I don't want to buy a property

Nope

I haven't bought a new property since 2018. I enjoyed the cashflow from my investments extensively for a few years (well, let's just say up to the point a global sniffle shut the world down). Out of all the investments I've made over the years I must say that property has, and continues to serve me well. The actual ownership of property not so - hear me out.

I don't like paying for repairs.

On my rental properties I see it as a cost of business. It's a simple equation. Rent comes in, costs go out, I reinvest the profits - be it at the local bookies or otherwise. But living in my own property - I don't like being unable to move. I don't like being tied down. And that is exactly why I wouldn't buy a property to live in, unless I'm dead set on staying somewhere for at least 10 years; because that is roughly the amount of time you'll need these days to wash the costs involved with moving. Banks, conveyancers, estate agents - everyone gets paid before you do, so any equity you may have created dwindles away quite quickly if you need to sell up before 5-10 years have past. Of course this depends on a lot of factors, but over the past 5 years I've seen zero growth in my rental properties for example - a zero sum game. In fact I've just agreed a sale at exactly the level I refinanced one out at in 2018. Surprised? Well, we have had a pandemic and a mass exodus from London over that time, and my properties aren't exactly first time buyer flats (I trust that had I purchased smaller units they would prove more popular) which would have seen a bit higher demand. The 5 yearly rigmarole of refinancing really gets my goat as well. Other countries in Europe or even the USA offer 25-35 year fixed terms, negating the need for income reassessment, changes in rates, unnecessary red tape to create industries, the list goes on.

Long term

We've just had half a decade of turmoil in the property market. So if you're a first time buyer just think long and hard what you'd do if you had to move tomorrow for your job etc. What would you do with this shiny new flat? Sell it? At a loss? Let it? probably at a loss. Rent it out? Hmmm, not really because you need the rent to be 145% of the gross rental amount. Unlikely this will be attained if you've taken out a 65% or higher loan to value mortgage.

The right time?

Perhaps now is exactly the right time to buy if you're a first time buyer (investment or live-in) if capital growth is your game. Be aware that we've seen little to no capital growth over the last few years (certainly not if you're looking to break even after fees and stamp duty and so on). If a mortgage however means security for you that you won't have to move until you want to (rather than a landlord giving you notice) perhaps it is right for you. Just be aware that if flexibility is a concern, just think that the mortgage payment outgoings are not necessarily going to be less than what you pay in rent. If you are thinking of purchasing a property - for investment, to live in, whatever - and you need some advice, reach out! I've been involved in letting, selling, buying and renting property in South London for 20 years now and I'm happy to share my expertise. Find me on linkedin, instagram, or old fashioned email: jeroen@claphampropertyblog.com

Update on Buy to Sell deal - with video (that works this time)!

I was disappointed to see that the video I posted in my last update didn't work, so do CLICK HERE TO SEE THE VIDEO of the deal in my last post, the hold and rent project in Camberwell. 

On to the next update then. You'll remember that I had bought another property at auction. Again a lovely deal, this time purchased for £160,000. Again slightly further out than I normally venture (Thornton Heath). A property riddled with "problems" as some people refer to them as. I only see challenges, and moreover, an excellent way to pay less for an investment property. It had been on the market with two agents for over a year... what could possibly be wrong?

Well, problems included Japanese knotweed, modernisation required and the block was looking tired. No problem too big of course, but one thing I did notice was that the property used to be a 1bed! The previous owner (who had been repossessed) had cheekily split the living room to create an extra bedroom. Normally this would make the property very difficult to sell as it's a breach of the lease.

So what did I set out to do? Investigate further... After reading the legal pack in full detail it had emerged that there was actually a treatment plan in place for the knotweed (so that's one problem down) and the freeholder had given consent in writing for the internal alterations - another problem down. So the only problems remained were cosmetic ones. Lovely. Armed with this information I went to the auction room and the bidding commenced at £140,000. I started the bidding at £150k when the first of the two bidders had failed to increase and I outbid her £159,000 only for the gavel to fall at £160,000. I had exchanged contracts, excellent!!

Upon bringing the memorandum of sale back to my solicitor he asked whether he'd like me to complete it sooner than the planned 28 day timeline if possible. This was March and the stamp duty was going up considerably in April, so I was more than happy for him to act quick and save me on the purchase.

A mere week later I had the keys in my hand and the purchase had gone through. I made a schedule of works and a specification with the builder I had appointed and off he went, turning a landfill into a palace.

CLICK HERE to see a video of the before and after pictures.

I have also made a walk around video of this project to explain what I did. Click here to watch it.

If you are interested in more videos as I make them please subscribe to my YouTube channel.

Naturally the proof is in the eating of the metaphorical pudding - after having booked a 30% return on this deal we can safely say that, even after sitting on the sidelines advising for so long, my clients appreciate my input and say that I certainly know my onions when it comes to property investment. So if you would like to grow your portfolio, or start one, or would like general advice related to property, lettings and so forth of any kind - do get in touch via Facebook, LinkedIn or old fashioned email. Don't forget, you can also meet me in person at the Clapham Property Meet. This month I will be doing a talk on sourcing the best deals through agents and revealing some of the estate agency industry's best kept secrets...

Will the confidence continue in the Clapham Property Market?

I was interviewed by Brendan Quinn recently for his podcast and my sentiment is clear. The market is still strong and there is no holding back the buyers at recent auctions (auctions are always a good indicator of investor sentiment). So much so that some sellers have been upping their reserves to a level that could not be met. I think the days of achieving 50% over the guide are gone, so auctioneers are wise to set the reserves competitively and let the buyers decide the price. I note that some London auctions have had a fair few unsold where the expectations were too high; I believe this is due to a shift in demand for certain types of properties.

Click here to listen to the podcast

I had carried out due diligence for several clients on recent lots and they decided not to buy at the prices that they were going for as it didn't fit in with their particular strategy (buy to sell). Judging by the fact that the properties still sold they certainly were fit for those opting for a longer term strategy. Those buyers are clearly seeing these properties as hold and rent opportunities. They are buying more with yield in their sights than instant capital appreciation by adding value. Is this a better strategy?

It's certainly one to consider. Buy to Let is not a new phenomenon of course, and has done very well over the years, I can say this from personal experience and that of many of my clients. A caveat however is that more money is invested per property, perhaps limiting the number of properties an investor can buy - normally an investor will look to leverage to buy as many as they can, but if they are unable to "finance out," that is, lend on the increase in value they have created it will ultimately slow the market down; they can't buy as frequently/as many properties, so they will be just collecting rents until the time is right. On the plus side they will be better cushioned to rate rises, small market dips and voids should they be unable to find tenants for some reason. Not unwise.

As per my previous blog posts and many talks I have had recently I predict that London will see very high rent rises over the next few years due to the increased taxation on residential landlords - so perhaps a long term view is the right one?

I am not alone in thinking that rents will rise substantially over the next few years. The Tax Payers Alliance (formed to campaign against the recent changes in taxation for residential landlords) seems to agree. For the full article from the Tax Payers Alliance click here.

So if you are looking to invest in property with a view to buy, add value and resell, perhaps it's time to rethink? There are certainly still opportunities out there however so if you are aiming for the first time buyer market I feel you are nearly guaranteed to do well (and others agree judging by a recent article in the Property Reporter), providing you can find the properties at the right price. If you are considering a longer term strategy and a longer cycle per property - the market is looking good for landlords at the moment, and with further rent rises to come it would be worth considering more letting stock in your portfolio. If you are looking to make the most of your property investment why not drop me a line and start a dialogue? I'm on jeroen@claphampropertyblog.com.

PS I will be hosting an investor evening in Clapham in September - an ideal time to meet in person - so do keep your eyes peeled for more details with date, venue and guest speaker lineup.