UK Sales Market Update

Welcome to our Property Market blog, where we provide you with insightful information on the latest trends in the housing market. In this edition, we'll focus on the sales market, highlighting key statistics and offering valuable insights for both buyers and sellers.

 

1. Transaction Stats:

In January 2023, there was a 10% reduction in property sales recorded year on year, while new home purchases saw a 9% rise in completions. Mortgage approvals experienced a significant 46% reduction, with gross lending down approximately 7%. The decrease in mortgage approvals from the second half of the previous year largely explains the significant difference in lending statistics.

 

2. Buyer Demand:

According to the latest ARLA Housing Insight Report, there was a 30% fall in the number of prospective buyers registered across member branches in April 2023 compared to April 2022. Additionally, member branches reported a 70% increase in properties available for sale year-on-year. These figures indicate a drop in buyer demand, likely influenced by higher mortgage rates and economic challenges affecting affordability.

 

3. Market Activity and Pricing:

Rightmove reported that agreed sales numbers are currently just 3% behind the pre-pandemic market of 2019. The average price of properties coming to the market experienced a 1.8% month-on-month increase in May, reflecting robust activity levels and confidence. Sales agreed in May showed positive growth, and the level of negotiation from the asking price to the sale agreed price remained steady at around 3%.

 

4. Mortgage Rates and Affordability:

Despite an increase in the Bank of England base rate, mortgage rates have remained steady. The average 5-year fixed rate with a 15% deposit is now 4.56%, significantly lower than the 5.89% recorded last October. This decrease in mortgage rates contributes to maintaining home mover confidence in the market outlook.

 

5. House Price Growth and Market Activity:

The Zoopla house price index reveals a year-on-year price growth of 1.9%, the lowest in recent times compared to the 9.6% recorded a year ago. Prices have fallen by an average of 1.3% in the last 6 months due to higher mortgage rates and rising living costs. However, buyer confidence has improved, resulting in an increase in sales agreed, primarily driven by falling mortgage rates during the Spring.

 

Regional Property Price Movements:

The West Midlands region has seen year-on-year price growth of 3.5%, surpassing the national average of 1.9%. Birmingham ranks second among major cities, with a growth rate of 3.8%, just behind Nottingham at 3.9%. These figures indicate a significant difference compared to last April when the year-on-year price increase approached 10%.

 

The Outlook for the Sales Market:

Market activity in the UK sales market remains comparable to pre-pandemic levels. However, predictions suggest that mortgage rates may increase in the second half of the year, impacting affordability and pricing. It is anticipated that the year-end may see approximately 20% fewer transactions than the previous year. Sensible and realistic pricing is crucial for sellers, while buyers should not be discouraged as long as the numbers align. As the year progresses, increased stock levels may provide negotiation opportunities.

 

Conclusion:

The UK sales market demonstrates resilience, with activity levels approaching pre-pandemic norms. Understanding market dynamics, considering pricing strategies, and staying updated on mortgage rate changes are vital for both buyers and sellers. Seek professional advice and remain adaptable to navigate the ever-evolving property market successfully.

Thank you for reading

What's The Wolverhampton Rental Property Market Doing Right Now In 2022?

The landlords in Wolverhampton really started to embrace Lettings in 1990 after the change to the Housing Act in 1988, which introduced the Assured Shorthold Tenancy that we all operate under today, so what’s changed this year?

At that time, the Private Rented Sector was sitting at just 7% (7% of all properties being privately rented), but since then the market has grown fast.

Currently, 21% of the total housing stock is privately rented, which has come around due to an astounding level of growth, but in the last 2 years, this seems to have taken growth to an entirely new level.

We have seen masses of investors wanting to buy in the area, rents rocketing in price, and properties prices increasing to an unprecedented rate.

So, what does all this mean for Landlords in the PRS now?

As you can imagine we get asked a lot of questions daily, so we decided to answer the most common questions and put them here for you.

We also decided to look at our stats over the last 2 years (2020 and 2021) and interview Ali Durrant, our Branch Manager on the ground in our Wolverhampton branch on what he has seen over the last 24 months and in particular the beginning of this year (2022).

Here are our findings on the Lettings Market in Wolverhampton in 2022...

 

Where are the biggest demand areas in Wolverhampton from tenants right now?

We are seeing the biggest demand we have ever seen in history for rental property, in January, we were getting upwards of 50 pre-applications per property, it was crazy! So much so we had to build an automation system to deal with the hundreds and hundreds of tenant calls coming inbound to the office every day, it was chaos!

With that in mind, it seems any property right now rents fast, but if we had to select the best areas (the most commonly asked for areas) it seems North and East Wolverhampton is winning (2022), being the WV10 and WV11 postcodes (Oxley and Wednesfield).

It’s also worth mentioning the close follow-up areas being asked for are Penn, Bilston, and Willenhall too.

 

What type of property is there a shortage of right now?

In these strange times, there is a shortage of all types of property at the moment, which means it really is a landlord’s market, but there does appear to be more flats and smaller properties on the market than the larger 3 and 4-bed homes.

This is probably due to our experience of lockdowns. Many tenants are looking for that little extra space now than they would have probably accepted before because we all craved more space in the lockdowns of 2020 and 2021.

 

Which area is attracting investors right now?

It seems a real mixed bag right now, probably due to the level of activity being higher than we are used to seeing. HMO investors are trying to find pockets where article 4 isn’t in operation and are picking up already active HMOs near the hospital (WV11).

We also have people looking for the cheaper areas to buy to try to maximise cash flow, as well as quite a few more professional type investors that are looking to opt for more quality professional areas, which would normally attract higher capital appreciation.

 

How much have the average rents gone up in the last 2 years?

Properties in the UK (outside of London) have on average gone up by 12.6% year on year, and we are certainly able to confirm this increase and in some cases more. We have had a lot of landlords reviewing their rents, albeit some may have not been reviewed for a couple of years, with some increasing by as much as £200 per month (25% increase). In some cases, 

our system shows rents have increased for us locally by nearly 15% over the last 12 months on average.

 

How much have property prices gone up in your market?

The average property price in the West Midlands region is £262k. The average price of a property, however, has increased by £23.4k (10%) over the last twelve months. The average price of an established property is £261k. A point to note; the average price of a newly built property here is £301k.

 

Is there a market for furnished or all unfurnished now?

We tend to find that with smaller properties, yes furnished still works as long as the furnishings are of good quality, however, for the larger properties (2 bedrooms or above), normally unfurnished is preferred.

 

What’s the most asked for feature in properties now by tenants?

Generally, the most common thing people seem to want now other than more space is en-suites in HMOs, they seem to have become an essential item, and as a result, are actually becoming very difficult to let without these, and for single lets, parking and/or driveways go a long way too.

 

What would you buy now if you were buying Ali? 

I would buy a 3 bedroom home in an average to the above-average area, such as WV6, WV4, or WV8. We see high rent return in these areas, longer tenancies with families, which means fewer voids and less maintenance. With that in mind, I would also consider a modern 2-bed flat within a couple of miles of the hospital subject to lease, etc to get into the contracted NHS worker market.

 

Are the landlords that are buying 1-time landlords or multiple investors?

We seem to be getting a lot of portfolio buyers at the moment, adding to their existing portfolio and seeking opportunities from the older 20-year landlords that are selling now due to their mortgages expiring and retiring.

 

What gives the best return in your area?

We find modern 2-bed flats can be picked up for a good purchase price at the moment as the bulk of demand is in freehold, you need to be aware of shortening or expiring lease terms or have a plan/allowance for that, but it does mean better purchase prices can be negotiated

Also, there are a lot of 3-bed semis that generate £800 - £900pcm which can still be picked up for around £175,000 in mid-range areas, giving around a 6% gross yield, easy solid rental units, longer-term tenants, and decent capital appreciation too, so good all-rounders which should stand the test of time.

If you have any queries, want to discuss anything in this article, or want to discuss buying property, just email me at wolverhampton@concentricproperty.co.uk  

Alternatively, you can schedule a complimentary call with me here.

What Is The Rental And Property Investing Market Like In Liverpool Right Now?

We have let thousands of tenancies, worked with hundreds of investors, and managed hundreds of properties, helping landlords navigate the local Selective Licensing schemes since their inception in 2015.

Like tenants, landlords and investors come in all shapes and sizes, have different levels of experience, and have different wants and needs, but there are a few questions that we get asked all of the time, and right now, it seems like everyone wants to buy property in Liverpool and the surrounding areas... and I can see why.

We have been instrumental in letting property in and around the west of Liverpool for over 10 years now, our focus; to work with the landlord investors in the area.

We have let thousands of tenancies, worked with hundreds of investors, and managed hundreds of properties, helping landlords navigate the local Selective Licensing schemes since their inception in 2015.

Like tenants, landlords and investors come in all shapes and sizes, have different levels of experience, and have different wants and needs, but there are a few questions that we get asked all of the time, and right now, it seems like everyone wants to buy property in Liverpool and the surrounding areas... and I can see why.

There's a lot of investment opportunity in the area with great property prices compared to many other city locations, and will generate fantastic income (and now capital) returns.

So, if you are thinking of buying a property in the area, here are a few questions you should be asking yourself.

 

What are the most in-demand areas from tenants at the moment?

The top areas that are most in-demand from tenants right now are Bootle, Walton & Fazakerly.

 

What sort of property cannot you get enough of? 

There appears to be a real shortage of 2/3 bedroom houses, maybe because people want more space or a place to work from home, we have all experienced being locked in, and a 1 bed flat can become less desirable. 

 

Where are most investors looking to buy at the moment? 

Most Investors are looking to buy property in Bootle & Walton, which ties in nicely with the increased tenant demands we are seeing. 

 

What rent increase levels have YOU seen in the branch? 

With rents across the UK increasing on average by 8.5% (according to Homelet), we have seen rents across the board here increase by at least 10% over the last year and in some cases a lot more! 

 

What property price increases have you seen in your area?

According to the Liverpool Echo, Liverpool has the fastest rising house prices of any UK city. This year is set to be the busiest for the UK housing market since 2007, with Liverpool topping the house price charts at 10.6% and some areas such as Toxteth maxing out at over 20% in just 12 months.

 

Are unfurnished properties renting better than furnished? 

We find that most properties rent better if they are unfurnished, that is unless they are a house share or student accommodation, then of course furnished is best.

 

What are the key features tenants are asking for right now?

Of course they still want the usual, a good location that feels safe, a nicely presented property that’s clean and has good access to facilities and transport, but this year we have seen a rise in tenants asking for gardens, and to be allowed pets (probably due to the experience of lockdown), and with HMO’s they really do all want en-suite facilities (due to becoming more germ aware). 

 

How many applications from tenants are you getting per property?

During most of 2021, we were seeing around 10 applications from tenants per property, however, this year it has more than doubled, we seem to currently (January and February) be getting up to 25 pre-applications for each property, it's gone crazy!

 

If you were looking to buy a property right now Elisha, what would you buy?

If I was to buy a property now, I would definitely be looking to secure a 3-bedroom terraced house for around £130k, generating me a monthly rent of around £750pcm which results in a 7% gross yield, because I know I could rent it over and over again with zero problems and get good quality tenants.

 

What sort of landlords are buying at the moment?

It seems all types of landlords are buying at the moment, from 1st-time landlords, those with 1 or 2 properties looking to expand their portfolio and large landlords alike, it feels like everyone is buying right now, it’s a very busy market, driven in the main by the huge increase in demand and the shortage of stock out there.

 

What’s the big challenge for the Liverpool market at the moment?

It has to be the introduction of another Selective Licensing scheme across Liverpool from April 2022. This is going to be an additional cost and more paperwork for those landlords in the areas affected, but we have been through this before with Sefton, so we are ready to support our landlords through it.

If you have any queries regarding any of the subjects covered in this article or want to learn how the introduction of the new Selective Licensing laws could effect you as a landlord in the Liverpool area, we're running and inviting you to a free-to-attend webinar on the 23rd March 2022 at 18:30. On the webinar, we will cover all the nitty-gritty details you should 100% be aware of.

Register for the webinar on the next page.

Things you should consider before you rent out your property (Part. 1)

When you are preparing your property for rental, what’s the first thing that comes to mind? What are the things that you look for when you are checking the home for potential tenants? Is it the standard of the décor? The appearance of the carpets and flooring? It’s likely that you will be looking at these things, envisaging it through the eyes of the tenant – but before you even take those things into consideration, you should be thinking about safety.

When a tenant looks around the property, they won’t be able to see whether or not the electrics are up to standard. They won’t be wondering whether the boiler has been serviced. Because they will expect that you, as the landlord of the property, to have done all of the work required to make sure that the property is safe. Don’t let those things escape your attention, as these are the things that could cause you the most problems down the line.

Our advice, particularly to first-time landlords, is to focus your attention on the safety first, before anything else. It really doesn’t matter if the property isn’t ultra-modern in its décor or furnishings – first and foremost, it needs to be completely safe.

Make sure that you take the time to check your compliance with Gas Safety Regulations, that you have adequate smoke alarms placed in key places throughout the property (and that they are in full working order), and that you have fitted carbon dioxide sensors in places where there are risks.

Touching a bit more on that – if your property has an open fireplace, regardless whether it is used or not, it is essential that a carbon dioxide sensor is fitted nearby – if, as has happened in the past, the tenant decides to go against your advice and use the fireplace, then you as the landlord would be liable.

All aspects of safety for the property are the responsibility of the landlord. Keep all safety checks, such as electric and gas etc. up to date – that way you have proof if something were to go wrong.

Make sure it’s clean

This seems pretty obvious, but always make sure that the property you are renting out is clean before you show it to potential tenants. There is nothing more off-putting than walking into a home which has a bad odour, grubby door handles, and unsightly marks on the carpets.

The cleanliness of a property is the first thing your potential tenants will notice, so if you are unable to get it up to standard yourself, make sure you get a professional cleaner in to get the jobs done for you.

Key things are:

Remember; if the property is in a clean and tidy state when the tenant moves in, then they are more likely to keep it that way. And of course, you can insist that when they vacate the property, they leave it in the same condition as when they moved in – this will be noted in both your contract and your inventory.

Present to suit your market

This is something else that is often overlooked – presenting your property to attract the type of tenant you want. You’ll want to take into consideration the kind of area the property is in, and the demographic. If you’re in an area of town where there are a lot of retirees, then you should make sure that the property is set up and decorated in such a way to attract an older clientele. If it’s somewhere that tends to attract professional couples, then they will be more attracted by modern décor and slick modern appliances. And families will have different requirements again.

Something else to consider is, how will you attract the kind of tenant that you want? For example, if your property is a bit run down, hasn’t had any investment in the overall décor, kitchen, bathroom, then think about the grade of tenant that you’re likely to attract.

And to add to that, the more you are willing to invest in getting your property modernised, the higher rent you’re likely to get for it, as people are willing to pay for the convenience of having modern appliances, adequate storage, a good number of plug sockets to suit their needs, and any little modern touches that will make their lives within the home easier and more comfortable.

Of course, these are just a few of the many things that you as a landlord will want to consider when you rent out your property – join us for part 2 of this series where we will guide you through some more of the requirements and legalities you will face when looking to fill your property.

Need advice? Call our office on 01902 421405 where we will be happy to help you to get the right tenants for your property.

Alternatively, download our FREE 'SELL YOUR HOME FAST' guide here.

Section 11 Repairing Obligations – what you need to know

Statutory Implied Terms

Firstly, what are the obligations of the landlord under the Landlord and Tenant Act? The official line states that:

“The landlord [is] to maintain the structure and exterior of the property, including installations for the supply of water, gas and, electricity, heating systems, drainage, and sanitary appliances.”

In simple terms, this means that if anything you as the landlord have provided as part of the tenancy, it is your obligation to keep it in good working order throughout the duration of the tenancy.

If we look a little deeper, the statement implies that the installations are ‘maintained’, which tells us that they must indeed be in proper working order before the start of the tenancy. It’s important that anything that isn’t in good repair is dealt with before the tenant moves in, otherwise, the landlord can be deemed in breach of Section 11, and therefore can be prosecuted.

So, what is included, and what do we mean by installations?

Maintenance of the structure and exterior is quite self-explanatory; by this, we would include the brickwork and external structure, roof, drains and gutters, and windows and doors, etc. It is expected that the property is structurally sound, will not be subject to leaks or damp caused by damage to brickwork or roof damage, and is secure, with adequately fitted doors and windows etc.

With regards to installations, you should include in this anything that is included in the property as part of the agreement. That includes any appliances which are already in the property when the tenant moves in. It also includes all and any water or gas pipes, electrical wiring, water tanks, boilers, radiators, and other space heating installations such as vents for under-floor heating, baths and sinks, and sanitary ware.

 

Supplied appliances

If you have provided appliances to the tenant as part of the tenancy, i.e. they are not gifted or provided as a goodwill gesture, then these must also be kept in good repair as part of the agreement. These might include:

As a landlord, it is not under your responsibility to repair items that belong to and were brought into the property by the tenant. Make sure that any items you have provided are included in your tenancy agreement, and are listed on your inventory. It is also important that you can prove the condition of provided appliances in your inventory, so that your tenants cannot claim for damages for which they are responsible.

 

Advertising the property and the Consumer Protection Act

Something you’ll want to consider when you’re advertising the property is what you’re including in the tenancy. If, in your photographs, you have shown the property with white good, and you are not intending to include them, you must state that in your advert, and make it clear whether you are willing to gift those items, or whether they will be removed before the tenant moves in.

 

Tenancy Issues

Something we’ve seen come up and have frequently been asked about is whether the landlord’s responsibility under Section 11 changes if the tenant is behind on their rent, or is under dispute for some other reason.

The answer is absolutely not. Regardless of any issues with the tenant, you as the landlord are still under obligation to make good any repairs to the structure and installations included within your property.

You must also get the permission of the tenant to gain entry to the property to make any necessary repairs. While we know that when a tenancy is under dispute, this can sometimes be difficult, but remember that if you don’t have permission to enter from the tenant, then you can be liable for trespass.

In all circumstances, the tenants right to privacy in their home should be respected.

If the health of your property is a concern, you can download our FREE compliance check download here.

Build To Rent

In recent years, there has been significant growth in the build to rent sector, which reports suggest will see heavy investment over the coming months and years, as the demand for privately rented properties hits an all time high. So, what exactly is the build to rent phenomenon, and could it be a threat to private landlords in the UK? Let’s take a look.

Build to rent explained

We’ve seen for a while now that the home-ownership rates have been falling, as people are finding it much more difficult to secure a mortgage, and indeed save for a decent deposit to buy a home. Alongside this, factors such as population growth, changes in the economic landscape, and a shift in people’s perception of the rental market have all contributed to the recent demand for more privately rented housing, not least so in the social housing sector.

While this has been a good thing for landlords, we’ve also seen some major changes in legislation, brought in to protect tenants, but which has left a lot of landlords wondering what the future holds. And there are some big players who have caught on to this, making build to rent an attractive option.

Following the announcement back in 2017 by Sajid Javid about plans to reform the housing sector by building new homes to keep up with the huge demand, we’ve seen a lot of new properties spring up in cities, towns and villages all over the country, and this is one of the key things that has allowed the build to rent movement to take such a big leap forward.

Rather that homes being built to be bought by landlords looking to rent them out, it has given the opportunity for companies to invest in properties built specifically for the rental market.

Corporate clout

There are some big players putting up the money for build to rent projects, and the worry is that the average landlord isn’t going to be able to compete with such competition. Remember that changing tenant perception we mentioned earlier? People in general have a much higher expectation when they’re looking for homes, because whereas before rentals were perhaps seen as a temporary move while they saved for their own home, rental properties these days are more permanent. And so tenants need homes that will allow them to grow, raise a family, and do so with all of the convenience and comfort expected in a modern home.

In this, landlords have a much higher standard to live up to – you can no longer get away with poor décor, inadequate kitchens and bathrooms, and shoddy finishes. Your tenants are looking for longer-term accommodation, and so will need a home that will stand the test of time.

And this is really where the corporate investors are able to put their money down and give the tenants what they need. Where does that leave private landlords, though?

The options for private landlords

It’s been estimated that a massive £75 billion will be invested to the professionally managed private rented sector in the UK by 2025. That’s due to the growing demand for housing across the country. It’s a big number, and it’s even bigger if you consider that right now, there are huge numbers of individual landlords exiting the property market.

Lettings is an increasingly difficult industry to be in, and it’s tough for landlords. There’s no denying that. And yes, there are landlords out there who are struggling, who can’t keep up with the changes in legislation, and are taking a huge hit in income after the introduction of the Tenant Fee Ban earlier this year. But for those of us who are fighting through it, and despite everything, are determined to maintain growth and make thongs better for our industry, what does the future hold? Are we doomed to be held at ransom by these big companies?

Well, I doubt it – and here’s why.

On the whole, the build to rent sector is aimed at a specific client. You’d find, in reality, that many build to rent properties tend to be either blocks of flats, which are quick to build (and therefore quick to start getting a return on), or small units of apartments aimed at people like students, single people, young couples, or the retired community (who typically downsize when they retire or are widowed).

That’s not, in most cases, the market we aim for as landlords. We know that our income mainly comes from the other end of the scale – those who are starting on their career path, and are growing their families. Those who are looking for a family home, where they can stay long-term.

So really, there are two possible options. And these depend on your long-term needs.

Investing

It might be that you’re in a position where you’ve either grown a successful portfolio, and are looking to expand your growth in other directions. Or you might see the benefit of selling up, and putting your money into something which gets you a guaranteed return for little effort.

And yes, there are benefits to investing in build to let, if you’ve got the funds to do so. Perhaps you are one of those landlords mentioned earlier, who are seriously thinking about exiting the market in this difficult new landscape. In which case, placing yur cash in something like build to rent could be a viable option.

Sticking with the current market

Your other option, of course, is to put all of your efforts into that portion of the market you know so well. If you still have that passion for the game, and are prepared to ride out the changes, evolve with them, and push through in order to grow your current portfolio, then the option to stay true to yourself and stay on your chosen career path is what you need to focus on.

I think it’s vital that there are landlords still prepared to cater for this niche, as there will always be the demand for good, well maintained, family homes. And that’s really what we are here to deliver. And if we can do that with professionalism and a personal service, then we are doing justice to our industry.

7 things landlords might not know about LHA tenancies

It’s a common phrase you see rounding off nearly every rental listing - “No DSS”. DSS – being the now-defunct Department of Social Security – refers to LHA tenants, the catch-all term for low-income tenants who claim Local Housing Allowance (LHA), named after the now-defunct Department of Social Security. 

LHA tenancies have become a bit of an enigma due to the lack of uptake on them. As such, they are an untapped market for many investor landlords, and offer a great opportunity to create a solid portfolio. 

Much is said of LHA tenancies in the lettings world – they’re unreliable lets, they’re a one-way ticket to rent arrears, and so forth - but it’s important to separate the truth from the myth. Here’s some facts you might not know about LHA tenancies:

1)    LHA is a capped flat rate allowance, calculated based on the size of a tenant’s property and the area in which they live. This means tenants need to source a property before their allowance can be calculated. Potential LHA landlord investors should research market values of low-income areas and make sure any properties they would like to let would qualify to be LHA-funded.

2)    Only 30% of available properties in a given area in the UK are affordable to LHA tenants with an even smaller percentage actually renting them due to “No DSS” policies. Due to supply and demand, if you have an affordable property, you could tap into a pool abundant with potential tenants.

3)    Landlords by default can have LHA paid directly to them if the tenant incurs 8 weeks’ arrears, but can apply for direct payment BEFORE this happens. Contrary to popular belief, local councils assess applications on a case-by-case basis and are open to paying landlords directly for a variety of reasons. If you have concerns about a tenant’s ability to pay, council help is always available.

4)    Many local councils, housing charities and letting agencies host direct letting schemes to introduce landlords to low income tenants. This means LHA tenancies are often easier and quicker to set up, which could benefit landlords dealing with vacancies and short-term lets.

5)    Some local councils in Northern England are part of the Empty to Plenty scheme, which helps house LHA-qualifying tenants by guaranteeing the safety and compliance of landlords. The scheme aims to reduce empty properties by assisting landlords with their lets, including options such as leases through housing associations or refurbishment loans for derelict properties of up to £15000. 

6)    As part of the Green Deal, LHA-qualifying tenants can also claim government benefits for replacing old appliances with new, energy efficient models. This means landlords could potentially have boilers, ovens and other expensive appliances upgraded at zero cost.

7)    If it is found that your tenant has been fraudulently claiming LHA and you have been directly receiving the payments, you will not be responsible for the repayments as long as you can prove you were not aware of any wrongdoing, so keeping of records is vital when handling LHA tenancies. 

Due to landlord reluctance, LHA tenants have developed a less-than-favourable reputation, but not all LHA tenants are the same – they can be employed or unemployed, disabled or fit for work, have families or be single. Specialising in LHA tenancies could prove to be a worthwhile investment – not only would you helping many people in need, but you could build a strong portfolio that generates regular cash flow. 

If you are interested in letting to LHA tenants, always have a full discussion with each applicant about their financial situation, what requirements they have for their property and request a full reference. If you’d like further help, you can get in touch your local Concentric branch, who can offer you further guidance and support on meeting LHA property standards and sourcing tenants.

Should I concentrate on capital appreciation in buy-to-let?

The growth of the buy-to-let market isn’t slowing down, as the housing shortage in the UK continues. Because of this, you now see a lot of information out there to help landlords get the best rental yields for their properties, but interestingly there is less information on capital appreciation. More associated with buyers and vendors, capital appreciation is also a factor that landlords need to consider when they invest in property, now more than ever.

What is capital appreciation?
In comparison to cash flow, which is money that goes straight into your back pocket, capital appreciation is the profit made on an asset that has not yet been liquidated. Many investors use property for appreciation due to being one of the more reliable assets.

Investing in private rental properties is more often than not a longer-term commitment compared to refurbishment projects and other types of property investment. Therefore, it’s in a landlord’s best interest to look into the capital appreciation potential of a property for when they or their successor eventually sells them. It’s not worth investing in a rental property only to lose capital once you leave the sector.

Why should you think about capital appreciation? 
If you’re looking to boost your personal income – maybe you’d like to add more to the retirement fund or raise more money to help out family -  then it would be wise to consider capital appreciation opportunities.

Once you reach pension age, you could stand to have a good nest egg to fall back on, especially since properties in the UK are increasing on average by 24% in value over 10 years.

Things to consider for capital appreciation

1)    Buy an asset you can actually liquidate. It’s okay investing in properties to create some steady cash flow, but if the property is difficult to sell or in a poor location, then you could end up losing more capital than you earned overall. This is called capital depreciation. Look for properties in up and coming areas or areas going through regeneration. According to statistics, you could stand to gain up to 25% in value on a property over just 5 years if a new supermarket is built in the area.

2)    Budget correctly and be aware of your net income. Only invest in properties you can genuinely afford – this includes décor and furnishing, maintenance and repairs, mortgage fees, taxation and utilities that match its size and build.  The mortgage tax relief cuts introduced by the government last year only heighten the need for you to plan your budget carefully. Pushing yourself to invest in properties that generate a large gross income will end badly if you can’t manage the financial upkeep. You could end up cancelling out any rental yield you make for a number of years, but even worse, you could end up in debt with a need to liquidate quickly. You want capital appreciation to boost your income, not make up for your losses.

3)    Be a good landlord. Don’t allow your property to become run-down and filled with bad tenants; it could influence the reputation its area has and thus decrease its market value. Looking after your tenants and ensuring a well-kempt property is heavily linked to how much the property will be worth over time. 

If you’d like to focus on capital appreciation when making a buy-to-let investment, a consultation with a local property expert is highly recommended. Many of our local Concentric branches offer buy-to-let advisory workshops, where you can get advice and guidance tailored specifically to you. Click HERE to find out more.

Planning on investing in HMOS? The 7 Essential Factors You Need to Consider...

Like any investments, HMOs come with risks and rewards. If you want insider knowledge gained from my many years’ experience in the property industry, I’ve got some insights that I’d love to share with you. Read on to discover how you can get ahead of the game when investing in HMOs.

   1. Planning and Building Regulations:

   2. Refurbishment:

   3. Fire Safety:

   4. HMO Compliance Considerations:

   5. Neighbours:

   6. Presentation:

   7. Licensing:

For a FREE 16-page document on HMO investment, detailing how Concentric can help you streamline your experience and maximise your investment funds, click here.