SOLD! WILDCARD! Freehold 2 flats in Abington, DISCOUNTED

OFFERS INVITED AROUND £180,000. The flats themselves are worth £200,000

An interesting one here, and quite a complicated one too. Offered for sale are 2 TENANTED flats, including the freehold. They currently bring in £1050 per month which a 7% return on the asking price. They are in good order too. In theory, these should be worth about £90,000 and £110,000 each, so there's an immediate saving of about £20,000 on the asking price.

 So what's the catch? Well there are a couple of things the purchaser needs to be aware of and take on the chin

• if you look at the diagram above there are actually 2 freeholds for sale here - number 4 and number 25. The latter is a ramshackle commercial building (see below) in the garden of the former, let since the dawn of time at a peppercorn rent. Once you own it you could leave it, or evict the tenant and develop it, or turn it into a garage or garden - your choice. But you're buying it as it is.
• the house has a natural spring in the cellar - always has. There's a pump down there that deals with this, but it's a known issue. 
• the current owner has had the property for many years and paperwork is pretty scarce. You're buying it a discounted rate accepting this. 

It's the type of purchase that will appeal to someone who is happy to take a property on at a genuine discount and accept that there are a few irregularities - the vendor seeks that type of buyer. It really needs to be a cash purchase, as the vendor wants a quick transaction. A solicitor will be required to 'process the transaction' rather than analyse in the n'th detail. It's the type of property that would usually end up in an auction for these reasons, and that's where it will be heading if a sale isn't agreed in the next few weeks. 

SOLD! LITTLE BILLING : cluster house £112,000

Just when I’d nearly given up, along comes a 1 bed FREEHOLD cluster house in Little Billing at £112,000. It’s a nice area this, and we have half a dozen rented out for between £450 and £500. This looks to be a good one so will get towards the top end of the scale. Stamp duty is part of the deal now, so I’d simply advise factoring that into any offer you make. A nice safe rental in a decent area if that’s what you like.

richard.baker@belvoir.co.uk if this takes your fancy.

Time to UP the rent?

As I’ve said on this blog before, rents in Northampton are on the up! I’ve been letting properties here for 10 years and rarely has it been necessary or advisable to raise the rent – the market has been solid but static. However in the last 18 rents we’ve seen rents start to creep up consistently to the point that when we review (which we do for managed customers every 12 months) pretty much every rent is seeing a small increase.

Why is this?

I’m not 100% sure! Well I am – it’s because demand exceeds supply. But what is fueling the demand?

Property prices are high – that’s certainly a factor which means that the average first time buyer is stretched so chooses to rent instead. Immigration is certainly a factor – every other tenant we let to at the moment is Romanian whereas 5 years ago they were Polish. Generally speaking this is the good end of the market too – I hate to think where we would be if we didn’t have Eastern European tenants. And a lack of house building is also an issue. If you read the local newspaper you’ll see that every time a development is proposed, local people object to it – that may suit them but I’m not entirely sure that’s in the interests of future generations!

What should you do?

If you’re a managed landlord of ours, nothing! We’ll raise the rent as appropriate but we won’t squeeze it to the limits, as that’s not in the interests of our landlords or ourselves. Clearly there’s a benefit for a landlord in increasing the rent, but zero benefit if the increased rent causes the tenant to give notice.

If you’re managing yourself you're clearly an experienced landlord so will doubtless have dealt with this already using the appropriate legal forms and taking the appropriate safeguards.

Is this a good thing?

I’m a landlord myself and won’t pretend it doesn’t feel good to see rents creeping up. We do after all live in an age where the costs to landlords increase on an annual basis with more regulation and government intervention in the sector – so it’s nice to reclaim at least a bit of this through increased rents. But I’m also conscious that Northampton isn’t the centre of the economic centre of the universe and whilst employment is high, most people aren’t in massively well paid jobs. You need to remember that whilst the market rent for your property may be £x, that doesn’t mean the current tenant can afford £x – and by increasing the rent you may be creating problems (arrears and evictions) that it ends up costing you to sort out. As an agency we’re seeing more arrears (slightly, not massively) and when tenants move out there’s a definite increase in “moving back with the parents” which is a sure indicator that affordability is being stretched. As such whilst increased rents are a good thing for landlord, they need to be welcomed with a note of caution. 

Is everyone getting an increase?

Certainly not! Rental increases generally apply to properties that weren't over squeezed in the first place, and properties that are in good repair. If your tenant is on the phone every 5 minutes complaining about A, B and C, you're hardly likely to get away with increasing the rent. Deal with any issues outstanding before proposing an increase as ending up having to change tenant will always cost you more than you make back.

STAMP DUTY : What has the effect been so far?

With the government about to increase stamp duty levels for investors from April 2016, it’s all gone strangely quiet in terms of investors purchasing property. There’s a huge amount SSTC at the moment – many conveyancers are snowed under – and there’s a big focus on getting these transactions completed this month. But in terms of new purchases agreed, it’s private purchasers doing the buying, rather than investors.

There has certainly been a small bubble in the first 3 months of this year, with a number of investors keen to buy before April - and this has pushed prices to record levels for freehold houses in particular. But as any sales agreed now will not complete this month, there's been a definite slowing of investor interest in the last few weeks as people take stock and wait. 

Waiting probably isn’t a bad tactic. I rather suspect that some of these SSTC deals won’t complete (will run out of time), and for that reason at the start of April we may see a number of properties coming back onto the market. Within that number there should be some interesting picks for the sharp investor, even if stamp duty then needs to be factored in.

I spoke to an accountant the other day who said this was exactly what the government wanted, and they had succeeded in driving new investors out of the market. I disagree with this – changes to stamp duty have created a cut-off point with a bubble before it and a temporary lull after it. But I haven’t spoken to a single investor who says he or she won’t buy again – myself included. People are simply waiting to see how the market adjusts and when it settles, which it will, people will start buying again with the cost of stamp duty factored into the equation.