Oakham Buy-2-Let … Freehold House or Leasehold Flat?

Well my Oakham Property Blog reading friends, as seems to be all the rage with Jeremy Corben asking the PM questions emailed in to him at Prime Minster Question Times, I to wish to answer a question emailed to me from a potential Oakham landlord last week. Nice chap, lives in Barleythorpe, and it turns out, after having a coffee with him, he works in IT, has a spare bit of cash (now the kids have flown the nest) and wanted to buy his first Buy-2-Let (B2L) property.

His main question was ... “Do I buy a freehold house or a leasehold flat in Oakham”?

Most people will say “freehold” every time, because you own the land. However, it’s not as simple as that (it never would be, would it!). The definitive answer though is to research what Oakham tenants want, in the area of Oakham they want!

The tenant is ultimately your customer, and, if they don't want to rent what you decide is best to buy, then you are not going to have a successful B2L investment.

So, starting with the tenant in mind and working backwards from there, you won’t go far wrong.

In a nutshell, find the demand before you think about creating the supply.

Leasehold flats and apartments in Oakham are excellent in some respects as they offer the landlord certain advantages, including the fact that a flat can be initially cheaper to buy. Yields can be quite good, offering better cash flow. The building will already be insured and, yes, there is a service charge, but it’s still for a service at the end of the day and that cost is spread between many others (i.e. when your freehold house roof goes, its falls 100% on your shoulders) and one of my favourites is that there is often no garden to maintain or blown down fences to replace!

However, some Oakham leasehold flats can suffer from poor capital growth. Some leasehold properties have no cap on the level of the service charge and it may get out of control. The length of the lease will significantly affect value if not renewed before it gets too short.

Thankfully there’s not many, but some Oakham apartments/flats have burdensome clauses. Finally, with leases, there can be sub-letting issues – which means you can’t let them out.

So what do the numbers look like? Well, since 2003, the average freehold property in Oakham (detached, semis and terraced) has risen from £131,412 to £184,657, a rise of 40% whilst the average Oakham leasehold property (flats and apartments) has gone up in value from £88,500 to £119,998, a more mediocre rise of 35%. 

I was really interested to note that of the 1,741 rental properties in the Rutland County Council area that the Office of National Statistics believe are either let privately or through a letting agency, 249 of them (or 14.3%) are apartments.

However, there are only 1,168 apartments in the whole council area (be they owned, council rented or privately rented), which represents 7.8% of the whole housing stock in the area. This really intrigued me that, quite obviously, there is a high proportion of Oakham’s leasehold apartments/flats rented to tenants compared to detached, semi’s or terraced. Fascinating, don’t you think?

Every Oakham apartment block, every terraced house or semi is different. Like I said at the start, the definitive answer though is to research what Oakham tenants want, in the area of Oakham they want.

Demand for good apartments near transport links can be popular and can offer the Oakham landlord very good yields with minimal voids. However, Oakham terraced houses and semi’s, whilst not always offering the best yields (although sometimes they can), they do offer the Oakham landlord decent capital growth.

My advice to the prospective landlord as it is to you is do your homework.  One such website, which only talks about the Oakham buy to let Property Market, is the Oakham Property Blog.

Another source of info many Oakham landlords use, is me!

What many Oakham landlords do, irrespective of whether you are a landlord of ours, a landlord with another agent or a DIY landlord, if you see any property in Oakham that catches your eye as a potential buy to B2L property, be it a terraced house, semi or flat ... email me and I will email you back with my thoughts (although I will tell you what you need to hear ... and not necessarily what you want to hear!)

And the 3 BEST Buy-2-Lets this week are...

i) 3 Bed Semi-Detached - On the market for £165,000 with UPP Property Agents

http://www.rightmove.co.uk/property-for-sale/property-37085196.html

 

Tremendous rental investment. Currently let out to the same tenant for the last 8 years!! No rent increase over this period and is achieving £525pcm. However, on the market I would expect the rent to increase by £100pcm to £625pcm.

 

 

Offered in good decorative order and offers the full package.  Drive, Garage, 3 bedrooms, front and rear gardens.

 

 

UPP Property Agents

Call Adrian McCarthy on 01572 725 825 to discuss further

 

 

 

 

ii)  2 Bed Terraced home - On the market for £149,950 with Goodwins

http://www.rightmove.co.uk/property-for-sale/property-51988051.html.

 

Northumberland Ave rentals are fantastic for many reasons. The location of the property is great for town and access and this particular property is immaculate. Whilst only offering two bedrooms the property offers fantastic internal size rooms and large gardens.

 

Great starter home for a young couple and the rental income at £575pcm isn’t a bad return for Stamford.

 

 

iii)  2 Bed Terraced home - On the market for £142,500 with Murrays Estate Agents

http://www.rightmove.co.uk/property-for-sale/property-55889402.html

 

Ladywell in Oakham is a rental investment haven. Having circa 12 fully managed properties on this development, rarely does a 2 bed terrace home become available.

 

Capable of fetching in the region of £475pcm - £495pcm, the property is a great starter property for any first time investment.

 

If you would like to discuss the above properties in more detail, or would like my opinion on any other strong buy-to-let properties you have seen, please contact me via David@upp-property.co.uk and I would be glad to talk to you.

Values of Stamford Terraced Houses smash through the £250/sq ft barrier

The Council of Mortgage Lenders latest snapshot of the Buy-to-Let (B2L) mortgage market shows us that Buy-to-Let landlords haven’t been put off by the Chancellor's announcements on the way Buy-To-Lets are taxed.

Last month, the Council of Mortgage Lenders stated £1.4billion was borrowed by UK landlords to purchase 10,500 B2L properties, up 26.5% from the same month in 2014, when only 8,300 properties were bought with a B2L mortgage.

Go back two years and the number of B2L mortgages used for purchasing (again not re-mortgaging) is 36.4% higher! Even more interesting has been the fact that the average amount borrowed has risen as well. The average B2L mortgage last month was £133,330, up from £128,480 a year ago.

In Stamford, I am speaking to more and more landlords, be they seasoned professional landlords or first time landlords, as they read reports that the Stamford rental market is doing reasonably well, with rents and property values rising.

Interestingly, one landlord recently asked how much he should be paying per square foot (more of that in a second).

The first thing you have to decide is whether you want great capital growth or great rental yield, as every knowledgeable landlord knows, you can’t have both. Over the last twenty years, property values in Stamford have risen by 137.2%, compared to Greater London’s 436.2%.

This has proved that capital growth increases faster in the more expensive South, but your investment money doesn’t go very far, meaning there won’t be as much rental yield from a 1 bed flat in Chelsea (2% pa at best with a fair wind) as a 2 bed semi in Stamford.

However, whilst the figure of 137.2% is an average for the area, certain areas of Stamford have seen capital growth much higher than that and others areas much worse (we have talked about those in previous articles).

If you recall in an earlier article, my research reveals that Stamford apartments tend to generate a better yield than houses, probably because several sharers can afford to pay more than a single family. But houses tend to appreciate in value more rapidly and may well be easier to sell, simply because there are fewer being built.

So what should you be buying in Stamford, and more importantly, for how much?

·    Average apartments in the town are currently selling for approx. £278 / square foot.

·   Terraced houses in Stamford are currently obtaining, on average, £237,000 or £254 / square foot.

·   An average semi in Stamford is selling for £218,600 (and achieving £229 / square foot). 

Now these are of course averages, but it gives you a good place to start from.

In the coming weeks, I will look at rents being achieved on Stamford houses and apartments, and the yields that can be obtained, depending how many bedrooms there are.

 

How EU Migration has changed the Rutland Property Market

 

The argument of migration and what it does, or doesn’t do, for the country’s economic wellbeing is something that has been hotly contested over the last few years. In my article today, I want to talk about what it has done for the Rutland Property market.

Before we look at Rutland though, let us look at some interesting figures for the country as a whole.

 Between 2001 and 2011, 971,144 EU citizens came to the UK to live and of those, 171,164 of them (17.68%) have bought their own home. It might surprise people that only 5.07% of EU migrants managed to secure a council house. However, 676,091 (69.62%) of them went into the private rental sector.  This increase in population from the EU has, no doubt, added great stress to the UK housing market.

Looking at the figures, the housing market as a whole is undoubtedly affected by migration but it has been the private rented housing sector, especially in those areas where migrants come together, that is affected the most.

Indeed, I have seen that many EU migrants often compete for such housing not with UK tenants, but with other EU migrants. In 2001, 3.68 million rented a property from a landlord in the UK.

Ten years later in 2011, whilst EU migration added an additional 676,091 people renting a property from a landlord, there were actually an additional 4.14 million people who became tenants and were not EU migrants, but predominately British!

As a landlord, it is really important to gauge the potential demand for your rental property, especially if you are a landlord who buys property in areas popular with the Eastern European EU migrants. To gauge the level of EU migration (and thus demand), one of the best ways to calculate the growth of migrants is to calculate the number of people who ask for a National Insurance number (which EU members are able to obtain).

Interestingly, in Rutland, migration has fallen slightly over the last few years. For example, in 2006 there were 116 migrant National Insurance Cards (NIC) issued and the year after, in 2007, 119 NIC cards were issued.

However, in 2014, this had slipped to 106 NIC’s. However, if the pattern of other migrations since WW2 continues, over time there will be an increasing demand for owner occupied property, which may affect the market in certain areas of high migrant concentration.  On the other hand, over time some households move into the larger housing market, reducing concentrations and pressures.

In essence, migration has affected the Rutland property market; it couldn’t fail to because of the additional 969 working age migrants that have moved into the Rutland area since 2005.

However, it has not been the main influence on the market. Property values in Rutland today are 9.32% higher than they were in 2005.

According to the Office of National Statistics, rents by tenants in the East Midlands have only grown on average by 0.66% a year since 2005... I would say if it wasn’t for the migrants, we would be in a far worse position when it came to the Rutland property market. This was backed up by the then Home Secretary Theresa May back in 2012 - more than a third of all new housing demand in Britain is caused by inward migration and there is evidence that without the demand caused by such immigration, house prices would be 10% lower over a 20 year period.

If you want to know more about the Rutland property market, and for more articles like this, please visit the Rutland Property Blog www.rutlandandstamfordpropertyblog.co.uk

Stamford Tenants Pay 28.0% of their Salary in rent

 

I had the most interesting chat with a local Stamford landlord the other day about my thoughts on the Stamford property market. The subject of the affordability of renting in Stamford came up in conversation and how that would affect tenant demand.

Everyone wants a roof over their head, and since the Second World War, owning one’s home has been an aspiration of many Brits.  However, with rents at record highs, many are struggling to save enough for a house deposit.  Let’s be honest, it’s easy to get stuck in a cycle of paying the rent and bills and not saving, but even saving just a small amount each month will sooner or later add up.  George Osborne announced such schemes as the upcoming Help to Buy ISA, where the Government will top up a first time buyers deposit.

Therefore, I thought I would do some research into the Stamford property market and share with you my findings.  Stamford tenants spend on average just under a third of their salary to have a roof over their head.  According to my latest monthly research, the average cost of renting a home in Stamford is £778 per month. 

When the average annual salary of a Stamford worker, stands at £33,268 per year, that means the average Stamford tenant is paying 28.0% of their salary in rent.  I doubt there is much left to save for a deposit towards a house after that, and that my Stamford Property Blog reading friends is such a shame for the youngsters of Stamford.

You see one the reasons for rents being so high is property prices being high.  As I have mentioned before, there is a severe lack of new properties being built in Stamford.  It’s the classic demand vs supply scenario, where demand has increased, but the number of houses being built hasn’t increased at the same level. 

Also, Stamfordians aren’t moving home as often as they did in the 80’s and 90’s, meaning there are fewer properties on the market to buy.  If you recall, a few weeks ago I said back in Autumn 2007, there were over 540 properties for sale in Stamford and since then this has steadily declined year on year, so now there are only 111 for sale in the town.

So, the planners in Stamford haven’t allowed enough properties to be built in the town and existing Stamford homeowners are not moving home as much as they used to, thus creating a double hit on the number of properties to buy.  This is a long term thing and the continuing diminishing supply of housing has been happening for a number of decades and there simply aren’t enough properties in Stamford to match demand, these are the reasons houses prices in Stamford have remained quite buoyant, even though economically, over the last 5 years, it was one of the worst on record for the country and the East Midlands region as a whole.

However, things might not be all doom and gloom as originally thought, as a recent Halifax Survey  (their ‘Generation Rent 2015 Survey’) suggested  more and more people may be long term, if not lifelong tenants. In fact there is evidence in the report to suggest that the perception of how difficult it is to get on the housing ladder is vastly different between parents and people aged 20 to 45.  It seems from this survey that the state of the UK economy has shifted priorities quite significantly in quite a short space of time.  With fewer people able to save up the deposit required by mortgage lenders, more and more people are continuing to rent.  This delay in moving up the property ladder has driven rents across the UK up as more people were seeking rental properties .

 It is often said that more people in central Europe rent for longer or never own their own property. The last two census in 2001 and 2011 show that proportionally the percentage of people who own their own home in Britain is slowly reducing and, as a country, we are becoming more and more like Germany.   That isn’t a bad thing as Germany is considered to have a more successful economy, one of the main stays, often quoted,  is because they have a much more flexible and mobile workforce, (which renting certainly gives) and from that, they have a higher personal income than in the UK.      

Therefore, if we are turning into a more European model and the youngsters of Stamford and the Country have changed their attitudes, demand for rental properties will only and can only go from strength to strength, good news for Stamford tenants as wages will start to rise and good news for Stamford landlords, especially as property values in Stamford are now 5.4% higher than year ago!