the FTB they are not "wasting" money by paying a landlord's mortgage. So this piece of the pie is very slow. That will cause surge in demand a few years down the line ones all these new first time buyers want to trade up! I predict second properties will be in short supply, leading to a surge in prices. I would like to say the same for the bottom of the market, but I think the slow and phased taxation change will mean that landlords selling off will be gradual over time, drip feeding the supply to the pit of hungry first time buyers. There is no material change on the horizon that would incentivise the middle of the market to move. Instead the stamp duty higher up the ladder means that it is much better value to extend and stay put.

What can we learn from this?
I predict there will be a sudden surge in demand for these (middle of the market) homes  in 2018-2020 when this surge of first time buyers decides they have outgrown their properties and want to trade up. If the stamp duty costs in the upper end of the market have not come down by then, we may well see a mass exodus of young families out of Clapham (and this theory can be applied to the rest of zone 2 also of course). Either those that have extended and want a change of scenery, or more truthful you may even get the first time buyers of today moving out because by 2020 I'd be surprised if you could buy a three bedroom terraced house in SW4 for under £1,000,000! The upper end of the market may well stay stagnant for a few years yet until earning power and deposits have caught up. Stamp duty cannot be financed, it needs to be paid like the deposit, it must be money in the bank. 

So what does that mean for investment in Clapham?
I feel that there is reasoned argument to deduce that the demand for bigger properties will surge in the next few years. You may be wise now to look at bigger as opposed to smaller units, both for yield (higher rental income per £ spent on purchase) and in the long run, for capital appreciation. I can say from personal and professional experience that 3 bedroom apartments and houses have done well. Whether you buy for yield or capital appreciation both Victorian and old Local Authority units do remarkably well. There is however, more incentive than ever for first time buyers to get on the housing ladder, and with the government's continued attack on the property investor you are sure to see good capital appreciation from a desirable 1 bedroom apartment too, especially Victorian ones. As aforementioned you'd be pressed to find a good one now for under £450k on a desirable road near a tube - just be aware that due to lending tightening up (because of the tax changes) you will find that it will be nigh on impossible to leverage a period property over 70%LTV, normally you'll find you can't get beyond 60-65% due to these stress tests (the lender will simulate the interest rate at 5% and then insist the rent is 1.45 times the rental income).

I have helped many investor landlords build profitable portfolios. If you  are interested in learning more about growing your investments wisely then do get in touch. I offer a range of investment options to help you invest - either by helping you purchase property or by helping you fund sustainably profitable property developments. It can be as hands-off or hands-on as you like. Get in touch by emailing me: or come down to a meet in Clapham (Clapham Property Meet) and learn more about getting the best returns in the London property market.

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