Monday, 18 October 2021

BUY-TO-LET DEAL OF THE WEEK:  2 bed house in Chichester, £230,000, 5.7% yield

2 bed house in Chichester
Listed for sale on 04/10/21 @ £230,000*
Rent = £1,100pcm
Yield = 5.7%

*It will sell for more than this, as it goes to 'best and final offers'

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

Thursday, 14 October 2021

Buy-to-let mortgage rates drop below 1%

Homeowners have enjoyed sub 1% mortgages since April (since dropping to as low as 0.81%), but now landlords can get in on the action as buy-to-let mortgage rates drop below 1% for the first time. Whilst the headline figure is certainly attractive, read on to understand why it might not be the cheapest option overall.

Other lenders are sure to follow, but it is The Mortgage Works that have become the first lender to offer landlords an interest rate below 1%, having introduced a two-year fixed rate product with an interest rate of 0.99%. A deposit of at least 35% is required, but the real sting in the tail is that it comes with a 2% product fee of the loan amount. Factor that in to the equation and you’ll pay more in fees over the two-year period than you will interest! 

Weighing up the interest rate versus product fee will largely depend on the size of mortgage you are taking out. It is also why a mortgage broker can be invaluable in guiding you towards the right product. As an example though, a £300,000 property with a 35% deposit (£105,000) will mean taking out a mortgage of £195,000. 

Over the two-year term of The Mortgage Work’s headline grabbing product, you would pay £3,861 interest alongside a £3,900 fee. There is also a £340 arrangement fee and £20 banking fee to be paid, equating to a cost of £8,121 over two years.

Instead of this, consider that Platform’s two-year fixed-rate mortgage may have an interest rate of 1.65%, but it comes with no fees. That means all you’ll pay over the same two-year period is £6,435 in interest; a saving of £1,686!

Personally, I prefer taking out five-year fixed-rate mortgages. Using the same example £195,000 mortgage as above, the cheapest five-year buy-to-let mortgage comes via Virgin Money. Their 1.67% interest rate and £895 product fee means paying £6,871 by the time the previous products’ two-year fixed rates will have ended. For me, that isn’t much of a premium to pay to provide the assurance of what my monthly payment will be for a five-year period, along with not having to deal with the admin of re-mortgaging again.

And whilst rates could of course fall further, meaning taking a further mortgage in two-years’ time could see you even better off in years three, four and five, bear in mind the time and energy this takes, as well as potentially the cost of instructing mortgage brokers and solicitors again. 

As ever though, you need to consider your own circumstances when dealing with such matters. For instance, if you’re thinking of selling or wanting to re-finance sooner, you wouldn’t want to tie yourself in for a long period (which normally comes with exit penalties). Different lenders have different criteria too, so you’ll need to navigate this to match the best overall package for you. 

All of the above is why it’s typically a good idea to consult with the professionals for independent financial advice, as a headline grabbing figure isn’t always as good as it first sounds.

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Monday, 4 October 2021

BUY-TO-LET DEAL OF THE WEEK: 2 bed flat in Westhampnett, £244,950, 4.9% yield

2 bed flat in Westhampnett
Listed for sale on 15/07/21 @ £249,950
Now = £244,950
Rent = £1,000pcm
Yield = 4.9%

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

Thursday, 30 September 2021

Petrol is in demand, but not as much as property!

You will be well aware of the petrol shortages that have plagued the UK this past week. In today’s world it seems petrol has become a necessity for many, with the fear of running out leading some to queue for hours to seemingly grab as much as they could. The same, however, could be said for property at the moment, with supply simply too low to fulfil demand. A few new-build sites have been in the press in fact, having had people queue for days to be the first in line when the sales office opens! That may also help understand why property prices in the UK have risen so much over the past few decades…even more so than fuel prices.

Ten years ago the average price at the pump was 129.9p per litre. Today it is reportedly 136.5p, which would mean an increase of just 5% in a decade. Compare this to property, whereby the average UK home sold for £165,649 in 2011, versus £255,535 today, and prices have increased by 54% in that same timeframe.

This year though, petrol has certainly leapt in price. We also feel its affects more as it has a bigger impact on our day-to-day lives than the (albeit bigger and more significant overall) property price increases. Having peaked in 2013 at 138.9p per litre, we had become used to (slightly) cheaper prices at the pumps, with the price of petrol averaging 123.9p per litre in March this year. That means fuel has increased in price by 10% in six short months; hence the furore over the current situation and the increase in prices we are witnessing across the supply chains.

Looking at data back to 1983, it shows we are not yet witnessing the steepest fuel price increase we have seen though. That happened in 2010, when prices rose by 24.4% (to 111.9p) in a year, having actually dropped by 13.5% the year before. We are, however, getting ever closer to setting a new record high average price at the pump across the UK.

As for property prices, their biggest increase came in 1989, when they rose a little over 30% in a year! Since last peaking in 2008, before dropping 15.5% the following year, 2020 did turn out to be the strongest year on record. It too means property prices are currently at their highest on record.

Hopefully the fuel rush will be over soon and things will go back to normal. Unfortunately, it is a little harder to crank up the supply of homes. As far as prices are concerned then, the continued demand for housing suggests property prices aren’t likely to abate any time soon. And the people queuing at the forecourts this week have demonstrated their thirst for fuel and willingness to pay more for it, so lower prices are unlikely to filter through at the pumps either.

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Monday, 20 September 2021

BUY-TO-LET DEAL OF THE WEEK: 3 bed house in Tangmere, £290,000, 5.0% yield

3 bed house in Tangmere
Listed for sale on 20/08/21 @ £290,000
Rent = £1,200pcm
Yield = 5.0%
Last sold for £230,000 in 2019 (+26% in 2 years)

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

Thursday, 16 September 2021

Landlords - what you should check before arranging a viewing

Demand for rental property seems to be at record highs, with literally dozens of prospective tenants wanting to view and snap up a property within hours of it being marketed. A recent house I listed had over 50 enquiries within 48 hours; but clearly it can only be let once! Processes therefore need to be put in place to avoid wasting the time of both yourself and some of the interested tenants who either won’t be suitable for the property or will find that the property is not suitable for them.

The first port of call is to understand who will be living at the property, as there may be restrictions on the property’s usage from both a legal and/or practical perspective. For example, I recently had two couples and a friend wanting to share a three-bedroom house. Housing five adults would mean more wear and tear on the property than many of the other potential applicants but, even more importantly, it would mean the landlord having to apply for an HMO license from the council (at a cost of £1,098!). Conversely, I had two friends wanting to rent a two-bedroom apartment; not a problem I said, but are you happy with the second bedroom only being a single? They weren’t, and thus checking this saved me and them the bother of viewing a flat that wasn’t appropriate for their needs. 

You should also speak to the tenants about their financial situation; doing so now will save conducting a viewing with tenants who might fall in love with a property, only to find they can’t pass the referencing. You should ask whether they have any credit issues that might affect their application, along with understanding their income to ensure it passes the typical affordability criteria set out by referencing agents. If an issue is identified, you could consider whether an alternative solution can be found, such as having a guarantor or for them to pay rent upfront.  

Finally, understanding the tenants’ situation is often useful. If the property is vacant and therefore available to rent immediately, it is beneficial to find tenants who can move in as promptly as possible. On the other hand, if the property is not ready to move into for a couple of months, then it’s little good showing it to someone who needs to move within a fortnight! You may also discover that the prospective tenants are only looking to rent for a short period of time, which may not fit with your preference for a long-term tenancy.

All being well, I then send the prospective tenants a video walkthrough of the property, which is recorded from a first-person perspective as if they were viewing the property (including commentary). This shows far more than a description, photographs and floorplan can do alone, and helps to ensure the property is suitable for them. This has greatly cut down the number of viewings whereby the prospective tenants weren’t already chomping at the bit to take the property (saving everyone’s time and helping to keep people safe during the pandemic). 

This all means by the time I’m viewing a property with potential tenants it is highly likely that they will want the property (assuming it matches the video) and that I will want to, and be able to (from a referencing point-of-view) rent it to them. 

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Monday, 6 September 2021

BUY-TO-LET DEAL OF THE WEEK: 2 bed house in Chichester, £299,000, 4.4% yield

2 bed house in Chichester
Listed for sale on 24/06/21 @ £310,000
Now = £299,000
Rent = £1,100pcm
Yield = 4.4%
Last sold for £230,000 in 2016 (+30% in 5 years)

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