Recently, I was asked by a client, who’s been with us for many years, to source a property for him to invest in. His day job pays him close to the average wage of £36k, leaving not a lot left over for saving. Investing in property is seen as a way out for him. However, the amount of money he has saved up for a deposit is only £25k.
This is a small amount of money, and you cannot buy anything in London with these kind of funds. Geared up, it allows one to purchase a property for £100k, not allowing for the ancillary expenses. The conundrum is what can be done with a relatively small amount money, in this environment?
Back in the day you could purchase property with even no money in your pocket. I purchased my first property with a 95% mortgage, and the other 5% was borrowed off a credit card. The property was purchased for £155k, it was a two bedroom flat in Wembley, and the mortgage was £778pm. However, I was getting £923 rent per month.
The property was a dive, and I managed to get all the furniture second hand from Gumtree. I remember, we went in the evening to pick up the furniture, and the next day I discovered the sofas had grime on them. So, I spent that morning scrubbing them clean with a Brillo pad!
The electric certificate failed due to some minor reasons. However, the electrician was a very reasonable fellow and told me exactly what to do to reach the required standard. It required some earthing, which I managed to do myself by running a wire through the attic and to the outside of the property, connecting it to a pipe which ran along the outside of the front wall.
True to his word the electrician, passed the work I had done, and issued the certificate to my relief!
It was all about counting and saving the pennies. The property was to be rented to the council, as at the time they were the highest payers. Rest assured, I had done my research well. Two bedroom properties were the most in demand, due to the fact that they are best suited to accommodate one parent families. The flat was promptly rented by the first tenant to view the property, much to my surprise.
Not surprisingly, she asked permission to throw the sofas out, I replied in the affirmative. Furnishing the apartment was more of a tick box exercise, as many tenants have their own pieces to bring in.
The great thing about council tenants is that they tend to stay. This one stayed for a good six to seven years, primarily because there is such a shortage of housing stock and such a long waiting list for accommodation. This means you can have a long steady flow of income, it reduces the need to refurbish every time a tenant leaves, and avoids void periods.
To be continued next week…
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Any tenant or the right tenant?
Let me tell you a story about a landlord that didn’t trust his gut instincts. His buy to let property had been empty for one month, this is because it was the run up to the Christmas period, which is typically a quiet time, and therefore there had not been any interest in the apartment. Understandably, the landlord was getting quite concerned. In time, he was approached by a family that was desperate for accommodation. There was something disconcerting about this family, so I advised him that it might be better to have the property empty than just any old person in there, and that he should trust his gut. However, he decided to let them move in, as he was anxious to have tenants in his empty property.
Once they had moved in, they proceeded to redecorate the property, painting the walls black and all the radiators dark purple. Numerous complaints were received from neighbours about their behaviour and loud music at night. There were several incidents when the police were called out to the property, and it was suspected that they were taking drugs.
They had paid one month's rent in advance, but had then failed to pay any further rent. The landlord had to issue proceedings for possession, in order to evict them. This took four months, by which time the rent arrears had risen to several thousands of pounds.
The night before the bailiffs were due to come to evict them, they had a huge party, during which several windows were broken, and other damage was done. It was left completely filthy, with rubbish in all of the rooms. Much of the furniture had been either broken or removed from the property.
The landlord was left with a property which needed several thousand pounds of work (including re-decoration throughout and replacement of almost all the furniture) to make it fit for re-letting; a bill from his solicitors for the eviction proceedings; and no chance of recovering anything from the tenants, who had disappeared without a trace.
Moral of the story?
Never let anybody move into your property without full references, and be very, very careful who you rent to. Once in, it is not so easy to get them out. This type of nightmare story only happens rarely - but this does not mean it cannot happen to you! Use our service to find a tenant and manage your property, in order to reduce any risks.
Richard Bond
Lettings Manager
Sow & Reap
