Tyler Ward Letting Agents View : What What Type of Property Is best for BTL and how to find out

Quite often clients in Reigate ask me as a letting agent, what type of property is best for letting and in particular, how many bedrooms should the property have.

In truth there isn't a single right answer for this, it all depends on demand and supply and every area is different.

For e.g some areas have such a shortage of 3-4 bed family homes that even though the cost of these are far greater than a 2 bed flat, they go immediately.

However it would be fair to say that family homes are in high demand in suburban areas that have good schools and good transport links to the main city centre's where the offices are situated.

As a generalisation, one and two bed flats are in most demand, particularly in high employment areas as many young people migrate to where the work is.

However some areas, particularly in the midlands and the north have suffered from an over saturation and over supply of new build one and two flats. This has had the effect of not only suppressing rents, but meant that in some cases rents have fallen.

Many BTL investors assume, as I did many years ago, that two bed properties are better to let than one beds, because intuitively, people prefer more space.

However in general, I have found the opposite to be the case because most tenants want the cheapest rental property available and are not willing to pay the extra premium for a two bedroom property.

This is, surprisingly the case in Reigate, which given the affluence of the local population, seems strange at first glance.

However when you realise that most people that rent one bed flats are young workers moving to the area or couples moving in together for the 1st time, then this fact is less surprising.

How To Test The Market

I would hope that before you purchase a property, you would take an in-depth look at the locality and do the usual review e.g amenities, transport, schools, large companies based in the area etc.

However I have found the best three ways to find the right type of property to buy is

a) talk to good local letting agents and ask them what will rent the quickest

b) Place test adverts in the local paper to see what the response rate is for different types of property assuming that the market price is being charged for each type of property.

c) old fashioned market research- stand near the station entrance and ask!

In reality a and b are normally sufficient!

Once you know this, you can follow on and stack the numbers. This is something that will be discussed in depth in a later post

The lesson to be learnt is to not rely on assumptions but test actual data

see you soon

Don't get caught out by cheap overseas property

Every few years there seems to be a new hot property international destination

In the late 90's - 2002 it was Florida, then from 2002-2005 it was Spain (and if you couldn't afford that then Bulgaria!) then 2005-2008 it was Dubai and then 2008-2010 it was Cape Verde.

Now it seems that its Brazil. All these trends were perpetuated by investors looking at glossy brochures and being shown graphs of 20% per yr price increases.

I have been asked by clients what I think of the latest property trend emerging over the last few months i.e heavily discounted overseas property.

Indeed the latest batch of emails that I receive on an almost daily basis from so called "property experts" aka salespeople (who I bet wouldn't invest their commissions on what they are selling) include 70% off market price valuations in Florida, Spain, Ireland, Cape Verde and properties for 15k in Detroit.

Now it would be wrong of me to state, without knowing all the facts for each development, that all of these properties are rip-offs. In fact I was following a round of auctions last month where you could pick up a genuine tenanted studio flat in the Temple Bar district of Dublin (equivalent to our Covent garden/Leicester sq) with a yield of 9.5%!,. The unit also wasn't a new build.

However I often wonder why they are at such high discounts. Quite often its in a development where nothing has been sold in the first place or whether most properties have been repossessed, so you might as well buy in a ghost town as the likelihood of getting tenants is very low.

A note of warning- quite often you'll see that the property has two year rental guarantee- these guarantees are paid from the commissions that the agent makes or from the income on the sale.

However thats not to say you can't get a bargain in that particular area, you just have to cover yourself. For example I'm potentially looking for a holiday home in Florida for an equi-distant meeting place to meet my brother and his family that live in Toronto.

So a property that used to be worth 90k but is doing going for 35k could be of interest. However instead of buying via the agent all I need to do is visit a local listings site e.g http://www.trulia.com/ and see what the real value of an equivalent property is ,with out the massive commission being paid to the selling agent.

Unlike the UK where finding a below market value is difficult, (hence finding an equivalent cheap property is difficult) these areas are flooded with them, so that the discounted price has in fact become the market price.

Then all you need to do is go out and visit these places for yourself!!

If you would like any further advice- please feel free to call in the office.

Life Changing Books - Rich Dad Poor Dad

Hi Readers- One thing you'll begin to see is how I love a good self improvement book!

At Tyler Ward Estate agents & Architecural and Building Services -one book stands head and shoulders above them all - the daddy of them all - and thats Rich Dad Poor Dad by Robert Kiyosaki- It simply is A MUST READ- not just to try and work out how to become financially free- but it really brings home how conditioned our minds become over time.

As somone who trained and qualified as a chartered accountant, its premise is quite basic i.e buy assets that produce income and that we are conditioned to go to school to get a job for life - however the style its written in really makes you realise how little we question the choices are parents conditioned us to make.

The title of the book loosely corresponds to a true story whereby the author has his own biological dad who believes in education and getting a professional job to do well in life, and his best friend's dad who is a entrepreneur and who believes in making money via businesses.

As someone who pursued the former and who how follows the latter path, the book has had a profound impact on my life and I know its had a smilar impact on my others I have met.

Howeve the book isn't just about getting rich, its about cash flow and lifestyle and that where its impact on property people is so important.

Most people chase equity growth i.e buy a property for 100k and hope it goes up and value.

What I focus is on cashflow. I.e buy a property thats worth 100k (hopefully buying it at discount for 75-85k - this will be discussed in a later blog ) and making sure that the rent i.e 650pm is greater than the mortgage i.e 400pm and buying multiple properties to produdce extra cash flow.

That way the extra cash flow pays for my expenses e.g running my car.

We all hope that the equity growth comes, but its dangerous to reply on it.

Quite simply - go and buy this book - I can't recommend it highly enough

Tyler Ward Property Services To Save The Masses at Retirement!!

Since the goverment outlined its initial intention a few years ago to increase the working age until retirement and having already implemented the first increase (of many no doubt) the need to plan for retirement is every more important.

And that's before we take into account the reduction in pension plan values due the stagnation of the stock market over the last decade in nominal value (and large reduction in value taking into account inflation) and the 15% reduction in average prices in the housing market over the last 3 years.

Nevertheless I wasn't surprised to read this article in the Telegraph, talking about the lack of real retirement planning, http://goo.gl/lFGlB , given I know many people in their late 40's that haven't planned for retirement, let alone those in their early 30's like myself. Inded when I used to teach property education, it always saddened me when i met those in the late 50's and early 60's with no pension pot at all.

At Tyler Ward Property Services, we've always believed that property should be part of a well thougt out retirement plan which is why everyone at the company owns property. Forgetting speculative property purchases for the moment and dreams of 200% growth in a decade like the 2000's, or clever strutured-finance property purchases of the last 5 years, lets just focus on basic fundamentals.

Even in a worst case scenario of property prices just matching the rate of inflation, we would expect prices to double in a 20 years, as would the rents.

Hence if a person working in their twenties could set aside enough deposit to buy two average houses on a capital repayment mortgage (assume 20% deposit buying 2 x 200k houses) by the time they were 40 yrs old i.e a total of 80k or 4k per year, then at the very least they would 2 houses worth 400k each with no mortgage by retirement, though one they would be living in.

Taking an average yield of 6% then the monthly income would be 2k a month on the investment property.

Given the vast reduction in final salary pension schemes (a topic to be discussed in a later blog) then at the very least someone would have a stable retirement pot to get by with. This is a far better position then many currently find themselves in.

Look out for future posts on how we can use clever strategies to make the above scenario seem incredibily dull!! Our minimum goal should be to get to 4 investment properties as this would provide a 8k a month retirement!

Listening to the Property Press - Is it a good thing

I've always been fascinated by the press and the power they have over the thoughts of other people.

No where is this more so than economics and property. If the press say that times are good then we think that they are good (even if there is evidence to the contrary) and vice versa. As a property services company covering multi-disciplines, Tyler Ward is in a unique position to look at how each one is performing e.g Sales, Lettings, Architectural services requested and Building jobs being worked on.

Taking this into account is there any merit in what they say. I was intrigued by this article in the mail which paints a familiar picture of doom and gloom http://goo.gl/wArHX. They suggest that property sales have fallen by 18% within one month. If that's the case then thats a staggering fall.

However unfortunately most people don't take the time to ask certain questions to validate the information they receive. In this example we would ask questions such as

a) Was the prior month exceptionally high (take a look at the same month's sales over the last few years

b) Was this months sales exceptionally low (take a look at the same month over the last few years

c) what were the regional variations

d) were there any variations in the types of property build and respective prices.

i.e 1 bed flat, 2 bed flat, 2 bed houses etc

It is the last question that intrigues me the most because thats the whole key to the market. Not only is there is a North South divide but there are massive differences in each area and for different types of property.

As Estate and Lettings with a branch in Reigate, we have 1st hand knowledge of the real shortage for family property and see for ourselves that homes in the £500k+ range go within weeks.

Likewise there has been no shortage of tenants enquiring about a luxury two bed flat we have on the market at £1200. Furthermore, any one bed flats priced realistically go within one week.

And if I told you about the number of large extensions being built, you really wouldn't believe me!!

However on the flip side, a one and two bed flat priced incorrectly for sale would happily sit on the market weeks and weeks on end.

I think the real lesson here is that you have to look beyond the headlines and look at the real variations in area and type of property. Only then can you really ascertain how good or bad the market really is for that specific locality.

Why We Are Different

Our Story

Tyler Ward is taking a fresh and innovative approach to the provision of property services. Overall the public perception of various elements of the property industry from estate agencies & investment property advisors through to building services is one of low regard - Tyler Ward's main focus is to bring trust, reliability & professionalism into the delivery of these services with customers needs as the key to what we do.

What we found from our own experience…

In general, we found that property knowledge on the high street was in all honesty poor (although the talk was good!). Also many people we met lacked a passion for property - it was just a job to them to earn commissions.

With some firms we have previously used over the years, we found there was a sales-like culture, often a frequent turnover of staff and people that didn't really care about our needs - whether that was for our own personal properties or in managing and growing our property investments. There was also a lack of joined-up property knowledge – some staff we met knew how to sell or rent a property, but would know nothing about how to renovate one or what would make a good investment.

What makes Tyler Ward really different…

TRUST OUR EXPERIENCE....THE PROPERTY EXPERTS

From our 30 years of personal property experience buying, renting, managing & developing our own properties, we have learnt many valuable lessons about what works well, what doesn't work and the risks & pitfalls to avoid. We want to share this experience with our customers.

SEEING THINGS FROM OUR CUSTOMERS' EYES....

Our own experience as a customer showed us that there was a clear need for a fresh approach to property services. We wanted to try and see things from our customers' eyes. From this we understand what matters to our customers – proactivity, reliability and experience all help to deliver what is important to them. Trust and integrity are at the heart of all we do. We are obsessed with giving our customers exceptional service focused on their needs - it is their genuine satisfaction that builds our reputation. Our team are our MOST important asset, they strongly believe in these values - we choose them carefully, they are the kind of people you would trust and would want working hard on your behalf.

OUR COMPLETE PROPERTY SERVICE....

We can offer you the complete solution for all your property needs using the same trusted, reliable and experienced team that we use ourselves for our own properties. Aside from our Estate Agency team, we also offer in-house services including Investment Properties and Architectural & Building Services. We do offer services across the M25 and the South East region, however we are a locally based, independent & ethical firm. We are not a large corporate name but a friendly and knowledgeable team. We believe in valuing and supporting our local community.

Jatinder Singh

Head of Tyler Ward Estate Agents & Investment Properties
• T: 01737 668669
• M: 07908 486991
• E: jatinder@tyler-ward.com