How to invest in property with £10,000

Exciting times

As you'll know from previous posts property management is now at the forefront of my priorities. Long term lettings has always been on the radar, but this year Daniel and I have taken the plunge and started offering short-term letting services also. A great additional string to the proverbial bow.

What have we done?

We had taken on a few apartments in E14 (I know, it's not south of the river, but needs must) in order to test them on a short-letting basis. With us being outside of that locale it was key for us to partner up with a reliable person with ample experience to be on call for the day-to-day things: cleaning, check-ins, check-outs, ejecting party revellers and so forth. Thankfully our network is vast and we found the right person for the job! Once we secured the properties the keys were handed over, the properties prepped and listed on the sites ready for bookings. We have been running them for 6 months now and have had an average occupancy rate of 85% and an ADR (average daily rate) of £140. Makes for great margins for sure!

Have a look at these apartments on my youtube channel here: https://youtu.be/8nZ_8y2xYQw?t=125

How does it work?

Some landlords want their properties managed, some want to be more hands-on. When it comes to short-letting, it's VERY hands-on. As you can imagine, everything has to be picture perfect when guests arrive. Think high-class hotel. Towels folded up on the bed, teas and coffees provided, all that sort of thing. Unless you have the time and inclination to worry about laundry, cleaning, and restocking dishwasher tablets you will need a property manager that can do all of that. You can't have a full-time job as well as run a serviced apartment, that's for sure! We have offered the landlord of these properties a guaranteed rent - that is, we rented the property on a company let basis, with permission to allow short stay guests. That way the landlord is getting a guaranteed rent (insofar as that our company will pay the agreed rent regardless of whether we have guests or not) and we are free to make a profit on the short stay income, less of course expenses such as internet, heating, electric, gas, and management fees.

How much?

We agreed to rent the properties on a three year term, hence giving us ample time to recoup our investment of time (sourcing the property), outlay of furniture, initial void (well, there wasn't really any as we agreed we could market them before getting the keys), and so forth. We had to pay the landlord a normal deposit as if we were a tenant, so initially we paid a 6 week deposit, a month advance plus some furniture bits. All in all it was £10,000 or thereabouts for 2 apartments. The breakdown is roughly as follows on a monthly basis:

£3575 - average income thus far

- Less

£1850 - rent

£275 - bills (elec/gas/water/internet/council tax)

£1050 - Management fees including web costs (30% oif gross)

--------

£400

So as you can see, over the last 5 months we've made a great return, and we are projected to make approximately £5000 per annum over the 3 year term. £15,000, plus the £5000 in deposit monies returned means that we'll have turned a £10,000 outlay into £20,000 in 3 years' time.

This sounds too good to be true!

It is, it's definitely something that comes with risks - let's talk about a few:

Parties, drugs and rock and roll - it's no surprise that short term letting has a few party people around that just want a plush pad to trash for a good houseparty. Thankfully our management systems are able to catch these out, eject them, and where possible relist the property for immediate occupation (hence getting double income for some nights).

Credit card fraud - again, rife in the industry. people will book with either genuine or stolen card details and charge it back later or the charge gets reversed due to fraud. Thankfully our systems have prevented any fraudulent bookings from taking place at all!

Damage - comes with the territory. You can expect a lot more wear and tear on walls because of suitcases and bags being dragged in and out of the flat, so the odd paint job will be required.

Planning permission - it is a known fact that some councils will require a change of planning use for serviced apartments to C1 if there are more than 90 days' holiday stays per annum. Thankfully for us this is not a well-enforced rule, if it is enforced at all. To mitigate risk however we do offer the properties to a varied clientele in order not to exceed the 90 day annual limit. Where do these bookings come from? Well, quite simply we have links to companies who require longer stays for their staff and therefore the properties can be let on a company let basis to them for a short period of time. This is then not a holiday stay and the 90 day counter stops ticking; problem solved.

Going further

Having now tested the model we have moved on to joint ventures with investors who would like to invest in property but in a hands-off kind of way. Daniel and I source the properties, we arrange for them to be furnished, prepared and photographed for listing and the investor has to put in the initial funds for the setup. The profits are then split between the parties. If you are interested in discussing the model further then please get in touch via email.

The truth about HMOs - with Rod Turner

Another day, another podcast! Glad to welcome fellow investor and friend Rod Turner on to the #DownToSouthLondon podcast this time; we frankly discuss the ins and outs of HMO investing, in South London and beyond.

Click here to listen to the podcast.

https://podcasts.apple.com/gb/podcast/down-to-south-london/id1471978277

I hope you enjoy the podcast. As always, If you are looking for help with your property investments please feel free to reach out to me via email. Also, if you are interested in more information on property letting and investments do head over to my youtube channel.

I never wanted to run a business again!

Well not a "proper" one at least... I have my investment properties largely in a limited company, which I guess, is a business. One that gives me a semi-passive, recurring income without requiring a heap of my time. Well having taken over an existing management portfolio has been everything but passive. Daniel and I have been working very hard to sort out the problems the previous managing agent had left behind for us - just a brief overview of some of the problems we've dealt with in the last few weeks:

• Tenants locked the WC door from the inside
• Dripping tap
• Radiator not working
• Broken washing machines
• Blocked shower drains (and the tenants kept on showering causing flooding and collapsed ceilings below 😱)
• No internet because the previous utility company had cut it off rather than waiting for us to switch it over.

So why the sudden change? Well there's opportunity. Daniel and I have been great working together on our WeSourceLondon.Properties brand and we've sourced a good half a dozen investment properties for clients over 2018. Our efforts didn't go unnoticed with plenty of investors contacting us to source for them too, so most of our business came from referrals and repeat business. Sourcing is however far from passive and even further from recurring. Management is a far less time intensive business for us (with the right team), so we decided to focus on that. With great success, we've been very luck finding this portfolio, and as the owner wanted to exit completely we've taken over his existing team and even his office. Once the teething issues are out the way and the properties are up to our high standards it should be a lot less time intensive.

This leads me right in to something that I did want to focus my time on - expansion. Standing still is the same as stepping backwards (because everyone else is moving forward of course). The best way to expand is together, so we set out to acquire further properties in Central London to manage on a short let basis. I'll dive in to this further in the next post as it requires some explaining, but in essence other investors are now able to hire us for property management for properties that we source for them, all packaged up, investors just sign on the dotted line and put the money in to the deal. The yields are great as we are letting the properties on a short let basis (both holiday letting and short letting in order to stay on the right side of the 90 day rule). More on this later.

If you'd like to know more in the interim by all means drop me a line. Also, if you are interested in more information on property letting and investments do head over to my youtube channel.

Busy with Management - in a good way!

A good month has gone by without a blog post; you can certainly tell I've been busy! Over the next week I'll release a few articles on my latest acquisitions, but thought I'd just release a brief overview to start with and then dive into a bit more details over the coming articles.

• Acquisition of an existing management portfolio in Southwest London
• Taken on 2 more managed properties since the beginning of this month
• Taken on a permanent office with staff
• Taken on 3 further units to manage on short-let basis

So firstly about the brand - WeManageLondon.Properties - does what it says on the tin, really. Why the "."? well the name serves as a website address at the same time, so more for convenience.

The existing portfolio is a combination of managed properties for landlords who just want us to manage the tenancies for them and those that prefer a "guaranteed rent" solution, so invariably I will be letting by the room. The area lends itself very well to that because the rents are such that there is a reasonable margin between the total of the room rents and the rents payable to the landlords. I'm sceptical this model would work as well closer in to London, but zones 4 - 6 seem to be the ideal area for this model. Great!

So all in all I've been busy together with my business partner Daniel getting the properties up to scratch; taking over the management always brings issues such as hidden repairs that needed doing and things like regular cleaning to manage. The properties were dirty as the previous managing agent had failed to bring in systems such as regular cleaning and maintenance reporting, so a lot of tenants simply didn't know what to do when a repair needed to take place, or worse - repairs were reported and nothing was done! Among the repairs were two building insurance claims for collapsed ceilings due to bathroom leaks, repairs to a bathroom refurbishment gone wrong, sound proofing a stud wall that hadn't been built correctly, leaking shower valves and a plethora of broken appliances to repair! Thankfully I have been blessed with some good members of staff as part of the acquisition that know the portfolio and have been superb in getting the transition done smoothly.

I'm looking forward to expanding a bit more in future updates, but for now if you'd like to know more about the management services I offer in SW London do drop me a line: jh@wemanagelondon.properties. I'll go into more detail in future posts.

Short leases - danger or opportunity?

I have invested in leasehold properties primarily - an area I would like to think I know a fair bit about, yet we all find ourselves the student still in most parts of our lives. My learning experience was an expensive one when I tried to extend the lease on a property I bought at auction in 2017; the lease took 11 months to extend at a cost nearly double what I thought it was going to be! Sadly this is down to me simply taking a risk too great, and I ended up making very little money on this particular project. I should have risked less, but "you can't win them all" as they say so I used this as a learning experience and moved on.

The other part of leaseholder woes is the excessive charges. Ridiculous charges for things like consents built in to the leases, blatant back hand agreements that Freeholder X uses managing agent Y to manage (and funnily enough the directors of both companies are one and the same), the list goes on...! A good friend of mine Stefania recently had a great victory - she took her freeholder to court and won! Her victory was actually recently published in The Times (click here for the article). She was even able to make a very astute purchase because the seller was not aware that such charges were unfair. She was able to make the most of her property knowledge in order to secure a better purchase price; by getting the charges down to a reasonable level she was instantly able to add value - mind, she did do a big refurbishment job also, but let's focus on the leasehold for the moment.

Here are some factors that will influence the (perceived) value of a leasehold property:

Length of lease
It goes without saying that the shorter this is, the less the property is worth. For all intents and purposes a leasehold is nothing but a long tenancy agreement, really! Sub 80 years and you'll struggle getting a mortgage. You can serve a Section 42 notice on the landlord which forces them to extend it, but only if you've owned it for over 2 years. They will demand you pay for legals and valuation fees. To summarise you get a 90 year extension, buying off the remaining ground rent left on the term and the rent goes down to a peppercorn. However if the length is sub 80 years you also pay half of the marriage value, the difference between its value today and what it would be worth with a long lease. Don't let it go under 80!

Ground rent
It's not unusual for ground rents to be anything from a peppercorn to £250 per annum. However it's the doubling or increasing of these which are tricky. Lenders are NOT lending on anything where the ground rent doubles every 10 years to some absurd amount. A ground rent of £250 becomes £500 in 10 years, £1000 in 20, £2000 in 30 years, £4000 in 40 years and by the time the house is 50 years old it costs £5000 a year in ground rent! When these properties are sold they are done on 999 year leases so even by purchasing a 90 year extension and getting the ground rent to a peppercorn you would still have to "buy off" 997 years of ground rent at £outrageous! Taylor Wimpey has even put aside a special fund of £130 million to buy back freeholds of those they sold on to property investors preying on these types of ground rent investments, which are unfair to leaseholders. I'm actually genuinely amazed this doesn't fall under the protection of the Unfair Terms in Consumer Contract Regulations!

Service charges
As mentioned above, if a backhand agreement exists, or the right for the landlord to charge whatever he likes for his time managing the building then you are indeed at the hands of their pen and mood when they are writing that invoice. Time to think about buying the freehold and self-managing in order to bring the costs down and add value to the property this way.


So in summary: leasehold properties are great investments, in fact all of my properties are just that. Just be aware that there is maintenance with bigger blocks and bigger blocks cost more to maintain. Yes, the costs are divided among the leaseholders, but.... things like roofs and scaffolding, windows and the like are not cheap, even divvied up between everyone! There are pros and cons to both big and small blocks, freehold and leasehold. Ultimately opportunity exists everywhere, you just need to be aware of the pitfalls.

If you are looking to learn more about property or you'd like to reach out, do get in touch via email or visit my website www.jeroenhoppe.com for more details on property coaching to help you get started or if you'd like to hammer down a particular niche with some help and guidance from someone with experience.

Build to rent - can it be done in South London? Rohit Chopra does it with great success

On today's episode of the #DownToSouthLondon Podcast I interview Rohit Chopra. Rohit has been in property for longer than me and he has made a local success in Peckham! Coming from a retail background he moved over into property and over the years expanded his commercial and residential portfolio in South London. A truly inspiring story! I was lucky enough to be show around the development he currently has going on and I can say it's a very impressive build in terms of size, number of units and sheer work put in to it all. Rohit is a very humble man but don't let that fool you, his journey is one to learn from. Build to rent is his main strategy, see what you can pick up from his interview. Click here to listen to the podcast.

Show notes:

01:00 intro and Rohit's background
03:16 Transition from retail to property
05:30 How to decide what to build on the site
07:00 Where did you find the knowledge from to build?
09:12 Natural progression into bigger and better and the pitfall of too much too soon.
12:00 Overcoming (inevitable) hurdles with contractors
14:50 Rohit's top three lessons in property
18:50 Specialism vs drilling down into a niche
23:00 Risk vs speed
26:00 Focusing on longevity through property development and management
30:52 What's next?


If you're looking to get in touch with Rohit do drop him a line on rohit@radnorproperties.co.uk.


As always I'd love your comments so do send me a line or if you're interested in finding out more about property training or even have me source a suitable investment for you check out www.jeroenhoppe.com

The sneaky update the government didn't want you to know about!

For those of you who are keen, hands-on landlords you will no doubt be aware of the need to serve your tenants with a plethora of government approved bumf to make sure that you are acting in accordance with the law.

These things include:

• Valid gas safety certificate
• EPC
• Deposit information leaflet
• Deposit protection Certificate
• Tenancy Agreement
• and of course the "How to Rent" booklet published by the government

Now it's the last item on that list which is key today. It's of paramount importance that you serve THE MOST RECENT ONE at the time of you issuing the agreement. Failure to do so will cause lightning to strike and all manner of other things to happen, but most pertinently you will lose your right to serve a section 21 notice. Now when did these changes occur you ask? Well, the current published version at  https://www.gov.uk/government/publications/how-to-rent indicates that the version is dated May 2019. However, since then there have been changes made, most recent one being 10 days ago. So landlord simply referring to that document, seeing that it is still dated May, could be forgiven for thinking they acted correctly if they created a tenancy between May and now (August).

However the details are located in the version history. One can see the version history below the download link and actually reads:

So you can see there has been two updates, one in June and one on the 7th of August, in both of which the date on the actual booklet has not been updated. Naturally as to whether a judge would deem a landlord to have acted "fair and reasonable and within the spirit of the law" by serving the 31 May version up until now is yet to be tested.

But let's not take that chance. If you are doing your own paperwork always refer to the webpage and download the currently published version, and don't rely on downloaded documents on your computer - they might have just sneakily been changed, materially or otherwise!

If you are looking for help with your property investments please feel free to reach out to me via email. Also, if you are interested in more information on property letting and investments do head over to my youtube channel.

Property investing - easy way to make cash, right?

I've just put together another light-hearted "Day in the Life of" video on my youtube channel. Be sure to head over there and check it out, I'll tell you more about the hard work that goes on behind the scenes. Property investing isn't just about counting the cash, you know!

A very special thanks to my good friends James Gallagher, Daniel James Dennis, Christian Broere and Sam Hill for featuring in this video! 

As always I'm happy to help you so do reach out via email. I love to help other investors old and new find their way in the myriad of strategies that are available. Are you looking for coaching, mentoring or simply after a sourced deal? Do check out my personal website to choose a package for you!

Ro Sharma and his HMO Development in South London

We are LIVE! Many of you have already downloaded and subscribed to the #DownToSouthLondon Podcast, but for those of you that haven't yet - here is a taster. Ro is a good friend of mine and he kindly took the time out of his day to come on the show to talk about his latest HMO Development in Croydon!

If you would like to hear more episodes subscribe to the Podcast on Spotify or iTunes!

As always I'm happy to help you so do reach out via email. I love to help other investors old and new find their way in the myriad of strategies that are available. Are you looking for coaching, mentoring or simply after a sourced deal? Do check out my personal website to choose a package for you!

#DownToSouthLondon - the new property podcast by Jeroen Hoppe

Another exciting month has gone by. I've worked on a few things this month, notably another episode for my "day in the life of..." series on my YouTube Channel - please check it out if you haven't already.

The other thing I've been working on is the #DownToSouthLondon podcast. I've been asked by many of my readers whether I'd be interested in recording one, so I went ahead and interviewed some close friends/colleagues to document what they're doing in an audio format. Stand by, more details to follow later this week once it hits the iTunes store!

As always I'm happy to help you so do reach out via email. I love to help other investors old and new find their way in the myriad of strategies that are available. Are you looking for coaching, mentoring or simply after a sourced deal? Do check out my personal website to choose a package for you!

Vlog Episode 2 - A Day in the Life of a Full-Time Property Investor

Off to Battersea today - we had a stab at recording the #DownToSouthLondon Podcast! Had a look at a portfolio of managed properties together with Daniel Dennis (Partner in my sourcing business WeManageLondon.Properties) and it turned out to be rather challenging!! Click this link to see the video!

Remember if you are looking to step into property investment, be it part-time or full-time do reach out to me. Happy to help of course and assist you to make your property investment more profitable. Reach me on jeroen@claphampropertyblog.com

Tips for Investors Video Series 24/30 - Letting your property at the right time?? Are you really?

So when do you let your properties. If the answer is "when they are available" you may be lacking some planning. Here's a great video that tells you my take on things!

Remember to subscribe to my youtube channel (hit the bell for notifications)!

As always I love feedback, comments and so forth so do get in touch if you're interested to speak further. On that note I have some interesting opportunities for sophisticated investors - if you are looking to invest in property and are looking for good returns then please drop me a line and start the conversation; I have a few projects which need funding and I am still looking for an investor in order to get it off the ground.

Tips for Investors Video Series 23/30 - Dealing With Deposit Deductions (Fairly!)

Oh here we go, another year down and you need to return some deposit monies! Sometimes we'll need to make deductions so here's a neat video on how to deal with things fairly!

Remember to subscribe to my youtube channel (hit the bell for notifications)!

As always I love feedback, comments and so forth so do get in touch if you're interested to speak further. On that note I have some interesting opportunities for sophisticated investors - if you are looking to invest in property and are looking for good returns then please drop me a line and start the conversation; I have a few projects which need funding and I am still looking for an investor in order to get it off the ground.

Vlog - a day in the life of a Full-Time Investor

Not a day goes by without people saying that they would love to invest in property. Of course, I hear this all the time because property is what I eat, sleep and breathe regularly! Little do people know that being a full-time investors does come with its perils. I'm quite hands-on and I self-manage - admittedly because I've been doing this for over a decade it doesn't require a lot of time from my part, but sometimes I do have to jump in the car and see things with my own eyes.

This was no exception. I've put together a little video for your viewing pleasure to depict "A day in the life of..." A little bit light-hearted and gives some insight into the reflection I have to do with the information I receive from various sources... and yes, a lot of traffic!


Enjoy! Click the preview below or this link to start the video.

Remember if you are looking to step into property investment, be it part-time or full-time do reach out to me. Happy to help of course and assist you to make your property investment more profitable. Reach me on jeroen@claphampropertyblog.com

Comparing returns on your investments - Savings, ISAs or property?

Wow it's been a whirlwind of a month. Those of you following me on LinkedIn and Facebook will no doubt have kept abreast of the various property meetings I've been going to. I've discussed at length people's strategies when it comes to getting good returns, and I must say that there is a very wide range of investments returns that people are happy with (all dependant on the risk involved).

One key thing that came up is that none of the people I spoke to considered the "rate of payback" on their investment. By and large all of them worked on the presumption that having assets was the most preferable strategy - this is why they came to talk to me in the first place, primarily because of my asset-heavy investment strategy. My desired period of holding a property is of course, forever!

Let's however consider a few things. I had mentioned in a previous post that there are various options when investing in property - it doesn't have to be by purchasing assets per se; these are, in London, often prohibitively expensive so that strategy doesn't suit everyone. However let's assume for the sake of comparison that there is £120,000 to invest and that the risk profile of the investor is OK with using leverage to increase returns.

I've made a few assumptions of course:

1. The investor is happy to purchase an HMO style property such as one of the ones I've purchased in the last few years (refer to previous articles to read more).

2. The investor is not remortgaging at the end of the initial term to release more capital (doing so will dramatically increase returns but it gives rise to too many variables and falls outside the scope of this article).

3. I've assumed that the 15 years AFTER the Savills 5 year forecast on which I relied is a bit more optimistic (not much though) at 5% per 5 years growth. I think we can all agree that normality will return to the UK housing market after the politicians have cleared up their Brexit mess (according to Savills this will take 5 years) so my predictions should be conservative.

4. I have not factored in any increase in rents over the period. Naturally this would be by at least the rate of inflation, and in London I foresee a 5-10% year on year increase in areas of good demand. Therefore returns in reality could (and probably will be) greater than I've put on paper.

5. The Return on Capital Employed figure I use for my investments is 20% so our hypothetical property investor gets this as well. That's return on money in the deal after all expenses, so invest £120k, get £24k net before tax.

6. The rental income starts coming in at month 6, assuming some building work, refurbishment and some void for getting it dressed. Again, in practice this is much quicker but let's be conservative.

Now - returns in residential property that I propose are dictated by two things: rental income and capital growth. The latter of which can only be realised upon sale, but it can also be leveraged by drawing down some of the equity by means of remortgaging. As mentioned let's keep it slightly more simplistic: Investor parks £120k in a property and pays for a managing agent to do the repairs/maintenance/running around so it's by and large as passive as putting the money in a savings account (well, as close to that as property will get).

So the numbers: Here is what Savills says will happen with capital values over the next 5 years. They don't have a crystal ball, but let's assume by and large they are right.

Source:https://www.savills.co.uk/insight-and-opinion/research-consultancy/residential-market-forecasts.aspx

Here you have it... comparing some other forms of (perhaps shorter term) property-based investments you can see that a buy to let property really outstrips any sort of investment.

Key takeaway though is that the penultimate row of the table shows that if you hang on to the property and you do not dispose of it or refinance your return on capital will never quite reach your target of 20% per annum - especially the first year where you had significant outlay/costs and you only started receiving rent after 6 months, thereby cutting your returns in half for that year. This all changes drastically of course if you refinance after your initial term, which in the current climate I would probably recommend to be 5 years. Although the market may have only risen 4.5% on average the fact that you bought cheap and added value will raise the property's value to a point where it becomes worthwhile to extract some capital. This capital extraction means that your returns will go up in this investment, and although it won't be enough (on its own) to purchase another property you can diversify and use another investment vehicle to get better returns overall.

So.... is buy to let for you? Perhaps. Bear in mind it's a long game - it's not as passive as putting money in the bank, no - but under the right circumstances you can make healthy returns - very healthy when leveraging. If you are interested in talking further then please reach out via email and start the conversation. I have helped dozens of clients over the years and demonstrated that great returns are possible in South London - what are you waiting for? 

Video Series 22/30 - Lettings Regulation Changes You Need to Know About RIGHT NOW!

Dear Reader/Watcher,

Fresh off the press in time for the summer - the latest changes to lettings regulations you need to know about.

As always I love feedback, comments and so forth so do get in touch if you're interested to speak further. On that note I have some interesting opportunities for sophisticated investors - if you are looking to invest in property and are looking for good returns then please drop me a line and start the conversation; I have a few projects which need funding and I am still looking for an investor in order to get it off the ground.

It's a great investment, right?

All too often are those words spoken... "it's a great investment, right?"

"Well, buying a new build is hardly going to give you the best rental return, let alone capital appreciation..."

"But it will go up eventually right?"

That is true... property, most of the time, appreciates if you give it long enough. Time to revisit a nifty article I wrote a while back (High Yield HMOs vs Low Yield New Build) to dig up a graph that I made to demonstrate this exact point. The point being that you pay for the "shiny factor" in the new build, or newly refurbished home. 

Now there could of course be a multitude of reasons to buy a new build or newly developed property. Time is the primary one of course. Those with busy jobs cannot afford to invest the time into sourcing new bathrooms, flooring, paint, dealing with tradesmen and so forth, that much is true. Money is another. In the case of first time buyers using the help-to-buy scheme they can only take advantage of the scheme when the property is eligible (it must be new build and the developer must be registered with the scheme). So we've identified a few caveats where it is not perhaps not feasible to buy an older style property (leaving aside personal preference as Victoriana is not everyone's cup of tea of course).

So how do we calculate how good an investment is? Normally there would be metrics we can use such as Gross Yield (annual rent divided by purchase price) or Return on Capital Employed (more applicable when you’ve added value and refinance to represent how much return is made on the money left in the deal. In our hypothetical scenario we are adding time and effort into the mix though. How do we calculate that? Well if you are a homeowner it goes without saying that you will, at some point, have to put in some time and effort to carry out (or have carried out) repair works to the property you live in. Something, at some point, will break and you will need to call a plumber, tiler, electrician or some other trade professional. So aside from routine maintenance what about improvements works? Installing a new bathroom is considerably more time-intensive because of choices that need to be made - design, colour, you name it.

Back to our analogy. New build - 0 time/effort choosing bathrooms and kitchens, it’s already A* quality. Older style property doer-upper - considerable hours pouring over bathroom designs and the like. The temptation is also rather high to overspend with this sort of thing because you want to make it “just right.” So how much do you value your time? To see the real trade-off between the two you can’t just compare purchase price against what it would be worth in 5/10/25 years, but how much time and effort you spend updating/refurbishing/maintaining it. Same goes for the exterior. Although by and large a new build developer will appoint some kind of managing agent this is of course an expense that you, as the leaseholder, will need to bear. The time spent maintaining the outside is outsourced, so you are paying for someone else’s time. I would argue that if you are going to buy a property and hold it you are planning to hold for the longer term, 15-25 years. in that space of time you would expect to have to carry out some form of work, be it bathroom/kitchen or maybe even a roof repair. I would therefore wager that less time is spent upgrading and repairing a new builds style property; this is however reflected in the returns over time (see graph).

So which is the “best?” Well that still very much depends on how hands-on you want to be. New build is certainly less involved from a repair and upgrading perspective, but if youdon’t mind the odd repair or upgrade then you can’t beat an older style property, they have always done better over time in terms of saleability (less identical supply on the market at any given time) and have lower fixed outgoings on the whole in the form of service charges, ground rents and the like. So from a purely investment point of view I would have to lean towards an older style property from an appreciation point of view. Is an older style property suitable for everyone? No, one size doesn’t fit all - which is right for you? Bear in mind however that there are better vehicles out there than new build properties - the yield is likely to be in the region of 3-4%; better returns can be made by working together with a property investor to leverage their skill and expertise and employ the money into a bigger, more profitable scheme rather than become a landlord yourself. I for one am working with a few bigger developers in order to accelerate my returns. If you’d like to hear more then by all means drop me a line and start the conversation. 

Live in Clapham? About to Retire and Privately Rent? You Could be £13,400 a Year Worse Off!

You read the personal finance pages of the newspapers and it all seems to be the impending pensions crisis ... where people aren’t saving enough for their retirement. But it’s not the lack of Clapham peoples’ future pension incomes that are my immediate concern. The fact is that so many of the future retirees in Clapham over the coming decade, who never bought their home in the Millennial years of the 1990’s and 2000’s, will have to make some tough decisions regarding what house they live in when they retire anytime between now and 2038.

In Clapham (or SW4 to be exact), there are 193 privately rented households, where the head of the household is between 50 years and 64 years of age (meaning they will be retiring anytime between now and 2038). They are working now and easily paying the rent, yet what happens when they retire?

A Clapham retired couple, who currently privately rent and who have paid their fully qualifying NI stamp over the last few decades are likely to retire with the couples State Pension of £1,091 per month plus a tiny bit of private pension if they are lucky. Given that the average rent in Clapham is £2,029 a month - a lot of that pension will be lost in rent. This means taxpayers will have no alternative but to step in and top up the rent payments with Housing Benefit, yet...

The maximum housing benefit for a couple in Clapham is currently £910.87 per month … leaving a significant gap when you consider the average rent in Clapham is £2,029 per month

It is most people’s opinion that retirees are either council tenants or own their home outright. Looking at these figures though, it looks like both these ‘mature’ private renters could be having to make some decisions on their lifestyle and where they live, possibly looking at downsizing the home they rent to make things more affordable in their old age. Also, the government will be in for a horrible surprise as more of Clapham people retire and continue to rent from a private landlord. Numerous Clapham private renters, with little or no savings, will have to rely on Housing Benefit, which will put greater pressure on the public purse.

The average Clapham retiree will need to find £13,418 pa to stay in their privately rented home after retirement

A recent report from Scottish Widows suggested that 1 in 8 OAP’s will be privately renting by 2032, up from the current one in 15.47 OAP’s whom currently private rent (or 6.47%). In fact, in that report they said the equivalent of more than one-third of the whole annual NHS budget would be spent on Housing Benefit for OAP’s in retirement living in private rented property.

What does this mean for mature Clapham homeowners? I see many using equity release schemes to stay in their homes to pay for a better retirement and others more open to downsizing, selling their large home to a family that needs it and moving into a smaller apartment or bungalow ... yet lets be frank - they aren’t building bungalows in large numbers in Clapham anymore.

And for the Clapham landlords? Well with the younger Millennials showing no appetite in jumping onto the homeownership bandwagon anytime soon, it can only result in the demands on the buy to let market from Clapham tenants rising substantially. Of course, many Millennials will inherit money from their home owning parents in the coming few decades, yet a lot won’t as it will be spent on nursing home care and any leftovers (if any) split between siblings.

For those retiring in post 2050/2060, there is better news as official reports suggest those retirees will enjoy a State Pension approximately similar to today’s pensioners with auto-enrolment into top-up private pensions through their employer.

The solution to all this is to build more homes, of course. Last year we created/built just over 217,000 households in the UK, up from a post Millennial average of just under 150,000 households a year. We need to get back to the building booms of the late 1960’s and early 1970’s when on average 300,000 households were built ... but back to reality ... that won’t happen so it looks like we are turning into a nation of renters, which is of course good news for Clapham’s buy to let landlords!

Do let me know if you are looking to invest and you could use a hand. if you are a ready and able investor sign up to my list that will bring packaged deals to your inbox! If you are looking for no-obligation advice then drop me a line and let's start the conversation.

As OAP’s set to rise to 1 in 8 of Clapham’s population by 2037 – Where are they all going to live?

With constant advances in technology, medicine and lifestyles, people in the Clapham area are, on average, living longer than they might have a few decades ago. As Clapham's population ages, the problem of how the older generation are accommodated is starting to emerge. We, as a borough, have to consider how we supply decent and appropriate accommodation for Clapham’s growing older generation’s accommodation needs while still offering a lifestyle that is both modern and desirable.

In 1997 in Clapham, one in every ten people (10%) were aged 65 years and over (and the local authority area as a whole), this decreased to around one in every twelve people (8%) in 2017 and it is projected to increase to around one in every eight people (13%) by 2037, meaning..

Over the next 19 years, the growth of the over 65 population in Clapham will grow by 62.5% - a lot more than the overall growth population of Clapham of 10.6% over the same time frame.

In fact, the number of those over 90 is expected to nearly double in our local authority from 1,285 (0.4%) in 2017 to 2,342 (0.7%) by 2037.

And looking at the proportional percentage changes over those years..

Looking at Clapham and the local authority as a whole, there is a distinct under supply of bungalows and retirement living (i.e. sheltered) accommodation. The majority of sheltered accommodation fit for retirement is in the ex-local authority sector whilst the majority of private sector bungalows were built in the 1960s/70s/80s and are beginning to show their age (although that means there is often an opportunity for Clapham investors and Clapham buy to let landlords to buy a tired bungalow, do it up and flip it/rent it out).

In the medium to longer term, we need to build more bungalows and sheltered accommodation and, if we do that, that won’t only be of benefit to the elderly population of Clapham – it will have a direct knock-on effect to the younger and middle-aged population by unlocking those family homes the older generation homeowners live in.

There have been 17 Housing Ministers since 1997. No one ever seems to stay in the job long enough to create a consensus and direction in Government Policy on the vital issue of the country’s housing shortage, yet the sound bites and White Papers seem only to focus exclusively on first-time buyers when there is an even more severe and disregarded shortage in suitable housing for the older generation.

This scantiness affects both mature homeowners trapped in unsuitably big family properties, unable to find smaller bungalows or suitable retirement apartments, whilst the waiting list for Council sheltered accommodation is putting a strain on other aspects of social care. In both circumstances, policy coming (or not coming) out of Government is repressing the supply and type of accommodation mature people desire, need and want, whilst at the same time, increasing the cost (and taxes) for social and NHS care.

Maybe we need tax breaks for people to downsize or planning permissions that stipulate bungalows only. Whichever way you look .. there are challenging times ahead for us all.

Do let me know if you are looking to invest and you could use a hand. if you are a ready and able investor sign up to my list that will bring packaged deals to your inbox! If you are looking for no-obligation advice then drop me a line and let's start the conversation.

Rents are rising for Clapham Landlords - are they rising for you?

Those of you that know me know that I'm a keen lover of BTL. A steady, passive income stream. Whether you are into single let ASTs or slightly more work/reward and you invest in HMOs, truth remains is that many people I meet are struggling with the FEAST/FAMINE that comes with building, development, buy to sell, you name it.

Nothing beats a steady income stream. Steady, yes you read that right. It's steady. After all, if rents aren't paid you've protected yourself with a rental warranty, right??

So why am I so keen, especially now when the government has it out for us poor landlords?

Simple. Today is January 31st. The day of the self-assessment tax return. The day when a lot of landlords will be hit with the hard reality that their taxes have gone up, because they've not been paying attention. They've let their investments ride on the capital appreciation of years gone by, being able to refinance their way out of trouble. Not any more. These landlords will be calling their agents tomorrow if not today and demand rent increases because hey, costs have gone up! And if everyone's costs are going up (taxation) then tenants will bear the cost. To an extent. You can't just ask what you want and expect to get it, come on landlords you're not a millennial!

But the truth is that a lot of landlords will be hit with higher agency fees in the next 6 months too as the tenant fee ban comes into effect. That's another 10-25% on top of the letting fee. I've run an agency; my income was split 75/25, with 25% of revenue coming from tenant fees. That's a profit margin in a business if the agency doesn't take action!

But rents can't rise forever, you say? Yes they can. ONS has wage inflation at 3.3% in the 3 months leading up to November 2018. Tenants, on average, have the means to pay. Landlords, on average, have significantly increased costs this year. You do the maths! Rents were up in the final quarter (in London) by 2%, and voids down to 4 days from 5 days the year before as reported by a large independent estate agency which operates Londonwide.

These are cold hard facts. Yet I was at a well-known property networking meeting last night and landlords were advised to be cautious and not to raise rents beyond the tenants' ability to pay. This goes without saying of course. My age old adage is to charge market rent. What is fair for me, before I consider what is fair for the tenant. After all they are not going to be paying the tax bill; I'm obliged to operate as a business and charge a fair market rent; ultimately those that do not and undercharge will find themselves without profit and sell up sooner rather than later. Being a landlord is not a charity-led enterprise after all!

Buy To Let still is my favourite property strategy. It's long-term, the gains are good over time and most of all it's still the most reliable source of income - as a great man once said, don't wait to buy property, buy property and wait.

Clapham ‘Home Owning’ Movers and Shakers in 2018

It’s now commonly agreed amongst economists and the general public that the dramatic rise in Clapham property prices of the last six years has come to an end.

Read the National newspapers, and they talk of doom and gloom in the British housing market with such things as strained buyer affordability (as property prices have increased over the past six years at a far faster pace than average salaries), a lack of new properties being built and the Brexit uncertainties over the last two and half years being blamed for the slow down - yet in the last 12 months, people have still been moving, buying and selling in Clapham at levels similar to the last six years - something tells me we have a case of ‘bad news selling newspapers’.

So instead, let me share with you what, exactly, is happening in the Clapham property market, and more specifically, who is moving and why in Clapham. Most of the sales in Clapham over the past year were flats, which on average sold for £571,150. Terraced properties had an average sold price of £1,246,050 and semi-detached properties averaged at £1,586,600.

In Clapham in the homeowner sector in 2018 (i.e. owner occupation), 309 households moved within the tenure (i.e. sold the home they owned and bought another one) and 60 new households were created (i.e. they moved from living with family/friends and bought their first home without privately renting).

What does this mean for Clapham buy to let landlords? Well looking at the graph, it appears bad news for landlords. There were 144 households that moved into the home owning (owner occupation) tenure from the private rented sector, whilst on the other side of the coin, 113 Clapham households moved to the private rented sector from owner occupation … which appears on the face of it, a reduction in the private sector.

My research has calculated that in 2018, an additional 150 new households in the Clapham private rental sector were created

...and it will continue to grow at those levels for the foreseeable future.

I have one final thought and opportunity for you Clapham property investors. 75 owner occupied households in Clapham sold in last year where the homeowners had passed away. These properties can be a potential goldmine and offer great returns. The reason being is some members of the older generation who have owned these homes for decades have spent money on high capital items (double glazing / central heating etc.) but not spent money on more superficial low-ticket items such as up to date carpets, kitchen, bathroom and decorating (vital if you want to sell your property for top dollar). These properties can often be bought cheaply because most buyers can’t see past the avocado or brown bathroom suite from the 1970’s and the dated decor, so if you were to buy wisely and do the works, you could sell it on for a healthy profit.

So, whatever is happening in the world with Brexit, Trump, China, and the Stock Market … the Clapham housing market is in decent shape for the medium to long term. If we do have small corrections in values in the next 12 to 18 months, in the long term, house prices have always returned ... and returned with vengeance. Like I say to anyone buying a property, be they a first time buyer, landlord or homeowner ... property is a long game ... and if you play the long game, you will always win (although isn’t that true in most aspects of life?).

Do let me know if you are looking to invest and you could use a hand. if you are a ready and able investor sign up to my list that will bring packaged deals to your inbox! If you are looking for no-obligation advice then drop me a line and let's start the conversation.

Top 25 Most Saleable Streets in Clapham

Following on from my last article, if you recall I said that Kings Avenue had the most properties sold in the SW4 Clapham postcode, yet I felt that this information wasn’t telling the whole story, as some roads in Clapham have more properties on them than others. Therefore, I promised that I would compare the average number of properties sold by the actual number of properties on that street, to find out the streets whose owners proportionally moved (or sold) more often than the rest of the locality.

To give some foundation to the article, in 2017 Clapham homeowners had, on average, lived at their existing address for 17 years and 6 months. However, when I looked at the difference between homeowners with and without a mortgage; Clapham homeowners without a mortgage had lived in their Clapham home for an average of 23 years and 9 months compared with 10 years and 1 month for homeowners with a mortgage. Interestingly, Clapham’s Lambeth Council house tenants have on average resided at their present home for 11 years and 4 months, whilst finally for those who rent from a private landlord, tenants generally have lived in their property for an average of 3 years and 11 months (up from 3 years 5 months only five years ago).

The SW4 street in the top 25 saleable streets with the highest number of households on it is Kings Avenue, which has 466 residential addresses. Yet since 1995, only 511 properties have changed hands (some multiple times!) .. which means the street’s saleability or churn rate is 109.7%.

However, the street or road that has the highest saleability or churn rate is Sandmere Road … which has 159 households on it, yet since 1995 there have been 280 house sales … a saleability rate of 176.1%. Here is the full breakdown of the top 25 streets …

So, as you can see, some interesting statistics and a lot more correlation between saleability rate and property values (unlike the article last time where we compared value to ‘out and out’ raw sales figures).

Therefore, what does this all mean to Clapham homeowners and Clapham landlords? Well these 25 streets are the best performing streets out of the 231 streets in the Clapham (SW4) area so if you live/own a property on those 25 streets … you are sitting on a very saleable street. If you want to find out how saleable your street is .. please drop me a line and we can discuss this further.

Do let me know if you are looking to invest and you could use a hand. if you are a ready and able investor sign up to my list that will bring packaged deals to your inbox! If you are looking for no-obligation advice then drop me a line and let's start the conversation.

Kings Avenue, Clapham …the road where people move the most

Many folks say moving home is the most stressful thing. Moving home is like someone (and that someone is usually you and you are the cause of this devastation) has collected all your worldly goods, put them into brown boxes and into a lorry making your whole life look like a Amazon delivery van, only to spend the next six months unpacking it all, whilst unable to find important things like your bank cards, ‘those’ shoes or special jewellery!

We wish we could be instantly transported like in Star Trek “Beam me up Scotty to a blissful moved in state”. Yet the week you move, it’s like an episode from the original 1960’s series Star Trek, when the crew had a transporter accident with an ion-storm sends Kirk and Spock into an alternate reality, where the caring Federation is the merciless Terran Empire, and the USS Enterprise is a warship and chaos eschews!!!

Star Trek aside, when you decide to move and before the stress of living out of cardboard boxes for months descends; first you trawl the portals (Rightmove/Zoopla/On The Market) to find a new house, which out of the hundreds of properties available to buy, you will probably only view around four or five of them, for no more than 20 minutes each. Then, you will arrange a second viewing of one or two of those initially viewed properties for the estate agency industry stated average of 30/45 minutes maximum (fascinating when you think most people take hours to decide what clothes or shoes to buy but minutes to spend hundreds of thousands of pounds on their next home!). Then you put your property on the market with an estate agent, find a buyer for your Clapham property, agree a price for both, then instruct solicitors. The property becomes sold ‘subject to euphuism’ ... sorry ‘contract’ … as solicitors and surveyors and mortgage companies pick holes in the paperwork, threatening to wreck the chain at any moment, whilst you can’t get too attached to the property you want to purchase in case the sale falls through … phew - stressful or what??!!

Is it worth it? Worth the stress? The brown cardboard boxes? Well many Clapham people think so.

In the last 12 months, 324 families have sold and moved home in Clapham (SW4)

Yet the question I want raise is ... do people on certain streets in the SW4 postcode move more often than others? Well, the answer might surprise you. I looked at the Land Registry for the all the property sales going back 23 years (to 1995) in the SW4 postcode whilst also calculating the average value of a property on a particular street/road (to see if there was a correlation between price and moving). So initially looking at the top 10 streets in the postcode, in terms of pure out and out house sales, Kings Avenue is the winner with an average of 22.22 house sales per year (since 1995) as on the graph below.

And to look at the bigger picture, the table below shows the top 25 streets, with the average value of a property on that street. As you can see, there is no correlation between the average value of a property and the number of times a property gets sold on that street.

However, I still felt the information wasn’t telling the whole story … some roads in Clapham have many more properties on than others, so I wanted to then compare the average number of properties sold by the actual number of properties on that street, to find out the streets whose owners proportionally moved (or sold more often) than the rest of the locality.

In the next article, (and I promise I won’t mention Star Trek again), I will answer that question in great depth ... and the results should (as they did me) certainly raise an eyebrow. The question is ... do you live on one the top 25 Clapham most saleable streets in Clapham (SW4)?

Come back to my Clapham Property Blog for the next article to find out!

Do let me know if you are looking to invest and you could use a hand. if you are a ready and able investor sign up to my list that will bring packaged deals to your inbox! If you are looking for no-obligation advice then drop me a line and let's start the conversation.