Landlord Investor JANUARY 2015

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LANDLORD | PROPERTY | INVESTMENT

W R I T T E N B Y I N D U S T R Y E X P E R T S C O V E R I N G A L L A S P E C T S O F B U Y - T O - L E T

CLIMBING THE LADDER TOPROPERTY SUCCESS IN 2015

HOW TO AVOID BAD TENANTS: EVERYTHING YOU NEED TO KNOW

PROPERTY PREDICTIONSFOR 2015

- Paul Shamplina

SURREY BUY TO LET MARKET INVESTMENT HOT SPOTS

- Kate Faulkner

- Tom Entwistle

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Buy-to-Let AnalysisIndustry Update

Great Property TipsLease Extensions

InvestmentHappy New Year

FinancialLegal

Expert AdviceAuctions

Landlord Insurance

CONTENTSWELCOME TO THE JANUARY ISSUE OF LANDLORD INVESTOR!Let me start by wishing all of our readers a very Happy New Year indeed! For the most part, this is our belated Christmas gift to you, a fountain of knowledge shared by industry experts. We here at Landlord Investor hope you all are ready for the new year, whether you represent a business, looking to invest, or are a seasoned landlord, we hope the articles within this issue will give you some insight to what the new year will bring in the world of investment.

2015 will no doubt be a huge year for the shows and will in-turn of course be a big year for Landlord Investor too. We aim to keep you up to date throughout the year on the latest trends and developments of the property industry within the U.K.

This issue covers Surrey's buy to let hotspots, everything you need to know about avoiding bad tenants and predictions for the year's property market, plus much more.

We hope you have enjoyed your Christmas, and we hope that this issue makes your New Year a successful one.

Tracey Hanbury | EditorLandlord Investor

Tracey Hanbury

EditorialEditor

Tracey Hanbury

[email protected]

Editorial Contributors

Art Dept.Design

Craig Edmonds

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landlordinvestmentshow.co.uk

/LandlordInvestmentShow

@LandlordInShow

Allison ThompsonDavid HumphreysDavid SandemanKate FaulknerKevin WrightPaul ShamplinaRichard SumnerRobin PilleySteve CoxSusannah ColeTom Entwistle

Tenants HistorySouthbridge HouseSouthbridge PlaceCroydon CR0 4HA

Statements and opinions expressed in articles, reviews and other materials herein are those of the authors; the editors and publishers. While every care has been taken in the compilation of this information and every attempt made to present up-to-date and accurate information, we cannot guarantee that inaccuracies will not occur. Tenants History Limited will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information accessed through the promoted links.

January 2015 LANDLORD INVESTOR

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Well here it is: 2015 and this is a fantastic year to celebrate for investors. Why? Well buy to let for the masses is pretty much 20 years old (give or take!!) which is the normal ‘lifespan’ of ownership for

investors and secondly, because I love property stats, this year we will have15 years of sold property price data.

PRICE DATA IS ONE OF THE GREATEST TOOLS BUY-TO-LET INVESTORS CAN USE TO WORK OUT IF THEY HAVE MADE A GREAT INVESTMENT OR NOT! And of course it gets more exciting with two big mar-ket changes which we have no (or very little idea) of how they will impact on the market and that’s:-

Progressive stamp duty system, not a slab tax.More accessibility to pension funds.

WHAT'S HAPPENED IN WOKING AND SURREY FROM A PROPERTY INVESTMENT SINCE 2000? As they say in financial services ‘past performance is not an indication of future performance’ or some-thing like that! However, I always find understanding what’s happened in the past is useful when you look-ing to the future of property performance, especially from an investment perspective.

To analyse past property price performance, I look at the Land Registry data. It doesn’t necessarily re-flect what’s happening now as it’s typically three or more months behind the current market prices can go from zooming upwards to crashing down within that time period.

However, the data is a good reflection of what has ‘actually happened’. The Land Registry data for Sur-rey (it doesn’t track down to Woking level) shows the average property price since January 2000 was

SO WHAT'S UP IN WOKING FOR

BUY TO LET INVESTORS?

Kate Faulkner - Propertychecklists.co.uk

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£156,000, while the more likely to be rented terrace property average was £126,500.

Now the growth in capital value has been huge. The England and Wales annual average growth rate since 2000 is 6%, with the average price moving from £79,369 to £177,377. In comparison, Surrey, on average has achieved pretty much the same with prices moving up to £356,705. For terraces averages have moved from £126,500 to £290,000.

So on average, if you have invested in property in Surrey, ideally you should be achieving AT LEAST 6% increase in capital growth every year. But, remember that’s what the ‘average’ householder has achieved and if I’m honest, I would never invest for an ‘average’ return, that to me is not really successful investment, so I would always hope to beat this figure.

WHAT'S HAPPENING NOW? So the history is good and hopefully anyone who has invested to date has seen a 6% increase in property values year on year, or ideally more.

Currently, the good news for existing landlords is that Surrey is now starting to see the double digit year on year growth that London has enjoyed over the last 18 months. The year started with annual growth of around 5% year on year (so as per the long term an-nual average) but Land Registry data shows prices have increased more year on year every month and the latest October 2014 stats show prices are up by nearly 14%.

And these levels of increase are backed up by more recent house price surveys such as Home.co.uk which track marketing prices and are a useful ‘for-ward indicator’ of what’s happening. They show mar-keting prices are also up by 14%, but, more interest-ingly, flats are lagging behind with just 10% growth while the real driver is semi-detached homes, report-ed to be up by 17%.

These increases are great if you own property al-ready, but not so good news if you are looking to buy more investment property, especially as typically rental growth lags behind price growth. This means yields ie the income you earn versus the cost of the property are going to get squeezed, so it gets a little more difficult to make property deals stack up and deliver positive cash flow.

And as you can see from the Belvoir chart below, rents aren’t rising at anywhere near the rate prices have been. The chart shows the average month-ly rent for Surrey in Q3 2014 is £1,131 per month which is a 2% increase year on year – not bad for rents, mostly they are as flat as a pancake at the mo-ment! And it means they are growing year on year in line with inflation. This is essential for anyone who is hoping to see their rent deliver a pension income in the future.

Source: http://www.belvoir.co.uk/belvoir-rental-index

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BUY TO LET ANALYSIS


WHAT'S THE FORECASTS FOR 2015?

Well we know the capital growth is good and rental income is, at the moment keeping pace with inflation – but what does the future hold?

There are several ways to forecast, firstly you could use the ‘annual average’ increase seen over the last 15 years for Surrey ie 6% year on year with a 2% an-nual increase in rents.

And in addition you could compare these to the fore-casts from the professionals at Savills and the likes of Knight Frank. For the South East and West, both or-ganisations are predicting a 4-5% increase for 2015.

Knowing this information can be really helpful for in-vestors. You can have an idea of what your property will be worth in a year’s time, or if you buy today, an idea of how much additional equity you may have in 12 months or more time.

And if you are looking at exiting the market, then it’s worth thinking whether you wait until this time next year when prices may have risen by 4-6% or things change, interest rates rise and prices start to be held back more than forecast, so that’s the potential ‘risk’ you take.

Interested in receiving REAL monthly property price and rental? Then sign up to our newsletter or be-come a member of www.propertychecklists.co.uk and we’ll deliver them to you and answer any ques-tions you may have! ⌂

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THE UK BUY-TO-LET MARKET HAS BEEN A RELATIVELY SAFE WAY OF MAKING MONEY OVER THE LAST 15 YEARS OR MORE ON THE BACK OF A HOUSING SHORTAGE, GROWING TENANT DEMAND, AND MORE RECENTLY, ULTRA-LOW INTEREST RATES.Despite living through the worst credit crisis in living memory, today’s residential buy-to-let landlord is still beating other forms of investment returns by a country mile.

From a standing start of around 7 or 8 per cent of the UK’s housing market in the 1980s, we are now up to around 19 per cent of households in private rented accommodation, and according to Savills’ forecasts this figure is set to reach 24% in five years’ time. During the years of recession there have been very few if any industries with a growth rate to match this one.

The UK breaks down into two distinct property mar-kets: London and the rest. In the rest there are pock-ets of deprivation where tenant demand is still poor, but many hotspots where there is exceptionally good tenant demand and good initial yields.

London is a different story. High property prices – even one bed flats are commanding over £400,000 – where rental growth has been left behind, result-ing in gross income yields of just 4 to 5 per cent. If you deduct all the costs: service charges, letting fees, maintenance etc., there’s not a great deal of income left and capital growth is slated to slow over the next five years to not a lot above general inflation.

The easy money is over for new investors in the Lon-don market, but there’s still a severe housing short-age and no sign of sufficient new homes being built, so capital values will be well supported in the future.

The signs are good for the rest of the property mar-ket outside of London. As people migrate out of the capital, healthy demand for property purchase and renting is pushing up values in commuter-land, in the south east particularly. Economic recovery is helping and interest rates are likely to remain low until after the general election next May, and with record low inflation and oil prices most likely this will extend well into the autumn of 2015.

It’s inevitable that interest rates will rise eventually, putting pressure on mortgage affordability, but the rises are likely to be slow and steady over an extend-ed period and unlikely to have a major impact on property prices or bring about a huge market cor-rection.

THE RENTAL PROPERTY

MARKET IN 2015Tom Entwistle - LandlordZONE


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INDUSTRY UPDATE

Come next April the pension freedom reforms will allow over-55s to access their savings all in one go and will make buy-to-let investment an affordable opportunity for a lot more people. But if you're one of those people weighing up the prospects of a buy-to-let investment, then be aware that the taxman will be watching and waiting.

Anyone withdrawing more than 25 per cent of their pension pot will face income tax on the balance, stamp duty on buying the property, income tax on the rental income stream, and capital gains when the buy-to-let is sold. Add inheritance tax into the equa-tion and the chancellor will benefit greatly from the whole affair.

The other thing to bear in mind is that property is not a passive investment, whatever the property invest-ment gurus may have you believe. Managing tenan-cies successfully has always involved a fair amount of good management, skill and legal knowledge, even when good letting agents are employed, so anyone contemplating this type of investment should be pre-pared for a bit of hassle from time to time.

Increasing regulation of the sector is not going to make life any easier for landlords in the future: with tenancy deposit rules changes, right-to-rent immi-gration legislation, minimum standards for ener-gy efficiency by 2018, the Mortgage Market Review and threats of local licencing, rent controls, longer tenancies and restrictions to the section 21 eviction process, landlords will have their work cut out in the future.

As they say, there’s no such thing as a free lunch, so landlord investors should be prepared for a bit of trouble for the reward of above average investment returns over the long haul. What’s needed to make a

success of the business is attention to detail; a good knowledge of the housing laws and some good man-agement and documentation systems in place to help you manage your tenancies efficiently.

Media talk of buy-to-let multi-millionaires and the more recent campaigns and claims of “revenge evic-tions” is doing nothing for the image of the landlords and is in danger of spilling over into a wave of an-ti-landlord sentiment.

We are no longer in the Dickensian era of the ruthless landlord exploiting the hapless tenant, though some of the campaigning charities with a view to swinging changes to tenancy laws would have us believe this is the case. Most landlords today are ordinary hard working people who have put their life savings into property and are providing a much needed com-munity service. By far the majority of landlords are responsible and have very happy tenants. It’s a tiny minority of rogues who get the industry a bad name.

It remains to be seen what changes are to come af-ter the election, but one thing is certain: politics will feature highly when it comes to predicting the future of the property market. From the promised chang-es in rental tenure laws, a mansion tax proposed by two of the political parties, and a lot of anti-landlord sentiment around in the media, housing has never featured as high on the pre-election political agenda.

The mansion tax proposals are having an impact now, particularly on the London market, but regard-less of the result of the coming election, it is thought that housing taxation including council tax and stamp duty land tax is in for a wholesale review.

The way the burden of the council tax system falls unevenly, and the stepped or “cliff edge” nature of stamp duty, and any proposed mansion tax, points to the need and likely prospect of a wholesale review and a major change.

But the future never ceases to surprise us: for ex-ample, as Savills report, “it may surprise you to know both that annual house price inflation was never higher than under Blair’s Labour government and public sector house building after 1979 was at its highest during the Thatcher years.” ⌂


2: WHY KEY PERFORMANCE INDICATORS (KPIS) MATTER TO YOU.How will you be successful in delivering your per-sonal property strategy? By knowing the market metrics, knowing ratios such as how many tenant viewings do you need to do to ensure a proper-ty will be rented (hint, in my business, 5 viewings) and therefore what to expect typically, you can plan your own activities to ensure you reach your property targets.

Be aware of the market statistics – currently in the UK 1 in 3 property sales ‘fall out of bed’. Ensure that to deliver your property business plan, you take account of this statistic in your sourcing tar-get. This means that for every two properties you want to buy, you need to source three.

If you know your market metrics and ratios then you can identify what numbers need to go into your business plan, which will ‘automatically’ deliv-er you the success you are planning in 2015.

ARE YOU READY TO HIT 2015 RUNNING IN YOUR PROPERTY BUSINESS?

Susannah ColeThe Good Property Company

1: WHY WORKING ON (AND NOT IN) YOUR BUSINESS IS THE BEST WAY FOR YOU.From the start, take time to work on your prop-erty business as well as in it. The more you work on your business, the systems and processes, the more successful you will be.

When you are surrounded by urgent things to do, and can at times struggle to see the wood for the trees, this is a tall number, but it is vital you rise above the daily noise and see the bigger picture. Therein lies success.

Remember, Plan, Do And Review? Working on your business is part of planning in this Business Cycle.

In this article, I cover 5 areas that will help you and make sure 2015 is a great year for you in property.

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3: BUILD A WONDERFUL PROPERTY NETWORKOur industry has a wonderful characteristic – structurally there are so many houses in the UK, that no one investor/company can have a majority share. So we are not jostling for a larger slice of the pie – we realize that to each enjoy an improved performance in property, we are better working together, cooperatively, sharing knowledge.

I gained massively from that goodwill and helpful-ness when I first attended property meetings, in awe of the ‘big guys’ who had large portfolios and a lot of experience. Those same ‘big guys’ were so helpful and thoughtful in sharing their knowledge with me, that I was able to quickly build a portfolio and leave my J.O.B.

4: KNOW YOUR WHY, AND FEED IT WITH TIME!What were the 3 Key Reasons that moved me from doing 3 property deals a year to over 50 deals in 2014?

Knowing my ‘WHY’ and focusing on it. Determined-ly, with humour and most of the time, with grace.

Going full time in property – which means I had the resource of time. Time spent working directly on the goal of property deals, but also time spent networking, making friends and building my prop-erty community.

Property is a simple business – you need time, money and skills. And having mentored a lot of people in property, the one that makes the most difference in results is putting time into a property business – whether yours or other peoples’ time.

5: AND MOST IMPORTANTLY, BUT ALSO MOST SUBTLY, HAVING A MENTOR. You will make faster and more effective progress if you work with a mentor.

Chose someone whose values you agree with, someone whose achievements you admire and want to emulate, and who is ahead of you in his or her property journey. Someone you respect huge-ly. And someone you cannot fool, even if you can fool yourself!

Agree a programme of mentoring, and stick to it. Being held to account by someone who can see ‘the wood for the trees’, who in all likelihood has made the mistakes they guide you away from is an invaluable resource in your property journey.

Remember property is a large cost game, those houses are expensive, and poor decisions or inac-tion will not allow you to achieve your end goals.

By attributing some budget towards expert help and support, you are investing in your own devel-opment as a property investor.

There were plenty of times when I had ‘far too much to do’ to be able to ‘afford’ (in my mind, d’oh!) the time to talk with my mentor. However, 2 ses-sions not withstanding, I made every session we had booked in the last 3 years. Often skidding in at the last minute, frequently 7 minutes late…. almost always mind absolutely full of the here and now, like a ball of wool after a cat has played with it.

His subtle focus, on the bigger picture, the statis-tics, the long game, when at times I could only see to the tip of my nose, has been invaluable.

Working with a mentor does not always show im-mediate gains – you reach a milestone and look back, grateful for the patience (!!!), pace, guidance, occasional tough love (suck it up, buttercup!) and knowledge you have been given, rather than com-ing off every call, thinking yes, that’s it! (Though I usually came away from every call thinking, ‘he’s right again’).

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SO, AFTER READING THIS, WHAT ARE YOUR NEXT STEPS TO GET READY FOR 2015?• Write your business plan, and identify the gaps you currently have.

• Identify the Measurements you will use, to make sure you are delivering to that Business Plan, and how you will measure them.

• Know your Why, and feed it with time.

• Get friendly in property; build your network!

• Get ahead; Get a Mentor!

Good luck in your planning and delivery of your property strategy in 2015. ⌂

ABOUT THE AUTHOR;Susannah Cole is highly respected in the Property Investing Circles. She is a well-established proper-ty expert who is running a very successful flipping strategy already, with the market place buzzing, alongside her property portfolio.

She started The Good Property Company 4 years ago, as a kitchen table start up. In that time, she and her team have sourced more than 160 prop-erties in Bristol.

She loves property and loves to give back, in the shape of Workshops and her Group Mentoring Programme, helping others achieve (and hopeful-ly, surpass) her own successes to date.

To contact us;

Email: [email protected]

Facebook: facebook.com/SusannahColeTGPC

YouTube: www.youtube.com/user/goodproperty-company

Telephone: 0117 942 8914

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One of these opportunities is investing in short leasehold properties which are often marketed at auction or even with local agents. A short lease is considered to be less than 70 years. The reason for this is that mortgage companies are unlikely to lend on properties with leases of less than 70 years. As properties with short leases are un-mortageable, this limits the market to cash buyers. This has a negative impact on value that cash buyers can profit from as they find themselves in the driving seat for negotiations. The graph below shows how the value of leasehold property decreases as the lease length shortens:

Some banks even consider 80 years remaining on a lease as being low as this is when “Marriage Value” becomes payable.

TURNING SHORT LEASE FLATS

INTO GREAT INVESTMENTS.

Richard Sumner - Arnold & Baldwin

HAVING RECENTLY PRESENTED AT THE LANDLORD INVESTMENT SHOW AT THE KENSINGTON OLYMPIA IN OCTOBER, WE RECEIVED POSITIVE FEEDBACK WITH PEOPLE LOOKING AT WAYS TO INVEST INTO PROPERTY TO CREATE ADDITIONAL VALUE.Many investors try to stay away from leasehold property for one reason or another. However, with the right professional advice, you can build confidence investing in leasehold property and there are great opportunities to generate capital.

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SO WHAT IS MARRIAGE VALUE? Marriage Value is the uplift in value of the property created by the extension of the lease. This uplift is split between the leaseholder and freeholder 50:50. It is this part of the calculation for a lease extension that allows an investor to create additional value in their investment.

For example a property with a 35 year lease has a long lease value of £300,000. Its value with a short lease is in the region of £180,000. The property has a fixed ground rent of £100 per annum. The cost to extend is circa £90,500 (including professional fees) providing a potential profit of £29,500.

Under the Leasehold Reform, Housing and Urban Development Act 1993 (‘The Act’), qualifying leaseholders are entitled to a 90 year extension and a peppercorn ground rent. So in the example above the qualifying leaseholder would be entitled to receive a 125 year lease and effectively no ground rent, saving £100 every year.

The other benefits are that you pay a lower Stamp Duty on the purchase price potentially making large savings. In the example above this saving would be £3,900.

Under ‘The Act’ there are various qualification criteria including the two year rule. Leaseholders must have been the registered owner of the property for more than two years. In order to overcome this obstacle as an investor buying a short lease flat, the act allows the right to extend the lease to be transferred with the sale by serving a Section 42 Notice. Your solicitor should ensure the notice is served and transferred correctly with the sale.

The lease extension process is fairly straight forward. With proactive surveyors and solicitors an agreement for the premium can be agreed fairly swiftly in what could otherwise be a long drawn out process. The first step is to instruct a valuer to provide you with three valuations for the costs to extend the lease. These valuations will comprise a range including the best case, mid case and worst case. The best case is the figure that is used to serve a Section 42 Notice. The notice claims the right for the leaseholder to be granted an extended lease as per the terms of The Act, i.e. a 90 year extension to the existing term and a peppercorn ground rent. The leaseholder’s solicitor drafts the notice

and serves it on the freeholder. The freeholder will then have a minimum of two months to respond with a counter notice. After receipt of the counter notice there is a statutory two month period for the surveyors to try and agree the premium. If this cannot be agreed an application must be made to the First Tier Tribunal no earlier than two months from the counter notice and no later than six months from date of the counter notice.

Leasehold properties can also cause problems for investors with high ground rents and high service charges eating away at the rental return generated if bought as a buy to let.

In one particular case, Arnold & Baldwin dealt with a ground rent that was £500 per annum doubling every 10 years on a 99 year lease. The ground rent for the last term rose to £128,000 per annum. The value of the property was circa £110,000. Unfortunately the property was bought at auction without seeing the legal pack. With our knowledge and expertise we were able to help the clients buy the freehold. For this particular lease the share of freehold was negotiated down saving our client £133,435.

Under ‘The Act’ leaseholders are entitled to purchase their freehold and under The Commonhold and Leasehold Reform Act (2002) they also have what is known as “The Right to Manage”. This allows leaseholders to effectively self-manage or appoint their own managing agent. If you own a leasehold property and the building is poorly managed and service charges seem very high, then why not consider buying the freehold or taking over the right to manage the building.

At Arnold & Baldwin we specialise in lease extension valuations and freehold enfranchisements. We have saved our clients thousands of pounds over the years as well as providing professional advice to investors buying leasehold property.

Please do not hesitate to contact Richard Sumner or Ewan Crispin on 0208 642 2999 if you have any questions or wish to discuss your particular case. ⌂

LEASE EXTENTIONS

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Blocks of student flats provide the students of city universities a top quality facility. They are often complete with gymnasiums, entertainment rooms and 24 hour CCTV.

Therefore it is no surprise that there is a high de-mand coming from foreign students who are will-ing to pay the price for this type of bespoke accom-modation. Best of all, these apartments normally come as an ‘armchair’ product, with many of the developments housing their own concierge ser-vice.

The yields are very attractive and often guaran-teed for the first year. Major investment develop-ers such as Fortis certainly seem to have created a niche product for themselves which has had an effect on more traditional student landlords.

STUDENT LETS

Robin Pilley - CXG

CXG HAVE RECENTLY TAKEN NOTICE OF A GROWING APPETITE FOR INVESTMENT OPPORTUNITIES WITH STUDENT LETS.We now have available opportunities in a number of locations around the UK. I believe there are a number of sound investment reasons for this and therefore felt that in this month’s article I would share with you what is leading to the upsurge over the last couple of years in this type of investment opportunity.

The student rental market is something not many people think of when talking about property in-vestment. However, with low entry points and guaranteed high returns, purchasing a student let can be the way forward for landlords looking for a good cash investment or as part of their pen-sion package. They also make very attractive in-heritance gifts as the purchase price is set by the return the investment generates. In other words, your income is less speculative than a traditional ‘buy to let’ investment and is also insulated against the volatility of the housing market.

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INVESTMENT

Landlords were renting out ‘buy to let’ properties as a house of multiple occupation (i.e. on a room by room basis). The student tenant definitely seems to have become more discerning, and favours this new style of customised accommodation, and is prepared to pay the higher rental rates to acquire the additional facilities which are now available with these specific student lets – or perhaps the bank of Mum and Dad are!!

Although there is currently no mature resale mar-ket as this is a relatively new concept, and for this reason finance is less readily available, this also seems to be changing with banks such as Shaw-brook now looking to enter this market as they can see the potential which will only help the investor. Therefore with less speculative growth, student lets are good income generators both for current or prospective landlords and could be a great in-vestment to have in your property portfolio. ⌂

Please feel free to look at the CXGinvest website should you require more information:

www.cxginvest.co.uk

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Allison continues; "Choosing the right property to suit the type of tenant you want is key and the condition of the property is another important factor in obtaining the best rents and increase your return on investment. The average tenancy length for Leaders properties is 34 months, which of course means fewer void periods which is key to a successful investment, but tenants are more discerning and will always chose modern and refurbished homes over those that are tired.

This doesn't mean you have to buy new build, but getting the finish of the property right to compete with that market place is vital.

For those that are new to investing in property getting the right advice is vital. The market in Surrey offers some fantastic investment opportunities, but every investors requirements are different. For some it may be a way to increase the return on capital which is otherwise earning very little in the bank, for others it may be a long term pension plan or it may be the start of a new business which will eventually be the main source of income. Each investor will therefore need to explore different approaches to what and where they buy.

Leaders are very pleased to offer our exclusive Investor Network service which helps investors purchase proven buy to let properties with a maintenance history and proven track record in rental income.

If you would like further information on any aspect of letting and management visit the website at: www.leaders.co.uk ⌂

BUY TO LET IS THE PERFECT

INVESTMENT IN SURREY

Allison Thompson - Leaders

Surrey has long been a popular area for young professionals and families alike, boasting the perfect mix of villages and towns, rural retreats and busy suburban life.

Not surprisingly it has also been a very popular area for investment thanks to its high rental values and stable capital growth opportunities. The close proximity and easy commuting options to London have seen rental demand across the county continue to grow and ensured that even in vastly growing and developing towns such as Woking property is snapped up tenants as soon as it's available.

Letting specialists Leaders have 15 branches across Surrey including Guildford, Kingston, Surbiton, Walton, Weybridge and Woking. Our Leaders' regional director for Surrey, Allison Thompson, comments; "Woking has already seen a huge number of new developments including landmark Barrett Homes sites such as The Centrium and New Central as well as others such as Enterprise Place, Century Court and Park Heights.

But despite the number of properties being built, demand continues to outstrip supply making it an excellent place for investors. Not only does it offer the fast train into London, but it's also well placed for access to the M25, A3 and M3 making it a commuter heaven and ensuring that higher income professionals have a reason to call it home.

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HAPPY NEW YEARFROM THE TEAM AT:

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New Year greetings from some of our clients at the Landlord Investment Show24


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Kevin Wright - Positive Property Finance

THE PROBLEMThe problem with buying property as an investment is that you need capital to put down as a deposit – and then it’s locked into your property for six months or more, until you can re-mortgage. The days of ‘no money down’ mortgages are gone; you need a de-posit to get any mortgage these days.

At this rate you’ll be lucky to manage to add two properties a year to your portfolio, unless you have a big nest egg. The secret is not to lock your capital into a mortgage, but to use creative financial packag-es specially developed for property investors.

DO YOU FIT THE BUY-TO-LET LENDER'S TYPICAL PROFILE?It’s easy to imagine that lenders love property in-vestors, because they have plenty of assets so their mortgage is secure.

Wrong!

Buy-to-let lenders like their clients to have a nice secure full time job earning a minimum of £25,000 a year and have their own cash for deposits. They don’t like you to have too many properties as that may mean you will soon leave your nice secure job, which makes them nervous.

They expect you to be able to put 25% down on each property and then to go away and just pay your mortgage each month until it’s paid up.

They don’t like people who want to re-mortgage their property after six months when the property has been refurbished and is now worth a lot more.

Serious property investors are going to find it tough.

Since the flexible mortgage products were with-drawn from the market in 2008 when people talk about ‘no money down’ strategies what they are real-ly describing is a method of concealing the true pur-chase procedure from the lender. This is fraud and any legitimate investor, bridging financier or credible

HOW TO GROW A PROPERTY PORTFOLIO

FASTER THAN YOU THOUGHT POSSIBLE

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mortgage or finance broker will have nothing to do with it.

However, there are creative means of putting togeth-er finance packages that are entirely legal and don’t put the lender, the purchaser or the property at risk.

CASE STUDYAkhtar Khan used bridging to buy a property that had fallen into disrepair, had a kitchen fire and was unmortgageable. The owners had two charges on the property of £50K and £55K, although the prop-erty was only worth about £75K.

Akhtar negotiated the second charge on the proper-ty down to £15K and ended up paying a total of £65K for the property.

HOW THE DEAL WORKEDPurchase price: £65,000

Refurbishment costs: £15,000

Exchanged with key access and 4 weeks to carry out the refurbishment. On completion of the refurb the bridger valued at market price of £125,000.

The bridger released 65% of market value (£125K) on completion, releasing £81,250, which covered both the purchase price and most of the refurbish-ment costs.

The finance structure that Kevin Wright put in place made this possible without Akhtar needing a sub-stantial cash investment to purchase the property outright.

To be successful in bridging finance you need an experienced bridging lender and a solicitor who un-derstands bridging finance and can complete trans-actions in days, rather than months.

Positive Property Finance has a wide range of lend-ers and will match you up with the right one for your property deal. They can also introduce you to solic-itors who understand bridging finance and will get things moving quickly. ⌂

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FINANCIAL

THIS ARTICLE IS A RE-RUN FROM OUR PREVIOUS ISSUE, DUE TO A PRINTING ERROR


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Over the last decade, those locked out of home-ownership and others who simply prefer the freedom and flexibility of renting have formed ‘generation rent’. This in turn has paved the way for

dozens of by-products to support the growing demands of landlords and tenants, including the possession industry.

Paul Shamplina - Landlord Action

THE BUY-TO-LET INDUSTRY HAS GROWN AT A RAPID RATE, WITH BOTH PROFESSIONAL AND NOVICE LANDLORDS ENTERING THE MARKET AS AN INVESTMENT ALTERNATIVE.For those landlords that buy wisely, achieve high yields as well as capital growth, maintain their prop-erties and have good tenants, a rental property can earn a respectable return. However, for any land-lord, a problem tenant can quickly devastate even the shrewdest investment if not handled correctly.

Paul Shamplina has been helping landlords with problem tenants for over 25 years. His company, Landlord Action, originated the 3-step fixed fee evic-tion process, which has since assisted in over 28,000 cases. He believes many problem tenant cases can be resolved very quickly, or even avoided altogeth-er, if landlords follow the proper procedures prior to embarking on a tenancy, or take action at the first signs of something going wrong.

TOP FIVE TIPS ON HOW TO AVOID BAD TENANTS:The best way to avoid having tenant problems is not to allow a bad tenant to rent your property in the first place. Here are a few ways to help you do this:

1. Ask any prospective tenant for three months of bank statements enabling you to check expenditure versus income

2. Watch out for forged references, passports or driving licences – it is advisable to have an agent or professional referencing company check these for you

3. Make sure work references are valid – for exam-ple, ring the company switchboard rather than ring-ing a direct dial to make sure you're speaking to the person you think

4. Research a tenant's rental history

5. Closely match pay day with the rent due date.

DEALING WITH BAD TENANTS...AND AVOIDING THEM ALTOGETHER

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Problem tenants can range from relatively trivial is-sues, such as stains on the carpet, through to crim-inal activity, such as setting up cannabis factories costing tens of thousands of pounds. However, the most common problem landlords face is tenants fail-ing to pay the rent – either on time, or at all.

Paul Shamplina, the founder of Landlord Action, says non-payment of rent is something a landlord should always act on as quickly as possible. “When a land-lord has a reason to evict a tenant, such as rent ar-rears, we always advise landlords to try and make contact with the tenant to see if they can enter into dialogue and come to some agreement. Sometimes tenants default through no fault of their own and communication can help to solve the problem be-fore it is taken any further” says Mr Shamplina.

When tenants fail to communicate properly in an ar-rears situation, the landlord is left with no option but to take action. Paul advises:

“As soon as a tenant defaults on their rent make con-tact straight away. A polite phone call to enquire if there is a problem, followed by an email as proof of communication, is the first step. Give the tenant a few days grace to rectify the situation. Following this, a series of credit control letters should commence giving the tenant seven days notice to pay the rent. If these first steps fail, send a final letter stating that if payment is not made within seven days, eviction proceedings will commence with a Section 8 notice.”

At this point, if no action has been made, landlords should start the eviction process by serving a Section 8 notice, or instructing a qualified solicitor to act on their behalf.

THREE STEPS TO EVICTING A TENANT

STEP ONE:

SERVING NOTICE - SECTION 8 PROCEEDINGSA Section 8 notice is a notice seeking possession, which is served on the tenant when they have breached one or more clauses within the tenancy agreement. A section 8 notice is commonly used when the tenant is in arrears of rent.

If the tenant fails to clear the arrears and/or vacate the property when the section 8 notice expires, then court proceedings are required. The tenant will need to owe at least two months rent on the day of the court hearing in order for a landlord to rely on these grounds for possession.

STEP TWOCOURT HEARING AND WHAT IT MEANS:Where a claim is for possession and rent arrears (Section 8), there will be a Court hearing before a Judge. The landlord will be required to attend the hearing, or appoint an agent to attend on their be-half. The landlord or agent must be fully conversant with the tenancy and have all relevant paperwork readily available, such as the tenancy agreement and an up to date schedule of arrears.

If the tenant clears the arrears prior to the hearing date, then it is unlikely a landlord will get a posses-sion order.

If the claim is successful, the judge usually grants a 14 day possession order; this means the tenant has 14 days from the date of the hearing to vacate. In the event the tenant does not vacate, the landlord will be required to appoint a bailiff to carry out the eviction. In addition, a judgment for the arrears of rent may

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also be granted at which point a landlord may also make a claim for interest and costs.

Paul says “If the tenant is at the hearing and pleads exceptional hardship, they may persuade the judge to grant longer before leaving. The most a judge can give is 42 days. We always oppose this as we believe the hardship to be in the landlord’s favour.”

However, a landlord may wish to seek possession of their property for personal reasons, such as the land-lord would like to sell the property, move back into it, or simply have a vacant period to carry out necessary maintenance work. For this, a landlord may wish to serve a Section 21 notice. Section 21 gives a land-lord an automatic right of possession without having to give any grounds (reason) for eviction, once the fixed term has expired. There does not have to be a breach of the tenancy agreement.

SERVING NOTICE - SECTION 21 PROCEEDINGSWhere a landlord’s claim is for possession only (Sec-tion 21) and he/she uses the courts’ accelerated pro-cedure, the tenant will have 14 days to file a defence. If no defense is filed, a landlord can apply to the court for an Order for Possession. It can take approximate-ly 8 weeks to receive the Order for Possession, de-pending on the workload of the court. Claims under accelerated Section 21 do not enable a landlord to claim for arrears of rent.

STEP THREEEVICTION - COUNTY COURT BAI-LIFFIf a tenant fails to vacate on or before the expiry of the Possession Order (which is usually 2-6 weeks), a County Court bailiff must be appointed to carry out the final stage, eviction. Applying for a warrant for eviction can mean the process takes a further 6 weeks. The eviction can only be carried out by a County Court bailiff.

MR SHAMPLINA CONCLUDES:“It can take a long time to regain possession of a property through the courts, often 4 to 6 months, and sometimes difficult tenants can delay matters even further which is why we always encourage land-lords to do everything they can to establish contact and resolve issues, where possible, before taking this route. We appreciate, this is not always possible and it can be a very frustrating and worrying time for landlords, particularly if they rely on the rental income to pay a mortgage. If this is the case, it is imperative that a landlord acts quickly in order to mi-nimise losses as much as possible.

However, the most important thing to remember is never ever be tempted to harass the tenant in an attempt to resolve the matter. The penalties for ha-rassment are severe and can result in heavy fines, so always seek professional advice and stick to the correct procedures.”

In early 2015, Paul Shamplina is launching a book for landlords called “The Landlord’s Friend”. He is also due to appear on BBC London’s Inside Out programme in January, which will follow Landlord Ac-tion helping three landlords gain possession of their properties from tenants who have failed to pay rent.

www.landlordaction.co.uk

Free Legal Advice Line: 020 8906 3838 ⌂

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DISCOVER THE SECRETS OF MANCHESTER'S BUY TO LET MARKETHOW TO RUN A SUCCESSFULHMO PROPERTYWHY BUYING YOUR NEXT PROPERTYAT AUCTION MAKES SENSE

SEPT

/OCT

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DISCOVER THE SECRETS OFMANCHESTER'SBUY TO LET MARKET


UNDERSTANDING EVERY ASPECT OF

BUY TO LETDavid Humphreys - Property Auction Expert

THE PROPERTY INVESTMENT EDUCATION WORLD IS A POTENTIAL MINEFIELD FOR BOTH NOVICE & EXPERIENCED INVESTORS AND WILL PROBABLY BECOME MORE SO DURING 2015 With the relaxation of the Pension Rules planned for April 2015, which supposedly will release substantial lumps of cash to be spent on whatever the "pensioner" desires from Lamborghini's to Exotic Holidays or just helping out the kids, possibly avoiding Inheritance Tax.

Into this mix of possible spending comes Buy To Let. An investment that offers both substantial profits and the possibility of literally, "losing your shirt". Why, because a common claim with many training organ-isations has always been to “make you a millionaire” in a year or so, with costly training, often in the thou-sands, to achieve what is inevitably a "mirage".

The problem is that buy to let training is unregulat-ed with trainers qualified by experience alone. There

is no recognised training for trainers. I remember a "thinking about it" student who attended my 3-day workshop, went away, revamped part of my course, and came out days later offering “expert" training in buy to let!

Unfortunately, a lot of so-called “training” is offered by people with a vested interest. Google "buy to let education" and you get a list of banks, brokers, es-tate & letting agents. Problem is, few if any are im-partial, most can/will only talk/educate about their products/services, be it loan connected or housing & tenant demand in their immediate locality which may not be what you want or need.

I started this article saying that whilst you can make substantial profits, you can also lose your shirt.

Am I overstating or exaggerating the risk? After all, you know about tenants and tenancies, you were once a tenant. You also know about buying and fix-ing up houses, you have done that with your own home. So, there should not be a problem with buy-ing a nice local des-res and letting to a "nice" person.

But borrow a high percentage of the cost, as advised by your broker friend, house a tenant who passed the credit check was then made redundant and now can't afford to pay the rent forcing you to evict them. Unfortunately, your property has fallen in value pushing you into negative equity so you can’t sell and clear your mortgage. Into the bargain, your tenant trashes the property so, on eviction, it's un-lettable and you can’t afford to fix it.

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In the meantime you haven’t paid your buy to let mortgage and your "friendly" lender wants to re-pos-sess both your buy to let and your home to settle the debt. To make matters worse, your buy to let still costs money each month even though it’s empty.

To avoid this nightmare scenario you need to under-stand every aspect of buy to let, particularly the risks and how to mitigate them. To achieve that you need expert impartial training regardless of your tenant and homeowner experience.

Buy to let is probably the best deal in town, if you can get it right, because it's about the only deal where you can borrow a major part of the cost. With an, available today, 85% loan, £50,000 released from your pension will buy over £300,000 worth of prop-erty, excluding transaction costs.

The returns on your cash can also be very high. If your £300k property increases by 5% (£15k), that’s a 30% return on your £50k, when sold. If the rent is 5% of value, (£15k), another 30% “gross” return on your cash. I’ve said "gross" because out of this £15k you will have numerous costs such as loan interest, which reduce your spending money to a smaller per-centage.

Before buying a buy to let, you need to understand every aspect. This includes a lot of number-crunch-ing plus location, property & tenant due diligence to arrive at a strategy that suits you. Then build in safe-guards so that a nightmare scenario simply cannot arise. This objective requires training.

Now some will disagree with me and say that you can learn all you need to know off the Internet. Problem is, you don't know what you don't know and regard-less of how many hours you spend online, how many network meetings you attend, how many books you read, that will remain the case.

Question is, how do you find good training and here I must declare a vested interest, I have recently re-leased my Online Foundation Course through www.propertyinvestoronline.com. Developed for novice and experienced investors, my Course includes 80 Videos in 17 Modules. Uniquely, a Single Video/Mod-ule is available, or the Complete Course.

Now, I am not the only person offering training, though few offer training online. In most cases, train-ers train in a location expecting their students, you, to travel to them, for a 1-2-3-4 day workshop/train-ing.

Most trainers give Free Presentations at Network Meetings and Exhibitions. These presentations are very valuable if you are looking for training because you are able to assess the trainer, their subject and knowledge before buying in. I, likewise, regularly present at networks and exhibitions giving free pre-sentations lasting about an hour including questions.

The Landlord Investment Show Seminars, where I present, provide a clear picture of the variety of Buy To Let & Flip Investment Opportunities.

An analogy that I have always used over the past 18 years is the Fruitcake. Fruitcakes include differ-ent ingredients in different measures. Change either changes the result, and so it is with property invest-ment.

There is no single "right" strategy. A 30-year-old in-vestor will, correctly, have very different aims and objectives compared to a 60-year-old pensioner. To achieve the Right Strategy for each, Training is Essen-tial. ⌂

EXPERT ADVICE

35


UNDERSTAND THE GUIDE PRICEVirtually every lot will be offered with a guide price. If there is one nugget of information you take away from reading this article it is that the guide price is not necessarily what the Auctioneer expects to sell the lot for, but merely a good indication as to where the reserve is currently set, though this level may well change as the marketing period progresses de-pending on the interest in the lot.

The reserve is the minimum price that the vendor will allow the auctioneers to sell the property for and the industry guidance for setting the guide is that if the guide is a range, i.e. £60,000 to £65,000, then the reserve should be within the range and if it is a single figure then it should be no more than 10% above that figure. So a property with a guide of say £100,000 or £100,000 plus, the reserve should not exceed £110,000.

In setting a reserve and guide price the auctioneer will want them to be as low as possible, to maximise the interest generated in the property. Typically they will look for it to be some 20-25% below a bullish open market valuation.

GREAT DEALS AT AUCTION

David SandemanEssential Information Group

FINDING THE PROPERTY COMING THE AUCTIONSo you have heard stories and read articles about bidders securing great deals at auctions and turning a profit on them, or getting a good return if the prop-erty is subsequently let out. Well, how do you find out about what is coming to Auction in your area?

A good place to start will be identifying auctioneers that are active in your area. This could be done with Google, asking local agents or just keeping an eye on local papers and boards. Additionally the majority of auctioneers place their stock on Rightmove and or Zoopla. It can however be quite tricky to search sole-ly on auction lots. Here at eigroup.co.uk we list every property coming to auction and can e mail clients the moment a property matching their requirements is listed for auction by any one of the 340 active auc-tioneers who offer between them over 36,000 lots a year.

Unlike estate agents who generally only offer stock within a few miles of their office, auctioneers, even the smaller ones, offer stock from a much wider geo-graphical area so you may well find properties being offered in your locality by auctioneers based some distance away. For that reason using eigroup will en-sure that every potential lot will be brought to your attention. Do remember the wider the choice you have, potentially the better the deal.

In the first of several articles David Sandeman, founder and Managing Director of The Essential Information Group looks at ways to secure great deals at auction, and what needs to be done to achieve this.

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AUCTIONS

WORK OUT WHAT IT MIGHT SELL FORWhilst the guide price gives you a good indication of where the reserve is, you should really be more in-terested in what it might sell for because if you are not willing to go to that amount, you may not want to bid. So how do you assess this? The auctioneer might give you an indication, but most would be reticent to be too specific, land registry records don't differen-tiate between private treaty and auction sales, so to a certain extent you are on your own with this one.

Again our clients using eigroup have access to the prices achieved for virtually every lot offered at auc-tion since 1991 (some 650,000 lots) and from these you can identify similar properties that have sold at auction that will give you a good steer on current auc-tion values. I have seen many inexperienced bidders at auction wrongly assume that if they are prepared to bid the guide they will be successful in purchasing the property, and disappointed when they did not.

Recently a house in Balham, London was offered at auction with a guide price of £775,000+, and sold for £1,000,000. 4 other similar properties (though I am unaware as to size and condition) in the area had sold by private treaty within the past two years for sums in excess of £1,250,000 giving an indication as to where the market level is.

DUE DILIGENCEYou have found a property you want to buy, under-stood the guide price and found comparable evi-dence to give you an indication as to what it might sell for. What next?

VIEW AND INSPECT THE PROPERTYIt is absolutely imperative you carry out a detailed inspection of the property. The second fact to take away from this article is when the hammer falls on your bid you have exchanged contracts on the pur-chase of the lot (unless it is a conditional sale, more on that later). You have to be completely comfort-able with the lot and aware of all its defects and plus points!

Viewing is generally by arrangement with the auc-tioneer or block viewings that happen a couple of times a week on a set day and time each week pri-or to the auction day. Go prepared to have a good look round with the necessary tools to ascertain its condition. This might include a ladder, torch, tape, screw driver etc. A camera is a good idea to allow you to refresh your memory when working out later what needs to be done. At the same time you might want to get your friendly builder or surveyor to give it a cursory inspection to bring to your attention any issues you might have missed.

Whilst there, note where access to the property is and ensure that it is recorded on the legal docu-ments and if it is a flat, check that the current layout is the same as the lease plan because if alterations have been carried out without freeholder consent then raising finance on it may prove problematic.

Next month we will look at how to interpret the legal pack and surveys. ⌂

For more information, please visit the website on www.eigroup.co.uk

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EMPTY PROPERTY

Steve Cox - Alan Boswell Group

SECURITYClearly, you will wish to protect your property – especially with so many cannabis farms being put in houses by criminals, doing untold physical damage, which the landlord has to pay to repair. This means that you need to ensure that the premises are secure, both doors and all accessible windows.

It is also important to consider who still has keys to the property, once tenants have left. If they gave keys to friends, it could well be worth replacing the door locks – this is far less expensive than dealing with squatters!

PROPERTY OWNERS' INSURANCEMost insurance policies will exclude damage resulting from the activities of malicious persons while property is left unoccupied for a period of more than 90 days. This will also apply to theft and accidental damage. In fact it is important to let your insurance company know when the premises are likely to be left unoccupied for any sustained period of time, because they may wish to impose terms. While this could restrict your cover, failure to notify the insurance company might invalidate your insurance altogether in certain circumstances.

Buildings occupied partly or in whole for commercial purposes, are likely to exclude cover while the premises are unoccupied unless the insurance company has been notified in writing.

There are likely to be occasions when any property – particularly residential lets – remain unoccupied. While having your property unoccupied impacts on rental income, and is therefore

something landlords will naturally wish to minimise, there are additional considerations that apply in respect of security and insurance.

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MINIMISING THE RISK IN PRACTICEIf your property is likely to be unoccupied for any period, it is good practice to take a few simple steps that will help you to not only minimise the risk but also serve to keep your premiums down and avoid considerable inconvenience.

1. Inspect the buildings internally and externally as frequently as practicable but at least every seven days – or arrange for someone to do this on your behalf.

2. Take all reasonable security measures for the safety of the property, ensuring that all doors, windows and other means of entry are secured with good quality locks. Your insurance broker will be able to advise you on this.

3. Where possible, you should remove combustible materials (that are not fixed to the building) from the site.

4. You should also turn off all sources of power, fuel or water (except those required to operate an approved sprinkler, alarm system or central heating system).

GETTING THE RIGHT ADVICEReviewing your property owners insurance is always a good idea, but this should be done in the light of ensuring that adequate cover exists, at the right (not necessarily the cheapest) cost.

Insuring commercial premises for property owners is a specialised area and you should always ask your insurance advisers what experience they have of dealing in this sector. ⌂

For further advice contact Steve on: T: 01603 218031 M: 07766 715654 W: alanboswell.com E: [email protected]

Alan Boswell Group offers a range of other services including business, home, travel, car insurance and financial planning.

LANDLORD INSURANCE

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Landlord Investor JANUARY 2015