We purchased a property on behalf of a client a couple of months ago. The idea was to trade the property on without doing any works to it whatsoever. There were two additions we were going to make to the property. One was to extend the lease, and the other was to purchase the roof space from the landlord. This makes the property accessible to end users, people who purchase to live in, not speculators like us. The reason being, a property with a long lease becomes mortgageable, otherwise only a cash purchaser can purchase.
The property was purchased for £336K, and the idea was to have a quick resell for £450K. This price was set not by us, but by local sales agents. Two agents and two months later the property still hasn’t sold.
This is testimony to the condition of the market, especially considering this property sits at the bottom end of the market. End users, for whom this is probably the biggest purchase of their lives, are concerned if they put money into a property will it decrease by another £25K next month? This is their fear, and this causes paralysis in the market place. I met an end user who was looking for a freehold house to live in, in Ealing. He reported properties which he was looking at were dropping sometimes at a rate of £50K per month. Therefore, he didn’t know when he should enter the market.
When purchasing to live in, the aim is to buy somewhere which suits one’s life style. Whether you pay slightly over for it won’t matter so much in the long run. However, this is typically not the mindset of an end user.
As we could not resell the property on, we went on to Plan B, which was to get the planning, do the works, refinance and rent the property; and hold on to it. The aim being to extract most, if not all, of the money our client has put into the deal. The trouble with trying to do a trade in this market is you cannot be certain of the resell-ability. IF it happens that’s great, but you cannot be dependent on it, otherwise you can be caught out.
A model which is bullet proof to the above is one which is not reliant upon the resell values. The only other component in property investment is yield. So, an idea would be to invest in property where they can be developed into HMOs with a strong yield. Yields of anywhere between 6-10% can be achievable, dependent on location. There was a time when a 5% yield in London was the norm, not anymore. For example, you could look at purchasing freehold houses which can be converted to six bed sits. They can be rented out individually for a higher premium. The property can be refinanced once developed. You then have an asset producing money for you on a monthly basis. Whether the market goes up or down in terms of capital value is irrelevant. Your concern would be the rental yield and occupancy levels, which are far less prone to fluctuations.
Currently, this is one of the strategies we are focusing on for our clients.
Agony Agent is here to help!
Q: Do I treat a room let in my home, the same as a flat let?
A: No. Whilst there are some similarities between the two i.e monthly rental payments, written agreement and legal responsibilities, there are clear differences. The best way to look at them is that people that rent out a room in your house are lodgers/ licensees, and people who rent out your property are tenants. These words have different legal
A lodger is someone who lives in the same property as you. In this case you are called a resident landlord. Lodgers rent under a licence and have fewer rights e.g. you only have to give them ‘reasonable’ notice to leave which is normally 28 days – 1 month. Tenants on the other hand are people who have sole and exclusive use of your property, and have more rights than lodgers which should all be listed under their AST. A prime example is access rights, for tenants by law you must give 24h written notice unless it is an emergency. For lodgers, no notice is required.
With both though, it is essential to ensure you have met all legal obligations and health and safety requirements; and of course ensure that checks have been made and the correct agreements have been signed prior to move ins. Legal obligations, and health and safety requirements also differ for other types of tenancies, e.g. HMOs, so do check all requirements in each instance. Do get in touch if you require any assistance.
We are our word
"In the beginning was the Word, and the Word was with God, and the Word was God". This is how the Christian bible starts. The ancient Indian Vedas reveal that the sound vibration "aum" or "om" produces the cosmos. Modern scientists explain, through sub-atomic physics, how creation is built on energy, vibration and, ultimately, sound. Mantras are powerful sound/word constructions that empower the chanter to raise his/her awareness and consciousness. My experience is, whether you look at this in spiritual, mystical or very earthly tangible terms, what we speak we become.
When we speak we create our present, and thus our future, through sound vibration. Our speech, that being what we say and also what we do not say, determines what we think, how we meet others, how we connect with others, ongoing relationships and trust. In short, not only are we what we eat, but it is also true to observe: "We are our word".