What Other People Don’t Tell You

71% of landlords make a profit, whilst 22% break even or make a loss. We want all our investors to make a profit – be prepared and learn about your Business.

We source properties that are heavily discounted up to 40% off the Market Value. We offer genuine below market value deals which are exclusive to us. This discount is then passed on to you, making you a massive saving on a quality property. Whether you are looking at purchasing a single investment property or looking to build a portfolio we have an experienced and dynamic property team to help. There are No hidden charges and we work with you all the way.

We are 100% honest and want to provide you with a high level of service. This Section is to advise you some of the issues that are associated with Property Investment,

Buying Properties with a view to renting them out is known as Buy to Let. Buy to Let is a business, and it comes with its own Legal and Financial responsibilities. It is important that you are aware of the risks beforehand and in that way you can make a positive move in the right direction.

We take property investment seriously and would like for you to go in with your eyes open.

Are you aware of the following Risks of Property Investment?

You understand that property can be a medium to long term investment strategy – Solution, make sure your property has cash flow, high rental demand, in the right location, and above all has equity.

You understand that prices can go up and down – If you purchase a property at a discount based on today’s value, then you will have factored in a potential negative equity situation against your capital invested should prices go further down.

You understand that there are legal implications to owning a property that you rent out – you can join associations such as ARLA [Association of Residential Letting Agents], the subscription normally a nominal annual fee, and they will keep you up to date with latest changes in legislation you download documents and they have an advice line.

You understand that there are costs to maintaining a property – These can be factored in when you conduct a visual inspection followed by a survey which will highlight any urgent repairs. You can budget for other repairs in the medium term.

You understand that Rents are not normally guaranteed – you may be able to an insurance policy subject to terms and condition to protect against loss of rent.

You understand that there are costs associated with finding a tenant and managing a property – you can factor these in, you may agree a fixed fee to find a tenant, or pay a % of the rent collected by the agent every month [this can range between 5 to 10%]. You can build these in to your business plan.

You understand that there may be void periods and costs to you when the property is empty – You can build in void periods in to your cashf low model, we use 21 days as a rule. However, if you develop a good relationship with your tenant/s then your properties will remain occupied longer. If a property is becoming vacant then subject to your tenancy agreement you can look to market the property, therefore reducing voids.

You understand the risks that can be associated with borrowing money and that if you do not keep up your repayments then your property could be repossessed. – If you have developed the right income stream for your property and have the reserves in place, then your property should be rented, you must remember that the Lender is potentially the one that is at risk, and if they did not feel comfortable with the property risk in the first place then they would have not lent to you in this first place.

You understand that your property must be compliant and meet the Legal requirements when renting to a tenant - you can join associations such as ARLA [Association of Residential Letting Agents] , they will provide you information and ways in which you can keep up to date.

You must understand that you may have to pay ground rent and service charge on certain types of property even if it is vacant – You can factor this in to your business model. There is not normally a service charge to pay on houses, and ground rent can be nominal. Service charge can sometimes be effective, as you are paying for the upkeep and insurance of the building that your property is in.

You must understand that you will have to keep your paperwork up to date and must keep the Inland Revenue informed of your income and expenses and pay tax as required on your rental income less expenses – your rental agent will provide you with a monthly report, this will let you know, the income and their expense. You can then tally this up with your bank statement. If you keep hold of all the expense invoices, together with the interest payments made, you can work out the profit figure relatively easily. You may decide to engage with an accountant or liaise directly with the tax office. There are also many accountancy software solutions available.

You must understand that you may be liable to pay Council tax and Building Insurance, even if the property is vacant – this must be factored in with your business plan. You should have surplus capital to pay for voids from the cash flow you receive.

Common Mistakes made by Investors?

Failing to understand why they are looking to invest in to property without considering personal risks – this should be addressed and hence provisioned for in your business plan

Not looking after your investment property – it is advisable to carry out an inventory before you rent a property and carry out inspection visits. You may nominate your agent to do this on your behalf.

Not using the right letting agents, solicitors and or financial advisers – we can recommend and refer to you tried and trusted professionals.

Not buying in the right location – this is where the due diligence process is imperative.

Not buying the right type of property - this is where the due diligence process is imperative.

Not looking at current or future market trends and factoring in changing market conditions - this is where the due diligence process is imperative.

Not keeping up to date with legislation and the changing market – Subscribe to a rental association such as Arla, they will keep you informed. You can also subscribe to our newsletter and visit our blog. Land Registry also provides a great insight to changing market conditions and trends.

Not being proactive in looking at ways in which to grow or consolidate your portfolio – working with us will allow you to build and strategise the way in which you create and, orgment and grow your portfolio. Sometimes it’s not about growth but about consolidation, ensuring your portfolio is well managed and income producing before you out to acquire more assets.

Not looking at ways in which to maximize the rental income on the property in order to give you the best possible return – always keep an open mind and consider your options.

Not factoring in the cost and time to run your property investment – an absentee boss will always run in to problems, this is a business and although it may not involve a full time effort we strongly advise you manage your time in a way so that you do not neglect your property investments.

Tenants – It is not always plane Sailing

A good tenant is a tenant that adheres to the tenancy Agreement; they pay the Rent on time and maintain your property to a high Standard. If they discover a problem in the Property they notify you immediately so that you can carry out emergency repairs so that your property does not deteriorate from unnecessary damage. Problematic tenants can be a nuisance, please see an example of some issues we have come across below?

• They pay no rent, do not pay rent on time, or look to pay a reduced amount from the pre agreed tenancy agreement.
• They may cause malicious damage to the property
• They may be calling you out to do repairs and try to pressure you, albeit they are not of an urgent nature.
• They have other people living in the property that are not allowed to do so
• They have pets, and you may have excluded this from their Agreement
• They use the property for immoral use
• They try to damage the property structurally
• They break the windows, damage locks, damage the kitchen, bathroom and or wardrobes
• They damage the decoration or break internal doors
• They keep the property untidy and unsafe, which could affect your insurance
• They could be a nuisance to Neighbors and the local residents
• Vacant or Occupied, arrears deposit assessments
• They could not clear litter and as such cause infestation with mice or cockroaches
• If you have furnished the property they could look to damage your furniture or belongings, and pressure you to buy news items
• They could look at bringing an action against you for something you have not done as a Landlord, and as you may not be entitled to Legal expenses cover, you may have to fund defending such an action.
• They could misuse the boiler and as such damage the heating system
• They could strip the lead of the roof and try to sell it
• They could use your address for fraud
• You could send repair workers to the property, and agreed a time for the tenant to be present. The tenant could not be there and as such you may have to pay the contractor for their inconvenience. You will then have to reschedule another appointment adding to the cost and time you have spent.

You can insure against tenants and as such look to protect your interest subject to the insurers terms and conditions.

Always take references for tenants and a deposit [which will have to be held in a compliant protected scheme].

Take an inventory of the property and inspect the property either yourself or through an agent every so often.

Have a protocol in place, should the tenant be in arrears or breach the terms of such agreement then speak with them to remedy the situation, if they refuse to cooperate and remedy the situation then commence legal action against them. You will be helped by ARLA who will advise you should you be there members, alternatively you may decide to instruct a solicitor to do it on your behalf, and then look to recover costs at a later date should you be successful from the tenant.
You may take out insurance cover for boilers, electrics and drains for parts and labor.

Types of Tenancy Agreements for Residential Property Investments

The most common type of residential tenancy is an Assured Short hold Tenancy Agreement which normally ranges from either a 6 Monthly or 12 Monthly contract terms. These Agreements can vary as to whether the property is furnished or unfurnished.
Requirements to create an Assured Shorthold Tenancy
In order to create an Assured Shorthold Tenancy all of the following need to apply:-

• The Tenant is renting from a Private Landlord
• The tenancy started on or after 15 January 1989
• The property is the Tenant's main accommodation
• The landlord does not live in the property - i.e. If the Tenant has rights to have privacy in the property where the Landlord cannot enter without mutual agreement before hand
• The rent is less than £100,000.00 a year

Eviction

If the matter relates to a civil breach by the Tenant then you may decide that the best solution is to evict the tenant, and as such you will have to use a civil court procedure. This can be a time consuming and costly process. You must at all-time act fairly, responsibly and appropriately as a Landlord. This is a very simple process to follow and something that a Landlord can do without the need of instructing a solicitor. You may also be able to recover costs from the Tenant and or the tenant’s guarantor should there be one in place. You may use a solicitor to do this or may have an insurance policy that will do this for you or at least cover any associated costs.

You will also have to factor in the cost of loss of rent, damages, legal fees, interest on monies due, personal time and expenses, court fees and disbursements.

Hidden Charges – Watch out for the unexpected when purchasing a property

Mortgage Brokers Fees – always find out the costs upfront

Lenders Arrangement Fees - always find out the costs upfront

Valuation Fees- always find out the costs upfront

Specialist Reports – such as Timber, Damp, Electrical Safety, Gas Safety - always find out the costs upfront

Solicitors Legal Fees – watch out for the charges such as case management charges, etc. Try to get a full estimate of costs beforehand with a break down for the likely disbursement cost.

Title Indemnity Insurance and / or other Legal Policy that may be required – this is normally nominal amounts in comparison, but you still may decide to get a quote first and pass this cost back on to the seller.

Searches -these could be legal searches such as, land charges, environmental, drainage, utilities, chancery check, insolvency, boundaries, right of way, land searches, ownership searches to name but a few - always find out the costs upfront

Insurance- always find out the costs upfront

Stamp Duty- always find out the costs upfront

Interest Rates within contracts [just in case you miss your completion deadline]. – ask your broker to explain these to you or alternatively ask your solicitor.

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