BUY-TO-LET DEAL OF THE WEEK: 2 bed house in Chichester, £280,000, 4.2% yield

Summary:

2 bed house in Chichester

Listed for sale on 03/02/21 @ £280,000

Rent = £975pcm

Yield = 4.2%

Last sold for £225,000 in 2017 (+24% in 4 years)

It seemed sensible to highlight a two-bedroom house in Chichester as this week's buy-to-let pick, seeing as my most recent article focused upon the severe lack of two-bedroom houses that are available to rent in Chichester, which has led to a jump in their rental asking prices. The problem is, the same can be said for the number of two-bed houses available to buy in Chichester.  

Of the 40 available, this is the cheapest two-bedroom house available to buy in Chichester. But at £280,000 I can't say it's a bargain, based on having sold for £225,000 just four years ago (a 24% increase since versus an average 10% rise across Chichester in that time) and a 4.2% rental return, which is decent if unspectacular for the area. But, that's the point (which I've been making about two-bed houses for years!) - supply is so lacking that prices are going up. I see no why reason why that won't continue to be the case for the next owner of this particular two-bed room house.

It is in a nice part of Chichester, just to the South of the A27, close to the canal and within walking distance of the city centre (and the Southern Gateway development, which should further improve this part of the city in the next 10-20 years). It has two double bedrooms, which makes it suitable for a wider variety of tenants compared to those with one double and one single bedroom. It seems to be in nice condition throughout, with double glazing and gas central heating, so it should be ready to rent straight away rather than requiring extensive refurbishment works first.

The property is on the market with Cubitt & West and full details can be found on Rightmove via the following link: https://www.rightmove.co.uk/properties/102439622

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Rents rise across the board in Chichester

The average asking price for a rental property in Chichester currently stands at £1,050pcm. That is a 5% increase compared to a year ago, despite the onset of Covid-19 and the subsequent impact on the economy since then. Furthermore, data from Zoopla has revealed that rental properties are letting 30% quicker than a year ago. If that seems counter-intuitive, the story behind it all is one of a simple supply and demand imbalance.

You see, one year ago there were 136 properties available to rent in Chichester. As I write, there are just 19! That is the lowest availability of rental properties I’ve seen on record and is a shocking 86% down on twelve months ago. 

Despite lockdown, people are still looking to move though, with 79 properties showing on Rightmove as ‘let agreed’ (which is only 13% fewer than a year ago). So, with people wanting to move and an extremely limited number of properties available to move to, it is pretty logical asking prices will increase. So drastic is the imbalance I’m surprised prices haven’t increased by a greater amount, although I suspect that’s because most landlords and letting agents are taking a more sensible and morally acceptable long-term approach in this regard.

It is interesting to note however, that whilst every type of property in Chichester has seen an increase in rental prices, some have risen more than others. One-bedroom flats have increased the least (+1.9%) followed by four-bedroom houses (+3.5%). Bear in mind though that many of those four-bedroom houses are student lets, which have been facing a drop in demand for a couple of years now and were subsequently hit hard by the pandemic.

Instead, it is the two- and three-bedroom properties that are seeing the greatest increase in rental asking prices in Chichester; with two-bedroom flats up 6.1%, three-bedroom houses up 7.9% and two-bedroom houses seeing the greatest increase by rising a little over 10%.

I’ve always been a strong advocate that landlords should focus on buying two- and three-bedroom houses, so this is of little surprise to me. Popular during ‘normal’ times, the extra privacy and outside space they provide compared to most flats have been a godsend during our recent need to ‘stay at home’. It seems more people have come to realise this over the past year too, as the premium between renting the average two-bedroom house in Chichester, rather than a two-bedroom flat, has increased from an additional £100pcm a year ago to £150pcm now.

The continual landlord bashing in the media though, along with increased taxation and costly legislation (with harsh penalties for even an innocent oversight), has led many to conclude that being a landlord simply isn’t worth the hassle or risk. Fear over the ability of tenants to pay their rent as the full impact of the pandemic becomes clear has also spooked some to get out of property, especially those landlords who have calculated the financial bother they’d be in if they were to receive no income from their asset.

This is a key factor in what has led to such a heavy decrease in the supply of rental properties, as landlords are increasingly selling up. Until last year it was almost a no-brainer that when one set of tenants asked to leave, the landlord would instruct me to re-let the property. In the past six months though, several of my long-term managed properties have been sold instead of being re-let, whilst several other landlords have actively asked me to provide tenants with their notice so they can sell the property. 

For now, most landlords seem not to be imposing rent increases on existing tenants who have been paying their rent and looking after the property. This seems a sensible approach and one I both promote and adopt myself (unless the rent is truly out of kilter with the market). I do wonder though how long it might be before some landlords’ generosity in this regard is broken by tenant groups continual (and often successful) lobbying against the private rented sector.

Meanwhile, Chichester’s sales market is booming. It’s no wonder many conveyancers, surveyors and mortgage companies are at breaking point, with a 60% increase in the number of properties showing as ‘sold subject to contract’ compared to a year ago. This is largely due to the rush to beat the impending stamp duty relief deadline, which is forecast to see property sales fall off a cliff in April. 

It does make you wonder though if this incentive was necessary in the first place, when instead it is tenants facing a lack of supply and increasing rents who need the assistance most. To help tenants though it might be sensible to realise you have to help landlords first, which in turn will see an increase in the supply of property and with it, a halt to what could become a runaway train of rent increases.

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BUY-TO-LET DEAL OF THE WEEK: 3 bed house in Chichester, £250,000, 4.8% yield

Summary:
3 bed house in Tangmere
Listed for sale on 07/01/21 @ £315,000
Rent = £1,250pcm
Yield = 4.8%

A three-bedroom house anywhere in Chichester for £250,000 is always worth a look as a potential buy-to-let 'deal'. That price is similar to the other three-bedroom houses in Charles Avenue that have sold recently, but still represents a good amount of property for the money. On this occasion the house requires redecoration and new flooring throughout, along with some works to the bathroom. The kitchen, however, has been refitted and it benefits from double glazing and gas central heating throughout, so the bigger ticket items are already in place.

Once those cosmetic works are done it will be in an excellent condition, which will make it attractive to the large number of people looking for a well-presented family home. The cheapest three-bedroom house in Chichester currently to let is up at £995pcm...but it's no longer available. The cheapest of the 11 available is £1,200pcm....that's right, there are only 11 three-bedroom houses available to rent in Chichester. The lack of supply is incredible right now, and that is translating to an increase in rents. This house then, the cheapest three-bedroom house for sale in Chichester, once updated and therefore in excellent condition will easily rent for £1,000pcm, generating a 4.8% rental return. Such is the lack of supply right now, it could probably shift at £1,100pcm without trouble either, meaning a stonking 5.3% return from a freehold property that has room to grow from a capital growth point of view too.

The current owner purchased the property for £170,000 in 2010, so has seen the value grow by 47% based on today's value of £250,000. That is slightly below Chichester's average growth of 54% over the same period and I don't see why starting from a relatively low base it can't continue that upward trend. If it does, it could produce an above-average capital return alongside a solid and strong rental income.

The property is on the market with W Welch and full details can be found on Rightmove via the following link: https://www.rightmove.co.uk/properties/77543430

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Five tips to avoid ‘slum landlords’

Despite mainstream perception, the majority of rental properties are let by landlords who wish to provide safe and pleasant accommodation to their tenants, in exchange for receiving a fair rent. Unfortunately, like in any industry, there are rogues that don’t follow this convention and instead treat their tenants (and property) poorly. Here are five tips for tenants to try to sniff out and avoid these so-called ‘slum landlords’. 

1. Check the basics are in place

All rental properties should have an Energy Performance Certificate, Gas Safety Certificate (if there is gas at the property) and an Electrical Installation Condition Report. These three documents ensure the property is suitable in regards to energy efficiency and safe in regards to the gas and electrical installations. If a landlord doesn’t have or know about these, they are illegally letting the property and clearly don’t understand even the most basic of their responsibilities.

2. Check the property’s condition

Don’t just rent a property based on photos or an online advert - be sure to see it in the flesh! Feel free to check fixtures and fittings at viewings; I’m used to prospective tenants checking the shower pressure to ensure it’s adequate before they move-in. Whilst sometimes there will be works scheduled to be done to the property between a viewing and your move-in, be wary if there are structural or troublesome-looking damp problems, as these can be harder to resolve and there’s no guarantee it will be done to your satisfaction (or in the case of a real slum landlord, done at all!).

3. Check where your money goes

Letting agents must have Client Money Protection, whereas dealing with a landlord directly does without this safeguard. Most transactions will be done via online banking nowadays, so at least there’s a trail of what has been paid. Cash in hand payments should be avoided for this reason and may also point towards a landlord with something to hide (you should at least insist on a receipt). 

You may wish to do a Land Registry search on the property you intend to rent (it only costs £3) to ensure the named owner of the property matches the person you’re about to hand your money over to. 

Meanwhile you’ll most likely pay a security deposit (typically five week’s rent), for which it has been mandatory since 2007 for the landlord to register it into a government-approved scheme. Ask them which one they use - any that respond they “don’t bother with that” should be avoided.

4. Check what the service will be like

Online reviews are easy to find for letting agents and should give you a good idea of the level of service you’ll receive. Whilst this is more difficult when renting from landlords, a quick ‘Google search’ of their name should throw up anything particularly nefarious.

Consider the property as it is now - if it’s been left to get run down then that is quite possibly how it will be managed after you’ve moved in too. You might also like to ask the current tenants how they’ve found things at the property and with the landlord.

5. If the landlord isn’t worried, you should be

Landlords are likely to be as anxious of renting to a bad tenant as you are of renting from a bad landlord. Any who seem too relaxed and eager to simply get you to sign on the dotted line may not be as friendly as they first appear. 

Legitimate landlords will typically want proof of your earnings via bank statements and ID (to conform with the ‘Right to Rent’; another legal requirement on their part). If a landlord isn’t concerned about this it might also point towards an overly-relaxed attitude when it comes to their basic legal requirements and resolving ad-hoc maintenance issues.

So, whilst most tenants simply consider the property when they are searching for their new home, it is equally as important to consider who you’ll be renting it from. Consider whether you are confident that you can trust and communicate with your landlord or letting agent openly. Hopefully the tips above will go some way to ensuring you don’t get trapped in a property that looks ok on the surface but is run by someone who turns out to be a ‘slum landlord’.

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BUY-TO-LET DEAL OF THE WEEK: 3 bed house in Tangmere, £315,000, 4.8% yield

Summary:
3 bed house in Tangmere
Listed for sale on 07/01/21 @ £315,000
Rent = £1,250pcm
Yield = 4.8%

This nice-sized three bedroom house in Tangmere is on a newish estate (built circa 2018/19), meaning it's modern throughout and in very good condition. Set over three floors it has well-proportioned rooms, included two large double bedrooms and a further single bedroom.

Outside there is a South-facing garden, which is a little bigger than most new-build plots (although the quality of grass installation isn't much better looking at the photos!), plus there's a garage and driveway.

This would therefore make a lovely family home, which I believe should rent for £1,250pcm. That figure would equate to a 4.8% rental return based on the asking price of £315,000. That's a very decent return for a nearly-new freehold property in a growing and popular village. 

The property is on the market with King & Chasemore and full details can be found on Rightmove via the following link: 

https://www.rightmove.co.uk/properties/76888071

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Chichester’s Monopoly board

Christmas was a rather low-key affair for the majority of us and it seems a distant memory now as the decorations are stuck in the loft for another year. Normally I would have dug out a variety of board games to enjoy with friends and family, but this year they remained untouched in the cupboards. Like much of 2020 though, things moved online…and this year that included a couple of rounds of Monopoly, having picked up the ‘app’ on sale in December.

Whilst the app features an array of fancy graphics, new board layouts and updated values, I couldn’t help but play in ‘classic’ mode…meaning I could still own Mayfair for a rather unrealistic £400. That figure is based on the game being made in 1935 (although it was originally released in 1903 entitled ‘The Landlord’s Game’). So, as 2021 kicks off, it serves as the prelude to my annual look at how Chichester’s modern-day Monopoly board would stack up.

With around 461 streets in Chichester (PO19 postcode district only), it would take a long time to get around the full board, so I’ll pick out a few notable mentions.

Let’s start with Old Kent Road; the cheapest space on the board. In Chichester that spot would go to Lennox Road, with the average property on the street valued at £170,000. Located close to the hospital, the street mainly consists of flats; many housing just a single person, the majority of which are renting (with a mixture of social and private tenants).

The Strand is halfway across the Monopoly board and today in Chichester this spot would be occupied by Oak Avenue. It is a straight road close to the parade of shops in Parklands, mainly consisting of 1930’s-built semi-detached houses and bungalows with driveway frontages. Their average value of £409,000 closely matches Chichester’s average property value as a whole (which has increased by 11% in a year!).

And what’s the Mayfair of Chichester? Well, in a change at the top after several years of dominance for North Pallant, the most expensive street in Chichester is now West Street. The average property in this city centre street, with the Cathedral on its doorstep, will set you back £1,187,000. There have been quite a few recently upgraded and converted buildings on West Street, with a beautifully restored seven-bedroom Georgian home selling for £2.525m in September 2020 helping to move West Street to the top spot of Chichester’s most expensive streets. 

So, what type of Monopoly player are you? It’s always interesting to note the different styles of play, which seem to mimic landlords’ real-life dealings. Some like to accumulate the cheaper properties, receiving multiple rents, whilst others prefer to save up for the premium plots, every so often bringing in a king’s ransom.

If you’re thinking of getting into the ‘landlord’s game’ for real, be sure to follow my Chichester property market updates throughout 2021 by visiting www.bit.ly/chipropertynews.

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BUY-TO-LET DEAL OF THE WEEK: 4 bed house in Chichester, £265,000, 5.0% yield

Summary:
4 bed house in Chichester
Listed for sale on 18/11/20 @ £280,000
Now = £265,000
Rent = £1,100pcm
Yield = 5.0%
Last sold for £64,950 in 1999 (+308% in 22 years)

This is the cheapest four-bedroom house currently available to buy in Chichester, at a very reasonable-looking £265,000. That's a slight misrepresentation of the property's original form though, as what was a three-bed house has been reconfigured to provide four (rather small) bedrooms. Even so, the square footage you get from this freehold house in Chichester, which appears to be in very good condition, is decent for the price tag (which has been reduced from its original £280,000 asking price).

I assume the house was formerly let to students, based on the configuration and the matching bedroom furniture and single beds. It could be re-instated as one and produce a very decent return. But, like this landlord and many others, student lets are seemingly falling out of favour - both due to a supply and demand imbalance and, now, because of the coronavirus. It could therefore be time to re-configure it back to it's three-bedroom layout and rent it to young professionals or a family. Its proximity to St Richard's Hospital should ensure a steady supply of tenants and I'd expect it to rent for around £1,100pcm, which would provide a decent 5% rental return based on the current asking price. It's layout could also give rise to converting it to several bedsits or studio apartments, which could again provide a way of squeezing more rental income out of the property, if that's what you were looking for.

The current owner purchased the property just before the turn of the millennium. In that time it has quadrupled in value, from £64,950 in 1999 to £265,000 today.

The property is on the market with Cubitt & West and full details can be found on Rightmove via the following link: 

https://www.rightmove.co.uk/properties/100050347

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