Currently there are many many deals coming to the surface. A recent one, we presented to a so called interested party, was procrastinated upon for a period of time and then three different excuses were delivered to me.
One, was the way to evaluate a deal may vary from person to person. Whilst in theory this sounds like a fair and reasonable comment, in practice it was utter stupidity. The property in question was fully developed almost like a show house. There was no planning risk, it was close to 40% below market value in a very strong location, quite frankly anybody could have seen this was a deal.
The biggest hurdle to property investment is not making the wrong decision, it’s making no decision. Many investors approach us earnestly saying they want to do a deal, yet when you place one underneath their noses they come out with a story. When this story is satisfied they then come out with a different story. They keep doing this in order to avoid making a decision.
You cannot confront them with anything, as the story is not the real reason it is merely a covering, An excuse.
The real reason is fear and their relationship with money. This is not an intelligence thing, many very clever people in the highest rungs of society suffer the same issue. The reason why this issue is hard to solve is many people are not ready to acknowledge this is the actual issue. You cannot wake up a man who's pretending to sleep. I remember confronting one client who came to our seminar, in quite a frank way. He had been in touch with us for several years, asking about deals and meeting us, yet whenever a deal was placed in from of him there was always a reason why he shouldn't do it. I told him the deals which we had placed in front of him, which he could not decide on, have only gone up in value. His indecision has cost him hard money. This seemed to shift something in him and he nodded his head in agreement. He finally agreed to move on the next deal, and give it some attention.
He ended up purchasing a three bedroom property, ex-council with a long lease, in Hallfield Estate for £318k in 2011. Currently the property is worth £650k. From a 100k investment he has made £380k in 4 years. Prices in this area have jumped and are still set to rise even further off the back of the regeneration going on in Queensway.
The issue is if you do nothing you actually go backwards. Generally, property prices rise medium to long term, and money decays sitting in the bank. The cost of living in society is only increasing. I remember the times when we didn't have to pay for university and used to get free milk bottles delivered daily in Primary School. Neither of these exist today.
Therefore, sitting on the fence is not an option, even to maintain your current standard of living. There must be progress, otherwise you will get left behind. This does not mean you should be reckless or blind in making your decision.
A miniscule percentage of the deals we have done have not gone to plan, for one reason or another. Typically they have been sitting on the wrong side of the fence whilst incurring expensive finance costs. All our other deals have done very well and have made excellent money. Due diligence must be done, but this does not justify doing nothing.
Have you read the small print on your BTL insurance policy?
Whether it is to cover a car, pet, home or holiday, choosing insurance can be a tricky minefield, involving endless small print and variations between different policies and what they do and do not cover. For landlords, the right home insurance cover is vital, but it is all too easy to get it wrong and doing so can result in financial devastation, as one ill-fated couple discovered.
Mr & Mrs X, rented out their home to tenants while they were overseas. When they returned, they found their house and all its contents had been completely trashed. The tenants had stripped the property of all the furniture and other fittings, and there was extensive water damage to the walls, ceilings and floors caused by extremely high heat and humidity levels, indicating the tenants had likely been growing cannabis in the house.
The couple mistakenly thought their home insurance policy - which was sold to them as suitable for a tenanted property - would cover them for the £100,000 worth of damage incurred. But when they tried to claim on their policy their insurer refused to pay out, pointing to the small print in the policy. The small print stated that it did not include cover for malicious damage or theft caused by people lawfully in the home. The only cover provided was for one-off incidences such as fire, escape of water, subsidence, storm damage, flood, theft and damage following a break in.
Although it may seem reasonable to assume that an insurance policy for a rented property will provide cover for damage caused by tenants, when it comes to insurance one should never assume anything. Every detail should be checked so you have a thorough understanding of exactly what you are and are not covered for.
Sadly, this couple’s experience is not unique. Too many landlords inadequately insure their property, some mistakenly believing that a standard home insurance policy will cover them. This story is a salutary reminder of the importance not only of choosing the right insurance product, but also of regular professional property inspections in protecting your investment and mitigating your risks.
Here at Sow & Reap we can tailor a service to your needs, including insurance pointers, recommendations on works to improve letability and to increase profit. Contact us today for a chat.
