Latest Peckham project - complete!

As you will know I'm always working on a project or two, but I've been so busy recently I've not had a moment to post the most recent completion (of refurbishment that is).

I've made a little video walkaround so that you can see the finished product. A light blue (Ocean Skies) theme this time; fresh, bright and airy. In brief this property was fully refurbished. This included rewiring, new plumbing, new woodwork throughout and of course a new kitchen (in a new location) and a new bathroom.

Have a look at the video and I look forward to hearing your comments.

Living Room - Before

Living Room - After












Video:

I hope you enjoyed my video. Do let me know if you are looking to invest and you could use a hand. if you are a ready and able investor sign up to my list that will bring packaged deals to your inbox! If you are looking for no-obligation advice then drop me a line and let's start the conversation.

Video 21/30 - 7 Top Tips to Refinance Your Investment Property Like a PRO!

I have purchased rather a few properties in the last few years, all of which I have added substantial value to. Naturally it's key to refinance in order to take some of that newly created equity out. I thought I'd share 7 Top Tips with you, so here we go!

Remember - if you're looking to acquire an investment property and you need help, drop me a line and let's start the conversation. Whether you would like to have me help you acquire your next property or whether you would like a more hands-off investment, there's never been a better time than now to enter the market. I am currently fundraising for further projects so if you have savings in the bank that are not earning enough get in touch to see how you can earn 10x returns.

Rents are set to rocket in Clapham - are yours?

The title will have many investors licking their lips with joy of course. Rents on the up, lovely. Mortgage rates at an all time low, excellent - all ingredients for a nice slice of profit pie. Let's take a moment though and analyse the why, how and what effect this will have on the medium to long term future. Don't worry, on the whole it's good!

The Royal Institute of Chartered Surveyors (RICS) reckons that rents will rise 20% over the next five years (source: Landlord Today). That's not actually that much I believe, some 3.7ish% compounded. That's really low in my opinion. But I'm a London investor and my clients are London based. The RICS also reckons that property prices will rise 18% over the next five years. If you are reading this and you know anything about the property market within the M25 you will laugh. Fact of the matter is that it is very well possible to get gains like that in 2 years! So why the "pessimistic" statement from RICS? Well as with any of these claims and opinions they are cast over a very great geographical location, ie nationally. Some parts of the country will not rise at all, whereas in London it is near certain that prices will go only in one direction. Near certain I emphasise - in general London property price rises do exceed other parts of the country.

So what will actually happen and why?

Allow me to whip out my crystal ball. Based on 15 years of London property market experience I see the following happen:

1. Accidental landlords and small-time landlords will start to sell up. Why? Increased taxation and the perceived stun of the capital growth in London ("uncertainty" due to Brexit will have smaller landlords sell up. They are likely only making a few hundred pounds after the mortgage. Factor in repairs and perhaps a void because they can't or don't want to spend time on their property (they have a career, perhaps children by now) and it becomes a millstone as opposed to an investment. These properties are likely to be FTB homes, such as they were when they were bought. This will feed the demand from this audience of buyers. They are now no longer competing with investors - after all, they are priced out from buying these flats because of stamp duty and lack of mortgage interest relief now make these types of property a poor investment.

2. Investors will shift to investing in larger properties. 1 bedroom flats have historically always been easy to rent, and a favourite among smaller investors because, put plainly, they are cheaper than a big house with lots of bedrooms. Lower barriers to entry. So you take that away from them and investors will scale up. Bigger properties hold the key to good returns. Landlords now buying property will most likely go for 3-5 bedroom properties, perhaps even bigger if they want to properly scale up. They are not afraid of HMO regulations, or even doing some work on a commercial unit's upper flat in order to rent it out as a massive unit with 5-8 bedrooms. Scale is king, you see, offering far superior returns. I actually find the sweet spot between 3-5 bedrooms and two storeys, staying clear of most HMO requirements. Each to their own of course, but larger number of bedrooms per unit certainly yield better returns. This is compounded by the ease of purchase, after all there are no FTBs chasing these bigger properties, and smaller landlords will want something easier, they may get out of property altogether if they are not ready to adapt. So commercial to residential conversions to provide a large number of bedrooms will be popular!

3. Rents will rise dramatically more than aforementioned in London. It is not uncommon for the London landlords to refinance frequently in order to reinvest, or purchase a bigger home for yourself. I would wager that a lot of property in the London PRS is leveraged quite substantially, and if care is not taken to minimise the finance costs then the lack of mortgage interest rate relief will hit hard. It will hit everyone to a certain degree; my prediction is that rents will really start rising next year (2018) once the first Self Assessments in Jan 2018 are done and the realisation of the dramatic increase in running costs will lead to a phone call to the agent to certainly be bullish on the prices this year. The thing is the majority of landlords will be raising their rents. Everyone will be at it, so renters have no option but to pay. I predict you won't have a void if you raise your rents because your competition - the landlord next door - will be raising theirs too. 

4. The last point that I'd like to make on rising rents, and this is slightly further in the future, is that the consultation over tenant fee banning has not yet abolished said fees, but is likely to. What this means is that in the long run agents will have to charge the landlord more for their work in order to remain in business. You can't simply ask this fee to go away, you see. Businesses need to be paid in order to run, and if you take away 25% of their revenue it is very hard for them to swallow. Short term this may be swallowed, but it's certain that ultimately Mr. Landlord will have to pay. And that means rents will go up. If a business (be it letting agency or property rental portfolio) is not producing a meaningful profit then it will cease to exist. Tenants will pay for this in the long run. The cost will be spread over a longer term, but they will pay. I guarantee it.

What will this mean for my investments?

Well be prepared for more shake-up in the industry. Watch what happens with rents and talk to you agents and fellow investors as you will likely be able to command premium rent (because, of course, you offer premium product). The scarcity of good accommodation is still real, so if you continue to do what you do and offer good housing you will not have voids. I predict that your buy to let in London will likely see 5-8% rent rises if not more. I feel that once there is clarity on the fee ban this could  give rise to double digit rent (%) rises in Clapham.

What should I do to improve my portfolio and achieve greater profits?

1. Look at your costs. Borrowing: You likely have property in your personal name. Don't rush to get these transferred as currently is the craze. Stamp Duty, CGT and transaction costs will outweigh any benefits for a long time. And then the government will think of something else. So my thoughts are to stick with what you've got. If you are buying new properties then incorporating is wise in my opinion, this at the very least spreads your risk and allows you to reinvest your profits relatively tax efficiently. Take advice though, everyone's circumstances are different. Secondly speak to your broker (and I'd happily recommend you one if you want, just ask) to make sure you are paying the lowest monthly payment you can.

2, Are you getting top rent? Get a portfolio review. Speak to your agent or email me if you like, I can advise you too. This will mean looking at your current rents, maximising your existing rentals in terms of layout, furnishings and overall presentation in order to get the best price.

3. Do you have money floating around? Look at what you can achieve if you spent it on your current property - you don't necessarily have to buy another property to invest the money wisely. For example if you can get an extra £1700pcm by adding two bedrooms to your house by way of a loft conversion that costs £50,000 that would mean a return of 40%. You can't buy a whole new property with £50k, let alone get a 40% return!

So in summary there is lots you can do to get better returns. Be mindful that these "rocketing rents" don't just land in your pocket, you will need to ensure you are doing everything right in order to capitalise on this rising market. Invest in bigger units, cut costs, make changes to enhance profits. If you would like a one-to-one to see how you can get better returns why not get in touch on jeroen@claphampropertyblog.com or come down to the Clapham Property Meet. This month we'll be focusing on building a property portfolio for long term wealth; building from the ground up and refinancing in order to keep the properties as long term rental investments. If you are interested in coming along then join the meeting group and RSVP YES.

5 reasons why the phrase BMV is a complete and utter farce

There, I've said it. I absolutely hate the phrase "below market value," or BMV. Hate is a strong word, but there is simply no other way I can describe my feelings. BMV does not exist. It is merely a throwaway phrase to describe "a good deal." Let's delve further into this...

So what is BMV?

As the phrase indicates it is a purchase price lower than what you would normally expect to pay for a property. So if all the flats on Clapham Road with two bedrooms and approximately 600sqft are £550,000 and this particular seller sells at £440,000 you will be buying at 20% below market value.

Why?

Yes, indeed, why on this green Earth would someone give you £110,000 off simply because you can complete quickly, or act confidentially, or any other rubbish that the "gurus" spout that will help you convince sellers to sell cheap? In a market such as London one merely has to drop the price a smidgeon to get interest. And don't tout the old "it was £550,000 and now it's £525,000 rubbish, that just means it was overpriced to start with.

Creating genuinely good buys

So what creates "discount?" Well there's no such thing as discount. It's price. If the price you want to pay is lower - and as an investor you will want to pay as little as possible - you have to look for the right set of circumstances. Reverse these if you are selling of course. 

1. Timing - Don't go in straight away with a low offer (low compared to the asking price, not to the value, more on this later) or you will be laughed out the door. Everything is about timing. Day 1: seller is hopeful to get over the asking price, a million bidders outbidding each other for his crummy, pokey, dated flat. You want a deal? Look for properties that have been sitting around for a while. Sort by date listed on the portal and work backwards.

2. Presentation. A cheap agent is generally a bad agent. A good one charges what he's worth of course. So look for properties on Zoopla. Rightmove is expensive and cheap agents can't afford to advertise on such a posh portal. What does a pen cost in WH Smith vs Harrods? Right, same pen, different price!

3. Cheap sellers. Linking with the previous point, the cheapest sellers will be the most ill-educated. Property-wise of course, they probably have pHDs (eyeroll emoji). There is a time and a place for DIY agents, but I will go on a limb here and say that the vast majority of sellers that sell through Yoga, PurpleMortar, Tipelo, HouseDifficult, ZMoove are confident that their iPhone quality photos of their dirty-toilet-with-lid-up-shot as the first picture will attract viewers by the dozen. If you are reading this you must agree that, in the vast majority of cases, good photography, a description written by someone that has proper command of the English language (or has a computer with a spell check function) will attract more interest/viewings/offers and thus a higher price. So... want a deal? Look for DIY agents' listings. They're not getting any other viewings or offers so yours is best by default!

4. Circumstance. These all link together, but "I love it when a plan comes together." In an ideal world you want the smelliest property that you can find, simply because it completely puts off owner occupiers that normally offer about 20% above what it's worth already refurbished. So when you call the agent... "oh, it's tenanted you say?Access is tricky? Oh no Mr. Agent, well I'll wait for your call then, do try and get in for me!" Now I've been down this road a fair few times. Mr. Seller has probably let his property through ClosedRent, zPad or some other "upload rubbish photos here and attract the worst tenants possible" portal and not had the foresight to keep a set of keys. Now he doesn't want to get rid of the tenants when he's selling because he wants to squeeze every last penny of rent out of the property. Well that's good for you, the investor, because the tenants are smelling the place out like a medieval cesspit, not airing or heating the property and they work unsociable hours so viewings are nigh on impossible. What do you think these circumstances do to the achievable price of the property? Yes, 10 points for you, nobody can get it and view, let alone offer on this lovely pile of opportunity. Good for you! Keep chasing that agent, set a reminder to call him every 2/3 days and make sure you get in, you'll be the only one and when you do, give that agent an offer and make sure you tell him it's the best he'll get. It will be, mind you, and he will do his best to shove that offer down the seller's throat with his size 10s simply because he doesn't want to go through the hassle of trying to arrange another viewing on it. Industry average is an offer every 10 viewings, but if getting another 10 means 10x the man hours he's already put in he'll definitely be pushing your offer - it will be easier for him!

5. Relationship building. This comes after you've actually booked an appointment. I hate all these things floating around saying that you must take estate agents out to lunch/dinner/coffee/buy them flowers and otherwise schmooze them. Rubbish. Estate agents want a solid offer, a solid deal and they want the transaction to go smoothly. So talk to him (or her) about the potential other offers that they won't get because they've had to spend 10 hours of phone calls with the tenants just to get you in and they will side with you and your offer. Then when it gets agreed and you go through with the deal with professionalism and returb the property to them for the follow-on transaction they know you are a serious player and will come to you with difficult flats first. Results mean a good relationship. 

Ultimately though, chase the property, not the agent.

So - BMV - fact or fallicy? I say it's a farce. Market value is determined by a distinct set of circumstances surrounding the property, nothing else.

If a seller wants to sell quick, you can buy and you have a little more equity in the deal because if you sell at "market value" and just take your time you'll find it's worth more. Like a commercial property that's empty, the inverse is true for residential. Filled with a smelly tenant the value plummets. So you want to sell for top dollar? Sell to an end user buyer (owner occupier) so get the smell out (and the tenant) and do some work to maximise value!

So as we've established, smelly tenants (not to be confused with good tenants that keep the place tidy and add value of course) and other problems such as decoration and refurbishment requirements reduce the market value. Beware though, a property that needs £50k worth of work to get to £600k market value is not worth £550k! Do your numbers because by the time you add in stamp, legal and finance costs you'll probably need to buy at £400k to make any meaningful money. Perhaps you can sail closer to the wind if you are looking to hold long term, but you will want to buy at less than the work costs you. As a rule of thumb you should make £2-£3 for every £1 spent on costs on building works. For example on my latest purcahse the £25k refurb added £85k worth of value, thereby trebling my investment.

So, go out there and find the most difficult to access properties and be tenacious. Winston Churchill said "Never ever, ever, ever, ever, ever, ever, ever, ever give up," so go forth and find those impossible to access flats. Because nobody else will get over the threshold to offer. Where there is no competition the price is low.

If you are looking for investments and are on the verge of giving up because you can't get over 10% return on your investment come and talk to me. I source properties on a retained basis for clients and I can help build you a profitable portfolio. Read my blog, you will see the projects I do for myself and the numbers are in plain sight. Follow me on social media, come meet me at the Clapham Property Meet or send an email: jeroen@claphampropertyblog.com

Maybe Airbnb isn't the way forward for your rental, be it in Clapham or elsewhere...

Let me start this article by saying that I admire entrepreneurial spirit. Naturally maximising return on your investment should certainly be applauded. Things that are, however, high on my agenda are sustainability and longevity when it comes to property investment. Oh, and I like passive income...

So with that in mind, let's delve deeper into the phenomenon of Airbnb.

What is it?

In case you didn't know, it's essentially a property website for tourists that matches would be hotel guests to property owners that are in the position to rent out a room, or even the whole property for a "short let." So anything from a night to say... 365 nights.

Why Airbnb?

Well simply put, a property is worth more by the night than it is by the week/month/year. A bit like a hotel. For £150-200 a night you can book a room at the Ritz, but you can also rent a swanky 2 bedroom 2 bathroom penthouse with some river views. Self-catering mostly, but there is something awesome about staying in a plush new build rather than a hotel. So there's definitely appeal from guests, and the monetary incentive is there for the owners. A market - and Airbnb provides the platform.

But?

No problem as yet, no. There is demand, there is supply, there is basically a Rightmove of short lets connecting owners and guests, so what's the problem? Well, hang on to your hats...!

Caveats:

1. A lot of leases will prohibit using the property for commercial use, ie serviced apartment style short letting arrangements such as the one on Airbnb. If you're just renting out a spare room it may be another story though, but naturally if you want to make money from it like you would to a buy to let then you'd let the whole property. In contravention of most leases... As the age old saying goes, RTBL (Read the Bloody Lease)!

2. Mortgaged property - your mortgage company will probably have stipulated in their terms that you have to let your property to professional, working tenants, maybe even restrict the length of AST (commonly 12 months) and crucially let on an AST. A short let is not an AST for one, and the interest rate you pay reflects the risk that the lender is taking by lending to you. A short let/holiday let type business is more risky and requires commercial finance. Lower LTVs, higher rates.

3. Factor in your time. You will need to meet & greet, deal with late arrivals (and believe me there are plenty, if not all) and damages need to be fixed pronto before the next guest. But hey, you wanted to be a self-employed hotelier, didn't you?

4. Just pay someone to do it? No problem, there's plenty of people that can manage your Airbnb listing. They'll charge you 15% of every booking on top of Airbnb's costs and perhaps even a charge for every meet & greet they do. Profits dwindling pretty fast there. Beware though, a lot of them won't tell you about the legal obligations in this article. If they have Ts and Cs they will have a tick box you need to tick to "indemnify them against all claims" of such nature and they will assume that by signing "you have sought all the necessary consents." Problem is, up until reading this article you may not even have known what they were.

5. Insurance. You took out landlord liability insurance right? Well you've just invalidated that by short letting. Fire? Trip? Guest hurt themselves? Game over.

6. Planning permission? Yes that's right. If you're reading this I'll take a wild guess you live within the M25 and therefore your Airbnb will probably be too. You can only short let for 90 days or less in any one 365 day period without applying for planning permission to change the usage class of your domestic dwelling from C3 to C1, Hotels, Bed & Breakfast, Guest Houses, Inns, Motels

and Halls of Residence. No problem you say? Well, see points 1 and 2 above, your freeholder most definitely won't like it and chances are your lender won't either.

So what next?

It's abundantly clear from the above there are a lot of legal hurdles to jump over if you want to do this whole "get rich quick and make £200/night as opposed to £200pw" thing. So why are people still doing it? In my opinion the legal aspects are being completely flouted. Does that make for a sustainable business? A passive investment? Nah. Sustainable? Well put it this way, what if you wanted to remortgage the property and you told your new lender that you think you'll achieve £2000pcm. "Great" they say, "can you supply us with last year's tenancy agreement?" Game over, you won't have one because your last "tenant" was backpacker from Venezuela. Good luck with that...

So don't be suckered in to people telling you that the "profits are amazing" and "I've never made so much money by changing some sheets" take a moment to factor in, if nothing else, the time element of managing it all. I happened to run an Airbnb listing myself and thanks to a very good, local help I was able to stay hands-off. Truth be told though I didn't make much more money than a long let, if any once I factored in voids. You're never going to let it 7 nights a week and you still need to pay for all the bills whilst it's vacant.

There's the other aspect of Airbnb changing neighbourhoods and driving rents up, but I think that argument is slightly far fetched. Regulations are there for a reason and most people will understand they need to adhere to these. However for the flouters - beware - councils are cracking down on these short lettings under nuisance/ASBO laws and can take drastic action. If neighbours complain to environmental health about noise nuisance then things can go pear-shaped for a flouter quite quickly!

So, speaking from experience, I would always invest in a sustainable, less labour intensive form of property investment. I am currently achieving very good returns for clients by sourcing them good investments, or they invest in my projects and learn the process hands-on. If you would like to know more about some of the projects I'm doing at the moment - sustainable, legal, profitable, passive investments - then do get in touch via social media or email: jeroen@claphampropertyblog.com

PS: A little video in the link below that I'd like to share with you for a laugh, essentially highlighting some of the pitfalls of Airbnb. Facts above, fun below, some of it is a little exaggerated! Happy investing

https://www.youtube.com/watch?v=n0eTLdQ1cQc 

Tenant fees are banned. Bad news for your lettings in Clapham and surrounds?

Well here we are, another bold move by the government for "Generation Rent." It seems you can't go a day without a picture of some poor tenant on the news saying "I paid thousands to move in to a property." To everyone who doesn't understand the concept, let me put the record straight. It is perfectly normal to have to pay a deposit (normally 6 weeks' rent), a month's rent in advance and then a fee to the agent to sort out all the paperwork. So in London where the average rent is £1500ish this would break down as £2100 deposit, £1500 and then say £350 for the agent. Yes, it's thousands of pounds, but this wasn't all for the agent was it? No... only about the equivalent of week's rent was for the agent. As people are renting for 2 years on average nowadays I don't think that's a big cost.

Why this draconian measure then? <sarcasm> Well the government was clearly so pleased with the results achieved in Scotland. All the tenants are now praising the government for banning these fees, which have now been passed on the landlords, and on to the tenants through higher rent. They really enjoy paying more rent. </sarcasm> 

Well done, own goal! The group they are trying to help has just been sold an expensive finance deal to pay the agency fees monthly. Plus interest of course. Clap. Clap. Clap. Sadly Generation Rent genuinely thinks this is a victory. Any attack on evil landlords and their agent counterparts is, of course, a move they support. In fact Shelter commissioned a study, which was quoted in a newspaper (I use this term loosely) claiming that rents didn't go up much, if at all. The validity of this statement is on par with the credibility of the paper that published it, namely the Mirror, article here. Interestingly they quote that the fee ban in Scotland has made no difference to rents, yet fail to reference where the data is on which they base this statement. The research was commissioned by Shelter, so by default I would say the data is biased. Campbell Robb, Shelter's chief executive, said banning fees was a welcome move:  "Millions of renters in England have felt the financial strain of unfair letting agent fees for far too long, so we are delighted with the government's decision to ban them. We have long been campaigning on this issue and it is great to see that the government has taken note," It's a move I wholeheartedly disagree with. We live in a Western, capitalist society and nothing is free. Simple. If you don't want to pay an agency fee then don't move house. Agency fees are subject to the supply and demand in the market. If they are too expensive customers will go elsewhere, we don't need the government intervening with this.

I am not alone in thinking this is a terrible move for renters. David Cox, MD of the Association of Residential Letting Agents (ARLA) has already warned that “…a ban on letting agent fees is a draconian measure, and will have a profoundly negative impact on the rental market." I think we can agree on the fact that the tenant will end up paying for this. You will see the BBC writes a more balanced article but one can't help but see the bigger picture here. It's simply a move to get sympathy from the "generation rent" and win some votes. Sadly this group largely consists of those that don't understand the bigger picture and the implication of such a move.

Actual figures from the Homelet Rental Index claim that the Scots are suffering the biggest rent increases outside of the M25!! Article here. In a nutshell, rent increases within Greater London about 7.9%, rest of UK 4.9% and Scotland 7.7%! So there you have it. I believe this will be a great way for landlords to increase their rents and then some. Along with the Tenant Tax, which will come into effect tax year 2017-2018, this is certain to make rents rise by double digit figures in London come summer of 2019 compared to the year prior. I predict that once landlords start paying those Self-Assessment tax demands due by Jan 31st 2019 they will realise in cold hard cash what these taxes are costing and implement knee-jerk rent rises. The thing is it will be done en masse, so tenants will be hard up to find value for money in the summer of 2019 the busiest time of the year in terms of demand.

So what do I do now? Well sit tight and see how the bigger London agencies react to this news, I trust the rest of the country will follow. Will letting a property through an agency cost the landlord more? According to Shelter's report 10% of Scottish agents have found some kind of work-around, but as they are in the minority I doubt this is a "reputable" way to go. I will sit and watch to see the market does with great interest. What I do know is that the tenant will ending paying for it in the end...! Hopefully investors will see a ban on arrangement fees from mortgage companies and solicitor fees for conveyancing... Ah no, we are sensible and understand capitalism and that you can't get something for nothing (!)

I am a career property professional, helping landlord investors 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 grow your portfolio. It can be as hands-off or hands-on as you like. Get in touch on jeroen@claphampropertyblog.com or come down to the Clapham Property Meet and learn more about getting the best returns in the London property market.

Is the end is nigh for bad landlords in Clapham!?

For those of you who managed to make it down to the Clapham Property Meet and heard my eviction talk you will know that there is plenty of regulation to comply with when renting out your property. Get caught out and it could spell disaster. Literally! If you do spell things wrong on a notice then it could mean the invalidity of an important move-out date that you sought, and/or whether a judge will throw out your request for possession, if it does get that far.

But what does all this regulation really mean for renters and landlords in Clapham? Well for starters it will increase barriers to entry. More regulation (or red tape as some people refer to this as) means that it is more difficult for the average man to just start letting out their property. They are made to comply with a myriad of safety checks, and should they not comply the penalties are severe. 

This is a good thing! The private rental sector has improved vastly over the last 50 years, what with the Protection From Eviction Act, Housing Act, and so on and so forth. There isn't a day that goes by without a newspaper reporting on yet another "beds in sheds" case where a landlord lets a property in an overcrowded state or doesn't comply with the various safety protocols that are in place for both single lets and houses in multiple occupation.

There is less and less room for bad landlords these days; one will have to comply and rent their property in a professional manner in order to get the best returns and rent to respectable tenants. Tenants that cut corners are a risk for the landlord I'm sure that you will agree. 

Legislation may not be completely obvious. It is very easy to find a tenant due to the vast demand of rental properties in London, but it is more difficult to comply with legislation and at the same time maximising your investment. Regulation costs money after all - the vast majority of professional tenants don't mind paying that little bit extra to a professional agent or landlord in order to "buy this safety" as it were. There are, of course, still landlords that cut corners, knowingly or unknowingly. For example from 2018 landlords will not be allowed to let out properties that have a Rating of E or better as I mentioned in a post some time ago: https://goo.gl/1FXHpk. 

More legislation that is not immediately obvious is the serving of the government "How to Rent" booklet. A lot of landlords are being caught out with this, because any tenancy that started after October 2015 will be subject to this legislation: if the booklet was not given to the tenant then the service of a Section 21 notice (notice for a landlord to end the tenancy) will not be valid. Can this be done retrospectively? Yes it can, but you can't serve a S21 notice until 6 months down the line.

Some say that "what you don't know won't hurt you" but I think ignorance is not bliss when it comes to renting out a property worth hundreds of thousands of pounds. It is a big risk not to be able to get possession just by not serving a pdf from the internet. Aforementioned are only some of the hidden rules of renting. I am a career property property professional and I have built portfolios for many clients. If you are interested in investing your money in the London property market then I can help you get the best returns whilst complying with all the relevant legislation so that you needn't worry about risking your capital. I offer a range of investment options such as portfolio building for high yield and maximum capital appreciation with hands-off management (armchair investing) or opportunities to invest your money into refurbishment projects for relatively quick returns on your capital. If you are interested in working with me do get in touch on jeroen@claphampropertyblog.com or come down to the Clapham Property Meet and learn more about investing in the London property market.

Investment properties in Clapham - Have you got everything you want?

I was speaking to a client the other day and he said he had as many properties as he wanted to own. A bold statement. To the layman it's the equivalent of a child at Toys 'r' us saying "I've got everything I want."

He had amassed a portfolio of a substantial size and over the years he had used the equity to purchase more. A lovely idea of course, getting a return on equity - imagine that! More about that momentarily. He said he didn't really want to to own any more properties to hold and rent out, so was focussing his efforts on bigger property transactions where he could add substantial value using his expertise and experience. 

He had structured his portfolio to ensure that his assets paid for all his liabilities. Repairs, service charges, ground rents, voids, tax bill and at the very end a nice monthly allowance. He had now moved on to the next thing on his list: developing properties. He was telling me about a lovely deal that he had found locally: a pair of flats, one of which with a short lease and the other with loft conversion potential. He had cleverly bought both at auction, made the freeholder an offer to buy the freehold (he agreed to sell) and has now written himself nice long leases and included the loft space in the lease for the top flat and extended the downstairs flat to make a nice 2bedroom flat. Talk about maximising your return! He had financed the transaction through a private financier or two that were just looking for somewhere to park their money and get a fixed return and have him use his expertise to maximise the profit on his deal. All parties happy. This particular deal is still ongoing, but once it completes the profit margin will be substantial, well into 6 figures.

How did he have the confidence to do all this? Well, quite simply he had enough passive income to pay for the finance charges on a monthly basis, and enough capital to fund the deal, partly his own, partly through co-investors who had given him a loan. 

It sounds like he had everything he wanted. Very interesting. Let's go back to the point I made earlier about passive income. You may be reading this and thinking "I'll never be able to build up enough income to leave my job (which you may love, or hate!) or pay for the finance costs on a large development" or "I don't want to be a property developer." One of those statements may be false, but certainly not the former.

I am a very avid believer in passive income - and assets do just that, they by and large deliver you with a passive income. I remember buying my first property in 2004 when was still renting myself. This was the start of a nice passive income. At the time the mortgage on this property was £450pcm and the rent £650pcm (yes it is in London and I still own it today). Not a life changing amount of money, but fast forward 12 years and the property is now worth more than 2.5x what I had paid for it. And of course by remortgaging I am able to make use of some equity in order to reinvest.

Having used the "investing your equity" method a few times I have now honed this skill to perfection and I only look at properties that I can remortgage after doing some building works (be it redecoration, extensions, reconfiguration) in order to "take back out" a large part of investment. What I am left with is a property which pays the mortgage and then some, most of my money back, and BEST OF ALL.... an asset which will sit there and increase in value over time. Because as sure as night follows day the London market will (short term corrections aside) rise steadily over time.

An example of a recent purchase:

So after refinancing there was just over 17k left in the property and the property was £850pcm cash flow positive after fees, ground rents and service charges, and repaid £97,500 of the initial investment in order to fund another purchase.

That means that using my methods you could theoretically pay back your private investors in less than 24 months. Let's think about that for a moment, because the above assumes that you immediately refinance it. But let's say that your aim is to pay back your investors as quickly as possible - you don't, therefore, want to refinance immediately (being 6-8 months after purchase) but instead take advantage of some of that capital gain that London has to offer. Let's say the market moves another 5% - after 12 months your property is suddenly worth £445k. If you were to set aside the monthly "profit" then you would be in a good position to pay back your investors after 12 months. Once the investors are paid back then you enjoy a handsome capital appreciation (all things remaining equal of course). The capital appreciation in this case is above the national average wage, imagine what happens if you buy another property, and then another. You know that job you didn't like? You can now do whatever you like because you're making as much money with your portfolio as you are from your job. Eye-opening I'm sure. Even if you love your job, you would want to have a better plan in place for retirement than your average pension fund, no? The fees that you pay to a pension fund manager is hardly worth the return they bring, and besides - this is much more tangible and you are able to cash in early if you wanted to. 

People I've spoken to have always asked me "what if prices go down?" and indeed that is a risk in any market. But when property prices go down it tends to be in a climate of instability. People then decide to put off moving or buying and rent instead. As a result rents go up. So your profits will be increased in terms of monthly revenue and slightly hampered in terms of capital gain. Sir Isaac Newton's law of equal and opposite reaction applies. It's the law. it applies in economics too.

If you want to learn how to find properties, fund properties and refinance properties in order to repeat the process and build a recession proof passive income then get in touch. Together with my esteemed colleague Trevor Cutmore I am hosting the Clapham Property Meet Training weekend at the end of November and I will be focusing on building a passive income and having other people finance it. Are you coming? Even if you have little to no cash to invest you will be able to build up a passive income using my tried and tested methods. Email me on jeroen@claphampropertyblog.com to find out how you can be investing your money or other people's money effectively to build your passive income. If you would like to meet me in person then do come along to the next Clapham Property Meet, details can be found here.

More contradicting headlines in the news today. What's really going on in Clapham?

Not a day goes by that I don't have my finger firmly on the pulse. Be it Clapham, Brixton or beyond I do like to get a feel of what is going on in South London. As do you, I'm sure.

Today, however, I was confronted with such contradicting headlines I couldn't help but tell you about it.

A selection:
House price growth to slump 1% post-Brexit
Prime London prices cool in Q2
Limited company applications surge in June
43 million Brits 'would go over budget' for the right home

The first claim about house prices "slumping" (if you can call 1% a slump) was made by Fionnuala Earley, Countrywide’s Chief Economist. Forgive me for not immediately agreeing. Countrywide have not exactly been the best bunch of business people or estate agents for that matter, so much so that they are now investing heavily in online property sales. Anyway, rest assured, they do conclude with something sensible such as "Countrywide says they will mean prices returning to levels similar to Q1 2016". Scaremongering over.

The second article again has a misleading title. You get the jist of the article by the title you would have thought, but I quote "The rate of quarterly house price growth in Prime London cooled in the second quarter of the year, with a 0.3% decrease from the opening three months of the year". Yes, you read that right, the RATE OF HOUSE PRICE GROWTH. So there is still growth. Excellent news.

On the brighter side you will see that limited company applications are up in the mortgage sector. A very interesting development - it is clear that astute landlords have taken advice to proceed down such a route. Thanks to a growing number of lending products now available to limited companies (this has grown exponentially over the course of this year) more and more landlords are incorporating and taking advantage of this tax efficient way of holding a portfolio. A clear sign that a) opportunities are there and b) investors are not holding back.

The last headline pertains somewhat to investors using a "buy-to-sell" strategy. Excellent news really. In a nutshell 75% of people would stretch the budget to get the ideal property that suits their needs. With this in mind I re-emphasise that knowing your target audience can pay dividends. A bidding war worth of dividends, mind you! A recent development of mine saw a bidding war - perhaps due to the modern bathroom with underfloor heating, perhaps because of the wine cooler in the kitchen. Maybe both. I know for a fact though that first time buyers like aspirational property, so sell that lifestyle; the key to a successful development.

In summary, read closely. Headlines conflict, but the overall message is still clear: there is a market for your product (property). If you are selling, ensure you know your audience. Same goes of course for your letting portfolio, but key is to structure wisely to minimise your tax bill. With recent changes you will see some of your tax breaks go, so make sure you adapt, or you will lose money to the Chancellor of the Exchequer.

To finish off, a lovely quote from the first article: "Annually, Prime London prices saw a 1.3% increase, rising to 2.7% in Outer Prime London. This has been driven by particularly strong growth in certain south London areas, with Clapham (9.2%) and Balham (6.5%) – forever popular with aspirant, young professionals – leading the charge. North Kensington (5.1%) also enjoyed solid price growth on a year-on-year basis." Lovely news of course, so let's keep investing locally!

Remember - if you are after investment advice, whether you are looking to grow your existing portfolio or start afresh then do get in touch by emailing me on jeroen@claphampropertyblog.com or come and meet me at the Clapham Property Meet Wednesday 28th September. There are still a few tickets remaining to the event, so do RSVP promptly here. Also, if you are looking for hands-off investing and you wish to invest upwards of £50,000 then do get in touch as I have a number of transactions that are ready for funding within the next 2-12 weeks. I help investors like you make better returns on their investment. I have done so for nearly 15 years, with proven results. If you are interested in taking the next step on your investment journey then reach out and I will expertly guide you through the process. I am actively looking for clients to invest with and for to expand the current successful portfolio. 

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.

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.