Property Geek http://www.propertygeek.net Wed, 19 Apr 2017 07:00:17 +0000 en-US hourly 1 https://wordpress.org/?v=4.7.4 Every episode, I interview someone with expertise in a different area of UK property investment - discussing the issues in their field, and teasing out their top tips for investment success. Property Geek clean Property Geek rob@propertygeek.net rob@propertygeek.net (Property Geek) Essential discussion for UK property investors Property Geek http://www.propertygeek.net/wp-content/uploads/2014/11/Final-Logo-JPEG.jpg http://www.propertygeek.net Using the personal touch to bridge the worlds of self-managing landlord and hands-off investor http://www.propertygeek.net/using-personal-touch-bridge-worlds-self-managing-landlord-hands-off-investor/ http://www.propertygeek.net/using-personal-touch-bridge-worlds-self-managing-landlord-hands-off-investor/#respond Wed, 19 Apr 2017 07:00:17 +0000 http://www.propertygeek.net/?p=3831 (Want to get each episode sent automatically to your phone or iPod? Click here to learn how to subscribe.) Sam Jones had a terrifying experience very early in her self-managing career – but she didn’t let it put her off, and she’s spent 17 years managing a geographically distributed collection of properties. Now though, she’s […]

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(Want to get each episode sent automatically to your phone or iPod? Click here to learn how to subscribe.)

Sam Jones had a terrifying experience very early in her self-managing career – but she didn’t let it put her off, and she’s spent 17 years managing a geographically distributed collection of properties. Now though, she’s started using an agent for new acquisitions – but she’s not losing the unique ability that made her such a self-managing success.

For Sam, property really is all about the people – and she uses her people skills to straddle the worlds of self-managing landlord and hands-off investors.

Listen to this week’s show and learn:

  • How Sam started young in property…and survived a scary experience that would put most people off for life
  • The approach she’s taken that’s allowed her to manage an HMO remotely for over a decade
  • Why being a “soft touch” has been good for business
  • How her understanding approach turned a potential eviction into a long-term, model tenant
  • Why she decided to start using an agent for her new acquisitions
  • How she makes sure she maintains the personal touch, even when she’s more hands-off
  • The secret to building a strong working relationship with letting agents

MY NEW BOOK IS OUT NEXT WEEK!

My book, How To Be A Landlord, covers everything you could possibly need to know about letting and managing a property – and even if you’ve been doing it for years, I guarantee you’ll still learn plenty.

It comes out on 26 April 2017, and there are some great bonuses if you buy in the first week – so make sure you join my mailing list to learn what they are and be reminded when it comes out.

If you’re listening to this episode once it’s already out, you can pick up a copy as a paperback, for Kindle or on audiobook at propertygeek.net/book

Thanks for listening!

If you enjoyed the show, could you help me out? I’d love it if you could tell a friend about The Property Geek podcast – you can use the buttons below to share it by email, Facebook or Twitter.

You can also leave an honest review on iTunes. Every review helps move the podcast up the rankings for others to find, so you’ll be doing me a big favour.

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http://www.propertygeek.net/using-personal-touch-bridge-worlds-self-managing-landlord-hands-off-investor/feed/ 0 (Want to get each episode sent automatically to your phone or iPod? Click here to learn how to subscribe.) Sam Jones had a terrifying experience very early in her self-managing career – but she didn’t let it put her off, Sam Jones had a terrifying experience very early in her self-managing career – but she didn't let it put her off, and she's spent 17 years managing a geographically distributed collection of properties. Now though, she's started using an agent for new acquisitions – but she's not losing the unique ability that made her such a self-managing success.<br /> <br /> For Sam, property really is all about the people – and she uses her people skills to straddle the worlds of self-managing landlord and hands-off investors.<br /> <br /> Listen to this week’s show and learn:<br /> <br /> *How Sam started young in property...and survived a scary experience that would put most people off for life<br /> *The approach she's taken that's allowed her to manage an HMO remotely for over a decade<br /> *Why being a "soft touch" has been good for business<br /> *How her understanding approach turned a potential eviction into a long-term, model tenant<br /> *Why she decided to start using an agent for her new acquisitions<br /> *How she makes sure she maintains the personal touch, even when she's more hands-off<br /> *The secret to building a strong working relationship with letting agents<br /> Property Geek clean 35:49
How to raise the money to invest in property http://www.propertygeek.net/raise-money-invest-property/ http://www.propertygeek.net/raise-money-invest-property/#respond Tue, 18 Apr 2017 07:44:37 +0000 http://www.propertygeek.net/?p=3827 As suggested by the word “invest”, you need money to buy a property. That should be so obvious there’s no reason to take up valuable space on the internet by writing it. But – probably due to hazy pre-2006 memories and courses that sell the dream more than the reality – there are an amazing […]

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As suggested by the word “invest”, you need money to buy a property.

That should be so obvious there’s no reason to take up valuable space on the internet by writing it. But – probably due to hazy pre-2006 memories and courses that sell the dream more than the reality – there are an amazing number of people who find it an unpleasant shock when I tell them they’ll need access to cash if they want to invest.

(OK: there are ways into property – like rent-to-rent – that involve very little money. But as you’re just controlling the cashflow from an asset rather than owning it, I wouldn’t call it investing as such.)

In my book, the “Complete Guide”, despite calling it “complete” I didn’t cover how to get the money together in the first place – in the same way that a magazine reviewing cars wouldn’t start with an article about how to afford them. But the ability to generate cash is important – especially as remortgaging gets more restricted – so it’s worth having a quick run-through the main ways to build that stash.

Save aggressively

Let’s start with my favourite: saving as much as possible from your income.

Unless you’re wired a bit strangely (like I am), saving isn’t fun – but it’s straightforward, it’s within your control, and it’s predictable. Just track your spending (I use Toshl) so you’re aware of where your money goes, then find ways to reduce it as far as you can.

Look at it this way: every pound you don’t spend on something else is a pound you can invest in property. Actually, if you’re using a 75% mortgage, every pound you don’t spend means you can buy four pounds’ worth of property.

I really do think that consciously spending only in ways that maximise your happiness is a huge win in itself, and I could go off on a big tangent here – but I won’t. Just know that saving up isn’t the glamorous part that’ll make up the bulk of your autobiography once you’ve made your millions, but it’s something that almost everyone has to do if they want to invest.

Borrow against your own home

You might have little in the way of cash, but lots of equity in your own home. Some people in this situation choose to extend their mortgage to release the cash to invest elsewhere.

Is it the right thing to do? Only you can answer that: would you rather be able to start investing earlier, or have the security of paying down your personal mortgage?

If you do decide you want to, there are a few things to consider:

  • Some mortgage providers will be happy for you to borrow more against your house in order to invest in property, others won’t – you’ll need to check with your lender or broker
  • Mortgages on your own home tend to be the cheapest debt you’ll ever have, but it does mean that the property you buy will be effectively 100% mortgaged – so you’ll have to check carefully that you’ll be cashflow positive after repayments
  • Your residential mortgage will be assessed based on your income, so you’ll need to be able to show enough earnings to tap into that equity

Invest with friends/family/strangers

Got friends or family members who like the idea of property investment too? You could pool resources with them and invest together.

If I could make this section flash in bright red text and have a siren going off while you read it, I would: getting money involved in a relationship is a great way to ruin it.

If you do decide to invest with someone you know, make sure you’re 100% aligned in what you want to achieve. Discuss what you want to do, how you’ll do it, everything that could go wrong, and what you’ll do in each of those scenarios. Plan what will happen if someone wants to sell and the other doesn’t – or one person needs their money back unexpectedly. Talk about everything, and get it all down in writing.

You could also invest with strangers – or rather, people you meet specifically for the purpose of doing property deals together. This only really works if you’ve got something other than money to bring to the party – like construction experience, or access to a source of unusually good deals.

Let me break out the warning klaxons again: investing with someone you don’t know well is extremely dangerous, and you should research them to death before committing – as well as getting every last detail of the agreement in writing.

Start a business

If you don’t have equity in your house or wealthy family and friends – and aggressive saving isn’t going to get you there as quickly as you’d like – you’ll need to find ways to make more money.

Starting a business is unlikely to be the “instant gratification” option, because it usually takes a couple of years to really get to grips with any business and start making reliable money. But if you’ve got the time and will to do it alongside your normal job, any profit you make is extra money that can all go towards your property investments.

Doubly-beneficial could be starting a business in property. For example, say you start a property sourcing business – finding discounted property deals and selling them on to other investors for a fee. This is far easier said than done and will involve lots of drive, commitment and time before it starts working, but if it does work it ticks every box: you’re earning money, developing the same skills you’ll need to invest yourself, and building your network at the same time.

There are plenty of other businesses you could start around property too – like construction, inspections, estate agency, letting agency, photography, developing software, project management…your only limit is your imagination.

~ ~

Short of engaging in fraud or heading to the casino, those are all the ways I can think of to raise the cash to invest in property. Have I forgotten any? Let me know!

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How an HMO landlord harnesses his “core competency” to avoid tenant dramas http://www.propertygeek.net/self-manage-hmo/ http://www.propertygeek.net/self-manage-hmo/#respond Wed, 12 Apr 2017 07:00:00 +0000 http://www.propertygeek.net/?p=3800 (Want to get each episode sent automatically to your phone or iPod? Click here to learn how to subscribe.) My guest this week, Tom Charrier, didn’t intend to have anything to do with managing his properties when he started out – but after one awful experience, he decided to take matters back into his own […]

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(Want to get each episode sent automatically to your phone or iPod? Click here to learn how to subscribe.)

My guest this week, Tom Charrier, didn’t intend to have anything to do with managing his properties when he started out – but after one awful experience, he decided to take matters back into his own hands.

Now, he and his wife manage their small portfolio of HMOs themselves – and consider their ability to pick the right tenants and build strong relationships to be the biggest strength in their business.

Listen to this week’s show and hear:

  • The experience that put Tom off from ever working with a letting agent again…
  • …and how he could easily have avoided it
  • The clever marketing Tom does to find his tenants
  • Why Tom finds it so essential to do his own viewings – and the thoroughly bizarre experience that confirmed it!
  • The checklist he uses to make sure things go right, every time
  • The advice Tom would give to someone else who’s planning to self-manage

Links for this weeks episode:

Tom’s blog, Living Space
Tom’s website for his properties, Fat Properties
Jeff Bezos’ biography, The Everything Store

Thanks for listening!

If you enjoyed the show, could you help me out? I’d love it if you could tell a friend about The Property Geek podcast – you can use the buttons below to share it by email, Facebook or Twitter.

You can also leave an honest review on iTunes. Every review helps move the podcast up the rankings for others to find, so you’ll be doing me a big favour.

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http://www.propertygeek.net/self-manage-hmo/feed/ 0 (Want to get each episode sent automatically to your phone or iPod? Click here to learn how to subscribe.) My guest this week, Tom Charrier, didn’t intend to have anything to do with managing his properties when he started out – but after one awful exp... My guest this week, Tom Charrier, didn't intend to have anything to do with managing his properties when he started out – but after one awful experience, he decided to take matters back into his own hands.<br /> <br /> Now, he and his wife manage their small portfolio of HMOs themselves – and consider their ability to pick the right tenants and build strong relationships to be the biggest strength in their business.<br /> <br /> Listen to this week’s show and hear:<br /> <br /> *The experience that put Tom off from ever working with a letting agent again...<br /> *...and how he could easily have avoided it<br /> *The clever marketing Tom does to find his tenants<br /> *Why Tom finds it so essential to do his own viewings - and the thoroughly bizarre experience that confirmed it!<br /> *The checklist he uses to make sure things go right, every time<br /> *The advice Tom would give to someone else who's planning to self-manage<br /> <br /> <br /> Property Geek clean 31:27
Mortgages for limited companies: what property investors need to know http://www.propertygeek.net/mortgages-limited-companies-property-investors-need-know/ http://www.propertygeek.net/mortgages-limited-companies-property-investors-need-know/#respond Tue, 11 Apr 2017 14:02:02 +0000 http://www.propertygeek.net/?p=3796 For reasons I’ve covered extensively elsewhere (largely boiling down to “tax”), more and more investors are deciding to buy properties within a company. See: When is it right to buy a property in a limited company Buying property through a company: yes or no? Individual or company: a rule of thumb Many of these investors […]

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For reasons I’ve covered extensively elsewhere (largely boiling down to “tax”), more and more investors are deciding to buy properties within a company.

See:

Many of these investors want to use a mortgage to buy the property – and this is where lots of confusion and misunderstandings kick in. While you’ll need a mortgage broker to take you through the finer points of what’s available, in this article I’ll set out the main “structural” issues that often confuse investors looking into this for the first time…

Trading company v SPV

For our purposes, a “trading company” is one that has a primary activity other than owning property. For example, a manufacturing company might buy the building it operates from, or an IT contractor (who’s set herself up as a limited company) might buy a residential property with cash that’s built up within the business.

An “SPV” is a company that only exists for the purpose of holding a property. For example, I might set up a company called “RobProp Ltd” and have that company buy a house. The company doesn’t conduct any business activity at all – it just holds the property, has rent coming in and expenses going out. The SPV might hold one property, or over time more properties might be bought and held in the same company.

Both a trading company and an SPV are limited companies – and other than this distinction of convenience (which is my own, and isn’t used by HMRC or anyone else), there’s no difference between them. You register the company in exactly the same way in both cases, and there’s nothing special you need to do to make a company an SPV or not.

So it’s not really a “true” distinction, but it is useful for understanding some key points when it comes to limited company mortgages.

How lenders see the difference

If a trading company wants to buy a property with a mortgage, the lender will need to look at the performance of the company. How strong is its balance sheet? What are its outgoings? What projections is it making for the coming years? That’s because if the primary activity of the company suffers (for example, the manufacturing company loses its biggest client) it might be unable to make its mortgage payments – or could even go bust.

For an SPV, none of this matters: all it does is hold the property, so there’s no risk from its primary activity running into difficulties. But there’s another challenge: the company has no financial standing at all, because (if it’s buying its first property) it doesn’t do anything yet.

The role of the directors

In both cases, a lender will normally take a personal guarantee from each company director. This just means that if the company ceases trading or is unable to pay its debts, the lender can pursue the directors personally for the money owing: you can’t just say “oh sorry, the company failed” and expect the debt to be written off.

This is particularly important in the case of an SPV (especially a new one), because the company doesn’t have any ability outside of property to generate cash to pay its obligations. It’s therefore the ability of the directors to pay their debts, rather than the company, that matters to the lender. We’ll come back to this shortly…

How long must the company have been running for?

There’s a common misconception that a company needs to have been trading for a certain number of years in order to get a mortgage.

If a company wanted to get a business loan (for example, a manufacturing company wanted a loan to buy a new machine to increase production), this would be true. But for mortgages for SPVs, this isn’t the case: you could set up an SPV today, and apply for a mortgage tomorrow. (Actually, you could even apply for the mortgage before the company exists at all.)

This is because – again – the company isn’t really relevant here: it’s all about the directors.

So, where this leads us is…

To summarise, for the majority of investors who are thinking about using a limited company to invest through (primarily for the tax advantages), the situation is:

  • Your company doesn’t need to have been trading for any length of time: you can set up a company online now for £20, and use it to apply for a mortgage now.
  • You, as director, are what matters. The lender will want to see that you can meet your obligations – by looking at your job, income, credit history etc – in exactly the same way as they would if you were taking out the mortgage in your own name.
  • You will be asked to give a personal guarantee – meaning that you’re personally on the hook for the company’s debt.

You can think about it as a “pseudo personal” mortgage. The company takes out the mortgage, but the company isn’t actually all that relevant: it’s all about you.

What if I already have a trading company?

Say you’re an IT contractor operating as a limited company. Should you use that company to buy property?

You should take advice from an accountant – which I’m absolutely not – on this point, but in terms of mortgages it’ll be simpler to set up a new company to buy the property (an SPV). It means that the lender won’t have to get to grips with the performance of your existing business, and it maintains a separation in case anything goes wrong in either business.

What about getting the money into this new company to serve as a deposit? Again, I’m not an accountant and this isn’t advice, but investors often find it useful to make an inter-company loan: so the trading company lends the deposit to the new company, to save the director needing to draw the money out personally then put it into the new company.

How does the process of getting a mortgage for an SPV differ from an individual?

Really, not much: because again, it’s a pseudo-personal mortgage anyway. There are a few points you’ll need to consider though:

  • The lender will tend to charge a higher arrangement fee, because they’ve got more paperwork to look at: there’s now you and the company to consider.
  • Your solicitor will generally charge more for the purchase too. They’ll need to check the company’s articles of association and prepare board minutes, which is straightforward but extra work nonetheless.
  • You’ll generally be required to obtain independent legal advice about the personal guarantee you need to give. This means that another solicitor (who isn’t acting for you in the purchase) makes sure you understand what you’re guaranteeing, and watches you sign. For the lender, this means you won’t be able to wriggle out of it later by saying you didn’t understand what you were signing – and for you, it can mean extra expense in paying for this extra appointment with a solicitor.

What is the mortgage market like for limited companies?

It’s improving all the time. Because so many investors are going down this path as a result of the tax incentives, lenders are increasingly offering limited company mortgages so they can win investors’ business.

However, at the moment there isn’t as much of a range – and therefore rates are higher to reflect the lack of competition, and fees are higher due to the extra work involved.

You’ll also need to consider that limited company lending can be particularly limited for more “niche” investments. For example, say there are six lenders in the whole market who will lend against properties that cost less than £50,000. If four of these lenders don’t offer loans to limited companies, you’ve now only got two to choose from.

~ ~

So there you go: you should use a broker to fill in the finer details, but that’s the gist of getting a mortgage for a limited company. It’s a bit more expensive and a bit more complicated, but there’s nothing magically different about it – it’s just a case of weighing up the tax (and other) advantages against the disadvantages, and choosing what works best for you.

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How to self-manage – from another country http://www.propertygeek.net/self-manage-another-country/ http://www.propertygeek.net/self-manage-another-country/#respond Wed, 05 Apr 2017 07:00:14 +0000 http://www.propertygeek.net/?p=3775 (Want to get each episode sent automatically to your phone or iPod? Click here to learn how to subscribe.) Self-managing can be tough. Self-managing HMOs can be really tough. So, self-managing HMOs from abroad…surely that’s not a good idea? Well, my guest this week Richard Dyke makes it work – managing his portfolio (including a […]

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(Want to get each episode sent automatically to your phone or iPod? Click here to learn how to subscribe.)

Self-managing can be tough. Self-managing HMOs can be really tough. So, self-managing HMOs from abroad…surely that’s not a good idea?

Well, my guest this week Richard Dyke makes it work – managing his portfolio (including a couple of small multi-lets) from Bergen in Norway. Richard visits several times a year for inspections and maintenance, and has all sorts of little hacks in place to make sure the distance isn’t too much of a challenge.

Listen to this week’s show and learn:

  • How Richard came to be managing his properties from such a distance
  • Why using a letting agent originally wasn’t an option for him
  • How he finds his tenants
  • How he uses his existing tenants as unpaid letting agents!
  • The most challenging situation he’s faced as a landlord
  • The advice Richard would offer to other landlords looking to do it themselves

Thanks for listening!

If you enjoyed the show, could you help me out? I’d love it if you could tell a friend about The Property Geek podcast – you can use the buttons below to share it by email, Facebook or Twitter.

You can also leave an honest review on iTunes. Every review helps move the podcast up the rankings for others to find, so you’ll be doing me a big favour.

The post How to self-manage – from another country appeared first on Property Geek.

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http://www.propertygeek.net/self-manage-another-country/feed/ 0 (Want to get each episode sent automatically to your phone or iPod? Click here to learn how to subscribe.) Self-managing can be tough. Self-managing HMOs can be really tough. So, self-managing HMOs from abroad…surely that’s not a good idea? Well, Self-managing can be tough. Self-managing HMOs can be really tough. So, self-managing HMOs from abroad...surely that's not a good idea?<br /> <br /> Well, my guest this week Richard Dyke makes it work – managing his portfolio (including a couple of small multi-lets) from Bergen in Norway. Richard visits several times a year for inspections and maintenance, and has all sorts of little hacks in place to make sure the distance isn't too much of a challenge.<br /> <br /> Listen to this week’s show and learn:<br /> <br /> *How Richard came to be managing his properties from such a distance<br /> *Why using a letting agent originally wasn't an option for him<br /> *How he finds his tenants<br /> *How he uses his existing tenants as unpaid letting agents!<br /> *The most challenging situation he's faced as a landlord<br /> *The advice Richard would offer to other landlords looking to do it themselves Property Geek clean 29:49
Getting up-to-date with the ever-changing world of lettings http://www.propertygeek.net/new-lettings-legislation/ http://www.propertygeek.net/new-lettings-legislation/#respond Wed, 29 Mar 2017 07:00:59 +0000 http://www.propertygeek.net/?p=3676 (Want to get each episode sent automatically to your phone or iPod? Click here to learn how to subscribe.) This episode kicks off a new series about lettings and management: not the glamorous part of property that it’s easy to pack out seminars about, but the very important bit that makes sure your investment runs […]

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(Want to get each episode sent automatically to your phone or iPod? Click here to learn how to subscribe.)

This episode kicks off a new series about lettings and management: not the glamorous part of property that it’s easy to pack out seminars about, but the very important bit that makes sure your investment runs profitably, smoothly and legally.

To get the series started I’m joined by Joanne Dron – a landlady of 13 years and a letting agent too – to run through some of the recent and upcoming changes that should be on your radar. Many of them have been poorly publicised – so it’s well worth taking half an hour to make sure you’re up to speed on everything that could land you in hot water if you’re not paying attention…

Listen to this week’s show and learn:

  • The most common mistakes that self-managing landlords make
  • Why taking properties back from agents could be a false economy
  • The actions you need to take to make sure your “easy” eviction isn’t challenged in court
  • What you need to do to cover yourself when it comes to repairs
  • What the rise of property licensing means for landlords
  • The proposals for HMO licensing, and their likely effects
  • What Joanne recommends you do today to make sure your tenancy continues to run smoothly

Thanks for listening!

If you enjoyed the show, could you help me out? I’d love it if you could tell a friend about The Property Geek podcast – you can use the buttons below to share it by email, Facebook or Twitter.

You can also leave an honest review on iTunes. Every review helps move the podcast up the rankings for others to find, so you’ll be doing me a big favour.

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http://www.propertygeek.net/new-lettings-legislation/feed/ 0 (Want to get each episode sent automatically to your phone or iPod? Click here to learn how to subscribe.) This episode kicks off a new series about lettings and management: not the glamorous part of property that it’s easy to pack out seminars about, This episode kicks off a new series about lettings and management: not the glamorous part of property that it's easy to pack out seminars about, but the very important bit that makes sure your investment runs profitably, smoothly and legally.<br /> <br /> To get the series started I'm joined by Joanne Dron – a landlady of 13 years and a letting agent too – to run through some of the recent and upcoming changes that should be on your radar. Many of them have been poorly publicised – so it's well worth taking half an hour to make sure you're up to speed on everything that could land you in hot water if you're not paying attention...<br /> <br /> Listen to this week’s show and learn:<br /> <br /> * The most common mistakes that self-managing landlords make<br /> * Why taking properties back from agents could be a false economy<br /> * The actions you need to take to make sure your "easy" eviction isn't challenged in court<br /> * What you need to do to cover yourself when it comes to repairs<br /> * What the rise of property licensing means for landlords<br /> * The proposals for HMO licensing, and their likely effects<br /> * What Joanne recommends you do today to make sure your tenancy continues to run smoothly<br /> Property Geek clean 37:48
Are these terms in your tenancy agreement? Maybe they should be… http://www.propertygeek.net/tenancy-agreement-useful-terms/ http://www.propertygeek.net/tenancy-agreement-useful-terms/#respond Mon, 27 Mar 2017 18:26:22 +0000 http://www.propertygeek.net/?p=3761 A tenancy agreement is both an important legal document and a “manual” for how a tenancy will run – setting out what each person should do in just about every situation you can imagine. Pretty important, then. All too often though, landlords will just download the first template they find on the internet and thrust […]

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A tenancy agreement is both an important legal document and a “manual” for how a tenancy will run – setting out what each person should do in just about every situation you can imagine. Pretty important, then.

All too often though, landlords will just download the first template they find on the internet and thrust it in front of the tenant to sign without reading it properly themselves. This is dangerous, and a wasted opportunity – because a well-drafted agreement can make your life easier in ways you can’t even imagine.

While putting together my book, How To Be A Landlord (coming out on 26 April 2017), I asked more than 50 investors for their advice – and some of them mentioned clauses they had in their tenancy agreements that I thought were absolutely brilliant. We’re actually updating the agreement we use at Yellow Lettings – which I thought was pretty bulletproof – as a result.

So, let’s get seriously geeky and take a look at some clauses you might find it useful to include…

Service of documents by email

It will make your life substantially easier if you have the option of sending documents (such as those relating to the deposit) by email. But be aware that you’ll need a clause expressly saying that the tenant consents to receiving communication by email – otherwise they could argue in court that the documents hadn’t been validly served.

Even with this clause in place, you should still serve notice to end the tenancy by post.

Late rent

Rent is far more likely to be paid on time when there are consequences for it being late. A late rent clause can’t be what would be considered an “unfair term” ( such as “The tenant will pay the landlord one trillion pounds if the rent isn’t paid on the day it’s due”), but you can charge a reasonable rate of interest on overdue rent as long as you say in the tenancy agreement that you will.

Tenants’ contents insurance

If a tenant has their own contents insurance, they’ll be covered for moving into emergency accommodation in the event of a fire or flood. It also means that if the tenant blames a tradesperson for breaking or stealing something, you can advise them to make a police report and claim on their insurance.

As a result, you could stay out of the way of multiple problems if you make it a condition of your tenancy agreement that the tenant has a policy in place.

Pets

You don’t have to let tenants keep pets. But if you’re happy for them to do so, insert a clause with the pet’s name, type of animal and breed, and say that no other animals may be kept without permission. This makes sure that they can’t seek permission for a goldfish and open a small petting zoo in the living room.

Are you really going to insist that the tenant contacts you to amend the tenancy agreement when they find poor Jaws floating on the surface and rush out to the fair to win Nemo before the kids notice and get upset? No, you’re not – but for more furry and bitey animals it’s important to get specific about what you’ve agreed to.

Pests

You can’t palm off all pest problems on tenants: if the pests were present at the start of the tenancy or the infestation is a result of a structural defect, it’s your responsibility whatever the tenancy agreement says.

But it’s handy to include a clause that says that in any other situation, pests are the tenant’s responsibility to deal with. Pest control is expensive, and you don’t want to bear the cost of removing critters that were attracted by a tenant’s messy use of the property.

Informing third parties

There’ll be lots of situations where it comes in handy to have a clause that allows you to contact and provide information to third parties.

A common one is dealing with utility bills that were left unpaid, where you might want to provide a forwarding address to the company. You might also want to provide the tenant’s details to a tradesperson, so you don’t have to pass messages back and forth when trying to arrange a safety check or a maintenance job.

This clause is also important when dealing with tenants on housing benefit, where you may need to correspond with the council about unpaid benefits that they owe you.

Access for viewings

If you want to significantly cut down on gaps between tenants, you’ll want to get access to carry out viewings while the existing tenants are still living there.

This is a pain for tenants so they won’t always play ball, but your hand will be strengthened by adding a clause stating that tenants will give access for viewings at reasonable times upon receiving at least 24 hours’ notice.

You’re not realistically going to start ranting and raving about breach of contract if they refuse viewings, but it sets out your expectations and might make a difference if you gently remind them about the clause when they’re not being overly helpful.

This post has been abridged and adapted from my book, How To Be A Landlord – released on 26 April 2017. Find it on Amazon once it’s out!

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Series wrap-up: The essential elements of turning pro in property (plus: what’s coming up in the next series) http://www.propertygeek.net/series-wrap-essential-elements-turning-pro-property-plus-whats-coming-next-series/ http://www.propertygeek.net/series-wrap-essential-elements-turning-pro-property-plus-whats-coming-next-series/#respond Wed, 22 Mar 2017 07:00:21 +0000 http://www.propertygeek.net/?p=3755 (Want to get each episode sent automatically to your phone or iPod? Click here to learn how to subscribe.) In this series of the podcast we’ve been looking at “turning pro” – how to embrace the mindset of a professional investor, so you can continue to thrive despite the more challenging conditions for property investors. […]

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(Want to get each episode sent automatically to your phone or iPod? Click here to learn how to subscribe.)

In this series of the podcast we’ve been looking at “turning pro” – how to embrace the mindset of a professional investor, so you can continue to thrive despite the more challenging conditions for property investors.

During this quick series wrap-up episode I revisit the major themes we’ve covered, draw some lessons we can take from what we’ve heard, and look ahead to what’s coming up in the next series.

Listen to this week’s show and learn:

  • Why I’ve put such an emphasis on investing away from home in this series
  • What we can learn from all my guests who’ve recently made changes to their strategies
  • The key ingredients to embracing a “professional” mindset
  • My main takeaways from this series
  • What topic we’re going to be covering in the next series

I also reveal the name of my new book, which is coming out in the next couple of months!

And if you’d like to explore some of the ideas from this series in more depth – along with a step-by-step journey through everything you need to know to invest in property – check out my book: The Complete Guide To Property Investment

Thanks for listening!

If you enjoyed the show, could you help me out? I’d love it if you could tell a friend about The Property Geek podcast – you can use the buttons below to share it by email, Facebook or Twitter.

You can also leave an honest review on iTunes. Every review helps move the podcast up the rankings for others to find, so you’ll be doing me a big favour.

The post Series wrap-up: The essential elements of turning pro in property (plus: what’s coming up in the next series) appeared first on Property Geek.

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http://www.propertygeek.net/series-wrap-essential-elements-turning-pro-property-plus-whats-coming-next-series/feed/ 0 (Want to get each episode sent automatically to your phone or iPod? Click here to learn how to subscribe.) In this series of the podcast we’ve been looking at “turning pro” – how to embrace the mindset of a professional investor, In this series of the podcast we've been looking at "turning pro" – how to embrace the mindset of a professional investor, so you can continue to thrive despite the more challenging conditions for property investors.<br /> <br /> During this quick series wrap-up episode I revisit the major themes we've covered, draw some lessons we can take from what we've heard, and look ahead to what's coming up in the next series.<br /> <br /> Listen to this week’s show and learn:<br /> <br /> *Why I've put such an emphasis on investing away from home in this series<br /> *What we can learn from all my guests who've recently made changes to their strategies<br /> *The key ingredients to embracing a "professional" mindset<br /> *My main takeaways from this series<br /> *What topic we're going to be covering in the next series Property Geek clean 12:53
An investor with over 300 properties shares the difference between an amateur and a professional http://www.propertygeek.net/investor-300-properties-shares-difference-amateur-professional/ http://www.propertygeek.net/investor-300-properties-shares-difference-amateur-professional/#respond Tue, 14 Mar 2017 07:00:46 +0000 http://www.propertygeek.net/?p=3746 (Want to get each episode sent automatically to your phone or iPod? Click here to learn how to subscribe.) The theme of this series has been “turning pro” – so what better way to wrap it up than to speak to someone who’s been a professional trader and investor for over 30 years? Jonathan Schuman […]

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(Want to get each episode sent automatically to your phone or iPod? Click here to learn how to subscribe.)

The theme of this series has been “turning pro” – so what better way to wrap it up than to speak to someone who’s been a professional trader and investor for over 30 years?

Jonathan Schuman holds around 300 commercial and residential properties, and has his own private “agency” to manage them. When the credit crunch hit, Jonathan was perfectly positioned with his contacts and knowledge to profit while everyone else was panicking – and he took bold action to seize the opportunity and rapidly scale his portfolio.

Our conversation touches on the property cycle, what constitutes a “deal”, and where the opportunities are in today’s market. Prepare to feel in equal parts inspired and inadequate…

Listen to this week’s show and learn:

  • Why Jonathan aggressively expanded his portfolio after the last crash, while everyone else was selling
  • How he managed to find funding for his purchases, at a time when nobody else could
  • The properties he targeted to make sure he got really spectacular discounts
  • How Jonathan has shifted what he’s buying in response to a changing market
  • What he considers a “good deal”
  • How he sources the type of deal he’s looking for
  • What he considers the dividing line between an amateur and a professional
  • The best and worst deals he’s done over the last 30 years
  • Where he sees the opportunities as being in the current market
  • What he’d do if he was starting again today

Contact this week’s guest

You can email Jonathan via jonathan@magnetproperties.co.uk

Thanks for listening!

If you enjoyed the show, could you help me out? I’d love it if you could tell a friend about The Property Geek podcast – you can use the buttons below to share it by email, Facebook or Twitter.

You can also leave an honest review on iTunes. Every review helps move the podcast up the rankings for others to find, so you’ll be doing me a big favour.

The post An investor with over 300 properties shares the difference between an amateur and a professional appeared first on Property Geek.

]]>
http://www.propertygeek.net/investor-300-properties-shares-difference-amateur-professional/feed/ 0 (Want to get each episode sent automatically to your phone or iPod? Click here to learn how to subscribe.) The theme of this series has been “turning pro” – so what better way to wrap it up than to speak to someone who’s been a professional trader and ... The theme of this series has been "turning pro" – so what better way to wrap it up than to speak to someone who's been a professional trader and investor for over 30 years?<br /> <br /> Jonathan Schuman holds around 300 commercial and residential properties, and has his own private "agency" to manage them. When the credit crunch hit, Jonathan was perfectly positioned with his contacts and knowledge to profit while everyone else was panicking – and he took bold action to seize the opportunity and rapidly scale his portfolio.<br /> <br /> Our conversation touches on the property cycle, what constitutes a "deal", and where the opportunities are in today's market. Prepare to feel in equal parts inspired and inadequate...<br /> <br /> Listen to this week’s show and learn:<br /> <br /> *Why Jonathan aggressively expanded his portfolio after the last crash, while everyone else was selling<br /> *How he managed to find funding for his purchases, at a time when nobody else could<br /> *The properties he targeted to make sure he got really spectacular discounts<br /> *How Jonathan has shifted what he's buying in response to a changing market<br /> *What he considers a "good deal"<br /> *How he sources the type of deal he's looking for<br /> *What he considers the dividing line between an amateur and a professional<br /> *The best and worst deals he's done over the last 30 years<br /> *Where he sees the opportunities as being in the current market<br /> *What he'd do if he was starting again today Property Geek clean 36:18
What determines rents and house prices? http://www.propertygeek.net/what-determines-rents-house-prices/ http://www.propertygeek.net/what-determines-rents-house-prices/#respond Mon, 13 Mar 2017 09:32:28 +0000 http://www.propertygeek.net/?p=3739 This article originally appeared in Issue 6 of The Property Hub Magazine. When it comes to house prices and rent levels, everyone has an opinion. But given the number of column inches and dinner party conversations devoted to the subject, it’s surprising how little thought most people dedicate to why things are they way they […]

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This article originally appeared in Issue 6 of The Property Hub Magazine.

When it comes to house prices and rent levels, everyone has an opinion. But given the number of column inches and dinner party conversations devoted to the subject, it’s surprising how little thought most people dedicate to why things are they way they are – and for evidence to support their assertions about what might happen next. Vague ideas about “not enough houses” and “greedy landlords” are often trotted out – and while both of those play some part, the true picture is a little more complicated.

As part of the annual renewal of my geek badge, I’ve given some thought recently to why prices and rents move as they do. Although the model I’ve built in my head is incomplete, untestable and likely inaccurate in places, I still think it has value – as a more reasoned approach than decision-making based on dogma or hearsay – even if I can’t tell you exactly what’s going to happen and when.

What determines rents

Contrary to popular/media belief, rents aren’t set by landlords on a whim – and with thousands of individual owners making up the property market in each town, they can’t act as a cartel. In reality, market rents are determined by two main factors: local wage levels, and the balance of supply and demand.

Local wage levels are important because they determine the practical maximum the average person can afford to pay in rent and still have enough left over to pay their other bills: if the average wage in a town is £1,500 per month, you’re not going to get many takers for a luxury one-bedroom flat priced at £1,250 per month. In another town with an average wage of £3,000 per month, it’d be a different story.

The common recommendation is that only 30% of an individual’s disposable income should be taken up by rent, so if supply and demand are in balance, we might expect rents to settle somewhere around this level. Perhaps surprisingly, this is the case in much of England and Wales.

But when demand exceeds supply, prices get pushed up. If you imagine two people chasing one house, it’s easy to see why this happens: the landlord would be acting rationally if she increased rent to the point at which one person is forced to walk away. This is what’s happening in London, where some studies suggest that nearly 70% of take-home pay is taken up by rent.

So as a rule, rents tend not to swing wildly: they rise and fall in line with wages, unless something in the local economy causes people to move in or out in droves.

The same, however, can’t be said for house prices…

What determines house prices?

House prices are driven by three main factors: rent levels, the cost and availability of borrowing, and expectations of future price changes.

For owner-occupiers, rents and the cost of borrowing are the primary factors in the decision about whether to buy. It’s pretty simple: if the mortgage payments aren’t much higher than what they’d pay in rent, they’re likely to buy. This also explains how house prices can rise in spite of stagnant wages (and therefore rents), when cheaper financing is available.

For investors, the same factors (rents and interest rates) are at play. Let’s say an investor is willing to buy a house as long as they can earn a 5% annual return over and above their mortgage costs. We’ll also assume that they borrow 75% of the purchase price, and the annual rent is £7,000.

In this scenario, if the investor is borrowing at a rate of 6%, they would be willing to pay £68,000 for the house: I won’t bore you with the maths, but this is the price at which they would still make a 5% return on their money after paying their mortgage. But if the cost of borrowing was 3% rather than 6%, they would be willing to pay £120,000 for the same house: the lower mortgage payments mean they’ll make exactly the same percentage return on their investment, even when paying more.

If rents increased rather than borrowing costs falling, we’d see the same effect. Following this example along and imagining that the rent rose from £7,000 to £9,000 (and the cost of borrowing was still 3%), an investor would then be able to pay £156,500 for the house and still make the same 5% return on their money.

This is extremely simplified, of course (it doesn’t factor in running costs, the availability of mortgages and many other things), but it does show that house prices aren’t random: they’re driven by rents and interest rates.

Another factor that injects a sizeable dose of unpredictability into the system is the influence of individuals’ expectations of future price changes. Investors may be willing to accept a lower return on their investment if they believe that the capital value of the house is likely to increase. Homeowners, too, are more likely to stretch themselves in terms of repayments and scrape together bigger deposits if they think they’ll be “left behind” by price rises. When these expectations become extreme, bubbles form: people are willing to buy based on no return at all (or even a negative return), purely because they think prices will rise further.

What does this tell us?

Depending on your tolerance for economic theory, this might have all bored you senseless, but there is a point: understanding what drives prices can help us to make better investment decisions.

Firstly, it tells us what would need to happen in order for house prices to collapse: we’d need a major change in the supply/demand balance (affecting rents), an increase in the cost of borrowing or reduction of mortgage availability, or a change in sentiment. None of these factors is easy to predict, but – barring government intervention to restrict borrowing – it seems likely that conditions that support high property prices will remain in place for quite a while yet.

Importantly, it also tells us that prices can’t just go up indefinitely. There comes a point when borrowing can’t get any cheaper, expectations can’t get any more bullish, and people can’t afford to pay any more of their income as rent. To me, this looks a lot like London in 2016.

Analysing what drives prices can also give us clues about where to buy…

Is that all there is to it?

Because I’m simultaneously greedy and tight-fisted, I want high yields and a high probability of prices increasing when I invest. Looking at the underlying causes of price movement allows us to focus on where these factors are most likely to be in place.

Finding areas with high yields is pretty easy, but in many cases they’re high because prices are held down by lack of buyer demand. This is the case in parts of the North East: you can buy and collect a good return, but there’s little prospect of prices increasing.

For there to be the prospect of price increases too, we need to look for additional characteristics:

  • Rents not being too stretched in relation to incomes
  • Potential for local wage growth
  • Factors that might increase demand relative to supply (such as new employers)

For reasons we’ve already seen, these factors will push up both rents and the prices that owner-occupiers are willing to pay. They will also attract more investors into the market, putting further pressure on prices.

Cautious optimism

Having gone through a whole load of maths and economics, we’ve reached some thoroughly non-astonishing conclusions: steer clear of areas where there’s little room for rents (and therefore prices) to grow, and opt for places with strong fundamentals paired with relatively high yields. But while none of this will come as a great revelation, it can help you to stick to your guns and unearth promising areas when you know why (as an investor focused on a blend of growth and income) you probably don’t want to be buying in Hammersmith or Hartlepool right now.

It should also give you confidence that – while measures like a piece of government legislation could throw a spanner in the works at any time – the outlook is promising. Interest rates are low, banks are keen to lend, and in much (but certainly not all) of the country there’s a lot of room for prices to grow.

There’s undeniably going to be a bust at some point, and it’s likely to be a big one. But right now, it seems a fair way off – and by keeping an eye on the underlying factors, you’ll be better able to see it coming.

This article originally appeared in Issue 6 of The Property Hub Magazine.

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