Rental Valuations - it's a strategy! Find out why less is more...

Your rental valuation strategy should be all about not aiming too high. You don't want to ask for too much monthly rental income. "What?!" I hear you cry. It's true! In this game, less is more. Much more sometimes - possibly several hundred if not a few thousand pounds more over the course of several years. Read on and find out why.

2016 has been a really interesting year so far - and it's only February. But with SDLT changes happening in April we are seeing a flurry of activity and requests for rental valuations of prospective rental properties. Some of these requests are coming from new landlords who are keen to make their first property investment before April. We're also getting a good run of interest from experienced landlords who are reconfiguring their investments and portfolios. Proudhouse Property Management are possibly the leading independent rental specialists in Yeovil and South Somerset. The stats from Zoopla show that for house rentals, Proudhouse is currently 4th with only multiple-office and sales-led businesses taking the top 3 places.

Stats from Zoopla, market share, Feb 2016, Houses, BA20, BA21, DT9 Postcodes

As a dedicated rental specialist it is important to us that we advise our clients fairly, and also correctly manage their expectations. Which is why we're finding it disappointing to engage with a few new landlords whose expectations of rental income have been completely mismanaged - usually because some over-zealous sales agent, or developer, has plucked a sky-high rental figure out of the air as a way of incentivising their buyers. Or sometimes a new landlord has, unfortunately, made some comparisons to other rental properties without factoring in all aspects which has distorted their expectations.

However, there is a big difference between the experienced landlord and the newcomer!  

The experienced landlords all have something in common. They understand one key concept which is really simple: Void periods! (Voids are periods when the property is unoccupied) These landlords will usually say to me, "Chris, I'd rather the house was let than standing empty". Well that sounds like a no-brainer but experienced landlords are willing to drop their price-per-calendar-month expectations - and that is how they secure a better overall income within any given year. Example:

Landlord 1
Has a well presented but average 3 bedroom house which is valued ambitiously at £800pcm. It goes on the market on April 6th 2016. Interest is luke warm as most tenants are looking in the price band £600 - £799. A month later a tenant secures the property, gives one month's notice on their current home, and then moves in at the end of May. This leads to a total of around £8000 paid in the 2016/17 financial year.

Landlord 2
Has an identical house in the same area but has valued it at £725 pcm and it also goes on the market on April 6th 2016. However, this property is valued in the middle of the target price band. It gets lots of interest. Heck, it's even better than some of the more expensive properties. 6 viewings are lined up in the first week and the landlord is spoilt for choice. A couple of the tenants are so keen that they offer to take the property immediately which the landlord agrees to. The house is rented by mid April. The total amount of rent received in the 2016/17 financial year is £8337. That's £337 more than landlord 1!

Now also bear these factors in mind:

1) Many tenancies only last 12 - 18 months so avoiding voids is essential over the years and over the course of several tenancies.

2) Lower asking prices will likely generate more interest and therefore more choice of tenants which in turn means better chances of a good match between tenant and property = happy tenant and happy landlord.

3) Tenants are less likely to leave a property where they think the rent is fair, where they're treated well and with no mandatory renewal fees or other ongoing agency expenses. This means, no void periods caused by needing to re-let.

But my property has a superb, premium, high-end interior? Surely that's worth more?

A great interior - will let your property quicker!

In South Somerset (and unlike a major city area), great interiors with high-end features can command a slightly higher asking price. But only slightly higher. The "going rate" is a powerful market force and the practicalities of space, room size and location are, more often than not, higher up on tenants' lists of priorities than premium fixtures and fittings. However, great interiors can be incorporated into your strategy! A great interior, coupled with an attractive rental value will let your property quicker! Time is money so use your premium property as a mechanism to avoid voids!


Summary
If you're deciding on rental valuation then think "average"! Think "less is more"! Avoid the voids! You will be better off in the long run. Be suspicious of any agent promising gloriously high price-per-calendar-month figures - they're just trying to win your business and are probably setting you up for a disappointment. 

By Chris Chambers
Owner at Proudhouse Property Management

Proudhouse manage properties throughout South Somerset and are are gaining a reputation for excellent customer service through a range of lettings and property services. Proudhouse are dedicated to property rentals and offer a first class personal and professional service. Proudhouse are not a sales office, franchise or part of a corporate chain.

Right To Rent... Bigger then Ben Hur

Right to Rent checks are now in force! This very important requirement of the Immigration Act has been causing much debate in the lettings industry and in various blogs, articles and magazines - however, there is no reason why complying with the requirement should not be fairly straightforward - anyone capable of making and keeping records (ie, any organised person or business) should find it fairly easy to comply but the phrase "Bigger than Ben Hur" springs to mind when I see some of the fuss that is being made. However, busy landlords may overlook this requirement at the tenant find stage and thus risk a big fine. Of course, a good agent, such as Proudhouse Property Management and Lettings, will take care of all this for you along with all the other administration required for setting up a tenancy.

So what's required?

For anyone who is not aware, there is now a requirement for landlords and/or agents to check the identity of tenants (and lodgers) and confirm they have a right to rent a property in the UK. This is for ALL tenants - even if it seems obvious that the tenants have a right to rent. Compliance can be achieved by checking and making a dated copy of an official ID document, within 28 days prior to a tenancy commencing - this record then needs storing. Verification is also to be made that the tenant intends to use the property as their main home. The aim of this blog article is to inform our readers and clients that we are setup and ready for this legislation. The actual requirements are detailed here:

www.gov.uk - Right To Rent

As it happens, we have always done this but we will now be formalising the arrangements in our Service Agreements.

For our existing clients we will contact you (when appropriate) to clarify and assign responsibility for conducting Right to Rent checks (for managed properties we'll do it for you, as will we for our tenant-find only clients).

For our clients who are self-managing and who arrange bespoke services through us then feel free to call us for free advice on your obligations.

For any other landlords out there then you need to be aware of this legislation and comply with it. You could be fined £3000 if you do not comply! We can also arrange one-off services for you and do these checks for you if you require. Feel free to contact us here for a friendly and free consultation.

By Chris Chambers
Owner of Proudhouse Property Management and Lettings.

Proudhouse manage properties throughout South Somerset and are are gaining a reputation for excellent customer service through a range of lettings and property services. Proudhouse are dedicated to property rentals and offer a first class personal and professional service. Proudhouse are not a sales office, franchise or part of a corporate chain.

Tenants - get the property you want. 10 top tips!

Tenants - get the property you want!

House hunting for rental properties can be very frustrating; demand is high and often houses are not on the market for very long. We often hear tenants saying they've been "looking for ages", or that the property they like won't accept pets or that agents are useless and never respond to queries etc. Well... some agents are useless actually but for the purposes of this article we'll concentrate on what you, the prospective tenant, can do. Finding your perfect home is a bit like finding your perfect job - in the same way that you need to get noticed by a potential employer then tenants need to get noticed by the agent. Follow these steps to give you the best possible chance of securing that perfect home.  

1) Keep watching the market - login every day and keep an eye on new listings. Use the well known portals such as OnTheMarket.com and Zoopla

 2) Be pro-active - target the properties you want and phone the agent direct - simply sending an email to an agent with some vague requirements will probably not work 

 3) Make sure the property is right for you before viewing! Ask plenty of questions over the phone - and be prepared to answer queries from the agent - the agent should want to know a little bit about you and who will be living in the property.

4) Don't view properties that are outside of your budget!! Understand the market you're  in and make sure you have a reasonable idea of the going rate for the type of property you're after. Also see point 10 below.

 5) Be friendly and easy going! Moving is a stressful situation and a good agent will understand this - furthermore, landlords can also find the prospect of new tenants stressful. A calm, measured, friendly and understanding approach will allow everyone to think clearly and negotiate the various requirements they each have. 

Don't delay - view as soon as you can!

6) View the property as soon as you can - the rental market place is fast-moving and waiting several days to view might mean you miss out. If you do have to wait then ask the agent if there is a deadline; often agents like to take several viewings and present several prospective tenants to the landlord and tenancies might not be offered on a first-come-first-served basis. 

7) At the viewing give feedback to the agent - if you like, love or hate the property then tell the agent, and if you like it, then ensure you know the next steps to take to start securing the property for you.
The best dog on the world.
8) Pets: if you have pets then tell the agent early on! Most landlords would prefer tenants without pets... and most tenants have pets! Every tenant thinks their pet is really well behaved and house-trained; the agent will have heard this a thousand times before! Instead, say that you are prepared to mitigate the risk through paying increased rent or a pet fee or signing a pet agreement etc. Perhaps offer to make professional cleaning of carpets or flea treatment etc a condition of the tenancy. You could also offer to restrict parts of the house (eg upstairs) to your pet.

Know the costs.
9) Money - know what the agent's fees are upfront and make sure they're reasonable. Be prepared to under go a credit check and if you have CCJs or adverse credit then this could seriously affect your chances; again, mitigate your risk - tell the agent early and perhaps offer a guarantor or 6 month's rent up front. 

10) The rental asking price: there is absolutely nothing wrong with making an offer below the listing price. However a good agent should have valued the property accurately relative to other comparable, local properties. Any offers significantly below the asking price are likely to be dismissed by the landlord - remember, there are a queue of tenants lining up to view the best properties! You may even want to offer more than the asking price if you are really keen! However, that is rare and not expected. 

Good Luck! Proudhouse Property Management are always happy to offer free advice to tenants as well as landlords. Feel free to call us 01935 388456.  

By Chris Chambers. Chris is the owner of Proudhouse Property Management and is based in Yeovil, Somerset, UK. 

Pension Or Property?

By Chris Chambers. Chris is the owner of Yeovil-based firm, Proudhouse Property Management. Chris is also an experienced landlord, and property developer, with his own portfolio of houses and flats in Cardiff and Yeovil. 

This article augments information provided at www.proudhouseproperty.co.uk

This article aims to provide information for our landlords, tenants and potential clients. All opinions are our own and do not constitute formal advice; none of the content is intended to form a contract or promise of services outside of our Service Agreement. Please feel free to browse these articles and use as an informative resource for lettings and property management. We would be delighted to discuss your needs in more detail; for Lettings in Yeovil, Sherborne, Somerset and Dorset please contact us on 01935 388456

Pension Or Property? 

Property rental as an alternative to an annuity?

This month pension rules will change - it will become easier for pension holders to draw cash out of their pension pots and it is anticipated that many people will use this opportunity to invest in property. If you're in this situation then you should be sure that you are taking the best financial decision based on your circumstances and tax situation; if in doubt then you should seek the advice of a financial or tax adviser.

Withdrawing money to invest in Property
The first 25% of a pension pot can be withdrawn tax free; the remainder can be withdrawn and you will be taxed at your marginal rate. So if you have a £400,000 pension pot then you can withdraw up to £100,000 tax free. The rest of this article will concentrate on how you could invest this money in property. If you have multiple income streams, or do not understand the tax implications then you should consult a financial adviser.

Investment Strategy
If you have never invested in property then you maybe wondering where to start; is property investment as simple as buying a house and renting it out? You may be thinking you want to buy a property outright, with no mortgage, and enjoy a monthly income of several hundred pounds a month. Perhaps you are considering a mortgage but don't know whether a repayment mortgage or an interest-only mortgage is best for you. Lets look at some examples based on a cash fund of £100,000 and an annual increase in value of 3%:

• A. Outright ownership: £100,000 should be enough to purchase, outright, a reasonably modern 2 bedroom flat. Advantages: 1) no mortgage therefore no mortgage fees/interest, 2) protection from changes in interest rates, 3) If you have the time, are local, and fully understand your role as landlord, then you could probably manage the property yourself. Disadvantages: 1) Bad tenants or empty periods will provide you with no income, 2) A poorly chosen property (ie not in demand by tenants) in the wrong area could leave you with no income, 3) We're assuming value will increase but it must be borne in mind that your capital is invested in one concentrated asset which could go down in value or, in extreme cases become worthless should an unforeseen event happen eg; subsidence, fire, etc. Value increase after 1 year: £3000

• B. £100,000 deposit on a large house: It's tempting to think bigger is better - £100,000 used as a 33% deposit on a 66% LTV mortgage of £300,000 could purchase a quality 4 bedroom house. Is this a better option than outright ownership as in example A? See the paragraph below on rental yield. Value increase after 1 year: £9000

How to spend money?

• C. 2 x £50,000 deposits on 2 flats at £100,000 each: Advantages: 1) As long as void (unoccupied) periods do not co-incide then some income, if not all, can be expected every month, 2) Better chance of protection from value decreases, 3) Capital gains could be made on 2 properties. Disadvantages: 1) Interest rates can change, 2) More management work. Value increase after 1 year: £6000

• D. 4 x £25,000 deposits on 4 flats at £100,000 each: This approach involves leverage of the £100,000 fund across several assets in the hope of increasing gains. This approach would put you into portfolio landlord territory. Advantages: 1) Good redundancy against void periods, 2) Good redundancy against price decreases (assuming the properties have been purchased in different locations), 3) Good chances of capital gains. Disadvantages: 1) Workload - you will almost certainly want to use the services of a managing agent and will incur their fee (of course, using a good agent, such as Proudhouse Property Management, will ensure you can sit back and enjoy your investments without the day-to-day burden!), 2) Mortgage fees and interest rates start to increase at high LTV, 3) High administration burden - even if you are using an agent, you will still need to be organised with administration and keep track of costs, fees, interest payments etc in order to take best advantage of allowable expenses in the context of tax and self-assessment. This applies to all of the examples, however, more properties requires more work. Value increase after 1 year: £12,000 

The above examples are very simplistic but I hope they show the broad strategies that could be followed. There are many, many more variables to take into account; ground rents, service charges, mortgage fees, arrangement fees, maintenance costs, insurance and not least rental income - on the subject of rental income you should have a basic knowledge of rental yield.

Rental Yield

It is useful to have some sort of financial reference to gauge how well a property rental is performing in terms of income versus investment. That reference is called rental yield. However, it is not as simple a calculation as some agents and advertisers would have you believe - calculation of a true rental yield needs to take account of running and maintenance costs and this can only be calculated once a property has been acquired and been let for a period over which the actual costs can be ascertained. However, a simple rental yield calculation for use as a very basic measure for comparing properties at the buying stage is:

(Annual rental income divide by purchase cost) multiplied by 100

So for example; a £100,000 flat will rent for £600 pcm

(600 x 12) / 100,000 = 0.72

0.72 x 100 = 7.2%

If you use an agent then ensure they
are ARLA registered.

The higher the percentage the better! Anything at 6% or above would be considered to be a good rental yield. However; do the calculation again but this time subtract agents fee, insurance costs, 1 month rent (assuming one void period), accountants fee, anticipated maintenance costs, gas safety check fee etc from the annual income. The percentage will be a lot lower! Bear this in mind at the purchase stage and use this method of rental yield calculation with caution.

But what about capital gains tax?

CGT is only payable when the equity is released - furthermore there is a £11,000 allowance before CGT taxation takes effect. And this is your pension plan - you're probably investing for the long term, or even until death! 

Give your property away! (and make a will)

Think about what will happen to your property when you die - one huge advantage of property over an annuity is that your children can inherit property. Take legal/tax advice on this but it may be that you can gift your property to a child and, as long as you don't pop your clogs inside 7 years, your children should not be liable for inheritance tax. You would not be able to claim any rental income if you did this. An alternative could be to part-gift to a child; annual part-gift increments could be managed in such a way that the value of the gift is below the recipients annual CGT allowance of £11,000. Part-gifting would mean you could still benefit from the property and receive rent.

Summary

Attempting an article on property investing in one blog post is pretty much impossible! There are whole books devoted to it - but I hope this has scratched the surface and provided some basic fundamentals. As an alternative to a pension, rental properties can be an excellent option. There is much research to be done - don't rush in; start looking early, get a feel for the market and feel free to approach us for a lettings consultation. We of course would be delighted to offer you advice which is completely free. We have an excellent lettings and property management service and would love to hear from you. 01935 38845

email: chris@proudhouseproperty.co.uk 

  

Who can you trust?

By Chris Chambers
30 Dec 2013

Would you entrust a cherished and valued item to someone that knows absolutely nothing about how to look after that item? Let's say it's a vintage car - you would want your chosen custodian to know when and where to take it for a service; how to top up the oil; make sure it is taxed and insured etc. You wouldn't dream of giving it to someone that didn't know or care about cars.

Well it seems to be a different story with houses. The boom in the rental market has led to a proliferation of property management and letting agents and in an unregulated industry this has meant an inevitable rise in the number of unscrupulous agents. And there are plenty of unwary landlords willingly handing over their properties to agents in exchange for low rates of commission and getting a poor service in return.

Landlord & Tenant law and the Housing Acts are complex subjects riddled with points of law waiting to trip up the uninitiated; the statutory requirements placed on a private landlord are not for the faint-hearted; houses need maintenance and an agent really needs to know about property in order to correctly diagnose problems and ensure he/she calls out the appropriate tradesman (eg; the boiler is leaking and the electrics have tripped off - is an electrician, plumber or gas engineer required??); tenants go into arrears and breach tenancy agreements; the list of pitfalls is long but a robust and knowledgeable agent will foresee and prevent many of these issues and will act quickly to safeguard a landlords interest.

So who can a landlord trust?

Firstly; look or ask for an agents fees - agency fees have come under the spotlight in recent months: lettings and property management have become known as the "Wild West" of the property industry due to countless examples of agents charging unfair fees, having hidden fees or not disclosing their fees up-front. Get this information; ask for their terms of business and make sure that you sign up to an agreement that, should you need to, you can get out of on reasonable terms.

Check if your chosen agent is a member of a redress scheme; the main one in the UK is The Property Ombudsman Scheme. Membership of this scheme shows that the agent is bound by a Code Of Practice and follows managerial and customer-focused standards and practices. Our firm Proudhouse Property Management is a member of this scheme.

Secondly, find an agent that is actually trained and qualified! The National Federation Of Property Professionals (NFOPP) oversee the education, examination and qualification for a range of services within the Property Industry - holders of their qualifications are then permitted to become members of various licensing/accreditation bodies. Membership of ARLA (Association of Residential Letting Agents) means that your agent has gained a minimum of a Level 3 qualification and is qualified to practice within the industry. It also means they are a member of a redress scheme. Furthermore, ARLA licensed-firms have had their accounting practices verified by an accountant, have client money protection and will have the appropriate indemnity insurance cover in place. Proudhouse Property Management provide lettings and management in Yeovil, Somerset and are ARLA members.

There are other bodies out there - most notably NALS - they provide redress, assurance and require agents to have client money protection in place. However, a landlord shouldn't just assume an agent is trained or qualified simply because there are some fancy looking logos in the agents window. Do your homework and ensure that, whether it is your cherished former home or a buy-to-let investment, your property is placed in safe hands.

Chris Chambers is a member of ARLA and owns and runs Proudhouse Property Management who provide lettings and management in Yeovil, Sherborne, Somerset, Dorset and the South West. Proudhouse Property Management also conduct energy assessments and Green Deal advice.

Regulation Of Letting Agents

Yesterday the Communities & Local Government Committee called for the regulation of letting agents. This move would empower the Office Of Fair Trading to ban agents that act unfairly or improperly. Proudhouse Property offer letting and management services to landlords in Yeovil, Sherborne, Dorset, Somerset and the South West. We have long been opposed to what can only be described as underhand and greedy charges made by some agents for all manner of reasons: setup fees with no tangible return for the landlord; eye-watering registration fees for tenants; fees for overseas landlords; renewal fees; administration fees; correspondence fees; finders fees; lock in fees if a landlord decides to dispense with an agent but retain the tenant; set thresholds below which agents have free reign to spend a landlords money without his/her prior approval... the list goes on - if you can think of it, some agent somewhere has charged for it! Sure, it can be argued that there is good reason to charge some of these fees but the basis for any contract is agreement... it is simply unfair to charge someone a fee which they are not aware of; sometimes the landlord only becomes aware of the fee when they check their bank account and see less money for a particular month than expected! It's a pretty disappointing experience - our ethos is not this.

Your property is your business - the rental fee is your income. We charge fair and reasonable fees that reflect the level of work that we put in. We are unique in having our own in-house domestic energy assessment and electrical services and provide that necessary certification, along with a Gas Safety Certificate, in return for our setup fee. We are a relatively new business and serve a niche market for members of the Armed Forces - we do not need to maintain or depend on archaic income streams that some of the more established agents have become dependent on. Our fees are available on request and also provided to potential landlords during our free initial consultation. We offer flexible services and a refreshing, honest and professional approach to landlords and tenants alike. We are working towards ARLA accreditation and landlords' money is held in our client accounting bank account with regular statements provided. Please contact us if you are need letting and management services from true property professionals in Yeovil, Sherborne, Somerset, Dorset and the South West.

Hot Dimmer Switch!

By Chris Chambers

Hot dimmer switch! Somebody asked me today why a particular dimmer switch in their house gets very hot. The IET wiring regulations allow non-metallic parts that are intended to be touched (but not hand-held) to be no hotter than 80deg C - so the hot dimmer switch could be normal. However, any appliance cannot withstand infinite energy passing through it thus a dimmer is rated to a maximum wattage eg 250W. So 8 x 40W GU10 lamps (in an array of downlighters for example) would exceed the capacity of a 250W switch. Prolonged heat in electrical parts can, over time, break down the insulation and ultimately cause dangerous shorting and potential fires. Check that you're not overloading your dimmer switches. Incidentally modern dimmers work in a very clever way - more about that some other time!

For more electrical information visit: www.wigglies.co.uk

Chris Chambers is the owner of Proudhouse Property LLP and Wigglies - Electrical Services. Creating and developing innovative homes in Somerset and South West England.

www.proudhouseproperty.co.uk

Every UK home will receive a free Smart Meter!

By Chris Chambers

Did you know that between 2014 and 2018 most homes within the UK will have a Smartmeter installed? This is just one of many measures and schemes in place by the Government in order to meet the legal requirement to reduce carbon emissions by 80% by 2050. The meters will replace your existing meter and will monitor your energy usage - you'll never have to read or send a reading to your supplier again as that will be automated via a mobile phone type signal. It should also provide you with detailed information about your homes energy usage and help you see where you can save energy.
 
The meter will be replaced by your electricity distributor - not a regular electrician but www.wigglies.co.uk and www.proudhouseproperty.co.uk can provide help and assistance with upgrading home electrics and advising. See the Gov link for more detail on Smart Meters. https://www.gov.uk/smart-meters-how-they-work

And one energy company is already supplying them! Click here

The devil is in the detail.

By Chris Chambers

An acquaintance of mine recently bought a property in Dorset - a nice 1950's semi in a nice market town. It needs a bit of love but it is what I would regard as a fairly standard refurb (get a skip, get a crowbar, remove everything, plaster, install new electrics/boiler/kitchen/bathroom, decorate, paint the front door, neaten up the garden... Done). Sounds straightforward but of course it isn't - the real skill is being able to co-ordinate tradesman, timescales, stay on budget and create a home at the same time. As a Part P registered business, Proudhouse Property and Wigglies Electrical Services have been employed as the electrical contractor and this project highlights the need for good project management - it is really important to have a firm grip on what needs to be done and when - are you happy to have new surface mounted electrical sockets installed in a utility room before the plasterers have visited? Similarly, if you have a plasterer visiting to skim a room then be careful with your preparation and arrange for who is going to do what - and plasterers will plaster around (and not behind) any obstacles so make sure that absolutely everything is off the walls - sockets, curtain rails, cupboards, architrave, skirting etc. The boiler fitter will want to make his life easy and fit the boiler where he can easily get a gas supply, vent, and electrical supply to the boiler as well as water pipes - so if that location is in the kitchen then will that work with the kitchen design? Would a bit more effort and time (and a bit more money probably) get the boiler to another location (such as the utility room) and be a worthwhile endeavour? Afterall, you'll use the kitchen many times a day - the boiler will hardly ever get interacted with so why locate it in your most used room if you don't have to? There are many more examples of little details that need to be thought through but won't be considered by the tradesman; it is a sad fact that the majority of tradesman are simply interested in completing what they've been asked to do and then getting paid - so good communication is key to getting it right! The tradesman, although arguably in a very experienced position to do so, will not do a lot of the thinking for you. My advice, having been in the clients shoes on many occasions, is to not congratulate yourself on rapid progress until you're 100% confident that the order of work is logical and the outcome is going to be something you're happy to live with - and if it's not then stop and rethink! The tradesman work for you, not the other way round. A good project manager, whether that's the home-owner or an employed professional, should help create a home, not merely manage a process of refurbishment.

I recently went back to the house concerned and my client has done a great job! A few headaches along the way but patience and a few re-visits from some of the not-so-helpful tradesman have all paid off.

Chris Chambers is the owner of Proudhouse Property Management and Wigglies Electrical Services. Creating exciting and innovative homes.

www.wigglies.co.uk
www.proudhouseproperty.co.uk
www.facebook.com/wigglies