PROPERTY | SPECIAL
IN A REAL STATE RUPERT SMITH OF COMPLETE RPI QUESTIONS WHY ESTATE AGENTS IN THE UNITED KINGDOM ARE SO AVERSE TO RAISING RENTS ON PROPERTY YOU OWN.
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elcome to my fourth article discussing the hot topic of residential property investment, letting, management and sale in the UK. My name is Rupert Smith the founding Director of Complete Residential Property Investments Ltd (hereinafter CRPI). We are a specialist property investment company offering a unique and results-orientated commercial approach to UK property investment. Established in April 2001 I have built up the business based upon a resultsorientated, commercial approach to the ownership of UK residential investment property … a far cry from your traditional estate agent I am pleased to confirm. Following on from last month’s article I wish to cover the topic of rental values and market conditions, amongst other topical issues. Rent levels in the UK are at an all-time high and occupancy rates just the same. Your typical rental agent will I am sure tell you to re-let at the same level to the same tenant because that is the path of least resistance. To put things in perspective, the British newspapers have in recent times been full of headlines like, ‘Rental prices hit record levels in the South East’; Rents in London increase to highest amount on record’; ‘We are experiencing the highest occupancy levels on record’; ‘UK rents rose by 6.3% between last year and this year’. I could go on, but the point I am trying to make here is actually most relevant to the last market comment: “UK rents rose by 6.3% between last year and this year”. This point is very, very newsworthy as the majority of estate agents are just happy to leave the rent level as before … why change? ‘Surely you should renew to the old tenant at the same rental, sir?’ Well, no actually, Mr Agent: sweat my asset like any other investment I have; I expect you to maximise my return!’ Sound familiar? To be frank if I was to walk down the high street and interview 10 agents and ask the question, “What was my ROI last year please?” methinks you will be greeted with a rather dumfounded expression … Do not be afraid to tell you agent to increase rental, a typical tenancy will have a clause that allows the landlord to serve notice on the tenant in the last 60 days of the tenancy. If your agent is worth his salt he will ask the question 90 days prior to the end of the tenancy and ascertain whether the tenant wants to renew and at what level. Generally speaking the contract, which don’t forget you can dictate the terms, should allow for an increase at the point of renewal generally in line with RPI (Retail Prices Index). In our contracts we stipulate a minimum of 3% to a maximum of 5% increase, however we increased our rental income for clients by some 7.5% last year which if you do the math is considerable. We are asked to evaluate clients’ portfolios often (a portfolio can consist of just one rental property by the way) and I am constantly amazed by how many properties are consistently underlet. Complete RPI will overview a myriad of elements as a matter of course, including rent levels, gearing, void periods, maintenance costs, etc and are happy to review
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In our contracts we stipulate a minimum of 3% to a maximum of 5% increase (in rent). However we increased our rental income for clients by some 7.5% last year, which if you do the math is considerable. your portfolio at no cost. It is fair to say that rents will indeed ease at some point but the market is very postcode sensitive, occupancy levels and demand is very high so work on the basis if you don’t ask you certainly will not receive. Most people don’t realise that price movements and rents often go in the opposite direction, but as prices rise due to higher demand, the future looks bright for renting, as it means renting becomes increasingly affordable versus buying, especially if tenants need to maintain flexibility. Speaking of tenants this leads nicely to the next topic.
WHO LIVES IN MY HOUSE?
With tenants in abundance these days you can afford to be very selective. Sadly, the typical agency mentality is to try and persuade you to accept an offer below what could potentially be achieved or with conditions generally driven by the tenant. My advice is to not forget you are in the driving seat here and with market conditions strong, stand by your guns! In the last 60 days of a tenancy you can afford to be a little more particular as you are still receiving the income, but beware this can quickly bite you on the preverbal bottom if you’re not careful. I’m not suggesting be the “Wolf of Wall HKGOLFER.COM
Street” but unless you are completely happy with the terms of an offer, and if you have some time to market before the end of the current tenancy, hold back. If you are offered three occupants fir your two bedroom apartment and one wishes to use the sitting room as a bedroom, say no! OK, that’s an extreme example but it does happen more than you probably realise. Corporate organisations are moving more people nationally than they used to and make sure your agent has good contact with Relocation Agents etc in order to hopefully identify a quality tenant. Exposure is everything and more often than not a quality tenant will come from out of area, not within the immediate vicinity. At Complete RPI we utilise the entire market to source you a tenant; we are not just local representation. References are vital so make sure your agent uses a reputable referencing organisation. This should not be up for negotiation. The process is very simple and at the point a tenant is identified they complete a pre-populated form which is passed through a referencing agency with a simple scoring system – either a PASS or FAIL, plain and simple. In fairness it’s important to ascertain on what points the prospective tenant has failed as these could become favourable points of negotiation. A case in point: we recently identified a tenant moving from overseas to work in the banking sector and he failed on a credit score as he has spent no time in the UK. In summary he passed all other criteria such as employment status and previous landlord references and we were happy he was who he said he was and was gainfully employed. At this point as we could not ascertain any credit history we took a commercial view and negotiated six months rental in advance! All in all a great outcome and the tenant has proven to be excellent. In the case of ‘the computer said no’, common sense prevailed. As a matter of course Complete RPI provide HKGOLFER.COM
free rental guarantee insurance for our clients, which will protect against any rental arrears. It is well worth taking out such insurance subject to references; however you will normally have to pay premium. It is worthy of note that Complete RPI at the time of writing have an occupancy rate of 98% with a UK national portfolio. As with house prices, the regional picture is mixed. For those looking to invest in buy-to-let now, you have to spend some serious time crunching the numbers to make sure a property stacks up financially. Investors would be wise to appreciate it’s mainly capital growth over a long time period where traditional buy-to-let often delivers best. To really earn money from income these days, you really should consider property with a higher yield in “middle England” and then you have to look at the net income – not just gross yield. It’s essential to make sure you also have an exit strategy in place. We at Complete RPI will produce an investment strategy from the outset, highlighting true net returns and cost calculators. This can be done for new clients with existing portfolios and is an excellent overview of your exposure to the market.
YOUR PROPERTY, OUR PRIORITY Let Complete RPI overview your UK property free of charge and answer the following questions: - Is your property under-let? We increased our rental income for client's by 7% last year, did your agent? - Have you contracted with the most up to date tenancy agreement? Changes in legislation occur daily. - We only charge monthly fees, are you paying up front? We charge a monthly Letting & Management Fee and no up-front fees, does your agent do the same? - We offer free rental guarantee insurance, does your agent? - Is your property inspected every three months by an independent inventory clerk? If not it should be and we pay the cost. Does your agent? - Do you have 24 hr access to your very own bespoke online property platform which allows you to view all aspects of your property including management statements, invoices, interim inspection reports, values, gearing ratios, etc ... at Complete RPI this is standard. The answers to these questions and many more could both save you money and increase the return on your capital invested. Please call us on +852-9307-0337 or write to info@completerpi.com Why not visit us at www.completerpi.com ... “Your Property, Our Priority."
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