Streetwise Property Alert 27th August 2013

Welcome to today’s email of news and views…

BTL Mortgage Update

Teachers Building Society has made changes to the criteria on its buy-to-let products. The rental calculation has been changed to 125 per cent of the mortgage payment at 4.99 per cent. It was previously 125 per cent at 5.74 per cent.

The restriction on the maximum number of mortgaged properties in a landlord’s portfolio has been moved from three to eight.

There is also a reduction to minimum earned income requirements for buy-to-let products to just £15,000 per annum. As always, do talk to a broker first. We can introduce you to brokers if you do not have one at the moment.

Best BTL Locations?

New research by Move with Us and Home.co.uk reveals their top 10 BTL locations – based on those locations that deliver the highest gross yields.

B7 (Birmingham), 10.6 per cent

TN28 (Kent), 10.5 per cent

L14 (Merseyside), 9.6 per cent

GU6 (Surrey), 9.5 per cent

TS1 (Middlesbrough), 9.2 per cent

B35 (Birmingham), 9.2 per cent

L4 (Liverpool), 9.1 per cent

RH4 (Surrey), 9.1 per cent

B18 (Birmingham), 8.7 per cent

EN8 (Hertfordshire), 8.7 per cent

Worth mentioning, of course, is that yield is only one criterion for savvy BTL investors. And a generic gross figure can be quite different from a specific net figure. The only yield figure that is is of any relevance is your own. Still, food for thought…

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Wind Farm Impact

Had a pizza with my wife in a restaurant last night. At the end, the waiter presented us with two coffees. He then hurried back with a look of alarm on his face. He had forgotten to warn us they were hot drinks which, apparently, he has to do every time he serves ‘anything hot’. (‘That pizza is hot’, the garlic bread is hot…’ etc). Madness.

I thought of that this morning when I read that the government has commissioned a report to assess whether wind farms affect local property prices or not. It’s really stating the obvious – would you buy a property near a wind farm? No? Then there’s the answer – it affects property prices.

Frontier Economics is to examine the impact of a range of technologies, including onshore and offshore wind farms, shale gas, anaerobic digestion plants, overhead power lines, coal, gas, nuclear and biomass power stations and coal mines on local property markets. Clearly, these will all impact although, to be fair, it will be interesting to see by how much in hard cash terms. More to follow.

All for now – see you again soon.

Upcycling Opportunity

I was reading about a business run by Scott Hamlin in Portland Oregon, and wondered how many other people might be able to cash in on something like this.

Hamlin’s company, Looptworks buys up  end-of-line, unwanted fabric from warehouses in Asia which is destined for landfill or the incinerator. It then turns it into shirts, skirts, laptop sleeves and backpacks. The company is very much for profit, but has a strong environmental ethos.

Any enterprise that has a positive environmental impact will be well received by prospective customers and the media. Upcycling (converting waste materials or useless products into new materials or products of better quality) is environmentally friendly and can be highly profitable if done well. Are there upcycling opportunities in your sphere of expertise? Do you know of any waste materials that could form the basis of a new upcycling opportunity?

Watch Out For The Elephant In The Room

If most people were accused of selling s**t they’d be offended, but Miroslav Bobek isn’t most people. He’s the director of Prague Zoo in the Czech Republic, a place where they’ve just launched a lucrative sideline selling Elephant dung.

For around $4 you can buy a bucket containing 3 pounds of dung. Apparently there’s nothing finer for your garden. Given that an adult African elephant can produce 300lbs of dung a day, there’s no shortage of supply, and a quick calculation suggests that each elephant could be worth $400 a day in dung alone.

I’m not suggesting you buy an elephant for the purposes of selling its dung; I  suspect the food that produces the dung would more than offset any profit…even if you had room in your back garden for the elephant!!  However, this story is a reminder to give some thought to any waste products which are created as a result of your business or enterprise. Could there be a market for them? Could they be converted into something saleable? Could you be taking profits to the tip…or worse still, paying someone else to take them away?

The White House Chimney Sweep

Wisconsin Chimney Technicians have swept the White House chimneys (there are 35 of them) for the past 19 years, and they’ve never been paid.  It all started back in 1993 when Bill Clinton addressed congress about the state of the federal deficit. Jeff Schmittinger saw an opportunity (or wanted to help, depending on your view) and contacted the White House to offer to sweep the chimneys for free. He never expected them to take him up on it, but they did.

Now it might seem counter-intuitive to be doing work for 19 years for free, but think about it for a moment. If you were looking for a chimney sweep, might you be drawn towards one entrusted to sweep the chimneys of the seat of government and one of the most famous buildings in the world?

This has to be something to think about for any business. What high profile customer could you attract by offering to work for free, and then how could you capitalise on what you were doing?

Property Alert

Market On The Move?

Whisper it quietly, but the top house builders have all reported profit growth of 33 per cent or more in the most recent year and, what’s more, they are now actively seeking new development land according to industry reports. (That, no doubt, will see another wave of landbanking scams coming soon – watch this space).

Looking at a recent Savills’ report on this subject, we note, ‘There are clear signs of more positive industry sentiment and activity. Latest government house building statistics reveal that private starts in England, at 22,200, were 7 per cent higher in the first quarter of this year than in the final three months of 2012.’

‘House builders, having rebuilt their balance sheets, are looking to secure a pipeline in an improving market. However the market is highly localised and values remain very suppressed beyond the pockets where land is trading, but real opportunities exist in many urban markets for developers able to take a long view.’ More to come.

Rents – What’s Happening?

We’ve signed up to The Rent Check to keep you up-to-date on current and future trends. The Rent Check report monitors rents agreed by more than 1,500 private landlords in England and Wales and who are all members of the National Landlords Association. ‘The Rent Check report will track movements in the private rented market every six months analysing changes in actual rental rates by property type and region.’

‘The data shows 87 per cent of landlords achieve their listed asking rent or higher, 61 per cent are confident in the prospects for their own letting business and 41 per cent have agreed higher rents over the past 12 months compared to 7 per cent who had agreed lower rents. The average tenancy lasts two and half years.’

‘Excluding London, the average monthly rent for a two bedroom flat ranges from £480 in the North East to £695 in the South East. Rent for a three-bedroom property, terraced and semi-detached houses, ranges from £500 in the North East to £935 in the South East. In London, average monthly rents for a two-bed flat are £1,515 in zones one and two, £1,060 in zones three to six, £1,815 for a three-bed property in zones one and two and £1,435 further out in zones three to six.’

‘Open House’ Viewings

We’ve had a huge response to the London property sourcing service and, fingers crossed, we should start matching members and properties soon. I would stress that, although we welcome everyone, this one is really for people who are ready and able to start investing rather than the ‘I want 50 per cent off and no money down’ members.

Catching up on London reading, we note that search consultant Erica Evans makes some interesting comments on ‘open house’ events. ‘In the more sought-after parts of London, such as the South West, West and North West postcodes, we have seen consistently brisk activity levels. We believe that many estate agents are still struggling to understand just how strong demand level is, evidenced by the large number of ‘open house’ viewings that are tending to be arranged. These are little more than on-site auctions where the agent is largely guessing at true demand and price levels.’ Food for thought.

An Opportunity In Dog Sh…

There can be few more annoying things than realising you just stepped in a steaming pile of dog muck and it’s going to take you half an hour with a sharp stick to return your ridge-soled trainers to their former glory. I was therefore interested to hear of a company called Streetkleen based in Wales. The company have developed a system which I don’t really understand, for converting dog waste into biogas. I have no idea how viable this is as a business, but there’s no shortage of raw material so it could be worth investigating.

Any business that converts waste products into something useful has to be commended and will receive a sympathetic hearing from both potential investors and customers. Is this eco-friendly trend something you might be able to cash in on.

Capital Growth Hotspots

New research from The Bank of Scotland reveals which cities outside of London have seen the biggest price rises, 2002 to 2012. Do you have investments in these hotspots?

Aberdeen 94 per cent

Inverness, 81 per cent

Bradford, 77 per cent

Dundee, 73 per cent

Perth, 70 per cent

Hull, 68 per cent

Carlisle, 65 per cent

Durham, 65 per cent

Swansea, 58 per cent

Stoke on Trent, 58 per cent

Clearly, if you are a BTL investor you do need to have at least one eye on capital growth – if you had, for example, a BTL investment in Belfast from 202 to 2012 you’d have seen growth of just 3 per cent over that time.

BTL Mortgage News

Cambridge Building Society has reduced the rates across its buy-to-let range by up to 0.80 per cent. Quoting the press release, the five-year fixed rate at 5.49 per cent is being cut by 0.80 per cent to 4.69 per cent and the application fee drops 0.5 per cent from 1.5 per cent to 1 per cent, plus £199.

The two-year fixed rate of 4.49 per cent is being cut by 0.50 per cent down to 3.99 per cent. The product comes with a £1,499 application fee where £199 is payable at the time of application.

The two-year discounted rate of 4.39 per cent is being cut by 0.54 per cent, to 3.84 per cent. There is a 1 per cent application fee with £199 payable at the time of application. All three are available at 75 per cent LTV, both direct and through intermediaries in the wider East Anglia area. Talk to your broker.

Are Your Aware?

As part of Carbon Monoxide Awareness Week, the National Landlords Association (NLA) reminds all landlords of the dangers of carbon monoxide and the importance of maintaining any gas, oil, wood or coal-run appliances.

Faulty appliances can cause carbon monoxide (CO) leaks. CO is an odourless, colourless and tasteless gas which is highly poisonous and can kill within hours or cause serious illness through long-term exposure. Symptoms of poisoning include headaches, dizziness, nausea, breathlessness and loss of consciousness.

Landlords are required, by law, to have gas appliances checked every 12 months and to provide the inspection report to the tenant. Only a Gas Safe registered engineer should carry out gas work. Landlords should also install carbon monoxide detectors in their properties. These detectors will warn tenants of a leak.