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.

5 ways to add value to your investments in Clapham in 2017!

I mentioned in my last post that it is becoming increasingly difficult to make a living as a regular buy to let landlord. This year is the year of having to add value somehow, simply buying and parking an investment will not get you the returns that you did in years gone by. With the increased red tape, taxation and scarcity of good deals you will have to work that little bit harder in order to maximise every pound you invest.

Here's 5 ways to add value and make better returns:

1. Multi-let
   Yes it's as it sounds, you let the same property with sharers but instead of letting it on one tenancy you let it room by room. You CAN make better returns employing this strategy, but do check the terms of your mortgage, some lenders prohibit it. Point to note is that it will be more time intensive and potentially you will have a void now and again. Not for the time poor. You will need to add value to the customer by including bills such as gas, electric, broadband and the such.
   
2. Extend - the sky is the limit
   If you have a freehold house, an ideal way to add to your gross rental income would be to do a loft conversion. In most areas you can get a loft conversion done under Permitted Development or PD and get another two bedrooms and a bathroom up on the second floor. An average room in Clapham goes for £700-900pcm, so let's say you make an additional £1800pcm/£21,600pa by converting the loft. That's not a bad return on a say £50k expenditure, over 40% return on capital employed! If you have a spare £50k sitting around then it's worth thinking about (£50k won't buy you another property)! You can do this on leasehold flats too providing you own the loft, otherwise you'll have to negotiate with your freeholder to purchase the loft space, which can add to the cost. Often times it still makes sense to proceed though, although with a flat you can't do this under PD, you will have to apply for planning permission. Not to worry though, your loft company can sort this all for you. Check with the local HMO office though if the property will be more than 2 storeys, the textbook definition of an HMO is "five occupants over three storeys living in two or more households" so freehold houses would often fall under this. Some councils' definitions vary though, so please do check if you will become licensable if you decide to go down this route.
   
3. New purchases - add value from the outset
   This is key for all those investors looking to add to their portfolio this year. Say for instance you were to price up a normal BTL opportunity. You do your sums and you calculate the potential return based on your input. Deposit, stamp duty, legal fees and you divide the net income (so gross rental less agency and finance costs). There will often be other things involved as well, the "set up costs" like a lick of paint, new furniture and so forth. Now here are two golden nuggets in one: when purchasing, get the seller to leave the furniture. You're probably thinking "oh it's rubbish I'll have to replace it" and that's exactly why you should get them to leave it. Because a REPLACEMENT of said furniture is tax deductible, whereas the first purchase is not. Stained mattress/broken frame? Excellent reason to replace, no? Exactly. Here is nugget number two... If you purchase the property with bridging finance, spend money on refurbishment and ADD VALUE so that your property is worth significantly more then you can refinance to a new lender and withdraw 75% of the NEW value. This means that you will, if you do the sums right, get your money back in your pocket that you just shelled out on the refurb, leaving you with that money to invest further. If by using this strategy you could leave £30-50k less in a property, even taking into account the bridging costs, this would create leverage and you can then take that money and invest it elsewhere - after all if you are looking to maximise the returns you are better to leverage. This of course depends on whether you are expanding, you could also refinance and simply ask for a lower LTV (loan to value) so that you get a better rate and pay less interest monthly. Food for thought; this will be a personal choice. Personally this is my strategy of choice as I'm aggressively expanding my portfolio and I'm looking to leverage as much as possible. I recycled nearly 60k out of my previous purchase.
   
   
4. Refurbish your existing property
   Bathrooms and kitchens sell! Not just that but if your property isn't up to scratch then you won't be getting the best returns. If an average 3bed property can fetch a rental increase of £150pcm or £1800 per annum then spending £5000 on a refurbishment provides you with a 40% return and it will pay for itself in 2.5 years. Bathrooms and kitchens tend to last about 10 years mind, so it's not like they will last forever, but do go the whole 9 yards and raise your game. Make your property more desirable. After all the competition is fierce for good tenants - do you want to be an average landlord with an average property or do you want to be good/better/best and offer a good product? I'm not talking gold taps and marble flooring incidentally. If you want me to advise you on cost-effective refurbishments then get in touch - I'm sure you've seen the quality of my own projects so I'm happy to manage your refurbishments too if you're looking to go down this road.
   
5. Work together with a fellow investor to pool your resources.
   The life of an investor can be lonely - it needn't be though. You would be amazed at how many people came to the Clapham Property Meet earlier this week to learn more about investing. If you network with other investors you will get the confidence to do things with your portfolio and your money in order to create better returns. So take action and experiment with strategies that are tried and tested by others. Never bought an ex-local authority property? Talk to someone about the pitfalls. Never invested outside of Clapham? Learn from others' experiences. Never multi-let before? There will be someone who has done it and is happy to share.

So - how are you going to add value to your investments? As a thank you for reading I'm going to offer a FREE 20 minute phone call to run through your strategy and give you some hints and tips. I'm going to limit this to the first 5 readers that respond, so if you're interested in a quick strategy pep-talk for 2017 then do drop me a line and we'll get a call scheduled in.

A landlord asked me about auctions - and a good thing she did!

Well I tell you what, last week's "auction specials" on the blog have certainly stirred up some interest. Lots of landlords came back to me with potential ideas with what they were going to do after having had a look at the properties in the flesh. All very exciting!

Some of you who are eagerly looking for the next deal but didn't know quite how to go about buying at auction asked me for hints, tips and advice. I thought I'd share these as I know there are plenty of readers out there who WANT to take the next step, but don't realise quite how to go about getting an auction property.

I'll go through a couple of things and perhaps you'll decide it's too risky for you after all. Nothing wrong with buying through estate agents, there can be a lot of competition in the room on the day and that may drive the price up over and above your budget. Don't be tempted to win an auction for the sake of winning (we've all done that on eBay!) as it could cost you dearly.

1. Decide on a property and strategy - will you hold it and rent it out for long term gain? Or will you be looking to add value and resell straight away? If you are just starting out the former is probably a safer bet as it may be financially restrictive to be able to spend ample on a property and then have the funds for refurbishment too.
   
   
2. If you are holding and renting are there tenants in situ already? Are they professionals or Housing Benefit tenants (if the latter your income will be capped by the Local Housing Authority - they only pay x for a 1bed and y for a 2bed and so forth, so you'll never get more than that). If there are private tenants in there are they paying market rate? Check with local agents (ahem) as to what you can reasonably expect to get in its current condition and after you do some work. Factor in the costs of the work - is it worth doing straight away to get a higher rent, or could you use that money to perhaps invest in another property?
   
   
3. Are you buying with a mortgage or buying with 100% cash? If you are buying with a mortgage you will be wise to get the property surveyed first and bid with a mortgage offer in hand for the highest amount you will want to pay. This way if you get it for less, great, it can be amended and you'll have the funds ready for completion. But if you go over you will have to find the difference yourself! If you are buying a flat to hold and rent but you want to do work to it this will raise the value. In order to take advantage of that boost in value you will want to buy with cash if possible and then mortgage it later. You can, of course, take a redemption free mortgage but these often attract a lot of fees, thus eating into your returns. Do your sums wisely.
   
   
4. Always have an exit strategy. Holding and renting? What if you can't get the rent you want, are you happy to drop the price? Be sensible. Better get £450pw when you can't get £500pw because the alternative is £0! You can give the market a try next time around when tenants are in there paying your mortgage and you have their 2 months' notice to play with.

There are always potential downsides to buying at auction and particularly pre-bidding. You may want to look at 3 properties, get 3 different lots of surveys and mortgage offers done and see what you end up buying on the day - but this is expensive, if you end up buying the first one then the other two are wasted, but all 3 could go over what you are willing to pay and you can waste thousands in search of a bargain - is it really a bargain then? Higher risk, higher reward of course.

There is of course the old school buy-to-let route. A slower process of course but you are generally in less competition. Pick your flavour - this will be down to your attitude to risk of course.

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.

Emerging Outer Prime London Area Sees High Yield

This 3 bed property in Tulse Hill offers a buyer a chance to acquire a flat that is poised to benefit from high yields. At an asking rental price of £380 per week the yield will be 6.58% which is not so readily available nowadays. Jereon Hoppe (director of Xandermatthew) has discussed the advantages of capitalising on the more competitively priced properties available which are slightly further away (emerging outer prime) from Tube stations such as Tulse Hill. There’s plenty to do in the area with Brockwell Park moments away, locals enjoy swimming in the lido as well as all that the trendy and authentic village of West Dulwich which is close by has to offer.

http://www.rightmove.co.uk/property-for-sale/property-34179831.html?utm_content=v2-ealertspropertyimage&utm_medium=email&utm_source=emailupdates&utm_campaign=emailupdatesinstant&utm_term=buying&sc_id=15889878&onetime_FromEmail=true

Given its location of being within an emerging outer prime area the property stands to benefit from capital growth which the neighbouring prime emerging property areas such as Clapham have continued to enjoy even in the run up to the election. This is largely due to the area being regarded as a hotspot for young professionals and overseas investors too with the trend set to continue due to the undeveloped stock in the area.

Southwark Has All The Answers For Buy To Let Landlords.

This is a good deal for investors as it is a flat somebody can come along and transform to make it into a rental machine. Buy to let investors can expect to enjoy a cool 6.3% yield if it rents in the region of £320 per week which is great for a London property.

http://www.xandermatthew.com/printable.dtx?propertyid=28EC562E-9821-4505-A191-70C3EE15376B&fromwebdadi=true

Resale will be strong due to the growing interest in the area with the multibillion regeneration on Elephant and Castle nearby which of course will have a ripple effect on neighbouring areas. Southwark is an exciting borough to be involved in with good projected growth in coming years and already been confirmed as the number one borough that has built  the most new homes since 2012. Central London is a very short bus ride away too and ideal for the many that are opting to jump on their bikes to work.

You will find the likes of famous landmarks such as the Shard and Shakespeare Globe in Southwark so Amery house is amongst a healthy cultural background which is sure to grow in the future because of its closeness to central London.

If you are after any lettings or sales advice feel free to ring me in the office on 020 3397 2099 or pop in to the office on Clapham Park Road.

Close to Clapham South - another high yielding investment opportunity - Clapham SW4

Love them or hate them, from an investment point of view they are proving very popular with our clients.

More and more renters are priced out of period conversions and with the growing trend of flat-sharing longer and longer (it is taking longer of course for people to settle down with Mr/Mrs right in their own place) the demand for bigger units is only going to rise.

We estimate a rental return of £450pw in average condition, but with no internal photos on show this one may need some TLC. Nonetheless nearly 6.2% @ asking price, so I trust this flat will be popular.

Check out the full details here

This estate is close to Clapham South tube so offers excellent links to the underground (zone 2/3 border), Balham High Road and Clapham High Street for local bars and restaurants as well as Clapham Common itself for recreational use. Ideal for renters in their 20s.

Drop me a line if you are looking at an investment and you need another pair of eyes or by all means call the office on 020 3397 2099.

Jeroen Hoppe
Director
XanderMatthew

Excellent high yielding BTL investment Albion Avenue SW8

I’ll kick off this week with a lovely flat just around the corner from Clapham North Tube. Having let one of the first flats in my career here some 10 years ago this estate retains some nostalgic value for me. Rents have risen substantially over the years (from £240pw 10 years ago) and the buyer of this lovely 3 bedroom flat can expect a rental of around £450pw.

http://www.rightmove.co.uk/property-for-sale/property-46735202.html

Another excellent “ready-made” investment I dare say it’s one for the BTL shortlist. Three bedders are always in good demand and with Clapham High Street nearby sharers will love the local amenities. 5.9% gross return I make that at asking price. Do your sums, do your viewings and make your offer!

Remember I'm always on hand to numbercrunch any potential investment you've got your eye on so please email me or give me a ring in the office on 020 3397 2099.

Jeroen Hoppe

Director

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

Buy-To-Let Property Of The Week

http://www.rightmove.co.uk/property-for-sale/property-48669697.html

Look no further than this property if you are looking for a buy-to-let investment that looks decidedly cheap. With a approximate rental income of £1350pcm, this flat would provide any investor with an excellent yield of nearly 6.5%.

Also to be taken into consideration is the fact that several 2 bedroom properties have recently sold in this block for over £350k. As a general rule of thumb, you can allow a £50k - £75k difference between a one bedroom flat and a 2 bedroom in this part of London. It is often said that money is made by the professionals when a property is bought, not when sold – and in this instance whoever buys this flat has a very good chance of locking themselves into a tidy profit, and a property with every chance of capital appreciation.

Richard T
Sales Manager
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