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Rental stories

The Art of Buy to Let

Once again the Bank of England Monetary Policy Committee has opted to hold interest rates at 0.5%.  This has been the case since March 2009 or to put it another way the interested rate have remained at this level for the last 32 months.

There has been further commentary to the effect that interest rates are likely to remain at this level for another 12 months and in fact the money markets, through SWAP rates seem to anticipate this as well.

This is all good news for borrowers.  However the opposite is the case for savers. With inflation officially at 5.2% then cash held in the bank is not only providing very little return but also going backward due to the effect of inflation.

Buy to let – an attractive alternative

Buy to let property investments do provide an alternative that is attractive to many savers.  Yields can be achieved of 3 – 5% on residential property and there is the added advantage of some capital growth for the future.

We have advised a number of investors over the last few years and believe that there are good buying opportunities in the current market.  Any investment will need to be tailored to the individual circumstances but one thing for sure is that property investors take satisfaction from the fact that they can see and feel their investment.

Market Harborough is an affluent town with a large employed and wealthy population.  This means that tenants are in good supply.  The housing stock is generally in good order and there is a healthy balance between flats, starter homes and family properties.  The town has the benefit of a London main line railway connection as well as a wide range of industries and employers.

But to lets that we have sold have included flats and 2 bedroom houses up to the £150,000 level.  Rents range for £400 pcm plus for a one bedroom to £500 to £700 pcm for a two bed house or flat.  New build will have little or no repairing issues.  It is even possible to buy properties with tenants already in residence.  This not only means that rent is received straight away but also there is a track record of how the tenants perform.

With the prediction that interest rates will remain low for the foreseeable future is it the time to review your savings plans.  If so property might just be the foundations to build on.


Rental Properties Take Off

Anyone who regularly follows this article will have pieced together the fact that the autumn has been disappointing from the sales prospective.  There are many reasons for this which have previously been explained albeit from the difficulty of acquiring lending, shortage of stock and of course the reduced confidence in the overall economy.  As we enter the darker winter months the sale of property gets harder.  I believe that over the last few years this has been more and more the case.

Rental sector demand

However as one sector slows down the rental market appears to be flat out.  Certainly from our position we have rented all our available properties in quick succession.  The reason appears clear to me.  Individuals and family need roofs over their heads and if they are not going to purchase then renting is the only other choice.  In fact the Association of Residential Lettings Agents (Arla), say some 70% of member offices are saying demand now outstrips supply.

We have seen flats and house that are well presented in great demand and often the landlord is in an attractive position where they can select a tenant from an attractive short list.  This is important because different landlords have different objectives therefore it is appealing to have the opportunity to consider the best candidate for the property.

Buy to let investors

This upturn in rental demand has also been of encouragement to the buy to let investors.  Indeed we are seeing a resurgent in the property investor after all the doom and gloom of the last few years. The difference is that these investors are much more cash oriented and will not be susceptible to increases in interest rates.  The investors are attracted by the high yield that can now be achieved in the market especially compared to the bank interest they would have been receiving on deposits.

The interesting analysis is that with the increasingly difficult sales market there is considerable opportunity still existing for investors.  Coupled with demand from tenants such buyers can purchase with the confidence that they can secure good quality tenants in the right sort of properties.  With the general uncertainty in the economy such security could well be attractive in the short to medium term.

Energy assessments – are they worth the fuss?

Anyone marketing or renting a property in the last few months should have been visited by a DEA, not a drug enforcement agent, but a Domestic Energy Assessor.  What it all about and is it worth it you might well have thought.

The starting point to this issue is the crazy situation that there are some properties out there that seem to be intent on heating half of Market Harborough.  The poorer your property is insulated the worst you are going to be as the heat escapes through the walls, windows and loft.  This is a crazy waste of your money as well as a rather reckless use of the world’s resources as well as contributing to “global warming”.

An assessor is now required to visit all residential properties that are to be marketed for sale or rent.  Indeed there are further rules for industrial and commercial property and the need for them to be assessed.  However here I will concentrate on residential property.

The assessor will need to inspect and measure many of the components of the house including the boiler, loft insulation, windows, walls and roof construction, light bulbs and electric meters.  In addition the age of the property has to be established as this has a crucial effect on the rating.

All this data is then fed in to the software which will produce the rating and the standard recommendations.  The most energy efficient are Grade A and the worst Grade G.  The average for England is Grade E.  Recommendations include cavity wall insulation, double glazing, extra loft insulation, a more efficient boiler, more low energy light bulbs, internal insulation, wind turbines and solar panels.  The report also predicted what you current energy cost are and what they could be after those improvements.

What’s all the fuss about then?

On the negative side there are criticism that this is more regulation and cost to be paid for by the estate agent and homeowner or landlord.  There is a frustration with interference for European and the nanny state.  A reality that with such a diverse housing stock there can never be a one size fits all solution.  Will the purchaser of a £Million property be put off because there were solid walls in the 18th Century Rectory. Fair points.

On the other hand wasting money by heating up your street rather than your home is not sensible.

William Naylor practise at Naylors at 12 The Square and is an estate agent and domestic energy assessor.