The three child stars of Harry Potter have invested a third of their earnings in worldwide luxury property, between them building up a portfolio of mortgage free properties. With the huge profits from their latest film, part two of Harry Potter and the Deathly Hallows, yet to come through more purchases are no doubt on the cards.

One of them may consider buying JK Rowling’s childhood home, a detached grade II listed cottage with three bedrooms in the village of Chepstow. It comes with numerous original features and a mature cottage garden, however the price tag of £400,000 is well below the trio’s more extravagant purchases.

In London Daniel Radcliffe owns a £3million apartment in Soho and a large flat near his parents in leafy Fulham, whilst Emma Watson opted for a £3million townhouse in the classy North London suburb of Hampstead. Elsewhere in the UK Rupert Grint has bought three houses in the Hertfordshire countryside including a £5.4million manor house in 22 acres of grounds.

Further afield Emma Watson has acquired a £1million ski chalet in the French Alps whilst Daniel Radcliffe clearly prefers the American city of New York where he owns a flat overlooking the hudson river and a £4million townhouse in the trendy Greenwich Village area.

Some homes in the vicinity of the Olympics are being advertised at up to £5000 per week, with even small flats being marketed at £1500, however with a year still to go are these prices realistic? Many look to the Wimbledon fortnight as evidence that there is plenty of money to be made, however the competitors and perhaps even the visitors to the All England Club are far more moneyed than the average Olympic competitor making comparisons difficult.

Additionally many landlord’s may be reluctant to lose good stable tenants for the sake of a potential few weeks of massive returns, and for home owners leaving for a few weeks may be more hassle than the potential income is worth.

Other costs involved include agents fees, typically 10 to 15%, although self-advertising can be cheaper but carries more risks as collecting the rent is totally up to the owner. The lack of an agent may also make potential visitors less likely to commit to sending large deposits so far in advance of the event.

As well as these costs and hassles other things to consider when renting out your home are whether it is allowed under your current mortgage and home insurance conditions, changing these may prove expensive. Additionally any profit made will be taxed further reducing the appeal.

In Sydney in 2000 many homes were still available to rent as the games started, history therefore suggests that those paying the high prices advertised now are paying well over the odds to secure accommodation for the games. This point, in addition to the practical and financial obstacles discussed above mean that short-term renting is not the goldmine for homeowners it may have initially appeared to be.

Four tenants are chasing each available rental room in the UK, with competition as high as 13 to 1 in some areas as more and more people delaying buying due to the difficultly of obtaining mortgages in the current climate. This is driving up rents and making saving for that elusive deposit even more difficult, giving the property market an uncertain future, particularly in expensive areas such as London.

The Council of Mortgage lenders says that the rise in renters corresponds to the falling numbers of first time buyers, 15,900 new mortgages were granted in May 2011, well below the peaks of 2007.

In London this has led to already high rents now being at levels which are 50% higher than the national average at £1125 pcm. This means a room in a flat in London is now an average of £520pcm compared to £370pcm nationally. Other fashionable hotspots include Cambridge and Brighton where average rents are £430pcm and £419 respectively.

Whilst good news for landlords increases such as this will soon become unsustainable for tenants on fixed incomes; however, their inability to save for a deposit due to high rents may ultimately be bad news for landlords as reduced first time buyer demand could lead to further falls in house prices and  therefore reduce the value of landlord’s portfolios. Additionally the Governments proposed cuts to housing benefit may further reduce the rents landlords are able to command.

According to financial analysts house prices will not return to their peak until 2020 if current trends continue, and that this is only 50% likely making property investment a risky business in the short to medium term. The average UK home now sells for £203,000, an annual fall of 1.6%. The actual fall may be larger as many high end deals went through last year due to stamp duty changes for property worth over £1million, which would have artificially raised last years figures.

Those with most to gain are first time buyers with deposits as prices are at their lowest for some years, however still unsustainable for many, particularly with rising rents.

The general economic slowdown is also reducing consumer confidence with many being reluctant to move or leave stable jobs further slowing down the market compared to the boom years of the early 2000s.

The Royal Institute of Chartered Surveyors attributes some of the slowdown to the reduced availability of new-build property this year, as many sellers are holding off until conditions improve.

There’s only one winner and one loser in the property game – and that’s you.  Come what may, your fortune or losses depend on how YOU act NOW – not what John Smith down the road thinks about where the property market is going.  This month, we talk to Millennia Property about how many investors are going wrong – and where the next opportunities may be.

Who are Millennia Property?

We are a HMO-specialist management agency and property consultancy who provides beginning-to-end solutions to investors and business owners.  Providing bespoke coaching and education services through to sourcing and arranging finance for deals, Millennia Property has strategic partnerships in place so that we can cater for the full needs of any professional property investor.

Formed in late 2009 the directors; Matthew Moody, Mark Smith and Kenny Ranns have over 50 years senior level corporate experience within the IT, oil, travel and leisure sectors.  This coupled with their 25 years experience in the property market gives them a strategic corporate approach which few other experts possess.

What is the problem with the current market?

One of the main strengths (and thus correspondingly its main weakness) is that anybody can enter the property market, buy a property and start renting it out. Whilst this is great in that anybody can become a successful property investor, what we tend to find is a lot of people are not building a business, they are building a noose around their necks. Most of the investors we speak to have no business plan, no marketing plan, no sourcing plan, no systems nor structures and are unfocused on where they need to go next. We’ve talked about this in past mentor columns (see Matthew’s regular YPN Mentor column) but it is critical that anybody that wants to build a sustainable business in the property market puts in place processes and systems for the future.

Millennia Property works with individual investors to identify their strategy through a thorough analysis of their business and goals.  We then partner with investors to help build their business through our sourcing and educational solutions.

Our core USP is: Property + Systems + Cashflow  = A Property business.

Why are the current strategies not working

Most property investors we speak to have their head in the sand.  They are frightened by the media circus, the negativity found from professionals and are mixing with the wrong set of people. You need to change this today by accepting responsibility for your actions, brainstorming solutions to the issues you face and ensuring you have a reason for being in the property game. Its no longer enough to find a deal, send it on to your broker and expect them to find a great product at a low interest rate from a lender who is keen to lend to you. 

In todays market, you need to have access to the best and most experienced professionals who have survived the last recession and have the contacts to allow you to succeed through this one. Combined, our strategic partnerships bring 150 years of property experience to the table – if you need an expert, we’ll have one.  If you need finance, chances are if we can’t do it, nobody can.

What is the critical problem right now

Many people are still fixated by no money down schemes or offerings.  Whilst we don’t deny the viability of this strategy, we question its validity in a downwards market and whether this can form the basis of a sustainable portfolio in the long-term. The problem right now is you are still chasing a dream which hasn’t existed for nearly 18 months now and really, you need to wake up and smell the roses.

Yes, property is still an extremely good viable long-term investment but you need to be prepared to – dare we say it – leave some money in a deal – if the cashflow is strong enough and gives you a good cash-on-cash return. 

Its no longer enough to go chasing large cashbacks on houses that at best just about wash their faces and at worse, will leave you with a nasty cold for a long time.  The only thing that matters in any business is cashflow.

What are the core components for running a successful property business

Strong systems and processes linked with a strategic vision that gives you massive cashflow every month. Lets look at two different investor strategies and see which one you think will work in the long term:

Investor A has 30 houses around the country that he bought over the last 3 years.  He has a mixture of new-build and resale units with varying yields of 3%-7%.  His portfolio spans a radius of 300 miles and he rarely gets to visit all of his properties.  Instead, he has agents that fully manage them and averages occupancy of 85%.  His cashflow is negligible because even though his properties on paper yield good returns every month, the ground rents, service charges and outsourced maintenance drain away his cash.  He is hoping for long-term capital appreciation but already knows that in reality, it will be 5+ years before his properties are back to the same valuation prices he bought then at. 

Investor B has 10 houses in two towns local to her that she’s bought over the last 10 years.  She manages them all herself and has a handyman that works part-time for her maintaining the properties.  She owns 9 little terrace houses and 1 new apartment.  Her occupancy is in the high 90’s and her yields average 7% but her on-costs are lower as her properties are mainly freehold and maintenance is preventative rather than reactive.  She makes good cashflow each month and isn’t too bothered about capital appreciation as she is paying down two of the small houses every month on repayment mortgages.

Which investor would you rather be?

Investor A is 3 months away from going under; Investor B has a sound system in place with established processes that allow her to make good cashflow and occasionally treat herself.

Put in place the processes and systems to enable you to generate cashflow but not at the expense of adding cost to the business.

For example. Matthew has a marketing system for generating dozens of tenants leads per day that he couldn’t turn off even if he wanted to!

What strategies are you following today?

There are several that spring to mind.  Many people have talked about them before but the proof is always in the walking and not the talking.

Multi-Lets, HMO’s, Professional Houseshare etc

We’ve talked about this all day – many “experts” say they are hard work and a hassle; most of them have never managed or set foot in a HMO so they wouldn’t know.  If your HMO is full, then you can manage the property in less than 2 hours per week.  If you’re making say £150 per week per full house; complain all you like about hard work; nothing was ever delivered on a plate…

High-yield single let

There’s only one type of single let you should be aiming for – and that’s a high yielding 9%+ property.  Anything less and you are massively subject to the vagaries of the interest rates, unexpected maintenance charges and management fees.  Whether its rented through the LHA, private tenants or corporate lets, do your homework and go where the yields are.  Oh, and buy at least 5+ in an area so you can maximise economies of scale.

Commercial/Businesses

We are not talking about dead office space here – these are bona fide businesses operating in commercial territory.  Whether its hotels, bars, nightclubs, care homes or whatever; if it’s a business, its successful and generates good cashflow, there are methods of financing and buying to add to your asset base.

Finance

Nothing else matters but gaining finance to support your business.  We have made it our priority and key focus to get the building blocks in place to ensure that when others are falling by the wayside, we can continue buying.  Do you have access to instant refinance, refurbishment, asset financing, open bridging and open doors at many lenders that do not have a high street presence?  We do and you can get access through our website.

Overseas

We have seen massive drops in overseas asset pricing which makes them extremely attractive to purchase – and with similar commercial mortgages available, now is the time to get in and start generating cashflow.  With yields of 15-20% in some areas, provided you perform due diligence and buy in a concentrated area, this adds another diversity to your portfolio which will reap benefits in years to come.

What do you think the next 12 months hold?

We forecast that lending will become a more bespoke individual decision rather than the mass-market “the computer says no” approach taken by many of the high-street lenders today.  We have already seen encouraging signs of it with lenders who want to meet, greet and touch you and understand your business, your vision and help support your goals for the future.

We also believe that being part of the right community will become even more beneficial with the lines clearly drawn between the amateur investor and the professional investor.

Millennia Property is one such community where professional investors are invited to join with us and help us achieve your goals.  Our vision is to create 100 property millionaires by 2015 through our financial and educational services.

Register today to find out how we can help you make it in today’s property market

http://www.yourhmoexpert.com

“From Romans and Vikings to pirates and noblemen – all have used the island for their own purposes, foul or fair, and evidence of a burial mound and a hill fort, together with the timber skeleton of a wrecked vessel are visible on or around the island today,” according to the agent selling Sully Island in the Bristol Channel. He would also argue that there is a bargain to be hard, previously on the market at £1.25million the seller is now accepting offers of £95,000.

The 14.5 acre island is just 400 metres from the coast of Wales, meaning the owner can walk there at low tide. It offers spectacular views of the Bristol Channel and Severn Bridge to the East and to the West, assuming the clouds clear, views of the hills of Devon. The lack of planning permission and roads is perhaps compensated by the idyllic isolation, excellent fishing and the reputed ability for the owner of the island to print his own postage stamps. In the past the son of the Marquis of Bute managed to grow a successful vineyard on the island, perhaps in the long-term allowing the owner to produce an ideal accompaniment for the local fish.

Behind all this ivy believe it or not lies a house. Yet all this excess shrubbery hasn’t seemed to bother the owner, Jonathan Norman, who has admitted that the ivy has been growing unchecked for the last 20 years.

Similar houses on this street in Chelmsford, Essex have been selling for around £350,000 yet this unusual specimen has been asking for offers above £120,000. So far the highest bid has been £172,000.

Property developer Mick Flaherty who has examined the house has estimated around £50,000 worth of spending is due on this unusual property. Flaherty stated, ‘I’ve never seen anything like it. There were no carpets, the lights didn’t work and it was dark inside because you couldn’t see out of the windows. ‘The water didn’t work and there was no kitchen. I don’t know if there are any period details because you couldn’t see anything.’

The disappearance of the greenery has been long awaited by the neighbours who have told the press that although they like Mr Norman they will be happy when his house has had a hair cut!

Around 80% of homes bought since 2006 have been classed as worth less than originally paid. Expectations when these homes were bought were prices would continue to rise but with the opposite occurring, with many now not willing to make a loss on their asset and sell.

To date 3.5 million home-owners have seen their property investments literally fall in value. Those buying between 2007 and 2008 were particularly hard hit and those who have bought in the North East have also seen the biggest slide. The average price of property in the North East region for June this year was £149,364, a staggering £33,000 less than in 2006.

London has to some extent been protected from these trends and still continues to have resilient house prices, with only 46% of homes worth less now than 2006. This arguably is due to the large amount of buy-to- let landlords in the market pushing house prices up.

As the demand for rental properties continues to rise whilst supply remains low, rental prices are experiencing a staggering rise. As a result a growing numbers of tenants are now finding themselves priced out of the market.

According to the Royal Institution of Chartered Surveyors more rents rose rather than fell in the three months to the end of April. An average of 35% of surveyors reported such rise in demand which was the highest level reported for more than two years. In particular London and South East saw the most considerable rises.

Yet the high costs are failing to deter people from renting with many having little alternative. With more people than ever not being able to afford the deposit for buying, this has led to more people seeking rented accommodation and higher numbers staying in rental properties for longer. Royal Institution of Chartered Surveyors spokesman James Scott-Lee has said: “Although we are beginning to see more mortgages aimed at first-time buyers, many potential homeowners are still restricted from getting a foot on the property ladder, leading to increased demand in an already oversubscribed rental market. There has been a small uplift in supply, but the imbalance between demand and availability can only mean rents will continue to rise.”

A recent survey in the wake of the Welfare Reform Bill’s report stage this week in the House of Commons asked landlords about how changes to Local Housing Allowance would effect them. A staggering 58% of respondents answered that they would cut the number of properties they currently let to benefit recipients and a overwhelming 90% planning to do so in the next 18 months.

The bill proposes that instead of LHA rising with the market, it will in future instead be linked to the Consumer Price Index.

Changes to the Local Housing Allowance (LHA) therefore look to drastically change the amount of landlords who will offer their properties for such use. Most landlords have stated that the reason behind this is because they cannot afford to reduce their rents to absorb changes. With the large majority of landlords faced with mortgage repayments and rising utility costs.

Ultimately, these responses offer a warning signal to a possible intensification of the housing shortage for the poorest in our society who receive LHA support. David Salusbury, Chairman of the National Landlords Association mentions these concerns in his comments below:
“The private rented sector is playing an increasingly important role in providing accommodation to housing benefit recipients in the UK. The Government is implementing cuts which, this survey tells us, is likely to lead to an increasing number of people struggling to pay their rent.

The NLA believes there is a risk that the Government’s policies will result in fewer affordable rental properties available to vulnerable families across the UK, especially as the number of people claiming benefits continues to rise. Benefit payments must ensure that LHA tenants are not left at risk and that landlords providing this much-needed housing can cover their costs.”