Sow & Reap : Rising from the storm

Wednesday 19th December 2018 06:15 EST

Recently, I had an investor who did a U turn on an investment, citing Brexit as the reason. This is a convenient reason, as it’s all over the press and is in our faces daily. People like simple easy headlines to hide behind. The truth is, not many know what Brexit actually will entail, neither its impact; especially on the property market. Does it have an affect over all? Of course it does, that’s easy to see. The reality is, you cannot paint the whole property market with one brush. There are segments within, which are segregated both geographically and price wise. Each has its own politics. 

The deal we were looking at is a two bedroom property, in the South East of London, which has a yield touching 5%. The price point is £245K. In the midst of the current turmoil, we forget there is a fundamental housing need in this country which is not being met, and will not be met in the foreseeable future. Property is not just an investment. It provides a fundamental human need; shelter. At this price point you are looking at the bottom end of the pyramid. One in which it becomes within the affordability range of an average couple earning £25K each. A combined salary of £50k would qualify for a mortgage of £250K. This puts this property well within the reach of first time buyers, who some say are responsible for fuelling the property market from bottom up. 

Is there a chance this property will fall in value due to Brexit? Very unlikely, as we are dealing with the bottom end of the market, and the yield of nearly 5% speaks for itself. This used to be a normal yield in the early 2000s, but you would be hard pressed to see this anywhere else in London. As property prices have risen the rents have not kept pace, and consequently the yields have dropped.

There are two major forces in play, which will ensure this investment will not only weather the Brexit storm, but rise from it. One, is this is the last borough of 33 boroughs in London where the average property price is below £300,000. Historical analysis has shown this factor alone will ensure it will be in demand; purely from the view of satisfying a need. Two, is this is in a location where when Crossrail finally comes in, it will mean Canary Wharf will be 11 minutes away and Bond Street only 22 minutes away. We have compiled an 18 page in depth report on this location. This is an area we feel will be on the rise for at least the next five years. 

Agony Agent is here to help!

Q: Is contents insurance my tenant’s responsibility?
A: This may come as a surprise to you, but, both you and the tenant need to take out contents insurance.

As your property may be prone to a higher number of risks, and many of these risks may not be covered under a standard home insurance policy, you need to have landlord contents insurance, rather than the standard one. It is not a legal requirement, but it can keep you protected from instances that are out of your control. 

Landlord insurance usually covers:
 Fixtures & fittings
 Accidental damage
 Public liability and property owner's liability
 Alternative accommodation costs
 Loss of rent
 Glass and lock replacement
 Landlord’s contents e.g. furniture

Be sure to compare landlord insurance policies in order to find one that covers your needs. 

What about tenant insurance?

Insurance for tenants is like regular contents insurance, which covers their personal belongings, however, theirs additionally includes “tenants liability insurance”. This means, they would be able to claim for accidental damages to your property in addition to their own; so you won’t need to tear your hair out if they spill a glass of red on your sofa.

If you have any questions, or if you need help managing your rental property, feel free to get in touch. 

Richard Bond

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