Are yields of 7.6% per year on the Lordswood Estate the best Southampton has to offer the investor?

I regularly talk to landlords about investing in Southampton. Following a discussion with one of them last week, he asked me to look into the Lordswood Estate area - (one of the flat roofed 1960’s town houses in the Upper Shirley area near the General Hospital), and whether it was a good place for him to invest in as he wanted to know whether such properties would be of interest to the nursing profession working at the local hospital.  There was a three bed, end of terrace, town house up for sale in mid-September with a guide price of £135,000. Average rents in these types of properties have risen by 18.1% since 2008, which is amazing considering average rents in Southampton are in fact only 5.3% higher (on average) than those being achieved in 2008.

Let’s say you buy it for £139,000, the achievable rent can be in the order of £850 to £900, depending how much effort you have put into presenting it; but being sensible, we are still looking at a yield in the region of 7.6% per year ... yields that are only normally achieved in risky HMO’s (Houses of Multiple Occupation ie Student housing .. with the fun and games that brings!). Property values since 2002 have risen, according the Land Registry, in Southampton, by 45% but looking at the properties that sold in 2002, and again more recently, average increases in property values in the Lordswood area have been in the region of 136% over the same time frame.

So is this an investor’s paradise – great rental growth, great yield and great capital growth? Well, all is not as it seems. This is a great example of the headline numbers (yield and capital growth) not being the only factor to consider when choosing an investment property, as you should also consider how long it takes to find a tenant. The average time it takes to find a tenant for one of the town houses in the Lordswood Estate area is, looking back at all the rentals on that development since 2008, is 47 days, whereas in most other parts of Southampton a tenant is usually found in one or two weeks. If you take into account the extra five or six weeks of void period for your property, every six to nine months, because tenants in areas in such as the Lordswood Estate tend to have a high propensity to move more regularly, the annual overall return from the property is lower than it seems.

Finally, the property was of non-traditional construction, ie not a cavity wall of two skins of brick and breeze block, but of a concrete and steel frame having concrete infill blocks. Sometimes these are difficult to obtain mortgages on, so it’s only normally cash buyers who can go for these. I am not suggesting you don’t buy it, but go in with your eyes wide open and having done your homework.

We don’t sell property but we can help you to find the best investment property with our specialist lettings advice. It is in our interest that you buy a property which will rent well and for long periods of time. If you would like any advice on choosing properties come and see me at our offices on London Road or contact me at 023 8001 8222 or email brian.linehan@belvoirlettings.com.

Solicitor landlord ordered to pay more than £7,000

A St Helens landlord who works as a criminal law solicitor has been fined £3,500 and ordered to pay costs of £3,807 for failing to comply with a Formal Improvement Notice which tried to get her to bring shoddy bedsits up to standard.

Criminal law solicitor Grace France lives in Victoria, Central London but lets out property in St Helens.

The solicitor changed her plea during a trial at St Helens Magistrates’ Court and eventually admitted the charge. The judge heard how the council became concerned about conditions at a house owned by the defendant and converted into six bedsits.

Over a four-year period council officers had attempted to work with the defendant to remedy a series of disrepair issues including lack of a fire alarm system, damp and excessive cold.

Yet even after serving two Minded To notices – aimed at gaining a reasonable working relationship with the landlord – the necessary repair work failed to take place and conditions grew worse.

The Formal Improvement Notice was served in January 2013 but by the time it expired – in May 2013 – the work had still not been completed.

Even though several extensions were agreed, a re-inspection in December 2013 revealed that little work had taken place and that conditions had deteriorated further.

Throughout the process – until November 2013 – tenants had continued to occupy the bedsits.

Councillor Richard McCauley, St Helens Council’s cabinet member for regeneration, housing, planning and community safety, said: “This case shows that no one is above the law – and that we will take the appropriate action when necessary.

“Credit must go to the council officers who pursued this case with diligence and determination – and whose job it is to protect the rights of tenants across the borough.”

http://www.landlordtoday.co.uk/news_features/Solicitor-landlord-order-to-pay-more-than-%C2%A37-000

A landlords story - a warning to everyone

http://www.landlordaction.co.uk/site.php/blog/a_landlords_story_a_warning_to_everyone

Written by paul@landlordaction.co.uk

It has become a popular past-time of late to bash landlords. Day after day there are cynical stories in the media about rich capitalist landlords seeking to exploit poor beleaguered tenants, abuse them and then throw them out on the street for a minor infraction. This type of polarising and partisan approach is frankly divisive and unhelpful. The truth is that within any constituent group there will always be a minority of those who seek to hide behind the law and exploit it to the detriment of others. Sadly this is part of the human condition and at Landlord Action we get to see both sides on a daily basis. What is lost amongst all this is that there are genuine stories that deserve to be heard. Somewhere amongst all the debate there are real people who are having their lives upside down, enduring months,sometimes years, of stress to regain access to that most basic of human rights,their own property.It's not just tenants.
Last week I spend a considerable amount of time on the phone to Jo. Jo isn't a rich portfolio managing entrepreneur chasing the bottom line or profit cynically riding the crest of an ever growing market, she is an ordinary mother and grandmother who has seen the very worst that the rental market can offer. When I speak to her she is on her way to check out the progress of renovations on her property. This is a property that she reluctantly moved out of due to personal circumstances. It used to be well maintained, equipped, and a considerable source of pride to her. Today it is being effectively gutted.The place she called home for many years, raised her family in and which held many happy memories was obliterated and she is now spending thousands of pound to bring it back to something approaching habitable condition. Her only mistake she admits was to rent her property to someone in a  difficult situation,on the personal recommendation of  a family friend. Out of compassion she rented her family home to a women who systematically destroyed her life. The well furnished and presented property was reduced to a shell. Property stolen, windows nailed shut, interior doors kicked in, appliances damaged beyond repair,family members threatened, neighbours alienated and abused. The Police and the RSPCA  were a regular occurrence at a home which quickly resembled something from a war zone ( as we think the pictures will testify). After months of hard work, we sent the bailiffs in. Unfortunately what confronted us was an all too familiar scene of devastation. Realistically Jo realises that she has very little financial or judicial redress and the errant tenant escapes without punishment or consequence.
After nearly two years of exhaustive attempt to negotiate and abortive legal efforts Jo finally approached us, as many of our clients do via a personal recommendation. As she says.  " As soon as Paul and the team we were involved thinks started happening. Finally I managed to get these awful people out. The impact on me and my family has been terrible, I have endured years of hell and the family home which I cherished has been tarnished forever. I really want my story to serve as a warning to others.It really can happen to anyone."
Sadly Jo's story is all too common. As the demand for property continues to outstrip demand it is vital that landlords wether 'accidental' or 'professional' difference seek out the best advice. Due diligence, a proactive agent and the right legal backup and support can make all the difference between peace of mind and a situation that can test your sanity

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Number of damaged properties sparks stark warning for landlords

One in three landlords (28%) have had their property damaged by tenants in the past 12 months according to the latest research from the National Landlords Association (NLA).

The findings, estimated to affect more than 400,000 of the UK’s 1.5 million landlords, come as a stark reminder about the potential problems of letting property.

Furthermore, the findings showed that landlords in the North East were most likely to face damage to their properties by tenants, with 46% having encountered the problem in the last year. Landlords in the South East were least likely to experience the problem, with one in five (21%) having encountered property damage.

The NLA figures also show that on average one in 10 (8%) – approximately 120,000 – landlords in the UK have had to make an insurance claim of some kind in the past 12 months.

With this in mind, the NLA is reminding all landlords to ensure they have the right protection in place to cover all eventualities and to insure their investment against the unexpected.

NLA chairman Carolyn Uphill said: “Property damage is just one of the many different problems a landlord can experience when letting property. Many are unaware that a simple home insurance policy will not provide sufficient cover for all eventualities, so we’re urging all landlords to protect their investments.”

Flat prices up by over £50,000 in the past 10 years, how has Southampton performed?

The average price of a flat in the UK has risen by nearly £51,000 (£425 per month) from £157,172 in 2004 to £208,169 today, according to latest research from Halifax.

The 32% increase in the average price of a flat is more than double the 15% rise for all residential properties over the same period. Detached homes (12%) and bungalows (13%) have recorded the smallest rises over the past 10 years.

Whilst flats have increased most in price nationally since 2004, much of this rise is due to the performance of flat prices in London, where flats represent a relatively high proportion of the property market.

Terraced homes have been the best performing property type in the greatest number of regions (five of the 12): North West, Yorkshire and the Humber, West Midlands, East Midlands and East Anglia. 

Semi-detached and terraced homes have remained the most popular types of property purchased over the past ten years. These two types represent 60% of all home sales in 2014; up from 56% in 2004. For first-time buyers, semi-detached homes have risen in popularity, accounting for 29% of purchases in 2014 compared with 25% in 2004. Detached sales have fallen from 21% of all property sales to 16% over the past decade.

Prices have improved across all property types since 2009 with flats recording the largest increase between 2009 and 2014 (43%). Terraced properties (31%) experienced the next biggest rise. Bungalows have seen the smallest gain (15%). The increase in flat prices nationally has been led by London (44%) with a more subdued performance elsewhere in the country.

All property types recorded substantial price falls during the housing market downturn between 2007 and 2009. Terraced houses (-33%) and flats (-32%) performed the worst, declining in value by approximately one-third. Bungalows (-21%) and detached homes (-26%) fared best.

The tightening in credit criteria and the reduction in mortgage availability following the onset of the financial crisis made it more difficult for first-time buyers (FTBs), in particular, to enter the market. This helps to explain why terraced houses and flats – which are very popular with FTBs – recorded the largest price falls during 2007-2009.

Martin Ellis, housing economist at Halifax, said: “There has been a significant increase in the number of first-time buyers since 2010 compared with a modest decline in the number of those moving home. This difference is reflected in a bigger rise in prices over the past five years for those property types that are most popular with first-time buyers: flats and terraces.

"Since 2009, larger property types – such as detached homes, semis and bungalows – have underperformed flats and terraces. The demand for such properties has been partly constrained by a widespread lack of equity amongst homeowners who bought for the first time around the peak in the market. Many of these homeowners are still finding it difficult to finance a move to a larger home."

http://www.landlordtoday.co.uk/news_features/Flat-prices-up-by-over-%C2%A350-000-in-the-past-10-years

Majority of renters may be breaching their tenancy agreement

The majority of tenants may be breaching their tenancy agreement, according to new research.

The study was conducted on behalf of mortgage and loans provider Ocean Finance. It found that 94% of people who rent their home admit to acting in a way that may breach their tenancy agreement.

The most common potential breach was the burning of candles, which more than half (58%) of respondents who rent admitted to doing. However, it’s unlikely burning a few candles now and again will have a lasting effect on the property, unlike the second-most popular possible breach – redecorating. One in two renters (54%) revealed they had redecorated their home.

Another potential breach that could put the tenant’s future in the property at risk was the decision to keep a pet. Half (50%) of all renters polled admitted they had kept an animal at their rented home.

Some of the rule breaks were small, such as using Blu-Tack on the walls (36%) – which can damage the wallpaper or plaster, or leave a mark – and over-filling the bins (22%), which may encourage rodents. However, these breaches were less likely to be made by tenants than some of the more serious rule breaks, like keeping a pet or redecorating.

Perhaps the most serious breach in many tenancy agreements is the sub-letting of rooms in a property. However, one in 20 (4.9%) respondents in rental properties revealed they had done this.

While not all tenancy agreements include all of these rules, many do. Perhaps the reason so many tenants have committed these acts is less a deliberate flouting of the agreement and more the case that they are unaware of the detail of the agreement they have signed. A quarter (23%) of people who rent admitted they did not fully read their tenancy agreement when they moved in and just half (57%) of respondents said that they did thoroughly read their agreement. A further one in five (20%) revealed they don’t have a tenancy agreement in place with their landlord or agent.

Ian Williams, spokesman for Ocean Finance, said: “Many standard tenancy agreements contain a lot of ‘niggly’ clauses about cutting the grass and emptying the bins. Whilst breaking these conditions might seem trivial, doing so could have serious consequences. Blu-Tack stains on the walls might be just the excuse the landlord needs to withhold some or all of their deposit, while keeping a pet or sub-letting rooms could result in being asked to leave the property.

”To avoid this, it’s important tenants always read their tenancy agreements and ask their landlord about anything they’re not clear about.”

http://www.landlordtoday.co.uk/news_features/Majority-of-renters-may-be-breaching-their-tenancy-agreement

The pace of house price inflation slows, are we seeing this in Southampton?

The average price of a property in the UK now stands at £186,270, 9.7% higher than a year ago, according to the latest Halifax house price index.

However, house price momentum has slowed since July when it saw a 10.2% year-on-year jump.Halifax said there were “tentative signs” that a better balance between demand and supply might be emerging which, if sustained, would help to dampen the pace of price growth.

Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “The combination of more property coming up for sale and the prospect of an interest rate rise at some point in the future is applying the brakes to the runaway market. However, with a number of lenders reducing their two- and five-year fixed-rate mortgages in the past couple of weeks there are still some excellent deals available for buyers who are concerned about rate rises and want to lock in. Assuming you can meet stricter lending criteria, it could be a great opportunity.”

Guy Meacock of buying agency Prime Purchase, said: “On balance the next few months will be the time to buy a home rather than sell. Vendors who want to exchange by Christmas are coming to market at an unfashionable time of year and may need to be more flexible on the price if they want to meet that deadline. Prices are already softening so there are good opportunities for buyers.”

http://www.estateagenttoday.co.uk/index.php?option=com_k2&view=item&id=1276:property-price-gains-slowing&Itemid=583