Reform for speedier evictions on the agenda?

Could we finally have a Pro-Landlord Housing Minister?!!

It seems the rare quality of common sense in a government figure has reared its head with the increasingly impressive Grant Shapps talking about measures that could potentially speed the eviction process for Landlords with troublesome tenants.

http://www.telegraph.co.uk/news/politics/8250950/Evicting-anti-social-neighbours-from-council-homes-to-be-made-easier-Grant-Shapps-to-say.html

For those that read my earlier post about evictions- you would have noted that it takes a minimum of two months to evict a tenant if you serve an eviction notice.

However two months can be an eternity if you have a tenant-from-hell who has the intention to cause as many problems as possible. Indeed many Landlords find that such tenants can trash a property and cause £000's of damage during their notice period.

Lets see what these measures are and how effective that may be

Lies, Dammed Lies and Statistics, a property investors view

I had to chuckle when I read this article today about how house prices increased in the north (144%) more than the house prices in the south (107%) over the last decade.

http://www.guardian.co.uk/money/blog/2010/mar/19/north-leading-house-price-boom

While the figures may be true in percentage terms, I really don't believe they reveal the truth.

Ultimately the reason why people love their house price going up is because they feel wealthier and so can potentially remortgage part of this wealth to spend on consumer goods.

However house price values increase in percentage terms in these surveys while wealth is an absolute value.

let me explain

Average house prices in the north have a lower average base level e.g 100k while southern properties have a higher average base level e.g 200k.

If northern properties double they are now worth 200k - an increase of 100k of wealth.

If southern properties increase by only 75% they are worth 350k an increase of 150k.

Therefore those in the south have increased their absolute value of wealth by an extra 50k compared to those in the north, though their percentage increase in wealth is lower

Remember forget the headlines, look at the underlying story and the assumptions made.

Property Investment : The Has and Has Nots

Really interesting profile of a couple of successful investors in todays Guardian

http://www.guardian.co.uk/money/2011/jun/04/generation-rent-the-winners

I always enjoy reading the heated comments that the public write below the article.

The comments on this article are fairly civilized- if the article was published in The Times or the Daily Telegraph's then you might as well get ready for ww3!

The crux of these articles always come down to the same points with those that make these comments.

1) Do BTL investors distort the market by increasing the price of properties and therefore prevent 1st time buyers getting onto the ladder

2) Is that a bad thing.

I could write and essay on these and I'm sure I will at a later date, but for now I want to draw your attention to a couple of points

With reference to point one - It is assumed that because BTL investors buy more property than1st time buyers / single occupiers they drive up the price of property.

However that isn't really true given that owner occupiers make up a far greater proportion of the market than BTL investors

Secondly you will find that in the Boom times of the housing market- it is owner-occupiers who drive up the price of property as they are willing to pay a higher price than an investor for the same property (on the basis that its a home to live in etc). For an investor its always about the numbers, so if the price increases too much, the yield falls making the investment less attractive.

With reference to point 2) - the morality of BTL- Ultimately it comes to what your political beliefs are. If your a capitalist then ultimately your going to argue that the free market dictates what happens to an asset's price and that the profit motive benefits all of society.

If you don't have the capital to invest, then its highly likely that you won't approve of those who build BTL empires.

However I would also like to make one observation- its interesting that the government gives some of the biggest tax breaks to property investors compared to other asset classes.

Ultimately this is because they want to incentivise the property owner to provide the accomodation they can't provide.

Others may argue that the government has a number of vested to do otherwise......

Landlord Insurance Problems and Referencing

Why Landlord Insurance is not what you have been told

This is a real bugbear of mine. I talk to many landlords who feel they would be protected from a tenant failing to pay them, due to landlord insurance policies that they have been sold by their previous agent.

However they fail to read the short print (and their agents fails to tell them) which would show them that the in most cases, insurance companies will only start to pay out after a minimum of two months after the arrears have been reported. Given you would only know there is a problem after the 1^st month rent has not been paid, you would end up having to pay the mortgage yourself for three months. You will also pay an excess on the policy!!

Why Credit Checks and Reference Checks Don’t Provide as much protection as you think

A lot of landlords believe that passing a credit check means your tenant is of good financial standing. Unfortunately that is not the case.

It simply means that they are not in such a bad financial standing to have caused anyone to get a CCJ against them. We all know people that are struggling to pay bills but yet pass credit checks to get a credit card. It's the same situation potentially.

If a tenant fails to pay a prior landlord, it is unlikely that a claim would have been registered against them to have been highlighted on their record. This is because a tenant eviction under a S21 gives no right to missed rent compensation, only re-possession of the property.

Also , even though a prior landlords’s reference should be taken it quite easy to have a friend lie for them.

An Employer’s reference can provide better protection if it states the amount that an employee earns as it allows you to see the tenants disposable income and hence affordability for the rent.

However in this modern age where many organisations are seeking to reduce any exposure to potential litigation, most organisational references simply state that the employees works for the company.

Better Protection for a Landlord

The best protection that I find is checking the tenants bank statements for the last three months and asking them to prove they can afford the rent.

You’ll find that most tenants have no problem with this and those that do are inevitably the ones that cannot prove their incomes. Do you want these tenants?

Property Investment, data and predictions galore!!

Maybe June turns on the rent a property prediction/property data tap but the last few days have just been very very strange.

On one hand some very unnerving data came out from the US stating that prices in some areas such as Atlanta and Vegas are now down to their 2002 prices. Add in some consumer price inflation during that time then realistically you got some pretty serious property price issues.
http://www.guardian.co.uk/business/2011/may/31/us-economy-consumers-house-prices-fall

Not to be outdone- any press topic relating to the US economy but then get in a comparison with the great US deppression of the the 1920's
http://www.independent.co.uk/news/business/news/us-house-price-fall-beats-great-depression-slide-2291491.html

Then you have the front page of the express stating that house prices willl increase by "15-20% by 2015 - highly unlikely- but if it happens ill buy you all a glass of champers!

Then its back to the gloom with
http://ftalphaville.ft.com/blog/2011/06/01/581341/uk-house-price-gloom/

Then its back to how rich we property owners are if the properties are in the south!
http://www.guardian.co.uk/money/2011/may/31/home-ownership-expensive-london


The truth is that no one truly knows what is going to happen to the housing market. All we can do is look at the fundamentals and whenever you breaks that down, its really demand and supply.

If you look at the states, there is so much land available, that somebody has the alternative to go and build themselves a home ( as well as the financial products) if they dont like what they are being charged by the builder. The ease with which people can build out there is illustrated by greedy builders who kept on building in places like vegas and florida without asking themselves who was going to buy them.

That option isnt available in the uk to the same extent due to very old planning laws. Most of the time (and we'll discuss planning later) planning rules are a pain, but they serve home owners very well in times of distress as they prevent excess building to the same degree as we see in the states.

Secondly if people could get the finance, their are literally thousands of people that want to buy their own home but can't. Hence they have to rent which is increasing rental prices and hence yields. If prices fall which they have, buyer then move into the market (e.g BTL investors who can get finance) and prices rise reaching equilibrium.

I can assure everyone that although I'm very pro property- we always look at the downside for all our clients and investors before we make any comments or recommendations.

I always say the £million question you should ask any so called property seller is, would you buy it yourself.

And if I could afford to buy a million pound house in the south, particularly in Reigate, London or other parts of Surrey (safely without over-stretching myself) I would!

till the next time.