Friday 24 February 2017

Are you ready to start a new buy to let project in Clapham?

I am very excited to announce I've completed on another flat. I thought I'd take this opportunity to share a little more about it. Perhaps it will inspire you to take the plunge. By all means get in touch and I'd be happy to help you with your next purchase.

I've got the video posted here, so follow the link and enjoy the tour. And if you'd like to see it in the flesh, well all you have to do is ask!

In a nutshell it will be a 3bed to 4bed conversion. The property requires some serious upgrading. New electrics, new bathroom and WC and new kitchen, so whilst I'm at it I will shift things around a little bit and offer a superior product. From 3 bedrooms and one WC it will become a fully refurbished 4 double bedroom 3 bathroom apartment. This will increase the potential rental from its current £1600pcm to approximately £2800pcm.

Current layout

Proposed layout

Artist impression


If you are looking for excellent returns on your new buy to let, why not get in touch and I can help you find a suitable investment. I don't just point and say "that's a good one." I invest, actively at that. I will show you how to make better returns, my systems are proven. My work will give you confidence that your money will invested wisely when working with me. Start the conversation now: or follow me on social media for more...

Wednesday 22 February 2017

Is individual room council tax banding killing off HMOs in Clapham?

I've been getting a lot of feedback through the investor grapevine that HMOs (House in Multiple Occupation. Generally let room-by-room, nobody knows each other, each bedroom is effectively a household) are getting more and more difficult to run. You will have heard about new regulations, I'm sure, for "vanilla" buy to let properties over the years. You have to carry out Right to Rent checks, you have to deliver the "How to Rent" booklet and much more of course. HMO managers have even more red tape to contend with. I won't bore you with all that now of course.

The real attack here via the council tax. Some councils in the country have taken to banding HMOs by the room, not by the whole property.

What does this mean?
Well in layman terms you as the landlord or HMO manager will be paying the bills (including of course, council tax), and this bill will go up substantially. Naturally a room is of less value than a whole house, but an HMO of say 6 rooms charged by the room will end up costing more than 1 house. A moneyspinner for councils then, isn't it?

I don't care, I don't let out an HMO
This may be. For the moment. You will find that Southwark for instance is clamping down on properties let to multiple tenants and multiple tenancies. If you are, therefore, letting by the room you run the risk of, in the future, being caught in "additional licensing."

But I'm in Clapham/Lambeth
You may be. Lambeth does not have as strict HMO licensing criteria as Southwark, this is true. But it may only be a matter of time before they catch on to this money spinner.

What do I do?
In my experience zones 2 and 3 are extremely high demand areas for letting. ESPECIALLY the bigger properties. In my 14 years of property in South London I have yet to experience a low demand for 3, 4, 5, 6 bedroom properties. They have always been scarce on my agency's books and always fly out the door. So why not let as one unit? Although not fool proof this will certainly help the council be convinced of your argument NOT to band it by room, but by property address. After all you are arguing it's one household, despite the group being unrelated. They are all friends, they cook together, and so forth. Criteria change all the time of course so this may not be fool proof.

What are the other benefits of letting as a whole?
Well I'm a big fan of this, so here's what it means for me:

1. Easier management. Deal with 1 tenant for instance, easier on the communication front.
2. Less repairs, you generally get less wear and tear
3. All of the tenants move in at the same time. If one does want to move out it will be his responsibility to find a replacement. They all want to terminate early? They are to pay for your agent to find a replacement tenant AND pay rent up until a new tenant takes possession.
4. Easier to get finance if you let on 1 AST
5. Generally eliminates the need of HMO Licensing (take advice on this of course, this will be council dependant) If you'd like me to put you in touch with an expert who can advise you on your property's HMO licensing requirements then let me know and I will connect you.

So to conclude - letting is becoming harder, so you as an investor have to look for ways to invest more profitably. This will mean making your life easier and it yielding you better returns, being higher income or lower costs. I am certain that letting a large property as a single unit will be easier and more profitable than letting it room by room, certainly once you factor in your time involved letting rooms and dealing with 6 tenants instead of 1 all year.

If you are looking to pick my brains on your property strategy do get in touch. I can help you define your strategy and help you build a profitable property portfolio. Having been active in buy to let in South London for nearly 15 years you can certainly make good returns. You don't always need to have millions in the bank to invest in London. Do you want good returns? Do you want to improve your current returns? Start the conversation:

Friday 17 February 2017

5 Things you need to know before buying your next investment property in Clapham

I get probably a call a week asking for the "best" property to buy. Truth be told the adjective is quite vague, really. Are you looking to add value? Are you looking to park your money and forget about it? Are you looking to buy something to sell on straight away? Whatever you're planning on doing with your next property these are key things that you need to keep in mind.

  1. Run the numbers. Borrowing is a cost. Voids are a cost (you pay the bills - gas/elec/c tax whilst it's empty). Are you planning to sell the property on? Buying with cash is great but factor in opportunity cost too. Service charges, insurance, letting fees. Build a spreadsheet or email me for mine so you can tailor it. If you are looking to resell the property have you factored in the cost of the selling agent and the bridging finance for a period 50% longer than you think it will take because... well sales fall through don't they. Then plan b - point 2 below:
  2. Does the rental income cover AT LEAST 150% of the mortgage payment? Remember that stricter lending requirements mean that loans will be tougher to get if your yield is low. I'd argue that you shouldn't buy the property in the first place unless the rent isn't double the mortgage, but that's a whole other conversation!
  3. If you are refinancing use a metric such as Return on Capital Employed to measure how well your investment is performing. Naturally a property you've had a long time and then refinanced may well produce an infinite return, then we can start looking at ways to improve/extend/add value/add letting rooms and so forth. This is a great metric to compare properties, much more detailed than the old "gross yield." Read my previous article for more detail.
  4. Is there a demand for what you are planning to supply and is it "lettable?" All too often I hear grand plans of chopping up rooms and making two where there was one - but will it be liveable? Especially as HMO regulations trickle down further into the PRS there is a real need to "futureproof" your refurbishments. Get in the know and make sure you are installing fire doors from the word "go" in order to prevent having to spend more money on this later.
  5. Are you spending your money wisely? All too often I hear from clients that wish to self-manage their refurbishments that it's been a contractor nightmare after another and they paid more for materials than they wanted to. In fact a friend with nearly 20 years' experience in the building trade has asked me if any of my readers were interested in saving money on refurbishments. I certainly did and truth be told sitting down with Lloyd for a day probably saved me £10,000 per refurbishment (that's 1/3 off the total cost!). He's got a very worthwhile day planned so if you want to learn more about this have a look here for more information.

In summary - know what your numbers are going to be, buy wisely and don't overspend! If you are looking for your next investment or want to partner up with someone more experienced to help you make the best returns in South London then by all means drop me a line and start the conversation or come and see me at this month's Clapham Property Meet. This month we'll be discussing adding value and I'll show my current and past projects in greater detail and show you where I think you can add value in South London. 

Wednesday 15 February 2017

High Yield HMOs vs Low Yield New Build - which is best in Clapham?


An often discussed metric in property, but what is it exactly?

Well there's different kinds of metric to measure the performance of an investment, and gross yield is probably the most basic form of measurement.

So what does it tell us? Well it tells us, broadly, how the investment will perform. Generally a yield of 4%-6% is the going rate for a London property, even less in Central London, more on the outskirts as generally the "safer" an investment the lower the yield. For reference let's remember the interest you get from your savings will be 0.5%-1%. But "safe as houses" varies, as does yield!

So let's drill this down a bit further. The above is only really relevant if you buy the whole property with cash and you ignore all the annual expenses. Truth is you won't generally buy with cash and you have to pay for letting fees, voids, repairs and insurance (and a lot more, I'm sure). So does that mean we have to measure net yield? Maybe. You can't predict all the expenses you're going to incur, but if we compare two opposite properties the picture will become clearer.

I was pitched a new build property in this development called Camberwell On The Green the other day. A lovely new build development - you'll never guess where it was. Anyway, a 2bed there was being sold at £695k with a £2000 service charge and an estimated rent of £2200. Estimated. Real rents probably about £1700-£1800pcm. Service charge of £2000p.a. and so forth. For the sake of argument I'll base the numbers on a rent of £1800pcm.

Let's compare this to a 3 bedroom house in a similar area that you could let to 5 sharers, using both reception rooms. Yes more maintenance, a bit more legwork when letting but let's compare them and see how they fare just for this example.

I prefer to use the Return on Capital Employed metric because this will take into account a few other factors such as:
  1. You will have only paid a 25% deposit, the rest is leveraged from a bank (account for the interest payment in the monthly costs).
  2. You may be able to add value and refinance, so you can apply this metric to the final figures once you have refinanced your property
  3. This takes into account all the running costs. On a new build the repairs will be less but service charges will be higher. Houses with multiple tenants or Houses in Multiple Occupation tend to incur more management costs, both time and money-wise.

When I run some numbers through my spreadsheet such as projected income and expenditure I actually find that the gross yield for my hypothetical HMO is 5.57%. Respectable, but despite leverage this actually drops to 5.16% ROCE after taking into account the bills and management costs. Still miles better than the new build though: 3.09% gross yield and 1.1% ROCE.

So why should you invest in a new build? Well, above points to "you shouldn't" as it's the least likely to cash flow. In fact, I had to run the numbers on a 42% loan to value scenario because the rent achieved would need to cover 145% of the mortgage payment. And unless you put down 58% deposit it won't, and you'll find difficulty in finding a lender. So leverage will hold you back if new build is the way you are thinking of going. Service charges are enormous vs repairs on an older place (and service charges are guaranteed, you may be lucky and not need repairs).

The other point that I'd stress is that a new build is very niche in the sense that they will often be much more expensive than other local properties - developers will command a premium for their "brand new" flats. A 2bed in Camberwell goes for anything from £350k upwards, a period one for about £550,000, the new builds are being sold at a far higher price! However when you come to sell it's not brand new anymore. Remember that new car you bought? Right. Property is same same but different. If you hang on to a new build for long enough they will certainly go up in value like the rest of the market, but the first 5-10 years you will find that the value doesn't change much, in fact it probably goes down a bit because the developer is still finishing off the development, there may be a few unsold and if you decide to sell that particular day you would have to compete with the developer, so probably would have to sell at a cheaper price. Each development is different of course and there is certainly a market for people reserving a particular unit and then trading it on to someone else, but this is more common for developments with hundreds of units and built over 3-5 years. Let's ignore this for now.

In summary the values will go up at the same rate, but only once they've "normalised" and the premium is gone. In the same way a car's depreciation will become more reasonable once it's say 3 years old. New build is lovely and new, but if you're employing your money as an investment you will want better returns than a new build can offer you I trust! As you can see in the graph above, like-for-like comparison will see period property become more desirable in the long run, at least so is my prediction based on my years of experience.

So what to buy? Well new build if you must, they are as low maintenance as property investments come, but I would still advise putting your money elsewhere. There are plenty of developer projects where you can fund a property investor and make a 5-8% return on your money without taking any of the risk of enormous service charges and the like. If you do want to get more involved and benefit from longer term capital appreciation then buying a property to add value to in South London will most certainly offer good returns. I am currently averaging 22% return on capital employed over my last years' projects and I have two more in the pipeline which I'll tell you about in due course. If you want to hear more and how you can invest for better returns just drop me an email or come down to the Clapham Property Meet - we have an exciting talk on this month about property finance and I'll be running through my most recent deals with the audience too.

Monday 13 February 2017

Why you should be getting a judgment against your tenants in Clapham

A commonly discussed topic of course when you are a landlord - rent arrears. For some it's a dreaded time of the month, that time when you sneak at your online banking to see if the tenants have actually paid you... It won't be trouble 99% of the time of course as you use a reputable agent with stringent referencing criteria to help you find the best tenant. But there's always that 1%...!

As aforementioned most tenancies go without a hitch, not even a late payment; well once you're over the hurdle of making sure the standing order is set up properly it's a "set up and forget" system isn't it? This whole process of paying rent is done by the bank's computer and does the work for the tenant; they forget the process as it's automated. Wages go in, rent goes out. Simple. But what if there is no money there to pay the rent to start with? Uh-oh...

It is entirely possible that the successful marketing manager has found themselves in troubled times and can't find enough income after going it alone, or was let go from their job without finding a suitable replacement. Circumstances change of course, but one thing that doesn't change is the contractual obligation to pay rent on a given day of the month. They may, however, have more pressing priorities like food - knowing that they can't just walk out of the shop without paying for their weekly shop. They can short change you on the rent a lot easier!

So arrears do happen - how should you deal with it?

1. Speak to them. There may be an entirely innocent reason for them not paying. Changed bank accounts, just went a bit overdrawn, didn't realise, etc, etc. Easy to solve.

2. If the above doesn't lead to prompt payment, and I mean payment within 24hrs, then I would expect it was an excuse. Be prepared for a lot more. Make sure that you have enough funds to cover your own BTL mortgage payments however, because you don't want their shenanigans to negatively affect your ability to get other loans and things. This will prohibit your property investing that's for sure!

3. They haven't paid within 48hrs and now it's time it's time to get serious. Most tenancy agreements will have a clause in there that says you as the landlord will be allowed to charge them an admin fee for writing them a reminder letter. Normally this ranges from £25-£50. Believe me this isn't about the money, this is more about making a full report on the methods you have used in order to ensure they know that rent is formally (over)due. Note there is a time period specified, so you can't charge them £50 if it's a day late, normally this is 3-7 days. Not a money spinner, just for reporting purposes and to cover your time and effort.

4. Letter has gone out, excuses still forthcoming quicker and faster than an incoming tsunami. No money. So there's two issues really. The first is that you want payment and the second is that you probably want to evict your tenant(s). Possession and arrears. We can't sue them for arrears as we don't know how much they owe until they leave, so let's get them out first. Now it's time to look at where we are in the tenancy. For the sake of ease, I will assume that the tenancy was set up properly and all was done by the book, ie deposit registered, right to rent checks carried out, EPC and GSC given to the tenant at the start of the tenancy and so forth. If you haven't, well, naughty naughty first of all, and secondly you'll have a real problem getting them out! Now - if you have granted a 12 month AST and this happens to be happening around the last 2 months or so of the tenancy then you can serve what's known as a Section 21 notice (you can contact me for more specifics if you like, there are some variations here) and the tenancy will come to an end. If it's NOT near the end of the tenancy you will have to get possession under various grounds of the housing act, normally 8,10 and 11 (google these for full explanations, but in a nutshell it comes down to irregular payments, history of late payments and 2 months of arrears). The last is key, because it's a mandatory ground. Tenants can sometimes know this and pay off £1 towards their debt if the case goes to hearing and they have exactly 2 months' arrears and then you can't get a possession order. A common misconception is that you have to wait two months, but this is wrong - you have to wait until they are 2 months in arrears, which is effectively only 31 days (longest) after they missed the first payment (this will soften the blow somewhat). So you can apply for a hearing and so forth, I'll spare you the technical form filling.

5. Arrears and possession - you can apply for APP, accelerated possession proceedings, this will get you a possession hearing quicker but NOT deal with the arrears. Now a lot of landlords leave it there and simply let the tenant fly off, leaving arrears and often damages behind them. Often times I hear "well they'll never pay anyway, what's the point?" I am very keen for you NOT to let this slide. If nothing else, you want the next landlord to be forewarned of their behaviour. Nothing says "don't rent to this person" like a CCJ! So how do you do it? You'll need an address for the tenant. If you have just come home from your APP hearing and won, get straight on to MoneyClaim OnLine and launch a claim against your tenant at the property address (part of the success is that it has to be a current address, doesn't matter if they are about to move). So you will no doubt get a judgment. Whether they defend the claim or whether you get what's known as a "judgment by default" (where they don't defend it), you now have a CCJ against the tenant. So when they apply for anything with credit and a credit check is involved, they will have to disclose their previous addresses. And guess what, they won't be able to do anything until your arrears (your judgment) have been paid off.

A win in my books. It's not a guarantee of success of course, they may, in extreme circumstances, declare themselves bankrupt or leave the country. But if they are after credit again they can't leave the CCJ unsatisfied, that's for sure. And you've just done a fellow landlord a big favour by putting a black mark on their file.

So no excuses of "it's too difficult" and "oh I need an expensive solicitor" and "I can't be bothered." With the average rent in Clapham being around £1700pcm two months' arrears quickly adds up. You can charge interest too, you know! For £185 fee for any claim between £3000 and £5000 it seems unwise not to invest it. If you don't put that claim on their credit file you'll definitely never see the money back, are you?

Do you have tricky tenants? Do you have arrears? Do you want to know more about the next steps to take? Drop me a quick line on or better yet, why don't you pop by and see me later this month at the Clapham Property Meet, the networking hub for landlords and investors for Clapham and surrounds.

Friday 10 February 2017

The Changing Face of Property Finance - effects on your Clapham Property Investing

This month at the Clapham Property Meet...!

Trevor and Jeroen welcome Martin Smedley, a property finance expert with 30 years' experience in the financial services sector working predominantly in the commercial mortgage sector. Martin has extensive experience with Commercial mortgages, Development Finance, Refurbishment Finance, HMO funding, Bridging and of course Buy To Let.

This month's talk will be on the changing lending landscape and how you can make sure you can finance your next investment! 

Jeroen and Trevor discuss adding value to rental properties and how to seek out the best yielding properties.

And the monthly Q&A where you can get your questions answered! Please feel free to email your questions in beforehand to

Format of the evening:

6:00-7:00: Arrival and networking

7:00-7:15 - Introduction and Market Update with Jeroen and Trevor

7:15-7:45 - Martin Smedley - the Changing Face of Property Finance in 2017

7:45-8:05 - Jeroen talks about maximising rental returns by adding value

8:05-8:30 - Question time! A time to bring your questions to the floor to get answers!

8:30-8:45 - Round the room introductions for networking

We look forward to welcoming you back at THE JAM TREE CLAPHAM, 13-19 Old Town SW4 0JT!

Tickets can be reserved by joining the Meetup Group and RSVPing YES

Friday 3 February 2017

5 ways to add value to your investments in Clapham in 2017!

I mentioned in my last post that it is becoming increasingly difficult to make a living as a regular buy to let landlord. This year is the year of having to add value somehow, simply buying and parking an investment will not get you the returns that you did in years gone by. With the increased red tape, taxation and scarcity of good deals you will have to work that little bit harder in order to maximise every pound you invest.

Here's 5 ways to add value and make better returns:

  1. Multi-let
    Yes it's as it sounds, you let the same property with sharers but instead of letting it on one tenancy you let it room by room. You CAN make better returns employing this strategy, but do check the terms of your mortgage, some lenders prohibit it. Point to note is that it will be more time intensive and potentially you will have a void now and again. Not for the time poor. You will need to add value to the customer by including bills such as gas, electric, broadband and the such.
  2. Extend - the sky is the limit
    If you have a freehold house, an ideal way to add to your gross rental income would be to do a loft conversion. In most areas you can get a loft conversion done under Permitted Development or PD and get another two bedrooms and a bathroom up on the second floor. An average room in Clapham goes for £700-900pcm, so let's say you make an additional £1800pcm/£21,600pa by converting the loft. That's not a bad return on a say £50k expenditure, over 40% return on capital employed! If you have a spare £50k sitting around then it's worth thinking about (£50k won't buy you another property)! You can do this on leasehold flats too providing you own the loft, otherwise you'll have to negotiate with your freeholder to purchase the loft space, which can add to the cost. Often times it still makes sense to proceed though, although with a flat you can't do this under PD, you will have to apply for planning permission. Not to worry though, your loft company can sort this all for you. Check with the local HMO office though if the property will be more than 2 storeys, the textbook definition of an HMO is "five occupants over three storeys living in two or more households" so freehold houses would often fall under this. Some councils' definitions vary though, so please do check if you will become licensable if you decide to go down this route.
  3. New purchases - add value from the outset
    This is key for all those investors looking to add to their portfolio this year. Say for instance you were to price up a normal BTL opportunity. You do your sums and you calculate the potential return based on your input. Deposit, stamp duty, legal fees and you divide the net income (so gross rental less agency and finance costs). There will often be other things involved as well, the "set up costs" like a lick of paint, new furniture and so forth. Now here are two golden nuggets in one: when purchasing, get the seller to leave the furniture. You're probably thinking "oh it's rubbish I'll have to replace it" and that's exactly why you should get them to leave it. Because a REPLACEMENT of said furniture is tax deductible, whereas the first purchase is not. Stained mattress/broken frame? Excellent reason to replace, no? Exactly. Here is nugget number two... If you purchase the property with bridging finance, spend money on refurbishment and ADD VALUE so that your property is worth significantly more then you can refinance to a new lender and withdraw 75% of the NEW value. This means that you will, if you do the sums right, get your money back in your pocket that you just shelled out on the refurb, leaving you with that money to invest further. If by using this strategy you could leave £30-50k less in a property, even taking into account the bridging costs, this would create leverage and you can then take that money and invest it elsewhere - after all if you are looking to maximise the returns you are better to leverage. This of course depends on whether you are expanding, you could also refinance and simply ask for a lower LTV (loan to value) so that you get a better rate and pay less interest monthly. Food for thought; this will be a personal choice. Personally this is my strategy of choice as I'm aggressively expanding my portfolio and I'm looking to leverage as much as possible. I recycled nearly 60k out of my previous purchase.

  4. Refurbish your existing property
    Bathrooms and kitchens sell! Not just that but if your property isn't up to scratch then you won't be getting the best returns. If an average 3bed property can fetch a rental increase of £150pcm or £1800 per annum then spending £5000 on a refurbishment provides you with a 40% return and it will pay for itself in 2.5 years. Bathrooms and kitchens tend to last about 10 years mind, so it's not like they will last forever, but do go the whole 9 yards and raise your game. Make your property more desirable. After all the competition is fierce for good tenants - do you want to be an average landlord with an average property or do you want to be good/better/best and offer a good product? I'm not talking gold taps and marble flooring incidentally. If you want me to advise you on cost-effective refurbishments then get in touch - I'm sure you've seen the quality of my own projects so I'm happy to manage your refurbishments too if you're looking to go down this road.
  5. Work together with a fellow investor to pool your resources.
    The life of an investor can be lonely - it needn't be though. You would be amazed at how many people came to the Clapham Property Meet earlier this week to learn more about investing. If you network with other investors you will get the confidence to do things with your portfolio and your money in order to create better returns. So take action and experiment with strategies that are tried and tested by others. Never bought an ex-local authority property? Talk to someone about the pitfalls. Never invested outside of Clapham? Learn from others' experiences. Never multi-let before? There will be someone who has done it and is happy to share.

So - how are you going to add value to your investments? As a thank you for reading I'm going to offer a FREE 20 minute phone call to run through your strategy and give you some hints and tips. I'm going to limit this to the first 5 readers that respond, so if you're interested in a quick strategy pep-talk for 2017 then do drop me a line and we'll get a call scheduled in.

Wednesday 1 February 2017

Are you adding value to your investments to get the best returns in Clapham?

Last night was definitely a great success - a packed room full of investors looking to advance their journey in property investment. We had Mike Holt deliver a fascinating talk on using your pension funds to invest in property, be it someone else's or even your own! Very good insight and some very good tax tips too.
Trevor Cutmore

Full House!

I discussed finding the best deals using traditional estate agents, but of course making the most of the tools available, whether sharp or not of course.

In other news – and this was discussed last night in more detail – prime central London sales  are down 21%. This is obviously down to stamp duty (as the pound has devalued you’d expect more foreign investment). This highlights a massive problem for investors in that they have to create value. Value add is the new investing. You can’t make any sort of returns by simply buying a buy to let and parking it and hoping for capital growth, this is simply a non-investment. More on that next time.

For next month we are hosting Martin Smedley, stay tuned for further details. Martin is a master broker and will tell us more about property finance.

If you are a landlord and/or investor looking to maximise your portfolio profits then get in touch. I offer a range of things from portfolio reviews to site visits to give practical advice tailored to your property. Start the conversation by email.

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