Friday, 29 September 2017
The mind-set and tactics you employ to buy your first Maidstone buy to let property needs to be different to the tactics and methodology of buying a home for yourself to live in. The main difference is when purchasing your own property, you may well pay a little more to get the home you (and your family) want, and are less likely to compromise. When buying for your own use, it is only human nature you will want the best, so that quite often it is at the top end of your budget (because as my parents always used to tell me – you get what you pay for in this world!).
Yet with a buy to let property, if your goal is a higher rental return – a higher price doesn’t always equate to higher monthly returns – in fact quite the opposite. Inexpensive Maidstone properties can bring in bigger monthly returns. Most landlords use the phrase ‘yield’ instead of monthly return. To calculate the yield on a buy to let property one basically takes the monthly rent, multiplies it by 12 to get the annual rent and then divides it by the value of the property.
This means, if one increases the value of the property using this calculation, the subsequent yield drops. Or to put it another way, if a Maidstone buy to let landlord has the decision of two properties that create the same amount of monthly rent, the landlord can increase their rental yield by selecting the lower priced property.
Now of course these are averages and there will always be properties outside the lower and upper ranges in yields: they are a fair representation of the gross yields you can expect in the Maidstone area.
As we move forward, with the total amount of buy to let mortgages amounting to £199,310,614,000 in the country, landlords need to be aware of the investment performance of their property, especially in the era of tax increases and tax relief reductions. Landlords are looking to maximise their yield - and are doing so by buying cheaper properties.
However, before everyone in Maidstone starts selling their upmarket properties and buying cheap ones, yield isn’t the only factor when deciding on what Maidstone buy to let property to buy. Void periods (i.e. the time when there isn’t a tenant in the property between tenancies) are an important factor and those properties at the cheaper end of the rental spectrum can suffer higher void periods too. Apartments can also have service charges and ground rents that aren’t accounted for in these gross yields. Landlords can also make money if the value of the property goes up and for those Maidstone landlords who are looking for capital growth, an altered investment strategy may be required.
In Maidstone, for example, over the last 20 years, this is how the average price paid for the four different types of Maidstone property have changed…
· Maidstone Detached Properties have increased in value by 251.1%
· Maidstone Semi-Detached Properties have increased in value by 274.5%
· Maidstone Terraced Properties have increased in value by 285.4%
· Maidstone Apartments have increased in value by 279.6%
It is very much a balancing act of yield, capital growth and void periods when buying in
Maidstone. Every landlord’s investment strategy is unique to them. If you would like a fresh pair of eyes to look at your portfolio, be you a private landlord that doesn’t use a letting agent or a landlord that uses one of my competitors – then feel free to drop in and let’s have a chat. What have you got to lose? 30 minutes and my tea making skills are legendary!
*For a online rental or sales valuation please visit our website www.seekershomes.co.uk*
Thursday, 7 September 2017
The tightrope of being a Maidstone buy-to-let landlord is a balancing act many do well at. Talking to several Maidstone landlords, they are very conscious of their tenants’ capacity and ability to pay the rent and their own need to raise rents on their rental properties (as Government figure shows ‘real pay’ has dropped 1% in the last six months). Evidence does suggest many landlords feel more assured than they were in the spring about pursuing higher rents on their properties.
During the summer months, historic evidence suggests that the rents new tenants have had to pay on move in have increased. June/July/August is a time when renters like to move, demand surges and the normal supply and demand seesaw mean tenants are normally prepared to pay more to secure the property they want to live in, in the place they want to be. This is particularly good news for Maidstone landlords as average Maidstone rents have been on a downward trend recently. So look at the figures here...
Rents in Maidstone on average for new tenants moving in have risen 0.9% for the month, taking overall annual Maidstone rents 0.9% lower for the year
However, several Maidstone landlords have expressed their apprehensions about a slowing of the housing market in Maidstone. I think this negativity may be exaggerated.
Before we get the Champagne out, the other side of the coin to property investing is capital values (which will also be of interest to all the homeowners in Maidstone as well as the Maidstone buy-to-let landlords). I believe the Maidstone property market has been trying to find some level of equilibrium since the New Year. According to the Land Registry…
Property Values in Maidstone are 5.64% higher than they were 12 months ago, rising by 2.3% last month alone!
Yet, I would take those figures with a pinch of salt as they reflect the sales of Maidstone properties that took place in early Spring 2017 and now are only exchanging and completing during the summer months.
The reality is the number of properties that are on the market in Maidstone today has risen by 14.1% since the New Year and that will have a dampening effect on property values. As tenants have had less choice, buyers now have more choice ... and that will temper Maidstone property prices as we head towards 2018.
Be you a homeowner or landlord, if you are planning to sell your Maidstone property in the short term, it is crucial, especially with the rise in the number of properties on the market, that you realistically price your property when you bring it to the market ... with the increase in choice of properties, the balance of power during negotiation generally sways towards the buyer. Given that everyone now has access to property details, including historic stats for how much property have sold for, they will be more astute during the offer and negotiation stages of a purchase.
However, even with this uplift in the number of properties for sale in Maidstone, property prices will remain stable and strong in the medium to long term. This is because the number of properties on the market today is still way below the peak of summer of 2008, when there were 1,812 properties for sale compared to the current level of 790 (if you recall, prices dropped by nearly 20% in Credit Crunch years of ‘08 and ‘09).
Compared to 2008, today’s lower supply of Maidstone properties for sale will keep prices relatively high...and they will continue to stay at these levels for the medium to long term.
Less people are moving than a few years ago, meaning less property is for sale. Fewer properties for sale mean property prices remain relatively high and this is because of a number of underlying reasons. Firstly, buy-to-let landlords tend not sell their properties as often than owner-occupiers, consequently removing the property out of the housing market selling cycle. Secondly, Stamp Duty is much higher compared to 10 years ago (meaning it costs more to move). Next, there is a dearth of local authority rental housing so demand for private rented housing will remain high. Then we have the UK’s maturing owner occupier population, meaning these older people are less likely to move (compared to when they were younger). Another reason is the lack of new homes being built in the country (we need 240k houses a year to be built in the UK and we are currently only building 145k a year!) and finally, the new mortgage rules introduced in 2014 about how much a person can borrow on a mortgage has curtailed demand.
Some final thought’s before I go – to all the Maidstone homeowners that aren’t planning to sell – this talk of price changes is only on paper profit or loss. To those that are moving ... most people that sell, are buyers as well, so as you might not get as much for yours, the one you will want to buy won’t be as much, (swings and roundabouts as Mum used to say!)