Number of Amateur Landlords on the Increase

Rajiv Mehta, Asset Manager – Investment, Young Group

Rajiv Mehta, Asset Manager – Investment, Young Group

According to a new report the level of amateur (part time) landlords, those who use their investment property to supplement their other income, have reached the highest ever levels.

The National Landlords Association (NLA) claims that amateur landlords now make up more than 70% of the Private Rented Sector and that they typically own around four properties.

Due to the current strength of returns seen in the rental market 25% of these amateur landlords are intending to add to their property portfolio with 40% planning to use buy-to-let financing to fund their lettings portfolio.

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Overhaul of Bank interest rate policy

Bank of England

Bank of England

Mark Carney, governor of the Bank of England (BoE),  has overhauled his guidance policy on interest rates as part of his latest inflation report. The governor had originally stated that a rate rise would not happen until there had been a fall in unemployment, but this policy has now been reviewed after the jobless level fell faster than expected.

The governor has reiterated that the BoE will take into account a number of economic factors before raising interest rates, these indicators would include wages, productivity and spare capacity within the economy.

Mr Carney was quick to point out that when rates increase, they will “only increase gradually”.

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Analysing Private Rented Sector investment and yield

Neil Young

Neil Young

Current Private Rented Sector (PRS) market conditions are such that finding the next ‘hidden gem’ for an investor is proving to be a challenging task.

This is due to a continuation of overseas money chasing, and overpaying for, property situated in London. The factors that drive this situation are; favourable exchange rates due to a weakening pound sterling, favourable interest rates on debt (especially in the Far East) and capital protection in countries such as Greece, Portugal and Spain.

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We’re clearing the hurdles, but now need local support

Ian Fletcher

Image: Ian Fletcher, Director of Policy (Real Estate) at BPF

The summer of 2012 saw our nation gloriously indulging itself in the once-in-a-lifetime opportunity that is the Olympic Games.  Life, however, returned to normal and the focus shifted to more domestic matters, such as how do we build enough homes to house our nation?

As the parent of a seven year-old I wanted to let our son sample some of the action and, along with judo and basketball, we’re fortunate enough to live close to what seems to be becoming the UK’s home of road cycling – rural Surrey. Through sun and showers, we were there, sampling the efforts of ‘Cav’, Lizzie Armitstead and ‘Wiggo’, sitting out on our garden chairs, ourselves bedecked in red, white and blue.

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The housing minister, Mark Prisk, talks to the National Housing Federation conference

Mark Prisk MP

Image: Mark Prisk MP

Housing Minister Mark Prisk has called on housing associations to use their expertise to help meet the growing demand for private rented homes.

In his speech to the National Housing Federation conference he said that landlords should aim to bid for a share of the £10 billion debt guarantee scheme.

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Researching Investment Opportunities

PRS Investment Opportunities

Investment Opportunities: It's all About the Knowledge

There are not as many solid PRS investment opportunities as you might expect considering the current economy. Yes, there are many ‘deals’ floating around, but finding investments that you can have a sensible discussion about with both a client and a lender is far trickier.

There is a school of thought that if a lender will lend on the property, it is worth buying. However, this suggests that the lenders are the best judges of an investment – and that’s a whole different topic!

As with any investment decision it’s all about knowledge, or advice from those with knowledge!
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In Conversation: Mark Weedon

Mark Weedon

Mark Weedon, IPD

There are a wealth of leading figures in the property, investment and finance sectors and we regularly speak to them about their work.  If you would like to feature in this series, or to suggest someone who might, please get in touch through our contact us page or let us know on twitter.

Why not take a lucky dip into our In Conversation archives and discover:

Richard Blakeway, Mayoral Advisor on Housing

Liz Peace, Chief Executive at British Property Federation

Jo Causon, Chief Executive of the Institute of Customer Service

Bill McClintock, Chairman of The Property Ombudsman Service

Today, we speak to Mark Weedon, Head of Residential and UK Alternative Real Estate at IPD (Investment Property Databank). Read more of this post

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Tendering, New Business & Austerity

Francois Hollande
Francois Hollande

David Cameron is currently being bashed for focusing too much on austerity and not enough on growth.

Francois Hollande, the new French President, came to power with a promise to focus more on growth than austerity.

FTSE 100 companies are being criticised for hording cash and not investing for future growth.

There is a clear theme here, do you cost-cut, sit tight, and hope all is well. Or, try and grow your way out of an economic slowdown? Read more of this post

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Environmentally Friendly Self Build

An Environmentally Sustainable Home from Baufritz
An Environmentally Sustainable Home from Baufritz

How serious are we about the environment?

The general comment is we must look after the planet, and therefore be as ‘green’ as possible. In the recent London Mayoral election the Green Party came third, ahead of the Liberal Democrats. Before the credit crunch, green issues were at the top of the development agenda, these days it seems to be further down the list. The government’s Green Deal is trying to move it back up the agenda once more – let’s see.

Sustainability used to be associated with environmental issues (just look at the language relating to the Olympic Park), but now it seems more about the financial sustainability of a business. Read more of this post

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Olympian Broadband for Stratford’s East Village

broadband for olympic village

High Speed FTTP Broadband

Infrastructure’s not just about roads and rail links these days. Equally important, especially to businesses and residents, is telecoms infrastructure.

With the Olympic countdown continuing, we take a quick look at the legacy that the herculean telecoms infrastructure project will leave to the future residents of Stratford’s East Village.

During the Games BT, the official communications partner, will be running a high speed broadband and wireless network across 94 locations expected to handle four times the amount of traffic as during the Beijing Games. Read more of this post

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Don’t Play the Games

Last year, I wrote an article looking at the pros and cons of letting property for the short term with an eye to maximising rental income from the Olympics. At that time, a year ahead of the Games, I cautioned against trying to ‘cash in’ by highlighting the practicalities involved:

• Potential voids
• High agency fees for short term lets
• High turnover of tenancies (typically 3-4 nights at a time)
• Local authority short–term letting restrictions and licensing
• Leasehold restrictions on short –term lets at apartment buildings
• Potential for a glut of property coming back to the market post-Games

My recommendation was to think very long and hard before turning away from the security of an incumbent long-term tenancy as the pros looked distinctly outweighed by the cons.

But add to this the fact that demand for short term ‘Olympic’ rents is yet to materialise and it seems even more prudent to steer well clear.

Our philosophy is to always look at the big picture and to take a long term view of your property assets and associated returns; after all, property investment isn’t a game.

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Number of B2L Deals Doubles in Two Years

Now, call me a cynic, but as soon as this headline popped into my inbox this morning (courtesy of Mortgage Strategy), I thought: ‘fair enough, but what impact has that actually had on lending?’

A couple of minutes on Google revealed the answer: Not a huge amount.  Latest stats from the Council of Mortgage Lenders (CML) show that the amount of buy-to-let lending (both by value and volume) has by no means shot-up over the last two years. Read more of this post

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1 in 5 Landlords Bought Additional Rental Property in 2011

click above to download the full report (PDF)

The latest Young Index report of Private Rented Sector (PRS) sentiment shows that 19.1% of landlords added additional residential property assets to their portfolios during 2011. The activity was driven by strong positive expectations for both capital growth and income returns for the year ahead.

London clearly leads the way with 85.1% of respondents expecting rents in the capital to continue to rise throughout 2012 and a full 100% of landlords predict that property values in London will be at current levels or higher by the end of the year.

Interest rates are widely expected to remain low. 58.3% of landlords expect the Bank of England base rate to remain static throughout 2012. Of those who do see a rise on the horizon, their average prediction for Q4 2012 is less than half a percentage point higher than the current all time low of 0.5%, at 0.78%.

Undoubtedly, current low costs of finance represent a short term fillip but landlords clearly see the Private Rented Sector as a long term investment class. Data from Young Index Q4 2011 show that 36.9% of landlords intend to hold their property until 2031. The average future hold period across all respondents was 15.4 years. You can read the full Young Index report here.

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Leverage, Gearing and Debt

‘Leverage’, ‘gearing’ and ‘debt’. The terms may sound a bit esoteric but all essentially mean the same thing; borrowing money to buy an asset.

The person on the street typically uses leverage to buy property. Providing you have a cash deposit, banks will look at your employment/income and creditworthiness and can lend against this simple premise.

Debt can be considered a ‘bad’ thing to have. Generally homeowners look to pay off their mortgage, typically over a 25 year period, in order that they have an unencumbered (owned outright) property later in life. That is understandable and commendable for anyone purchasing a family home. Read more of this post

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Why Hold Residential Property?

A question we are asked at Young Group quite often is:

“Should I hold my residential property investment(s) or should I sell?”

As with many questions I am asked regarding property and investing, I look at it from a personal perspective.  I have my own property portfolio, so what is my personal approach?  I have said and written many times, my belief is to hold property for the long term.  Trading property is one thing, however, much research has shown that the best returns come from holding property. My blog post explored this topic. Read more of this post

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