Towards the end of last week I went to see a one bedroom property in Kentish Town. I knew nothing about the property, it was sourced by a colleague and I was simply told to go, as often I am.
I knew the area well, I used to attend a martial arts class twice a week in the local area for about 6-7 years 13 years ago. It used to be a real run down ghetto, with social misfits on the streets and predominately occupied by council houses, not the ones which have been bought and then sold in the open market; back then the majority of these were still occupied by the original tenants. This was a place where hashish was sold quite openly on the High Street.
The property is in a purpose built building which has a very clean and modern look to it. It could have been an office conversion, or a new build. Entering the lobby you could immediately tell this was a quality development. The reception is a generous height, and features have been left exposed, which is the case for many developments now. It adds character and gives a rustic, authentic feel to a development. I have seen a look in the warehouse conversions close to Tower Bridge, where the original brick work, vaults and piping had been left exposed and enhanced. This is in stark contrast to many developments where pounds per sq. ft. is the sole dominating consideration, leading to shoe box flat designs.
The location of this block is equidistant from Camden Town Station, Kentish Town Station, and Camden Road Station. I would say no more than five mins walk to each one.
The property in question is a one bedroom on the fifth floor, newly done up and ready to rent. The fifth floor is a good floor to be on as it reduces the sounds from the road, the higher you go the less it is. It is a large, light and at 590 sq. ft. a very spacious one bedroom apartment. The price we have got the contract in for is only £350k. This equates to only £600 per sq. ft. To put this into perspective new builds in less desirable parts of Wembley are now valuing for £650 per sq. ft.
This is extremely cheap, not to mention you could easily turn this into a comfortable two bedroom to enhance the rental return. There is a slight sting in the tail with this deal, the service charge is high at £6,000 per annum, the reasons why I know not. However, when you analyse this it’s not so bad. In a development like this you would expect a £2K - £3k service charge, let’s assume £2k. The ‘extra’ £4k per annum can be turned into a lump sum of £80k assuming an interest rate of 5%. So even at a purchase price of £420k the £ per sq. ft. is only £730. The last property sold in the block was priced at £760 per sq. ft. and sold in March this year. This means the deal we have is 28% below the market value.
It’s better if you’re a high rate tax payer to have the money coming out of the service charge rather than the interest payment, as service charge is one of the expenses deductible from the rental income. The ability to deduct the interest element of the mortgage is being phased out for higher rate tax payers.
This is a cracking deal, in a very strong location and it is harder to find deals this discounted at the bottom end of the market. Not only are you quids in on day one, but the property will rise very well in the coming years.
Agony Agent
Each week, we answer a reader’s rental property question, from first-time landlords to experienced owners. Agony Agent, is here to help!
Q: I think my tenant has done a runner, what should I do?
A: When times get hard, the instances of tenants leaving without notice before a tenancy comes to an end, increase. “Doing a runner” indicates a legal term known as abandonment of a tenancy.
Often you will not know the property is vacant until rent payments stop, and if no regular checks are carried out on the property, several weeks can go by before you know this has happened. Your insurance policies usually request you to inform the insurers if a property is vacant for more than 2 – 3 weeks, so insurance cover could be compromised when the property is abandoned.
When tenants leave like this they often leave possessions behind, even pets in some cases! They may post the keys in the letter box, take the keys with them or even give them to someone else. When tenants’ possessions are left behind, you owe a legal duty of care to the tenant to protect them. This is the case even though the tenant may be in rent arrears and has damaged your property. But what is more of a pain for the landlord is that if the tenants have left possessions this shows that the tenants may come back at some point, which means the landlord must take extra care not to breach the Protection from Eviction Act:
"It‘s a criminal offence to unlawfully deprive a residential tenant of his or her occupation of the premises, or attempt to do so."
Basically, a landlord cannot stop a tenant from using or living at the property without first obtaining a surrender of the tenancy or gaining consent from the courts via a Possession Order.
Landlords should keep a watch on their properties for signs of abandonment: unopened mail piling up behind the door, bins not emptied, drawn curtains, empty parking spaces etc. Better still, it’s a good idea to develop a close relationship with neighbours to report problems like this.
What if you strongly suspect abandonment?
The first thing you should do is speak to the neighbours; once you are sure the tenant has left, you should cautiously enter the premises with spare keys. Have a witness with you, for example an agent, and be prepared to find the premises occupied. If that is the case you would need to make your excuses and leave fairly quickly – tenants should understand if you state your concern for their safety.
However, if the place has been abandoned, cleared out or with some of the larger items left behind; letters behind the door and gone off food in the fridge are all signs you were right. At this stage, if you are sure the property has been abandoned, you may want to secure the property by changing the locks. You should take photographs of the state of the property and take all the meter readings. Better still you may want to ask your inventory clerk to do a full check-out inventory as independent evidence and a careful note should be made of the tenant’s possessions.
You should then go ahead and affix an Abandonment Notice to the door of the property, and also serve at the property a 14 day Housing Act 1988 Section 8 Notice citing the relevant grounds for seeking possession.
This process will take time and unfortunately can be very tricky as there are further details and important points that need to be addressed in order to take over the possession of the property. If you find yourself in this situation then please contact the office for our assistance.
