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Future Auctions News Bites Vol. 1, Issue2: November 2012

Note From The Editor…

[dropcap style=”font-size: 60px; color: #2bbe22;”] F [/dropcap]irstly, I’d like to say thanks for the emails and comments I recieved following the launch last month of our new Newsletter, “Future Auctions News Bites”.

This month we’ve again provided some short bite size tips and advice for property investors looking to maximise the amount of money you can make from the properties you buy at auction.

Please continue to give us feedback and any comments so we can make this as useful a resource to you as possible.

CLICK HERE to send me comment NOW.

Alicia Cousins, Future Auctions

IN THIS ISSUE

Save a Fortune on Electrical Applicances

How to Maximise Your Yield on Rented Property

Don’t Let Letting Agents Charge You Unnecessary Fees!


TOP TIP: Damp Proof Redecoration Cheat!

 

Save a Fortune on Electrical Appliances!

[dropcap style=”font-size: 60px; color: #2bbe22;”] P [/dropcap]roviding modern electrical appliances in a rented property is becoming not only an expectation of many tenants these days, but can actually help differentiate your property from others on the market with cheapskate landlords trying to save a few quid.

This should help you get the property rented quicker, and nobody likes an empty property, but this can also help justify a slightly higher rent.  Both of which over the long term will help maximize profits. However, electrical appliances can be costly to replace and nobody wants to pay those extortionate “Extended Warranty” fees, just in case something does go wrong.

So here’s a tip on how to get cheap electrical appliances, which could save you a fortune. Many manufacturers and retailers do often sell off damaged products that they can’t be put on the shop floor, for a fraction of the cost.

Contacting the major manufacturers direct can yield some bargains if you’re prepared to shop around.  However, searching for these can be time consuming and it requires a bit of being in the right place at the right time.  As a landlord, this doesn’t really work well for us, as it can take up too much of our precious time, and if a tenant is without a fridge, they’re not going to wait too long for you to find a replacement.

Comet, who have recently announced going into administration, provided a website, where you can bid on electrical goods that are new, but can’t be sold through their stores as they might have some damaged packaging or some small cosmetic flaw, or have been returned by a customer who didn’t like it and they now can’t sell as new.

The website is www.clearance-comet.co.uk which is currently down at time of writing, but I would expect the administrators to leverage this asset at some point and reopen the site, so probably still worth keeping an eye on.

An alternative are the numerous “Outlets” that major brands like Tesco are setting up on Ebay.  Here they are selling new and refurbished goods at a fraction of the cost, but still with Tesco’s 12 month warranty.  Here’s the link for more details:

http://stores.ebay.co.uk/Tesco-Outlet/About-Tesco-Outlet.html

 

Brian Conway, SC Properties

 

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How to Maximise Your Yield on Rented Property

[dropcap style=”font-size: 60px; color: #2bbe22;”] A [/dropcap]s a property investor buying property at auction to rent out, one of the most basic and most important financial figures you need to work out is the yield.There are two different yield figures to calculate.The first is Gross Yield.

This is a simple calculation based on two components; the amount of rental income and the cost of buying the property value: Gross Yield = Annual Rental Income ÷ Property Value x 100%. For example a rental income of £500 per month, or £6000 per annum on a property valued at £100,000 would create a yield of: Gross Yield = £6000 ÷ £100,000 x 100% = 6% per annum

The second yield figure to calculate is the Net Yield. This is a similar calculation but you first deduct all the costs you incur as a landlord, from the rental income figure. In the example above you might incur costs during the year for things like ground rent on a leasehold property, some management fees and landlord insurance. Let’s say this was £1000 a year. The Net Yield is now calculated as:

Net Yield = (Annual Rental Income – Landlord costs) ÷ Property Value x 100%

Net Yield = (£6000 – £1000) ÷ Property Value x 100% = 5% per annum

Yield figures are a simple but effective way of comparing different potential investments and is helpful for a number of reasons.

First, It helps you compare potential investments and set a limit on how much you pay at auction. For example, a quick check on a few different properties in the same location as one you are considering will show you the level of yield you can expect.

Second, if you need to borrow money or take out a buy-to-let mortgage, the yield figure will affect how much you can borrow.

Third, when you come to dispose of a rented property a potential buyer will usually want to check the yield , especially if they are looking at buying one or more properties that are already rented.

How can you maximise the yield figure? First look at location. Yields can change dramatically within quite a short distance. Rental properties closer to good schools, shops and railway stations often produce higher yields than those that are more remote.

Next, look at the the viability of furnishing a property for renting out. If spending £3000 on furnishing and equipping a property with some appliances allows you to increase rent from £500 a month to £600 a month your Gross Yield will now be:

Gross Yield = £7200 ÷ £103,000 = 6.99% in the first year alone, and even higher in subsequent years as the furniture cost is not recurring.

In terms of Net Yield you can also improve the figures by shopping round for cheaper landlord insurance or by passing some or all of the management costs and responsibility for insurance to your tenants.

So “Yields” act as a great Yardstick for making quick intial property investment decisions, and can then be improved by looking at ways of reducing any spend, either on property purchase or running costs, whilst increasing rental income through “value add” i.e. location or furniture etc.

Mike Willshare, SC Properties

 

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Don’t Let Letting Agents Charge You Unnecessary Fees!

[dropcap style=”font-size: 60px; color: #2bbe22;”] L [/dropcap]et me start by stressing that I have no legal qualifications, I’m not a legal professional in any shape or form, but I am a landlord and have had Letting Agents try to take money from me for contract renewals that wasn’t necessary.In this article I simply want to share some of my experiences on how letting agents have tried to get money from me, and even our tenants when I wouldn’t pay, by charging for unnecessary contract renewals.

What I’m referring to is a feature of the standard Assured Tenancy Agreement (AST) Letting contract (used for property letting arrangements in the UK) called the “Rolling Contract”.

In most cases a landlord and tenant would agree an initial term of property occupancy, usually 6 or 12 months.  At the end of that term, the letting agent will often then try and “re-sign” the tenant for another 6 – 12 month period assuming they wish to continue to live in the property.  By doing this, the letting agent creates the need to charge you a new contract fee, often a month’s rent.

However, there is no need to do this, as there is a feature in the standard AST that allows for the contract between you and the tenant to continue on a rolling basis, which as I said makes your agreement a “Rolling Contract”.

The Rolling Contract feature comes into play automatically after the fixed term of the AST expires if the tenant continues to occupy the property.  What this means is that the tenant is still obliged to continue to pay you your monthly rent as before, but now only with a monthly commitment.  The tenant can now, and must, give you a full month’s notice should they intend to vacate the premises, or they are obliged to pay for the next full month.

As the landlord, your obligation would be to give the tenant 2 months notice if you wish them to vacate the property.

All this takes place, without any further charges to you or the tenant.

To be clear, if you want to sign the tenant up again for a longer period e.g. 6 to 12 months, and the tenant is in agreement, then you can.  Some landlords and tenants prefer this as it creates a longer more guaranteed commitment to each other.  But it’s not mandatory as you might be led to believe.  I have tenants who’ve been in properties for years following the initial 6 month agreement and have paid every month without fail.

It is a matter of preference for you and the tenant, rather than just another reason for the letting agent to charge you a fee.  In fact, I once had a letting agent contact the tenant to ask them to pay to renew an AST contract when I wouldn’t; which is totally inappropriate.  And in another case, the agent tried to convince the tenant that they should demand a fixed term contract from me, forcing me to renew and pay the fee, by trying to scare them into thinking that I might kick them out with only 2 months notice.

Now I’m not suggesting that this is commonplace practice and I understand we’re all in this game to make a buck, so I can’t blame them for trying, but we want you to know what options you have available, so you can make informed decisions.

Remember every months rent that goes into your pocket instead of the Letting Agents’ is pure profit, and we like profit.

Again I’ll stress that these comments at based on my opinion ONLY at time of writing. They should never be taken as correct or factual without confirmation from a legal professional and are given without prejudice or liability.

Brian Conway, SC Properties

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TOP TIP for Cheaply Hiding Damp Repairs Without Having to Fully Redecorate

[dropcap style=”font-size: 60px; color: #2bbe22;”] I [/dropcap]f the property you’ve bought from auction suffers from damp and you’ve got to rip off a meter of plaster in the downstairs rooms to put in a new damp-course and remove the offending plaster etc, but don’t want to then have to redecorate the whole room, here’s a tip that might help.Just decorate the bottom half of the wall using a product call EASIpanel.

It’s simple to apply and looks like real wood paneling when painted up. It’s quick, relatively cheap and in the rooms we’ve put, it’s lasted for years so far with no signs of deteriorating.

Before…       and  after…..

As well as acting as a quick decoration fix, it does actually look really good and can make a room very inviting and homely, just what we need to entice our prospective tenants or buyers to part with their money!

For more details go to www.easipanel.co.uk

DIY Dave

 

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