Increasing Your Rent

You find a good tenant, receive the rent on time and hear nothing from them for a year until contract renewal which you happily do to as a paying and non-complaining tenant is worth their weight in gold. Do this two or three times in a row and you’re quite possibly losing out on a significant amount of income. It’s easily done.

Some landlords are friendly with their tenants and feel uncomfortable in raising rents, but renting out a property is a business. You may be friendly with your local supermarket cashier but it does not mean she takes a pay cut because of that relationship and the same principle should apply to landlords and tenants.

With a mortgage rate rise on the cards and ever creeping inflation, it is important that rents are reviewed on an annual basis, especially when they have been increasing in landlords’ favour over the past year upwards.

Here are some tips to increasing your rents:

  • Start the process in good time. If you say you want to raise the rent on the day the tenancy ends and the tenant says no, you may be stuck with an empty property whilst you scramble to find new tenants. A month or two before is the best time to broach the subject with your tenants and if they are moving on, you have plenty of time to find new ones
  • Be reasonable. If you get too greedy and ask for above market rent, you may well scare a perfectly good tenant off.
  • Be flexible. Although it would be good to get the top rent, if your property hasn’t been painted in 5 years and the carpets were a bit iffy before they moved in, these are costs you will need to pay to get the top market rent. In cases such as these, be prepared to take less than the going rate.
  • Ask your agent for advice. They can give a picture of the market for similar properties in the area.

For not so much effort you could make a significant increase to your income. If you’re a landlord and want to know what the market is doing, feel free to contact Homefinders for free and expert advice.

 
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The Chinese Investor

I have blogged before about foreign investment into London but earlier this month I watched a BBC programme called Inside Out London, The Great Property Race. This programme put a human face to the Buy to Leave investment trend.

A staggering £3.5 billion has flowed from China into the London property market in 2013. This has led to many developers setting up offices in China and new build apartments often being sold off plan at “expos” to Chinese investors before they are even released to the UK market. As an investor said on the programme about reasons for buying in London “It’s cheap. It’s as simple as that! £300,000-£400,000. People can afford it here and offer to pay cash,”

With safe returns of over 10% in value every year, many Chinese owners don’t even need to rent the property and like the idea that it is kept brand new if no one lives there. This has added to an existing housing shortage and led to boroughs such as Islington Council looking at ways to discourage buy to leaves. New developments in the borough such as the Orchard Building have over 50% of the building unoccupied. To deter this, Islington are considering fining owners £60,000 if the property is left vacant for 2 years or more. Quite a hefty sum if it gets the go ahead.

If you own a property in London, this investment rush is of course good news as prices continue to rise making you wealthier each year for doing very little. If you are looking to buy for the first time, this is perhaps not such good news but possibly a cloud with a silver lining. One couple on the show were looking to move to Forest Gate as they had been priced out of Walthamstow. Forest Gate was both affordable for them (with parental help) and up and coming as Crossrail makes travel to Liverpool Street and the rest of the city so much easier. Property prices may well soar here next making them a hefty return.

Interest Rates to Rise?

When the Bank of England held interest rates at 0.5% at the start of this month, it was widely expected. Later on in the month, the picture changed when the governor Mark Carney said in a speech just over a week later that a rate rise “could happen sooner than financial markets currently expect”.

Cryptic as always, but an indicator things are going to change. How and when will this affect homeowners on tracker mortgages?

If we look at an interview given by the outgoing deputy governor of the Bank of England in May to the BBC, Charlie Bean said

“The bank rate averaged about 5% in the decade or so before the crisis. It’s reasonable to think that given the headwinds that are still out there as well as some the global forces that perhaps the level that we go to three or five years out might a couple of percentage points below that” 

Always reassuring when someone in charge of finance is called Mr Bean, but keeping on point, his words translated say that around a 3% interest rate by 2017 to 2019 is likely. It will be a gradual process to get to 3% but before the end of the year, it is expected this process would have begun, perhaps a quarter a percentage point at a time.

If you have a tracker mortgage of say £250,000, a quarter of a percent rise in rates would add an extra £52 a month to your mortgage. If you work it out at the full 3%, it would mean an extra £520 a month on your current monthly payments. No small amount.

There is of course a way you can protect against this for a while, if your current mortgage has an introductory rate that has expired, re-mortgage and fix for as long as possible whilst rates are still low. Feel free to contact Homefinders and we can refer a mortgage broker to help you do this, after that it’s up to you to decide how to spend the money you’ve saved!

Disrepair Cases & Compensation

Over the last few years we have had a number of compensation claims due to disrepair where landlords refused to or delayed work needed that was their legal responsibility. This has mainly been from tenants on low income who have access to legal aid with nothing to lose but everything to gain on their part.

 

Solicitors advise tenants not to talk to the agent or the landlord and wave about inflated compensation figures to raise their hopes. In one case a tenant received £1,000 compensation and their solicitors got £15,000. There was a small fire in the hallway of the building and the tenant claimed that she was taken ill because of smoke; the solicitors were asking for £10,000 compensation. Our Insurance settled to pay £1,000 compensation for the tenant but had to pay the extortionate legal fees of £15,000 to the tenant’s solicitor.

 

We have professional Indemnity Insurance since 2003 without a claim until 2009. Over the last few years we have had number of disrepairs claims all from tenants on housing benefit. Professional tenants don’t usually take claims to these extremes.

 

Compensation culture is here and our indemnity insurance has shot through the roof.  We are advised by our insurers to tell landlords if they refuse to do or delay the work that is legally their responsibility then they will be liable for any compensation claim. We would strongly advise landlords to be on their guard when meeting their obligations for repairs, especially with housing benefit tenants.

 

Continued habitability of the property is your legal responsibility and any works needed to maintain this should be carried out as soon as possible, if that is not done, tenants can:

 

  • Request compensation or a reduced rent
  • Withhold rent until the repair is actioned
  • Report the repair to the Private Sector Housing Group who can inspect your property, assess the work and issue enforcement notices followed by fines which lately they’ve become incredibly aggressive at doing. If tenants go to the Local Authority for an issue they are obliged to check for 29 hazards under health and safety. In one case where a landlord refused to pay £150 to draught proof windows, the Local Authority got involved and found out electricity was old, pipes were lead etc and it cost the landlord £35,000 for extra repairs.
  • Make a disrepair claim though solicitors which is free for housing benefit tenants under Legal Aid.

 

Not all tenants will take the above action, but it’s important that we advise you of the possible repercussions of not to carrying out repairs. If you need advice or a reliable and inexpensive contractor, please call our maintenance department on 020 7033 0311 or email maintenance@homefinders.net.

Open Day Bonanza!

London is booming. With such an increase in demand, we now hold regular open days on properties for sale and usually have an offer accepted the same day which exceeds our seller’s expectations. As well as being successful, these days have also been entertaining.

On one open day in Beckton, I had a three bedroom terraced house for sale and several local residents keen to buy for their extended family members. They were desperate with such a shortage of houses on the market and when telling them it will be an open day when I meet them and not an exclusive viewing, they couldn’t hide their disappointment!

When the day came, buyers were keen to impress. One who lived two doors down presented me with a fruit bowl after the viewing and expressed their interest in the property. Another buyer wanted me to try a cake baked earlier by his wife. I felt like a Persian king with subjects bringing offerings to please me. In the end neither had their offers accepted which is a shame as I really wanted more cake! We did however get a very good price for the seller.

Days like these are common. When looking around some of the areas we cover such as Stratford and Leyton, they have shown great strength in rising prices even after the Olympics. Shiny new buildings are transforming the sky line with developments such as the Stratford Plaza being completely sold before even being finished. To cater for the new residents, shopping facilities are popping up to serve their commuter lifestyle such as Tesco Metro, Starbucks and Costa Coffee for their daily caffeine fix or something for dinner on the way home from work.

Demand is high and if you are a buyer, my best advice for you is to not haggle too much when buying a property. As prices rise, it is wise to go in with your best offer to seal the deal before someone else does, taking away that dream home from you as you tried to make savings. I would also say that as nice as a fruit bowl or slice of cake are, they unfortunately do not translate to a successful purchase!

If you’re looking to sell, now is the best time to act. With our average open day attracting over forty potential buyers, demand has never been so high. One of our sellers was so surprised by the amount of people we had through her door, she was insistent we help sell her sister’s house. She looked upset when I said we don’t cover Birmingham!

We do of course cover East & North London. Specialising in this area we have extensive local knowledge and more importantly, plenty of ready, willing and able buyers. We aim to get you the best price for your property so feel free to give one of our offices a call to discuss your property if you are considering selling either now or in the future.

– Asday Sayed, Stratford Branch Manager 020 8534 8852

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Gazumping Is Back

Gazumping may sound like an exotic African mammal, but unfortunately its true meaning is not so romantic. Gazumping is the act of a property seller taking a higher offer for their property from an outside party despite already having agreed a sale with another buyer for a lower amount.

With property prices on the rise, this is an all too common occurrence unfortunately. The original eager buyer has all their belongings ready to go, have a buyer for their own property, planned local schools for the children and their journeys to work, forked up solicitor and mortgage fees then suddenly boom, unless they can up the price, they are left without a new home. Most upsetting.

There are of course ways to protect against gazumping, here are a few tips to avoid the worst:

  • Ask the seller to remove the property from estate agents’ websites and change the “For Sale” sign to “Sold” when a sale has been agreed and the legal process has started
  • Don’t drag your heels. Push your mortgage broker to get a survey conducted as quickly as possible and make sure he has the paperwork required from you.
  • Keep in regular contact with your solicitor. If you want something done, politely chase and ask for time frames for the next contact to be made and make a call that day. When monitored, a solicitor who you may not of used before will have no chance to drag their heels.
  • If your own property is up for sale, ensure that is running smoothly and your own buyer is on top of things
  • Don’t be too pernickety. If the fixtures and fittings list comes back without the shed you liked in the back garden, don’t spend a week to re-negotiate or haggle over price for the sake of a couple of hundred pounds. In a buyer’s market, haggle all you like but when prices are increasing, it’s unwise to upset the seller.

The above does not guarantee you won’t be gazumped, but with a show of commitment and speed on your part, it is less likely to happen. As soon as you have exchanged contracts, you can breathe a sigh of relief as a severe financial penalty is on the table if either party pulls out.

If you’re thinking of buying or selling, please contact Homefinders for advice. With decades of experience and extensive local knowledge, we aim to offer the best service possible to see a successful sale whatever the market conditions.

Mortgage Rules to Change

Following the Mortgage Market Review by the Financial Conduct Authority, the process of getting a mortgage is likely to get harder with potentially less money available to people to borrow.

The new rules are designed to protect borrowers from taking on more debt than they can afford and lenders will now be looking in more depth at borrowers’ finances. From the end of April, all monthly payments and household expenses such as utility bills will be looked at and validation of these may be required. Bank statements will be gone through with a fine tooth comb and questions may be raised about any expense with supporting documentation asked to be seen.

A further aspect of this review is stress testing an applicant’s finances. Lenders will look at the effect of an interest rate rise to see how borrowers’ finances would cope with higher monthly payment.  If say you borrow £200,000 and there is a 1% rise in the base rate from the Bank of England, there would be a monthly increase of £167 on your mortgage payments for a non fixed product.

There has been concern from the mortgage industry that this will slow down the home buying process and make it more expensive to take out a mortgage with the extra work required, but in light of property boom and bust, is this such a bad thing?

Self certification mortgages are to be outlawed so the optimism of borrowers who want their dream home but ignore the fact they can’t really afford it are prevented from making bad financial decisions that will end up costing them their home when they fail to make payments.

If you’re considering buying, please feel free to contact Homefinders for mortgage advice and how the new rules may affect you.

The Bank of Mum and Dad

With the average house price in the UK being £254,000 and £500,000 in London, the average salary of £26,500 isn’t anywhere near enough to cover buying a home. Even if you go in with a partner earning the same, there is still around a £50,000 deposit required get a mortgage. Many find it hard to scrape together living costs, let alone save for a deposit when living away from the parental home. Thankfully the bank of Mum and Dad is there for many.

Around 80% of first time buyers under 30 get financial assistance from their parents according to the Council of Mortgage Lenders. That’s a staggering amount and has led to some criticism. If parents are helping their children to buy, they’re keeping house prices artificially high by pumping money into the bottom of the market. Of course, this works in their interest on the flip side, if the bottom of the property market is kept going, then the top end is secure where the parental home is most likely situated.

Of course, handing over money is not the only way parents help their children. Almost 50% of children in their early 20s still live at home according to the Office of National Statistics, avoiding high rents and hopefully saving for a deposit to buy their own home. With the average age of the first time buyer being 35, it could be a long time before many fly the nest.

Another way parents help is to act as guarantor for their children, raising the amount they can borrow to help them get their foot on the ladder. Without having to put a penny down, parents open themselves up to the risk of having to pay theirs child’s mortgage if something goes wrong, but that’s the great thing about parents, they will do anything for their children…or they just want to get them out of the house!

It is unlikely this situation will change any time soon, with the average life expectancy rising, people staying in employment longer and family wealth (if any) not being passed down until much later in a child’s life, it is hard for many to get their foot on the property ladder. Thankfully there is always the bank of Mum and Dad.

Rise in property sales leads to reduction in potential rentals

ARLA report shows reluctant landlords may become a thing of the past 

Association of Residential Letting Agents (ARLA) research reveals that the number of people letting out properties because they have been unable to sell has dropped to a record low.

According to ARLA’s latest quarterly report, the percentage of letting agents seeing an increase in rental property entering the market because it cannot be sold has fallen to just 13%. This figure represents the fourth consecutive fall, and is far below the 94% high recorded when the question was first asked at the start of 2009, during the post credit crunch property crisis.

The renewed ability to sell property is having a significant effect on the overall shape of the residential investment market. The proportion of ARLA members who think landlords are currently decreasing their net investment by selling properties is up sharply, from 15% to 20%. This is while the proportion of respondents who think landlords are increasing their net investment by buying properties declined from 43% to 42%.

Of the landlords who are retaining their property interests, the vast majority now appear to be investing for the long term, with the average time between purchase and sale now standing at 19.8 years. Again, this contrasts significantly with the comparable figure recorded at the start of 2009, when the average period was 16.4 years.

Additionally, only 1.5% of respondents said that they had become a residential landlord in order to make a short term capital gain over a period of less than five years. The majority either said that they had let their property to achieve a combined yield from rental income and capital appreciation (45%) or that they had done so in order to create a ‘nest egg’ for their long term future (37%).

Ian Potter, Managing Director of ARLA, said: “The resurgence of property prices and buyer demand in many areas is reducing the number of so-called accidental landlords. Despite the reduction of landlords in this situation, wider investment in rental properties remains strong across the market. The shape of the private rented sector is changing once again, with long-term landlords returning to the fore.

“As investment landlords make decisions that can affect their income for years to come, quality advice and information becomes ever more important. I would always advise choosing an ARLA agent to ensure you are getting the best possible advice about a rental property, whatever stage you are at.”

Source: ARLA

What to do if a house purchase falls through

NAEA offers advice for buyers facing disappointment in a competitive market

Losing out on a dream home can be a difficult experience, but there are steps that can be taken to
maximise a buyer’s chances of concluding their next purchase successfully, according to the National
Association of Estate Agents (NAEA).

NAEA’s latest research reveals that there are, on average at a national level, over eight buyers for
every property that comes to market. With this level of competition, buyers are increasingly left
disappointed, even if their offer has been accepted.

Under the rules of the English conveyancing system, the seller or purchaser is completely free to pull
out of the purchase process, without penalty, until contracts are exchanged.

Jan Hӱtch, President of the National Association of Estate Agents, said: “Losing out on a house can
be an understandably upsetting experience. To minimise the chances of disappointment, it is always
sensible to find out as much as possible about the seller’s situation. For example, ask if they have
already found a property to buy, and if so, whether or not the upward chain is complete. All of these
factors could impact upon your purchase.

“Remember that estate agents are legally obliged to let sellers know about any offers that are made,
and unfortunately this can sometimes result in gazumping. Rapid price increases in some areas have
led to some sellers deciding to leave their property on the market a little longer and hold out for a
higher price than the original valuation. It is important to work closely with the agent you are dealing
with to understand the seller’s situation and prepare your approach accordingly.”

The NAEA’s top tips for those who have just had a house purchase fall through are as follows:
Find out what happened – A purchase can fall through for a number of reasons. If, for example, the
seller was in a chain that broke down, the property could come back to the market, or the chain
could re-form with a different property being chosen by someone in the chain.

Prioritise – Sit down and list exactly what features you liked and disliked in the property that you
missed out on. This can help focus your search if you do decide to re-enter the market and may even
help to find a more appropriate property for you.

Communication is key – Keep in touch with the agent as they will understand your situation and may
be able to give you early warning of similar suitable properties in your search area. Remember that
you are an attractive buyer for anyone looking to make a quick sale as you will probably already have your mortgage finance set up and the ability to move fast.

Asking for a property to be taken off the market once your offer has been accepted and your mortgage finance and survey are confirmed is a reasonable request, and can minimise the chances of additional offers coming in over and above yours.
Don’t put all your eggs into one basket – If you are in rented accommodation, once an offer to buy is accepted, there can be temptation to give notice straight away on your current home. Remind yourself that nothing is set in stone until you have exchanged contracts, and factor this into any decisions you make about when to inform your landlord.

Get the best possible advice – Much of an agents’ involvement in a property transaction goes on behind the scenes, and a good estate agent can help a sale progress much more easily and smoothly than going it alone. To ensure you are getting the best possible advice and information about your purchase, always talk to an NAEA member agent.

 

article source: NAEA website