Tag Archives: Running A Business

21Nov 2011

Current Property News: A housing strategy for England. But is it for the rental Industry?

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By Steve Roulstone

Today the Government have released their Housing Strategy for England, which is designed to give a kick start to housing sales across the UK, which most would agree is something that is badly needed and a view point that I totally agree with and have commented so in these pages on many occasions over the last eighteen months. But Housing Sales are not the only consideration nowadays and for once the Government have acknowledged this, with a section and strategy purely designed to encourage Landlords to start buying more property for the rental market.

Rounding a square peg.

I recognise that one problem the Government had to address was how to encourage growth in an area that had come under such criticism (Profit from rising property prices) for the perceived effect profit on Property values had had on the current financial situation and current property price de-valuation. What I did not expect but can perfectly understand is the decision to encourage growth through Business organisations rather than individuals. This very comfortably  delivers possibility of growth, which according to conversations I have recently had with Management at one of the larger National Property houses, whose clients include the organisations targeted by this policy, who are actively buying property in numbers at the moment, will be well received.

Using Council powers.

What I still cannot understand and accept, is that Local Government will be the answer to what is described as the ‘rouge Landlords’ who still flaunt such legislation as the Tenants Deposit Scheme and Houses of Multiple Occupation standards or as mentioned, the Decent Housing standards, for certainly where we are based in the Midlands, all Councils that I have come in too contact with have confirmed that they do not have either the man power or time (ability) to pursue Landlords and therefore deliver a local deterrent.

Working with the Industry.

It is very encouraging to see a whole section giving information about what the Industry can deliver and I am sure the ringing endorsement of the ‘Safe Agent scheme’ has been well received by the Industry in general, but I cannot make comment about this situation without pointing out that if the Government really wanted to get rid of rouge Landlords at the same time as increasing standards, then the Industry is here with open arms! Surely the fact behind the figures quoted that more property in the rented sector is of better quality than in the hands of owner occupiers says it all. I know that all of the properties in our Management would pass with flying colours, because we would not manage property that failed these standards.

Where does the problem lie?

I am also well aware that the figures state that some of the worst quality housing is in the private rental sector as well. Now with the information that we do not manage them and with the firm belief that neither do other professional Letting Agencies, it does not take such a massive leap of imagination to realise where these properties do actually lie! So what is the answer? Simple, involve us in managing or looking at these properties, so that all Landlords have to be connected with some professional licensed Agent. There are further issues raised for the rental sector by this statement especially surrounding Green policies, which I will address through these pages later this week.

19Nov 2011

Current Property News: Rents rise in September.

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By Mike Edwards

There is no relief for tenants as rents rise in all regions for the first time on record, according to the latest buy-to-let index from LSL Property Services plc. September figures show the average monthly rent in England and Wales rose by 0.7% to £718, surpassing the previous record high of £713 in August. With annual rental inflation at 4.3%, the average rent is now £29 per month higher than September 2010.

Rents rose in all regions of England and Wales for the first time on record and as a result rents hit record highs in six regions. Not surprisingly rents increased the fastest in the South East and the East Midlands, where they rose by 1.8% and 1.1% respectively compared to August. The smallest increases were in the West Midlands (0.2%) and the North East (0.3%). However, over the course of last year, London’s rents have risen at a faster rate than any other region, increasing by 5.8%. However the appetite for UK property investment outside of the capital also remains subdued, with 12.5% of investors looking to acquire over the coming year.

LSL also report that annual returns on rental property dropped back in September after property prices fell annually. The average total annual return in September was 1.8%, the equivalent of £2,995 being £7,661 in rent, with a capital loss of £4,666. However, property prices in the last quarter have held up better than in the previous twelve months, and if this is maintained, a property investor could expect to make a total annual return of 8% over the next year.

Rising rents may prove to be a headache for tenants, but they are improving the outlook for investors – which may in turn encourage further investment in the private rented sector. Despite capital losses after house prices fell annually, growing rental incomes means returns are still in the black. The average yield rose from 5.2% to 5.3% in September, the highest level since the housing downturn, and outstripping many investments. So with house prices yet to resume their upwards climb, there are opportunities for prospective investors to secure profitable bargains.

Figures this week from Hamptons show that investors in the shape of cash buyers are being enticed back to the market. They have reported a yearly increase in cash buyer applicants (from 11.86% in September 2010 to 12.46% in September 2011) emphasizing the perceived strength of residential property as an investment asset. Marc Goldberg, head of sales at Hamptons International says: “Due to the long-term nature of property as investment class, many of our buyers prefer to invest their cash in bricks and mortar rather than more uncertain assets such as stocks and shares. Although the current economic downturn may have caused uncertainty, vendors can take heart that we’re seeing an encouraging increase in cash buyers ready to complete quickly.”

However, this picture of positivity jars with the appetite for investment seen in the latest Young Index figures, which appear to more accurately reflect the wider sentiment of continuing economic uncertainty. This quarter’s figures show a fall in the proportion of investors seeking to acquire property in London over the coming 12 months to 33.3% (from 46.3% in the previous quarter and 59.3% in Q4 2009).

04Nov 2011

Current Property News: Trapped renters equal half of the UK rental sector.

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By Mike Edwards

This information is taken from Rightmove’s Quarterly Consumer Confidence Survey out today. Trapped renters, tenants who would like, but cannot afford to, buy, make up 55% of the rental sector, with one in four of them over the age of 40, according to the portal’s latest Consumer Rental Forecast. Thus, this group faces the prospect of having to choose between a heavily reduced mortgage term to pay off any mortgage they do eventually take before they become pensioners, or continuing to pay off a mortgage into their 70s and beyond.

In rough terms recent surveys show that over half of those in rented accommodation would like to buy now, but can’t make the sums add up and, as a result, are trapped. The global economic woes that have left first-time buyer numbers at record lows will shatter the goals and aspirations of many as they face the reality of renting for far longer than they originally planned. Indeed those trapped and still renting when over the age of 40 could face the prospect of being an OAP mortgagee, or face difficulty getting a 25-year mortgage term if it takes them beyond lenders’ retirement age criteria. Generally most front line lenders will take age plus mortgage term to a maximum of 75

There is also a growing gap between demand and supply and demand continues to set records. But available stock is down 5% on the last quarter as the supply of new rental properties remains muted and tenants stay in properties for longer. The lack of supply means renters are resigned to paying more, with 53% of them expecting rents to rise in the next 12 months and 39% can see themselves still renting in three years’ time. On an Assured Shorthold Tenancy a properly served Section 13 notice to increase the rent leaves tenants with little option provided the newly sought rent is in line with local market levels for similar properties. The other danger for longer tenants is that it does not matter how much the rent is increased by, only that it reflects current trends. So any tenant that has been enjoying a fairly soft rent might find themselves with a nasty surprise if the Landlord or their agent monitors local rent and increases levels accordingly.

This of course is all good news for investors holding the type of property in demand especially in sought after locations. This combination of high tenant demand and upward rental pressure will be particularly appealing to long-term investors. Many investors say that attractive yields from rental returns, compared to returns on their other investments, are their main reason for investing in property. With the stock market continuing to offer the certainty of a stressful rollercoaster ride and safe cash investments delivering below inflation returns the solidity of bricks and mortar combined with high tenant demand and rising rents has growing investor appeal as a physical asset that could prove to be a better long term hedge against inflation.

18Oct 2011

Property Landlord Advice: PAT testing for all!

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By Steve Roulstone

The ‘all’ in the title above is referring to all portable electrical goods in any rented accommodation which is a House of Multiple Occupation and in particular the Tenants goods as well as any electrical items supplied  by the Landlord which is not something that would automatically come to mind, but the principals are just the same as the reasons why goods are tested in the first place.

Portable Appliance Testing

It is one of those sayings which gets accepted as an acronym and slips in to our language so easily that the proper meaning can easily be forgotten.  But the reason for testing all appliances supplied by the Landlord, is lost if the appliances supplied by the Tenants are not tested as well. This means any heating device, television or even fridge that they supply, will need to be tested as well, otherwise the whole point of carrying any test out is lost.

Enforcing the rules.

Of course it is how you manage this and of course why it should be done in the first place that needs to be explained. In our case at Stafford, we manage two blocks of rooms (over 60 in each) which are run by Wardens that we supply and the recommendation came about as a result of a Health and Safety and Fire Inspection, on behalf of the insurers, who naturally want to know that everything is being done to minimize the risks involved, especially where foreign students or workers are concerned with electrical items that run on a different current to our own electrical system. (Rice cookers are a prime example) What we do is to advertise the day we have our own test carried out and then allow goods to be tested free of charge.

Contractually bound.

The difficulty is enforcing the rule, which we also add to our contract for the accommodation, because if this opportunity is ignored, then it is almost impossible to enforce the test, so it is very much about communications and taking advantage of every opportunity to have the work carried out, which is why testing for free along with the Landlords property is, we feel, such a good idea.

Computers.

Of course the biggest area is lap tops and computers as virtually every student and indeed worker would now have their own computer, which still needs to be tested and despite the obvious reaction that any test would ‘blow’ the computer, there are set standards and methods (of course!) to follow. Such information is vital when assuring your Tenant that the test needs to be carried out and you are faced with the inevitable statement to do so would destroy the computer.

14Oct 2011

Current Property News: Rental services being stretched during difficult times.

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By Steve Roulstone

At our office in Stafford, we are seeing many Landlords reviewing what they pay for our rental services, this is to be expected when everybody has to look at their expenditure very closely and where possible make savings. We have seen whole families change from a Fully Managed service to Tenant Find only and we hope that what they have witnessed over the last seven years whilst we have managed property on their behalf, will stand them in good stead, and of course should they need professional help then we will be available to assist wherever possible.

Review prices.

What we have done to assure our Landlords that they are getting good value for money is to look at what we charge for all of our services, by breaking down the different facets of what makes a Fully Managed service and price them individually.

Comprehensive cover.

 This of course makes quite a list, from Initially finding a Tenant through checking them in to the property, dealing with maintenance issues, visiting the property on a regular basis, collecting rent and paying via statement and of course chasing and pursuing arrears, as well as finally checking Tenants out of the property, which leads to where we normally started, with a review of the home and advice pre renting again.

Value for money.

Of course when you look at the charges broken down in this manner, then the overall average charge to a Landlord under Full Management no longer looks out of place, and at times we need to be aware of what saving a Landlord would make set against paying individually. Not that I believe Landlords are wrong to review what they pay, far from it, this is what  they should do as would I for regular occurring expenses, especially under the current financial restraints that everybody is feeling.

Review services.

What we should be able to do as Agents is be aware of the possible financial restraints our customers are going through and be ready to assist the process, which means we need to review every section of our service and ensure we can offer each separate part in a professional and cost effective manner. Because even though Landlords may wish to make savings, there are still bound to be parts of what we do that would make better sense and that Landlords would still prefer to be dealt with by others, just look at Property Visits, or of course Rent collection and arrears chasing. There is no doubt in my mind that just like any other organization in these difficult times, we need to be ahead of the game on our Landlord’s behalf, as the financial situation is not going to change (as my Father would say) ‘just yet a while!’

30Sep 2011

Property Landlord Advice: Rents rising in August.

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By Mike Edwards

Rents rose by 1.2% in August – the largest monthly increase in a year – but tenant arrears increased for the first time since April, according to the latest buy-to-let Index from LSL Property Services plc. The average rent increase to £713 per month across England and Wales in August, surpassing the previous record high of £705 in July. This is the largest monthly increase since August 2010 with rents rising fastest in Wales and the South East, where both saw increases of 2.1%, closely followed by London (1.5%) and the South West (1.3%).

The only regions to see a monthly fall in rents were West and East Midlands where prices dropped by 0.4% compared to July. Annual figures show that London has seen the highest rental figures, with rents hitting a new record high of £1,025 per month in August, an annual growth of 6.6% equivalent to £63 per month. According to even more recent figures the average rent in Greater London according to tenant referencing specialist HomeLet has now increased to £1,202. This is an increase of 12.2% compared to the same time last year but over the same period; the average salary of tenants in the region has increased by just 2.4%.

LSL also report that annual returns on rental property improved in August after annual decreases in property prices slowed. The average total annual return in August rose to 2.6%, as capital losses diminish. However, there are signs that tenants are already feeling the strain of the rent rises as tenant arrears increased for the first time since April, with 10.7% of all UK rent unpaid or late by the end of August. This is up 9% compared to the previous month. Unpaid rent totaled £300 million across the UK in August, up 19.5% from the £251 million unpaid in July.

However, August figures always show an increase in arrears because the holiday season often takes its toll on tenant arrears, with many households squeezed by summer holiday spending. While arrears may be expected to fall back into line in the short-term, the growth is indicative of the mounting pressure facing tenants. With rents rising so quickly, soaring inflation and an uncertain economic outlook as evidenced by the recent turmoil yet again in the markets, over the long-term one can only anticipate that rental arrears will become a growing financial problem for landlords.

19Sep 2011

Rental Issues: Can Tenants decorate?

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By Steve Roulstone

As I stated in my last blog, it has been one of those weeks where recurring issues have chosen to raise their heads all at the same time and the latest one that has attracted the attention of my ‘electronic pen’ is that of Tenants decorating a property, either with or without permission!! This week it has been one of the latter that has caused the problem and because of this, I felt these pages would be a good way of clarifying exactly what should happen and what is or is not allowed for Tenants wishing to decorate in a rental home.

Good call.

Firstly, unlike many of my compatriots in this industry, I appreciate where Tenants are coming from when at a viewing they ask if they can decorate. I can see that the person asking (it is usually a Female who would ask the question) does so because they wish to make the house their own and put their own stamp on what they perceive as their future ‘home’. It can be disappointing for a Landlord to be asked after they have just completed decoration in the neutral colours we suggested, so unless decoration is a real issue, we normally say not for the first six months, after all, as we explain, if the Tenants decide to move after six months, then we would rather they saved their money!

Without knowledge.

This is the scenario that we all fear and I well remember the first time this happened to me, when  a Mother, wishing to provide her kids with a bedroom that was definitely their own, decorated one bedroom in red, black and white Manchester United wallpaper, complete with gold and red crest and the second bedroom in Barbie pink! It was not just that the wallpaper was garish, but also because it was job had very badly carried out and even after removal of the paper, the paintwork resembled a poker dot finish rather than a normal painted finish.

The correct way.

Of course permission to carry out decoration should not and cannot be unreasonably withheld and that means that a system should be in place so that approval can be sought. This should include a written request from the Tenant including colour and paper samples, which will produce a written response from the Landlord either saying yes or no to the suggested scheme. This is because it is unreasonable to ask that a bedroom should be painted deep purple, no matter what the reason for the request, so it is therefore NOT unreasonable to refuse permission. But with acceptable colours a written acceptance ensures there is no comeback, either for the Tenant, or the Agent!

Professional Decorators.

But Tenants should be made aware, that even if the Landlord does accept the scheme itself, they will (and should) expect a professional finish in carrying out the work. I have known Landlords insist that any work is carried out by professional decorators and if the property has been decorated in this manner in the past, then to request painters and decorators to carry out the work again, is reasonable. But to allow people to carry out the work themselves does leave the standard of the work squarely on the shoulders of the Tenant and if they fail to carry out the work well, with badly fitting paperwork and the edges of paintwork not defined, then it is perfectly reasonable for the Landlord to insist the Tenants pay to have the room returned to its original state and condition.

Confirmation is everything.

This is a judgement call for both Landlord and Agent and in most cases is dealt with as previously mentioned by ensuring letters are in place, with perfectly clear obligations contained in the letter and with photographs of both before and after. If doubt does exist, then permission could be given for just one room, such as a bathroom or small bedroom, to judge the standard of decoration achieved prior to allowing any further work to be carried out. Either way this is a major part of Managing a property and should be taken seriously, and dealt with professionally to ensure mistakes are avoided for all concerned. But even though we advise all Tenants of the procedure before  commencement of all Tenancies when we discover that decoration without permission on a property visit we know the consequence will more than likely, not be good!

05Sep 2011

Current property News: Rental increases Figures behind the Facts.

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By Steve Roulstone

Here are some of the facts behind the figures that are being quoted organizations who specialize in collating data for the property market. On their own figures do not always mean much, but placed together in this format and a pattern is emerging!

  • Rents rose for the sixth consecutive month in July, increasing by 0.6% to £705 per calender month and marking a new record high. It means that the average rent is now £29 higher per month than in July 2010. Nevertheless, the level of late of unpaid rents fell slightly from 9.3% to 9%, according to the latest Buy-to-Let Index from LSL Property Services.. The average yield also rose reaching 5.2% in July, up from 4.8% a year ago.
  • The greatest rental increase was in London, where rents increased by 7.1%, hitting a new high of £1,009 per month. This was followed by the North East, where rents increased by 5.5%, and the East and West Midlands, where rents rose by 4.8%. Only in Wales have rents remained flat year-on-year. On a monthly basis, rents increased fastest in the South East, up 1.7%, while in Wales and the East Midlands they increased by 1.4% compared to June. David Newnes, estate agency managing director of LSL Property Services, says: “Rents are on an upward trajectory, and it is unlikely that tenants will gain respite any time soon. Demand from thousands of frustrated buyers each month is underpinning buoyant competition for rental homes, enabling landlords to increase prices.
  • “This is the peak summer season, with more renters on the move, the market will continue to heat up. Such strong demand and high rental incomes has forced lenders to take notice, and more are returning to the sector. As a result of the competition in the buy-to-let market, the range of affordable products is expanding – and lending to investors rose by 21% in the last quarter. Nevertheless, even with squeeze on landlord finance abating, the new supply will not be enough to meet demand from tenants.

 

  • Almost a quarter of landlords are feeling more optimistic about the prospects for their property portfolios, rental income and yields. They are helped by a perception of availability of buy-to-let finance: 22% in the second quarter of this year said that it was reasonably available, compared with 17% in the first quarter. According to Paragon Mortgage’s Q2 Private Rented Sector Trends Report, 23% of landlords feel more optimistic than was the case in Q1, particularly if they are professional landlords, with 30% stating they were more optimistic, compared with 15% of smaller-scale landlords. On average, landlords expect to have 13.1 residential properties in their portfolios in a year’s time, compared with 12.6 properties currently.
  • This is the first time in two years that landlords have predicted an increase in the number of properties in their portfolios. Nearly three out of ten landlords (29%) have increased rents during the second quarter, the majority of whom reported an increase of between 2% and 4%. Landlords are also more optimistic about the net value of their portfolios, with a growing proportion expecting an increase in value (14% in Q2 against 13% in Q1), and fewer are forecasting declining values (12% Q2 vs 19% Q1). The majority of landlords (74%) expect net values to remain the same.
  • Also highlighted in the report is a shift in the types of property that landlords are looking to add to their portfolios during the third quarter. Of those looking to purchase during the quarter, terrace houses are the most popular choice, with more than half of landlords saying they expect to buy this type of property. However, there have also been significant increases in the popularity of semi-detached houses (up from 28% to 41%) and detached (up from 9% to 22%).

All of this confirms what we as Agents have seen and continue to see month on month. The rental market is healthy and from the shop floor it is also noticeable, that we are receiving far more enquiries from would be Landlords. The ‘Buy to Let’ market may not rise to the heights of five years ago again, but the investment Landlord is definitely coming back, the only difference is that the market will give this current trend another ‘name’ soon – let’s wait and see!!

16Aug 2011

Franchise News: Starting a Letting Agency not so easy!

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By Steve Roulstone

I have been somewhat surprised to hear that after many years of insisting that the only way to start in our Industry was to have a High Street presence, with all of the associated costs that this envelops, one of our major competitors has now made a major switch and started to market a start from home operation and from what I know about the industry and process I can only surmise that this is purely a cost motivated decision, because all of the evidence from my own Franchise offices is that the need for a High Street presence has never been stronger!

Historically not needed.

I took over the running of our Franchise two years ago, prior to that, the previous Management had assisted people to open offices in not only the High Street, but also from serviced offices and from a home start. The fact that this was possible at that time is confirmed by the fact that these offices are still trading and indeed have been doing so for many years, in some cases approaching a decade! But what is also clear is that this is not the case now, as I have had confirmed as I travel around our offices and discuss current trading levels.

Inherent differences.

What has been confirmed to me is that the offices with the biggest profile are the ones that are enjoying good increases in numbers of both property and number of Landlords. (This is an import point because it needs to be recognised that the number of Landlords is growing significantly and the growth is not existing Landlords buying more properties) This is not the same when smaller offices are concerned because of the massive increase in competitors. Through both the growth in Letting Agencies and Estate Agencies ambushing our trade, the customer has very soon learnt to look around and there is no doubt that even in a technological age, the best place to look is on the High Street!

Web sites tell no story.

 There is very good sense behind this, because on the internet it is very difficult to see any difference, in fact, the better the web site does not automatically mean the better or larger the Company and because of the financial implications of a poor service, the customer has taken to seeing with their own eyes! At Stafford, I recognised several years ago that when Landlords turned to the web for research, we needed something to make us stand out from competitors. Therefore with apologies to potential Tenants, if we only listed all properties we have available (as Rightmove eventually insisted, because of course Tenants are their customers) we would not look very large, so we have left all properties on our books on our site.

Best advice.

What this current trading pattern dictates, is that any new start (as we are only too aware!) needs to look very closely at where they are going to get new opportunities, because it is only new Landlords who will become their Customers (unless you have friends with property) because Landlords do not change either easily or often! It is the practical day to day reality of Management that confirms this, because unless you make a real hash of matters, you will always have the opportunity to resolve issues before any change is reasonably possible. (Consider standing orders for rents and relationships with existing Tenants) I always believe in placing myself in the position of the potential customer and what needs to be answered may be a hard reality, but one which needs to be faced straight on; Why should Landlords choose somebody operating from home, as against the choice in the High Street?

Starting again?

Not something I would like to do again at present and explains why those considering Franchising are not exactly rushing to the plate at present! But even and probably especially in hard times, we as Franchisors need to be both truthful and realistic for the benefit of potential investors in our Companies. Without and probably until professional recognition for Letting Agents, via licensing or qualification is introduced, however the Government decide to proceed as they surely eventually will to deal with an increasing level of complaints, we have nothing to differentiate us from the rest of the market I believe that the choice for Landlords will not diminish until such legislation is produced, so until then, we have to accept where we are and why!

04Aug 2011

Property Landlord advice: Wooden flooring best advice

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By Michelle Strassburg

Wood flooring is popular in many homes as well as in commercial properties. Landlords often fit wood flooring due to their durability and in an attempt to give the property’s decor a modern touch. We know from speaking with property developers and landlords that in order to reduce costs, those individuals with do-it-yourself skills will often fit the floor on their own.

 As a service to Castle Estates readers we wanted to share first hand the more common mistakes that unless taken into account and corrected could seriously degrade the durability of the floor, resulting in more costs.

 Common DIY Mistakes When Fitting Wood Flooring:

 Selecting The Wrong Thickness – Quality wood flooring allows you to sand and treat the wood if it looks warn, thereby giving it a fresh and new look. Only thick floorboards will react well to such treatment.

 Choosing The Wrong Floor Finish – Different areas require different floor finish. If you are planning on installing the floor in high traffic areas such as halls and entrances, you should look into selecting Lacquered, Varnished or UV oil as they all offer better resistance to stains and spillage and much easier to clean.

 Not Taking Into Account Underfloor Heating – As a rule of thumb, unless the wood flooring you bought specifically mentions that it will cope with underfloor heating, do not fit wood flooring over such heating systems. Otherwise, with time, the wood will expand and erupt.

 Fitting Wood In Damp or Humid Areas – Wood and water do not mix well, and you probably don’t need us to tell you that. Fitting wood flooring in areas with high humidity such as basement or bathroom is ill-advised unless fitting engineered wood flooring. These types of wood flooring are made from a mix of materials (including wood) and are better suited for damp or humid conditions. In any way, it is better to first solve the cause of dump before fitting any flooring.

 Going For Inadequate Underlay – This thin layer which is fitted above the sub-floor is traditionally thought to make the floor more comfortable to walk on, however if your property is in the shape of a flat with downstairs occupants a quality underlay is essential. It will silence the footsteps of the property’s tenets.

 Fitting Over Humid Sub-Floor – Another typical mistake is fitting the floor over a humid surface. The most common humid sub-floor is concrete that has not been allowed to dry sufficiently. When fitting a wood floor, it’s essential that the humidity level of the sub-floor does not exceed 6%.

 Failing To Leave Gaps – Wood is a natural material that can expand in hot temperatures or shrink cold in temperatures. When fitting the floor, it is recommended to leave a gap of 1cm to 2cm between the floorboard and wall to allow this natural reaction to take place without damaging the wood.