I HAVE MOVED!

I HAVE UPGRADED MY BLOG TO A MUCH MORE INFORMATIVE, USER FRIENDLY VERSION WHICH CAN BE FOUND AT:

www.burtonpropertyblog.co.uk

UNFORTUNATELY, YOU WILL HAVE TO RE-REGISTER TO RECEIVE THE BLOG POSTS BY EMAIL - BUT IT WILL BE WORTH IT!

MANY THANKS

David

Do you need to Extend your Burton Investment Property?

Last week, a landlord from Burton e-mailed me to ask, after reading the Burton Property Blog, if he should extend his terraced house by making an extra bedroom in the loft. He had a builder friend who owed  him a  favour, and thought it would be a good way to get an ‘inexpensive’ extension.

Having more useable space is generally thought to be consistent with better quality accommodation and home owners and tenants are prepared to pay for it. If you added a bedroom to a two bed terraced to make a three bed terrace, it will add, on average, around 10% to the value of the property. Turn a three bed terraced into four bed terraced, and 9% will be added to the value. Looking at semi detached properties, if a two bed is turned into a three bed then 12% will be added to the value, whilst making a three bed semi into four bed will add 9%.

However, before you rush off to the planning department or contact ‘Loft Conversions R Us’ there are some important considerations, whether you are a home owner or landlord.  What would be the cost of making that extra bedroom? You have to seriously consider whether the outlay is worth the potential benefit.

The average value of a terraced house in Burton is currently £104,600 whilst the average value of a semi detached house is £151,900, meaning to make money the cost of the extension would need to be less than £9,965 on the terraced property and £15,949 on the semi detached house. Talking to a number of trade’s people in the town, most are booking up into the New Year. Also, no matter how good a friend he was, I know of no builders that would charge as little as that. Maybe the builder was just thinking of a bit pointing work on the chimney!

Well, that got me thinking about how bedrooms affect rental prices and rentability as well.   Interestingly below, you will see that whilst bedrooms do have an effect on the rent that can be achieved and the rentability of the property – the difference does not warrant the expense, hassle and trouble of extending.

·        45.1% of the one bed properties on the market to rent in Burton have a tenant with an average rent of £399 per month

·        47.6% of the two bed properties have a tenant with an average rent of £520 per month

·        52.1% of the three bed properties on the market to rent in Burton have an average rent of £584 per month

·        35.7% of the four bed properties, an average rent of £742 per month

Now, if you do want to increase the value of your property, be you a Burton landlord or homeowner, there are things that cost a lot less than building extra bedrooms. Spruce up the exterior, decorate all the rooms, install fresh carpets and curtains. For homeowners, a matter of a few hundred pounds will add thousands whilst for landlords, these things can add an extra 10% to the rent that you can achieve.

Simple Economics in the Burton Property Market

I penned a recent article about the state of the Burton Property market and in particular what had happened to rents in Burton since 2008. If you recall, I said rents in Burton are still 4.68% lower than they were in 2008. However, following a chat with a Burton landlord who then rang me after reading the Burton Property Blog wanting to know more of the story of what was happening to rents in the City. The reason he asked was that his current agent hadn’t increased his rent for a number of years and was concerned if he was getting the best return from his buy to let investment.

The Burton rental market is all about supply and demand - isn’t it so in all parts of the economy! On the supply side, 149 rental properties have come up for let in the last 31 days in Burton. It sounds a lot until you consider there are 5,453 rental properties in Burton, meaning only 2.73% of the rental stock of properties in Burton is coming onto the market - it is normally is around 5%.  One reason for this lack of new rental properties coming on the market is the fact that tenants seem to be staying in properties longer.

With this lack of supply, newer tenants have to pay more to secure the property they want. This is the crux of the matter.. properties they want. Older properties in Burton, that haven’t been maintained, still retain their wood chip wallpaper from the 1970’s and thread bare carpets have seen their rents drop. Tenants now want either modern properties with all the mod cons or older style properties that have been presented to an exceptional standard – and they are prepared to pay for the privilege. Rents for top quality properties in Burton have risen by 0.4% in the last month Any properties, old or modern, put on the market in good or excellent condition normally rent within a matter of days.

   

Interestingly, looking at Burton property values, the Land Registry have just released their latest set of data on property values. Throughout April 2015, the latest set of data, property values remained static in Burton, with 0.2% growth, meaning they are now 2.5% higher than they were a year ago.  When one looks at the regional picture, the average property values in our area rose by 0.2% in the last month.

Looking forward, after considering all the statistics and talking to other property professionals, I expect property values in Burton to rise by 3% to 5% over the coming 12 months, following the Conservative Election victory.   In a forthcoming article, I will discuss how the number of properties changing hands each month has dropped considerably in the last 10 to 15 years in the town.

 

..and so back to our landlord. Each property is unique and, as his tenancy agreement allows him to inspect the property with notice to the tenant, we will be visiting the property next week with a fresh pair of eyes! 

For more in depth thoughts and opinions like this, on the Burton Property market.. visit the Burton Property Blog.

Surely there are better places for buy-to-let than Burton?

Whilst attending a recent business networking event in Burton recently, a landlord, who it transpired had a couple of buy to let properties, bent my ear on where the next hot spot town or city is to invest his money in and where the best rental returns are.

Now it can be tempting to just look at Burton when growing a buy to let property portfolio, but there can be big differences in the amount of rental income you receive and how much your property will appreciate by considering other locations in the country.

Regular readers of my articles in the Burton Property Blog know of my love of the ‘buy to let seesaw’. On one side of the seesaw is the rental return and the other side, capital growth. Landlords should be looking for a high return so that they can comfortably cover any mortgage payments and make some profit from the income return, but you also want the property to rise in value over time so you can get some capital growth when you come to sell. However, high yielding property in say such areas as the Waterside area in Burton, see the return side of the seesaw go up, will suffer from low capital growth and so the other side of the seesaw goes down. The relationship works in reverse as well, so in areas such as Rolleston, properties offer good capital growth, but at the expense of a higher yield.

  

The North East and North West of the UK are landlord magnets for great yields. The average yield in Burton today is 4.02%, which when you compare with say Hartlepool in the North East, which achieves 7.73% or 9.43% in the Anfield area of Liverpool, doesn’t look too healthy. Now of course, these are only averages and some of my Burton landlords are achieving 6% to 7% on some of their Burton properties, however, sometimes at the expense of capital growth. Anyway, after wasting a tank full of petrol up the A1 to Teeside or the M1 to Stanley Park, that high yielding Liverpool property would have dropped in value by 2.2% in the last 12 months and the Hartlepool property, by 1.4%.

When you compare the long term house price growth, it gets even worse! Looking at the graph, since 1995, property values in Burton have risen by 133.79%, compared with Hartlepool at just 21.02% and Liverpool at 90.11% – it just shows that you shouldn’t always chase the returns. As I always like to explain to landlords when they either email me, pick up the phone or pop into my offices for a coffee, a decent yield is important, but when you come to sell your buy to let property it would also be nice to make a decent profit.

At the end of the day, as a Burton landlord, you want to be making gains from both your rent and house price growth, particularly when you want to sell, because when combined, the rental yield and capital growth, that gives you the real return on your investment. Finally, do you know Hartlepool and Liverpool as well you know Burton? Do you know where the good and bad areas are in both those places? Are you happy that it would require you to take a day out of work if there was an issue with your property in the North? If you can’t answer yes to all three questions, then maybe you should be considering a closer to home?

Call me on 07973 666229 or pop into our offices on the High Street in Burton!

Landlords and Tenants both win in the Burton rental market

With the election now a distant memory and the stability of Downing Street secure, Burton, as in the rest of the UK, is starting to see that average wages are beginning to grow faster than inflation. This is good news for the Burton housing market, as some buyers may be willing or able to pay higher prices given the more certain political outlook and attractive inexpensive mortgage rates.  However, sellers who think they have the upper hand due to the lack of properties for sale should be aware that we should start to see an increase in the number of people putting their properties on to the market in Burton, thus giving buyers some extra negotiating power.

At the last election in May 2010, there were 460 properties for sale in Burton and by October 2010, this had risen to 784, an impressive rise of 70% in five months. An increase in the supply of properties coming on to the market could tip the balance in the demand and supply economics seesaw, thus potentially denting prices. However, as most sellers are buyers and confidence is high, this means there will be good levels of property and buyers, well into the Summer, as demand will continue to slightly outstrip supply.

Just before we leave the run up to the election, it is important to consider what the uncertainty in April did to the Burton Property market. I mentioned a few weeks ago that property values - what properties were actually selling for, not what they are marketed at - had dropped by 0.4% in March 2015. Data has been released from Rightmove about April’s asking prices of property in Burton. It shows that pre-election nerves finally came home to roost in the final weeks of electioneering, with the  average  price of property coming  to market only increasing by a very modest 0.7% - bear in mind that April is normally one of the best months of the year for house price growth!

I am sure our local MP, Andrew Griffiths, would agree that the biggest issue is the lack of new properties being built in Burton. The Conservative manifesto pledged to build 200,000 discounted starter homes for first-time buyers in the next five years. For Burton to gets its share, that would mean only 93 such properties being built in Burton each year for the next five years, not much when you consider there are 51,277 properties in Burton! We need around 610 per year!

On the face of it, housing didn’t seem to be a big issue for Conservative voters and because London is an increasingly Labour city where the biggest housing issues are found by a country mile, so will it remain on the ‘to do list’ but won’t get recognition it deserves. Until another political party gets back into power, nothing will seismically change in the property market, thus demand for housing will continue to outstrip supply, meaning property values will increase - good news for landlords. However, as rents tend to go up and down with tenant wages, in the long term, rents are still 4.68% lower than they were in 2008 - good news for tenants.. with renting in Burton everyone wins!

A slight drop in property values in Burton…

Property values in Burton fell by 0.4% in March. This follows several months of sluggish activity in the Burton property market in the run up to the Election, putting the average price of a property in Burton at £170,500, 2.7% higher than in March 2014. Despite the not so insignificant fall in March, the figures showed prices were still slightly higher in the first quarter of 2015 than in the last quarter of 2014.

Also, reports from Council of Mortgage Lenders and Estate Agent trade bodies over the last few months have seen a fall in mortgage lending and enquiries from prospective homebuyers. This is important because it comes amid an overall fall in housing market activity in Burton. Data from Land Registry said completed house sales in Burton in the three months to January 2015 - the most up to date figures available - fell by 13.35% compared to the same three month period up to January 2014.

However, I believe that the slowdown in property sales in Burton is supporting Burton property values, as there is a shortage of houses coming onto the market. Even though in the whole of the first Quarter of 2015, Burton property value increases may seem subdued when compared to 2014, let us remember, property values are still rising well above the level of inflation.

As I have said many times before, the population in Burton is growing at much higher rate than the number properties being built. This surplus in demand, which is outpacing the supply of new houses being built in Burton, has created a long term imbalance in the Burton (in fact the whole of UK’s) housing market, thus making home ownership a more distant dream for many Burton potential first time buyers.

In fact, I still maintain the view that house prices are likely to rise by around 3% in Burton in 2015, even after taking into account this blip at start of the year. The reason being is that rise reflects both a strong economic conditions and steady market conditions, with - and this is the most important factor - very low numbers of properties on the market.

Many buy to let landlords know that investing in the Burton property market is a long term strategy of 10, 20 even 30 years. Governments come and go, but unless East Staffordshire Borough Council start to build hundreds of properties a year to make up for the lack of supply, Burton people will always want a roof over their head, and irrespective of which party is in power, if there aren’t any council houses and they can’t or are unable to buy, there will always be a demand for rental properties.

As my existing Burton landlords clients will testify, whether you manage your property yourself, or another Burton agent manages your properties, everyone is always made to feel welcome when they pop in for a coffee to discuss anything to do with the Burton property market, how Burton compares with its closest rivals and hopefully answer the three questions above. I don’t bite, I don’t do hard sell, I will just give you my honest and straight talking opinion.

You can email me;

davidm@professionalproperties.co.uk

Or you can call me on 07973 666229!

Could you get a 868% return in Burton by saving your money?

Buy to let is essentially different from investing in stocks and shares or putting money in the Building Society. Whilst these other investments, Building Society Passbooks, Stocks and Shares etc. are passive  i.e. once the  money has been invested it you leave it alone, with buy to let, things are more hands on, in fact it’s almost a small business.

One thing the landlords I speak to say is the fact that they prefer buy to let because it is both an investment as well as a business. It is this factor that attracts many of my Burton landlords – they are making their own decisions rather than entrusting them to others such as City Whiz Kids in London playing roulette with their Pension Pot!

So, if you are investing in the Burton property market, you can earn from your investment in two ways. When a property increases in value over time, it is known as 'capital growth'. Capital growth has been strong in recent times in Burton, but the value of property does go up as well as down, just like shares do, however, it very rarely decreases below the initial purchase price. The rental income that the tenant pays you will, hopefully, grow over time. If you divide the annual rent into the value, or purchase price, of the property, this is your yield, or your annual return.

So, let’s look at an example; I was talking to a landlord who bought a terraced house in the Belvedere Road area of Burton. He bought a very pleasant 4 bed terraced house in 1999 for £41,000. It sold again in December 2014 for £130,000; a rise of 217.07% in just over 15 years – a compound annual return of 8%.

However, the real returns are for those Burton landlords who borrowed money to purchase their buy to let property. They have made significantly higher returns than those who paid 100% cash. If the landlord had borrowed 75% of the £41,000 purchase price of the Belvedere Road terraced house on an interest only 75% mortgage, he would have only needed to invest £10,250 based on a 25% deposit and borrowing the remaining £30,750. However, his £10,250 would be worth £99,250 today; £130,000 less the £30,750 interest only mortgage, a rise of 868.29% representing a compound annual return of 16.34%.. and I haven’t even mentioned the rent he would of received in those 15 years! This demonstrates how the Burton buy to let market has not only provided very strong returns for average investors since 1999 but how it has allowed many motivated buy to let Burton landlords to become particularly wealthy. In fact, if this landlord had continued to remortgage the property as it went up in value, he could by our reckoning have had an additional two or three properties, albeit with larger mortgages but with greater future potential.

As my article mentioned a few weeks ago, more and more Burton people may be giving up on owning their own home and are instead accepting long term renting whilst buy to let lending continues to grow from strength to strength.

If you want to know what, or would not, make a decent property to buy in Burton for buy to let, then one place for such information would be the Burton Property Blog.