Thursday, 13 August 2020

Do you have the right to rent?

Title, man with luggageSince February 2016 it has been a legal requirement for landlords in England to check their prospective tenants or lodgers have the right to live in the UK. A landlord’s failure to undertake these checks is a criminal offence, which can lead to five years imprisonment and an unlimited fine - so they will want to do them! 

As such, all individuals over the age of 18 wanting to live in a property that they or a family member don’t own, will be asked to provide certain documentation to prove they have the ‘Right to Rent’. The most commonly valid document that can be used is a passport or identity card from a European nation. Whilst these don’t need to be in date to prove your birthplace and thus residency status (assuming the photo is still a good likeness of the individual), what about those estimated 9 million+ Brits who don’t have a passport? 

They certainly do have the right to rent, but the law states that proof needs to be provided and a copy taken accordingly. A driving licence can be used (the second most readily available form of ID) but only in conjunction with another ‘acceptable document’. A birth certificate counts as one of these, as do a variety of letters from official sources, all of which can prove relatively difficult to get a hold of.

Of course, not everyone has the right to rent, otherwise the checks would be pointless. Non-EU citizens typically need to apply for permission to stay in the country (and thus the right to rent a property). These individuals will normally be provided with a dated visa, which provides them with a time-limited right to rent. Proof that this date has been extended when the time comes will need to be provided to the landlord / letting agent to stay within the law.

I currently have the unfortunate situation as a landlord whereby my tenants’ visa has expired. Originally valid until the end of May, with the expectation of it being extended (as it had been several times before), the tenant’s work contract was not renewed due to the Covid-19 pandemic. This meant his visa would not be extended and thus he has to leave the country (albeit a grace period has been granted due to the ongoing travel restrictions).

It is sad to see a decent family no longer allowed in the country, whilst it also means I’ll lose a good paying tenant and have an uncertain wait for when they can actually leave.

The above situation also illustrates why the right to rent checks have been called discriminatory against those without a UK passport (providing them with unlimited right to rent and, importantly, proof!). A High Court ruling last year proclaimed the Right to Rent checks were discriminatory and breach human right laws. This is why proposals to extend the law to the landlords of Scotland, Wales & Northern Ireland were put on hold, although landlords and letting agents in England are still required to follow the legislation as is. 

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Monday, 10 August 2020

BUY-TO-LET DEAL OF THE WEEK: 3 bed house in Westhampnett, £345,000, 4.9% yield

3 bed house in Westhampnett
Listed for sale on 20/06/20 @ £365,000
Now = £345,000
Rent = £1,400pcm
Yield = 4.9%

I thought best to follow up this week's article about '£ per square foot' by taking a case in point. There are two three-bedroom houses available for sale in Lillywhite Road in Westhampnett; this one, priced at £345,000 (having been reduced from £365,000) and another at £307,500 (having been reduced from £325,000. 

Both are a similar age (built circa 2010), are in good condition, include a garage and are primed for Rolls Royce employees who fancy walking the mere few hundred yards to work. They are also both leasehold houses, which marks them down as unusual (and in some peoples eyes unsuitable). Where the two houses differ though is on their size.

The 'cheaper' of the two (many people's 'obvious' choice as a result) is set over two floors and totals 907 square feet (excluding garage). That equates to £339 per square foot, which is above Westhampnett's average of £299 per square foot. My buy-to-let pick though is set over three floors (and should arguably be described as a four-bedroom house) and totals a massive 1,348 square feet (again excluding the garage). That equates to a bargain-busting £256 per square foot of floorspace!

Of course that isn't the be-all and end-all, and the lower priced of the two houses has a larger garden and is semi-detached rather than mid-terraced, so it isn't quite a straight fight. Nevertheless, calculating the £ per square feet acts as a guide to confirm my suspicions that this well-presented property in a nice location offers good value for money.

Due in part to its good size, I'd expect it to achieve £1,400pcm in rent, which equates to a decent 4.9% yield (although, again, bear in mind the leasehold costs). Interestingly that's identical to the yield I'd expect from the other three-bedder I compared it to, which is likely to achieve £1,250pcm...which also equates to 4.9%. 

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

Chichester rental valuation

Thursday, 6 August 2020

How useful is calculating ‘£ per square foot’?

I was chatting with a landlord who questioned why I calculate the £ per square foot of a property when analysing my ‘buy-to-let deals of the week’. I explained that £ per square foot is one of the metrics I always use when analysing a potential property purchase (property price divided by total square footage of the property) as it gives an idea of the value for money you’re getting.

It can be a good gauge as to how much you should be paying for a particular property too, as well as being a good comparison of different areas. For example, I often say I like Fishbourne, Tangmere and Westhampnett as they are popular amongst renters and offer a little more ‘bricks for your buck’ than more central Chichester.

This is shown in the average £ per square foot paid for a house in each area: Chichester costs £345 per square foot, Fishbourne £326, Tangmere £309 and Westhampnett £299.
Pound per square foot can be especially useful when comparing properties near to one another. For example, a few years ago I was tasked with finding a modern three-bedroom house in Fishbourne. There were three available at the time, all within 200 yards of one another and each of a similar age and specification. They were priced at £289,950, £315,000 and £325,000. 

Seems pretty obvious which one to plump for right? This is where my trusty £ per square foot calculation came in handy.

The ‘cheapest’ three-bedroom house at £289,950 was set over two storeys and had a footprint of 887 square feet, meaning it cost £327 per square foot.

The three-bedroom house priced at £315,000 was also the traditional two storeys high, but had a far greater footprint of 1,125 square feet, meaning it cost just £280 per square foot.

Even better value was found from the most expensive three bed house though. Set over three storeys it had an impressive 1,315 square feet; meaning you were paying just £247 per square foot.

Whilst the rental figure may only have been around £150 a month more for the extra 433 square feet of space (meaning the gross rental yield was comparable) I was confident as to which property would be the more appealing to prospective tenants and thus let quicker.

If you are thinking of buying a rental property and would like me to crunch the numbers on it to ensure you are maximising your investment, please get in touch.

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Monday, 3 August 2020

BUY-TO-LET DEAL OF THE WEEK: 4 bed house in Chichester, £450,000, 4.3% yield

4 bed house in Chichester
Listed for sale on 29/05/20 @ £485,000
Now = £450,000
Rent = £1,600pcm
Yield = 4.3%

To coincide with writing about the stamp duty relief up to £500,000 that now exists, I thought I'd pick a buy-to-let property that maximises that saving. I found a new-build property on Graylingwell Park at £490,000 (close enough right?) but then noticed an identical house (albeit a couple of years old now) up for sale for £450,000. A £40,000 saving for having had someone else work through the snagging - sounds like a deal to me!

At over 1,600 square feet I believe it is one of the largest houses on Graylingwell Park. It also means on a '£ per square foot basis' it compares well to other properties on the estate and in Chichester. Having been reduced to £450,000 from £485,000 when first listed in May, it means it now costs around £280 per square foot. Three-bedroom houses on Lloyd Road in Graylingwell Park are around 1,000 square feet and £330,000, equating to £330 per square foot, whilst the average value in Chichester is around £340 per square foot.

You often find good value like this on townhouses such as this property i.e. ones set over three floors. The house provides four generous double bedrooms, a large living space and a  kitchen/diner. Bear in mind as well that published square footage doesn't include the integral garage and large balcony! Even the garden (which is South-facing) is a reasonable size compared to others on the estate.

The above goes to show that what may seem relatively expensive at first glance compared to nearby properties actually isn't when you delve a little deeper. Unfortunately, it can take the market a little while to work this out, which will have a similar impact on the rental value. £1,600pcm seems relatively conservative for such a large property in great condition and in a nice part of Chichester. But that is reflective of prospective tenants just seeing it as a '4 bed end-of-terrace'. Even so, a 4.3% rental return based on that figure isn't bad in the wider context of buying a property significantly below it's new-build equivalent, which should do well from a capital growth standpoint as people catch on to its positives in the future.

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

Chichester rental valuation

Thursday, 30 July 2020

Chichester home buyers are set to save £12 million

You’ll no doubt have read about the stamp duty relief offered up by the Chancellor in the recent ‘mini-budget’. In short, there is no stamp duty to pay on property purchases up to £500,000, which equates to a saving of upto £15,000.

It should be noted, however, that the 3% premium for ‘additional properties’ i.e. second homes and rental properties, still applies. Nevertheless, the withdrawal of the standard rate still means a decent saving for anyone who is buying a property, until this offer comes to an end on 31st March 2021 (as it stands).

Some are questioning whether this tax relief was actually necessary though. Since lockdown was lifted the sales market had been pretty strong, with online chatter of properties selling both quickly and at a good price. Nevertheless, the rules are the rules, so let’s take a look at what it might mean for those looking to buy a property here in Chichester.

With the average sale price in Chichester currently standing at £376,285, the average buyer is set to save £8,814. That in itself would be half-way to the 5% minimum deposit buyers typically require.

When you consider the number of properties sold, along with the average price paid in Chichester between July 2019 - March 2020, the taxman would have collected £12 million from those buyers. So, if the same number of properties are sold at the same price (both of these figures are likely to be higher due to the new policy though) it could mean a substantial sum saved for those looking to buy in the next eight months.

Bear in mind though that first-time buyers already benefitted from stamp duty relief up to £300,000; which meant they had a £5,000 saving at this price compared to non-first-time buyers. The playing field has now been levelled, which has led to claims that it will now be tougher for first-time buyers to compete. That could be especially true as mortgage lenders seemingly tighten their criteria for those with smaller deposits on hand (typically first-time buyers).

Talking of mortgages and lenders tightening criteria; people are now realising that taking various payment holidays during the Covid-19 pandemic has resulted in them being rejected for new mortgage applications. As promised, the payment holidays haven’t actually affected their credit file. Crucially though, lenders are asking the question as to whether the applicant took a payment holiday and, if they did, are being rejected as a higher-risk accordingly.

I suspect there will be a mad rush in the Spring of 2021, just like there was before the additional properties’ premium was introduced in April 2016. In order to save the extra 3% stamp duty, a decade-high number of properties were sold in March 2016 (291) compared to a decade-low the following month (96). The number of properties being sold had been trending up nicely up until that point, but has been trending down ever since. I imagine a similar story might evolve with the latest cuts, as people won’t want to buy in April, May and June of next year, having just ‘missed out’ on the stamp duty savings.

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