220,000 less landlords in the PRS 😱😱😱

Hamptons claims there are over 220,000 less landlords in the PRS due to the impact of policy changes.

So what does that mean...?

For those of you that read my 30%APR Store card story you will know exactly what I’m on about. It’s been popular for a few years now to bash “evil, fatcat, money-grabbing” landlords. The powers that be have cottoned on to this and, targeting the younger voters, responded with tax increases, increased regulation and generally landlords got a negative vibe from Parliament, this probably to promote the widespread idea that homeownership is a must for most. Shame! 

What has happened is exactly as predicted really. Younger voters are keen because hey, who wouldn’t want a stab at the people who you’re paying this rent to, right? The attack on the PRS has left many a battle scar, but before I go into that I would like to take a moment and thank the government for the Help to Buy system. Under this scheme the government will loan a substantial chunk of the buyer’s deposit interest free for 5 years. Free money! Guess what happens though when these young buyers have free money though..? Right, they’ll spend it. As a consequence developers have now been accused of profiteering because they have all this government money pumped into their pockets through this Help-to-Buy scheme… Just can’t win, us property folk, can we??

Back to my train of thought. So:

1.     Purchase prices have actually gone up (for new builds that is, older (rental) housing stock doesn’t seem to be going up as much because of less incentives (if any) and also the flood of these ex-rentals on to the sales market. As ever, the younger generation prefers to pay more and move right in, so a doer upper is normally not a consideration.

2.     There is less rental supply, mainly due to landlords selling up.

3.     What rental stock there is left is run by and large by bigger, more astute, professional landlords. They know how to maintain property well and charge accordingly. That, combined with

4.     The ban on tenant fees and cap on deposits means it is less outlay for tenants to get into rented accomodation, but again these fees are just loaded into the rental price.

Perhaps the last item there was done in order to create a more fluid rental market, but in my humble opinion the UK Rental market is fluid enough. In Germany for example renters are expected to commit for much longer terms and are, often times, even responsible for furnishing the place with a kitchen. Assured Shorthold Tenancies are anything one month upwards, so commitment isn’t a problem, but I guess the government wanted to lower the financial barriers to entry…

So as a result of the “attack” on the PRS the government and its clan of generation renters has succeeded not only in reducing the choice available to renters but also increasing the price of everything that is left! The number of landlords has fallen to the lowest level in seven years. There were 2.58 million landlords in Great Britain in 2017, now down by some 222,000 according to Hamptons. That’s cold hard data there!

What do you think is the future of the PRS? Comment down below and tell me your thoughts!

I hope you enjoy my content. If you are looking to dive in to the wonderful world of property investing then do reach out to me via email or get in touch via my social media channels. I offer coaching, mentoring and more so be sure to check out my website www.jeroenhoppe.com for more information on what I can do to help you.

I don't care about your pretty pictures on Instagram!

There, I've said it, I literally do not care. One iota. Well maybe just one, it's a pretty picture so it will look great on your instagram right??

Wrong. (Prefer video? -->https://youtu.be/iuGnugWB4FY)

What looks good to a property person is numbers. Cold hard cash is what gets me going. Don't get me wrong, I love the excitement of a new project. I love seeing it all come together. And yes I have a loving relationship with interior design trends which I like to incorporate just like the next person.


In this day and age sex sells, and sexy pictures get likes. Attractive pictures of amazing co-living spaces are very nice to look at and do well on ye old facebook, linkedin and instagram feeds for sure! But does that make a good developer? Maybe you shouldn't be looking to JV with those that are posting great pictures on social media sites without having a good look at their spreadsheets first.

You see, spreadsheets and numbers, that's what it all comes down to in property investing. 90% of it at least. Will the deal work? Will it be profitable? Are there multiple exit strategies? What if things overrun? What if the costs are higher? How is the downside protected?

I mean, I love a pretty picture, but what I'd love to know is "did the project actually make money?"

What do you think? Will you be grilling posters of pretty projects in more depth in the future? Let's see past the pretty pictures and dig deep in to how well they can present the numbers. Like in Dragon's Den, most great "businesspeople" (ahem) fall to pieces when quizzed on the numbers. The same is true in property. I don't see enough grilling, but hey, let's stay positive, if they've got to the stage of pretty pictures they must have done well, right?

Food for thought...

Refurbishment tour Deptford

With works underway at my latest development in Deptford I've been inundated with requests for faces old and new to have a look around at the project in progress. I'm pleased to report that so far several visits have proven very useful and I was able to answer a lot of practical questions. 

Naturally I would like to offer the same value to my readers who may not have reached out to me in the past, so if you are one of the first 5 people responding to this you can join me and a few others on a group walk-around of my project in progress. 

During the walk-around we will cover:

• How to change a layout effectively without compromising rooms and making them useless
• Keep your exit strategy in mind
• Decor and finishing tips at builders merchant pricing, I'll show you where and how to get the prices and create the wow factor for peanuts. Remember it's got to look expensive without being expensive
• And much more of course

So if you want to tag along then send me a quick line to book a spot. I'm limiting this to the first 5 people, midday on 20th May. If you want to join and can make it then let me know and I'll gladly show you the project. Email me at:jeroen@claphampropertyblog.com And hope to see you soon. If you can't make this date then hopefully I'll see you at the launch day in order to showcase the finished product. 

The start of another project to maximise returns in South London

I did a short walk-through video of my latest purchase over in Deptford, I thought you may want to have a look to see how you could add value to your next rental property.

I will be reconfiguring the layout (much like my other project I'm running at the same time), so turning the property from 4 bedrooms to 5, but retaining a good amount of living/kitchen space. Naturally this will be open-plan, but I would say it's not going to feel cramped, the living space will end up being L-shaped, 5 metres in length by 3 metres. So roughly speaking that's 5x3 for the living area and 3x3 for the kitchen, very generous. In fact I also own a studio flat with similar dimensions just to put that into perspective - that whole flat can fit into the living room of this one! I digress however..

Why?

Well to maximise returns for rental you will have to increase a) the quality of the accommodation and b) you will have to increase the number of bedrooms. I can't very well extend beyond the upstairs unless I want to encroach on the neighbours, so by reconfiguring the space I will add a bedroom where the kitchen is currently. Ideal.

How?

Well you need to ensure that the walls aren't load-bearing of course before you go knocking things out. A structural survey is of paramount importance. Once that's out the way and the surveyor confirmed that none of the walls I wanted to move were load-bearing it was green light for the builders to go and turn my artist's impressions into reality.

Have a look at the video here and see what I'm doing: https://youtu.be/SVEINeRMYo4

Numbers?

You would think that simply buying a property and calling a room a bedroom instead of a kitchen or reception room wouldn't really add value. Well, normally it doesn't. In days gone by this trick has been used by many a landlord, taking a standard, two reception, three bedroom house into a 4 bedroom, 1 reception room house. I think we're all past this now, it may get a few quid extra in rent, but there's no value add (no, not even if you put up a partition wall in the once through lounge). So why is this different? Well, for one, I am totally refurbishing the property. My purchase price reflects the seller's situation. He wanted a quick, cash sale and didn't want to do any work. There were in excess of 10 people living there (of dubious immigration status as well I would guess) and he was looking for essentially a cash buyer. I have a great relationship with a bridging finance firm and the cash was ready within 2 days of request. To get there, however, was some task though as the seller, in his infinite wisdom, had not applied for various packs he needed to sell the leasehold interest, so the purchase took over 3 months. "Cash buyers only need apply..."

So for this 4 bedroom, 1100sqft property I paid a grand total of £305,000, plus stamp duty, costs, building work, etc will take me up to about £368,000 or thereabouts. I am planning to refinance the property and by using other 5 bedroom ex local authority properties as comparables I'd imagine the surveyor will agree with my estimate of £450,000, which is conservative. There are currently others on the market, which are of a lower standard of course (as this will be brand new and have 3 bathrooms) but they are unsold so I cannot consider these, really. A 75% mortgage would lend £337,500, therefore repaying most of my costs.

Summary:

£305 Purchase Price

£14 Stamp

£2.5 legals

£16.5 finance over 6 months

£30 building work and furnishing

£368 total

Refinancing on 75% of £450k (conservative) leaving 360-337=£23k in the property. So it's not No Money Down, but certainly Little Money Left In as they like to call it. Not too bad.

On the rental side increasing from 4 to 5 bedrooms means the rent will jump from £2200pcm to £2800pcm, so a healthy return even after mortgage costs (under £1000pcm). The property will cash flow nearly £2000pcm, or £24k per annum. That means that it will pay back the money I left in (23k) in about 1 year. That's nice.

So that's this project - are you looking to invest in a new buy to let? Or perhaps you are interested in co-investing in some of my projects? Whether you are investing, or yet have to start investing in South London get in touch with me via email if you want to see better returns. These projects are not fictitious, the figures are not plucked out of thin air. With nearly 15 years of South London property market experience I buy wisely for myself and my clients. If you are looking to have a chat in person why not come and join us at the Clapham Property Meet, the go-to social property networking event in Clapham. This month's meet is featuring Mark Barrett who will be giving an advanced talk on taxation - not section 24 and the like, you will know about all that I'm sure. So if you are looking to start/continue/advance your property investment come and join us!

5 helpful tips on getting the best out of your refurbishment in Clapham

Any astute investor will know that one of the ways to make a profit from property is to add value by improving the property. Often times investors will look to significantly improve the property before they offer it back to the market for rent. After all, there should be some "sweat money" factored into the purchase price. So if you are buying right a £400,000 should be worth significantly more than £420,000 if you are looking to spend £20,000 on improvements.

So here's 5 improvements that will add the most value to your next refurbishment (weigh up the costs vs the extra you will achieve in rent though, each project is different):

1. Redecoration - nobody wants a tired looking property. The attraction of shiny new builds is real for tenants. The kitchens, bathrooms and all the finishes are brand new. They however do not present the best investments for landlords. If you are looking for better returns a simple coat of paint with perhaps a feature wall thrown in will work miracles. Go ahead and match some of the soft furnishings too, you'll see what difference it makes in rent. Here's an example of a bedroom I did recently. See how just adding a neutral coat of paint and tying the curtains with a simple touch light gives it a slight edge? 

2. Square footage. Can you add or re-purpose the space? This is key really. An investor client of mine recently purchased a house and by going into the loft he was able to add another two bedrooms and a bathroom (and achieve an extra £20,000 in rent). The result was that the loft alone yielded a 40% return on his money! If the floor space can't be increased can it be repurposed? For example I am creating an open-plan living/kitchen in one of my latest additions. This will add another bedroom to the property and thus increasing the overall rent by roughly 1/3. The kitchen was due to be replaced anyway, so my only additional cost will be plumbing and a letter to the freeholder for permission.

3. Kitchens and bathrooms. These are absolutely crucial for successful letting. With kitchens and bathrooms available at rock bottom prices these days there is absolutely no reason your property should not have nice, modern kitchens and bathrooms. If you would like me to help you get the very best in discounts then do get in touch. Here is a picture of the next kitchen going into one of my properties and I sourced this for under £1000 (add £800 for all the appliances).

4. Flooring. old, tired carpets are a no-no in any property, let alone if you are looking to attract professional tenants to your newly acquired property. Durability is the key of course, but it's got to look good. No point therefore in going for the cheapest, thinnest carpets - this is an investment. Have you considered something more hard wearing for communal areas and limiting carpets to the bedrooms? Wood or tiles work miracles in hallways and living rooms (or tiling that looks like wood, I'm trialling this myself so stay tuned for more on this to see how it works out - I'm optimistic). You should be aiming for £15psqm. Cheap doesn't equal nice though, so beware to choose something nice.

5. Your builder. This is key to your overall success. Having a good relationship with your builder is key. After all, it's him doing all the hard work, not you. Draw up a schedule of works - everything that you want doing. Write it down and even have it to hand to give to him at the quote stage. This will make things easier as nothing can be forgotten! Furthermore payment terms are to be laid down in writing. X% in advance if he is sourcing materials, but labour can be done weekly in arrears. Remember to allow time for him to fix any snagging, and define a time period. For example if you are supplying the materials and it's a 4 week job expect to pay him 25% each week bar the last week where you hold back 10% for a period of say 2 weeks in case of any "snags," or things that come up after he's walked out the door. If there is a particular element you are not happy with, reduce the payment accordingly, but do not withhold all the money - after all 90% of it will be done to satisfaction.

If you are looking to purchase a property with letting in mind and you would like an expert opinion then by all means get in touch. Perhaps there is an angle that you haven't thought of that could yield you better returns. Just start the conversation via email. You can also have a look at some of my recent projects here and here. Are you interested in having me source high yielding investments for you? Manage your refurbishment projects? Help you get the very best trade discounts? It's time you got in touch.

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

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

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

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

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

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

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

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

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

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

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

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

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