Monday, 26 June 2017
Should you buy or rent a house? Buying your own home can be expensive but could save you money over the years. Renting a property through a letting agent or private landlord offers less autonomy to live by your own rules, with more flexibility if you need to move.
Yet, there is third way that many people seem to forget, yet it plays an important role in the housing of the Clapham population. Collectively known as social housing, it is affordable housing, which is let by either Lambeth Council or a housing association to those considered to be in specific need, at rents below those characteristic in the private rental market.
In Lambeth, there are 45,619 social housing households, which represent 35.08% of all the households in Lambeth. There are a further 18,792 families in the Lambeth London Borough Council area on their waiting list, which is similar to the figures in the late 1990s. The numbers peaked in 2012, when it stood at 27,534 families, so the current figures represent a drop of 31.7%.
Nevertheless, this doesn't necessarily mean that more families are being supplied with their own council house or housing association property. Six years ago, Westminster gave local authorities the authority to limit entitlement for social housing, quite conspicuously dismissing those that did not have an association or link to the locality.
Interestingly, the rents in the social rented segment have also been growing at a faster rate than they have for private tenants. In the Lambeth London Borough Council area, the average rent in 1998 for a council house/housing association property was £239.37 a month, whilst today its £477.45, a rise of 99% in 19 years.
When comparing social housing rents against private rents, the stats don’t go back to the late 1990’s for private renting, so to ensure we compare like for like, we can only go back to 2005. Over the last 12 years, private rents have increased nationally by a net figure of 19.7%, whilst rents for social housing have increased by 59.1%.
So, what does this all mean for the homeowners, landlords and tenants of Clapham?
As you will know, I've predicted rents in the private rental sector in Clapham will increase sharply over the next five years. Even though the council house waiting list has decreased, the number of new council and housing association properties being built is at a 70 year low. The government crusade against buy-to-let landlords together with the increased taxation and the banning of tenant fees to agents will restrict the supply of private rental property, which in turn using simple supply and demand economics, will mean private rents will rise – making buy to let investment a good choice of investment again (irrespective of the increased fees and taxation laid at the door of landlords). It will also mean property values will remain strong and stable as the number of people moving to a new house (and selling their old property) will continue to remain restricted and hence, due to lack of choice and supply, buyers will have to pay decent money for any property they wish to buy.
Interesting times ahead for the Clapham Property Market!
As always if you are interested in investing in Clapham, or perhaps other areas in south London then start the conversation on email. I have nearly 15 years investing experience in London and I can help you get better returns on your investments too. Whether you're starting out or seasoned investor, there's always more to learn. Project management? Deal analysis? Profit forecast? Get in touch. I'm always looking for more investors to work with, so if you have money sitting idle in a bank account and you want guaranteed returns on your savings then you will want to hear more.
Wednesday, 21 June 2017
I received a very interesting letter the other day from a Clapham resident. He declared he was a Clapham homeowner, retired and mortgage free. He stated how unaffordable Clapham’s rising property prices were and that he worried how the younger generation of Clapham could ever afford to buy? He went on to ask if it was right for landlords to make money on the inability of others to buy property and if, by buying a buy to let property, Clapham landlords are denying the younger generation the ability to in fact buy their own home.
Whilst doing my research for my many blog posts on the Clapham Property Market, I know that a third of 25 to 30 year olds still live at home. It’s no wonder people are kicking out against buy to let landlords; as they are the greedy bad people who are cashing in on a social woe. In fact, most people believe the high increases in Clapham’s (and the rest of the UK’s) house prices are the very reason owning a home is outside the grasp of these younger would-be property owners.
However, the numbers tell a different story. Looking of the age of first time buyers since 1990, the statistics could be seen to pour cold water on the idea that younger people are being priced out of the housing market. In 1990, when data was first published, the average age of a first time buyer was 33, today it’s 31.
Nevertheless, the average age doesn't tell the whole story. In the early 1990’s, 26.7% of first-time buyers were under 25, while in the last five years just 14.9% were. In the early 1990’s, four out of ten first time buyers were 25 to 34 years of age and now its six out of ten first time buyers.
Although, there are also indications of how un-affordable housing is, the house price-to-earnings ratio has almost doubled for first-time buyers in the past 30 years. In 1983, the average Clapham home cost a first-time buyer (or buyers in the case of joint mortgages) the equivalent of 3.1 times their total annual earnings, whilst today, that has escalated to 7.1 times their income.
Again, those figures don’t tell the whole story. Back in 1983, the mortgage payments as percentage of mean take home pay for a Clapham first time buyer was 32.8%. In 1989, that had risen to 84.6%. Today, it’s 46.1% … and no that’s not a typo .. 46.1% is the correct figure.
So, to answer the gentleman’s questions about the younger generation of Clapham being able to afford to buy and if it was right for landlords to make money on the inability of others to buy property? It isn’t all to do with affordability as the numbers show.
And what of the landlords? Some say the government should sort the housing problem out themselves, but according to my calculations, £18bn a year would need to be spent for the next 20 or so years to meet current demand for households. That would be the equivalent of raising income tax by 4p in the Pound. I don’t think UK tax payers would swallow that.
So, if the Government haven’t got the money… who else will house these people? Private Sector Landlords and thankfully they have taken up the slack over the last 15 years.
Some say there is a tendency to equate property ownership with national prosperity, but this isn’t necessarily the case. The youngsters of Clapham are buying houses, but buying later in life. Also, many Clapham youngsters are actively choosing to rent for the long term, as it gives them flexibility – something our 21st Century society craves more than ever.
I hope you enjoyed this somewhat meatier article. As always if you are interested in investing in Clapham, or perhaps other areas in south London then start the conversation on email. I have nearly 15 years investing experience in London and I can help you get better returns on your investments too. Whether you're starting out or seasoned investor, there's always more to learn. Project management? Deal analysis? Profit forecast? Get in touch. I'm always looking for more investors to work with, so if you have money sitting idle in a bank account and you want guaranteed returns on your savings then you will want to hear more.
Come join me at the Clapham Property Meet and let's talk property!
Tuesday, 20 June 2017
If you follow me on social media you'll probably already know that I was the winning bidder at a nice property in Crystal Palace yesterday. Instantly you may think "but you're a Clapham investor?" This is true, but as you will know from other project I have on the go one must look slightly outside of their core area to snap up a bargain or two.
The flat I put my hand in the air for is a short lease flat. Again, you may baulk at the thought of purchasing a leasehold with any less than 80 years remaining. There is, however, a little thing called the Leasehold Reform, Housing and Urban Development Act 1993. This little piece of legislation allows the leaseholder to serve notice on the freeholder that they would like to purchase a lease extension. Something the freeholder can then not refuse...! It's the legal equivalent of the gun to the head; quite contrary to olden days where freeholders would dig their heels in and either not sell an extension or ask for silly money.
Naturally nothing is free in life... This notice, under Section 43 (C)(2) allows the leaseholder to "specify the premium which the tenant proposes to pay in respect of the grant of a new lease." In layman's terms, make the freeholder an offer. Now this offer can be accepted or rejected; if it is rejected then a leasehold valuer will come in and value it and so forth, and you must pay both parties' legal fees regardless. BUT... fact remains that you could have a very amenable freeholder and they'd be happy to sell you a lease extension in return for a box of chocolates and a dozen roses... You never know! Worst case scenario you will have it valued and pay market rate for the lease extension. Nothing ventured, nothing gained.
So short leases are one way to outsmart the competition at an auction. More so than a straightforward refurbishment project, because everyone can do that and then it's a race to the bottom. When you start using "tricks of the trade" you will find there is a bit more scope for profit. Less bidders, and more sophisticated ones that demand higher margins...
If you are interested in learning more about auctions keep reading: My good friend Piotr Rusinek actually buys properties at auction for a living and he's putting on a day of auction learning this weekend! The day will include: how it's done, making savings on reading auction legal packs, using the EIGroup (the RightMove of the auction world) and an introduction to Jay Howard, Auction Manager at Auction House London! so click this link if you are interested in reading more about it and to book yourself on.
As always, if you are keen to start investing, or start doing something a bit more interesting with your current portfolio... Start the conversation on email. I'd love to meet you in person of course at this month's Clapham Property Meet, so do come along. We have a great talk on Planning and Lease options scheduled. Click here for tickets and more info.
Wednesday, 14 June 2017
Well, some interesting news in the world of property at the moment: Get Living, the company behind the UK's biggest rental scheme in the private sector in the Olympic Village is going to be scrapping deposits altogether from today. They reckon that the average deduction equates to a few days' rent, so for them it's not economical to register the deposit, comply with various bits of legislation and then have to account for returning it later. Amazing!
Yes, red tape. When you take a "holding deposit" as we used to call them, many a landlord and agent fell foul of the regulations already. After all, the Housing Act (amended 2008) states a deposit must be registered within 30 days of receipt. Furthermore, prescribed information must be given to the tenant. What's this? Well, it's just a paper trail that the landlord/agent is obliged to serve on the tenant to ensure they've been told where this deposit is held. If this isn't done in the right timescale then you may struggle to regain possession and are open to a fine of 3x the deposit amount.
Following on from the above, you can't just deduct whatever you fancy from the deposit because the tenant hasn't left it in pristine condition on exit. An allowance must be made for the useful life of the product. Say a worktop is damaged beyond repair. These are supposed to last say 10 years, it was 3 years old when tenant moved in and tenant was there for 2 years, well you've only had to replace it 5 years early, so the tenant would contribute 5/10 of the cost of a replacement worktop. For those that don't know a section of worktop is about £100-£200 depending on the quality. So you've deducted say £100 and the tenant puts up a fight; it's then down to you as the landlord/agent to prove the condition of said worktop on the way in. Inventory is key! So you've paid £200 for a good inventory on the way and another £200 on the way out. £400 plus the cost of registering the deposit (administrative and perhaps otherwise if using insurance-backed schemes). Doesn't seem worth it, now does it? Get Living claim to deduct a few days rent from each deposit. Say the average rent is £1650pcm or thereabouts per tenancy, the daily rent is about £54. They reckon they're deduction about £100-£150. So I guess what I'm reading (between the lines) is that they reckon, on a big scale, they're saving £400 or thereabouts per tenancy so they don't mind £150 worth of damages that they write off. I suppose this makes good commercial sense. Mind, some damages will be higher than others, but as a big company with so many units it all averages out.
Should you or shouldn't you?
As a private landlord and ex-estate agent I've always taken deposits. One may argue that we "want to make renting more affordable" and so forth. I disagree. Take this example - you have two applicants with the same job, the same qualifications, same social demographic. One however has had the foresight to save up for a rental deposit (let's face it, it's not a deposit on a purchase which runs into 6 figures here, we're talking just over 4 figures!) and one who has not - which tenant would you rather have? Yes, exactly, the one who can manage his finances better. Even if he is unable to manage his finances surely you have a credit card or similar to fall back on? Oh you don't? Well that's just poor planning isn't it? The other factor to consider is that you are not letting hundreds of units like Get Living. You will be letting less than double digit properties no doubt if you are self-managing. So you do not have the luxury of being able to "write off" damages like they can, because after all, your portfolio isn't so large that one flat being left damaged and 399 others being pretty much immaculate will balance your books. It's likely that if you have one bad tenant it will wipe out a big chunk of profit. So my thinking is you want to be attracting the right people, the right tenants who have a vested interest in getting back that deposit (because that's what's most important to them, above treating your home respectfully - one does lead to the other though).
So in summary, I am sceptical about this whole deposit scrapping idea. You are lowering standards, and in an industry where rogue tenants are on the up, you want to keep the bar high. I think having a vested interest in the property is a good thing. Not only financially, but perhaps offer to pay for an improvement, or some other kind of incentive. It may not be a bad thing...! I've been active in the London property market for nearly 15 years now, so if you fancy picking my brains about something by all means start the conversation via email, or come down to the Clapham Property Meet and join us this month for a lovely talk on planning gain followed by a social evening of networking with other local property investors. Hope to see you there!
Tuesday, 6 June 2017
As you will know I've been investing in residential property for some time now. I thought I'd share a few useful tips; things that I do on a viewing to ensure what I'm seeing is what I'm getting and to make sure I have a solid investment!
1. Is the floor plan correct? Often times the properties I'm attracted to are advertised with little more than an exterior photo and a sketch floor plan. Obviously an internal inspection is required, but is what you're seeing adding up to what you think you're getting? I, more often than not, measure up myself to eliminate the risk of an "optimistic" measurement from the agent. Here is the link to the laser measuring device I use, only £20 from our friends at Amazon. With the proper measurements I can be sure the surface area is on par with what I believe it to be. Believe me, it can swing either way. The last one I measured was 75sqm and the agent had it listed as 46sqm. It doesn't take a genius to work out that 46 m2 is impossible for a split-level 3bedroom flat, but needless to say it put a lot of people off viewing, so bagged another bargain!
2. Checking your numbers. There's no harm in calling local agents to see what they think you'll fetch. Whether you are looking to resell the property straight away or let it, it's wise to call a few agents to gauge confidence and price levels. Time of year will make a difference, so do ask them. And no harm in calling on different days pretending to be either a buyer or a seller. You'd be amazed at the difference in what you're quoted; not sure if there's a hard and fast rule, but I always feel that they tell buyers/tenants a higher price and a seller/landlord a lower price to manage expectations, but you do get the odd agent overquoting the seller/landlord to "win business." Be wary of this and take averages. Mix a few local independents and big corporates too, and don't bother calling the agent that you're looking to purchase the property from, it will be unreliably skewed to make the property look a better investment than it is!
2a. Further on numbers - what does it cost in fixed costs such as ground rent, service charges. Any Section 20 notices served by the landlord? These are repairs of over £250, so don't necessarily have to be life changing but you will want to know before committing, that's for sure. Add this in to your spreadsheet to make sure your overall return is still acceptable. Also, does the freeholder require an admin fee for consent to let? Is it a per tenancy, per annum fee or one-off?
3. Exit strategy. I'm very much a believer in keeping a property in a "family style" condition so that it can be resold. This is my qualm with the full-blown HMO strategy. It works, gives good cash flow but it hurts you on the resale because you can end up with a glorified youth hostel! If you chop it up into bedsit rooms etc will you be able to sell it as a family home? Probably not, families don't appreciate an en-suite shower room in the living room! If it is easily turned back into a family dwelling then fair enough, but if you will have to spend 5 figure sums then you need to reconsider. Here's two flats in the same block where someone has chopped the living room in order to get another bedroom. Sensible. I pasted an original floor plan of another one in the block on the right (it was mirror image so I flipped it around for easy comparison). You can see that it's just a partition wall in the living room, so easily undone if required.
4. Further on this topic, (re)financing. If you put en-suite bathrooms everywhere and let the property on multiple tenancies (by the room for instance) then you will not be able to get a mortgage through a mainstream lender, you will be limited to commercial finance through HMO lenders. Much higher rates and lower Loan to Value, limiting how much you can gear up, so beware of these pitfalls. The other factor to consider is, if you are buying ex local authority properties is that often times lenders have restrictions, so they won't like lending on properties with shared decking access, a less than 50% private ownership in the block or blocks of more than 5 storeys. Most lenders have 8 as a max, so anything above that is a cash buy only. And beware, being on the ground floor doesn't help either, they look at the whole picture!
I hope that helps you in looking for a great yielding property, for hints, tips, news and more do sign up to the blog via email here. I have been investing in South London for nearly 15 years. Would you like to get better returns from your investments? Why not start the conversation by sending me an email, or join me at the Clapham Property Meet, the monthly networking meeting where we talk about all things property. Join us this month for Jonathan McDermott's talk on Planning Gain.
Friday, 2 June 2017
Naturally as an investor/estate agent/property professional I speak to a lot of people in the trade. I thought I'd share some of the most outrageous repairs we've been called out to - and when I say "repairs" I actually mean a massive non-emergency! Needless to say there were no emergencies and most can be solved with common sense.
So here we go, hopefully you'll find the tales as entertaining as I have!
- Daniel White, local estate agent recants his tale - "...recently had a tenant kick off because his boiler was not working, I popped around before considering getting a plumber. When I arrived he was angry and was acting if it was my fault his boiler broken down but after 2 minutes minutes investigating, we found his gas pre-paid meter had run out of funds!!!! Apology, of course not.
- Mandy Wilshaw, landlord recants she "had a call out to a property because there was no electric - the whole area had a power cut!"
- Tradesman - Ally Menzies shared how he is called out to properties and "...the geezer was wondering why every time someone had a shower it rained downstairs!!!"He was kind enough to send in this picture which explains how badly fitted the shower screen was.
- My very own - I was told about a "puddle appearing in the kitchen." When I asked the tenants whether they were a bit lazy with mopping up after they got out of the shower they insisted the floor was bone dry. I inspected, told them it was likely that the water is finding a way down, so mop up. It took them a month to come back to me to say that the issue hadn't gone away. A MONTH! Ultimately it was down to a leaky seal in the shower screen like Ally's example.
- Pip Abbott told me about his sensitive tenant: "The blinking light on the smoke alarm in the landing keeps me up all night and I need to sleep!" I asked Pip whether the beeping bothered him in the end and he assures me the tenant took out the battery to stop it from doing that!
- Rick Player had a less than positive experience letting to someone with a dog:"How on earth did the water overflow on to the wall and floor from the shower? Didn't you close the door when you showered?"Tenant "Well, it's difficult to shower the dog with the door closed, so we shower him on the bathroom floor!"To be fair they've done well not flooding the entire house, think of how bad that could have been!
- Nearing the end of the list now - Dylan Stephens told me about his story about the blocked toilet. Every landlord's nightmare of course!Tenant: "The drains are blocked and water keeps running out from under the washing machine and into the basement room."DS: Have you put kitchen towel down the toilet.Tenant "No"DS: "Why is there 9 inch cardboard tubes in the bathroom under the sign telling you not to put kitchen roll in toilet."Tenant: "We clean bathroom with it."
- And finally - this has got to be today's winner!Jemma Bath - "I was on my summer holiday when I wake up to a number of calls from a tenant in our Battersea flat asking me to call her back ASAP. So I call and she proceeds to tell me how there's an invasion of spiders and we need to call pest control. So here's me picturing hundreds of spiders coming through the window. I ask her "OK how many are there?" And she said "Well so far there's been three....!"
I hope you've enjoyed a light-hearted article. Do follow me on all the usual social media platforms if you want to stay abreast of the latest property investment news, trends and more. Looking to invest in property and don't know where to start? Start the conversation by email: firstname.lastname@example.org or join me at the Clapham Property Meet, the go-to networking meeting for new and experienced investors alike.
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