I was reading an article the other day about property surveys and according to RICS, more than 58% of property owners were under the impression that property valuations also covered a property’s condition (damp and structural movement). Whilst 31% believed the report included advice on legal issues a solicitor should investigate.

And I was shocked…

I don’t know whether it is because I regularly invest in property, or am a cautious person so always opt to pay for a full survey, but the fact that so many property owners make the mistake of only having a property valuation is disturbing.

These types of valuations are only designed to indicate the houses property price, and are used by lenders to determine how much they will lend you. Never do they go as in-depth as to tell you if you need to do repairs.

It is no surprise then – considering these statistics – that 25% of property owners end up having to pay over £1,818 on unplanned building works – they have not been properly prepared.

Something definitely needs to be done to offer property owners more of an education. Too often am I reading nowadays about property owners who have spent thousands more on a property than they planned because they were not properly informed.

But who will teach them? Now that is the real question…

Wendy xx

I tend to keep a hold of my property investments and let them out, but over the last year I have felt increasingly sorry for the hundreds of property owners who have been unable to sell because their properties have been overpriced.

Many have been led to believe by their estate agents that their properties are worth more than they are and as a result they have become unwilling to lower their prices.

And it is a shame really, as more realistic property prices would definitely help to improve the fluidity of the property market.

The Idea

According to the article I read, Peter Hendry a member of RICS has suggested modifying the Estate Agent Act so estate agents have to buy any properties they are unable to sell.

And I think his argument is very justified…

Essentially by making it so estate agents have to buy whatever they cannot sell; they will be more realistic in their valuations which in turn will make it easier for property owners to sell and invest in property.

And it is true that if estate agents are being genuine in their valuations (and in the properties ability to sell), they should have no problem taking the property off of the property owners hand. After all, if it can sell at the price they are suggesting, what have they got to lose?

Yet I doubt many estate agents will be happy with this suggestion, especially if it comes into fruitation…

Too many have for too long gotten away with overpricing their properties as it has enabled them to get bigger commissions.

Don’t believe me? Take a look at these real scenarios:

One estate agent is believed to have valued a run down property investment at a higher price than other properties in the area which had recently sold – and all of them were in better condition! Where is the justification in that?

Similarly, there are others pricing properties 50%+ higher than they were 5 years ago even though their condition has diminished, their land is less and the property has been on the market for over a year! It’s silly!

I really do hope this suggestion gets taken seriously and the government acts on it. In the long run, more realistic property prices will provide a better outcome for everyone…

Wendy xx

In the last quarter alone, rents on average have risen by 2.3% to an impressive £839 per month – £19 higher than they were during the first quarter of this year.

But, what about supplies?

Now I have to admit that property sales have fallen considerably since property investors flooded onto the property market trying to sell their properties before the Emergency Budget. But the fact still remains that rents have continued to rise despite these new supplies – proof that property owners prefer to rent.

Across the whole of the UK property market, rents have risen year on year by 1.9% whilst specific regions such as Yorkshire and Humberside, and London have risen by a minimum of 2.6%.

Take London for instance. Average rents now rest at £1,729 a month – £44 more per month than at the beginning of this year, and will probably continue to rise unless mortgage lenders make their deals more accessible and affordable.

So far, lenders only appear to be offering longer loans i.e. 7 years+, but what are really needed are smaller deposits.

But until then, I say lets take advantage of this demand – what do you think?

Wendy xx

Not only is this increase going to cost property investors at least an extra £10,000 in taxes (on top of the existing £40,000), but the Land Registry is already predicting that this new stamp duty is going to affect 10,000-15,000 more buyers every year.

Now as you already know from reading this blog, I am not one to give up easily which is why over the last few weeks I have been researching into various methods to take the edge of this stamp duty fee. And luckily I think I have found a solution…

I was reading an article in the Telegraph, which revealed that many property developers are currently finding legal loopholes to help property owners, such as you and me, to save thousands of pounds on our property investments. And they are pretty nifty loopholes too:

1. Special Purpose Vehicles (SPV) – here property developers are proposing to set up companies or trusts where your potential property development becomes its sole asset. By doing so, when homeowners come to buy – instead of invest traditionally – they will instead be able to buy shares in the company that are only liable to a tax rate of 0.5%.

   NOTE: Not only are the Treasury now looking for methods to close this loophole, but it is important to remember that should your property rise in value after it has been put into a SPV, you will be liable to capital gains tax.

2. Buy land – another clever alternative that property developers are offering to homeowners is the opportunity to buy land and build their own homes. By doing so, you will only have to pay tax on the land, which if it is below the £250,000 threshold will mean you don’t have to pay anything.

   Some property developers are even going as far as to let property owners invest in their land, before entering into a contract with them to build their property. Under this scheme, property owners will still be classed as self-builders and will be taxed as such.

Of course for each of these schemes, you will have to heavily rely on a property developer to help you achieve it. But still, with proper research you can ensure that you work alongside a quality property developer who will help you to take full advantage of these loopholes.

They definitely are inventive! And for those of you who haven’t got an extra £10,000 spare to pay in stamp duties, these loopholes will be a blessing in disguise.

Wendy xx

In this article, property website reallymoving.com noticed a significant difference of up to 174 cubic feet between property owners in the North and the South of the UK, and it got me thinking that perhaps the amount of valuables we own actually affects the types of properties we invest in.

For instance, Londoners are reputed to own 737 cubic feet of possessions, whilst property owners in the North East generally own as much as 911 cubic feet.

Now this may look like nothing, but when you factor in to the equation the fact that 1) Londoners tend to move a lot (due to their jobs) and 2) they can only afford smaller property spaces the closer they move into the city centre, then it is no wonder than Londoners own so little. Property prices and where you live can affect how much you own!

Is this true of the whole UK?

After reading this, I began digging round looking into other regions across the UK to see if the results were similar, and to be truthful they were pretty spot on.

Taking into consideration that 1 large sofa equates to 45 cubic feet, a bed 40 cubic feet and a TV just 3 cubic feet, the results speaks for themselves:

• East of England – 911 cubic feet
• Midlands – 891 cubic feet
• South England – 877 cubic feet
• Wales – 868 cubic feet
• South West England – 856 cubic feet
• North West England – 844 cubic feet
• North East England – 828 cubic feet
• Northern Ireland – 783 cubic feet
• Scotland – 788 cubic feet
• London – 737 cubic feet

As a rule, the more expensive the location (apart from Scotland and Northern Ireland), the fewer possessions these property owners tended to own!

But what really fascinated me was how this knowledge could easily be used to influence which property investments you invest in. For example have the info to recognise that property owners in the Midlands own more possessions than those in Scotland and you can invest proportionately towards your tenants needs and ensure a greater tenancy demand.

It is definitely a crazy idea but definitely worth bearing in mind, the next time you invest.

Wendy xx

However, I did spot an article today which has given me some hope that the Budget Report tomorrow will present better opportunities for investors.

In this article, the National Landlords Association had essentially asked the government to recognise the importance of the private rental sector; its influence upon the economy and the need to re-evaluate current housing taxes.

And I have to confess that should they occur, it would make for a better market place…

The key 5 they addressed were capital gains tax, VAT, council tax, stamp duty land tax and the ‘Rent-a-Room’ Scheme – all of which play a fundamental role in our investment decisions.

Now if you haven’t already heard about this, here is a quick summary of what the NLA want to come from the 2010 budget report tomorrow:

Capital Gains Tax: At the moment property investors like you and me are excluded from ‘roll-over’ relief which enables us to release capital gains. However, the NLA are proposing that the government remove this rule so we can utilise this roll-over relief to renovate and modernise our property investments.

What does this mean for property investors? You will have more cash to maximise your property lets rental returns and accessibility to tenants.

VAT: The NLA want to reduce the rates for property renovations/home improvements down to the lowest levels possible of just 5%.

What does this mean for property investors? Yes I have to admit that there are currently plenty of provisions available to help property investors bring their property lets to a higher standard, but by lowering rates to just 5% this will present a much more attractive prospect for property investors who haven’t got the cash to renovate.

Council Tax: Now you’re probably already aware that local authorities differ in the amount of council tax their charge which can prove incredibly frustrating when you have got multiple property lets across the country. Under the NLA’s direction, they want the government to provide local authorities with clearer distinctions on how much council tax should be to help prevent further confusion.

What does this mean for property investors? The more uniform council taxes become, the easier it will be for you to maximise affordable and much-needed accommodation for the property market.

Stamp Duty Land Tax: The existing ‘slab system’ is calculated based on fixed rates in arbitrary price bands. The NLA want the government to reform this system as well as enable multiple property investments to be treated as individual properties instead of as bulk transactions.

What does this mean for property investors? If you are the type of property investors who prefers to buy in bulk, you will now be able to save on the cost of stamp duties. The existing problem with buying properties in bulk is that it is easy to end up paying 4% in stamp duties because 5 properties worth £100,000 have passed the threshold. However have the freedom to pay stamp duties on properties individually and in this situation there will be no cost at all.

‘Rent-a-Room’ Scheme: Basing their argument on the same used by the ‘Raise the Roof’ campaign which argues that property owners are being put off from taking lodgers due to the obstacle of having to fill in a tax return form. The NLA believe by simply raising the tax-free threshold from £4,250 to £9,000 a year property owners will feel more inclined to take on lodgers.

What does this mean for property investors? By sharing their properties and leasing them to lodgers, this will help to ease the growing property shortage occurring across the UK.

See what I mean?

Hopefully the government will see sense tomorrow and implement these changes proposed by the NLA. We will just have to wait and see.

Wendy xx

Like homeowners the last thing they want to do is live next to someone who harasses them – they want to live in peace. But the thing is… unlike homeowners who have to sell in order to get away from such neighbours; all your tenant actually has to do is end their tenancy agreement with you.

And let me tell you, this is the last thing you want to happen…

Can Nuisance Neighbours Affect My Profitability?

Surprisingly so… It is easy as a property investor to forget to check out the quality of your neighbours because you are not living in the property yourself.

Yet thinking on this subject I can see how this could quickly impact on your profitability. All you need is one tenant to say to another: ‘I wouldn’t live there the neighbours are horrible’ and it won’t matter how strong the tenancy demand is or how good the rental yields are, if you cannot get tenants to stay, it will be you who is footing the bills.

So what do you do?

You make sure you know exactly who are investing next to before you put down a bid:

1. Visit the property more than once – the average buyer views a property once maybe twice before putting down a bid and usually at the same time of day. To gain an accurate perception of whether your potential property let is actually a local hot spot for vandals and drunks, or if your neighbours are noisy, I suggest trying to view the property at least 5 times and at various times of the day. This will allow you to see exactly what conditions your tenants will be living under.
2. Introduce yourself to your neighbours – meeting someone face to face can tell you a lot about a person. Before you put down a bid, make sure to introduce yourself to your new neighbours. You’ll soon discover if you are going to have difficulties with them over noise or a shared driveway.
3. Know your covenants – if you have already invested in the property and have got tenants living there, make sure to check the covenants of the property to see if your neighbours for example are prohibited from being a nuisance i.e. playing music at certain times of the day, lighting all day bonfires etc…
4. Talk to a solicitor – this should always be a last resort, but should you find that your tenant makes a complaint; you speak/write to the neighbour and they still persist in their actions, then you may wish to speak to a solicitor. They will be able to issue a letter to your neighbour highlighting the properties covenants and the possibility of legal action.

So try to take these on board the next time you invest in property. £500 positive cas flows and a high tenancy demand are all well and good, but get a bad neighbour for your tenants and they may affect your long term profitability.

Wendy xx

Take this news story I read about this morning…

Over 6,400 property investors who own second homes in Cyprus may now be at risk of losing their land following the case of Linda and David Oram who have been ordered to give back their land to a Greek Cypriot refugee – all without any hope of compensation!

According to the article, this 5 year long case was initially sparked back in 2004 after Greek Cypriot refugee Apostolides went to the Nicosia Courts and put in a claim against the Oram’s land stating it was his and that he had fled it after Turkish troops invaded in 1974.

Now having been through the Nicosia Court, the European Court of Justice and just recently the Court of Appeals in London, all 3 Courts have ruled in favour of Apostolides stating that the land is rightfully his. As a result they have ordered the couple to demolish their second home; return the land; pay Apostolides damages and worst of all, pay him a monthly rent until the land is properly returned.

It is ridiculous to think about the number of cases which are now going to spring up as a result of this case. Especially as in all cases it is neither the property investors nor the Greek Cypriots fault, but those who took the land and sold it without checking its history in the first place.

According to UK and Greek Cypriot officials, more than 1,400 Britons are living on land which is believed to belong to Greek Cypriot refugees, whilst a further 5,000 are living on self-declared Turkish Cypriot land whose title deeds are held by displaced Greek Cypriots.

Add them together and that is a lot of property investors who could potentially lose thousands if not hundreds of thousands of pounds should they be taken to Court.

This case really goes to show, the importance of researching your property and consequently its land first before investing. No matter where it is located – UK or overseas – title deeds and land disputes can really mess up your investments if you are not aware of them when you invest. The outcome may not be as extreme as the Oram’s – who had to demolish their home – but you could still lose thousands of pounds unnecessarily.

Wendy xx

In the past, any homeowner looking to sell their property in Scotland would first have to advertise their property and give a minimum property price quote, before inviting buyers to put in ‘offers over’ bids.

Now what always used to fascinate me about this process was the fact that these quotes didn’t have to be accurate estimations. Using set guidelines, sellers could in fact set a minimum bid for their property which could cause buyers to place bids more than 25% above their original quote. Meaning not only could they benefit from guaranteed capital returns, but they could easily use this extra cash to invest in their property.

However, this has now all changed…

Following the introduction of the ‘Home Report’ last year – which are the equivalent of our HIPs – homeowners must now provide an accurate valuation price of their property, meaning they can no longer experience such sizeable returns.

In fact, Home Reports have impacted on their investment system so much that ‘offers over’ are rarely seen nowadays. Instead sellers are choosing to market their properties under an ‘offers around’ scheme which if they are lucky can generate them some capital, but nowhere close to what they were used to.

I have to admit, that this change to their property investment system has made Scotland a much more accessible location for property investment. Notoriously lower in price compared to properties in the Southern regions of the UK, all the myth – and overspending – behind this region has gone, making their system not that far from their own.

Even their ‘offers around’ is basically a similar version of our own general bidding system where the highest value is usually accepted by homeowners.

I can honestly say that I am thoroughly looking forward to getting stuck into the Scottish property market now it is less of a mystery.

After all, with average house prices of £155,691, and rental incomes of £907.63 a month (based on a 4 bedroom property), the returns far outweigh the investment cost.

Wendy xx

I sat down a few years ago with my insurance broker and had a long discussion about the plans for my property portfolio in the event of my death.  Now, I know that no-one really wants to consider their own mortality but one of the best pieces of property investment advice I can give you is to make sure that you have firm plans in place for that eventuality.  Like the Boy Scouts say, ‘be prepared’.

We all have something different we are trying to achieve with our rental property investment.  Whether it is retirement planning, capital growth, income or as an inheritance for our children, we all know what our goals are when we invest in property.  For many, those goals do not end on their own death and so it is vital that there is a will, a strategy and sufficient insurance cover in place for the management of your property (or properties) on your death.

I read a recent survey from The Money Centre that found that a staggering one  in seven landlords did not know what would happen to their properties if they died or become too ill to manage them, whilst a further 40% revealed that they had not bothered to take action in regards to alleviating their families from Inheritance Tax liabilities.

By not protecting their properties properly they are not only putting themselves at financial risk, but also their families.  As a property investor, it is imperative that you review your insurance arrangements.  You may want sufficient cover to repay any borrowing in order that the rental income is provided to your beneficiary.  You might want to leave the properties in trust for your children, or them to be sold and the cash realised for their inheritance.  Do you want your family to face a giant inheritance tax bill?  I know I don’t.

For this reason the Money Centre are advising all UK landlords to seek professional advice to make sure they have a holistic, sensible strategy for their rental property investment.  I can’t agree with them enough.