You’re Still Being Stuffed by Mortgage Lenders

The press has recently been full of stuff about closing (or sealing) fees which are the charges they impose when you close the mortgage. In a nutshell the FSA has ruled that the mortgage lenders cannot get away with saying your closing fee would be £50 say when you took out a mortgage but then charge you £300 when you come to close it a few years later.
If you have been overcharged, the money is there for you to claim - you just need to contact your mortgage provider. I've done it and just got a cheque back for £65 the other day - see previous blog.
Now, another big way the lenders make money is on surveyors’ fees. Suppose you are charged £300 for a mortgage valuation and survey report. It may be the surveyor might get only £220 of that with the lender keeping £80.
According to a chap I met at the Home Buyers Show, the margin that the lenders get is a lot higher than that.
And it seems that you are not free to arrange your own surveyor and make the saving.
How do I know all this – I used to work for a bank, so I know the hidden ways they make money.
I’m hoping one of my personal finance journalist friends will look into this soon and do a bit of digging around - as overcharging is a real topical one at the moment.
So, I’m sending this email to some of them in the hope that they will have time to follow up the story. So, let’s look out for that shall we?
Oh, and if you are a surveyor or work for a mortgage lender and happen to be reading this, and if you know exactly how much lenders load onto the basic survey / valuation fee, please do feel free to contact me and I'll pass it on to whoever at the Nationals runs the story.
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Copyright: David Lawrenson 2007

Rents are Up Strongly in London

I always try to keep my tenants rents some way below the market level. This gives me a good choice of potential tenants allowing me to pick and choose the best ones who I consider will look after my properties and also be fair and reasonable people to deal with.
It also means that they feel they are getting a good deal too.
As well as that I try my best to get things fixed as quickly as possible.
I also don’t like putting up rents. My view is that good tenants have to get a reward for being good tenants.
Right now though, my rents WILL have to go up because they are now something like 20% adrift of market rents locally in one area.
The reason for this is that rents have gone up strongly in the local area, by around 8% over the last year in fact -so mine are now too far out of line.
So, I’ll be putting them up, but I will still keep the level below the local market rent.
After all, my tenants are good practical people who have earned the right to be paying a bit less than market rent (and as good tenants they also help keep my costs down)
Would I ever have rents at a premium to the market? Yes, if I had a tenant who was an utter pain – the sort that would have you out to change a light bulb. This kind of tenant costs money in terms of time you have to spend on them.
Having a higher rent for them may compensate for this extra hand holding and hassle - and if they leave because of the high rent, then that’s no problem as you will be better off with another more hassle free tenant at a market or below market rent.
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Copyright: David Lawrenson 2007

Things to Consider with Overseas Buy to Let

Buy to let abroad is exciting and people have made a lot of money but there are many who have been disappointed too.
In my consultancy, I’ve come across a few people who have bought to let abroad but who seem to have left their brains on the plane and forgotten the basics.
One of the most basic things is whether the property you are buying is good value and can you get a good return on it?
Lots of property abroad is cheap relative to the UK but that does not mean it is good value.
It is only good value if you can get let it out easily at a decent rent that is not too far your total running costs and if, when the time comes, you can find someone to sell it on to quickly and easily.
Many places I have seen look great in a brochure or at an exhibition but if most locals cannot afford the rent on it, then it’s going to be a loser.
Always consider the supply side. If there are thousands of units going up just like yours and all being bought by investors then potential tenants will probably be able to play one landlord off against another and drive hard bargains on rents.
Also, tenants may have more rights than in the UK, and in some countries you may not even be allowed to let out.
If you buy a holiday let, holidaymakers will only want to rent it if it is close to the beach. If not, it does not matter how great it looks in a brochure. And people will have to find you -after all they could just look at Expedia or Thomas Cooks so advertising fees and web hosting fees are another headache on holiday lets.
Re-sale markets abroad are usually “thinner” than in the UK which means that it is hard to find out what a property is really worth. So, I’d advise people to look very carefully at promoter’s claims for past capital growth. Sure, you might get such and such a price eventually, but it’s often not like the UK, where you can have the property sold within 3 months of sticking on a for sale sign. In another country you may be waiting months to find a single buyer who will be in a strong position to force down your asking price.
Finally, costs for buying and selling abroad are usually higher than in the UK – and so are letting agency fees too.
Find out if you can talk to other property investors who have already invested with that developer or promoter. Propertysecrets is one company that has a web based forum which seems to be open to all to comment, so you can read how others have got on with their own purchases through the company. Investor’s experiences seem to have been generally good, so far.
I rather like that transparency and hope they will keep it open even if times get harder.
(I must state in the interests of openness that I write articles for Property Secrets)
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Copyright: David Lawrenson 2007

Home Buyers Show – More “Below Market Value”, Less UK Off Plan, Lots of Overseas Off Plan

I’m just back from the home buyers show at London’s Excel. Great fun superbly organised and as usual I met some great people.
Unsurprisingly, the number of stands offering customers the secrets to buying property “below market value” (or BMV) was up quite a bit on last year. And given the huge interest in this area that’s hardly surprising.
Meanwhile, the number of vendors offering off plan in the UK has now got ever smaller – the few still doing it are only offering really up-market apartments -the sort that may have some unique value for tenants.
The current “big thing” - other than BMV, that is - is in now off plan overseas and the number of vendors selling off plan overseas is well up (except for Coastal Bulgaria where the number of stands dropped dramatically as tales of non existing tenants and huge void periods have now hit home.)
As I said at my seminar, if you went back about 5 years ago, the show was full of vendors selling off plan flats mainly in the north of England. (Unfortunately, only two out of the 200 people who saw me speak over the three days had been at the shows 5 years ago!)
The clever investors 5 years ago usually avoided the heavy marketing of UK off plan flats and went for existing terraces - and they made far more money by doing so.
Sadly, many people at the show last weekend will have bought off plan overseas and may struggle to get any tenants – yields in many places are very low and tenants hard to find.
You can do well overseas and many of the investments on offer were good - but you must do your own research or you could end up with an asset far away that’s costing you lots of time and money.
And if you go down the BMV route you’ve got to be prepared to do quite a lot of work too to find the really good deals.
Sorry, to say, but whilst there is still very good money to be made in property there’s no easy road or quick path to millions for the armchair investor.
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Copyright: David Lawrenson 2007