Experienced investor and author David Lawrenson explains:

In a recent blog post I said, “It still amazes me how some people blindly believe what they are told by firms who push residential property investments.”

I then went on to list 6 things that any investor using a third party property firm should do as part of their research:

1. Find out what you can about the property company you are buying through. What does it say about them on the Internet?
2. Do they stand to lose money if the investment turns out to be a bad one?
3. Get your own valuation for both rental potential and property value. Don’t ever trust theirs.
4. Even with your own valuation, you must still do your own research – remember, lots of professional surveyors working for banks once thought all the shiny new builds going up 5 to 10 years ago were worth 50% more than they are actually worth now.
5. To avoid making the same mistakes these guys did back then, you should think carefully about supply. So, if there are ten thousand more units going up locally and they are just like yours and are all chasing a limited pool of tenants, I suggest you dig out your old economics text books and re-read the bits about demand and supply.
6. Visit the area!

Back to Basics Guide for Buy to Let Investors

In another blog post, I went “back to basics” again with a 10 point guide for buy to let investors and landlords:

1. Buy into the right location. Look at areas that are getting or have just got faster transport links. Use the Internet and publications like Estates Gazzette, available in most libraries, for news on planned regeneration. Do your own research.
2. Use today’s weak market to make “hard ball” offers at below the asking price. If the vendor won’t play ball simply walk away and make a cheeky offer somewhere else.
3. Buy the type of property that is in demand from tenants and for which there will be a strong resale market when you eventually come to sell. Ask letting agents for their view of what type of house is in demand locally.
4. Read up and understand your legal responsibilities as a landlord.
5. Try to build up a deposit of at least 25 per cent to allow you access to the best mortgage rates.
6. Carefully check all prospective tenants’ references to avoid the “tenant from hell”. If your agent does this for you ask to see the references they obtained. Don’t fully trust to an agent until you have worked with them for a while and they have earned that trust.
7. Treat tenants as you would like to be treated.
8. Keep all receipts and invoices and have a good administration system.
9. Have a sense of humour. You’ll need it from time to time.
10. If you need advice, make sure it is independent advice and not provided by someone also looking to sell a property or finance package to you.

Scam Watch

Most aspects of property investment are not regulated and so scam merchants abound – all too ready to take hard earned cash away from novice investors.

The latest things doing the rounds are …..

1. The Duff “Below Market Value Property” Lead

This is where someone pays a property-sourcing firm cash up front for leads for supposedly below market value property (BMV) deals.

But increasingly the customers are finding that the properties are simply not below market value.

A variant of this is where the punter pays for access to the mythical “secret repossession list.”

The fact is that repossessed properties are all made public because the lenders are legally bound to get the highest price for properties they repossess. There are NO secret lists.

2. Property Lease Options

I’m pretty sure that a lot of people are already being done by badly constructed Options Schemes. And in three years time, the press will eventually wake up to this and this scandal will be big news.

My advice to people wanting to buy property this way is to make sure the property lease option is fair and watertight by getting good independent legal advice.

David Lawrenson of www.LettingFocus.com

09-02-2010 – Leaders, the UK’s largest independent letting specialist, is reporting an increase in demand for rental accommodation at the start of 2010, with demand outstripping supply in parts of Sussex, Hampshire, Surrey, Hertfordshire, Berkshire, Buckinghamshire and Dorset, where the firm has a total of 42 branches.

Says Leaders’ managing director, Paul Weller: “Despite the disruption of the snow during the first two weeks of January, most of our branches experienced an incredibly busy month, with high demand for all types of properties, from studio and 1 or 2 bedroom flats to big and small family homes. We are finding that good quality properties are being snapped up quickly with many people waiting for more to come onto the market. This is an excellent time for anyone considering buying a property to let, or renting out their home, to enter the lettings market.”

Although the UK is officially coming out of recession, many people are still either unwilling or unable to take on a mortgage and are choosing to rent rather than buy. The availability of finance for first-time buyers has not improved significantly since last year and is still stifling the sales market, leading to increased demand in the rental sector.

Whilst recent research by the Association of Residential Letting Agents (ARLA) shows that 54% of landlords believe that tenants are being forced into renting as they either cannot afford to buy; cannot find a competitive mortgage; or are unable to find a suitable property to buy (these tenants have been coined “reluctant tenants”), Leaders believe that a significant number are choosing to rent because they prefer it.

Says Mr Weller: “Renting offers a more flexible and carefree lifestyle than buying. There are no worries about maintenance and repair costs, fluctuating interest rates affecting mortgage payments, or committing to a property or area long-term. Many people want or need to be able to move easily for work and enjoy the freedom that renting offers.”

This attitude towards renting, which is becoming more similar to that of mainland Europe where renting is the norm, means that renting out a property – provided it is done with professional, expert advice – is an attractive long-term investment.
Says Mr Weller: “Boom or bust, the letting market has the capacity to thrive: when the economy is doing well, people want the flexibility to move for work opportunities; when it is doing badly they prefer not to commit to a mortgage and the additional expenses of home ownership. Throw in the issues we have been experiencing lately – a credit crunch and a slow sales market – and it is clear why the lettings market is doing so well.

“Overall, we are very positive about 2010 as we expect the high demand for rented accommodation to continue in the face of both the slow sales market and the wider economic uncertainty.”

Landlords’ properties are being targeted by criminal gangs as a cover for illegal activity, according to the National Landlords Association (NLA), the leading representative body for private-residential landlords in the UK.

www.housefund.co.uk – 8 Feb 2010

Privately-rented homes across the UK are being used as a smokescreen to grow cannabis in homemade ‘factories’, and produce the harmful drug crystal meth. But it’s not just drugs. Prostitution is also found across the private-rented sector, with homes being used as brothels. Criminals are attracted to rented properties, often in quiet residential areas, as a base to operate without the fear of being disturbed.

Unfortunately, when these kind of crimes take place, it’s the landlord who ends up footing the bill. Many insurance policies are rendered invalid when criminal activity takes place in a property and the damage caused can run into thousands of pounds.

One NLA member lost £20,000 when two of his properties were used to grow cannabis. The gang involved took out internal walls and rewired the property directly to the electrical mains (example photos attached). And landlords who find brothels in their properties and fail to report them can face prosecution.

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The Residential Landlords Association is concerned that the courts may order outright possession to lenders if landlords fail to pay a buy-to-let mortgage.

Friday’s (January 29th) second reading of Bolton MP Dr Brian Iddon’s private member’s bill – to protect tenants from losing their homes if their landlord defaults on a mortgage – is a step towards fair play for tenants, landlords and lenders, agrees the RLA

But the association still has concerns – including the clause covering a situation where a landlord has given the keys back – which could require a court order to rectify the matter – but “an amendment would be helpful to make this aspect crystal clear,” says RLA lawyer Richard Jones.

An explanatory note from the department for Communities and Local Government says that the Bill gives protection in this situation. “We hope this is the correct view,” says Richard Jones. “A court order would need to be obtained but, as the tenant is a trespasser as against the lender, the court must normally order immediate possession meaning the tenant would have to move out there and then.”

With some reservations, the RLA believes “the bill will enhance the private rented sector and assist tenants who, through no fault of their own, find themselves facing eviction at short notice.

“Past experience shows that tenants may not find out until the last minute that a property is being repossessed and we are aware of cases where the first indication is a bailiff turning up on the doorstep. That cannot be fair – and it brings into disrepute the reputation of a private rented sector that has struggled hard to gain the standing it deserves.“

The Residential Landlords Association is a leading national organisation with members owning over 100,000 properties in the UK’s professional private rented sector. The range of members’ services – on www.rla.org.uk – includes legal advice, insurance, financial services, credit referencing and training.

The Government’s latest proposals for the UK Private Rental Sector (PRS) have been deemed ‘unworkable’ by the National Landlords Association (NLA).

yourmortgage.co.uk – 4 Feb 2010

The plans include a website based on the Trip Advisor model, which allows holidaymakers to post comments about hotels and resorts and rate them accordingly.

The idea is that tenants will post feedback about the rental properties and landlords they deal with, while landlords post comments about their tenants.

The NLA pointed out that the site would have to be so carefully monitored to prevent libel and inappropriate content that it would simply be impossible.

It also claimed that such a site would not offer a true reflection of the sector, as people are naturally more inclined to write about negative experiences than good ones.

The Government has also confirmed its intention of implementing a National Register for Landlords aimed at giving tenants information on the track record of prospective landlords including the condition of their properties and how quickly they fix any faults.

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