Should you be scrappping deposits for your properties in South London?

Well, some interesting news in the world of property at the moment: Get Living, the company behind the UK's biggest rental scheme in the private sector in the Olympic Village is going to be scrapping deposits altogether from today. They reckon that the average deduction equates to a few days' rent, so for them it's not economical to register the deposit, comply with various bits of legislation and then have to account for returning it later. Amazing!

Red tape?

Yes, red tape. When you take a "holding deposit" as we used to call them, many a landlord and agent fell foul of the regulations already. After all, the Housing Act (amended 2008) states a deposit must be registered within 30 days of receipt. Furthermore, prescribed information must be given to the tenant. What's this? Well, it's just a paper trail that the landlord/agent is obliged to serve on the tenant to ensure they've been told where this deposit is held. If this isn't done in the right timescale then you may struggle to regain possession and are open to a fine of 3x the deposit amount.

Deductions?

Following on from the above, you can't just deduct whatever you fancy from the deposit because the tenant hasn't left it in pristine condition on exit. An allowance must be made for the useful life of the product. Say a worktop is damaged beyond repair. These are supposed to last say 10 years, it was 3 years old when tenant moved in and tenant was there for 2 years, well you've only had to replace it 5 years early, so the tenant would contribute 5/10 of the cost of a replacement worktop. For those that don't know a section of worktop is about £100-£200 depending on the quality. So you've deducted say £100 and the tenant puts up a fight; it's then down to you as the landlord/agent to prove the condition of said worktop on the way in. Inventory is key! So you've paid £200 for a good inventory on the way and another £200 on the way out. £400 plus the cost of registering the deposit (administrative and perhaps otherwise if using insurance-backed schemes). Doesn't seem worth it, now does it? Get Living claim to deduct a few days rent from each deposit. Say the average rent is £1650pcm or thereabouts per tenancy, the daily rent is about £54. They reckon they're deduction about £100-£150. So I guess what I'm reading (between the lines) is that they reckon, on a big scale, they're saving £400 or thereabouts per tenancy so they don't mind £150 worth of damages that they write off. I suppose this makes good commercial sense. Mind, some damages will be higher than others, but as a big company with so many units it all averages out.

Should you or shouldn't you?

As a private landlord and ex-estate agent I've always taken deposits. One may argue that we "want to make renting more affordable" and so forth. I disagree. Take this example - you have two applicants with the same job, the same qualifications, same social demographic. One however has had the foresight to save up for a rental deposit (let's face it, it's not a deposit on a purchase which runs into 6 figures here, we're talking just over 4 figures!) and one who has not - which tenant would you rather have? Yes, exactly, the one who can manage his finances better. Even if he is unable to manage his finances surely you have a credit card or similar to fall back on? Oh you don't? Well that's just poor planning isn't it? The other factor to consider is that you are not letting hundreds of units like Get Living. You will be letting less than double digit properties no doubt if you are self-managing. So you do not have the luxury of being able to "write off" damages like they can, because after all, your portfolio isn't so large that one flat being left damaged and 399 others being pretty much immaculate will balance your books. It's likely that if you have one bad tenant it will wipe out a big chunk of profit. So my thinking is you want to be attracting the right people, the right tenants who have a vested interest in getting back that deposit (because that's what's most important to them, above treating your home respectfully - one does lead to the other though).

So in summary, I am sceptical about this whole deposit scrapping idea. You are lowering standards, and in an industry where rogue tenants are on the up, you want to keep the bar high. I think having a vested interest in the property is a good thing. Not only financially, but perhaps offer to pay for an improvement, or some other kind of incentive. It may not be a bad thing...! I've been active in the London property market for nearly 15 years now, so if you fancy picking my brains about something by all means start the conversation via email, or come down to the Clapham Property Meet and join us this month for a lovely talk on planning gain followed by a social evening of networking with other local property investors. Hope to see you there!

4 Important Things to Check When Purchasing an Investment Property in Clapham

As you will know I've been investing in residential property for some time now. I thought I'd share a few useful tips; things that I do on a viewing to ensure what I'm seeing is what I'm getting and to make sure I have a solid investment!

1. Is the floor plan correct? Often times the properties I'm attracted to are advertised with little more than an exterior photo and a sketch floor plan. Obviously an internal inspection is required, but is what you're seeing adding up to what you think you're getting? I, more often than not, measure up myself to eliminate the risk of an "optimistic" measurement from the agent. Here is the link to the laser measuring device I use, only £20 from our friends at Amazon. With the proper measurements I can be sure the surface area is on par with what I believe it to be. Believe me, it can swing either way. The last one I measured was 75sqm and the agent had it listed as 46sqm. It doesn't take a genius to work out that 46 m2 is impossible for a split-level 3bedroom flat, but needless to say it put a lot of people off viewing, so bagged another bargain!

2. Checking your numbers. There's no harm in calling local agents to see what they think you'll fetch. Whether you are looking to resell the property straight away or let it, it's wise to call a few agents to gauge confidence and price levels. Time of year will make a difference, so do ask them. And no harm in calling on different days pretending to be either a buyer or a seller. You'd be amazed at the difference in what you're quoted; not sure if there's a hard and fast rule, but I always feel that they tell buyers/tenants a higher price and a seller/landlord a lower price to manage expectations, but you do get the odd agent overquoting the seller/landlord to "win business." Be wary of this and take averages. Mix a few local independents and big corporates too, and don't bother calling the agent that you're looking to purchase the property from, it will be unreliably skewed to make the property look a better investment than it is!

2a. Further on numbers - what does it cost in fixed costs such as ground rent, service charges. Any Section 20 notices served by the landlord? These are repairs of over £250, so don't necessarily have to be life changing but you will want to know before committing, that's for sure. Add this in to your spreadsheet to make sure your overall return is still acceptable. Also, does the freeholder require an admin fee for consent to let? Is it a per tenancy, per annum fee or one-off?

3. Exit strategy. I'm very much a believer in keeping a property in a "family style" condition so that it can be resold. This is my qualm with the full-blown HMO strategy. It works, gives good cash flow but it hurts you on the resale because you can end up with a glorified youth hostel! If you chop it up into bedsit rooms etc will you be able to sell it as a family home? Probably not, families don't appreciate an en-suite shower room in the living room! If it is easily turned back into a family dwelling then fair enough, but if you will have to spend 5 figure sums then you need to reconsider. Here's two flats in the same block where someone has chopped the living room in order to get another bedroom. Sensible. I pasted an original floor plan of another one in the block on the right (it was mirror image so I flipped it around for easy comparison). You can see that it's just a partition wall in the living room, so easily undone if required.

4. Further on this topic, (re)financing. If you put en-suite bathrooms everywhere and let the property on multiple tenancies (by the room for instance) then you will not be able to get a mortgage through a mainstream lender, you will be limited to commercial finance through HMO lenders. Much higher rates and lower Loan to Value, limiting how much you can gear up, so beware of these pitfalls. The other factor to consider is, if you are buying ex local authority properties is that often times lenders have restrictions, so they won't like lending on properties with shared decking access, a less than 50% private ownership in the block or blocks of more than 5 storeys. Most lenders have 8 as a max, so anything above that is a cash buy only. And beware, being on the ground floor doesn't help either, they look at the whole picture!

I hope that helps you in looking for a great yielding property, for hints, tips, news and more do sign up to the blog via email here. I have been investing in South London for nearly 15 years. Would you like to get better returns from your investments? Why not start the conversation by sending me an email, or join me at the Clapham Property Meet, the monthly networking meeting where we talk about all things property. Join us this month for Jonathan McDermott's talk on Planning Gain.

8 Amazing "Urgent" Repairs That are Reported to Clapham Landlords

Naturally as an investor/estate agent/property professional I speak to a lot of people in the trade. I thought I'd share some of the most outrageous repairs we've been called out to - and when I say "repairs" I actually mean a massive non-emergency! Needless to say there were no emergencies and most can be solved with common sense.

So here we go, hopefully you'll find the tales as entertaining as I have!

1. Daniel White, local estate agent recants his tale - "...recently had a tenant kick off because his boiler was not working, I popped around before considering getting a plumber. When I arrived he was angry and was acting if it was my fault his boiler broken down but after 2 minutes minutes investigating, we found his gas pre-paid meter had run out of funds!!!! Apology, of course not.
   
   
   
   
2. Mandy Wilshaw, landlord recants she "had a call out to a property because there was no electric - the whole area had a power cut!"
   
   
   
   
   
   
3. Tradesman - Ally Menzies shared how he is called out to properties and "...the geezer was wondering why every time someone had a shower it rained downstairs!!!"
   
   
   He was kind enough to send in this picture which explains how badly fitted the shower screen was.
   
   
   
   
   
   
   
4. My very own - I was told about a "puddle appearing in the kitchen." When I asked the tenants whether they were a bit lazy with mopping up after they got out of the shower they insisted the floor was bone dry. I inspected, told them it was likely that the water is finding a way down, so mop up. It took them a month to come back to me to say that the issue hadn't gone away. A MONTH! Ultimately it was down to a leaky seal in the shower screen like Ally's example.
   
   
   
   
   
5. Pip Abbott told me about his sensitive tenant: "The blinking light on the smoke alarm in the landing keeps me up all night and I need to sleep!" I asked Pip whether the beeping bothered him in the end and he assures me the tenant took out the battery to stop it from doing that!
   
   
   
   
   
   
6. Rick Player had a less than positive experience letting to someone with a dog:
   "How on earth did the water overflow on to the wall and floor from the shower? Didn't you close the door when you showered?"
   
   
   Tenant "Well, it's difficult to shower the dog with the door closed, so we shower him on the bathroom floor!"
   
   
   To be fair they've done well not flooding the entire house, think of how bad that could have been!
   
   
   
   
7. Nearing the end of the list now - Dylan Stephens told me about his story about the blocked toilet. Every landlord's nightmare of course!
   
   
   Tenant: "The drains are blocked and water keeps running out from under the washing machine and into the basement room."
   
   
   DS: Have you put kitchen towel down the toilet. 
   
   
   Tenant "No"
   
   
   DS: "Why is there 9 inch cardboard tubes in the bathroom under the sign telling you not to put kitchen roll in toilet."
   
   
   Tenant: "We clean bathroom with it."
   
   
   
   
   
   
   
   
   
8. And finally - this has got to be today's winner!
   Jemma Bath  - "I was on my summer holiday when I wake up to a number of calls from a tenant in our Battersea flat asking me to call her back ASAP. So I call and she proceeds to tell me how there's an invasion of spiders and we need to call pest control. So here's me picturing hundreds of spiders coming through the window. I ask her "OK how many are there?" And she said "Well so far there's been three....!"

I hope you've enjoyed a light-hearted article. Do follow me on all the usual social media platforms if you want to stay abreast of the latest property investment news, trends and more. Looking to invest in property and don't know where to start? Start the conversation by email: jeroen@claphampropertyblog.com or join me at the Clapham Property Meet, the go-to networking meeting for new and experienced investors alike.

Where to find the best deals - in Clapham?

A lot of regular readers ask me where I source my property investments from. The truth is I'm something of an expert in finding deals "in plain sight..."

In plain sight? You mean through agents?

Yes, often times the properties that are the most attractive are the ones that have been sitting around for ages. The agent has lost interest, the owner disheartened about achieving the once "very realistic price" the agent pitched the asking price at. So then it's time to get to work...! Rightmove and Zoopla are your friend!

There are many other methods of finding great investments though, and a lot of good systems exist in order to have sellers calling you! Believe it or not there are people out there that make this a business (called sourcing). They could be property investors in their own right, like myself, who don't want to take a particular property because it doesn't fit their strategy (maybe capital gain vs cash flow, who knows) and they sell on the deal to a fellow investor for a fee. Once it's packaged up in a nice little box with a ribbon around it another investor could "buy" the deal from you and you've earned a sourcing/packaging fee.

Can I do this?

So if you are a starting investor and don't have any capital as yet, perhaps too little experience to invest 6 digit sums confidently, you want to be sourcing investment deals for others that are too busy to look around for bargains. Their time is money after all and they'd happily pay a few thousand pounds to bag a bargain. They, after all, do have 6 figure sums sitting there waiting to be invested. If it sits there it's not earning a good return so they'd happily pay you to kick start the returns.

Direct to Vendor?

A lot of the systems are indeed direct to vendor. You market to owners of properties for sale that could represent opportunities for investors. You could leaflet all day if you wanted but there are much cleverer systems than that...

So how do you start?

Well I'd love to give you an overview of how these systems work and help you source better investments. Be it for yourself or whether you want to become a professional sourcer, this event should give you an overview on the systems used by professional property investors to find themselves really good deals.

FREE, just register online!

Just before this month's Clapham Property Meet we're going to hold an interactive talk to discuss these methods (D2V and through agents) of deal sourcing. A talk not to miss if you want to get underway in property investment. If you want to make sure that you get a spot BOOK ON HERE.

We would love for you to stay and join us for the actual Clapham Property Meet also. David Clouter, investor of 30+ years experience will be doing a talk on Property Cycles. How to spot a downturn and make sure you're investing in the right property at the right time! BOOK YOUR TICKET FOR THAT EVENT HERE.

Buy to Let - is it still viable in south London?

An interesting question this week - I had a long standing client phone me and discuss why rents were on the slight decrease throughout his portfolio. It would seem the aftereffects of Brexit, stamp duty changes and many more things are still lingering in the south London rental market - he had to reduce some of his rents by £10pw or so. It's not massive, but a sign of the times still. 

First time buyers

Some may say that renting is less popular now than it was 12 months ago; more tenants are flocking to purchase their own home and stop spending (wasting?) money on rent. Let me tell you that this isn't true. Research suggests that the average age of the first time buyer has stayed fairly stable through the years, as the graph will illustrate. My common sense also tells me that tenants haven't suddenly saved enough for a deposit to go out and buy a property. 

What?So what has caused rents to stagnate? Well firstly we find ourselves in late spring-ish time, which is not quite peak letting time. As you'll know from my previous articles the best time to let your property is in August/September time; a time where students flock to London and the big firms are commencing their graduate programmes (and yes, of course housing is left til the last minute, creating the "gold rush"). This could have a part to play in a low/same rent being achieved on a new let, but we're talking renewals here. My client's tenants must have done a bit of research to ascertain they could get same/similar value elsewhere. They must see value elsewhere, so perhaps still a hangover from last year's new buy to let investors, all quick to offer a competitive price to entice tenants. Hardly professional is it, competing on price?

ImportantOn a new let therefore, it is crucial to differentiate on quality. I have always found it is crucial to dress the property like a show home. The old school of thought is "but they're tenants, they'll wreck it anyway" does not apply anymore (if it ever did!). Quite simply if you provide a quality product you will get better rent and in turn this better rent will more than likely be paid by someone who takes more pride in their home, ensuring that your property and its fixtures and fittings last longer, a win-win. Taylor Wimpey doesn't build show homes because they have nothing better to do, it works! So next time you are letting or selling an empty shell, think again. I have very good links with furniture suppliers and can help you furnish your rental or sales property in order to achieve the maximum price and more crucially achieve a quick transaction; after all, time is money!

Renewals

Alas there is little that you can do if you are finding that your tenants are reluctant to pay a higher price for your product. Perhaps it's time to be honest with yourself - is your property up to scratch? Is it offering the best quality it can? Can you not viably improve it any more? If you answer those questions honestly you will probably predict your rent level for next year...!

My expertise is, as you may already know, in residential buy to let, specifically in South London. Do you own properties that you think need some tweaking in order to get the best out of them? Perhaps you don't own any yet and don't know where to start? I have built entire portfolios for many of my clients and they are very happy with the returns they have been able to achieve. Residential property lettings gives a stable return and as I invest in South London you will know that the capital appreciation is fairly predictable and resilient in tougher economic times. If you are looking to invest or improve your current portfolio touch base via email and see how I can help you today. Email me on jeroen@claphampropertyblog.com and start the conversation.