Feb 19, 2016
I had an interesting email from someone in Rotherham a few weeks ago that I want to share with you (don’t worry I asked his permission to share). In a nutshell, the gentleman lives in Brinsworth, he is in his mid 60’s and still working.
He has a decent pension, so that when he does retire in a couple of years’ time, it will give him a comfortable life. He had recently inherited £90,000 from an elderly aunt. One option he told me was put it into a savings account. The best he could find was a 2 year bond with the Post Office which paid 1.9%; meaning he would get £1,710 in interest a year. One of his other options was to buy a property in Rotherham to rent out and he wanted to know my thoughts on what he should buy, but he had concerns as he didn’t want to take a mortgage out at his time of life. He was also worried about all the tax changes he had read about in the papers for landlords.
Notwithstanding the war on Rotherham landlords being waged by George Osborne, the attraction of bricks and mortar endures for many. As our man is a cash buyer, he would not have to deal with the intricate cut to mortgage interest tax relief that will diminish, or even eradicate, the profits of many Rotherham landlords. It’s true he would face the extra 3% in stamp duty to buy a second property, but with some good negotiation techniques, that could soon be mitigated.
I told him that buying a Rotherham buy to let property is all about the total return on investment. True, he could put the money in the Post Office bond and receive his interest of £1,710 a year or, as he rightly suggested, invest in property in Rotherham. The average yield (yield being the equivalent of the interest rate on the property) at the moment in Rotherham is 4.37% per annum, meaning our potential F.T.L (First Time Landlord) should be able to, depending on what he bought in the town, earn before costs £3,933 a year. (However, I told him there are plenty of landlords in Rotherham earning half as much again (if not more), if he was willing to consider more specialist investment types of properties – again, if you want to know where – look at my blog or drop me an email).
The bottom line is that the success of investing in Rotherham buy to let property versus a savings account with the Post Office (or whatever Bank or Building Society is offering the best rate) will depend on the performance of those assets. Unlike with a savings account, with property the capital you invested can also go up (and yes, it can go down as well – more of that in second). Property values in Rotherham have risen in the last twelve months by 0.6% meaning, that if our chap had bought a year ago, not only would he have received the £3,933 in rent, but also seen an uplift of £540 …meaning his overall return for the year would have been £4,473 (not bad when compared to the Post Office!).
.. but the doom mongers amongst you will say, property values can go down, as they did in 2008, and in 1988 and 1979. Yes, but after 1979 prices had bounced back to their ’79 levels by 1984 and went on to grow an additional 58% in the following four years. Then again, they dropped in 1988 and did take 13 years to reach back to those ’88 figures, but the following six years (between 2001 and 2007) they then increased by an additional 66%. Now, according to the Land Registry, average property values in Rotherham currently stand 19.41% below the January 2008 level, and anecdotal evidence suggests that in the nicer parts of Rotherham, we are well above these sorts of levels.
… and what would that £90,000 get you in Rotherham? A decent 3 bed town house in Kimberworth Park, a lovely 3 bed terrace in Treeton or Clifton (close to Rotherham town centre) .. in fact, the world is your oyster. But which Oyster? Well, my blog reading friends, if you want to read similar articles like this and what I consider to be the very best of buy to let deals in Rotherham, irrespective of which agent is selling it, then you need to visit the Rotherham Property Blog
Feb 19, 2016
There I was, out with the family at Boston Castle last weekend, when a smart gentleman approached me. ‘Hello’, he said, ‘You are the person writes that Property Blog aren’t you? We have met before at that Business Networking event in Rotherham a few months ago’.
I did then recognise him and, whilst I won’t mention his name, he runs a small but perfectly formed well known independent retailers in the town … It’s amazing who you see when out walking! Anyway, I was at a loose end for five or ten minutes as the other half was sorting things with the family, so we had a chat.
He wanted to know my thoughts on the future of the Rotherham property market, and I would now like to share with you that conversation, my Rotherham property Blog reading friends. People are always going to need a roof over their heads and somewhere to live will never go out of fashion – it’s a necessity for every single person. The 22 to 30 year olds of the town have a choice to what type of roof they have … they rent from the Council, they can rent from a private landlord or finally they can get a mortgage and buy one. In the 1970’s/80’s and 90’s, the expected thing was to save like mad for two years for the deposit (going without luxuries) whilst living at home or renting a cheap two up two down, then buy your first house. However, more recently fewer Rotherham youngsters have been buying, choosing to rent instead – mainly from private landlords (as Councils have been selling off council housing on the Right to Buy Schemes). The numbers are truly staggering … and I want to share them with you.
Roll the clock back 20 years and Rotherham was a different place. There were 32,524 households in Rotherham and 17,242 of those were owner occupied. Move to the present, and with all the building in the town, the total number of households has increased by 14.86% to 37,358 and quite surprising (to me at least), the number of owner-occupiers has increased to 20,928 (although as a proportion, it is only 56% compared to 53% twenty years ago).
However, it’s rented sector that is truly fascinating … twenty years ago, only 2,011 properties were privately rented in Rotherham … and now its 4,561, a rise of 2,550.
The twentysomethings of Rotherham housing difficulties haven’t been helped by the local authority selling off council housing, with the number of council houses dropping from 11,701 to 9,024 over the same twenty-year period. Demand for decent rented property remains high, as Cameron’s much vaunted house building program is years away and has decades of under investment to catch up on before it starts to affect demand. Even with the Buy to Let tax rule changes over the coming few years (which will see the maximum tax relief available to landlords drop from 45% to 20%), private landlords still have an important role to play in housing the people of Rotherham and those who educate themselves and treat it as a business will survive and prosper.
The best way Rotherham landlords can protect their income from property (and mitigate the affects of the tax rises) is to keep the homes they let out in Grade A condition. I have found, especially over the last three or four years, Rotherham tenants have ever growing demands from their rental property, but many are prepared to pay ‘top dollar‘ for houses and apartments that meet their high expectations. You must not forget, letting property in Rotherham (in fact anywhere) is a business, so all private landlords should also seek the advice, opinion and commentary of property professionals.
… And just as the other half had sorted the family, he asked ‘What of the news of Stamp Duty changes for Landlords coming in April?’ My thoughts are with such low supply (i.e. numbers of property for sale), and high demand it is hard to imagine Rotherham property values will see much impact – but I predict, ever so slightly, the proportion of owner occupiers should increase slightly compared to buy to let landlords in the coming decade as the the housing market should return to balance. For more in-depth thoughts on the Rotherham Property Market, which have a library of similar articles like this, all on the Rotherham Property Market, keep visiting this blog.
Jan 27, 2016
One of my landlords rang me last week from Hallam Road, after he had spoken to a friend of his. Over Christmas, they were discussing the Rotherham property market and neither of them could make their mind up if it was time to either sell or buy property.
If you read the newspapers and the landlord forums on the internet, there is a good slice of doom and gloom, especially with changes in the taxation towards landlords, new legislation on checking tenants and the general uncertainty in the world economic situation.
I would admit, there are certain landlords in Rotherham who have over exposed themselves in the last few years with high percentage loan to value mortgages. Those mortgages, with their current (yet artificially low) interest rates, will start to suffer, as their modest monthly positive cash flow/profit, i.e. income (rent) less costs (mortgage, fees, tax), will become negative when the tax and mortgage rates rise throughout 2017 and beyond.
It appears to me these landlords seem to have treated the Rotherham Buy to Let market as a sure bet and have not approached this as a business and, as a result, they will suffer as they thought “Buy a house – rent it out so it covers the mortgage and make a few quid on top”. These are the people who will be thinking twice. I see opportunity everywhere and won’t be stopping, I’m here to stay. It’s going to be an exciting new year.
Gone are the days when you could buy any old house in Rotherham and it would make money. Yes, in the past, anything in Rotherham that had four walls and a roof would make you money because since WW2, property prices doubled every seven years … it was like printing money – but not anymore.
True, since January 1997, the average price paid for a Rotherham flat/apartment has risen from £25,000 to today’s current average of £113,500 in the town, an impressive rise of 354% and terraced/town house have risen in the same time frame, from £27,188 to £68,140, a rise of 151%. However, look back to 2005, and in that year, the average flat was selling for £91,500, meaning our Rotherham landlord would have seen a modest rise of 24% and the terraced owner would have seen an increase of only 1%, as they were selling for on average £67,588 … which isn’t good for people who bought in 2005, but it gets worse when you take into account inflation.
Since 2005, then inflation, i.e. the cost of living, has increased by 33.4%. That means to retain its value, Rotherham terraced property bought for £67,588 in 2005 needs to be worth £90,141 today. Therefore, our landlord has seen the ‘real’ value of his property decrease by 32.4% (i.e. 1% less 33.4% inflation).
The reality is, since around the early 2000’s we haven’t seen anything like the capital growth in property we have seen in the past and it’s not predicted to grow at the rates it has previously done either. So it is high time anyone considering investing in property stopped believing the hype and did some serious research using independent investment expertise. You can still make money by buying the right Rotherham property at the right price and finding the right tenant. Think about it, properties in real terms are 32.4% lower than ten years ago, so investing in Rotherham property is not only about capital growth, but also about the yield (the return from the rent). It’s also about having a balanced property portfolio that will match what you want from your investment – and what is a ‘balanced property portfolio’? Well we discuss such matters on the Rotherham Property Blog
Jan 27, 2016
“What does the ideal Rotherham tenant look like?”
This was asked by one of my landlords from Moorgate the other day, to which he carried on before I could reply, “Let me guess, a professional couple, both in their 30’s, flawlessly tidy, pays their rent early, doesn’t complain or fuss, who has no plans to move and cheerfully accepts annual rent rises”.
Before I can answer that question properly, I have always believed all a landlord wants (and expects) of their tenants is to pay their rent on time and look after the property as if it were their own. In return, the landlord should provide a property that is warm, clean, modern and damp free and sort any issues (such as repairs) quickly and without fuss.
Back to the tenants – tenants tend to fall into several groups … 20 something professionals; young and middle aged families; corporate tenants (ie their employer finds their employee a house to live in); students; older singles/couples and housing benefit claimants – and they come with different needs and wants. So choosing who best suits your Rotherham property – and steering clear of bad tenants – is a big factor in making property investment a success.
One topic that I am often asked is should they, as a landlord, accept tenants on housing benefit?
It might interest the landlords of Rotherham that of the 11,153 private rented properties in the local council area, 54.7% of the tenants of those properties are on some form of housing benefit.
(6,109 properties to be exact). I know many landlords have suffered late rent payments with tenants on benefit, especially since 2008, when local authorities started paying housing benefit to tenants rather than directly to the landlords, but you can’t ignore the fact that housing benefit tenants make up a significant proportion of the Rotherham rental population. My opinion is that the final choice of accepting such tenants has to be the landlords but you can’t tar every tenant with the same brush (I will always give you a balanced opinion if ever asked).
Interestingly, it might surprise some readers of the Rotherham Property Blog, when we compare Rotherham to the national picture, Rotherham’s Housing benefit claimants are higher, as nationally a lower proportion of private tenants claim the benefit. Nationally, 39.2% of the tenants of the 3,891,467 rental properties in Great Britain claim some form of housing benefit (ie 1,526,915 properties).
Now, let us look at the occupations of Rotherham tenants, which makes even more fascinating reading. Of the 11,153 privately rented properties in the Rotherham area, 7,279 head tenants (the head tenant being classified as the head of the household) are in employment (the other 3,874 rental property head tenants either being retired, long term sick, students or job seekers).
Splitting those 7,279 head tenants down into their relevant professions, 1,930 of them are Managers, Directors, Senior Officials, Professional or Technical Professions, 584 in Administrative and secretarial occupations, 971 in Skilled Trades, 788 in the Caring, Leisure and other service occupations, 830 Sales and Customer Service Occupations, 1,010 Process, Plant and Machine Operatives and finally, 1,166 in Elementary Occupations.
The one thing I have always known anecdotally, but until I did my research, never had anything to back it up with, was the high proportion of professionals and skilled trades renting property in Rotherham – intriguing! Maybe in future articles, I will look deeper into the corporate tenant market, young and middle aged families, students and older persons rental markets…. but in the meantime, if you want more news, views and commentary about the Rotherham property market, there are many similar articles like this on the Rotherham Property Blog .
Jan 9, 2016
You find me in a reflective mood today as I want to talk about the future of investing in property in Rotherham.
The truth is that we have got fat and lethargic, with many people having mistaken the ever rising Rotherham (and in fact the whole of the UK) property market since the 1960’s as the eternal gift that kept giving as property prices constantly rose and doubled every five to seven years.
The days of making money from property as easy as falling off a log, like taking candy from a baby are sadly over my Rotherham Property Blog reading friends
Whilst George Osborne has decided now is the time to milk the ‘Golden Cow’ of UK’s private landlords, with changes in taxation for buy to let property, many pundits are predicting the end of buy to let as we know it. However, it is still possible to make a reasonable, profitable and safe return on property with these changes. You see, I have always seen investing in the Rotherham buy to let market (as I would anywhere in the UK), as I might see mother nature, creating some truly wonderful stunning warm weather but at the same time, she will bite, creating catastrophic situations such as snowstorms and hurricanes. You need to study the market, take advice and opinions from many people and then decide what the proverbial property weather will be … remember, tenants will always want a roof over their head and I don’t see the HM Government building the millions of houses required to house them?
Nobody knows the future, and yes people can predict but I wouldn’t be afraid of this change .. because as a famous French proverb says, (I told you I was a reflective mood today), ‘the more things change, the more they stay the same’. I mean, no one could have predicted how the property market has changed in Rotherham over the last couple of decades? Looking specifically at the Rotherham Parliamentary Constituency, twenty years ago, 17,242 households (meaning 53.01% of property) was owned and only 2,011 households were privately rented (meaning 6.18% of property was rented out by private landlords). Roll the clocks on twenty years and the change shows that 20,928 of properties in the Constituency are home-owners (a slight increase to 56.02% being owner occupied) and the jump in private renting has doubled, as 4,561 properties are now privately rented proportionally 12.21%). (NB Neighbouring Constituencies show similar changes as well).
Who would have predicted in 1995 the private rental sector in Rotherham would have grown by 97.57% in the proceeding 20 years?
Also, if you had asked someone in 1995 to predict what would happen to property values over the proceeding 20 years (ie between 1995 and 2015), they might have predicted similar growth to the growth experienced over the previous 20 years (ie between 1975 and 1995), which was a very impressive 351.55%. Yes, property values in Rotherham have increased over the last 20 years (between 1995 and 2015), but by a very modest 81.82% (and most of that can be attributed to house price growth between 2000 and 2006.)
The property market is constantly changing and buy to let for too long has been heavily dependent solely on house price growth, where yield has been almost forgotten. I see the changes in tax and landlord and tenant law in a different perspective to the doom-mongers and see it as bringing many opportunities. You might need to change your buy to let benchmarks, your approach to financing or even consider places other than Rotherham in which to invest your money, but this will shine a light on investing in properties with healthier yields and create more realistic long term buy to let opportunities, instead of short term growth bets and wagers.
The advice I give to my landlords, and you my blog reading friends is this; these changes will make some landlords panic, meaning competition for decent Rotherham buy to let bargains will reduce as fear of change kicks in and amateur investors flee the market. These opportunities will provide a more stable platform for knowledgeable and wise Rotherham buy to let landlords to thrive in. If you want to learn more about the Rotherham Property Market, feel free to pop in for a coffee at our office for a chat with me, or failing that, visit the Rotherham Property Blog, where you will find many more articles like this ..solely on the one topic of the Property Market in Rotherham
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