Spotlight on investing in the North. Is it really worth it?!

I thought I'd use today's blog post to tell you a bit more about what I'm doing in 'The North'. I went to University in West Yorkshire and so know it well (first rule of property investing - know your area well or at the very least partner with someone who does).

We've all heard of the great returns you can make with student properties but we're also seeing a rise in popularity of HMO's (Homes of Multiple Occupation) for professionals too. It's a great stop gap for people who want to move out of the family home but can't quite yet afford to buy or rent a flat of their own. It is now both of these markets which I am catering for in Yorkshire with some fantastic returns for both myself and investors.

Along with a business partner who lives in Yorkshire, I am in the process of buying two large HMO's. Both are joint ventures with investors and so I have detailed the figures of one of them below...

7 bed HMO with a 1 bed self contained flat
Purchase price: £215,000 (I know - a bit different to Teddington prices)!

Deposit and fees: £65,000
This is being funded by an investor on a long term basis. I am paying him 1% per month (£650 in cash every month!) for a minimum of 5 years. Better than what he'd get in the bank, eh?! :o)

Remainder of purchase price is funded by a mortgage at an interest rate of 4% above base.

The total costs for the property on a monthly basis including interest on the bank loan, interest on the investor loan, utilities, management fee and insurance equates to around £2,000. That may seem like a lot except when you consider that the total gross income from the property is £34,750! (This is based on an occupancy rate of 50 weeks of the year to allow for small voids - it is now standard for students to sign tenancy agreements of a full 12 months and so you, as landlords, now don't miss out on a chunk of income for the year). 

Each of the 7 HMO bedrooms are already rented at £85pw and the 1 bed self contained unit at £100pw. This property is 0.1 miles from a University and so will rent every day of the week to students.

So....

£34,750 gross annual income divided by 12 months of the year gives a gross monthly income of £2,895.83. 
Total costs each month, as stated previously, are £2000
That leaves me a personal profit of around £895 each and every month and I own the property 100% without using any of my own money - not bad in my book! I also have a very happy investor as they are getting a fantastic return on their money over a long period of time.

If you'd like to know more about this then please do get in touch. I'm always more than happy to chat about property investing!

Rebecca

http://www.rebeccasmithpropertyservices.co.uk/
rebecca@rebeccasmithpropertyservices.co.uk
020 8398 9333

Teddington two bed flat with a decent yield

Although this isn't the prettiest block in the town that isn't what's important is it investor friends?! As long as the numbers stack up and you've got a pot of potential tenants (something you'll never run out of in Teddington) then you're buying the right investment property.

This is a good size two bed and from what I'm seeing at the moment, it is definitely size that is winning the tenant race as long as it's a decent standard inside.

      

http://www.rightmove.co.uk/property-for-sale/property-54343196.html


It obviously needs a spruce up, i.e. a lick of paint and maybe new worktops and unit fronts in the kitchen, but you shouldn't need to spend any more than £5k max. If you get it for around £320k, which is reasonable, then your max outlay, minus costs, is £325k. The rental on this is in the region of £1500pcm which would give you a gross yield of 5.5% - cracking for Teddington considering the average is around 3.5%!

Please do get in touch if you're interested in finding out more about buy to let or property investing in general - I'd be happy to have a chat.

Rebecca Smith
http://www.rebeccasmithpropertyservices.co.uk/

Should we all be renting the homes we live in in Teddington?!

A pretty controversial title for today's blog, admittedly, but I read an argument for this recently that really rang true and I wanted to share with you.

I am part of a property investors network and mentorship program that meets every month. My mentor, Rob, regularly writes topical property articles and his most recent I found fascinating. He is a very successful property investor, earning over £300k per year from multiple property businesses, and yet instead of buying his most recent family home, he decided to rent it! Have a read and see what you think about his reasons why....

"The house I have just moved to is a rental property!

Now – if you’re like me you’ll have been brought up and conditioned by society that we should try and own the house we live in. Personally – I’ve owned my own house (well, a few different ones thanks to the RAF lifestyle!) since 2005 and never thought I would ever be “wasting” money on rent again.

But over the last couple of years my mindset has changed considerably – and I want to propose an alternative for debate here. (Please note – there will be no right or wrong answer and everyone will have different points of view on this. I am not suggesting any course of action but am very interested in your views..!)

The main paradigm shift came after reading Rich Dad Poor Dad and understanding the importance of owning assets rather than liabilities. I’m sure that you will have read the book but if not – please do – it will change your life!

So – many of us consider our homes to be our prize asset – but it could be considered that your home actually falls into the liability category. You may have a lot of equity tied up in it not working for you & it also costs money to maintain.

I didn’t really take this notion seriously until I decided it was time we needed a larger house to accommodate the (rapidly) growing family. You know the story – buy a young professionals shoebox in a trendy area when life is free and uncomplicated and all of a sudden you have 2 toddlers tearing the place to pieces…!

So – onto the house hunt. When we sat down and did the figures some things suddenly jumped out at me.

The type of property we wanted to move to (which will be the place our kids grow up in), was hugely expensive.

As a self employed investor – it was going to be difficult to get a residential mortgage to buy said house.

So lets put some numbers to this:

We would have had to put together a deposit and stamp duty of around £250,000 to make the move worthwhile. As a professional property investor there was no way I wanted to tie up that sort of money in my own house at this stage of life, even if it was just lying around in the bank account!

So – plan B. Start saving money from the cashflow produced through our existing assets. Hypothetically – if saving at £2000 per month (which would certainly impact quality of life), it would take over 10 years to save the deposit…

Again, if you’re like me I would assume that you wouldn’t want to sacrifice all of that cashflow now to save for a house you may be able to buy in 10 years time. Lets not even take into consideration that property market growth may well exceed your savings rate so actually the deposit you’ve accumulated will not buy half the house you need now…

You would also have to factor in the opportunity cost of not having all of this money working for you. If you invest £2000 a month over that same 10 year period wisely, it will compound and multiply many times. Just with a very basic Buy-to-Let investing strategy you would be able to buy 1-2 investment properties in your goldmine area every year….!

No – I want to enjoy life with the kids now. You only get one chance at that.

So – plan C. I sat down and did the figures and the answer literally jumped off the page…

I think as professional investors and financially literate people we can find the opportunity in any market. You will probably know that the rental market does not follow the same trend as house prices – so as properties get more expensive, their rental values start to shallow off. Therefore, we can rent truly fantastic houses for not much more than much cheaper ones…

After working all of this out on my trusty spreadsheet it became obvious that I could rent our dream house – and then by releasing equity by selling my current house, we could generate cashflow from buying BTL properties straight away that would cover 75% of the new rent.

Of course, if you are a bit more savvy and can buy well and recycle the deposits – within one refinance cycle the cashflow generated from the new assets will be in excess of the personal rent.

Lets put this in layman terms.

If you have equity in your own house and using these figures, within 1 year you could be living in your dream house for free. In fact, better than that, you will be in a positive net cashflow position.

This is an exciting concept.

Now, I do want to be impartial and discuss both sides of the story. Before making this decision, I brainstormed the downsides. This is what I came up with:

You would no longer have a residential mortgage. On consultation with my brokers this may affect lending criteria with some BTL lenders but shouldn’t be an issue with most.

You are not paying off your own residential mortgage. This was a big consideration – but what is important to remember is that you will be re-investing the equity in multiple investment properties which will carry on compounding in value over the years.

If market conditions change (i.e. interest rates shoot up) then the cashflow from your assets will be eroded and may not be able to support your personal rent. This is why it is important to stress test all of your numbers. In all honesty – any market change produces more opportunity which you – the savvy investor – will be able to capitalise on anyway to increase your wealth! (We will discuss that in a future blog).

So – what are the options for the future?

Option 1 is to live in rented accommodation for your whole life, funding it from the cashflow produced by your ever compounding portfolio. You have huge flexibility in life, especially as we are moving to an ever more transitory and mobile lifestyle.

Option 2 is to get to the stage where you have excess cashflow and you can hedge your investments to something which maybe more liquid and then build up a pot to buy your dream house. (Or you could sell some of your assets in the future to fund your own house).

Regardless, why wait for 10-15 years, scrimping and saving to live in the space you need to flourish and grow when you can have it right now, and be financially better off at the same time?

I’m sure, by now, you will have an opinion on this discussion – but there is a 3rd possibility for the future. If you are savvy there will be the opportunity to take an option to purchase your rental property at todays market price and benefit from any market rises. After all, many high quality properties on the rental market are there because the owner hasn’t been able to sell and is now an accidental landlord – you are actually helping them out as well."

So...what do you think?! Seems to make sense to me! If you want to discuss any of this or how you can start to invest in property then please do get in touch - I have some exciting stuff going on at the moment I'll gladly tell you about! :o)

Now for today's picture. Another one from my sister, Jodie, who sends these to me pretty much daily!

Rebecca Smith

rebecca@rebeccasmithpropertyservices.co.uk

020 8398 9333

http://www.rebeccasmithpropertyservices.co.uk/

Buy to let deal of the day - add value in Twickenham

The best recipe for doing buy to let is to follow this simple formula:

1. Buy below market value - i.e find a deal that needs work!
2. Put in new kitchen, bathroom and redecorate neutrally to add value with little cost and to appeal to as wide a range of tenants as possible
3. Get good tenants who pay on time and stay for a long time
4. Refinance the property as soon as you can and use the funds gained from adding value to do it all over again! 

Now that may be all good, I can hear you say, but nothing is ever that simple and that's true. However, if you can get as many elements of this formula right as possible though then you'll be well on your way to being a successful property investor. More about this in a future blog I think as I can feel myself going into rant mode....!

Spotted this little gem on Rightmove this afternoon that looks like it could fit the formula pretty well:




http://www.rightmove.co.uk/property-for-sale/property-53780537.html

There's no more pictures as it is described as being 'in need of modernisation'. This short phrase should make your ears prick up as you can add value to the property which is a key part of my successful property investing formula. Lets do the sums...

Purchase price - £315k (should be more like £300k)
Work needed - £10k (complete guess but you should be able to do the basics for this if you're clever)
Post works value - £340 - 350k approx
Rental value - £1600pcm
Gross yield - 6.2% (based on total investment of £310k if bought at reduced price)

Now there are a lot of 'what-ifs' there but this is all perfectly possible and is something I am doing with investors on a daily basis. If you'd like to know more then please do get in touch as I'm more than happy to offer advice and help.

Now here's another funny piccy from my sister. She sends an endless supply, just a shame most of them are completely inappropriate!!

Rebecca Smith
http://www.rebeccasmithpropertyservices.co.uk/

Buy to let deal of the day - Twickenham cosy one bed!

This is a cutey! It pretty much ticks every rental box....

Good location with fast links to London? TICK
Neutrally decorated? TICK
Spacious? TICK
Would rent every day of the week?! TICK!

     

http://www.zoopla.co.uk/for-sale/details/37396201

Two questions arise for me...
1. How long is the lease as it's not mentioned in the details?
2. There's no external photo so I'd be interested to see what the building looks like and what the access is like

Also, don't forget to take into account the service charge as might be pretty meaty which could seriously eat into profits.

Let's take a look at the numbers. It's on at £255k which is very reasonable given its location. Another reason why one of the above questions may be affecting the value. If not, however, then you might get it for a nice round £250k. It should rent for around £1200pcm which will give you a gross yield of 5.8% - very healthy for these parts.

Nice little starter pad for a new investor or one to top up the portfolio if you're more experienced.

If you have any questions about the local property market at all then please do feel free to get in touch. I don't charge anything for a chat or email! I own my own letting agency but also source properties for investors.

As an aside, I had to share this with you. My sister is an avid reader of my blog (more out of sisterly support I think rather than any interest in property!) and so she likes to send me pics to put at the bottom. Therefore she is solely responsible for this one and sums her up to a T! :o)

Rebecca Smith
http://www.rebeccasmithpropertyservices.co.uk/

Are landlords to blame for Teddington’s rising house prices?

The South East of England property asking prices jumped by more than £4,000 to £376,862 in May according to Rightmove, an increase of 1.1% from April but only 3.1% higher than a year ago. After the traditionally quiet months of January and February, the property market starts to heat up, but talking to some Teddington Estate Agents, they are reporting their lowest ever stocks of quality property for sale. However, asking prices have no relation to what property sells for! With property, the definition of price is what someone is prepared to pay, not what the agent thinks it’s worth!

So, is the issue a lack of supply?

Putting aside Teddington’s housing supply shortage, (according to the last Census, across the Twickenham/Teddington area we only built 561 properties in the last decade, but the population of the same area grew by 8,527)! This is now, according to some people, being exaggerated by an increase in homes being owned by buy to let investors. Landlords tend to be buying a property as part of a long term pension plan and are more likely to keep it for longer than an owner occupier would. I have also seen unwillingness among homeowners, thinking about moving, to put their own property on the market as they can find few suitable properties to make it worth their while going through the whole moving process. There are some new build developments underway in the Teddington area though, so hopefully with the influx of some new properties, this should level out the property market again. (How affordable they are though when including the developers premium in an already premium area is a whole different issue)!

What I would say to that is that I believe this is the new norm in the Teddington property market and is the consequence of not enough homes being built to meet the escalating growth in household numbers. This will inevitably result in a lack of quality homes for sale in many popular areas of Teddington.

When one looks at the historic data, in May 2007, there were 327 properties on the market in Teddington compared to today’s 234. Should we be worried?  Well in May 2010, there were 268 properties for sale in Teddington but six months later in November 2010; this had jumped to 315 properties, for it to drop to 248 properties in January 2011. The number of properties on the market is a cyclical thing in Teddington; it always has been and always will be. As we go into the summer of 2015, the number of new properties coming onto the market will increase... just as the sun will shine!

So are landlords to blame? Well, on one side of the coin, yes they are. If they buy a property to rent out, that means someone can’t buy it to live in. However, it doesn’t matter if someone wants to live in a property if they can’t afford the deposit and upkeep. So, on the other side of the coin, if the building of new properties is slow and people can’t afford the large deposit for the mortgage, then Teddington landlords have stepped in and bought property to rent out to them. Local landlords have bought 2698 properties over the last decade and now house 20,857 people across Teddington and Twickenham alone.

There is also an issue with the supply of housing in the rental sector. Whilst investor landlords are buying more property, where properties are currently tenanted, tenants are not moving out because they are unable to buy due to reasons mentioned earlier. This is having an impact on the rental prices as well, with average rental prices having risen by 23% in the last 2 years.

That sounds like a win-win situation for investors to me! It will be interesting to see what happens once the new developments in Teddington are completed.

The demand from Teddington tenants for Teddington property is only set to rise over the coming years. If you want some advice on where (or not) to buy, please do email or call me. I’d love to hear from you!

Rebecca Smith

http://www.rebeccasmithpropertyservices.co.uk/

Buy to let deal of the day - back to Isleworth...

I do like Isleworth! In my opinion it will get great capital appreciation in the next 5-10 years and prices are still 'affordable' enough to give decent yields. A rarity in these parts! :o)

This one caught my eye this morning. I know the road as I've sourced a couple of flats there for investors before. They've always rented easily as its a short walk to Twickenham road where you can jump on a bus to Twickenham station for the fast link to Waterloo. A key criteria for most tenants.

      

In an ideal world you'd replace the kitchen and install central heating as it looks like its got storage heaters but these are by no means essential for the rental market. You would get a bit more rent than if you just left it but it would take a long time before you get a return on your investment so I probably wouldn't bother.

So, how do the numbers stack up? Well its on for £309,995 which is a decent price. I'd probably push for £300k and if you achieved this, with a rental figure of around £1300pcm, you'd get a yield of 5.2%.

http://www.zoopla.co.uk/for-sale/details/37354171

If you're interested in investing in property then please do get in touch. I'll happily give you the benefit of my experience and a chat is always for free! :o)

Rebecca Smith

http://www.rebeccasmithpropertyservices.co.uk/