Yields are attractive in South London - if you invest right!

I'm hearing a lot of my investor clients say "I'm thinking of investing my money up North for better yields." I think it's an interesting point of view of course, basing your investing mindset on a gross figure. It is true, of course, that there is an inverse relationship between gross yield and capital growth. Often times investors that are new to me me have been used to very little cash flow and, as often with period property, spates of repairs further eating into their rental profits. So, they've got masses of equity tied up in these properties and no way forward. They think that buying with gross yield in mind is the way forward.

What can I do?

If you, like most of my new clients, are stuck with lots of equity and little option to release it for further investment, then it's time to review your portfolio. What can you do to enhance the cash flow? I had a call from a fellow investor who had several properties geared at only 30%! He was very astute and was on top of his mortgages, but due to the rental stress test he was unable to release any more equity. You see, the annual rent was exactly 145% of his interest payment. That's where the problem lied, the rent was too low. Having judged the current rent vs the market rent I saw it was far below the norm. Dated? Perhaps. After a site visit I saw some improvements that could be made to this particular property in order to increase the rent the landlord could achieve. We are currently drawing up plans in order to reconfigure this property to add another bedroom, adding another 33% to the rent, even if we don't update things as we go along. We will of course. This client, once the project is finished, will end up with an extra bedroom and a 50% rent increase! As a result more money can be released upon refinance for reinvestment.

So rather than taking what (relatively) little money he had up North, where it would be more difficult to manage, would cost hours of travel to even get to purchase stage and would invariably appreciate less than a London property, he is able to raise another £100k and has added another £75k to the value of his current property. This gives him enough money to embark on another project with me. I am currently looking to source him another property where we can add value like we have done with his own property. He will refinance the project once complete, leaving him with a net return after all costs of 10-15%, or a gross yield of around 7%. a London property appreciates say 5% per year on average over the long term, so you are looking at a 12% gross yield, or about 20% return on capital employed if you were to sell the property after say 10-15 years. On your doorstep as opposed to 300 miles away.

How to buck the trend

By sourcing viable projects for my investor clients where we are able to add value - both capital appreciation and rental - they benefit from the long term wealth this brings. They end up with property within zones 2-3 London. This should prove:

1. A more liquid asset should it come time to sell

2. A more desirable asset, commanding a higher price (as a property in London always will)

3. Benefit from high rental demand as London has a bigger and more diverse economy than any other place in the UK. Both price and and the demand from tenants will be high so less voids

4. Closer to home and therefore easier to manage should they choose to self-manage

5. A high yielding property AND the benefit of capital appreciation in London

Would you like to own more property within London? Use the resources available to you? Don't know where to start? Start the conversation today on email or come down to the Clapham Property Meet this month and meet me in person. There is so much I can do for you if you want to get started or help your property investing along. I can source a property for you, manage the refurbishment and help you dress the property for the best rental returns. I have nearly 15 years experience in the South London property market. I invest locally myself, and I'm a firm believer that good, safe, sustainable returns are on your doorstep. Let me show you.

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.

Ex-Council property in Clapham & Brixton? Buy now, the stigma is gone!

I was speaking to a buyer the other day and they were delighted with their new purchase. A two bedroom ex-local authority flat on the Cowley Estate in Brixton. They were delighted, despite it needing masses of work in the form of renovation. Having previously been let to a housing association you can imagine the state of disrepair it was in. Thankfully the bathroom was fully tiled, so that was the saving grace, just cleaning to be done there.

But as all good first time buys on a budget go, with a lot of blood, sweat, tears and elbow grease they will have that flat in pristine condition in no time. Or a lot of time, but it doesn't matter. Ultimately they have bought well. Having sold a few on the Cowley estate in my time I couldn't believe the way prices have changed over the years. For the better of course.

The estate itself has undergone a radical change over the years. Security gates with fob entry to keep the rogue parkers and their cars out, a refurbished playground for the children, and a whole host of improvements to windows and communal areas.

So who is buying these flats? Well it's not just buy to let investors that want to rent to LHA tenants. The buyers are young professionals who are buying to live in. And whether the new occupants are tenants or buyers, the number of people returning home from work in their suits and skirts (clearly just stepped out of the office in the City) was amazing. A real change.

These new buyers were telling me all of their friends were buying ex-local authority apartments. It's not just the Cowley estate that has massively improved over time, but others locally as well. Lambeth has been on a mission to improve their estates over the past few years and it certainly does show. The influx of professional buy to let landlords, together with competing first time buyers after value for money property is changing the demographic of these estates altogether.

I remember one of my first encounters in a block on Union road. Three girls came to see it. I arrived early, there were kids screaming, youths being thuggish and laughing around a burning car, boys on mopeds pulling wheelies. Nice. But gladly that doesn't happen any more, and prices have nearly doubled since then, in terms of rentals and sales.

So moral of the story? Ex-local authority flats are the new hot thing. If you're buying to live in or invest, the influx of suits that are a bit savvy is hard to avoid. Coming to an estate near you.

If you'd like some pointers with your purchase, investment or otherwise, feel free to pick up the phone and give me a call. Happy to talk. Or if it's easier drop me a line on jeroen@claphampropertyblog.com.

Two tenanted flats in Emerging Outer Prime SW2 – growth guaranteed!

2x Tenanted flats and opportunity for refurbishment (nearly) guaranteed!

http://www.auction.co.uk/residential/data/full_text/may2015/pos74.pdf

So what are we talking? A pair of 2 bedroom apartments, that’s what. Let on tenancies and yielding £26400 per annum. Let’s assume they are in average condition; and I make that assumption because they are achieving an average rent. I would have thought anything in good condition would fetch around £1400pcm in that neck of the woods. It’s a promising location – as you will have ready in my previous articles this part of SW2 is going to see some good growth in years to come. For nay-sayers – just look at the prices near a station. More people as opposed to less people are going to cycle, walk, take the bus than ever before. Growth is guaranteed..

So what’s it worth?  for the would-be investor to decide. I’m thinking that the layouts will vary slightly, but for all intents and purposes the rent both of the flats COULD be £33,600 if let at 1400pcm, which isn’t impossible, providing they are in good condition. You might need to spend some money on them to get that maximum yield. If you spent some money on the decoration, bathrooms and kitchens perhaps more like £1450pcm per unit which makes it worth nearly £35,000 per annum. In order to decide how much you’d be willing to pay you need to decide the minimum yield you want from the property and be prepared to walk away if bidding goes above that. At the current rents 5.8% yield would mean a maximum purchase price of  £455,000. If you are looking at the properties being capable of producing more like £35,000 though you’re looking at 600k all-in. Don’t forget that you will need to spend money to make money in that case so work out costs when you go and view them.

Looks like a bargain really, bearing in mind that Foxtons has three on the road for sale (and it indeed looks like the same block) for £450k!

Option A is to keep on to them, do nothing apart from a bit of decoration and perhaps push up the rents a bit. Refurbish to a good standard 5 years before looking to sell (or when the current standard of décor is not attracting good tenants). This will end up with a low-yielding property in the last few years of ownership, but frees up cash now for the cash yield to allow that expense.

Option B: budget for full refurbishments now (approximately 15-20k per unit) and allow an exit price of 425-450k

This would leave a likely maximum purchase price of 350,000 per unit to allow for refurb costs and selling fees in order to make a bit of a profit. Perhaps in the region of £30-40,000 per unit? Spend 250k per unit plus 50k for costs and refurb leaves a healthy profit of around 100k per unit. Could be done in 6 months. But with numbers like these I wouldn’t be surprised if the guide price goes out the window!

As always give me a call on 020 3397 2099 for a chat or drop me a line on: jeroen@xandermatthew.com – I’m always on hand to answer any property related questions.

7% Yield in Kennington SE17 – yes yes yes another golden find!

Have a look at this lovely 3bed ex-local authority flat on Doddington Grove. This part of Kennington is ideal for professional sharers starting their life in the City as it offers unrivalled access to the tube. Less than a minute walk and you are ready to embark on a Northern line train.

Garbett House SE17 – 3 bedroom flat at £450,000

http://www.rightmove.co.uk/property-for-sale/property-34559220.html

I estimate rents up to 500pw (470pw worst case) as a 3bed, thus yielding 5.8% (5.4% at worst) but to increase the yield you can actually let this property as a 4bed. Ideal for sharers who live their life in and around work in town and just need a place to put their head down at night. As a 4bed no living you would fetch 550-600pw (6.4%-7% yield).

Now that’s attractive.

And furthermore you needn’t really do much to the flat. It looks in perfectly lettable condition as it has a relatively modern kitchen and bathroom, it comes with a long lease and reasonable service charges as there’s no lift.

Buy now and I’ll guarantee you will have tenants for the peak summer months.

As always email me for property chat on jeroen@xandermatthew.com or call the office on 020 3397 2099.

Want to buy a piece of the regeneration in Battersea SW11? Look no further!

This superb ideal investment property should fetch between £400-£420 per week producing a mouth-watering yield of 8% if purchased for the asking price of £267,500!

This flat is perfect placed for those professionals that would like to be close to a train station with Queenstown Road and Battersea Park Stations both within 0.3 miles away. The split level apartment offers 3 double bedrooms which is almost a pre-requisite for sharers so that’s another major box ticked. It can only be purchased by a cash buyer so is ideal for an investor with liquid asset available and looking for a good long term return. Of course there is the multibillion pound investment programme of nearby Nine Elms into homes as well as the £1 billion connecting Underground line which will naturally increase the value of properties in the area.

As always if you want to talk property call the office on 020 3397 2099 or pop in and see us on Clapham Park Road.

http://www.rightmove.co.uk/property-for-sale/property-49150753.html?utm_content=v2-ealertspropertyimage&utm_medium=email&utm_source=emailupdates&utm_campaign=emailupdatesinstant&utm_term=buying&sc_id=15889878&onetime_FromEmail=true

Excellent 3 bedroom maisonette in Brixton SW9 with over 6% yiel

This beautifully well-kept 3 bed flat in a low rise block situated in the up and coming area of Loughborough junction is deliciously priced at £329,950. This flat can rent up to £400 per week which represents a yield of 6.3% which ticks all the buy to let boxes. It is also only 0.2 miles to Loughborough Junction Station and 0.7 miles away from Brixton Station providing easy access to the city and centre of town. It comes with a private garden plot giving it a unique selling point and could make the difference for potential tenants too.

Nearby Brixton has a flurry of excitement with the likes of the soulful Brixton Village, the dazzling Ritzy Cinema and the Brixton academy as well as the many new lively places to eat.

Growth in Loughborough Junction will continue to rise just as its neighbour Brixton has done over the past 5 years, so capital growth is assured also.

Click here for full details and please do get in touch if you are the lucky purchaser as three bedroom flats are always in good demand!

http://www.rightmove.co.uk/property-for-sale/property-50972900.html less…

Check out this property for sale on Rightmove! rightmove.co.uk

3 bedroom maisonette for sale in Rupert Gardens London SW9 £329,950. Marketed by Acorn, Kennington

Property on the Oaklands Estate outperforms Abbeville Road SW4

What would you choose? A beautiful period property situated in a desirable location, or an ex-local authority in a block? A good question for those new to investment and seasoned investors alike. Most investors prefer one or the other, for different reasons. One may prefer ex-local authority for its better rental yield, and others capital gains from period property. Historically there has always been a trade-off. Is that still true today?

Having taken a sample of data from the Oaklands Estate and Abbeville road for comparison:

Flat 4 Selby House Oaklands Estate, SW4 8AN was sold in 2000 for 118,000 and then again in 2007 for £279,950. This represents an annual capital growth of 13.18%. (It had been sold prior to 2000 but this figure is likely to include the right to buy discount, so was ignored). Our comparison property: 16a Abbeville Road SW4 9NJ was sold in 2000 for 285000 and then resold in 2007 for 555,000, representing a capital gain of 9.99% annually. Both properties are 3 bedroom leasehold flats.

It is very unusual to find that a purpose-built property that outperforms a period property over the same time period. On the face of it therefore the ex-local authority property seems to be a winner. But the real win here isn't just in the capital appreciation, there’s more.

You see with a lower purchase price from the outset and similar rental yields the real reason that an ex-local authority flat is a sound investment is simply because you can buy more of them. You can buy 2.5 flats in Selby House with the deposit you were going to put down on Abbeville road. So not only are you winning by capital appreciation, you will be doing it at a rate 2.5x greater than the investor who chooses a period property.

In the past period properties have outperformed flats in purpose-built blocks – but as the above illustrates this trend is coming to an end. With more first time buyers struggling to get on the housing ladder the demand for (relatively) cheaper homes has risen substantially. This increase in demand has led to a dramatic valuation increase for ex-local authority properties. Do bear in mind that the increase in valuation will only be capitalised upon re-mortgage or resale, and point to note is that period properties did hold their value better in the recession, but if you are not looking to exit the market in the next 10-15 years they are certainly a safe bet today.

So next time you are looking at a period property for investment, think again. One period property for two ex-local authority properties. Double your winnings? I do believe so.

If you are looking at a buy-to-let investment and need some assistance crunching the numbers do get in touch. I’m always happy to help and assist you source a viable investment in order for you to get the best out of the property market.

Jeroen Hoppe

Company Director

XanderMatthew

Top Places To Make Money in London

Yes, as the title suggests Southwark is a top target for shrewd investors who are leaving over-saturated markets for pastures new. Southwark is home to universally recognised and iconic landmarks such as the Globe and the Shard and this property finds itself tucked away within this catchment area. 

To find a two double bedroom property that oozes class in the form of a new heating system and radiators, touch-screen thermostats that control the under floor heating in the bathroom as well as the kitchen and it has been completely rewired throughout too; with wooden floors, (that’s oak flooring not just the tacky beech effect some people gravitate towards like a bull does to a matador)! The lease has a whopping 115 years left, service charge is a puny £750, with just a symbolic £10 annual ground rent. Does one need more convincing? 

Regeneration has already started here, with a gorgeous modern building (along with all the prestigious cars that grace it’s entrance) positioned adjacent to Aylesbury House, but of course it has; with the anticipated growth it is surely primed to capitalise on in the medium to long term. This property should rent in the region of £330-350 per week that gives a potential investor nearly 6% yield if bought for the full asking price.

On top of all this, it belongs to a borough that is recognised as the place to be right now largely due to the 21.5% growth that the area is expecting to witness as reported in the Telegraph in February 20015. We do not anticipate for this property to stay on the market for particularly long as the last one we marketed nearby sold in 2 weeks.

Brook W

Sales Negotiator

XanderMatthew

Deal of the week, and it's only Monday!

Buy-to-let investors looking for a great yield should look no further than this great 3 bedroom purpose built flat in Streatham Hill. With an expected rental income of £425 per week equalling £22,100 per year, even at the asking price of £275,000 this gives any prospective buyer a yield of just over 8%. With long term fixed rate mortgages of up to 10 years with rates around 2% becoming available on the market this would look like a very sensible purchase.

http://www.rightmove.co.uk/property-for-sale/property-48571028.html

With the Streatham Hill property market currently booming and benefitting from buyers looking further afield to find somewhere affordable, any potential investor would also be buying into a market which is likely to provide them with an excellent level of capital appreciation in the medium term, on top of an attractive yield. The property itself, with a total internal area of 836 sq ft, is the size of a small house. Over two levels with a large eat-in kitchen, spacious separate reception downstairs leading to a private balcony, three bedrooms upstairs along with the bathroom and a second WC. The location is excellent too, being just a short walk Tulse Hill station, as well as all of the shops and amenities of Tulse Hill – this represents fantastic value for money.

If you have any questions about a buy-to-let purchase you’ve got your eye on by all means drop me a line on email or call the office on 020 3397 2099; I’d be happy to help.

Richard Thompson

Sales Manager

XanderMatthew

Capital Appreciation vs Rental Yield

It’s an age-old debate: do I buy something “nice” and hope for long-term capital appreciation, or do I buy something a bit less easy on the eye and get a brilliant rental yield?

Take this property as an example:

http://www.rightmove.co.uk/property-for-sale/property-50514578.html

At first glance it appears to be a spacious three bedroom property with private garden.  On a second look we realise it’s a usually avoided high-rise tower block.  But wait, we have 3 double bedrooms in zone 2 with excellent transport links to the City, and just a stone’s throw from Battersea Park.

So what makes this such a wise investment?  Surely investing in a Victorian property is a more attractive proposition?  Let’s look at this in more depth, comparing with a 3 bedroom Victorian mansion block flat on Prince of Wales drive, just around the corner. 

Bought for £470,000 in 2001 and sold for £790,000 in 2010 the Victorian flat has seen price growth of 5.7% a year.  Average rents at the time of purchase would give a yield of 5% a year.  How does that compare with our ex-local flat?  Bought in 2001 for £82,500 and sold in 2011 for £144,000 it’s seen 5.7% a year price growth as well.  And the rental yield?  At the time of purchase you’d be enjoying a 15% return on your investment.

With identical price growth and a far superior rental yield, it’s easy to see why investing in ex-local authority properties is the thing to do.  Once you factor in the running costs associated with period properties (endless repairs, high service charges – for mansion blocks that is - , costly lease extensions etc.) investing in ex-local authority flats becomes an even more attractive proposition.

For ultimate peace of mind and a truly hassle-free investment I’d suggest asking your lettings agent to look after your property for you.  Naturally XanderMatthew offers a full management service.  To find out what we can do to make your life easier, just give us a call on 020 3397 2099.

If you have any investments you’d like to run by me to see what they’d yield long term, do get in touch.

All-time low rates, so repay, right? No, borrow more!

A client asked me for my advice on a buy-to-let investment not so long ago. He said he had £200,000 saved up for an investment property and wanted my advice on what to buy. He was looking to get a small mortgage of £50,000 and hence get a good difference between the monthly rent and the interest payments on the loan. Very sensible.

We had worked out that over the years his property would go up in value and stand the test of time, and also give him a kitty for when things went wrong. Plenty of money in that kitty; from experience more than is strictly necessary. I posed the question “what if I could show you how to buy two properties with the same money and you can DOUBLE your gains?” He was interested.

You see here is “le grand truc…” By taking the remaining £150,000 in our example and investing it in further properties you could quadruple your capital gains over time. You wouldn’t quadruple your cash flow as your interest payments would gobble some of that up, but nonetheless the crude example below illustrates my point: by investing borrowed money into further property you will be better off than choosing to borrow less money - you will increase your capital gains over time.

Example: (based on tax rate of 40% earnings between £31,866 and £150,000)

Purchase Price	£    250,000	£    250,000
Annual Rental Income:	£      15,600	£      15,600
Deposit	£    200,000	£      50,000
Loan	£      50,000	£    200,000
Interest Rate	2.50%	2.50%
Annual Interest	£        1,250	£        5,000
Yield before other costs	£      14,350	£      10,600
Net after tax:	£        8,610	£        6,360

If we estimate an average price rise of 8% on a property value of £250,000 it would be worth £539,731.25 in 10 years’ time. If you had one property you would gain £289,731.25 (excluding costs of course). Imagine if you had 3 or 4…

If you have any questions or would like to get in touch to talk property, drop me a line on email or call 020 3397 2099.

£1000pw with nearly 7% gross yield - Clapham SW4

£1000pw with nearly 7% gross yield

Kosta Giannakakis MARLA

Branch Manager at XanderMatthew

Currently for sale is this 6 bedroom house on Aristotle Road SW4. An ideal buy-to-let if you are able to go the extra mile and comply with HMO regulations. I classify this property a good find for professional sharers, offering excellent living accommodation (1500sqft) with mostly large double bedrooms. The property includes the necessities such as garden, garage and a nice open-plan kitchen/living, features that professional people will be considering upon their search. You won’t secure a better location to invest in, with this particular property situated right next to the underground tube (Clapham North) station and within close proximity of Clapham High Street which offers an array of fine restaurants, bars and the vibrant nightlife one seeks within this location. This is an exceptional opportunity for investment purposes, resulting in a high yield and attracting the finest tenants. I estimate £1000pw, yielding nearly 7% at asking price. Properties of this size are rare and will be snapped up very quickly by a group so low voids are nearly guaranteed. Definitely one for the shortlist. Give us a call on 020 3397 2099 for a price update on your current rental property if you think your tenancy is expiring in the next few months or drop me a line on email.

Click here to see the investment property in question