Letting Agents, what to look for.
July 1st, 2010
Once you have purchased your Buy to Let Property you need to make the decision “do you get an agent or do you go it alone.” Going it alone can be time consuming and a legal mine field if you have not got all the documents, agreements, do’s and don’ts laid out beforehand. Don’t forget this is your property that someone else has got rights over; this alone is a good enough reason to take on a Letting Agent.
So what should I look for in a good Letting Agent?
The first thing to do is take a look at what associations they are members of , the main ones to look for are ARLA (Assoc of Residential Letting Agents), NAEA (National Assoc of Estate Agents), NALS (National approved Letting Scheme), or RICS (Royal Institution of Chartered Surveyors). All these associations are bound by a code of conduct that helps protect you as their client.
What will my Letting Agent do for me?
The services a Letting Agent provides varies from agent to agent, it is always advisable to sit down with your agent and outline exactly what you want them to do, this can be as little as just finding you a tenant to fully managing the property. Having your property fully managed can save you a lot of time and energy in the future as they will carry out all the necessary inspections, report to you any problems and if agreed up front send out trades people to deal with any minor or emergency repairs without you needing to get involved.
How much will all this cost?
Fees, like services vary from agent to agent, the cheapest may not be the most economical and the most expensive may not be the best. In general a Letting Agent will charge a percentage of your monthly rental income usually around 10-15% depending on the level of service they are offering.
First Time Property Investor
April 2nd, 2010
Many people never give a second thought to investing in property and even more are put off hassle and time it takes to find the right property at the right price, not to mention the initial financial outlay and ongoing commitment. Investing in property can be challenging, that’s true, and many investors are self-taught, but the rewards can be great and there is plenty of help to be had out there, if you know where to look.
Once you decide to dip your toe into the property market, you must decide on a strategy. You must chose your goals and define them clearly; for example, are you looking to build equity or an income stream? Are you going to restrict yourself to your local area or are you going to invest nationally, or even internationally? As a first time Investor it is always perceived to be a good idea to invest in an area you are familiar with or use an Investment company that knows an area well. Happy Homes have been investing in Nottingham for a number of years now and have helped 1st time investors take that first step onto the Property Investment Ladder.
People invest in property for various reasons the main two as we have said are equity growth or an Income stream.
If you want to invest for growth or capital gains you must be prepared to take a long-term view on your investment, equity growth does not happen over night and you have to keep an eye on the market to make sure you are not caught short if property prices take a dive. If you are investing for income, make sure you do the maths and take all expenses into consideration. Bear in mind also that your priorities may change in future years so be prepared to be flexible with your plans. Many people who build a property portfolio which offers a combination of income now and future growth.
As part of your plan you will need to build relationships with a good tax specialist, a mortgage broker and a solicitor, all of whom you can have confidence in, since having a good team in place can save you time and money as you invest, along with the peace of mind knowing that they are always acting in your best interests. Happy Homes Investments work with highly skilled professionals we’ve known and worked with for years, and who we’d be only too pleased to recommend.
Property Investment
April 2nd, 2010
Investing in the property market over the last few years has taken off in leaps and bounds and has proven for those who invest sensibly, property can be a worthwhile and profitable investment. More Wealth has been created through property investments than any other method of financial investment over the last thirty years, both in the U.K. and throughout the world.
In the U.K. the most popular by far is the residential Buy to Let sector. This is because investors have a wealth of advice freely available compared with say commercial investment properties. Residential property is the easiest to finance with many banks offering special Buy to Let mortgages and specialist lenders focusing on just this sector they are also easy to manage on an ongoing basis especially if you employ a good letting agent. This is also the sector most “man-in-the-street” investors can relate to, since most of us have been involved in house purchases or renting as tenants in our own lives.
The residential market in the U.K. is huge and there are properties available to suit all investor’s needs which are as varied as the properties available, this is why at Happy Homes we always purchase our investment properties to order, all our clients will undergo a consultation with one of our team to ensure we are looking for the right property, in the right area at the right price. Along with this, we also ensure that every property is fully refurbished to a high standard to avoid the need for ongoing maintenance.
Wherever you look, the media and analysts are always debating about the state of the U.K. property market, often predicting “booms” and “calamities”. It’s no secret that the market changes daily, but regardless of the hype, the underlying trend over the last thirty-five years has been upwards towards the “boom”.
Nationwide records show that U.K. property prices have increased on average by 9% a year since records began in 1973, compared with an average 7% rate of inflation over the same period. The Halifax House Price index, which was created in 1983 shows house prices have risen by 8%, to date whereas inflation ran at around just 4.5%.
Profits from investing in property can exceed those averages depending on location, rental returns and “leverage”. Some areas can “boom” while others stagnate or drop, as exemplified by Hull in the 1980’s where prices boomed by as much as 20% while prices fell nationally, As for rental returns, it perhaps goes without saying that an investor who rents out a property for £450 with outgoings of £350 and a capital growth of 4% a year, is going to prosper more than one whose outgoings are £425 in the same area. Lastly leverage, having the ability to use just a little money to buy a comparatively lucrative asset, allows investors to benefit fully from long term increased property values through borrowed funds, if used effectively. What we are trying to say here is know your area. Happy Homes have been buying and selling property in Nottingham for sometime and they know the areas where house prices are realistic and rental demand is high, they also have a vast experience in ensuring your Return on Investment is maximised.
Buy to Let Investment
April 2nd, 2010
Purchasing a buy to let property can leave the buyer with a whole sack full of questions. Am I paying the right price? Is the property in the right rental area? As a landlord what are my responsibilities? How do I ensure I get the right tenants?
All these questions can put many people off investing in property. At Happy Homes we like to take all the hassle and worry out of investing by dealing with all these questions before you pay a penny. Happy Homes have had many years experience of buying rental properties in and around Nottingham so lets look at what they do to alleviate all these fears.
The Right Price
When purchasing a property Happy Homes will always conduct a full RICS (Royal Institute of Chartered Surveyors) survey, not only to ensure the initial price correctly reflects the current value of the property, but also the resale price once the property has undergone extensive renovation, ready to take tenants. This way you can guarantee the price you pay is always the true and accurate price for the property you are buying. In addition to this Happy Homes pays all your legal fees through their chosen solicitors ensuring you further cost savings.
Happy Homes always use long standing reputable builders to ensure all the work carried out is up to the highest standard and completed within the timescale agreed at the outset, again this guarantees you are getting good solid, high quality renovations at a reasonable price without the hassle of finding and overseeing the workmen yourself.
The Right Area and Right Tenant
As I have said before Happy Homes have many years of experience with rental properties in and around the Nottingham area, this means you can take advantage of their expertise to ensure the property is in a good rental area. The best areas of town are not necessarily the best rental areas and Happy Homes takes this into consideration before even purchasing the property. This, coupled with using a reputable and established letting agent, will ensure your property is working for you from day one. Happy Homes demands the highest of standards from its letting agent, which means all tenants are Credit Checked and Referenced before they move into your property saving you time, hassle and money.
Landlords Responsibilities
As a Landlord you will be responsible for the following.
- Building Insurance
- EPC’s (energy performance certificates)
- Gas Safety Certificates
- Electrical Appliance Testing Certificates
Without a good knowledge of what is required this can be minefield for the Landlord going it alone. As Happy Homes only use a reputable and established Letting Agent you can rest assured all these will be kept fully up to date alt all times again saving you the hassle of finding the right people to supply all the certificates and cover.
Return on Investment
April 2nd, 2010
Your Return on Investment (ROI) is always key to making the decision to invest whether this is in the Bank or Building Society, Stocks and Shares and Investing in Property. Key to this is finding the right rental area to buy in as with purchasing a property for your own accommodation buy to let is all about location, location, location.
Many investors think that you have to buy a property in the best areas of the city to be able to make a good return on their investment, but this isn’t always the case, this is not always the case. A disadvantaged area is not necessarily a poor rental area, many of these are undergoing regeneration and have an incredibly high demand for rental properties, and very low purchase prices, this makes them very profitable income wise and good potential for growth in the value itself.
A good knowledge of the area will also help you calculate how much rent to charge, too much, you will struggle to get tenants and an empty property gives a very poor ROI. Too little and you are guaranteed tenants but you are not maximising your ROI
Calculating your ROI isn’t as easy as looking at how much rental you will be getting each month then deducting your mortgage payments and saying that’s the return I will be getting, there is much more to be taken into consideration. Never use the Gross Yield, many property development companies use this to hide poor investments, you need to take the following regular costs into consideration
Mortgage Payments
Insurance
Maintenance Charges
Ground Rent
Letting agent fees
Happy Homes take all this into consideration when they calculate the ROI at the beginning of the process so you know exactly what you are getting from the outset. An example of how this is calculated is attached.
| Purchase | |
| RICS Valuation (guaranteed) | £87,500 |
| Purchase costs (paid for by Happy Homes) | £1,000 |
| Deposit | £21,875 |
| Mortgage valuation fee (if using a mortgage) | £395 |
| Total cash investment required (guaranteed) | £22,270 |
| Mortgage | |
| Mortgage product | 4.6% BMS 1 year tracker |
| Loan to Value | 75% |
| Value of Mortgage | £65,625 |
| Arrangement Fee (3% of Loan) | £1,969 |
| Mortgage rate | 4.60% |
| Monthly interest payments | £259.11 |
| Income | |
| Rental income per month | £475.00 |
| Expenses | |
| Buildings insurance | £15.00 |
| Letting Agent management commission at 10% | £47.50 |
| Mortgage interest payments | £259.11 |
| Return On Investment per year | |
| Positive cashflow per month | £153.39 |
| Positive cashflow per year | £1,840.69 |
| Rental ROI | 8.27% |
The Impact of the end of the Stamp Duty holiday
April 2nd, 2010
The end of the Stamp duty holiday had a dramatic effect on the housing market as the Council of Mortgage Lenders reported 49% fewer house purchase mortgages were granted in January than in December. However the 32,000 loans granted was still an increase on the 23,000 for the same time last year. The biggest drop was in first time buyers where the number of loans dropped by 54% compared to the number of mortgages granted in December.
The end of the Stamp Duty Holiday saw an increase of 49% in mortgages granted in December followed by a 71% drop in January.
The Director General of the CML Michael Coogan said, “When the December and January data are taken together, they show little change in the underlying market conditions compared with recent months, with activity still slow but well up on the lows of a year earlier.”
Happy Investing!
How to Rent out Your Home
February 26th, 2010
The property slump, recession and the phenomenon that is Buy-to Let has led to more and more accidental landlords. These are home owners who for whatever reason have decided to rent out their property rather than sell. Here are a few things they had to consider:
1] Do your maths: Do all your figures add up? Does your rental income cover all your houses outgoing costs? Don’t forget your tenants will be paying the utility bills and Council Tax.
2] Go it alone or get an Agent: letting Agents take the hassle out of renting out your property; they will find a tenant, collect the rent, arrange repairs and manage the rental from start to finish. What they will also do is charge a fee, and this can be anything from 5%-15%. Do your homework and choose a good agent not a cheap one.
3] Let your current lender know: You need your lender’s permission to rent out your property. If you do not inform them, you could be in breach of your mortgage terms and conditions. The majority of Lenders are not going to object, so what have you got to lose.
4] Know the rules: It is vital to know the rules and regulations, now you are a landlord. This may not be an investment property but you may still be liable for tax. Don’t forget you are now responsible for gas, electricity and fire regulations, Energy Performance certificates, Tenancy Deposit Scheme, etc.etc. etc.
5] Don’t forget Insurance: Your buildings insurance will be invalid as soon as you rent out your property, so this will need to be taken out as a landlord, and don’t forget to get cover if your tenants default on their rent.
Happy Investing!
2009 arrears lower than 2008
February 20th, 2010
LSL Property Services have released figures showing that rental arrears were much lower during 2009 than the previous year, despite the recession. This was totally contrary to all forecasters’ expectations that arrears would rise.
Figures show that 11.7% of rents were not paid by the due date, down from 14.5% in 2008, with 12.5% of rent remaining unpaid as at 31st December 2009 as opposed to 15.9% for the same time last year.
The expectations were that tenants would fall behind with rent as the recession took hold and people lost their jobs, but with the unemployment figures not reaching the levels many analysts anticipated, and landlords and letting agents keeping a close eye on rents, problems have been spotted early and dealt with promptly.
Happy Investing!