Chichester Property News: return of investment

Showing posts with label return of investment. Show all posts

Thursday, 11 April 2024

Five things to check when choosing a letting agent

Using a letting agent to manage your rental property should relieve you of hassle, whilst improving your return on investment. Here are five things to look out for though to prevent you being stung by a poor performing or sneaky letting agent.

1. Legal requirements
It is a legal requirement for all letting agents to be a member of a property ombudsman or redress scheme, which ensures you have a port of call if you have reason to complain about their service. Letting agents should also have indemnity insurance to protect you against any mistakes, as well as Client Money Protection insurance, which will compensate you if the agent should misappropriate your funds. Certificates for all of these should be provided upon request and be available on their website - if they don’t have them, they are breaking the law!

2. Service
Ensure you understand what level of service you expect from a letting agent and whether they can deliver it. Discuss what options are available and what the proposed service includes as letting agents’ interpretation of ‘fully managed’ can vary, and this can be at odds with landlords’ expectations. Ask what marketing the agent will undertake, what tenant referencing they perform (and if they’ll supply you with copies) and what the move-in process entails (including which deposit scheme they use and the level of detail to their inventories). Ask how often they will undertake inspections at your property and what their process is if rent isn’t received on time.

3. Fees
A major factor in choosing any service is its cost (although I’d argue value for money is more important than ultimate price). Fortunately, it is a legal requirement for letting agents to list all their fees on their website and in their offices. You should question those who aren’t doing this - firstly because it’s illegal not to, but secondly…what are they hiding?! A myriad of extra fees hidden away in the small print of their management contract can soon add up. Also, ask if they add commission to maintenance invoices; this isn’t illegal (if it’s made clear), but you might wonder why organising repairs isn’t simply part of their management fee.

4. Reviews
Perhaps the best way to choose a letting agent (like with any service) is by seeking a recommendation or referral from someone you trust. Failing that, letting agents are likely to offer up testimonials from their current clients, although it’s perhaps better to seek them out for yourself by looking up their reviews online.

5. Contracts
Whichever agent you decide upon, make sure you receive a written management contract. This should set out the service the letting agent will undertake for you, whilst clearly listing all the fees you’ll ever need to pay. This will provide clarity for both parties and should help avoid any mis-understandings or disputes at a later date. Be sure to carefully read the contract and raise any terms you are unhappy with before you sign it and the agent starts working for you.

This article was featured in...

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:

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

Thursday, 8 December 2022

Five things to check when choosing a letting agent

1. Legal requirements
It is a legal requirement for all letting agents to be a member of a property ombudsman or redress scheme, which ensures you have a port of call if you have reason to complain about their service. Letting agents should also have indemnity insurance to protect you against any mistakes, as well as Client Money Protection insurance, which will compensate you if the agent should misappropriate your funds. Certificates for all of these should be provided upon request - if they don’t have them, they are breaking the law!

2. Service
Ensure you understand what level of service you expect from a letting agent and whether they can deliver it. Discuss what options are available and what the proposed service includes as letting agents’ interpretation of ‘fully managed’ can vary, and this can be at odds with landlords’ expectations. Ask what marketing the agent will undertake, what tenant referencing they perform (and if they’ll supply you with copies) and what the move-in process entails (including which deposit scheme they use and the level of detail to their inventories). Ask how often they will undertake inspections at your property and what their process is if rent isn’t received on time.

3. Fees
A major factor in choosing any service is its cost (although I’d argue value for money is more important than ultimate price). Fortunately, it is a legal requirement for letting agents to list all their fees on their website and in their offices. You should question those who aren’t doing this - firstly because it’s illegal not to, but secondly…what are they hiding?! A myriad of extra fees hidden away in the small print of their management contract can soon add up. Also, ask if they add commission to maintenance invoices; this isn’t illegal (if it’s made clear), but you might wonder why organising repairs isn’t simply part of their management fee.

This article was featured in...

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

Thursday, 18 June 2020

Five things to check when choosing a letting agent

1. Legal requirements
It is a legal requirement for all letting agents to be a member of a property ombudsman or redress scheme, which ensures you have a port of call if you have reason to complain about their service. Letting agents should also have indemnity insurance to protect you against any mistakes, as well as Client Money Protection insurance, which will compensate you if the agent should misappropriate your funds. Certificates for all of these should be provided upon request - if they don’t have them, they are breaking the law!

2. Service
Ensure you understand what level of service you expect from a letting agent and whether they can deliver it. Discuss what options are available and what the proposed service includes as letting agents’ interpretation of ‘fully managed’ can vary, and this can be at odds with landlords’ expectations. Ask what marketing the agent will undertake, what tenant referencing they perform (and if they’ll supply you with copies) and what the move-in process entails (including which deposit scheme they use and the level of detail to their inventories). Ask how often they will undertake inspections at your property and what their process is if rent isn’t received on time.

3. Fees
A major factor in choosing any service is its cost (although I’d argue value for money is more important than ultimate price). Fortunately, it is a legal requirement for letting agents to list all their fees on their website and in their offices. You should question those who aren’t doing this - firstly because it’s illegal not to, but secondly…what are they hiding?! A myriad of extra fees hidden away in the small print of their management contract can soon add up. Also, ask if they add commission to maintenance invoices; this isn’t illegal (if it’s made clear), but you might wonder why organising repairs isn’t simply part of their management fee.

This article was featured in...

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

Thursday, 14 May 2020

1,333% return for Chichester’s landlords since 1997?

market returns on property investment for landlords

A landlord contacted me having seen one of my recent buy-to-let deals of the week. He was amazed that a simple three-bedroom house off St. James’ Road in Chichester had risen in value by 333% in 23 years. He commented on what an amazing return that was, before I flummoxed him by saying that the overall return achieved was likely to be FAR greater than that.

This tied in with my article from a few weeks ago, questioning whether ‘cash is king’ when it comes to property investment. You see, one of the key advantages of property compared to most other investments is the fact the banks are willing to lend you money against your purchase. Landlords that have done this in the past, rather than paying entirely with their own funds, have massively increased their returns.

Referring back to the three-bedroom house off St. James’ Road; it was purchased in 1997 for £59,995. It is now for sale at £260,000, equating to an increase of 333% in 23 years (or 6.6% compounded per year).

However, if the property had been bought with a 75% interest-free mortgage, it would mean the landlord would only have required £15,000 of their own money i.e. the 25% deposit, whilst borrowing the remaining £44,995 from the bank.

That original £15,000 investment would be worth £215,005 today (the £260,000 value minus the £44,995 mortgage). That’s a whopping return of 1,333%, or 12.3% compounded annually. That’s before factoring in the rent that would have been received in those 23 years!

Of course, this leverage can also work against you in a downturn, which is what caught many out in 2007/2008. Consider an over-developed city centre apartment priced at £200,000, which could be bought with just a 5% deposit at the time. A great use of finance if the price keeps going up, but if it was to drop in value by just £10,000 you would’ve lost all of your initial investment. Worse still, which is what caught many people out, is when values fall further than this and the owner faces negative equity i.e. you owe the bank money!

This is why many risk averse people are happy to purchase property outright with cash (as I discussed when I wrote whether cash was still king). There’s no chance of being forced to sell the property at a loss, meanwhile you retain more of the rent and still benefit from potential house price increases.

The phenomenal historical returns above demonstrates why property continues to be such a popular form of investment. It also explains how long-term buy-to-let investors have become particularly wealthy, especially if they were well-disciplined in re-investing their rental profits to fund more deposits to buy yet more property.

If you’re looking at property as an investment, please get in touch if you’d like to know what would (and would not) make a decent buy-to-let in Chichester.

This article was featured in...

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