Terraced property good BTL?

[CH1]

I'm considering purchasing my first terraced BTL property (got sick of 2-Bed new builds!) that is currently tenanted by students at 709PCM. After having the survey done some repairs and issues have come to light -it has damp downstairs and also needs some building work. So far got quotes for building work (chimney stack, re-pointing etc) in the region of £2.5k plus damp another £1k approx. I'm getting problem getting all the quotes but have some. Prior to my offer of 115k I was aware some building work was required in boundary wall and made my offer accordingly. Originally the carpets were to be replaced but the vendor accepted my offer on the basis I could complete quickly and decided not to replace the carpets as the offer was lower to what they expected (asking 119.5K). The issues brought out in survey are new and therefore I feel I should re-negotiate the offer. The vendor wants a quick sale and we'd agreed to complete on a certain date which is next few days. I've heard thru the EA that the vendor would negotiate a little but would accept no less than 112k however in view of the current findings I find it reasonable to offer in region of 111K.

Do you think this is a good BTL property given the current work required and yield?

Bearing in mind the general cost of maintenance of terraced properties with students. Any advice would be appreciated.

[Simon Dewsberry]

Several considerations

1. is that £709 x 12 OR £709 x 11 mths (students often pay half rent for 2 mths in the summer)

8508(12m)on 112k =7.6%

on 11m 6.9%

2.Is the prop at MV or below (with regards to other props in the area)?

3.Is the rent same as everyone else or higher /lower ?

4.Is ther a good demand for student let in this area or is it oversubscribed?

5.If you are getting -7.5% and interest rates go up by .5% is there space to increase rent ?

6.Remember it will probably only be let until june08 so you will only have approx 6 months "let" then presumeably you will do required works ?

7.Is there scope to "improve" prop and gain extra income eg attic con, garage, extendto get another lettable room etc ?

8.What other remedial works will be required in next few years eg decorating, kitchen, bathroom ,boiler, exterior, walls, fences etc and as already mentioned carpets?

Tip: always make your offer "subject to survey" ....

Bearing in mind i havent seen the prop, but if V wants a "quick sale" he may "need" the cash "quick" which always helps!I would revise offer down to 110K and see what happens ....

Personally i think the figs are a bit tight if you have no scope to drag in extra income ....Unless i have scope to "improve" situation,! then i use 8% as cut off point (and this only with at least 5% BMV itrinsic profit built in !) and that is what i would consider sailing close to the wind.

S

[CH1]

Thanks for your detailed analysed response -Wish I'd asked you before I put any offer forward.

Several considerations

<1. is that £709 x 12 OR £709 x 11 mths (students often pay half rent for 2 mths in the summer)

<8508(12m)on 112k =7.6% on 11m 6.9%

As far as I'm aware it's 709.50 till July-then down to finding new tenants again. Some students can pay half rent or no rent between July and August or some full -this is something I'd need to discuss with the student.

<2.Is the prop at MV or below (with regards to other props in the area)?

Most similar properties in the area have AP of around 119K with the odd one or two that are below that e.g. 112k or 109k often state in need of modernisation.

Survey I had done matched my OP. It also showed that property was surveyed 5 months ago at 116.5K by same surveyor.

<3.Is the rent same as everyone else or higher /lower ?

Rent is in line with most student Lets in the area. I have to check what each room actually is as there are 2 double rooms and 1 single room.

<4.Is ther a good demand for student let in this area or is it oversubscribed?

The area is a typical student area near to city centre, 2 universities and also home to lots of foreign workers eg Polish its always a booming area, lots of demand.

<5.If you are getting -7.5% and interest rates go up by .5% is there space to increase rent ?

I'm not quite sure what they're charging per room it's about £55 p/w I remember -maybe slightly less for the single room -I think theres scope of increasing a couple of pounds per week on each room. For this proposed purchase I've got myself a fixed rate for almost 2 and half years so will be ok till that period.

<6.Remember it will probably only be let until june08 so you will only have approx 6 months "let" then presumeably you will do required works ?

Its let till July 08 was let on a 10month Let from Sept. I can then decide what repairs to do. The students living there atm seem perfectly happy but then again they seem like a really nice bunch and I feel if I were to buy the property I'd at least get the new carpets put in hallway, sort boundary wall and damp out -or wait till next tenancy to sort damp as it would be quite disruptive.

<7.Is there scope to "improve" prop and gain extra income eg attic con, garage, extendto get another lettable room etc ?

Well, one possibility is the outbuilding which they've currently converted into a small room like a utility but is currently being used as a chill out area with cushions and small tv. This is single skinned brick at the moment so would need insulating and possibly it could be extended to provide a 4^th room.

<8.What other remedial works will be required in next few years eg decorating, kitchen, bathroom ,boiler, exterior, walls, fences etc and as already mentioned carpets?

Boiler is my biggest worry? They say it works fine but its not a new one and they have no idea how old it is and no guarantee for it. Looks like the current vendors appear to have done nothing in terms of maintenance to the property as the boundary wall between the 2 houses is partly missing and it'd need re-building.

<Tip: always make your offer "subject to survey" ....

Good advice! I did mention this at the time.

<Bearing in mind i havent seen the prop, but if V wants a "quick sale" he may "need" the cash "quick" which always helps!I would revise offer down to <110K and see what happens ....

I think I agree with you -though a bit cautious as EA firmly said they will go no lower than 112. I only have quotes to show for 3.5K not 5K, but it is a lot of trouble and the property does not have DG, or any guarantee for any work inc. damp course -apparently its had damp course at some stage but present owner doesnt have any paperwork-assuming the 35yr guarantte if the company is still trading....

I must admit I acted rather quickly on this property as there was a similar one a few months back that I lost out - same area with tenants that sold at AP which may be MV at 119 however that had DG too something this one does not have and the other was an end terrace whereas this is a mid-terrace, -but the current windows do look nice but wouldn't be energy efficient.

<Personally i think the figs are a bit tight if you have no scope to drag in extra income ....Unless i have scope to "improve" situation,! then i use 8% as <cut off point (and this only with at least 5% BMV itrinsic profit built in !) and that is what i would consider sailing close to the wind.

S

Good point -I really wish I'd learn to do things this way round to start with you wouldnt want to even think about what yield I have on some of those New Build 2 Bed's -I think its my pet hate now - new build 2 Bed's -the country is full of them! hard to rent out even more difficult to sell!

Thanks as always for your quick response and advice Simon.

[Simon Dewsberry]

Well, one possibility is the outbuilding which they've currently converted into a small room like a utility but is currently being used as a chill out area with cushions and small tv. This is single skinned brick at the moment so would need insulating and possibly it could be extended to provide a 4th room.

This is probably enough to make it much more viable !!!!!

I would try it in at 110 because when you put new DPC in you will be doing a fair bit of decorating as well ! also if this is in the same area as new carpets ..i would leave changing the carpet until dpc works have finished (for obvious reasons!!!)

Good point -I really wish I'd learn to do things this way round to start with you wouldnt want to even think about what yield I have on some of those New Build 2 Bed's -I think its my pet hate now - new build 2 Bed's -the country is full of them! hard to rent out even more difficult to sell!

Personally i would offload them (even at a loss!) and get that cash working where you stand a chance of recovering ! Unless you feel that mid-long term they are going to stack up !

Another good tip to help get the price down is "whatever its got ...you dont want"

ie

1.Beautiful ornamental pond ,........very nice but no good if you are renting to family with kids

NO POND ....every house you have ever lived in has had one and as you love your coi carp clearly it is going to cost you to put on in

2.Beautful Lawn ...well as an avid gardener you will have to dig all that up to put your green house and veg patch in

NO lawn and green house ...detest gardening so that will all have to go to put a nice lawn

you get the idea ...

S

S

[CH1]

This is probably enough to make it much more viable !!!!!

I would try it in at 110 because when you put new DPC in you will be doing a fair bit of decorating as well ! also if this is in the same area as new carpets ..i would leave changing the carpet until dpc works have finished (for obvious reasons!!!)

Good point -I really wish I'd learn to do things this way round to start with you wouldnt want to even think about what yield I have on some of those New Build 2 Bed's -I think its my pet hate now - new build 2 Bed's -the country is full of them! hard to rent out even more difficult to sell!

Personally i would offload them (even at a loss!) and get that cash working where you stand a chance of recovering ! Unless you feel that mid-long term they are going to stack up !

Another good tip to help get the price down is "whatever its got ...you dont want"

ie

1.Beautiful ornamental pond ,........very nice but no good if you are renting to family with kids

NO POND ....every house you have ever lived in has had one and as you love your coi carp clearly it is going to cost you to put on in

2.Beautful Lawn ...well as an avid gardener you will have to dig all that up to put your green house and veg patch in

NO lawn and green house ...detest gardening so that will all have to go to put a nice lawn

you get the idea ...

S

S

The carpets are actually in the hall, stairs and landing only. So the carpets could be done anytime without effecting any other work. The downstairs is laminates and the area where DPC is required is mainly tiled as well as the outbuilding thats also tiled, but a small extension of the outbuilding could be considered and then do DPC. Does one need planning permission to extend outbuilding thats attached to house?

Good point. I have a good communication with EA who originally accepted my lower offer over higher offers when i convinced her I could move faster, but as she is also acting for vendor shes naturally trying to achieve a high price as poss. apparently when this property last had offer accepted but didnt sell in the end it was at 118K but offering is one thing actually going ahead and seeing the deal thru'in entirely different.

Time is on my side and if they want a quick completion I can do it but at the right price in view of the works required. I'll try it at 110 and see what they say.

Equally I've also spent time and money on this survey, broker fees etc so would like to see it through..its certainly makes better sense to me than other new build flats, as from my experience of the area in which this terraced propery is..nothing ever stays around unsold for long..its a very fast moving place -good terraces often get sold within a couple of weeks though over 124K.

Thanks -if I do agree a sale on it...my next q will be insurance for terrace prop. with students....

[Matthew]

Regarding the building issues.

I pretty much had the exact same things come up on the survey for a house I bought last year. Some companies came up with about 5K of work, others a few hundred.

The damp ended up being a guttering problem - new guttering = 100 pounds.

But most said that loads of damp proofing work was required, 1 guy was honest and just said it your guttering mate.

The stack was repaired for 200 pounds.

It's not usually as bad as it seems, but the main point here is try and find someone you trust to assess the situation.

Boiler? Get it checked prior to buying? But beware of British Gas, they like to condemn boilers. On a property I bought this year they condemned it and when a mate of mine told me to get his mate to check it, there was absolutely nothing wrong with it and gave me the LL's certificate I needed. Boilers can and do go on for a long time if looked after and serviced correctly, this one is the same age as me, 27!

I would seriously look into maximising your return, I recently saw a place the same as one of mine up for 925 pounds per month, I rent mine out on room by room basis for 1,850 pcm.

Sounds like you have 3 bedrooms, but what about receptions. You really only need 1 reception for this type of let. If you have 2 receptions and the doo-dar off the back, then personally I would be looking into renting it out as 5 bedrooms and have the doo-dar as the communal space, tidy it up, ensure adequate heating etc, make it look like a lounge/diner. Paint bricks magnolia, put down laminate floor etc/ I built a conservatory for this previously as they are so cheap. (about 4K all in, inc building it) There are strict regulations on standards for bedrooms, but not so for communal space, you don't even need to have a lounge/diner legally.

If you can maximise the letting potential, then it sounds like a goer!

Ciao!

[CH1]

Thanks Matthew.

The property is actually only a 2-Bed -with the front reception being used as bedroom. Tenants enter house from the rear.

3-beds with 2 receptions in this area do not hang around long -there was one a couple of months ago -that looking back I should have made an offer on, it was vacant. I think its the attraction of property being tenanted from outset that seems to attract a lot of Buyers like myself who perhaps sometimes oversee the actual value of the property and it's condition.

All the works on survey are just suggested, nothing is severe or has to be done immediately -I have the mortgage offer ready already but would like to re-negiotiate my offer post survey in view of the building works.

I think I will look at the possibility of converting the 2 reception into a bedroom though would need a stud wall putting up as thats the room you enter coming downstairs and turn the outbuilding area to dining room.

All assuming I get my new offer accepted

[Matthew]

Ah right, thought it may have been.

But yes, i would definately look into doing that as it will probably make your rent over 900 PCM, and a decent return.

I had a 15ft stud wall and 8 ft studwall put in one house with 2 doors to create 2 rooms for about 1K, so for the extra return its well worth worth it.

I'm guessing the room isn't that big, but if it is you could divide it into two? Probably not. The one I did it with was 20ft by 10ft through lounge.

Also look at what you could get per room on Gumtree, Spareroom.co.uk. It may be much more profitable doing by room, also advertising on these sites is free or peanuts and it usually really easy to find tenants.

Ciao!

[Simon Dewsberry]

Be careful of fire escape ....if only entrance is from back and T has to go thru another room to get out ...it is known as an inner room, with guidelines on wall, ceiling and door firetime ratings (it will be an HMO if students ) although non licensable...but morally and for common sense check new layout to ensure adequate means of escape ...

S

[CH1]

I have a result.....my offer of 110 was accepted!

I have to thank Simon for this as I didn't think it would get accepted and was thinking of 111 prior to making it.

I backed my offer up with similar props in the area that had lower AP's and had DG (this one doesn't) and pointed out its market value is 110-114 as building work quotes seem to be coming up at £2.5 -£3K.

So thanks Simon if I ever come down your area I owe you a pint (or even two..)

The main prob. seems to be the chimney thats bulging with perished bricks for which some builders say they need to erect chimney scaffolding and render the chimney. I will of course get more quotes.

To do this repair work could I ask lender for a bigger advance (another 4K) i.e. maybe the original offer -they have already issued a lower mortgage offer (5K less) in view of the negotiated lower price. Or do I pay for it myself over the years?

[Simon Dewsberry]

Sorted !!

being cheeky does pay off if you are cheeky enough, often enough .....

Get youself a 0% credit card and tx bal to your normal bank acc (will cost you 3 %ish for tx) MBNA or EGG best cards for tx to bank acc that gives you 12 mths to find cash ...which you can pay out of rental profit .....if not paid down at end of 12 m then move to another 0% card ad carry on paying down until gone !!!

HSE will want to see scaffolding and if you get caught on ladders penalties are severe....(you will get them as owner NOT builder unless he signs to take full responsibility for job) ...exception to this is if owner is working on own prop which means you have to go up the ladder yourself !(this is a bit simplistic but take care regs are very clear on this !)

S

PS dont always believe what the agent is telling you ! besides it is not his decision ....

[CH1]

Well, what I thought was a good deal..turned out to have a hidden past. I was meant to exchange/complete on this property a week ago. Unfortunately the property had an equitable charge registered against it –which I didn't know of at the time but was made aware of it through the vendors solicitors about a couple of weeks prior to completion. I thought this charge would be removed by the time we complete; unfortunately it wasn't so I've incurred expenses of over a one thousand three hundred and have no property. My solicitor requested` funds from the lender last week, but as this charge wasn't removed they sent the funds back today as it's still not removed.

I've been asked by vendor's solicitors if I wish to carry on after the charge is removed… but I've no idea how long that will take and feel I ought to make an even lower offer for all the costs and expenses incurred.

Don't know if there are any legal experts on here that can advise or any opinions in general?

[GPEL]

Is it a good BTL?

Well that's the inside considered but what about the outside, remember Location, Location, Location. Have you done the research?

[CH1]

Is it a good BTL?

Well that's the inside considered but what about the outside, remember Location, Location, Location. Have you done the research?

Things have moved on since I started this thread after finding it to be a buoyant area for students and rental in general.

Sorry, perhaps I should have started a new thread as what the current situation on this purchase is whereby the mortgage was due to start over a week ago where I should have completed but it turns out there are uncleared charges registered against the property by a single named individual, who so far hasn't agreed to clear the charge. So my solicitor had to return funds back to lender. My understanding is that the sale of this property would be suffice to pay this person off. All this is costing me time and money so if I were to wait till these charges are cleared I'd have to have a new mortgage offer re-issued.

I feel a 3rd lower offer approx 2K lower is due (when? the charges do get removed) for all the time and expenses already incurred, even started Buildings insurance. However don't wish to lose sale altogether as I've already paid for searches, survey, mortgage fees already.

Any legal experts or general suggestions of what I could do to prevent further loss and retain the sale ??? (even though it's not in my control or vendors but that of a 3rd person who has this charge registered). Thanks

[Simon Dewsberry]

How much is the charge for ?

also do you know how much is outstanding on v mortgage ?

Most M offers are volid for 6 months so you have a bit if time !

[simhar]

If you just looked at terraced houses they represent the best type of residential capital investment - they've gone up 140% in the last 5 years!

cheers

simhar

[GPEL]

Not sure if this is of relevance but will offer it anyway as a possible consideration to avoid loss. When I bought in Portugal (and yes I'm still offering it thru the footer link at discounted rates of 25% off published prices), I entered in to a promissory contract at the time the deposit was placed with a solicitor, whereby if I pulled out I lost my deposit and if the seller pulled out they paid 3 times my deposit, incentivizing both parties to complete by a set date. This might be a consideration to progressing your sale subject to contract and mitigating losses if fails through no fault of your own, subject to searches being acceptable.

[Molly's dad]

Any legal experts or general suggestions of what I could do to prevent further loss and retain the sale ??? (even though it's not in my control or vendors but that of a 3rd person who has this charge registered). Thanks

CH1

I had a similar problem but sorted it out in a week and sale went thru - if you download a copy of the title register from land reg (www.landregisteronline.gov.uk) which costs you £3, it will tell you who has the registered charges on the prop (but not how much).

Get onto your Sol. Tell him who has the Reg Ch. Get your Sol to get the vendors Sol to fax the person/Co wirh the charge and agree to lift when sale goes thru on the basis the vendors Sol will pay them the money directly. Person faxes back to vendors Sol they are happy to get their money and lift sharge.

You exchange and complete on this basis. Everyone is happy.

1 week - well its Xmas now but should be one week into new year. I did it but took daily phone calls to my Sol to pull it off.

[CH1]

CH1

I had a similar problem but sorted it out in a week and sale went thru - if you download a copy of the title register from land reg (www.landregisteronline.gov.uk) which costs you £3, it will tell you who has the registered charges on the prop (but not how much).

Get onto your Sol. Tell him who has the Reg Ch. Get your Sol to get the vendors Sol to fax the person/Co wirh the charge and agree to lift when sale goes thru on the basis the vendors Sol will pay them the money directly. Person faxes back to vendors Sol they are happy to get their money and lift sharge.

You exchange and complete on this basis. Everyone is happy.

1 week - well its Xmas now but should be one week into new year. I did it but took daily phone calls to my Sol to pull it off.

Well it didn't quite take a week to get this charge lifted..more like 4 months! But Finally completed on this purchase just days before the 6 month mortgage offer was ending..it came at a difficult time as the particular lender was no longer doing new lending, but I managed to persuade them.

Had 4 days from verbal mortgage offer to complete or lender wouldn't allow it, in haste I lowered my offer by just another 3k, could have gone lower but had no time to think about it.

It's been a complex buy with my monies from my purchase being used to pay county court judgements and others off hence we even went over a day on completion. I've learnt now to buy the title reg. for £3 would have saved me months of hassle and waiting.

Well this is my first student let terraced property (sold with tenants) -well see how it goes, should be interesting as it needs quite a bit of maintenance.