Welcome to today’s email of UK property news and views…
Charles Brittain of investment adviser Invest Connect is in the news talking about the importance of contingency funds. ‘Buy-to-let repossession orders are on the rise because of rising rent arrears and void periods. If investors and landlords do not have a contingency fund in place to cover unforeseen circumstances, then they could fall into financial difficulty and potentially lose their property.’
‘As a general guideline, 30 to 35 per cent of one year’s gross annual rental income should be put aside to cover rent arrears, void periods, maintenance, repairs and refurbishment, plus white and brown goods replacement and the ongoing rental costs, such as gas safety certificates and letting agent fees. This contingency may not be used and should not be seen as an additional annual cost, just part of the investment business plan from the outset for investment protection.’
‘Buy-to-let is very profitable in the long term but only if you do your sums properly and structure your investment wisely. A property investment is similar to running a business, so you need a business plan, cash-flow forecast, finance and funding. The maintenance costs for a new or recently refurbished property are likely to be minimal at first. But over time, those costs will grow, particularly when larger-scale refurbishment is required.’
Charles offers a checklist of initial costs…
Energy Performance Certificate
Gas safety certificate
Letting agent’s fees
Tenancy Deposit Scheme fees
Assured Shorthold Tenancy fees
Council tax and ground rent
White goods and furnishings
Other costs? We have a fuller checklist to follow shortly.
A new report from Cluttons, ‘One Size Does Not Fit All: Diverse Opportunities in London’s Rental Market’ makes interesting reading for existing and would-be investors in London. Key points? The number of private tenancies has risen by 80 per cent over the last decade. That supply has increased to meet demand. About 50 per cent of Londoners rent; that compares with 30 per cent across the country.
Londoners aged 20 to 40 years are the main clients for property rental, according to the report and they rent for longer. ‘Younger people are choosing to rent for longer periods, especially if they plan to stay in the capital only for a few years, or wish to live centrally, thus avoiding long commutes from outside London’
‘There is a growing differentiation between those that put a high value on proximity and amenities when choosing where to live and those that react to rising housing costs with soul searching over lifestyles that are prepared to compromise on accommodation, in order to keep living costs down.’ More to come.