Buy to Let Yields are Good and So is Growth if you Buy in The Right Area and Right Type of Property

I’ve just received the latest set of data from Paragon Mortgages on landlords and how they are doing.
Now the data has to be treated with some degree of caution because it is based just on Paragon’s survey. However, it is fascinating nevertheless.
It seems that following the MPC's second increase in interest rates this year and the fourth since last summer, landlords are responding by increasing rents by more than CPI inflation and by adding to their portfolios of buy-to-let properties.
According to Paragon, average rents on a typical buy-to-let property have risen by 6.5% over the past quarter, from £9,942 in January to £10,591 in April. This compares with an increase in CPI inflation over that period of less than 1%, even taking account of last month's sharp rise in inflation.
I too have also seen strong rises in rents in my patch in London and Kent.
Paragon say that yields are averaging about 6% overall. But be careful here because they are talking gross yields.
I would say you need to take between 1 and 1.5% off to get to yields that are net of running costs. Still, that’s not bad compared to dividends in the FTSE where only a few big firms are paying much over 4%
The big question is where will prices of houses go next and how will this compare to capital growth on the stock market.
And that’s a big question.
I think there could be a bumpy few years for property but at worst I think prices will fall 10%. But buy in the right area and avoid areas that are hugely oversupplied and you will still do well.
New flats in some of the Northern English towns aren’t my idea of a good property investment – those of you who read my stuff will already know.
As Paragon’s figures show, terraced houses continue to generate the highest yields, roughly a whole 1% more than flats.
So get houses in the right place where strong tenant demand exists and you will be OK.
Copyright: David Lawrenson 2007 http://www.lettingfocus.com/
David Lawrenson is the author of the UK’s top selling buy to let book “Successful Property Letting” and is a consultant and speaker on residential property investment. He also runs seminars and one to one advice sessions at his site http://www.lettingfocus.com/

Being Good to Tenants

One lady who came to one of my recent seminars has this tip for being good to tenants.
If they leave the property it in the same condition as they found it she pays a £100 bonus and interest on their deposit.
She finds this is a nice incentive to them to keep the home in good shape with the view that it will pay off when they leave.
Another thing she does is to send a birthday card on their birthdays and a welcome to their new home on arrival. This would normally be a bottle of wine and a couple of nice but cheap glasses in case they do not have any (as unpacking is not the first thing they wish to do as they enter the house.)
She finds that treating tenants this way leads to few problems with them.
I'd agree. Thanks to Jayne for that tip.

Removing Squatters - Part One

First things first, if your tenant decides not to leave when he should -say after the expiration of a section 21 notice - he’s not a squatter, he’s just a former tenant who won’t leave.
For tenants like this you’ll have to use normal court processes to get them out. You must not rely on your own “self help” measures. If it’s an eviction of an assured shorthold tenant following non-payment of rent or because they have not left at the end of the tenancy and after the appropriate correct notices have been served, you can follow the simple court procedures yourself without having to pay for the services of a solicitor.
Real squatters are people who have no right to be in your property, either because your tenant has let them in (and they are not on the tenancy agreement and there has been no agreement by you to allow them to sub-let), or, they could be a third party who has simply let themselves in, while the property was left empty, unoccupied and unsecured.
In effect they are trespassers. (In fact there is no legal definition of squatter!)
I’ll look at what you can do to get rid of them in part two later this week.
Finally, if you are in London tonight don’t forget to come along to my networking / seminar event. For more details on this event see the main site www.lettingfocus.com or go straight to the Events page. http://www.lettingfocus.co.uk/enews/enews.html
Copyright David Lawrenson 2007