If You Are Thinking Of Buy to Let Abroad You Must Read This Post First!

One of my "Friends in the North" who is a successful investor in the NW Manchester area had a go at buying to let abroad.
He sent me this note the other day. All people thinking of fly to let, especially those thinking about Spain, should read before they take the plunge. Read on.....

"I have tried the investing abroad route with limited (no!) success. We have had 5 experiments in Spain consisting of 2 finka (detached villa) refurbishments, 1 apartment refurbishment and 1 new build villa and 1 off plan apartment.
I aimed to refurbish one to keep, rent out and use myself and the rest were for resale for profit. I have now a good team in place of solicitor/builder/pool man/gardener/general runabout person who speaks spanish but have no inclination to go further at this point.
The earth gets promised and the numbers appeared to stack up but nothing happens after that, I know the market is quiet, and understand several reasons for that but it is annoying.
One Estate Agent even came and looked/photographed the properties and then presented me with a bill for €2000 simply for putting them on his books – still awaiting the promised court case for his invoice not being paid! Evidently some people actually pay these bills! It seems to be everyone has his nose in the trough.
The off plan property looked a good investment and I have to pay for this before end March (suposedly ready Dec 05). However despite written assurances that the builders had sold all apartments, I find they have kept 12 out of 30. (turns out this is the building contractors payment for his efforts), which he is now marketing below our purchase price and we have 7% purchase tax on top
The whole experiment is costing approx £40K per annum in interest and running costs so if we could sell the at cost then we would be happy.
I have just found the distance, language and different systems to be more hassle than its worth. I am glad we tried because if not, who knows, but on reflection my time effort and money would have been better employed in the UK. It used to be fun getting the 6am plane for work but……..
For every £1 made in rental income in the UK, I am only getting €1 in Spain for exactly the same £100,000 invested so only 2/3rds the income. Capital growth may be the answer to my problems, but how long before it comes. The historical data is not there as it is in the UK. Also the advent of the Euro caused a vast increase in property prices, so maybe a five year lull before things pick up, perhaps the wrong time to invest in hindsight
My own views on emerging markets is why bother. If Spain which is a 30 year old market for investment is not worth it, where someone else has done all the hard work why go through all the hassle when the infrastructure/organisation is not in place to the same extent
Access is a major issue
Spain/France/Italy are all under 6 hours door to door . My in laws have purchased in Bulgaria and it is 9 hours door to door – so no quick trips for a long weekend
lack of local airports to developments a factor,
lack of competition from lo-cost airlines
low wage structure in the country, so low local appeal for the property, thus only aiming for holiday lets on a 4 month market
I could go on but you get the idea"
Thank you to Mr. P for that.
Copyright David Lawrenson 2007. Back to main site: www.lettingfocus.com

First Time Buyers Can Handle Their Mortgages (For Now at Least)

Lorna Bourke quotes Council of Mortgage Lender's stats in yesterday's London Evening Standard which show that in 1987 the average first time buyer's mortgage repayments were 17.9% of gross earnings. The figure today is almost unchanged at 17.8%
Of course multiples of income borrowed are higher today but as expressed as a percentage of earnings it works out the same as a result of the lower interest rates today.
This is an interesting statistic which suggests as long as interest rates don't go up (a big if!) then house prices won't crash like they did in 1989-1993 (when they fell by around 25% in London.)
Lorna also quotes me in the same article on the growing proportion of families who are renting rather than buying. Her article is a good read (and not just because she quotes me!)
If you live own or rent a property in London you should get the Standard's Homes supplement on Wednesdays. (Other papers with good property sections are the FT on Saturday, the Indy on Wednesday and the Times on Friday)
I'll be talking about the growth of family renters and why family homes will rise in price faster than flats (as well as lots of other things) at the London Home Buyer Show 2-4th March - and later in the month at the NEC in Birmingham and then in Manchester in June.
Also, there is my Networking and Short Seminar Evening in London on Monday 26th March.
Why not come along? It's only £20 if you pre-book.
I promise you the truth about buy to let, not the usual spam you often see - which is usually designed by developers and their backers to flog property.
Spaces are limited. Details are at my website www.lettingfocus.com or go straight to the Seminar page by clicking here: http://www.lettingfocus.com/pages/seminars.html
Copyright: David Lawrenson 2007

Negotiate On Letting Agency Fees

If you use a letting agent, their fees are not set in stone so look carefully at their rates.
My advice is to look at the contract they present and be prepared to negotiate (or remove altogether) any clauses fees that you might feel are unjustified or excessive.
For example, if a fixed term assured tenancy becomes a periodic tenancy after 6 months then the workload for the agent should be minimal at the 6 month point.
In these circumstances, all that might happen is an exchange of emails between your tenant and your agent to say they wish to stay on. This type of situation would hardly justify a hefty renewal fee.
Neither is a big fee justified for producing a tenancy agreement. These are available from the internet or from landlords associations at little or no cost.
But don’t be mean.
Good letting agents are well worth their fees and will work hard and do unsocial hours on your behalf so be prepared to pay for the work that the agency does when they do it.
In many cases this will mean at least 10% for finding a tenant and at between 3 and 5% for managing them.
Also, check out Chris Partridge's excellent article on this in the Independent today. http://money.independent.co.uk/property/homes/article2266123.ec
Back to main site: www.lettingfocus.com
Copyright: D Lawrenson 2007

One of the key measures bought in with the Housing Act was the introduction of what are called Tenancy Deposit Schemes.
From 6th April 2007, all landlords in England and Wales who take deposits and whose tenancies fall within the provisions of the Housing Acts (which includes all tenancies with a rental value of less than £25,000 a year) will have to join an authorised tenancy deposit scheme.
The idea is that these schemes will protect tenants’ deposits from rogue landlords who don’t pay up at the end of the tenancy.
Over the next few weeks, on this blog I will look at how the different schemes will work and why the government is bringing in the changes.
You should not ignore the new system becuase if you take deposits on a new tenancy from April 6th but don't join a tenancy deposit scheme you will struggle to regain possession of your property and you will be liable to pay the tenant three times the value of the deposit.
Scary stuff!
So look out for more info here.
Back to site: www.lettingfocus.com

Where Can I Find Info On Forthcoming Auctions?

Two clients of mine both asked me where forthcoming auctions are advertised.
So. I guess this is of interest to lots of people.
Often list of auctions appear in local newspapers as well as on the Internet or in the Estates Gazette magazine.
Useful websites listing upcoming ones are www.ukpad.co.uk, and www.propertyauctions.com
I hope this helps.
Back to site: www.lettingfocus.com