By Steve Roulstone
In looking at the second part of the Review of the Barriers to Institutional Investment in private Rented Homes, I have read and will comment on the sections headlined; The Barriers and Conclusion and The Recommendations.
The Barriers.
Most of these sections concentrate on the land and planning permission needs, but do refer to some rather confusing detail. Such as that Management costs are as high as 30% for Residential property. Now I know that National Companies specialise in offering services for Companies with large property portfolios, but when you consider the normal cost for Management on a local level would average at 10%, I find it difficult to see how this rises to 30% when managing from afar.
Total Costs.
I may of course be wrong, but it rather looks as though it is the cost of maintaining the property that has been added to the running costs, however, as the report confirms that it is normally Capitol growth that is considered to be the income from residential and not the rental income, whereas with Commercial investment it is the opposite way round. Surely then, if Commercial values drop over time, the cost of maintenance should be offset against Capitol growth and it is both that should be considered, as they are real income, when comparing residential to Commercial? Is this where encouraging Tax breaks can be made?
Local market.
Otherwise, once again, local Management will answer the cost issue, rather than distance Management having to find a local Agent to carry out the role of providing a Tenant, let the Local agent be the sole property Manager. Costs halved? – probably!
Lack of Experience.
The report then states that there is a lack of experience in knowing how any scheme would operate. But this does not exist in the market place; rather this confirms that in compiling the report, the Property Management Industry has not been approached. A fact confirmed by the later statement in Recommendation Five: that the market would benefit from; the professionalism of the management service. Had the Industry been spoken with (also confirmed in the Terms of Reference) then Sir Adrian Montague would have been aware that one already exists.
Right Model.
I also believe that the right model already exists as well. There are numerous professional Letting agents, who also operate as Property Managers as well, looking after leasehold sites (Block Management) throughout the UK. Providing that any incentives in profitability and land availability are made available Nationwide and providing there exists Agents with the ability to run both, then costs can be controlled, the whole Industry will benefit and progress can be made throughout the UK.
Professional Management.
But I believe that this is another opportunity for the Government to change their attitudes towards the rental sector, which is growing at the same speed home ownership for individuals is declining giving a thriving rental sector the opportunity to be part of the growth if not the very reason for it, that this country desperately needs. Tied with ensuring the Industry moves forward in a professional self managed, or Government managed (although I believe this is where the lack of motivation currently exists) manner, ensuring the scheme meets all the requirements listed in this report and that the properties concerned will continue to give the profitable long term return institutional investors require.
Hi there, I found your website via Google whilst searching for a related subject, your website came up, it seems to be great. I’ve bookmarked it in my google bookmarks.