10 Principles of Property Investing

Always wondered how to get into the property investing World and smash it?

We have listed 10 principle of property investing.

1. Always buy at discount (BMV)

  • You’re securing equity at the point of purchase rather than ‘buy and hope’ strategy
  • Insulated against market falling
  • Allows you to recycle your deposit & create infinite ROI (return on investment)

2. Add value

  • Increase the value of the property above the cost of works
  • Often get the property cheaper when properties are dirty-ugly
  • Spend £1 to add £3 of value

3. Invest for cashflow

  • Ensure the property is cashflow positive after all costs not rent vs mortgage
  • The number of properties you own is vanity, the cash flow you make is sanity and the cash you got in the bank is reality

4. Have a cash buffer

  • What if you have an unexpected cost such as having to replace a boiler?
  • Having a cash buffer of 5-6 mortgages payments on each property and an extra for expenses, to counter interest rate rises which can put a dent in your monthly profits or if the tenant leaves and you have to fund the void periods is essential

5. Buy for Yield, not capital appreciation

  • Buy stock on the basis that property prices will never rise, meaning your model is based on instant profitability: income from rent NOT just growth
  • Never buy on emotion – an asset is something that puts money in your pocket not takes it out (liability)

6. Due Diligence (aka doing your homework)

  • Due Diligence on the property: Get a builders report, get a valuation done, check the certificate of title. Check the properties structure is sound and your house is not going to fall down around you
  • Due Diligence on the numbers: Check & confirm that the numbers are true – sure estate agents says the house is worth 100k, but is it true? Same with rental assessments. Become a local expert in your area. Check to ensure that your reno costs will stack up. How much will the property be worth once renovated? Have you included void rates in your equations? What if rent decreased or interest rates increased? Are the tenants really paying that much rent?
  • Due Diligence on the deal: You should be buying property to suit out strategy, not working out a strategy to suit the deal. Does the property suit your deal profile? How will this property help you achieve your goals? Are you buying on numbers or emotion? You should know how much money you are going to make from the deal before you even buy the property

7. Invest for the long term

  • The main reason we believe selling is a mistake is because you are transferring your wealth to someone else. You are slaying the goose that is laying the Golden eggs.
  • Now, we do believe that IF your property is not performing well, or you have bought a property out of area or you can flip a low yielding property on a quick turnaround, then selling the property to reinvest in another better performing property project or to get out is a viable strategy.
  • The mistake we often see is investors not investing for the long term. If we go by past property cycles, and property prices increasing in value over time, then continually selling your properties reduces your asset base and long term wealth

 

8. Buy Existing, older properties

  • The right type of property can make you thousands every year for the rest of your life.
  • The wrong type of property will be like buying a new Ferrari, it will lose you a lot of money year after year
  • New Build property, Off Plan property, Overseas Property, Cashbacks, Rentbacks; you name it, we have tried it.

Existing property is the best type of property for the following reasons:

  • Existing [older] property have established values over a period of years
  • There is no immediate depreciation as you would get with the ‘new car from the forecourt’ syndrome with new build properties
  • Existing properties are very often on streets where there are many other properties of the exact same size and type. Do You think that this might just make the valuation process very simple?!
  • 10 properties have sold on Your street for £150,000. Yours is the same and in the same condition: what do you think it might be worth?!
  • There are less things that can go wrong with existing property: less value speculation, less smoke and mirrors [and no language or legal barriers]

9. The numbers never lie

  • Don’t chase the deals; let them come back to you. Play the long game – we had a deal that we exchanged that we have been negotiating on for 2 years that fell out of bed 3 times! This is not uncommon, and far better than trying to tie a price up too early and getting too emotionally involved and ‘wanting to get the deal done.’
  • Beginners are especially susceptible to this.
  • Have a strict set of rules and do not deviate from them. If the numbers do not work for you, don’t think they won’t for another investor. Consider selling the lead on/packaging the deal up. Maximise your revenue streams!

10. Always Selling your Property

  • You make your money when you buy and not when you sell.
  • The main reason we believe selling is a mistake is because you are transferring your wealth to someone else.
  • Now, we do believe that IF your property is not performing well, or you have bought a property out of area or you can flip a low yielding property on a quick turnaround, then selling the property to reinvest in another better performing property project or to get out is a viable strategy.

 

6 Property management tips for landlords and property investors

As a property investor, whether amateur or experienced, property management is a consideration. It may seem easy to Find tenants, collect rent, make repairs, and renew tenancy agreements, Right? Wrong! Property Management is time consuming, frustrating and not at all easy.

Property Management needs to be taken seriously, ignorance is no excuse and getting in wrong can be costly. Lengthy evictions, non-payment of rent, maintenance issues and relationship breakdowns. Cutting corners, ignorance or ignoring the law could result in tens of thousands in fines, litigation and even a prison sentence.

 

There are three classifications in this sector: Investors, Landlords and Novice Landlords.

Investors – value their time and do not want any involvement in the day to day running of a property. They are more interested in adding value, maximizing the returns and then setting and forgetting. This group tend to concentrate on Income and returns.

 

Landlords – actively run and manage their property portfolios. This group tend to concentrate on outgoings, cost savings and have disposable time, normally retired individuals. Time to read and understand legislation, attend Landlord groups, keeping up to date on legislation etc.

 

Novice Landlords – These tend to be accidental landlords or individuals with one property, who generally lack both time and knowledge.

The reality is it takes time to learn and keep up to date with legislation and a level of expertise to find the right tenant and pro-actively manage the property, tenancy and relationship. Systems and procedures help but the tasks can be never ending: have the rents been paid? When does the Gas Safety expire? When does the lease expire? When will the next viewing turn up? Does it need renovating before re-letting? Non-payment issues? Maintenance issues? Emergency issues? Have the contractors turned up? Standard of work completed? Litigation issues? Staff required? Cost / Cashflow issues.

Property Management has to be systemised, organised and menial tasks outsourced. It’s very easy to be sucked in and time swallowed up. It’s important to look at the bigger picture and fully maximize your time but ensuring processes are adhered too and property management is pro-actively managed.

 

Here are 6 Useful Tips:

1. Invest, Set Up & Forget

If a property is given in good condition, clean and tidy. Most tenants will keep it this way and look after your investment, treating it as their home. If you have a 15 year old boiler, you can waste so much time, repairing, renewing parts and unhappy tenants with no hot water and constant complaints. Sometimes a larger initial investment is required for long term benefit. The property needs to look, feel and presented in the best possible light, so the very best initial photos can be taken for ongoing marketing, when the property comes up for renewal. Poor photos equals reduced demand and rents.

2. Organised Systems

A lettings calendar system essential. This needs to remind you when the Gas Safety Certificates are due, when the renewal is due, when the maintenance inspections are due, when the rent is due monthly. The system needs to contain at least two plumbers, two electricians, two handyman, two letting agents, two emergency contacts, two cleaners, basically your power team.

3. Inspections

The first inspection is crucial and should be 3 months into the tenancy. This will provide a good indication as to the standard of your tenants, whether they are messy, dirty, and unreliable or set the property up as a cannabis factory. If you are unsure about the tenants, you need to inspect every 3 months indefinitely if needed. If they are house proud, no rent arrears and you’re happy, you can delay inspections to every 6 months and finally yearly. In my view, inspections should be carried out a minimum of once a year with a checklist of maintenance issues, looking at the roof and guttering, outside painting, chimneys, fencing, inspecting windows, fire safety issues – smoke alarms, carbon Monoxide alarms, fire escapes, black mold issues, water ingress and list potential upgrade expenses, new carpets within two years, bathroom needs to be re-decorated in 12 month’s time. Lastly, speaking to the tenants to make sure they are happy and know of any issues.

However, always think whether any items, like inspections, can be outsourced.

4. Rents

Tenancy Agreements normally charge tenants for late payments. Tenants need to pay the rent on the rent due date and if the rent is late by 7 days, they are charged.
It’s important to get all emotion and anger out of the process. All dealings need to be professional and business like.

This process needs to be systemized, for example.
Rent Due date.
Landlord/Investor check bank account 4 days later, to ensure rent received.
If not received, email sent to Tenant, stated Clause XYZ and will be charged, if 7 days late
After 8 days, Email & Letter sent to Tenant with charge
After 14 days, telephone tenants
After 20 days, book an Inspection

The inspection provides a good opportunity to speak with the tenants and find out what’s gone wrong. Life happens – redundancy, relationship break ups, addictions. Whatever the reason, its important to be calm and understanding and work out a joint action plan for them to move out or find a resolution to their problem. It does not help being angry and emotional, if they have just lost someone they love or have problems they can’t resolve.

5. Investment

The one yearly review, needs to incorporate an overall investment review.
Is the market rent correct? Rent review? Can any value be added to the property? It the property achieving you correct return? Check the mortgage amount / term period / marketplace?
Would a re-mortgage work? Has equity taken out to invest? Risks analyzed – Are rates going up and factored in? Tax changes? How will this affect returns?
Each individual property is a business in its own right and needs an annual review.

6. Management Company

If you are managing your properties by yourself and your finding it frustrating, it may be the right time for you to get a property management company on board to assist you in those pesky tasks that are giving you stress.

A Few Reasons Why You Haven’t Sold Your Property Yet

Do you recall when you first put your property on the market, you were most likely full of excitement and hope that your property would scoop up a ton of viewings and also offers immediately after it’s listing? But now that hope doesn’t seem to be the case as your getting less and fewer viewings than you initially did. So what is the reason why your home isn’t sold yet?

We have curated a list of few reasons why your property hasn’t been sold yet.

Your property isn’t ready for viewings

When selling your property, the selling point is the appearance of the property. If your house/flat doesn’t look well-kept, has too much clutter and just doesn’t look new or liveable, that may deter and delay the process of selling your property. As the potential buyers looking at your home is imagining themselves living on your property while on their viewing.

Your properties photographs are not doing justice to it

Another thing that potential buyers would look at is the photographs taken of your property before they even view it. At that stage, they’ve already decided whether they are willing to invest any interest in your home and also if they should even view it. This is one reason why your property isn’t receiving as many viewings as it should.

You listed your property at the wrong time of the year

Another reason why your property probably isn’t taking up as much attention as it should be because you’re listing it at an awkward time in the year. As your targetted market of people may not be looking for homes the same time that you are selling. For example, families with children usually start looking for new homes in Autumn/Spring as they want their children to start a new school or term at the beginning with other kids.

You chose the wrong estate agent to promote your property

Sometimes we are so in a rush to sell of our properties, that we don’t think much about the who we are getting onboard in helping us sell our properties. We recommend the you use the search tool on our site and look for an agent that is closely within the vacinity of your current home to promote your property as they will have the most knowledge on the area and your home. it’s always a good idea to befriend the agents as then they are able to help you more and are equally as motivated as you are to sell your home.

These are just a few reasons why your property hasn’t sold yet. So don’t feel discouraged on your journey to selling your property, but instead keep these points in mind for when you are selling in the future or now.

 

Home ownership at 29 year low

According to the latest survey conducted by English Housing Survey, only 63% of us now live in homes we own outright or with a mortgage following the 11th successive yearly decline in home ownership.

In contrast, as homeownership fell, the private rental sector grew by 19%.

the figures show that for the first we are seeing far more outright homeowners that those owning with a mortgage, indicating how much harder it’s become to get on to the housing ladder.

The younger priced out generation is hit the hardest, as 10 years ago more than half (55.6%) of 25-34 year olds owned a home with a mortgage but now its just a third (33.7%). Over the same time proportion of 25-34 year old privately renting has more than doubled, rising from 21% to 48%.

Across England Housebuilding is at its lowest peacetime levels since the 1920s and as these prices continue to pull away from wags and deposits now averaging £30,000 the National Housing Federation fears that home ownership could soon become the preserve of only the richest in society.

with home ownership being slowly pushed further out of reach and the number of households in affordable social housing also falling over the last thirty years, more people are renting from a private landlord. they tend to find themselves trapped in a cycle of expensive short term that leave certain stability or abilities to save for a house deposit, despite how hard they work

YouGov research for the National Housing Federation showed taht almost two thirds(63%) of private renters aged 25-44 years old in Britain said they thought they would have bought their own home by now. out of all private renters, the majority (56%) say that they’ve rented for longer than planned because they have no alternative.

David Orr , chief executive of the National Housing Federation, said : “People in their thirties are seeing their chance of home ownership slip through fingers as they struggle to save for the enormous deposits and mortgage payments, no matter how hard they work. We are in danger of winding back the clock on homeowenership, as house prices continue to rise only the privileged few can only hope to affording it.

At the moment people who can’t buy a home little or no choice but a rent privately going from one short term let to another at an ever escalating cost. we believe that people should be able to have a home they can afford, which means more affordable homes to rent or buy through shared ownership and a private rental market that’s fit for purpose.

we’ve had enough of short term, gimmicky housing policies. our younger generation are having all hopes of affording , affordable homes. The  next government must produce a long term plan for housing and commit to the end the housing crisis within a generation.”

Gavin Smart , interim chief executive at the Chartered Institute of Housing, added :” The English Housing Survey is a stark demonstration of national housing crisis. its clear that the cost of housing is affecting people all over the country in particular younger generations and people living in London.

However, homeownership continued to fail in 2013-2014, while the proportion of private renters continued to rise. nearly half of all households aged between 25-34 are living in the private rented sector, a figure that has more than doubled in the last 10 years. for the first time, there are more households who owned their home outright than with a mortgage, showing just how polarised housing wealth has become.

 
working households who still have to reply on housing benefit has almost doubled in just five years. if radical action isnt taken now more people are going to continue to struggle and the housing benefit bill will continue to grow. Making housing more affordable means building more homes of all tenures for ownership, shared ownership, private rent and social rent. To do this we need political will, commitment and leadership, We would like all political parties to commit to ending the housing crisis within a generation, and we think the government should take a more active role in boosting housing supply

Rents has risen by 16% over the last half decade

A new report from Your Move and Reeds Rains has found that in the past 5 years the average of rent has risen by 16.3%.

In absolute term, the average residential rent in England and Wales has grown by £107 since January 2010, to reach £763 as of January 2015.

This is an annual rent rise of 3.0% over the last half decade. However this represents a real term increase of 0.6% per annum when adjusted for inflation over the same period.

Recently, rent has fallen on a monthly basis down by 0.6% between December 2014 and January 2015. Rent is actually higher on a annual basis up by 2.8% higher than what was seen in January.

Adrian Gill, Director of Estate agents Reeds Rain and Your Move, comments: “the nature and affordability of UK housing is transforming before our eyes. In the last 5 years the private rented sector has successfully absorbed an unprecedented influx of tenants, while rental prices have broadly tracked inflation. As ever, the devil is in the detail but as this growth accelerates, even more investments will be necessary for the industry to keep up. So we need more buy to let landlords to help solve the crisis in demand for homes to rent.

It’s also important to recognise that these figures don’t float in a hermetically sealed chamber. There are many other aspects of this sector that feed it like finance and the housing market.  Rent represents a landlord’s attempt to recoup investments at a reasonable market rate dictated by consumer prices, inflation and basic principles of supply and demand. Over the long term, rents also tend to reflect higher house prices.

In real terms, rents have risen only incrementally. But any real and sustained growth in rents should offer a clear lesson

As with the purchase market, the only clear way to make rented housing dramatically more affordable is to build more homes, far quicker than in our current case. And until this occurs, landlords are more likely to earn double digit returns on their investments

Property’s abroad with France at the Top of the List

With the sterling hitting a seven year high against the euro, these are ideal buying conditions are tempting the Brits back to the French Market.

This is the first time mortgage rates are at a 60 year low and prices back at the levels they were in 2007 its perhaps no surprise that France has accounted for 46% of Conti’s mortgage enquiries over the last four months.

Rhone-Alpes region best known for its Skiing properties are proving to be the most popular pulling in the most buyers.

However, this steady increase of the value to the pound against the euro, which has reached a 7year high of €1.34 last week, is effectively shedding tens of thousands of pound off buyer’s budgets.

With the pound currently hovering around €1.33, a €200,000 home in France now costs £150,376 compared with £175,439 back in the summer of 2013 when the pound was worth €1.14. That is a saving of £25,000. Investors, full of fresh optimism, are bringing their plans forward and snapping up bargains while they can.

Clare Nessling, director at Conti, says:” Over the last three years, but during 2014 in particular, Rhone-Alpes has been growing in popularity, with more than 4 in 10 French Mortgages being taken out to purchase a ski property in the region. And also the department of Haute-Savovie, where popular resorts such as Chamonix Morzine and Les and Les Gets are located, are at the top of buyer’s lists.

The French Ski market is most popular with the British but at the same time is also extremely well supported by the domestic market, making rental opportunities very good. Another bonus is that it’s also very accessible wither by air, train and car and the culture is familiar, which British buyers like. When you combine this with the current mix of ideal buying conditions, including the favourable exchange rate, it’s basically a great time to buy a French ski property.”

French mortgage rates are still at their lowest in decades, with deals starting at just 2.2% for variable mortgage over 10 years, and 3.25 per cent for a 25 year fixed-rate mortgage. Unlike many countries where the best rates are limited to those with the biggest deposits, both of these deals, and many others, are available for mortgages of up to 80per cent loan to value.

Online estate agencies are predicted to force ‘rouge agents’ out of business

Property search experts; The Buying Agents, has stated that estate agents are delivering poor levels of customer service and in by doing so will be forced out of business by 2020 this is a result of quality, online based agencies emerging in today’s market.

The Buying agents believe that high street estate agencies can no longer afford to change high fees and deliver poor customer service. This firm has also claimed that over 90% of their clients would decide who they sold with based on the level of service they received when they were buying their properties.

Consequently, Henry Sherwood the Managing Director of The Buying Agents has predicted that high street agencies are falling to apply the standards of good practice in customer service amongst other things, and in doing so they will be out of business over the next 5 years, since the property market continues to evolve increasingly in favour of the digital medium.

Henry Sherwood continues to say; “We are seeing an emerging trend in the growing number of seller who opt for an online agent as a result of their own buying experience with high street agents. Many customers feel they could do much better themselves at a fraction of the cost by only paying for the services they actually require. As a result, agencies not meeting client expectations when they are looking to buy will quickly become a dying breed over the next 5 years.

“Encouragingly, the emergence of so many online agents has inadvertently acted as a kind of filter for ensuring that only quality agencies survive on the high street which is great news for us and for the clients we look after .“

The Demand from British buyers remains strong

Sourcing Property have released a new report into its clients of 2014, this reports shows a predominantly British clients base with 69% domestic buyers.

Buyers from France and Italy made up 9% and 5% respectively, with the remainder a mixture of overseas buyers from the Middle East, Far East and Australia. Of these, 53% were owner/occupiers whilst 47% were investing in buy to let properties.

Jo Eccles, Managing Director of Sourcing Property: “People are often of the view that buying agents, particularly thoise in London, are largely acting for the super rich overseas buyers, however he goes on to say that we have a very strong British client base with the majority   of which are owners occupiers (78%). Out of this 13% are first time buyers and 12% were buying for children which are becoming an increasing trend. Our clientele also work across a very diverse range of industries, 50% are in banking and the financial services and the rest are divided across industries including insurance, fashion, recruitment, government, property and law.

We saw a lot of sealed bids in the first half of 2014; and in 4 out of 5 sealed bids we entered; we were bidding against other buying agents. Buyers that are unrepresented often didn’t even get a look in. In the final six months of the year, the market became very price sensitive and where that asking price was too high, a lot of buyers and tenants refused to even bid as they didn’t want to deal with unmotivated landlords and sellers. In whole prices remained fairly flat with the expectation of trophy homes, where some buyers were prepared to pay up to 2% premium to secure something rare.”

When dealing with rentals and relocations Sourcing Property has seen a 26% growth in 2013, with the highest majority of relocations from the US at 46% with 36% from Europe and 18% from within the UK. These also include employees from CBRE, Lulu Lemon, JP Morgan and RBC.

Jo adds: “We are in talks with a number of large corporations to handle their employee’s relocations, but we are expecting this growth to continue as companies, especially tech, digital, media and finance, increase their relocation numbers and many would be buyers opt to rent instead. We have a partnered with a superb settling in and education consultants as part of this growth.”

Confessions of a Tenant

A very new report from online letting agents PropertLetByUs has highlighted some of the secrets that tenants are keeping from their landlords.

As you would expect, the number one tenant confession revealed in the study was the one and only making excuses for paying rent or avoiding paying rent that is what this study has shown. 63% of the tenants admitted to trying to dodge paying rent followed by 59% of tenants keeping pets with any authorisation. Tenants redecorating without permission (45%) and a third of tenants admitted to damaging walls by knocking nails.

This study also reveals that nearly a forth of tenants’ confessed that they have rarely or never cleaned their ovens, 18% haven’t mowed the lawn regularly, 11% have dumped rubbish at the front and 6% have sublet a room. When it comes to expensive damage to property, 4% admit to burning holes in floor coverings and concealing them with mats.

Jane Morris, Managing Director of PropertyLetByUs comments: “Our research shows that a considerable amount of tenants have made excuses to avoid paying rent, which is worrying. The latest industry figures show that tenants arrears are on the rise again, up by 7.2% in 2014. This represents an increase of 4,600 tenancies compared to the same quarter in 2013.

One key way that landlords can ensure they protect themselves from arrears and potentially bad tenants, is by conducting very thorough tenants reference checks. Background checks on tenants are so important and in doing so, you end up picking the right tenant and it can save a long and costly process further down the line.

Landlords need to be thorough in conducting background checks and above all reference gathering, including bank statements for the past 3 months; previous landlord references to check the tenant paid rent on time; credit checks, incorporating fraud indicators; and employer’s reference. It’s highly important for to also check identity and proof of current address- ideally tax and insurance documents and talk to at length to a prospective tenant.

Landlords should also make regular check on their property during the tenancy, so they can spot and breaches. In addition, landlords should also check each rental property thoroughly for signs of common damage, which can often be misses at the end of the tenancy, potentially costing landlord’s hundreds of pounds.”

Could this be a ‘bumper year’ for North East property prices?

Are changes to stamp duty and pension reforms bringing a bounty of new buyers to the market, creating a bumper year for North East property?

The announcement last year on the changes of Pensions are due to come into effect this April these will allow savers over 55 greater freedom to take their pensions as a lump sum, with a so called “silver landlords” likely to take advantage of the return on their investment offered by buy to let properties by buying homes to rent out pushing up prices.

Chancellor George Osborne also announced in December’s autumn statement the homebuyers that are purchasing properties with less than £937,000 will pay less stamp duty cutting £1000 from the cost of buying a North East home and encouraging more buyers into the market.

Expected delays and low inflation in lifting interest rates have also led to suggestions of a “mortgage price war” as several major lenders launch New Year “record low” fixed-rate deals.

Mortgage approvals, this week have hit a 17-month low and are 23% down on this time last year.

Ajay Jagota, founder and Chief Executive Officer of KIS lettings agents, nonetheless predicts a “bumper year” for North East property

“Despite what the doom-mongers might tell you, 2015 has all the makings for a bumper year for North East property. The ease of pension regulations will undoubtedly bring more purchasers to the market both as owner-occupiers and buy-to-let investors, rising up prices.  At the same time, stamp duty changes will make it cheaper and easier to buy a home. The North East rental yields are as good as any in the UK and as rental returns rather than capital appreciation are key to making money out of property, out region stands to gain the most. As a result I think we can expect to see double digit house prices growth in the North East 10% seems a good bet with rents set to rise in the region of 6%

North East have all the correct conditions existing  , low prices, high rental yields, strong demand, affordability of mortgages – means that if buyers and investors decide 2015 is a time to buy then self-fulfilling prophecy could raise prices just like they did in London.

As a result, bargain hunters need to strike early to get the best deals, and should stick clear of  signing lengthy tenancy agreements if they’re renting at the moment and are looking purchase”