Advice on investments

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You’ve decided to invest a property. Great! I’m sure you have an ideal image in your mind about your perfect home/investment, and I’m sure you can visualise exactly what you are looking for.
Without putting a dampener on your dreams (after all, dreams and goals help us work towards achieving our desired result), there are a few things you will need to keep in mind, the main one being finances.
Too often, I’ve seen investors look the price of the property, and excitedly calculate their annual yield from the rental monies they could potentially achieve on the property. This is a great start. Unfortunately, if it was this easy to work out, every investor in the world would be rich and owners of multiple homes.

There’s solicitors fees, agent’s fees, tax, keeping an amount of money as an emergency fund should something go wrong, along with all the other costs involved in purchasing a property. Suddenly, the yield you have calculated seems to be dropping with every calculation.
I advise that you should look for properties that can give you a pre-tax yield of between 4-6% annually. It’s difficult to find, but not impossible. The next thing you should work out is every single cost. Granted, it’s difficult to work out exact figures but it’s good to have a rough idea of what you will end up with.

If you would like, I can generate a report for you breaking down potential costs. All you need to provide me with are the following:

– Price of property
– Estimated rental price per week

I will provide it for FREE. No incentives. No catches. I want to help you make an informed decision and I ask for nothing in return.

Simply fill in the form below with the information required and I will get this sent over to you as soon as possible. The picture above gives a snapshot of what the report will look like, but trust me, there’s so much more to consider, which you will be able to see once you have requested a report.

Please keep in mind, and I cannot stress this enough, the figures I send to you are a rough guide, and not to be taken as the exact amount you can expect. The property market has ups and downs so use them as a guide.

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Government publishes renting guide for tenants

I was pleased to see that the government have published a check-list with advice and guidance on how to rent a property for tenants. To read their guide, click here.

The guide is great and provides tenants with the basic knowledge they need in order to rent a property. I’ve met too many tenants that do not know their rights when it comes to renting a property, especially with first time renters or those from abroad. There are an increasing number of tenants that I have spoken to who take the advice of a lettings agency without questioning them, and the guide published by the government gives tenants advice on what to look for when speaking with an agent. I’ve had situations with tenants where they are willing to hand over their money without really doing their own checks. Far too often I’ve heard the expression, ‘I love the property, I can pay a deposit right now’.

A property is a huge investment whether you are renting or letting a property out. For tenants, they hand over a huge amount of money over the course of their tenancy and it saddens me when I speak to some who have had terrible experiences in the past.

As I love to tell personal stories based on updates on the property industry, I’m going to share a story with you which illustrates the lack of knowledge that tenants have about their rights.

An applicant was completing their paperwork before their big move and we had started chatting about ther current home. They mentioned they were having problems with the landlord and the agent regarding the release of their security deposit. When they first moved in to that property, the check-in and inventory reported damp and mould issues in one of the rooms, and they were advised by the agent that they will inform the landlord with the view of getting it repaired.

However, the landlord failed to repair it and the tenants periodically reminded the landlord and agent that the mould issue hasn’t been fixed and it seems to be getting worse. The response was the same every time from the landlord – ‘no problem, i’ll get it looked at’.

They stayed at the property for 2 years and the landlord did not send anyone to look at the issue to get it fixed. As it was time to leave, they didn’t report it in the final few months of the tenancy and at this point, the mould had gotten considerably worse.

The tenants told me that the landlord was going to deduct some money off the deposit for the cost of the repairs for the mould issue. I thought this was strange but the tenants thought it was normal for this to happen as the mould got worse throughout their tenancy and they thought it might have happened because of the way they they were living there and assumed they were partly responsible. I asked if they had agreed to the deductions already to which they said ‘no’.

Now, agents have no obligation to offer tenants advice but they do have a duty of care towards them. Appalled at what I had heard, I advised them that they shouldn’t agree to the deductions. They had reported the issue to the landlord on many occasions and they had written evidence of this, so how can the landlord attempt to extract money from the tenant to repair an issue which is the landlord’s legal obligation? The health risks associated with sever mould are well documented and the tenants are lucky that they didn’t suffer any health issues from it.

The tenants were unsure of my advice, but I assured them that they had every right to contest the landlord’s proposed deductions. Reluctantly, they said they will try to contest it.

A week later, I received a phone call from the tenants who were extremely happy and grateful for the advice I gave to them. The landlord agreed to give them their deposit back without deductions for the mould.

The example I have given illustrates the need for more information and guidance for tenants. They are unaware of their rights because there isn’t much information out there for them, which is why the governments checklist is so important.

 

The 10 minute rule

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No, I’m not talking about the procedure that MPs need to follow in order to introduce a bill. The 10 minute rule that I am talking about is the rule that you should follow when purchasing an investment property. 

When you decide that you want to invest in a property, you are obviously going to keep a few factors in mind, such as price, age of the property and location. We’ve all heard the saying ‘location, location, location’, which has been made ever more popular after the Channel 4 programme. But what exactly about location do you need to keep it in mind?

This is where the 10 minute rule applies. Let’s think about it in more detail. You are purchasing a property as an investment, and what drives your investment? Tenants. 

When tenants are searching for a property to rent, it is temporary and usually short term. Properties that carry the most value are those that offer it’s residence the most convenience. We are beginning to see a trend where new developments are increasingly beginning to include a gym and a concierge for this particular purpose. 

So what is the 10 minute rule? 

This is relating to the location of the property. I strongly advise that if you are investing in a property, take a walk from the building to the nearest station. If it is within 10 minutes, this is ideal for investment purposes. You should also apply the 10 minute rule to the property’s proximity to local amenities such as schools, shopping malls, parks etc. 

The more local amenities fall within 10 minutes walk to the property, the better it will be for the value of the property over time. If at time of seeing a property, there isn’t many local amenities within a 10 minute walk, do a little research to find it what could be there in the future. You’d be amazed at how the value of a property can increase because of future regeneration in the area. 

So there you have it. A quick rule to keep in mind when you are searching for a property to drive your investment. 

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Rogue landlords: my thoughts

imageI previously wrote a post about rogue agents, or ‘sharks’ as I like to call them. I guess it would be fair to also talk about other types of ‘rogues’ in the property industry. I have come across an interesting article posted on The Guardian’s website which I thought would be a good read as it gives an example of sharks in other forms. Click here to read the article.

The link I have shared basically discusses why landlords should receive higher fines for letting a property to tenants which is deemed dangerous or uninhabitable, or by profiting from exploiting tenants. The government is proposing an unlimited fine to those landlords, which could be a considerable increase compared to the paltry £5,000 fine they can currently receive as a maximum.

This is great news, especially for tenants. Too much is highlighted by the media on bad agents, but in all fairness, I believe that most agents have a hard time satisfying landlord’s needs. It’s understandable that the landlord would want to generate the most income on their investment by trying to reduce their cost but they should also realise that by dealing with any issues quickly can prevent major, potentially expensive costs in the future. So if you own a property and there are issues, get it fixed!

Reading the article made me think about a situation I had with a new client a few months ago. He instructed us to let his properties, which we did at a higher price than the landlord had ever achieved in the past. As you can imagine, he was extremely pleased with us and gave us some excellent feedback. However, after the contracts had been signed, he had started to call me for general advice. This then turned to conversations on ways in which he could extract money from his outgoing tenants. He explained to me that one of the tenants in his property was abroad, and she had asked him if it would be ok if her boyfriend stayed in the property from time to time, to which he agreed. As long as the rent was paid in full and on time he had no problem. Over time, the boyfriend eventually moved in full-time but no amendment had been made to include the boyfriend’s name into the tenancy agreement. The landlord suspected that the so-called boyfriend was not actually the original tenant’s partner, but actually someone the original tenant was sub-letting the property to, but the landlord had no problem with this as he was still receiving rental payments. Furthermore, the landlord actually lived in the same building as the flat he was renting out so he had often bumped into the ‘boyfriend’ and they also had general conversations and got on well together. I believe he found out from the boyfriend that he was paying the original tenant a rental amount which was greater than what the landlord was receiving. The ‘boyfriend’ remained in the property for approximately 6 months.

I gathered from my conversations with the landlord that he may be struggling financially. In discussions, he mentioned he was currently unemployed and relied on his properties to generate his income, which he completely depended on. He told me that he was thinking of asking the outgoing tenant for a large sum of money or he would take action against her for breaching a term of the agreement, where a clause had been added restricting the tenant from sub-letting the property. I advised him that legally, the most the landlord can do in this instance is evict the tenant through the courts. He wasn’t happy with this information as the tenant was leaving anyway and he became visibly angry, not at me but at the tenant. He was swearing and shouting about how this was unfair for landlords. I pointed out to him that he was aware that the actual tenant was not living in the property for months so the argument against him would be why he hadn’t taken action earlier. His only response was that he would try his luck with the tenant with the hope that she wouldn’t know her rights and would hand over the requested amount of money without any fuss to avoid any further action. I urged him not to do this as he could put himself in an even worse situation, if the tenant decides to report the landlord for harassment or blackmail. After a very long conversation with the landlord, and after what seemed like hours of advising him against his intentions, he finally agreed not to ask the tenant for an extra payment. The situation had been settled with no issues, which was a relief for me.

The landlord only instructed me to let the property on an ‘introduction only’ service. I had no obligation to provide any advice whatsoever, but I genuinely think I saved him from a lot of trouble and a potentially difficult situation that he could have got himself in to. We now speak quite regularly, sometimes just for a general chat and a catch up, and I feel that he genuinely respects me and the company for going above and beyond our contractual obligations to him to prevent him getting into any potential legal troubles.

Back to the point of rogue landlords. The story I have shared with you is a personal one. Looking deeper in to it, if the landlord hadn’t taken my advice, I can’t help but think he would’ve had legal action taken against him rather than the other way round. It’s impossible for landlords to know all the legislation relating to renting a property, especially as it is not their full-time occupation or profession. This is why agents exist – to give advice and guidance, to help the landlord avoid any legal action taken against them, to educate the landlord on their rights and the tenant’s rights. Even if agents are instructed on a ‘let only’ basis, I believe they still have a duty of care to landlords.

The question I want to ask is this. Do rogue landlords exist because of incorrect or inadequate information from agents? I, for one, cannot imagine rogue landlords would exist unless the legal consequences of certain actions by landlords haven’t been explained to them properly. At the end of the day, landlords must have been in touch with an agent at some point in their lives if they have managed to purchase a property. A standard agent will usually tell the landlord what they want to hear. A good agent will tell the landlord what they should be hearing, whether the landlord likes it or not.

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Cooling-off period?

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The cooling-off period in consumer contracts has doubled from 7 days to 14 days, but according to a leading trainer in the industry, not many agents know of this change. I guess the first question we should ask is ‘what is a cooling-off period?’

In a nutshell, the cooling-off period is a specified amount of time whereby a consumer can cancel a contract after they have signed it. There needs to be a notice of the right to cancel a contract which must be given to a consumer before they sign anything. However, there are a few instances where this applies and where they don’t apply. If a contract is signed at the office of the service provider, there is no need to include this notice. However, if it is signed anywhere else, this notice needs to be given. Why? Simple. How many people have knocked on your door in the past and tried to get you to sign up to something that you initially had no intention of buying? Unfortunately, hard selling techniques have led to things being sold under pressure and this piece of legislation protects consumers against this type of sale. On the other hand, if someone signs a contract in the office of the service provider, no notice needs to be given. After all, you cannot force somebody to enter a shop, office or business premise so it is assumed that the consumer entered at their own will.

The initial cooling-off period was 7 days. However, this has recently doubled to 14 days, providing further protection for consumers against sales sharks.

What I find interesting is a statement made by an industry trainer within the residential property sector. Julien O’Dell states that most estate agents were not even aware that there was a 7 day cooling-off period, let alone being aware of the change to a 14 day period. O’Dell said: “On my training travels around the country in recent months, I have come across a significant number of agents who were unaware of the imminent legislative changes affecting the point of instruction.

“These centre specifically on the cooling-off period that applies when a client signs to instruct an agent, and the agent’s responsibilities at that point.

“I have met agents who didn’t know this period was changing, or indeed when.

“In truth, there have even been some agents who didn’t know there was such a thing as a cooling-off period.”

As a professional in the industry, I was initially shocked that agents had no idea of what a cooling-off period is! In an ideal world, a person who enters into an industry should be fully trained to avoid any mistakes, and being up to date with legislative changes needs to be the utmost priority for employees. The reality is, unfortunately, that businesses do not really follow this and push their luck as much as they can. My advice to landlords and tenants who are considering contacting estate agents is to find out if they are a part of a redress scheme, like the Property Ombudsman, or if they hold qualifications and memberships to industry specific groups, like ARLA.

A final thought regarding the cooling-off period. Should changes to legislation be announced in a more obvious way, or is it the responsibility of the company and it’s employees to do their own research to ensure high standards are kept?