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urther to my last article discussing the pitfalls of UK property ownership I promised to follow up on further topics such as fees, location, what to acquire, etc. For those readers who sadly didn't catch the last article please download last month’s issue of HK Golfer and inwardly digest. To get you up to speed 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.

AGENCY FEES Typically agents will charge in three ways to let and manage your property in the UK. A letting fee is typically 10% of the rental for the term of the tenancy and it is usually due upon commencement of the tenancy! BEWARE: this generally wipes out your first two months’ rent. For example, a rental at say £1500 per month x 12 = £18,000 x 10% = £1,800. Plus the dreaded VAT man at 20% totals £2,160, which is a large chunk of change. But wait, there is more! If like most investors you wish for the property to be managed you will be typically charged a further 5-7%. Most agencies will charge the additional 5-7% monthly, at source, when the rent is collected! NB: at CRPI we only charge the total monthly fee with no upfront costs! Cash flow is king and we certainly recognise that. Over and above this expect to be hit with an administration fee for the collation of the legal document (tenancy agreement). BUYER BEWARE: this varies tremendously, generally somewhere in the region of £200 paid upon the commencement of every new tenancy. Some agents even have the audacity of charging a fee equal to two weeks rental for the privilege. Note to self, you can generally negotiate this as essentially it is a pre-populated document which is edited with some minor data input and requires only the press of a button to collate. And yet there is more. "What, more fees?” I hear you cry. Yes indeed. There is the cost of an inventory; this is the collation of a document that reflects the schedule of condition and itinerary of furnishings. This is vital but quality varies tremendously. Most agents produce this internally – for an extra fee of course, However, I strongly urge you to make sure this document is produced by an independent inventory clerk. You are within your rights to stipulate this and clerks are in abundance. Utilise the services of a clerk who is a member of the A.I.I.C (Association of Independent Inventory Clerks). The rationale is that all AIIC members must draft documentation in line with strict guidelines and in the event of arbitration the documents will be used as evidence. If the document is not presented in the correct format (which is very common) your legal position becomes tenable. Needless to say, at CRPI this is standard practice. Generally the cost of producing this document is around £150 for a 2-bedroom apartment. The document also lists utility meter readings, keys, etc. But that’s not the end of it! The last fee should be for deposit registration. You have two options to hold deposits: one is the TDS (Tenancy Deposit Scheme) and the other DPS (Deposit Protection Service). Both will charge approximately £40 84


Some investors are wooed by high yield, generally in the north of the UK where capital values are lower and capital growth less likely. It is wise to include higher yielding properties within any portfolio but be very careful as a high yield does not necessarily mean a good buy! a year for registration, albeit agents will try and charge you more despite the fact it is the tenant’s money. CRPI will not charge you for the benefit of this service. In summary, beware of the add-ons. You should not be paying more than 15% for a fullymanaged service.

WHERE AND WHAT TO BUY? If I knew the answer to this question I would be sipping cocktails on my private yacht somewhere in the Caribbean right now! That said, having worked through two recessions I have a pretty clear view on which locations have performed better than others. One of the most important questions to ask yourself is: why are you investing? How much can you realistically afford then ascertain whether you can obtain a buy-to-let mortgage. This can be done very easily and an “offer in principle” can be obtained from the lender. This will put you in a stronger negotiating position and you can hit the ground running once a suitable property is identified. Some investors are wooed by high yield, generally in the north of the UK where capital values are lower and capital growth less likely. It is wise to include higher yielding properties within any portfolio but be very careful as a high yield does not necessarily mean a good buy! I have HKGOLFER.COM

advised many investors over the years who were tempted by high-yielding student investment schemes which no one can argue weren’t producing excellent yields. BUT these could not be geared (finance raised to acquire) and more importantly were very hard to sell. Circumstances change and you need the asset to be liquid; selling a student room appeals to a very limited audience and are notoriously hard to fund, if at all. T here are b et ter options! Leasehold apartments can be acquired at a similar value as a student accommodation; CRPI recently acquired 24 apartments just outside Manchester city centre for £60,000 each, with a tenant under contract generating an 11% yield – very simple to raise mortgage finance and very saleable in the future. By way of example, mortgage funding was available at 70%, thus a capital injection of £18,000, borrowing at 4% left the balance costing £1,680 per annum with an income of nearly £6,000. Much more attractive than an 8% yield and tying up £50,000 in a student room which will be very hard to sell, don’t you think? The majority of portfolios (which can consist of just two properties) should, in my view, consist of a mixture of both capital growth and yielddriven investment. So where is the growth? Having been involved in the property industry for nearly 30 years I have seen consistent capital growth in central London (no surprise there then!) and indeed more so of late, commuter towns within a 45-minute commute of central London, such as Kingston upon Thames, Teddington and Addlestone. Key university towns and cities have also proven to be excellent performers, such as Cambridge, Oxford, Guildford, etc. In the immortal words of many a television pundit, it’s all about “Location, Location, Location”. So when you found the right location, what about the best development? Now this is a tough call: you really need a specialist adviser to assist with making that decision. I am sure that a dedicated adviser at CRPI could assist. In summary there is method in my madness and whilst I respect that the culture of acquiring an investment property off plan at a property exhibition exists, I fear that fingers will continue to get burnt if there is no clear strategy on the investor’s part from the outset. Remember that there are many options out there and acquiring property for investment must be viewed as a medium to long term strategy. You do not have to acquire from plan. Second-hand property is as good, if not a better bet. Like acquiring a brand new car, the moment you drive it off the forecourt HKGOLFER.COM

you lose money, paying a premium for new build can also apply, as investments do fall, as well as rise, as we all know. Acquiring a second hand property has many benefits, case history being a major factor from a rental prospective. Many investors exit their position in the market so why not acquire a property with a tenant in situ? No more speculation of whether you may or may not achieve what the “rental guide” price may be. Rest assured that the price achieved in this scenario is always lower! More often than not tenants are served notice to leave a rented property during the sale when they could have remained in occupancy, thus offering the vendor rental until the day of completion and the purchaser secure income. A common “no, no” is too make an emotive decision when acquiring property for investment. If I was given £1 for every time a prospective investor said “I can’t buy that because I wouldn’t live in it” I would be back on my boat sipping cocktails. Bottom line, Mr Investor, simply is you’re NOT going to live in it; you are making a commercial decision so please leave the emotion at the front door! Next month I shall be addressing other topical issues such as rental guarantee insurance and appointing agents and furnishing. Should you wish to get in contact please do visit us at

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 Why not visit us at ... “Your Property, Our Priority."