With the end of 2016 approaching, it’s time to take a recap of the year and try to peek into the next.
This year has been a tumultuous one, where we ended up holding assets which were high in value and could not be sold due to the dampening market conditions. For most of the projects we have somehow or another found a way out. Some by going back to the drawing board and finding another more innovative strategy, some through finding JV partners, and making the deal attractive to them. One we had to let go of.
Property development is about three things mainly. One is reading the market, another is doing the development on time and on budget, and lastly getting the borrowing right in terms of rates and Loan to Value.
One or more of these factors can destroy the deal, as we have painfully learnt.
These few deals which haven’t gone to plan will be a blemish on our immaculate record of trades and sourcing deals.
To date we still have an exceptionally high record of both trading and sourcing deals.
On a positive note we are finally due to complete on a deal in Marylebone for £3m today, I say due because at the time of writing the funds have not yet been received by the lawyer, and the date for completion is today. Worst case notice will be served and we will then have 10 working days, which take us to 4th January 2017, to complete.
There is a new strategy which we will be pursuing with a vengeance in 2017. It will bring life back to property investments.
To do investments in the same way as the rest of the market doesn’t really give you an edge. The market is too small and knowledgeable. Generally, when a development is sold, it is sold with the appraisal done by the seller to ensure 20% to 30% is left for the incoming purchaser.
There can be an edge if you know of a planning angle which the seller has missed or you can do the development very cheaply by having in-house builders.
On the whole, this is the market. The property market in particular is very backward looking, there is not much innovation and forward thinking. Demographics are changing and there is a lot going on, especially in London. The property market is unable to read the current trends, and even at times when it does, it is very slow to react.
We have a strategy which will be yield focused in the prime parts of London. This means you still adhere to the scared mantra of Location, Location, Location; but the concentration is on the monthly cash flow. Yes, it is possible to get one. We will be announcing a seminar in the beginning of the year, which will be an opportunity for you to attend and see first-hand what we are planning.
Avoid The Rotten Apple
The private rented sector is becoming more and more competitive, while most tenants are unlikely to cause any hassle, some will wreak havoc, meaning you need to be on the lookout for any bad apples.
Ensuring that the right tenants move into your property can save you hassle down the line, such as the lengthy and costly eviction process. Some stick out like sore thumbs, so are easy to avoid, but others rely on deception and secrecy.
Here are some tips to help you avoid bad tenants.
Referencing
Research reveals that a staggering 38% of landlords do not carry out checks on prospective tenants, leaving themselves vulnerable to bad tenants. Referencing checks can provide a landlord with an idea of what to expect, such as if the potential occupier will pay their rent on time. These checks will also reveal if the person has any criminal convictions or county court judgements against them for debt, which should give a landlord a clearer picture of the potential tenant.
Be wary of tenants who try and get around referencing checks, as this could be an attempt to keep their history hidden. It is likely that such a person would target landlords that have just entered the buy-to-let property market or private landlords that choose to work without the help of lettings agencies.
Guarantor
This may not be required in all cases, so use your initiative to decide if a guarantor will be needed or not. Tenants that work part-time or receive benefits, or couples who apply for a joint tenancy may not be able to pay the rent if their situation changes, so in these instances it may be a good idea to give yourself added protection.
Deposit
Landlords should take a deposit, which generally equates to four to six weeks' rent. This provides the owner of the property with a degree of protection should any damage to the property occur or if the tenant absconds without paying their last month's rent. Deposits must legally be held in one of the government's three protection schemes until the tenant vacates the property.
Be on the lookout for any potential occupiers that ask you to forego the deposit, as it could be an indicator of a rotten apple.
Inventory
Taking an inventory will reduce the chances of a dispute happening when a tenant leaves a property. Write down what the house contains and make a note of any existing damage, taking photos as well. This means you have the evidence necessary to prove any missing items or new damage is the fault of the tenant.
At Sow & Reap we ensure that these checks and balances are carried out, in order to protect your investment. Give us a call for a free consultation regarding your rental property.
