Tuesday, 23 March 2010

Student Lets - The Future Looks Bright

Headlines have recently been full of speculation on imminent cuts to Government funding and Britain’s Universities have been in the limelight. There has been much talk amongst Property People about the impact on Landlords like us who own and let Student Properties.

Rarely a year goes by when we don’t have to amend our strategic plan to accommodate the Government’s latest changes in regulation and funding, often with very little notice to adapt. So where we can be ahead of the game we take the opportunity.

Today I have been looking at historical and current student numbers & applications and in my view the future looks bright.

The following figures are compiled from information on the UCAS website for all UK applications to Higher Education. Further info
Total UK
2008 502461
2007 454148
2006 432196
2005 444630
2004 413334
NB: top up fees introduced in 2006

The statistical section of the website is not fully updated for 2009 but figures released on 8 February 2010 in the press release section show that UK applications to Universities for 2010 have hit an all time record at 570,556.

Although cuts are predicted to University budgets for 2011-2012, the Universities have indicated this will more likely impact on quality than numbers on roll.

Couple the above information with the changes in Planning Regulations regarding HMO’s (Houses in Multiple Occupation) whereby Planniing Permission will be required for Change of Use to a HMO from 6 April 2010, then you can see that much of the existing stock of Privately Owned Student Properties are likely to be much sought after for the foreseeable future – as long as Local Authorities do not introduce the planning changes retrospectively which seems unlikely.

There will always be exceptions to this and much depends on an individual university’s performance. My advice to anyone who intends to purchase or hold existing Student Accommodation is to do your research. The property should be as close as possible to the University – students want to fall out of bed and into University and the property should be kept in good condition – students deserve a decent place to live even if they are a bit untidy.

For my own purposes I have researched Exeter University Student numbers which some of you might find useful. I got these directly from the University’s own website.

Student Numbers
2009 17210
2008 15523
2007 14252
2006 13369
2005 13827
2004 13554
2003 12930
2002 12442

Since I invested in Student houses in Exeter, Student numbers have increased approximately 33%, my houses are within 15 mins walk of the University, 10 mins from the City Centre and are maintained in excellent condition.

Many people argue that the Universities are building plenty of their own accommodation. In Exeter this is taken up by 1st year and overseas students who generate significant funding for Universities. I only deal with 2nd & 3rd years who no longer want to be in University Accommodation and are unlikely to be accommodated by them anyway.

Consequently I have never had a problem letting my properties at the best market rents and I can see nothing that is likely to change that.

Thursday, 18 March 2010

Property - Investment or Business?

If you are buying a property to earn income then you probably think of yourself as a Property Investor and you’d be forgiven for thinking that as everyday we are bombarded with this term in the media. Even the Tax Office want us to slip in neatly to this description and treats Property Investment differently than other businesses.

I don't really like to use the word Investment for what I do and I believe it's why some of us make money from property whatever the market is doing.

These are some of the things I do to keep my business alive & kicking:-

• Five year rolling strategic plan
• Five year cash flow forecast made up of 3 interlinked versions - one each for high, medium & low interest rates. I constantly tweak these to check I've got sufficient funds for at least 2 years even with high interest rates.
• Full feasibility studies for each project I consider, linking it in to cash flow to test it's strengths/weaknesses
• Keep flexible to new opportunities and the changing property cycles
• Never forget my tenants are my customers who need to be given reasons to stay with me
• Keep up with latest regulations, economic news & forecasts
• Tax planning with a Tax Consultant
• Keep up to date accounting records & separate bank account for business
• Carry out annual portfolio valuation and appraisal, taking action as necessary
• Rolling 5 year Maintenance Schedule which also links in to cash flow forecast
• Protect my rents with Rental Insurance
• Review rent annually
• Have varied portfolio (not put all eggs into one basket)
• Network - learn & share

Those are not necessarily in the order of importance but if I were to put one at the top it would be the Cash flow Forecast with at least 2 years' cash taking a pessimistic view on the next 2 years.

Tuesday, 9 March 2010

Adding Value improves your chances of success

So often I hear people say “I’d like to invest in a property but what happens if interest rates rocket, prices fall, tenants trash the property, rents are unpaid, voids etc etc “

Telling it straight, no one knows if these things will happen or not. I can only speak from experience and share with you some of the steps we’ve taken to protect ourselves from the worst that can happen.

Amateur Property Investors tend to forget that it’s a business which you need to manage efficiently and add as much value as possible. Over the next few weeks I will share with you some of the steps we take to ensure our business flourishes and we are protected from the unexpected.

Adding value will give you the edge, improve your success and help to protect you in tougher times.

There was an excellent discussion on the subject on the Property Tribes forum recently which is worth checking out click here

My tip is to always consider difficult properties, they can offer the greatest potential and give you more negotiating power. Many of the properties we have purchased have been the ones that others shy away from and have dust on the details at the estate agent's office. However, one criteria we never compromise on is location. Most other things can be resolved and often cheaper and easier than you might think.

Always do thorough research and be fully aware of the difficulties of a property then tackle it head on. We find neighbours, planners and tradesmen are only too happy to tell you the negative points about a property you might be interested in purchasing. Use these valuable and free tools to your advantage.

When adding value you need to be very disciplined with your budget, shop like it’s your last pennies and always ask yourself twice if you really will get the money back (+ profit!).

Don’t treat your investments like a hobby or an excuse to practice your interior design skills – unless you plan to make a living exclusively from interior design. Your customer really won’t appreciate it. Buyer or tenant, they all like to put their own stamp on a place so keep it simple, clean & fresh. We've sold some high value exclusive property with very simple finishes.

And for the gadget gurus I have to add, please don’t think that adding all the latest sound systems and wireless/remote control gadgets is going to add value to your property. At best it is going to impress and maybe help sell it. It is not going to make you a profit.

Sunday, 7 March 2010

It has taken the blind man 30 years to discover the entire shape of the elephant

After 30 years in Property I was a bit taken aback when a property person who I respect said ‘Jo, you need to define who you are’. We were having a conversation about Blogging and whether I had anything worthwhile to blog about.

I put a great deal of thought to this. My experience in property has been fairly extensive, wide ranging, detailed and very much ‘hands on’. But I’ve never specialised in any one area, preferring to be flexible. Flexibility has given me the ability to grab opportunities when they arise and respond to the unpredictability of the Property Market.

I have watched some Property People follow the herds and grow rapidly in one direction. But like herding elephants approaching an obstacle, the crash is sometimes inevitable. The elephants may have successfully trodden the route many times but as the herd expands and the unexpected happens there is no escape, the herd is too big and an escape route has never been considered.

Some of the best Property People I know have written some excellent articles in Property Network Magazine this month, giving a wealth of advice on how to make a career from Property. It is interesting to read how many different ways there are to achieve success, wealth & financial freedom by investing in property.

The message is clear - there is no ‘one size fits all’ in Property Investment and you don’t have to do the same thing over and over again to be successful. In fact it may be a disadvantage to do just that. If you grow too fast in one direction and the market changes will you have sufficient flexibility to adapt?

My advice is to take whatever opportunities come along - if the numbers stack up and you have done sufficient research. You must have a robust cash flow forecast in place to see the deal through to completion and beyond. Don’t be afraid to do something you haven’t done before, there are so many people out there to help you along the way. Keep networking and keep listening.

As Harry Shearer said “it has taken the blind man 30 years to discover the entire shape of the elephant”. I understand the elephant better now and I stay away from the herds.

I know who I am – a professional Property Person who adapts to change, uses several different strategies depending on market conditions and makes the most of opportunities. Do you know who you are?

Friday, 5 March 2010

How to Value a Property?

The key is to be armed with maximum knowledge.

The internet offers many tools and resources. Some give you the most recent prices that houses in a particular Post Code area sold for such as  houseprices.co.ukmouseprice.comnethouseprices.com

You can register at the Land Registry and pay a small fee to obtain title deeds for a particular property at landregistry.gov.uk

Other sites give you a bigger picture and list all properties currently for sale and/or sold subject to contract such as Rightmove.co.uk, findaproperty.com; & primelocation.com

I particularly like zoopla.co.uk which gives you all sort of useful statistics and comparisons

But all should be used with caution, they don’t always tell you the whole picture eg if a house was self built then only the price of the land will show or if the house was purchased ‘offplan’ from a Developer and then the house was built under a separate build contract this will distort the figures. Houses sold before renovation or bought at Auction are likely to give a misleading result.

However, helpful all these tools are, they don’t really substitute thorough ‘on the ground’ research and networking with as many people as possible who might give you ‘more knowledge’.

Developers sometimes use a ft2 selling price for their properties and this is often a useful tool – to a point. The larger the house, the less effective the tool.

My own recent experience of establishing the value of a property using most of these tools gave me an end result which varied from £525K to £725k. My gut feeling was that the property was worth £550k

In the end, there was no real substitute for talking to the best Estate Agents who have a more thorough understanding of what types of customer would target the property, what those customers are looking for and what is the most they are likely to pay before they give up and move on to look for something else. Estate Agents also get it wrong sometimes but armed with all of the above knowledge your ‘gut feeling’ will probably serve you well. The Estate Agents valued my targeted property at £575-£600k. So I don’t think I was too wrong with my ‘gut instincts’.

Tuesday, 2 March 2010

Investment Opportunity?

Yesterday I blogged my summary of the Conservatives’ Planning Green Paper.

Today I thought it would be useful to look at some examples of how their proposals might affect us Property People

Looking purely from an Investment Opportunity Angle:-

This 9 bedroom ‘Edwardian Gentlemen’s Residence’ has just sold, offers over £399k with potential to build another house in the garden subject to Planning Permission.

.Under current Planning Policies and the implementation of these policies by the Local Planning Authority where this house is situated, it is likely that Planning Permission will be approved for a building plot in the garden which could be sold for approximately £150k. Conversion of the main house to flats is also possible.

Under the Conservative’s proposals Planning Permission will almost certainly be refused both for the building plot and conversion of main house to flats.

Assuming the Conservative’s win the election and their Planning Green Paper is accepted in both houses of Parliament, was this a good or bad investment?

You might think it’s a bad investment. However, the Conservatives propose that any building can be used for educational purposes under Permitted Development Rights and no Planning Permission required – would this not make a profitable Language School? - 5 minutes walk to the local train station.

Foreign students apparently pay up to £30 per hour for tuition and I guess that a building like this may accommodate 50-100 students so it would not be unrealistic to assume that you could turnover in excess of £20,000 per day when occupied.

But how does this fit with the Conservative’s pledge to ensure local people have a say in how land and buildings are used in their neighbourhoods?

Monday, 1 March 2010

The Conservatives Planning Green Paper

Whatever type of Property Guru you are, the Planning Process is bound to have an impact on you in one way or another. You can't avoid the politics behind the scenes. So with my usual desire to 'research, disect and summarise' I share with you my take on the Conservatives Planning Green Paper.

The main thrust of the document is ‘local participation and social engagement’, giving local people and neighbourhoods control over what kind of development and land use they want in their area by consulting every resident in the neighbourhood in the evolution of their Local Plan.

Regional Spatial Strategies and National and Regional Building Targets will be abolished in favour of a National Planning Framework supported by short and focussed planning guidelines replacing the existing Planning Policy Guidance documents (PPG’s) and Planning Policy Statements (PPS’s). Within which Local Authorities can create their own distinctive policies to create sustainable communities.

Local Authorities have already submitted to Government their projected housing requirements which are known as ‘Option 1’ numbers. As Regional Building Targets are abolished, ‘Option 1’ numbers will be used as a base-line for the start of the collaborative planning process and a 5 year land supply is generally accepted as adequate.

Financial incentives for Local Authorities to permit development of new homes, businesses, schools, wind farms and affordable housing. A local tariff to be introduced for all permissions starting with just a single dwelling, with exemptions for Developers building affordable homes and Self Builders.

Use Classes Order to be amended to permit land and buildings to be used for any purpose as defined in the Local Plan. Buildings to be used for educational purposes (Class D1) to come under Permitted Development and existing class D1 buildings to remain as D1 unless Secretary of State for Schools agrees otherwise..

Classification of gardens as brownfield land to be reversed allowing councils to prevent overdevelopment and stop ‘garden grabbing’. Conversely, brownfield land is to include land previously occupied by Agricultural Buildings (built before a specified date) to facilitate use of disused buildings for other purposes.

Legislation will ensure a ‘duty to collaborate’ between Authorities and upper tier bodies on infrastructure planning. A National Major Infrastructure Unit to be established.

Travellers face new criminal offence ‘intentional trespass’ if local authorities have provided an authorised site in their area, councils to be funded and Travellers to contribute financially to service provision.

Human Rights Act to be replaced with British Bill of Rights

Mining & Minerals – minerals should be used as close as possible to where they are worked – “the proximity principle”

Conservation credits to build up banks for provision of biodiversity schemes

Simplification and expansion of Permitted Development Rights particularly with regard to shops, offices & public buildings

National Planning Framework to prevent development of the most fertile farmland in all but exceptional circumstances.

The Freeing up of Planning Resources with this streamlined system will permit more enforcement capabilities and Planners to return to what they were originally intended to do – designing and implementing visionary plans for their local areas.

So what do you guys think? Will you be voting Conservative?
Read the Conservatives' Planning Green Paper in Full