What to Know Before You Buy Your Next Investment Property - by Hazel de Kloe

Investing in property can be very exciting.  It can also be extremely complicated or stunningly simple depending on whom you speak to.

As a special treat and New Year gift to you, I have put together a new report to help you make the best and safest property decisions going forward in 2015.....

To view the rest of Hazel de Kloes' article, please click here.

Collins Road vs Grecian Way

A landlord came into our office looking to purchase a new buy-to-let property.  She had seen two properties of interest, one in Grecian Way, Broadfields and the other in Collins Road, Pennsylvania so wanted my advice on which would be best.

Collins Road offers a wide variety of properties, from bungalows and two bed terraced houses to large detached houses, so it appeals to a wide audience.  Due to the popularity of the road, it has an average rent of £1061pcm, which is slightly higher than the Exeter average, however when looking at the average property value, it is around 7.3% lower than the whole of Exeter combined, possibly due to the high number of rental accommodation units in the area.  A lower property value and higher rent means only one thing, a higher gross yield – averaging around 5.3%, which is around 13.2% higher than the whole of Exeter combined.

Grecian Way in Broadfields is a very popular residential area.  Generally people tend to buy property in the area to live in rather than rent out so this keeps the values higher than the Exeter average, however interestingly though, the average rent paid is considerably lower – around 17.1% lower in fact.  So we now have the opposite position to Collins Road, a higher price and a lower rent, therefore giving an average gross yield of only 3.56%. 

Moving on to compare the two roads directly, the gross yield for Collins Road works out at around an incredible 49.7% higher than Grecian Way, however the properties values are around 15.44% lower. 

This clearly shows that the question of yield over capital growth is the first one to overcome.  The higher property values in Grecian Way mean that in general the capital growth will be greater, depending on market conditions, however if you are looking for a good yield, Collins Road is the place to be.

If you are looking to buy a property in Exeter, please come and see us or call me on 01392 254488.

Stamp Duty 2014

Following my recent article on the rise of stamp duty in Exeter, as many of you will be aware, changes come into force tomorrow that will dramatically change the sales market.

George Osborne said 98% of homeowners in England and Wales would pay less after the changes than they do under the current system and that only people who buy homes worth more than £937,000 will pay more in tax.

The current system:

Stamp duty, which currently operates throughout the UK, charges successively higher rates on the whole of the purchase price. For this reason it is often criticised as a "slab tax". Its structure means there are sudden increases in stamp duty, when the price goes above the next threshold.

For example, someone buying a home for £250,000 would currently pay £2,500, or 1%, in stamp duty. But if the price was £1 more, they would pay an extra £5,000, as they then pay 3% on the whole purchase price.

The new system:

From midnight on 3rd December, the new rates of stamp duty will only apply to the amount of the purchase price that falls within the particular duty band, making it more like income tax.

In other words, someone buying a house for £200,000 will pay nothing on the first £125,000, and then 2% of the next £75,000, giving them a bill of £1500. Previously they would have paid 1% on the total purchase price, giving them a bill of £2,000. Thus although the percentage rates appear higher in some cases, the overall charge will mostly be lower.

The new rates will be

• Up to £125,000 : 0%
• £125,001 to £250,000 : 2%
• £250,001 to £925,000 : 5%
• £925,001 to £1.5m : 10%
• Above £1.5m : 12%

On average, someone buying a home in England and Wales will now pay £4,500 less in stamp duty. The new system will also smooth out the steps - or sudden jumps - in existing stamp duty thresholds.

Please find below a link to the HM Revenue & Customs stamp duty calculator.

http://www.hmrc.gov.uk/tools/sdlt/land-and-property.htm 

Capital growth or yield?

A couple came into our office this week looking to purchase another buy-to-let in Exeter.  

They already have three other properties in city and are getting a good monthly return, however as the properties are of relatively low value, they are concerned that the capital growth they will be getting may not be enough to cover their future plans, especially as they are currently on interest only mortgages.

I decided to look into the areas of Exeter that have achieved the greatest capital growth over the last six months, although this is a relatively small time period to make an accurate judgement on a market, it does show the current demand and trend.

Interestingly EX1 came out on top of the list, with an increase of just over 6.8%.  EX1 encompasses the city centre, Heavitree, Whipton, Monkerton and half of Pinhoe.  These areas are not known for their particularly high house prices, the average property price is currently just over £232,000, however as there are a large proportion of terraced properties (around 36.5% of the housing stock), they lend themselves well to the investment markets and buy-to-let landlords.  The area has excellent access routes and public transport so it is ideal for people working in and around the city.

The area with the lowest capital growth over the last six months is EX2, at around 5.85%.  EX2 covers a large area, from Dunchideok through Alphington, part of St Thomas, Countess Wear, St Leonards, St Loyes and Broadfields to Clyst Heath, Digby and Sowton.  Similarly to EX1, this area has excellent transport links and a wide variety of housing stock so it suits many different types of households.

The decision of where this couple should buy could be very different to where you should buy; it is linked to your personal position and requirements.  Therefore, if you are looking to buy an investment property in Exeter, come and talk to us so we can look at the best place for you.

A few facts about the property market around Exminster

A landlord who has invested in rental properties throughout Exeter asked me about the property market in her home village of Exminster.

Exminster and the surrounding areas are highly sought after , due in part to the beauty of the surroundings, relaxed lifestyle and wide open spaces. Many people purchase second homes in the area and it is also highly popular with retired people. 

The most popular types of property in Exminster are detached houses, making up nearly 48% of all available properties. This reflects the area’s popularity with families with children. In comparison, the least common type of accommodation is flats, which make up only 5.6 per cent of the market. It can be difficult for first time buyers in the area, as there is a distinct lack of new affordable housing. 

Unemployment is low in the area and many people living here are generally affluent, living in villages and commuting to towns and cities, such as Exeter and Plymouth. 

In EX6, some of the highest priced streets to live on are Haldon Drive, Lumley Close, in Kenton, and Castle Gate, also in Kenton. In these roads, house prices are on average, about £550,000. Some of the most affordable streets in the area include Kenton Mews, again in Kenton, Courtenay Terrace , in Starcross, and Alexandra Terrace, also in Starcross where prices average at about £110,000.

If you would like to discuss property in your area or where you are looking to invest, please come and see us at our office on South Street or call us on 01392 254488.

Keeping your tenants happy in Exeter

The value of properties up and down the country are still increasing, so it is more important than ever to provide your tenants with a comfortable home where they will be happy to stay for a long term, there will certainly be other landlords willing to do so if not. 

This does not mean that it is necessary to fully refurbish all your properties every six months, however there are a few simple steps that can be taken to ensure your tenants stay for the longest time possible.

The first and possibly most important question to ask yourself, and answer honestly, is if you walked into the property, would you live in it in its current condition?  If the answer is no then there is work to be done.  Modern and clean is not a tenant luxury, it is a basic requirement if you are to secure a decent tenant at the right rent. 

Neutral décor does not have to cost the earth to achieve, especially if the costs are spread throughout the length of a tenancy, perhaps put 10% of the monthly rent into a “refurbishment fund”, with the average rent being around £750pcm, after a six month tenancy you would have £450 towards some new paintwork.  Also remember some of these costs, subject to your personal position, are tax deductible.

Once you have got your tenants, you should be trying to keep hold of them.  There is a very simple message here and that is; a good landlord is an attentive and responsive landlord.  Don't hide from them, ignore them or hope they will go away.  Deal with their issues as soon as possible.  This simply means that you listen to their needs and act on them.  If you use a managing agent, listen to their advice, they will be trying to make the most of your investment for you and they will be able to advise on where best to spend your money.

If you want your tenants to remain happy, give them the tools that they need to keep the property in good shape. This could mean supplying that lawn mower which you were not going to offer originally, however, by offering one you are ensuring the continued support of your tenants and you are also giving your property the best chance to remain in good condition for as long as possible.

These are the basics and many landlords choose to go far above and beyond these points; they are the ones whose tenants stay for 3, 4, 5 years plus.

If you would like more advice on how to look after your property or how our “Cashback for Landlords” scheme could give your property the cash injection it needs to bring it back to life, please come and see us at our office on South Street or call us on 01392 254488.

Exeter owner occupation

Last week, a couple from Crediton, came into our office to discuss potentially investing in Exeter for the first time.

As our regular readers will know, the initial consideration you must make before investing in property is the balance between annual return and capital growth. However, what affects these two things in Exeter are very varied and complex.  The quantity of property and whether property is owner occupied or socially rented has a big difference on yield and capital growth.

It is worth looking at where the largest proportion of rented vs owner occupied properties are, will this have an effect on house prices and annual returns?

In 2011, the area of Exeter with the highest percentage of owner occupation was EX3, with around 75.2%.  This correlates to the average property value, currently at £395,158, and the highest in the Exeter area, however gross yields are in the region of only 2.7%, therefore it may not be the best place to invest for annual returns but the capital growth should be strong.

On the reverse side, in 2011 properties in EX1 and EX4 had the lowest average prices of £227,605 and £222,601, and owner occupation of 56.50% and 57.16%.  Looking at these figures I feel it is safe to say the higher the percentage of owner occupation, the higher the property price.  Interestingly, EX4 has the highest average rent of £916pcm, giving a gross yield of around 4.9% so if you are looking for a higher annual return, this is certainly one of the areas I would focus on.

There are numerous reasons why EX4 may be a preferred area for rental properties, there are lots of good schools, Exeter University draws students and employees, the Met Office and excellent access into the city centre.

There has been an increase in the number of households privately renting and this could be linked to the decline in the number of households getting on the housing ladder, usually by way of a mortgage. Those who read our recent article “How affordable are Exeter properties” will understand the difficulties buyers are facing.

To discuss investing in Exeter as there are many points to consider, please come and see us at our South Street office or call 01392 254488.