AUCTION PROPERTY : Cheap at £115k

In recent years I've ignored properties that are going to auction, mainly because Auctions have become a way of vendors selling their properties at inflated prices rather than banks and mortgage companies getting rid of their stock for the best money they can.

One has popped up today though that may be different - this is off to Harman Healy in London, which is more the latter type of auction than the former. As such I suspect it is a bank repossession or similar. A visit to the capital will put off the local buyers who drive the price up, so there may be an opportunity to pick this up at a decent price if you're prepared to have a day out!
The advert for the property is here : http://www.rightmove.co.uk/property-for-sale/property-62329423.html which contains details about viewings and management packs etc.
It's a bed apartment in Cliftonville Court - a GOOD LOCATION right next to the General Hospital, and 5 minutes walk from the high street. These are generally BIG FLATS with better dimensions than more modern build apartments. From the pictures it looks as though it's in good basic condition although some improvement may be required in places - WE CAN DEAL WITH THIS. It will RENT EASILY for no less than £650PCM and maybe up to £700PCM if you get the presentation really nice.
You will see from the internet that 2 beds in this development sell for as high as £135k, so if you pick it up anywhere near the guide price of £115k, you've done very well. Ex Council stock is selling for this sort of money at the moment, so one of these for £115k or somewhere near would be a very good bet. 

Where's the money coming from?

You often hear in the news that the London property market is built on foreign money - overseas investors buying big houses in premium postcodes. 

URBAN MYTH : the better areas of town appreciate in value more

I was recently asked to value a 1 bed apartment in Thorplands, NN3 as the owner was re-mortgaging. He reminded me that he'd bought the property a few years back after I'd plugged it on this blog, which prompted me to delve into the archives - it was actually the first property I ever promoted in this way. See http://lettingsblog.blogspot.com.es/2011/04/potential-investment-with-9-yield.html
He paid £41k for it, and it's now worth conservatively £85k - other properties are advertised well into the £90s. The rental price I suggested then was £375. Now it's £525.
How has the value changed?
What's interesting is that it's in an area that, according to some, isn't very nice. Thorplands is an ex Local Authority area on the east side of town, and we manage about 20 properties there. It wouldn't be my first choice of places to live, but the properties don't cause us as an agency any more issues than anywhere else and we attract good tenants. It's also an area that many investors have turned their nose up at over the years - "ooh I wouldn't want to buy there" etc, and when pushed they claim it's because property prices won't appreciate over time like they do in a nice area.

The apartment in that first blog rather disproves that theory. In just over 6 years it's more than doubled in value so the guy that bought it has done phenomenally well. I look at other properties we took on at the same time and see one in Grange Park which is generally considered to be one of the best areas of Northampton - modern, affluent, easy on the eye. When I do the figures that's worth about 20% more than it was in 2011 - again a fine return but nothing compared to the ex Local Authority area.
Why the difference in appreciation?
As we look back, the housing market was generally suffering in the late noughties. The market crashed in 07, it took everyone a couple of years to accept this and revise their valuations of their own properties, and prices didn't start to rise again until about 2011 - even then the rise was slow. When the market went south, the supposedly poorer areas of town suffered more and prices fell harshly whereas the more affluent areas whilst hit badly, didn't suffer in terms of value to the same extent. There's a logic here - people in the more affluent areas were in a better position to 'ride it out' and so they did.
The lesson to be learnt is that prices fluctuate less in the more affluent areas - so when the housing market is in poor shape these areas will suffer, but will suffer least badly. On the flip side, when the housing market is buoyant as it has been recently there's more upside in the cheaper areas as there's never a shortage of people wanting to get onto the housing market if the economy allows. In the time I've been a lettings agent, the investors who have seen the greatest capital return are those who have snapped up the cheapest properties in a stuttering market then sat on them waiting for things to improve.

WHY BUY THIS? Premium River-Facing Apartments in Town

Whilst I wax lyrical about the benefits of buying in some of the less pretty areas of town, one thing that has always proved popular over the years are modern, well positioned apartments in Southbridge. We have some more - but only a handful as the owner is retiring and moving abroad.
2 bedrooms, £145,000, long leases, rental potential of £725PCM. 

What's so good about them?
There's a lot of flats by the river in Northampton but ridiculously very few of them have a genuine river outlook - strange but true - planners have missed a trick on a major scale. The ones we're selling have sit-out balconies overlooking the river, were built in 2007, and are finished to a high standard - so they are genuinely 'high end' in comparison to the majority.
The location is great also. You're out of town, but can walk to the high street in 5 minutes, or the railway station in 10 minutes. The new university continues to be built immediately adjacent but the outlook of the building means that although it's on top of you, you don't know it's there.
Will they rent?
They certainly will, and are being sold with tenants in situ. We manage the existing tenancies and in most cases we have done since the building was built. Void periods have been close to zero in those ten years.
What are the financials?
Leases were all 125 years from 2007 so the shortest lease now will be 115 years - although there's a possibility some may be extended back to 125. The service charge and ground rent varies by flat, but usually totals between £950 and £1200 per annum. We have 2 bed apartments with balcony over the river for £145,000 with a rental potential of £725PCM.
Who's going to buy them?
These things tend to go to longer term investors who value a bit of kerb appeal over the maximum possible return! The apartments are easy on the eye - most of us would feel we could happily live there themselves which is important for some investors. It's also the case that tenant quality should (theoretically) be pretty good as nice places attract nicer people! So maybe a lower hassle investment than some others.
Interested?
These apartments won't necessarily be advertised as we're likely to have people on our books who are happy to take them. As such contact me - richard.baker@belvoir.co.uk in the first instance.

CREATE A HMO : join the bandwagon

A lot of people are playing this game at the moment. Maybe the relocation of the university to the town centre is a factor - maybe the increased cost of housing is causing people to look at HMO as one way to maintain their return on investment. But one thing is certain - compared to 5 years ago far more people who approach me wanting buy to let advice already have the idea of HMO in their head. In many way's it's the new norm in terms of letting properties.

What is a HMO? 

A HMO is a house in multiple occupation. So instead of letting a three bed house to a group of friends on a single tenancy agreement for, say, £800 per month - you let it out room by room at £450 per room - with each person on their own tenancy agreement. And what's more you cut the living room in half creating a 4th bedroom, so your £800 per month becomes £1800 per month. What could possibly go wrong? 

What could go wrong?

Well half a dozen things actually! Not least the fact that so many people are after a slice of the action that supply is far exceeding demand. A look at Rightmove will verify this - a good percentage of the 500 or so properties available to rent in Northampton are rooms as opposed to whole houses - and they are either hanging around or being reduced in price. If you're a tenant looking to rent somewhere like this, you have a lot of choice. 

Then there's the Council. Conscious that an increasing number of properties are being cut into rooms, the Council are all over this issue. That in itself probably isn't a bad thing as it maintains standards but their obsession with treating every landlord as a pariah doesn't really do their own reputation any favours. Irrespective - create a HMO and you're entering a heavily regulated area of lettings so you're far more likely to come up against the Council who may want you to pay for a license, and may want expensive works done to the property before they'll give you one. 

Operational issues need considering too. HMOs are furnished so your start up costs are higher. Your running costs will be higher too - you're paying bills so your tenants won't be too careful when it comes to conserving energy. And when something gets broken in a communal area you'll be footing the bill unless you can establish which tenant caused the issue - less easy when they are all on individual tenancy agreements. You're also sticking 4 people who don't know each other in a confined space, so there's increased potential for squabbles and disagreements that need resolving - the simple way to deal with this is to employ an agent to deal with the hassle for you, but whilst some of us do manage HMOs on a selective basis, you'll find the main HMO agents in town perhaps aren't the best agents in town!

Who's winning at this game?

Well it'd definitely not those who buy up a three bed house, turn it into a 4, stick in some old furniture that's been in their garage for the last 10 years, and start charging rent. See above - a lot of empty rooms in this town currently. But some landlords do very well out of running HMOs and they tend to fall into 2 distinct categories - 'hands on' and 'high end'.
The hands on guys have been doing this for years - their properties are their occupation and they invest as much time as required in the day to day running. They collect the rent (usually in person), attend to maintenance issues, and generally maintain standards. They are comfortable managing properties and people, and their tenants are used to being actively managed so fewer issues develop as a result.
The high end guys invest more heavily in their properties before they start renting them - nice quality furniture, as many rooms self contained as possible, lots of attention to detail. There's always good demand for nice places so they separate themselves from the competition by going over the top with presentation. Pair that with a good agent (I know one) and you can attract la creme de tenant which limits the amount of hassle you'll get further down the line. 

A success story
We had a landlord recently who took a big box in Briar Hill (indifferent area, but lots of square footage) and cut it into 5x high end flatlets (tiny but really well presented and mostly self contained). The Council were involved from day 1 so the whole thing gets their seal of approval. I was cynical (yes, me!) but to be fair we've rented the lot for a total income of over £2500 per month. Yes, the tenants will take the mickey on bills - lets say that costs £500 per month, and yes the set up cost will have been high - but even so I bet the whole project hasn't cost them more than £200k all in. If my figures are right, that's a return of around 12% after bills which isn't shabby to say the least. Replicating a model like this is probably the safest way to approach HMO if it's a path you're determined to take.

MAKE US AN OFFER : 2 bed house in Rugby for £115k

My colleague has been instructed on this 2 bed house in Rugby, Victoria Avenue, which needs a fair bit of work having not been touched for a couple of decades. It has double glazing but not much else. It must be a CASH PURCHASE as any mortgage company is going to worry about the internal condition. But if you are experienced I'm told there's not too much to worry you here - just a fair bit of hard work for whoever buys it. We've got a price of £115,000 on it but I understand there may be a little bit of downside on this if someone sensible gets in quickly.  There's a block viewing planned for Saturday week - I suspect if this gets as far as the block viewing the property will end up selling for in excess of asking price. Vendor is on board with this approach. richard.baker@belvoir.co.uk if you're interested.

Thinking of re-selling?

A nice one on this road would be around £135,000 based on sales in the last few months.

Thinking of letting it? 

A nice 2 bed house would get at least £650 in rental once the condition is improved. It's not lettable as it is.

Why buy this? 1 bed freehold house for £115k

This came to the market earlier in the week with Good Choice Estate Agents and is a 1 bed freehold house with garage in Manorfield Close, NN3, on the market at £115,000
Why buy it?
It's freehold that's as cheap as you can buy in Northampton. These things are sometimes built as clusters (with no garden) and sell for about £115k. This one ISN'T a cluster - it's a proper house with a garden, AND a garage too. There's nothing close to it in terms of value currently. If you're insistent on a freehold property, are on a budget, and don't want to buy in an ex Local Authority area, this is the one for you. A quick trawl of the property portals will show you there's nothing else FREEHOLD in this price range.
Will it rent? 
You bet it will. We'll get £575 for this without any issue which is a return of 6% based on the asking price. It's in a decent road so will rent to decent tenants.
Does it need work?
I don't know as I haven't seen it, but as there are no internal pictures I suspect it might. That's not an issue though - these are small places so getting them done up isn't a big issue - we can sort everything out quickly.
What next?
Good Choice are on 01604 631403. If you're not in town and want me to view for you, email richard.baker@belvoir.co.uk but don't leave it too long!

Before you sell a property, do this one thing.

Sort the presentation out man! We've all seen the TV shows - house on the market that hasn't sold in 6 months despite 60 viewings - TV presenter goes in - the place looks like it came from the land that time forgot - more bits and bobs on show than a car boot sale? TV presenter clears all the trash out, whitewashes the walls, sticks a cheap clean carpet down, then an estate agent rolls up in his best pinstripes and sells it first viewing. 

And the format is the same every show. No surprises here - the place is a mess - tidy it up and it will sell more easily. Everyone knows what's going to happen. But when it comes to their own property, why is it that people so often forget? About 1 in every 3 properties we take on for sale involves the conversation "if you spend £2k, you'll get an extra £10k" but on the vast majority of occasions people won't do it. I think they associate improvement works with hassle - they don't need to as we can get pretty much anything done quickly and cost effectively - but they forget that their buyer is likely to be from the same mindset. If they won't take the job on because they are scared, their buyer is either going to feel the same or associate a much higher cost with the work than they should, which will mean any offer that comes in is artificially low. 

LETTING OUT YOUR OWN HOME? Eyes open please!

Why do Londoners love a commuter?

Northampton Town Centre : Ripe for Redevelopment

Why buy this? 2 bed house in Standens Barn

Why buy this? Modern Apartment in Southbridge

Why buy this? 2 bed house in Hunsbury

Getting Tenant Selection Right

Investing based on area : 2 different strategies reviewed

REGULATION OF LETTINGS AGENTS : Why should you care?

We sold a property to a guy from London and the transaction completed last Friday. He's an investor so I was hopeful of retaining him as a landlord customer, but on this occasion it seems it wasn't to be - another local agent had quoted him 6% with no VAT for managing his property. And I'm not that daft.
I know the agent in question, because another landlord has just taken 3 properties off him and given them to me. He too was paying 6% with no VAT. All 2 of the 3 don't seem to have a gas test done. 1 of the 3 are in tenancy arrears. And there's no signs of any tenancy deposits yet - the agent has apparently told the landlord he's getting some money in later in the week so will be able to pay them over then. That's good news if it happens, but it's bad news for the landlord if he doesn't as it's the landlord who's legally liable to the tenant for the return of this money. Having taken some legal advice, the landlord has realised the mistake he's made and now instructed me "before one of my tenants sues me". He may get away with it, but if one of his tenants is savvy, he already owes them money based on the mistakes made thus far.

Which is all why lettings agents should be regulated! Sajid Javed, the Communities Secretary, said last week that he's (finally) going to do this (https://thenegotiator.co.uk/lettings-agent-to-be-forced-to-join-a-professional-body-sajid-javid/) but we'll have to see if he actually follows through, or comes up with some half-baked regulation whereby the standards required are really low, and no-one actually enforces it anyway. It's bonkers that anyone can be a lettings agent - issuing legal contracts, looking after tens of thousands of pounds of tenancy deposits, processing similar sums of rent - without there being any mandatory checks to make sure they are doing things correctly. It's the lack of regulation that enables estate agents to decide overnight they are lettings agents too, quoting a low fee, taking a load off cash off tenants that they don't separate from their own business funds, then wondering why they can't figure out who owes who what. Added to that they've got to manage the tenancy, do inspections, co-ordinate repairs - all things they've never done before in their life. Not rocket science maybe, but not their skill set either. When this landlord asked them to serve notice on one of his tenants, they said he needed to talk to a solicitor - seems that their knowledge of the Housing Act 1988 doesn't even extend as far as a basic bit of form filling. Not that it matters - he can't serve notice with the gas test and the tenancy deposits not administered correctly.
This is a rant but the underlying message is paying peanuts gets you monkeys. Choosing a regulated lettings agent will cost you more, but at least you're getting someone who's done a bit of basic training. And if it still goes wrong, at least then you have some comeback on them - there's a professional body to which you can complain - there's a guaranteed payout via insurance if the worst happens and the agent runs off with your / your tenant's cash. That's why regulation of the sector is long overdue - it will involve us in more admin probably, but from the customers perspective it should drive out those agents that are going to fundamentally rip you off.