How quickly will you start receiving rent?

When you first buy a rental property, you need to factor in that you won’t get the keys and instantly start receiving rent (unless you buy with tenants in-situ).

It is likely that you’ll first need to undertake some maintenance or refurbishment to the property. You will also need time to advertise the property, conduct viewings, reference the chosen tenants and complete all of the relevant paperwork and safety checks before finally moving them in and starting to receive some return on your investment.

Being pro-active can help to minimise this initial void period. I try to advertise the property as soon as I am allowed to by the seller, have confirmed the ‘earliest move-in date’ and can take representative photographs that show the property off well. 

Ideally you would conduct viewings at this stage too i.e. between exchange and completion. If that’s not possible, marketing it early still enables you to take prospective tenants names, numbers and details so that once you are in a position to conduct viewings you have a shortlist of interested parties ready to go on day one.

Letting agents or landlords with multiple properties may also have a head-start as they will often have tenants on a waiting list or who ‘missed out’ on a previous property but may find yours of interest.

It is also important to advertise the property at the correct rental price. You may even consider offering the property below the ‘going rate’ so as to attract more interest, rent the property quicker and thus minimise your initial void period on your first let (when the property is earning you nothing). 

Ideally the first batch of viewings will lead to suitable tenants who wish to rent the property. The next issue then becomes when they can move-in. It’s unusual for someone to be able to move-in immediately, as they will typically have a notice period to honour with their current landlord.

Property type can play a part here - smaller properties may be filled quicker as the tenants are naturally of a more transient nature, whereas larger family homes often come with tenants that have more commitments (and stuff to pack!) before they can move.

 In normal circumstances, if a property is advertised and a tenant is not found within a couple of weeks (not necessarily moved in, but scheduled to do so)  then I would say something is wrong - normally the price, property or marketing. One key proviso for a landlord is that the objective should always be to get the best tenants possible, not necessarily the first ones that come along. 

If you are buying a rental property and would like someone to help you find the right tenants as quickly as possible, please get in touch.

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Five tips to avoid ‘nightmare tenants’

Most tenants simply want to live in peace in a home that they can treat as their own, whilst happily paying the going rate to do so. A very small percentage, however, will set out to either mistreat the property or purposely not pay the rent. Here are five tips to avoid these so-called ‘nightmare tenants’:

1. Offer tenants a nice home

If you offer a neglected property in poor condition, you are likely to attract less interest and will have to settle for tenants who are perhaps unable to secure a ‘nicer’ home. Meanwhile, if the property is well-presented, it will attract a wider pool of tenants to choose from and they will most likely take pride in keeping it in good condition. 

This applies to ongoing maintenance issues too; afterall, if you don’t care about the property, why should your tenants? Furthermore, tenants will feel aggrieved paying full rent for a property that isn’t fully-functional or being maintained as it should be. 

2. Match the property to the right tenants

It’s hard to say no sometimes, but a property needs to suit its occupants. For example, most blocks of flats won’t accept pets as it is part of the head lease. This isn’t unreasonable if you think about trying to live with a dog in a small second-floor flat with no access to outside space and with neighbours on all sides of you. It might also be unwise to allow two adults and three children to rent a two-bedroom flat; they simply need more space and amenities than that to live comfortably and to be able to keep the property in good order.

3. Reference thoroughly

This is probably the most critical step in ensuring you avoid ‘nightmare tenants’. Helpfully, referencing is something that prospective tenants with something to hide will try to avoid. Do not take shortcuts because a tenant wants to let the property quickly, can offer monies upfront or because a ‘friend of a friend’ says they’re “good for the rent”. Genuine tenants won’t quibble about you undertaking credit checks and asking for documentation, such as payslips and bank statements, so as to give you a full picture of their financial standing and rental history.

Furthermore, (and similar to point 2) you aren’t doing someone any favours in allowing them to commit to a rental property that is simply too expensive for them in the first place.

4. Ensure all the paperwork is in place

Tenancy agreements should contain clauses relating to sub-letting, noise, pets and other common do’s and don’ts, which will help avoid conflicts later on (and can become grounds for eviction if they are ignored). A detailed inventory, including photos, not only serves as a record if there is a dispute over the deposit at the end of the tenancy, but acts as a deterrent in the first place (as the recording is so detailed) and a guide for tenants at the end of tenancy (so they can check how the property should be left so as to receive their deposit back).

Ensuring all the paperwork is completed and provided to the tenants in the correct manner will also avoid problems later on. For example, if not served correctly, you open yourself up to fines, compensation claims and difficulty in progressing eviction notices if necessary; all of which a ‘nightmare tenant’ could use against you.

5. Keep in touch

Maintaining an open dialogue with tenants and responding to tenancy-related and maintenance queries promptly will encourage a good relationship. Visiting the property regularly will allow you to spot problems early, as well as checking all is ok with the tenants so as to maintain and prolong their tenancy. It also shows you are pro-active and haven’t just ‘left them to it’; tenants are more likely to take liberties with absent landlords. 

There are many other ways to minimise the risk of letting your property to problematic tenants, some of which are quite subtle and come via experience. Ultimately there is no fool proof way to avoid a ‘nightmare tenant’, although these five tips will go a long way to avoid those who seek to enter a tenancy agreement with bad intentions from the outset.

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How much does a bedroom cost in Chichester?

Many first-time buyers will start out with a small ‘starter’ home, which is both suited to their needs and matches their modest earnings at the beginning of their careers. But as you get older there’s a tendency for extra possessions to pile up and for extra people to emerge in your life! This made me think; how much is a bedroom in Chichester and how much does it cost to climb the property ladder?

Let’s start with a one-bedroom property (typically a flat). The average price for one of these in Chichester is £200,000. As many will appreciate, the first step is often the hardest and that’s no exception when it comes to buying a property. The income and deposit you’ll require to afford even the most modest of homes in Chichester is probably the greatest barrier to getting on the property market.

Once you do though, and you hopefully rise through the ranks in your chosen career whilst growing your nest, the increase in price to afford an extra bedroom becomes a little easier at each rung of the ladder (in percentage terms).

The average two-bedroom property in Chichester will cost you £320,000 - a premium of £120,000 (60%) compared to a one-bedroom home.

The average three-bedroom property in Chichester will cost you £450,000 - a premium of £130,000 (41%) compared to a two-bedroom home.

The average four-bedroom property in Chichester will cost you £625,000 - a premium of £175,000 (39%) compared to a three-bedroom home.

Of course, this price increase isn’t just for an extra ‘bedroom’. As the number of bedrooms grow, so should the size of the other rooms throughout the house, as well as the outside space and amenities e.g. garden/garage/driveway.

It does however demonstrate that it’s the first couple of steps that are the toughest on the property ladder, which is why it’s common that government policies and incentives focus primarily on first-time buyers. Having said that, bear in mind that the need for an additional bedroom affects the ‘upsizers’ at a time when the financial strain (a new child being the most common) is often at its greatest.

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Is a ground floor flat a good buy?

 

Which floor a flat is on is an important factor when deciding what to buy (or rent). Some are ardent in their opinion that an upper-floor flat is the only way to go, whilst others can see plenty of benefits in keeping your feet on the ground. Typically, top floor flats have achieved a premium price over their ground floor counterparts, but is this justified?

Many will say it is and that flats on the ground floor represent both a privacy and security risk. In theory that is true; people walking past will be able to see into a ground floor flat rather than one higher up. And it’s easier to hop through an open window or break the glass of one on the ground floor than if you’d need a ladder to do so. But the same could be said for any house that isn’t built on stilts, so that logic doesn’t really cut the mustard in my opinion.

Certainly the view can be better in a flat on a higher floor and they tend to be brighter too. Plus, heat rises, so they are often easier and cheaper to heat in the Winter. I think there’s still something of a ‘status’ about being higher up in the sky though (think top floor penthouses), which largely clouds people’s opinions on the matter. Having said that, there’s definitely something to be said for only having neighbours below you, compared to ground floor flats, which in a poorly insulated building can mean hearing ‘footsteps on the ceiling’.

Ground floor flats though make perfect sense for those wishing to avoid the stairs. Whilst many immediately think of the elderly in this regard, the benefit is also there for young families with pushchairs and people with mobility issues. They’re also easier to evacuate for the safety conscious and you won’t have to worry about leaking roofs (although they’re the first ones to feel the impact of rising damp or drainage problems).

But the real bonus of having a ground floor flat is that many come with their own private garden or direct access to communal grounds. Apart from the obvious benefit this provides, which came to the fore as we were stuck at home during the pandemic, it can also make ground floor flats suitable for pet owners compared to their more penned-in upper-floor flat counterparts (although you’ll need to check the head lease to ensure pets are allowed at all).

I have long argued that houses are more popular than flats with both owner-occupiers and tenants. This is because they come with their own entrance, private outdoor space and, normally, better parking. But I’ve visited many ground floor flats that also come with these benefits and it’s not surprising that demand for these are holding up noticeably better at the moment compared to flats without these bonuses.

So for me, a ground floor flat that provides access onto its own outdoor space could be a winner; particularly with an aging population that values their own private space. This is a good way of getting many of the benefits associated with a house, but with a lower price tag.

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Should landlords take a security deposit?

There is nothing to say that a landlord must take a security deposit, but it is always advisable to do so. Most landlords choose to take a security deposit from their tenants to provide some protection against the risk of non-payment of rent and/or damage caused to their property. It is important, however, to understand the rules about taking a security deposit, which have changed in recent years.

Major legislation was first brought in back in 2007, whereby security deposits needed to be protected in one of the approved government schemes. This was introduced amid claims of unscrupulous landlords simply pocketing the security deposit by default at the end of the tenancy, regardless of the tenant’s conduct. These schemes either hold the money (custodial schemes) or insure against its disappearance (insurance schemes). They also act as arbitrators between landlord and tenant if there is any disagreement in regards to the return of the security deposit at the end of the tenancy.

CRJ Lettings is a member of the DPS (Deposit Protection Service) and their custodial scheme. It’s free to use and it means neither the landlord nor the letting agent is holding the tenant’s security deposit; it’s held in a government-backed ring-fenced account throughout the tenancy.

This seems preferable for both landlords and tenants, compared to letting agents who hold the deposit monies in their own bank accounts (via the insurance schemes). There have been too many stories of fraudulent (or just poorly managed) letting agencies dipping into these funds to cover their own cashflow, or even going bust and losing the deposit monies in the process (which the landlord will have to cough up when the time comes to repay the tenant).

Whichever scheme you opt for though, they bring with them additional paperwork and responsibilities, for which it is absolutely critical you get correct. The deposit needs to be properly protected and the paperwork served to the tenants within 30 days of receiving their money. If this is not done, the landlord cannot serve notice upon the tenant if it becomes necessary and can also be held liable for compensation in the amount of three times the deposit!

In 2019, security deposits were capped to a maximum of five week’s rent (in most cases). This rather curious addition to the Tenant Fees Act has meant it is now far more difficult for tenants without a squeaky-clean credit history and good references to be accepted. Previously, such worries could be bypassed by taking a larger-than-normal security deposit, but the government has made this practice illegal. The same goes for tenants with pets; which is why you now regularly see premiums attached to the rental amount for such individuals instead.

Recently, there have been a plethora of ‘zero deposit’ schemes pitched as an alternative to tenants stumping up the deposit themselves. Personally, I’m not a fan of these schemes in their current form. Most landlords prefer to rent to tenants with some ‘skin in the game’ and most (good) tenants prefer to hand over a security deposit, knowing they’ll get it back at the end of the tenancy, rather than paying an upfront or monthly fee that they won’t see again.

A major criticism of security deposits though is the challenge many tenants face in raising a second one whilst their current security deposit is tied up in their present tenancy. The government are talking about introducing a ‘transferable’ deposit, whereby the same security deposit passes from one tenancy to the next (making it easier for tenants to move home). The problem here is that you never truly know if a tenant’s security deposit will be re-paid in full until they have vacated the property, by which time they’ll have already moved home (for which they’ll need the security deposit for). So, it doesn’t seem altogether workable without some form of insurance product involved, which is likely to cost tenants money one way or another.

If you’re a landlord and all of the above sounds like too much trouble, or you’ve not been taking all the necessary steps (or worse, you’re with a letting agent who hasn’t), please feel free to give me a call to instruct me to take this important burden away from you.

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How quickly will you start receiving rent?

When you first buy a rental property, you need to factor in that you won’t get the keys and instantly start receiving rent (unless you buy with tenants in-situ).

It is likely that you’ll first need to undertake some maintenance or refurbishment to the property. You will also need time to advertise the property, conduct viewings, reference the chosen tenants and complete all of the relevant paperwork and safety checks before finally moving them in and starting to receive some return on your investment.

Being pro-active can help to minimise this initial void period. I try to advertise the property as soon as I am allowed to by the seller, have confirmed the ‘earliest move-in date’ and can take representative photographs that show the property off well. 

Ideally you would conduct viewings at this stage too i.e. between exchange and completion. If that’s not possible, marketing it early still enables you to take prospective tenants names, numbers and details so that once you are in a position to conduct viewings you have a shortlist of interested parties ready to go on day one.

Letting agents or landlords with multiple properties may also have a head-start as they will often have tenants on a waiting list or who ‘missed out’ on a previous property but may find yours of interest.

It is also important to advertise the property at the correct rental price. You may even consider offering the property below the ‘going rate’ so as to attract more interest, rent the property quicker and thus minimise your initial void period on your first let (when the property is earning you nothing). 

Ideally the first batch of viewings will lead to suitable tenants who wish to rent the property. The next issue then becomes when they can move-in. It’s unusual for someone to be able to move-in immediately, as they will typically have a notice period to honour with their current landlord.

Property type can play a part here - smaller properties may be filled quicker as the tenants are naturally of a more transient nature, whereas larger family homes often come with tenants that have more commitments (and stuff to pack!) before they can move.

 In normal circumstances, if a property is advertised and a tenant is not found within a couple of weeks (not necessarily moved in, but scheduled to do so)  then I would say something is wrong - normally the price, property or marketing. One key proviso for a landlord is that the objective should always be to get the best tenants possible, not necessarily the first ones that come along. 

If you are buying a rental property and would like someone to help you find the right tenants as quickly as possible, please get in touch.

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Does psychological pricing work for property?

If you’re wondering what psychological pricing is, it’s where retailers set the price of something to make it appear cheaper than it is using a simple trick of the mind. This typically means using a 5, 7 or 9 to round off a price, rather than using a round number. The classic is something that costs, say, £4.99. Wow, that’s much less than £5 right! Well to most humans it is, hence why retailers do this. It’s to do with our primitive brains looking at the first digit and ignoring the rest.

In the world of property listings that means a price tag of £400,000 becomes £399,999 (or more commonly £399,950). So, should property listings utilise these psychological pricing techniques i.e. do they work? Well, the answer is yes and no, which I’ll now explain.

Yes they do work, in that £399,950 does at first appear much cheaper than £400,000. In the olden days, when property buyers would look in estate agents shop windows and the local newspaper listings, this worked well. Plus, when people would contact estate agents to enquire what properties they had for sale, the estate agent would be able to say it cost “3-9-9-950”, which sounds a lot cheaper than the one next door who said “400-thousand”.

However, in today’s mainly online world i.e. where people scroll through the property portals, there are a few major downsides to continuing with this old method of psychological pricing.

Firstly, the default of the property portals is to list properties by ‘highest price first’. That means the property listed at £400,000 actually appears higher up the page than the one at £399,950 (unless the user has played around with the sort function).

Secondly, most people will use the search parameters to narrow down the number of properties that are shown. The £399,950 and £400,000 price tags will both show up when someone enters a maximum budget of £400,000. But the next level up may be someone with a £450,000 budget, who therefore sets a minimum price of £400,000 to narrow the field. Now, the property listing of £399,950 is cut from the search entirely!

And thirdly…..it doesn’t work as well anymore as people have grown wise of this ruse!

For me, it’s more important to consider the pricing within the context of the market and how it stands up against the competition. 

Referring to another bit of customer psychology though, the ‘big round numbers’ are of more significance when listing a property for sale or let. I once saw a property marketed at £251,750, which I thought was quite bizarre; how many people do you think set a maximum budget of £250,000?! Similarly, it’s why some rental properties that may well be worth £1,050pcm get dragged down to £1,000pcm, as this will open a far greater number of prospective tenants.

So, next time you’re scrolling through the property portals, why not have a play with its search tool and see the price increments they use so you can understand how this may fit in. Be sure to let me know whether you think using psychological pricing when it comes to property listings is a good or bad idea.

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How much does a bedroom cost in Chichester?

Many first-time buyers will start out with a small ‘starter’ home, which is both suited to their needs and matches their modest earnings at the beginning of their careers. But as you get older there’s a tendency for extra possessions to pile up and for extra people to emerge in your life! This made me think; how much is a bedroom in Chichester and how much does it cost to climb the property ladder?

Let’s start with a one-bedroom property (typically a flat). The average price for one of these in Chichester is £199,950. As many will appreciate, the first step is often the hardest and that’s no exception when it comes to buying a property. The income and deposit you’ll require to afford even the most modest of homes in Chichester is probably the greatest barrier to getting on the property market.

Once you do though, and you hopefully rise through the ranks in your chosen career whilst growing your nest, the increase in price to afford an extra bedroom becomes a little easier at each rung of the ladder (in percentage terms).

The average two-bedroom property in Chichester will cost you £320,000 - a premium of £120,050 (60%) compared to a one-bedroom home.

The average three-bedroom property in Chichester will cost you £450,000 - a premium of £130,000 (41%) compared to a two-bedroom home.

The average four-bedroom property in Chichester will cost you £600,000 - a premium of £150,000 (33%) compared to a three-bedroom home. 

Of course, this price increase isn’t just for an extra ‘bedroom’. As the number of bedrooms grow, so should the size of the other rooms throughout the house, as well as the outside space and amenities e.g. garden/garage/driveway.

It does however demonstrate that it’s the first couple of steps that are the toughest on the property ladder, which is why it’s common that government policies and incentives focus primarily on first-time buyers. Having said that, bear in mind that the need for an additional bedroom effects the ‘upsizers’ at a time when the financial strain (a new child being the most common) is often at its greatest.

---

Five tips to avoid ‘nightmare tenants’

Most tenants simply want to live in peace in a home that they can treat as their own, whilst happily paying the going rate to do so. A very small percentage, however, will set out to either mistreat the property or purposely not pay the rent. Here are five tips to avoid these so-called ‘nightmare tenants’:

1. Offer tenants a nice home

If you offer a neglected property in poor condition, you are likely to attract less interest and will have to settle for tenants who are perhaps unable to secure a ‘nicer’ home. Meanwhile, if the property is well-presented, it will attract a wider pool of tenants to choose from and they will most likely take pride in keeping it in good condition. 

This applies to ongoing maintenance issues too; afterall, if you don’t care about the property, why should your tenants? Furthermore, tenants will feel aggrieved paying full rent for a property that isn’t fully-functional or being maintained as it should be. 

2. Match the property to the right tenants

It’s hard to say no sometimes, but a property needs to suit its occupants. For example, most blocks of flats won’t accept pets as it is part of the head lease. This isn’t unreasonable if you think about trying to live with a dog in a small second-floor flat with no access to outside space and with neighbours on all sides of you. It might also be unwise to allow two adults and three children to rent a two-bedroom flat; they simply need more space and amenities than that to live comfortably and to be able to keep the property in good order.

3. Reference thoroughly

This is probably the most critical step in ensuring you avoid ‘nightmare tenants’. Helpfully, referencing is something that prospective tenants with something to hide will try to avoid. Do not take shortcuts because a tenant wants to let the property quickly, can offer monies upfront or because a ‘friend of a friend’ says they’re “good for the rent”. Genuine tenants won’t quibble about you undertaking credit checks and asking for documentation, such as payslips and bank statements, so as to give you a full picture of their financial standing and rental history.

Furthermore, (and similar to point 2) you aren’t doing someone any favours in allowing them to commit to a rental property that is simply too expensive for them in the first place.

4. Ensure all the paperwork is in place

Tenancy agreements should contain clauses relating to sub-letting, noise, pets and other common do’s and don’ts, which will help avoid conflicts later on (and can become grounds for eviction if they are ignored). A detailed inventory, including photos, not only serves as a record if there is a dispute over the deposit at the end of the tenancy, but acts as a deterrent in the first place (as the recording is so detailed) and a guide for tenants at the end of tenancy (so they can check how the property should be left so as to receive their deposit back).

Ensuring all the paperwork is completed and provided to the tenants in the correct manner will also avoid problems later on. For example, if not served correctly, you open yourself up to fines, compensation claims and difficulty in progressing eviction notices if necessary; all of which a ‘nightmare tenant’ could use against you.

5. Keep in touch

Maintaining an open dialogue with tenants and responding to tenancy-related and maintenance queries promptly will encourage a good relationship. Visiting the property regularly will allow you to spot problems early, as well as checking all is ok with the tenants so as to maintain and prolong their tenancy. It also shows you are pro-active and haven’t just ‘left them to it’; tenants are more likely to take liberties with absent landlords. 

There are many other ways to minimise the risk of letting your property to problematic tenants, some of which are quite subtle and come via experience. Ultimately there is no fool proof way to avoid a ‘nightmare tenant’, although these five tips will go a long way to avoid those who seek to enter a tenancy agreement with bad intentions from the outset.

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This article was featured in...

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If you are looking for an agent that is well established, professional and communicative in Chichester, then contact us to find out how we can get the best out of your investment property.

E-mail me on clive@crjlettings.co.uk or call 01243 624 599.

Don't forget to visit the links below to view my previous buy-to-let deals and Chichester Property News articles:

• Follow The Buy-To-Let Property Investment Market in Chichester
• Chichester Property Market LinkedIn Page for Clive Janes
• CRJ Letting Agents Chichester Facebook Page
• CRJ Letting Agents Chichester Twitter Page
• Chichester Investment Property Management Specialist CRJ Letting Agents Website

^{_{c/o CRJ Lettings, 30B Southgate, Chichester, West Sussex, PO19 1DP}}

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Should landlords take a security deposit?

There is nothing to say that a landlord must take a security deposit, but it is always advisable to do so. Most landlords choose to take a security deposit from their tenants to provide some protection against the risk of non-payment of rent and/or damage caused to their property. It is important, however, to understand the rules about taking a security deposit, which have changed in recent years.

Major legislation was first brought in back in 2007, whereby security deposits needed to be protected in one of the approved government schemes. This was introduced amid claims of unscrupulous landlords simply pocketing the security deposit by default at the end of the tenancy, regardless of the tenant’s conduct. These schemes either hold the money (custodial schemes) or insure against its disappearance (insurance schemes). They also act as arbitrators between landlord and tenant if there is any disagreement in regards to the return of the security deposit at the end of the tenancy.

CRJ Lettings is a member of the DPS (Deposit Protection Service) and their custodial scheme. It’s free to use and it means neither the landlord nor the letting agent is holding the tenant’s security deposit; it’s held in a government-backed ring-fenced account throughout the tenancy.

This seems preferable for both landlords and tenants, compared to letting agents who hold the deposit monies in their own bank accounts (via the insurance schemes). There have been too many stories of fraudulent (or just poorly managed) letting agencies dipping into these funds to cover their own cashflow, or even going bust and losing the deposit monies in the process (which the landlord will have to cough up when the time comes to repay the tenant).

Whichever scheme you opt for though, they bring with them additional paperwork and responsibilities, for which it is absolutely critical you get correct. The deposit needs to be properly protected and the paperwork served to the tenants within 30 days of receiving their money. If this is not done, the landlord cannot serve notice upon the tenant if it becomes necessary and can also be held liable for compensation in the amount of three times the deposit!

In 2019, security deposits were capped to a maximum of five week’s rent (in most cases). This rather curious addition to the Tenant Fees Act has meant it is now far more difficult for tenants without a squeaky-clean credit history and good references to be accepted. Previously, such worries could be bypassed by taking a larger-than-normal security deposit, but the government has made this practice illegal. The same goes for tenants with pets; which is why you now regularly see premiums attached to the rental amount for such individuals instead.

Recently, there have been a plethora of ‘zero deposit’ schemes pitched as an alternative to tenants stumping up the deposit themselves. Personally, I’m not a fan of these schemes in their current form. Most landlords prefer to rent to tenants with some ‘skin in the game’ and most (good) tenants prefer to hand over a security deposit, knowing they’ll get it back at the end of the tenancy, rather than paying an upfront or monthly fee that they won’t see again.

A major criticism of security deposits though is the challenge many tenants face in raising a second one whilst their current security deposit is tied up in their present tenancy. The government are talking about introducing a ‘transferable’ deposit, whereby the same security deposit passes from one tenancy to the next (making it easier for tenants to move home). The problem here is that you never truly know if a tenant’s security deposit will be re-paid in full until they have vacated the property, by which time they’ll have already moved home (for which they’ll need the security deposit for). So, it doesn’t seem altogether workable without some form of insurance product involved, which is likely to cost tenants money one way or another.

If you’re a landlord and all of the above sounds like too much trouble, or you’ve not been taking all the necessary steps (or worse, you’re with a letting agent who hasn’t), please feel free to give me a call to instruct me to take this important burden away from you.

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This article was featured in...

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Is a ground floor flat a good buy?

 

Which floor a flat is on is an important factor when deciding what to buy (or rent). Some are ardent in their opinion that an upper-floor flat is the only way to go, whilst others can see plenty of benefits in keeping your feet on the ground. Typically, top floor flats have achieved a premium price over their ground floor counterparts, but is this justified?

Many will say it is and that flats on the ground floor represent both a privacy and security risk. In theory that is true; people walking past will be able to see into a ground floor flat rather than one higher up. And it’s easier to hop through an open window or break the glass of one on the ground floor than if you’d need a ladder to do so. But the same could be said for any house that isn’t built on stilts, so that logic doesn’t really cut the mustard in my opinion.

Certainly the view can be better in a flat on a higher floor and they tend to be brighter too. Plus, heat rises, so they are often easier and cheaper to heat in the Winter. I think there’s still something of a ‘status’ about being higher up in the sky though (think top floor penthouses), which largely clouds people’s opinions on the matter. Having said that, there’s definitely something to be said for only having neighbours below you, compared to ground floor flats, which in a poorly insulated building can mean hearing ‘footsteps on the ceiling’.

Ground floor flats though make perfect sense for those wishing to avoid the stairs. Whilst many immediately think of the elderly in this regard, the benefit is also there for young families with pushchairs and people with mobility issues. They’re also easier to evacuate for the safety conscious and you won’t have to worry about leaking roofs (although they’re the first ones to feel the impact of rising damp or drainage problems).

But the real bonus of having a ground floor flat is that many come with their own private garden or direct access to communal grounds. Apart from the obvious benefit this provides, which came to the fore as we were stuck at home during the pandemic, it can also make ground floor flats suitable for pet owners compared to their more penned-in upper-floor flat counterparts (although you’ll need to check the head lease to ensure pets are allowed at all).

I have long argued that houses are more popular than flats with both owner-occupiers and tenants. This is because they come with their own entrance, private outdoor space and, normally, better parking. But I’ve visited many ground floor flats that also come with these benefits and it’s not surprising that demand for these are holding up noticeably better at the moment compared to flats without these bonuses.

So for me, a ground floor flat that provides access onto its own outdoor space could be a winner; particularly with an aging population that values their own private space. This is a good way of getting many of the benefits associated with a house, but with a lower price tag.

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Should you buy a developer’s show home?

With all the new housing developments springing up around Chichester recently, and with many more planned in the future, an interesting investment opportunity was raised by one of my landlords a while ago - should he buy the developer’s show home and rent it back to them whilst the housing development is being built?

This is not a new practice and has been a popular investment with some for many years - particularly when house prices were booming and it was a reasonably safe bet that come the end of the development the show home would be worth far in excess of what the investor had originally paid.

It can be difficult to get a mortgage on a property that you buy and intend to rent back to the builder (particularly when it is a corporate lease that might run for several years). This therefore means you cannot leverage your funds and thus it tends to appeal to more risk averse ‘cash-rich’ investors who aren’t seeking mortgages to turbo-charge their returns.

The concept of being able to lease back the property from day one on a long-term contract at a reasonably generous fixed return, is quite appealing. Particularly when you factor in that you won’t need to market for, or manage, live-in tenants and the builder will maintain the property.

It’s not without its downsides though.

Besides checking the developer’s credit worthiness to pay the rent, you need to be confident of what the property is actually worth. This can be difficult when it is the first home to be built on what will be a building site for often many years. New-build properties are normally sold at a premium, so it can be hard to find comparables that justify the price, as existing homes nearby are likely to be cheaper in comparison.

There seems to be a flurry of developers right now who are overpricing such offerings and simply paying the rental return from the overinflated price. This is predominantly happening in the North and North-East of England, where developers are largely marketing the properties to ‘Southerners’ who aren’t perhaps familiar with the local housing market and their accompanying lower house prices.

Unfortunately, at the end of the term the investor is likely to find the achievable market rent is far below what they had been used to and the property hasn’t necessarily increased (or retained) the value they originally paid.

As ever it is buyer beware in regards to how good the ‘deal’ actually is. It is also ‘horses for courses’ in regards to what you are trying to achieve as to whether buying a developer’s show home is right for you.

As it happens, for this particular landlord it seemed to make sense. It was a national housebuilder and the property price and rental return seemed reasonable. The landlord was a cash investor and for the next few years he needn’t worry about tenants or property maintenance and he won’t have to pay a letting agent their management fees! ……oh.

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