Archive for February, 2010

HMO properties are the bread and butter of many property investors, but new legislation could deter some interested parties from going down that route in the future.

John Healey, government Housing and Planning Minister, recently announced details of various new plans and legislation that will affect landlords, including the news that landlords will soon require planning permission to turn a residential property into an HMO (house with multiple occupation) with three or more unrelated tenants living in it.

Under the current legislation, you only need to obtain planning permission from your local council if the property will have six or more tenants living in it. Whilst the idea is that it will help give more control over unregulated changes and improve standards for tenants, it may not be quite such good news for landlords, especially as they’ll be more paperwork and waiting involved.

The new legislation is due to come into force by April 2010 and will affect any new plans to change the use of a property and turn it into a new HMO. Local planning offices are often already busy, so applications could take a while, which may deter some investors from going down this route.

If you’ve already got an HMO property, then this is unlikely to affect you, but would it put you off plans to opt for HMO properties in the future? We’d love to hear your views.

If you’ve experienced problems getting a loan for a property investment purchase, or have checked your credit score and found it to be lower than you’d expected, don’t panic. There are things you can do to try and improve your credit score – they won’t necessarily work immediately, but over time they can have a positive effect and improve your chances of being accepted for loans or mortgages.

Pay your credit card bill in full each month

One of the issues your credit score is ranked on is how efficiently you pay off your any existing credit, such as your credit card bill. Paying the full amount off each month, and doing so on time, will help boost your credit rating and show that you’re responsible with the money you have.

If you’re prone to forgetting to pay your bill on time, or are frequently travelling when the bill arrives, then the easiest way of paying it off on time every month is to set up a direct debit payment for the full amount.

Likewise, it’s best not to spend over your credit card limit, as it gives the impression that you can’t live or spend within your means.

Get listed on the electoral roll

Being listed on your local electoral roll can play a positive part in helping you get credit. If you’re unsure if you’re listed, contact your local council to check and, if your name isn’t down, get it on the list. Although the council do send out forms about once a year, if you’re keen to get going with improving your credit rating, it’s better to get on with it, rather than wait to be asked.

Space out applications for loans

If possible, try not to apply for lots of loans or credit at once, as details of all your applications will come up in your credit rating file and it can affect your score. This covers anything from mortgage loans and car insurance, to credit for buying large electrical products or mobile phones.

Maintain a fixed address and phone number

Having a fixed home address and a home phone number, rather than giving a mobile number, can also boost your credit score. If you have moved house a lot in recent years, then don’t try and hide it – be honest about your previous addresses.

So far in our series on finding potential property hotspots we’ve explored the benefits of examining new transport links and areas undergoing regeneration. Another useful way for property investors to find property hotspots is to turn their attention to university towns and cities.

Where there are large universities, there will always be undergraduate and postgraduate students, plus lecturers, in need of accommodation. Although many universities offer good on-campus accommodation, there is rarely enough to cater for all students and some people will always prefer to live off campus anyway.

In some areas, there may already be an overload of student rental properties, but one way of finding an area that may become even more of a hotspot is to look out of universities that are expanding, offering new courses or are experiencing an influx of student applications. 

Is student property in demand?

One issue that is always worth exploring, whatever property you are looking to buy, is what the market for tenants is like. After all, there is no point buying a property with a view to letting, only to discover that you can’t get any tenants. When it comes to buying in university towns and cities, this issue comes into its own as, as long as you’re buying the right type of property and in a popular rental area, you could end up with a stream of tenants on a long-term basis.

What’s more, there are several possibilities for landlords buying in university towns and cities, as properties can rented as HMOs for several students, small studios or flats for one or two students, or properties aimed at post-grad students or lecturers.

University towns and cities aren’t just locations where you’ll find plenty of students needing accommodation though – often there are lecturers and older post-grad students studying in the area who need rental properties too. Whilst younger students may be happy to live in the heart of student land, lecturers are unlikely to want to, so choosing a property away from the typical student zone can be a wise move.

Likewise, some graduates may want to stay within close proximity of where they’ve studied once they’ve graduated and got a job, so you could hone in on this market too.

Whatever your plan of action, it’s important to research the market in university towns and cities carefully, so that you can identify the areas where students and lecturers like to live and the types of properties that are favourable. Once you’ve purchased a property, advertising and marketing your property in appropriate ways will help, especially if you can get listed on the recommended university rental accommodation lists.

Finding Property Hotspots Part 1 – Transport Links

Finding Property Hotspots Part 2 – Regeneration Schemes

Do you know your credit rating? Knowing what your credit rating or credit score is might not seem like a big deal, but it’s something that property investors should be taking more notice of.

In the past, when buy-to-let mortgages were easier to come by and often given according to the proposed rental income from a property, your credit rating may not have played such a big role, but things have changed. For those applying for a buy-to-let mortgage in the current economic climate, more attention is paid to your credit score and this can affect the outcome of your application.

Credit scoring systems are used by companies such as banks, credit cards, insurers, mortgage lenders or insurers to rate and predict your behaviour. Although it’s often assumed that there is one universal credit rating list in the UK, this isn’t the case. There are in fact three main credit reference agencies, namely Experian, Equifax and Callcredit, and all three hold information about you. What’s more, the information may differ.

If you’re thinking of applying for a buy-to-let mortgage in the near future, or any other type of loan, then it’s useful to get an idea of what your credit rating, or credit score, not least as sometimes incorrect information can get on their files.

If you have a check done, then it is recorded on your file, but no lenders will be able to see this information and it won’t affect any loan applications you make.

It can sometimes take time to get the results through, so best not done in a rush, but as it could make the difference between being able to buy the property you want to invest in, or losing out on it, it’s worth it. Plus, if they turn out to have incorrect information on their files, you’ll have the chance to get it corrected, which could seriously help your loan application.

In the first part of our mini series, we explored the issue of the cost of properties and the pros and cons of different types of investment property. Now we’re turning our thoughts to the all important issue of rentability, or how well your property is likely to to rent out.

As everyone buying investment property will be keen to get the figures adding up and tenants in place, this is a crucial factor to consider when you’re deciding whether to buy an old build, new build or off plan property.

Old Build

Pros – If you’re buying your old build investment property in an established area that already has a good reputation amongst renters, then this will help with the rentability of your property. You’ll also be able to gauge a good idea of how much rent you can expect to get, which is useful for when you’re working on your projected figures.

Cons – When you first take on an old build property, and especially if it’s been through a fair bit of wear and tear, then you may need to spend time updating the property or decorating it. Depending on how long this takes, then you could lose out on getting a tenant in straightway.

New Build

Pros – Buying a brand new property does have its benefits, not least the fact that it should be ready for a tenant to move into almost immediately. As far as making money goes, this is good news for any property investor. Depending on the location and how the property has been finished off, you may be able to charge more for it.

Cons – Depending on the stage at which you purchase the new build investment property, and if it’s on a large development where more building is going on, it does run the risk that tenants will end up living on a building site for a while, which some people aren’t keen on. Some new build properties may tend to be smaller and more squashed in than old builds, with smaller sized rooms and less space outside.

Off Plan Property

Pros – Like new build, there are benefits in attracting tenants to a brand new property and, in theory, you may be able to charge more rent as a result.

Cons – The nature of off plan property, and the fact that you’re buying before an investment property is finished, means that you may have to wait a while before you can get tenants in and start earning. Like new build investment property, there’s also the risk that more building work may still be going on around your house or flat, so tenants may be living amidst noisy building work at first, which doesn’t appeal to everyone.

If you’re on the hunt for those elusive property hotspots, or soon to be hotspot areas, then here’s another aspect to explore that could lead you to investing in the right area.

We’ve already looked at how looking for areas that are improved by new and better transport links can signal potential for the development of a property hotspot and another way is to look out for details of new regeneration schemes being planned or started.

Regeneration schemes involve, as the names suggests, money and development being ploughed into areas that are rundown and need a boost. It often happens in areas of towns or cities that have seen better days, or where there’s a land opportunity to build and expand. Investors who’ve taken the plunge and invested in property in previous regeneration schemes often reap the benefit of their initial risk in the long-term, when people and businesses begin moving into the newly regenerated area.

How to Find Regeneration Scheme Plans

To hunt down possible areas where regeneration is being planned, you’ll need to do a degree of research. Keeping an eye on local news and planning departments is helpful, but if you’re not located in a region that is earmarked for regeneration, then online research is a good way of finding out what’s happening elsewhere in the UK.

For example, you could keep up with news by reading local and regional newspapers online or, for a time-saving approach, set up a search on Google to automatically let you know of any mentions of new regeneration scheme plans.

It can be a bit tricky knowing exactly when to buy – too soon, and the regeneration plans may fall through or get pushed back, too late and you could miss out on making a profit – but there are sadly no hard and fast rules as to what’s best and a lot of it comes down to good instinct and sound research.

The main thing is to carefully research what the regeneration plans are including. A good regeneration scheme will not only be looking to provide new homes and buildings, but also offer good incentive for local businesses, communities, schools and leisure facilities.

There are pros and cons involved in buying any type of property, but in this mini series, we’re going to explore the positives and negatives of three key types of properties – old build homes, new build and off plan properties.  Investors are faced with many dilemmas and opportunities when it comes to investing in property so in this mini series we will detail some key facts to help you make the right investment choices for you.

To start things off, we’re going to begin by looking at the issue of cost, something that’s a major factor in the purchase of properties for many investors.

Old Build

Pros – With old build properties, one of the major attractions is that there’s often more bargaining power available in terms of cost, especially in the current economic climate. In the case of below market value (BMV) properties in particular, it’s possible to pick up some great property investment bargains. Older properties also tend to be bigger in size, so you get better value for money.

Cons – You do have to know where to look to get the best bargains. There will always be some old build homes in desirable locations that hold their value and can’t be bought for a good deal. Some older properties will have suffered a lot of wear and tear, or may need updating. If it takes time, then you could lose valuable time and money before you can get a tenant in.

New Build

Pros – If you’re purchasing a new build property, it’s brand new and you won’t need to spend money on doing it up for rental. Plus, extra incentives are also often available, such as brand new appliances or the chance to choose how the interior is decorated, which can all help with your costs.

Cons – When you buy a brand new property, you’re often paying above the odds for it. Also, if you’re going to use it for rental purposes, you need to be able to make a decent profit from renting it out, especially if you’ve got mortgage payments to cover.

Off Plan Property

Pros – The cost of off plan properties is often a major selling point. As they’re being sold off-plan, as opposed to newly built, the cost can be considerably lower, which attracts some buyers.

Cons – Sadly, the low price can sometimes turn out to be too good to be true. For example, it may be a reflection on the fact that the properties on the development aren’t selling, which could mean that it will take ages for it all to be finished. There’s no fun for anyone, even tenants, to live on a building site.