Video Series 7/30 - How to Appraise a Buy to Let Property Investment

Well here it is, for those that want to see the numbercrunching and spreadsheet analysis!









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Mass exodus of Buy To Let landlords in Clapham & Brixton - glad you're not joining the masses!

Another day and another paper. And another articles which spells out DOOM and GLOOM for the housing sector. This time it's a "woe is me" for buy to let investors. Increased taxation, stamp duty surcharges and so on and so on. There's no money in Buy to Let if you read (and believe) all the journalists have to offer. I can't comment on the brilliance (or perhaps lack of) of the journalism itself, I certainly beg to differ.

Many of my savvier client landlords are currently rushing into the market with enthusiasm. Speaking to one of my bigger clients he exclaimed "I'm completing on two this week, find me another two, quick, before 1st April!"

http://uk.reuters.com/article/us-britain-houseprices-rics-idUKKCN0UZ0IG

He's not alone. If you read the article you'll see that many investors are rushing to get their savings; after all a deal will have to be 3% better in a few months for it to be worth the same to an investor.

A push from the government to push stock towards end user buyers as opposed to property traders. A push to perhaps slow the market? Personal thoughts are that rents will rise. Buy to let still remains a solid investment vehicle and the increased purchase costs will simply have a negative effect on "investment ripe" properties; think the probates and the doer uppers of the world. The reduction of mortgage interest deduction from the tax bill will certainly be a steady driver of rents (in the upward direction of course).

I certainly feel that long-term, it will not have an adverse effect on investors. This presents new opportunities as small-fry (accidental and otherwise) landlords leave the market. If you are a well-informed landlord and have help from the professionals around you (most advice is available free of charge, all you have to do is ask) there should be no reason NOT to invest more in to buy to let. You will certainly get a good capital growth, but buy well and you can replace your salary within 2 years.

A client of mine recently purchased a three bedroom property for 380k, refurbished for 25k and it was revalued at 500k! He's refinancing this one also, so in 6 months time he will withdraw £90k from the property, which was returning £3000pcm. Not bad for a £30,000 investment. Can you make 120% yield off an ISA, stock, bond, or share? I think not.

If you are thinking of investing (further) in the South London property market pick up the phone or drop me a line on jeroen@claphampropertyblog.com I advise clients on properties all day long and along my profitable portfolio I help people with property deals, letting, management and sales. Do you want to invest? Get in touch.

Happy New Year! Are you going to start your property venture the right way in 2016?

Are you ready for the new year?

I hope you have some serious property plans. I've been speaking to a number of readers over the past few days and they are keen to get their ducks in order for 2016. I've already advised on the purchase of several buy-to-let investments, one of which in particular was very lucrative. With a simple refurbishment the client should be able to withdraw £80k from the property in order to finance the next one, all within 8 months of completion. On another deal I agreed to sell the deal on to another client and both were happy with the end result. It was 20% BMV after all!

Hoping to help more of you on the way to property success in 2016!

Just a reminder - I'm giving the monthly lettings update tomorrow at Wimbledon PIN, so if you haven't already do sign up and come along. If you've never been before it's FREE! just register using the code xandermatthew at www.wimbledonpin.co.uk. It's a great opportunity to meet fellow investors as well as professional brokers to source your deals and fellow property people to help you source the next investment. Whatever you do, make your 2016 productive in property!

Hope to see you Tuesday night at 6pm!

Antoinette Hotel Wimbledon 249-263 The Broadway Wimbledon London SW19 1SD

Remember if you need advice on buy-to-let investments in Clapham and surrounds get in touch on jeroen@claphamproperty.com

Changes in 2015 and 2016 that will affect your property investment in Clapham, Brixton and surrounds

Well it's certainly been an eventful year. We've seen a lot of regulatory and taxation changes - we're already seen the results of these in the form of panicked twittering and facebookerings. 

2016 will be no different I'm sure!

So what is causing such a commotion? Well property investors are up in arms about a few things recently, some good, some bad. Let's have a quick reminder of the changes in the recent past, along with announcements for 2016.

Deregulation Act 2015

This covered a few things, but here are the highlights

• You can't serve S21 if:
• there are outstanding repairs
• you are sooner than 4 months into a tenancy
• the deposit isn't protected
• you haven't served the tenant with a "how to rent" booklet
• you haven't given the tenant a valid gas safety cert or EPC
• You don't need to re-serve the Prescribed information to the tenant(s) upon renewal

From 1st April 2016:

• Energy efficiency: Compulsory for landlords to make improvements at tenants' requests in order to make the home more energy efficient; and by 1 April 2018 ALL landlords must upgrade the energy efficiency of the rental properties which are rated F and lower to a minimum of E by April 2018 or they will not be allowed to let until such time improvements are made.
• Tax Changes: Interest relief being reduced to the basic tax rate. Phased in over for tax years starting with year ending March 2017, with the full effect being felt YE 2020.
• Stamp duty surcharge of 3% added to buy-to-let and second homes. Buying as investment? expect to pay more stamp duty. Primary homes exempt.
• Right to Rent: Mandatory ID checks for all tenants. Onus on the landlord to determine immigration status

So, it's been an exciting year, but with recent announcements I'm sure 2016 will be an eventful one. I've spoken to many of my fellow investors and they are of the opinion (as am I) that rents will rise astronomically in order to cover the increased running costs. Having said that, the recent changes to push for repairs to be carried out as well as homes to become more energy efficient will certainly improve the quality of homes to rent in the PRS.

What's your view? Feel free to comment below.

If you are looking for your next investment or advice on property and more, feel free to drop me a line on jeroen@claphampropertyblog.com.

Where should I buy my next property? Brixton or Clapham? How many bedrooms? House or flat?

So, another profitable year draws to a close. We all know that very little happens in the property market in these last few months of the year, so now is probably a good time to recap on what’s happened locally. It’s also a brilliant time to set your goals for 2016. How many properties are you planning on buying? Refinancing? Refurbishing? Adding value to?

Let’s look at some numbers I’ve compiled, courtesy of Zoopla. My main aim is to point out areas of good growth for you, the investor.

	Brixton SW2	Clapham SW4
Average Value	£496,886 up 5.22%	£843,777 up 6.74% (12m)
Flats	£405,081 up 4.96%	£566,979 up 5.36% (12m)
Terraced	£738,939 up 7.41%	£1,344,463 up 7.95% (12m)
Semi D	£914,410 up 0.66%	£1,808,612 up 0.66% (12m)
Average Rent	£1,822pcm	£2,141pcm
Average gross yield	4.4%	3%
Number of transactions	542	445

This table certainly makes interesting reading. On the face of it you’d be inclined to buy in Clapham straight away (average values up), but there are certainly advantages to both areas. For one, you can see that the average gross yield in Brixton is nearly 50% more than in Clapham! So rents are much greater in relation to the purchase price. That’s a good thing, because that will make up for the slightly slower house price growth we’ve seen compared to Clapham over the last 12 months. Also interesting to note is that terraced houses are absolutely unaffordable as a buy-to-let, with vastly diminishing yields, only made good by the increase in capital value.

Should I buy in Brixton or Clapham?

Well that depends. Historically we can see that both are good bets. But decide what you are going for: capital appreciation, on the face of it, looks stronger in Clapham but rental yields are definitely better in Brixton. But let’s compare over a longer period. Queue a beautiful graph again courtesy of Zoopla. Now look at how SW2 prices are keeping pace with SW4. There is a difference. But the gap isn’t widening. So as far as investment goes I think Brixton has more to offer in terms of house price growth as gentrification increases and “Brixton Villaaaage” becomes even more popular.

So we’ve decided that Brixton has the best yields and best potential based on historic data and trends. Which property is doing well? 1beds? 2beds? No, it’s actually 3beds which are doing the best. They are still relatively affordable (a big word in London of course) and command the best rents as a percentage of purchase price. Also personal experience tells me that they are ALWAYS in good demand.

   

SW2		1 bed	2 beds	3 beds	4 beds	5 beds
Houses	Value	£385,000	£517,492	£705,702	£1,073,638	£1,238,325
	Rent	£901	£1,807	£2,440	£2,977	£3,398
	Yield	2.81%	4.19%	4.15%	3.33%	3.29%
Flats	Value	£372,569	£512,683	£595,585	£514,544	-
	Rent	£1,280	£1,652	£2,970	£2,743
	Yield	4.12%	3.87%	5.98%	6.40%
All	Value	£372,958	£513,387	£635,820	£929,871	£1,238,325
	Rent	£1,263	£1,661	£2,872	£2,919	£3,398
	Yield	4.06%	3.88%	5.42%	3.77%	3.29%

SW4		1 bed	2 beds	3 beds	4 beds	5 beds
Houses	Value	£499,950	£873,000	£879,988	£1,456,663	£2,506,250
	Rent	£1,077	£2,136	£3,656	£4,444	£4,695
	Yield	2.59%	2.94%	4.99%	3.66%	2.25%
Flats	Value	£508,714	£702,250	£762,349	£1,071,000
	Rent	£1,581	£1,970	£2,321	£3,049
	Yield	3.73%	3.37%	3.65%	3.42%
All	Value	£508,412	£713,195	£787,115	£1,360,248	£2,506,250
	Rent	£1,564	£1,978	£2,714	£3,921	£4,695
	Yield	3.69%	3.33%	4.14%	3.46%	2.25%

Interesting to see that 3 bed flats are offering a near 6% yield in Brixton. Tell me it isn’t so, my chants in April of three bed flats in SW2 being a good bet were fairly accurate.

So if you want more advice on what to buy, where to buy it and when – just drop me a line on jeroen@claphampropertyblog.com. Helping landlords make wise investments now and in 2016. 

The ideal tenancy length for your letting in Clapham, Brixton and Surrounds?

The news

I read the news of the most recent DPS survey and I was surprised to hear that most tenants wanted a short tenancy. Surprised was actually an understatement. I fell off my chair. It's certainly not often that I hear that from would-be renters in my agency. More often than not they ask for longer term because of the costs associated with moving, the security they are after and so forth. In turn landlords generally prefer those tenants who can commit for longer and as a result I turn away people that only want to rent for a short period (12 months or less). Client's preferences, you see.

Long-term vs Short-term

To my surprise The survey, taken by 39,855 tenants who have their deposits protected by DPS, revealed that 80.1% of them wanted tenancies that lasted no longer than 12 months. 34.60% of the total stated a preference for contracts of 6 months or less. That's amazing. Especially this time of year. I can honestly say that a good majority of my landlords would want their property back during a busier time of year so they have the pick of the applicants and tenants bidding up against each other in order to stand a chance at getting their pick of the hot flats in Clapham and Brixton. Why go long? Well here's why... Tenants that are ABLE to offer longer term, in my experience, are a better long term bet. They are confident they don't want to move around (if they can help it). They prefer stability in their lives (they may have had a landlord sell up or move back in previously) and they will take care of your property like a home ( much like you would I'm sure).

Short term AirBnB style

I hear a lot of landlords thinking "I want to raise the rent every opportunity I can." That's right, you can't do that as frequently if you opt for 18 or 24 month tenancies. So match your approach to your situation. Ask yourself whether you can handle a void in order to get things repaired that tenants have failed to mention to you for ages, only discovered by your letting agent after you've given them notice. Can you afford these repairs? Can you afford the new furniture you're going to have to buy (because to attract top rent you're going to have to up your game to stand out). Having said that, some of my investor landlords have turned to AirBnB and are making handsome profits despite their 15% commissions. Do note however you have to be running the operation with military precision, changing sheets/linen, supplying fluffy towels, paying the council tax, WiFi, water, gas, electricity. And voids - it's going to be empty 20% of the time. I would say it's harder work than most envisage. I've even been approached by various management companies who can do this all for you. But... once you've paid everyone are you really better off? Add in the fact that most mortgage companies don't like these short term lets and you're back to where we started...

When is the best time?

For those of you that read my blog religiously you'll know that the best time to let your property in Clapham, Brixton and Surrounds is definitely the summer. The demand peaks in August. So if you are letting today I would most certainly opt for a tenancy length 18 months or even a shade longer to try and capture that peak demand.

If you are looking for advice and help with your property investments, be it in Clapham, Brixton or further afield then please get in touch. I source properties regularly and carry out due diligence reports for a number of investors and if you are looking to expand your portfolio profitably then talk to me. Drop me a line on jeroen@claphampropertyblog.com today.

Want to know more about investing in property in Clapham and surrounds? Come along... to Wimbledon PIN Tues 3rd November

You will probably have been reading my blog for a little while now, and hopefully you've learned some new things. A tip here, a trick there. All good pointers for those starting out as investors or even seasoned professionals. Here's your opportunity to learn some more and meet some interesting people.

I've been asked a colleague investor to come and have a chat at the Wimbledon property Investor Network. Trevor Cutmore has been a property investor for years. Initially trained as a chef he later realised that property investment was more lucrative. A wise man. If you are reading this blog I would assume you are at the very least intrigued to hear more... Could full time property be for you? Perhaps not full-time but you are keen to learn more? Having a few hundred or even a few thousand pounds per month extra in passive income would be a lovely thing for everyone I'm sure.

I'm giving a detailed lettings update next week. Topics I'll be covering include:

• BTL Tax Changes
• Right to Rent Regulation
• Deregulation Act 2015
• Importance of education
• Professional memberships

Who else will be there? People new to the game and seasoned investors alike. It will be a great opportunity to meet like-minded people and learn how to invest, where to invest and find the money to do it with - it doesn't have to be yours!

The best part of all it's free. If you have never attended a PIN meeting before just register online at www.wimbledonpin.co.uk using the voucher code xandermatthew and your night out meeting experienced professionals will be on the house. See you there on Tuesday November 3rd.

Remember - if you're looking at investments in Clapham, Brixton and surrounds then let me know! Happy to cast an eye over it and see if the deal stacks up. jeroen@claphampropertyblog.com 

How much does it cost to let a flat in Clapham or Brixton? Nothing, I'll treble your monthly income if you do it right.

I was speaking to a landlord just the other day about his investment. He called me up to ask me about my letting fees. Well in fact he phoned up the office and my colleague answered. She put him on hold and put him through to me, whispering in my ear "I know you shouldn't discuss fees but discuss value on the phone, can you show me how?" 

The gentleman explained to me how he was looking to buy a 1bed apartment on the William Bonney Estate. I commended him on finding something in such a brilliant location. Being the sleuth that I am I punched in the postcode into rightmove as I spoke. Up it came. An immaculate 1bed ground floor flat. Again I mentioned to him how easy it would be to let. "But," I said, "I wouldn't buy this, I think you can get a 3bed for the same money and get at least 50% more rent every month, with more chance of capital growth, better tenant demand and less voids."

He was amazed. A long conversation followed. He couldn't believe that a letting agent was telling him to buy a different flat. "Any agent would want me to buy this property quickly so that I instruct them to let it." He said. Not me. I look at investments all day long, and there's nothing better than helping landlords make a better investment. They get a higher yield and ultimately they are happier to come back to me because I've given them solid advice. They thank me for my advice and ultimately we all win. You see, I've been doing this for over a dozen years now. I know what is a good investment. I know what is not. I am local. Every day. I see demand shift from area to area. Flat to flat. I know what lets and what doesn't. And people come to me for knowledge, advice, expertise. Value that you don't get from high street branded (or bland) agents.

I recommended two other investments straight away that had come to market recently. They fit in with his criteria: he had a busy job and didn't want to get involved with loads of refurbishments; looking for something with minimal fuss to let and take advantage of a rising market. I trust he will be happy for me to advise on furnishings to get the best tenant in the shortest timescale for that type of property, too. He still doesn't know what I charge to let and manage. That's not important to him. Value is important. The fact that if he follows my guidance he would be netting £1000pcm from his investment and not £300pcm. So how much does it cost to let and manage through me? Nothing sir, I just doubled your capital growth over 5 years and gave you treble your cash flow on a monthly basis. After my fees. Using my services therefore makes money, it doesn't cost you money.

Invest more in Clapham & Brixton - with no more of your own money. And here's how.

So, when was the last time you did a portfolio review? I’ll bet it’s been a while. Landlords are long-term strategists after all. I spoke to a landlord who lets properties in Brixton over the weekend and he was keen to hear more about my thoughts on the market. He had read an article or two on the blog in which I mention that it’s “trendy” to live further from the station and cycle to work or get a bus to the station. Train station of course, tubes are so passé…

I had found a few properties which would suit his newly found love for Outer Brixton (Or Streatham Hill – sorry I still speak like an estate agent!) but he said they’d be too expensive as the deposit he had saved up wasn’t enough. Property prices had gone up more than he thought. I said “that’s a good thing!” and he looked at me curiously.

You see here’s the thing: if property prices are going up and you already have a portfolio it means the loan amounts you have stay static whilst the value of your assets is going up. So the “Loan to Value” percentage is lower. Imagine if you had a 300k property (5 years ago) and you put in 20% deposit the loan would be 240k. Over 5 years thought the value of the property would have gone up about 5% year on year (roughly speaking, valuation is a bit more of a science than simply a calculation, but bear with me). Today this property would be worth about 380k, in which case your 240k loan only represents 63% of the property’s value. So you could do one of two things:

a) Remortgage to a better rate (lenders are keen to lend to people that represent low risk – 63% exposure is better than 80% so they will lower their borrowing rates for you)

b) Remortgage and RELEASE SOME EQUITY AND INVEST MORE!

Nothing says savvy investor like taking out your gains and reinvesting – if you remortgage up to 80% LTV again you can borrow 304k, leaving 64k to play with after you've paid off the first mortgage. This particular landlord had 5 properties that he could do this with, so essentially giving him enough cash in the bank to purchase a further 5 properties. With which he was yielding 5.5% per annum. You do the sums!

In essence buy to let is a balancing act. Never have all your eggs in one basket of course. Buy a few further from the station, a few close to the station, look for a few high-yielding investments, play the long game on a few and so forth. If you are just starting your BTL journey you will love the gains – if you are close to retiring you may be looking to sell. Take advice of course, wherever you are on your journey.

If you are looking for a friendly chat about property, weather, or Wiggo’s latest triumph on the track by all means give me a call in the office on 020 3397 2099 or drop me a line on jeroen@claphampropertyblog.com.