There’s more to investment then a fantastic yield!

Recently I was scanning through properties for sale and I came across a little flat that I thought was too good to be true.

It had so many positives in terms of investment potential:

• Guide price of just £175,000 – tick!
• 2 bedrooms – always popular – tick!
• Long lease – tick!
• Existing tenancy in place for another year – earning money from day 1 – tick!
• Current rent £20,700 per annum – tick!

£175,000 with rent of £20,700 that’s a yield of nearly 12%! That’s the sort of yield that people dream about!

Now this flat is in N9 just off Montague Road and above a fast food restaurant, so not exactly ideal and I could understand the low guide price but….. £20,700 per annum rent. Really??

That rent works out to £1,725 per month for which you could get 4 bedroom house in Enfield Town. So what’s so special about this flat? The answer is of course nothing, in fact quite the opposite.

I suspect this was once a decent size one-bedroom flat that has been chopped about into a not very nice two bedroom flat, everything is just too small and the layout doesn’t really make sense.

The reception room would fit a sofa and chair, the bedrooms (one single and one double) would fit beds but not much else,  the shower room has been newly fitted as has the kitchen, but it was the kitchen that really did it for me. You have to walk through the kitchen to get to the shower room and, as the photos show, it’s very, very small the sort of size you would expect to see in a studio or bedsit. On one side there is a cooker and washing machine and on the other a sink and some units.

 

So how is the rent so high? Well it seems it is being let for use as temporary/ emergency housing and as we know this type of housing is always in high demand and short supply.

However anyone buying this flat now would do well to consider whether they could secure the same rent in future. I suspect that with it’s current layout emergency housing is the best (or only) option. Renting this flat out privately could have all sorts of issues including the kitchen, size of the bedrooms and lack of bath.

 

With all of this and the fact that the flat is above a fast food restaurant and therefore likely to be even more difficult to sell on later, I didn’t think there would be a huge amount of interest when this flat went to auction with McHugh’s on 4th October. Sure enough it didn’t sell and is currently available at £190,000.

Despite my initial excitement at the yield, this isn’t a property that I would be interested in. For me it’s just been squeezed too much and the layout needs a rethink, all of which costs money and reduces any investment potential. Maybe someone else will see it differently, I’ll keep watching.

 

 

 

 

 

Avoiding Rental Scams – Tenants

This morning I switched to Twitter to find that 10 people I follow had retweeted the below article from Property Industry Eye:

Renters Warned of Scam Which Asks For Viewing Deposits by Fake Landlords

Hmm, snappy title but you know exactly what the article is about. In a nutshell it’s about fake landlords asking renters for deposits to secure viewings.

Yes money upfront just to view a property, not once you’ve seen the property and decided you want it but money just to have a look around! Wow!

Now there are all sorts of scams around and some of them are pretty clever so you can only feel sorry for the people who fall for them, but on this occasion I scratched my head and part of me agreed with ArthurHouse02 who left the first comment on the article:

I’m not being funny, but how thick do you have to be to fall for this scam?

A little harsh maybe but…………. paying money online to a stranger before you’ve even seen the property? Really?!

At the bottom of the PropertyIndustryEye article is a link to this video of Joe Lycett:

Scamming a Gumtree Scammer – It’s very, very funny! But it also makes a few good points and highlights that the fake landlord reported in the article is not the only one running this scam – the video is a year old, so obviously people are falling for it.

The moral of the story is be careful with your money!

Don’t give anybody anything until you’ve seen a property. Sites like Gumtree and SpareRoom are great for finding rooms and smaller properties but anyone can create an advert and say they’re a landlord or agent, so do a bit more homework. Here are a few examples of the precautions you can take:

– Check that the ‘landlord’ is the real owner of the property (Land Registry),

– Check that the agency really exists and that this person works for them (Google, call the office, get a landline not mobile)

– Ask for an invoice and a receipt,

– Don’t deal in cash,

And, if in doubt be ready to walk away!

The Pain of Arrears (Part 2)

In The Pain Caused by Arrears (Part 1) I related the story of Edith who was struggling with arrears, desperate to get her house back and visibly feeling the stress and strain.

Landlords react in different ways and a couple of months before meeting Edith I met another landlord, Marsha, who had a similar experience but reacted very differently. Her tenant had stopped paying rent and after 6 months she ignored the advice of her agents and took matters into her own hands…….

Marsha’s Story

‘I went round there Rachel’ she said ‘I knocked on the door, he wasn’t in, so I phoned him. I said –

“Are you going to pay me this month? No? Then you’re not living in MY flat anymore!”’.

She let herself in, bundled all his things into black bags and piled them in the front garden. <Yes, really!>

My colleague Samantha and I looked at each other amazed, our mouths opening and closing like goldfish – had this petite unassuming lady really done something so extreme?! ‘Yes I did!’ she declared indignantly ‘He was in my flat and he wasn’t paying! He had a job! He was getting money from the Council and he was keeping it! KEEPING IT!’ By now her arms were waving around wildly as she was clearly reliving the nightmare.

Now I’ve met a few landlords who have felt like hurling their tenant’s belongings into the street and who’ve had to be persuaded that ‘maybe that’s not the best thing to do in the long run’ but I’d never met one who’d actually done it and Marsha just seemed so unlikely!

She composed herself and continued ‘I called him again – “Come and get your things from my garden” and then I phoned the police’.

The long arm of the law

Wow! Now obviously Marsha had broken the law, so not only did this not solve her problems it actually made them worse. However, when she told me the full story I could understand her desperation. She’d bought the flat earlier that year specifically to let out as a long term investment. It was a stretch, she’d used all her savings to pay the deposit and while her job paid for the mortgage on her home it didn’t cover the mortgage on the flat.

When the rent stopped coming in, she couldn’t pay the mortgage. The bank were on her back, she was heavily in debt, her agent kept telling her that there was a procedure to follow (although I’m not sure what was taking 6 months!!), and she, like Edith, just wanted the whole thing to be over.

Happy ending?

The tenant was rehoused and Marsha ended up in court. There was no happy ending for her, she was fined nearly £4,000 and voluntarily handed the keys to the bank. I didn’t ask how much they sold the flat for or whether she ended up owing them even more money but somehow several years later she’s trying again and renting out her own home, this time with rent guarantee cover!

The Pain of arrears (part 1)

I won’t rent my house out without a Rent Guarantee, it just won’t happen. I’ve got a mortgage to pay and if the rent stops coming in I’ll have a problem.

You can reference your tenants until the cows come home but things change and bad things happen to good people. I always say that we’re all just a P45 away from not being able to pay the bills. But if bad things happen to my tenants then I want to make sure I’ll still get the rent.

Over the years I’ve met a lot of landlords who have been affected by arrears. For some it’s a calculated risk, they rent to a particular sector where the risk of arrears and damages are higher but overall they come out on top. For others the impact both financially and emotionally can be huge.

Earlier this week I met with a landlord who fell into the latter category and below is a summary of her situation. In ‘The pain caused by arrears (Part 2)’ there’s a brief story of another completely different landlord experience.

If you’re about to rent out a property please give a lot of thought as to how you will protect your rental income, just in case.

Edith’s story………

About eighteen months ago I got a call from a lady called Edith asking for advice about her tenant who had fallen into arrears. I’ve probably spoken to her six times in total and each time she’s sounded slightly more desperate. Yesterday, though she came in to say ‘Hello’.

I knew it had to be good news and it was, Edith had finally served her tenant notice – yay! But…… she knew it could still take a few months to go through the courts and get her property back. Her tenant however, had made her an offer and she wasn’t sure if she should accept it so she wanted my opinion.

Now this I had to hear, everything I’d been told before indicated that this tenant is a very bad, bad person – thousands of pounds of arrears, damage, neglect and the removal of furniture. I perched on the edge of my seat ‘Go on, hit me with it’ I thought ‘He’ll give you all the money back if you let him stay? He’s got a payment plan idea? What can it be?’

Well apparently the offer was this – ‘Give me £1,000 now and I’ll be gone by the weekend.’

I almost roared out loud with laughter and then <Thud!> my jaw hit the ground as  I realised she was actualy considering this!! Wow, if she’d been a friend I’d have flicked her forehead and shouted ‘HELLO?! Are you crazy?!’ but when I looked at her I saw a tired, emotionally drained lady, at her whit’s end, who just wanted the whole thing to be over with.

Going for a slightly softer approach I asked ‘Do you trust him?’ There was an unexpectedly long pause and I began to panic! Yikes! What if she says ‘Yes, yes this time I trust him’?

Finally with a visible slump of her shoulders and drop of her head she said ‘No’. Phew! Note to self – Don’t ask stupid questions! All I’d really needed to do was point out that if she gave him the money there’d be no guarantee she’d get her house back and she’d just be another £1,000 out of pocket.

The stress Edith was under was obvious and I really wanted to help however, because the case is potentially quite complicated the best I could do was point her in the direction of a good solicitor and sadly more expense!

She asked me how she should avoid this situation next time (if she doesn’t sell up). My answer, as always – Rent Guarantee insurance. It costs around £200 per year and is worth every penny in stress relief alone even if your tenant never falls into arrears.

Good luck Edith, I hope there’s a happy ending for you.

 

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