Guides for buying and selling properties at auction and developing auction property.
Should you buy a tenanted property?
Buying a tenanted property promises to offer landlords a guaranteed income and no additional tenancy fees, making it an attractive option. For those looking to buy a family home, sitting tenants can mean a lower asking price, which also makes it tempting.
However it’s worth looking at the small print before you decide to buy. So, what do you need to know before you buy a tenanted property?
Two Types of Offers
There are two ways that you can agree to buy a tenanted property, depending on whether you want the tenants to stay or not. If you want the tenants to stay, you should offer to buy the property ‘subject to an on-going tenancy’.
If you want to take possession of the property yourself, or rent the property to different tenants, you should offer to buy the property with ‘vacant possession’. Vacant possession means that the tenants have moved out before the date of exchange of contracts.
A seller has to inform any possible buyer that their property has sitting tenants. After that, it is the buyer’s duty to find out all the details that could affect the sale.
Accessing a Tenanted Property
Under the terms of a standard tenancy agreement, landlords have to give 24 hours’ notice that they wish to enter their property for any reason. The tenant can refuse access if they are unable to be present, for example, if they are at work.
This could make it difficult to access the property, for example to allow surveyors to produce their report.
Without easy access, it could be difficult to assess which of the current fixtures and fittings belong to the current landlord, and which belong to the tenants. It is important to clarify this before exchange of contracts.
Buying ‘Subject to an On-Going Tenancy’
Honest, reliable tenants can take the stress out of letting a property, but even so it is important to check out the details.
To start with, find a solicitor who has had experience with this type of Buy to Let purchase. Remember that you must arrange a Buy to Let (rather than a residential) mortgage.
Next, get a copy of the current tenancy agreement. Find out how long the current tenants have been living in the property, what the rental payments are, and whether the tenants have kept up with payments.
This will give you an idea of whether you should stick with the current residents.
Now consider whether the current rent is a market rent for the area. If the rent is a lot lower than similar properties, you might need increase the rent in order to pay your mortgage. If you had hoped to keep the current tenants on, this might spoil your plans.
It is also a good idea to ask your solicitor to check whether there have been any legal notices issued on either side, or whether there are any non-standard agreements as part of the tenancy. These checks will help to prevent any nasty surprises.
Buying ‘With Vacant Possession’
If you offer to buy a tenanted property and want the tenants to have moved out by the completion date there are a number of things you need to keep in mind.
The most straightforward thing to do is insist that the property will be vacant by the completion date. Ask your solicitor to make sure this special condition is added to the contract. This will help to protect you financially if any issues arise.
If you have prospective tenants in mind, it is a good idea to make sure that the current landlord has taken the proper steps to remove the current tenants. This means serving an eviction notice 2 months before the end of the fixed term of the tenancy. The paperwork must be correct to make the eviction legal, so try to get copies if you can.
Although you might assume that tenants have to leave once they have been served with the eviction notice, this is not quite the case. It is possible that the tenant will refuse to leave, and in this case the landlord will have to go to court to obtain an eviction order. This can take time and money to sort out.
In cases where the council pays the current tenants’ rent you might find that the local authority advises the tenants to stay put until they receive a court order. This is because if the tenants leave before they are evicted, they will lose entitlement to social housing support.
If the tenant refuses to leave, and you cannot exchange contracts on the agreed completion date, the seller will be liable for your financial losses.
Preparing to Become a Landlord
Whether you hope to keep the current tenants or find new ones, it is helpful to ensure that the date that contracts are exchanged is the same as when rent is due. This makes it easier to distribute rental payments to the right party without complications.
Decide whether you plan to manage the property yourself, or use a letting agency to help find tenants and manage the property.
Current letting agents can be very helpful in providing information about sitting tenants, and will be able to provide information on this situation regarding HMO or other licenses and any past insurance claims.
If everything checks out and you do decide to keep the current tenants, make sure that you contact them after the date of exchange to let them know how and where to pay their rent in future. If you intend to raise rental payments, you will need to give 2 months’ notice before this can come into effect.
Your conveyancing solicitor should also arrange for the transfer of the deposit – you must ensure that this is placed in a recognised government deposit scheme. Once everything is organised, let your new tenants know where their deposit has been placed.
Everything should now be set for a positive letting experience. With the right preparation and planning, your new investment should be a great success.
Renovating for profit
In a housing market that is beginning to show signs of growth there are new opportunities for property developers. If you are thinking of renovating for profit, make sure that you consider the following:
Know The Market
Before you begin life as a property developer you should consider whether this kind of investment suits your needs. What kind of yield do you expect from your investment? Do you know the risks as well as the benefits? Remember that the value of property can go down as well as up, and that it is possible to lose money.
If you need to take out a mortgage in order to buy property for development you will increase the amount of risk that you are exposed to. For example, if you take out a mortgage for a property and the property sells at a loss, you are still liable to pay back the mortgage. This means that you could lose your original investment plus any additional shortfall. It is possible that you could end up with thousands of pounds worth of debt.
While there are risks, there is also money to be made in property development. If you are prepared to do careful research into the market it is possible to get a good return on your investment.
Location, Location, Location
The location of your property is one of the most important factors in successful property development. To maximise the profit from your renovation you should aim to find a property in an attractive location. Attractive doesn’t have to mean an expensive location with high-end developments, but simply means an area where property is in demand. Consider areas near popular or expensive locations that also benefit from good transport links, properties in the commuter belt, properties in the catchment areas for good schools, or properties near a lot of amenities.
Properties on the fringes of a popular location, sometimes called ‘up and coming’ areas could prove to be a good investment. These properties are more likely to keep or increase their value in a changeable market. Former council properties that have been bought by tenants can be a great opportunity to secure a cheaper property in a good location. It may be worthwhile driving round suitable areas looking for possible properties for sale. Even if a property isn’t for sale yet, it may be worth knocking on doors in ‘up and coming’ areas to see whether owners might be willing to sell. You might be lucky and pick up a bargain.
Buy Low to Sell For a Profit
When you are searching for properties to renovate, remember that developers make money when they buy a property. This means securing the best possible asking price. When viewing properties it is a good idea to bring tradesmen with you to give you an insight into the costs involved in renovating the property. Many tradesmen will offer this service free of charge or for a small fee, and their advice can also help in deciding what type of survey is required before putting in an offer.
Take the opportunity to have several viewings of the property so that you can identify any issues that you could use to negotiate a lower asking price. It is also a good idea to look out for properties where planning applications have been submitted to the local authority. The agent may accept a lower offer subject to planning permission and if the planning permission is granted later you can benefit.
Bear in mind that developers often have the same advantage as first time buyers; they aren’t part of a chain. Take advantage of this situation to make the lowest offer that will reasonably be expected.
Overall, remember the golden rule: you will be able to make a profit if the final value of the property is equal to the purchase price plus the cost of renovation plus 20%. If that doesn’t look possible based on the asking price, walk away.
Buying at Auction
Many of the best property deals can be found at auction and you can pick up a bargain provided you stick to an upper bidding limit. In the case of auctioned properties it is important to do your homework before the auction, making sure that you visit the property with tradesmen to get a clear idea of the costs involved in renovation.
Get an appropriate survey of the building to make sure there are no expensive structural problems, such as damp, dry rot or a leaking roof. Also make sure that there are no legal issues and that you are sure what is included with the property. For example, does the property include access to a garden?
At the auction, try not to bid first, and wait to see what others are prepared to offer before you show your hand. To avoid overpaying for the property, be sure that you stick to the limit that you have set yourself. If the bidding does not reach the reserve price, try to speak to the seller after the auction to see whether you might be able to negotiate a deal.
Remember that if you are going to need a mortgage to buy the property you should have your finance in place before the auction. Contracts are exchanged on the, so there is no room to change your mind. Careful research in the days before the auction could turn to profits later on.
When choosing your first renovation project, is it probably a good idea to choose a modern property that needs updating rather than major renovation. For example, pick a property that needs new interiors, such as paint, wallpaper and carpets as well as a new bathroom and kitchen. Consider who your buyer will be; if you are aiming for the top end of the market you may have to budget a little more for fixtures and fittings. If you haven’t already done so, put together a budget for the renovation works, allowing at least 15% contingency for unexpected issues.
Make sure that you obtain quotes from a range of tradesmen and get recommendations of good workmen from anyone that you know. Choose the firms that you think will do the best job within your budget and liaise closely with tradesmen and suppliers to ensure that you receive the quality you expect. This can be especially important because you are liable for poor quality workmanship, meaning that you may have to pay later to correct defects in the property. Also, poor quality fixtures and fittings may reduce the selling price of the property.
Once you have successfully completed your first renovation project you can decide whether or not you wish to take on a more involved property development, including building extensions or remodelling the interior of a property.
Hiring a Project Manager
Consider whether you will oversee the renovation yourself or will employ a project manager to look after the day-to-day issues. If you are able to do the job yourself you may save money during the renovation, but it may not be possible to manage another job alongside the project.
An experienced project manager may help you to negotiate any tricky issues with tradesmen or suppliers that arise during renovation. He or she can also ensure that the renovation work is completed within the agreed budget.
It is important to bear in mind that developers are liable for poor quality workmanship after the property has been sold, and so it is important to ensure that defects are avoided where possible. An experienced project manager may pick up on problems quickly and ensure they are fixed on the spot, avoiding costly legal issues.
Know Your Buyer
When renovating your property think about who will buy it once the work is completed. Consider the size of the property and the likely demand for the location. A one or two-bedroom flat with great transport connections may be ideal for young professionals, who would expect a modern, well-designed space. Families would look for larger properties within the catchment of good schools, with at least one large communal room, a modern kitchen and bathroom and at least three bedrooms.
Remember that you aren’t renovating your own home, so it is appropriate not to personalise fixtures and fittings, but keep them smart and practical to suit the needs of the eventual owners. These considerations also apply for properties that you intend to let after the renovation is completed. To maximise the profit for your renovation, keep costs to a minimum and target every aspect of the renovation to suit the needs of your intended buyer/ tenant.
Once your renovation is complete, contact a number of estate agents to get the property valued and ensure that attractive photographs are taken to show the property to advantage. Make sure that living areas are clean and clutter-free and that all work is completed to a high standard. If you have done your research well and the renovation work has added value, you should make a profit on your investment.
Finding a Project Manager for your Property Development
When you decide to become a property developer one of the biggest decisions you will make is whether you decide to manage your developments yourself, or whether you employ a property developer. Both options have advantages: managing your developments yourself gives you hands on experience of the project, and you will know exactly what’s happening and where you are spending your money; employing a project manager means that you will be able to focus on other important tasks (such as your family or day job) and will not need to concern yourself with the details of the development.
If you do decide to employ a project manager for your property development, it will be very important to find an experienced and qualified professional who understands how to ensure your development is completed on time and on budget. To find out how to find the right person for the job, keep reading…
Be Clear On Your Goals
From the beginning it is very important to know what you expect from your property development project, how long you expect the project to take, and what the budget for the project will be. If you have bought a plot of land on which you are going to build a residential apartment block, for example, you will require a project manager who has experience of similar property developments and who understands the process involved to ensure a successful project.
Find Someone with the Knowledge You Need
A good project manager is someone who possesses the right knowledge to successfully complete his or her project. A property developer needs a project manager with specialist knowledge, such as the rules for obtaining planning permission, the technical details of building control, the sequence of construction procurement, the environmental impact of construction materials and the implications of waste management. The Association of Project Managers (APM) offers a range of certificates for UK project managers, starting with the APMP that certifies that individuals have some level of project management experience. The APM also provides a registration of accredited project managers which can be accessed via their website. (http://www.apm.org.uk)
Employ a Skilled Professional
The most important quality that any project manager can possess is leadership, because he or she will have to motivate a team of diverse people and ensure that they work together to achieve an agreed outcome. At the same time, your project manager will need to be able to work independently, stick to a budget, drive the work schedule and manage difficulties and problems that arise along the way. To do this, he or she will have to be disciplined, flexible and approachable, good with people and have a proven track record of success.
A Good Communicator is Essential
Project Managers should be good communicators. This is because good communication lies at the heart of a successful property development. Your project manager should be able to communicate well with local planning authorities, a wide range of contractors, neighbours and you, their employer. A good communicator will smooth the planning and construction process, manage relationships between tradesmen on the building site and keep you up to date with regular progress reports. Finding the right person will save you stress, time and a great deal of money.
Find Someone with Experience of Managing Complex Budgets
Property developments are complex projects that involve several different stages. At the beginning of the project, the project manager can be responsible for finding the right development site at the right price. He or she will have to ensure due diligence and other legal checks are done, ensuring that solicitors fees, banking charges and associated taxes are paid on time. He or she may then be responsible for creating a work schedule and a budget for the building work, monitoring construction as it is scheduled, meeting regularly with all stakeholders and arranging progress payments as milestones are achieved. A project manager with experience of financial management is essential when managing property developments, because the right candidate will have to ensure that a project comes in on time and on budget.
Agree a Realistic Development Plan
Before you embark on any property development it is very important to agree a property development plan, which includes detailed information on all stages on construction and an agreed schedule for completion. This plan is essential, because it enables the different stages of construction to flow smoothly from one stage to the next without unnecessary interruption and costly delays. An experienced project manager can anticipate and prevent problems and delays that could otherwise sink a project, and a well-managed project can ensure a healthy yield from your property investment.
Pay By Results
When you have found the right project manager, agree their fees by multiplying their daily rate by the length of your proposed project. Payments can be made at agreed intervals, linking payment to the completion of milestones in the project. You can negotiate that your project manager will work a preliminary trial period or you can insert a break clause for situations where work has not been completed by an agreed time. As part of their contractual responsibilities, your project manager should be required to submit progress reports to you at regular interests.
The Advantages of Employing a Project Manager
A successful project manager will take responsibility for the overall completion of the property development and will arrange the final aspects of the project. If you do not have the time or expertise to manage your property development, a project manager can ensure that your results can be achieved on time and on budget. He or she can make the best use of all the available resources, whether these are people, money or material goods. Your project manager can take on the stresses and strains of the project on your behalf, satisfying the different needs of all stakeholders and will keep you informed of progress until the project reaches completion.
Getting planning permission for renovations
If you are thinking of renovating your property it likely that you would like to improve your living space and add value to your home. Planning permission is the consent from your local planning authority to allow extensive changes to your house, and the system has been put in place to ensure that all major development is safe and appropriate.
The regulations around planning permission are broadly the same across England and Wales, but there are variations depending on where you live, so it is important to check the planning rules before starting any renovation work. This is particularly important if you live in a listed building, in an Area of Outstanding Natural Beauty or in a National Park, all of which have stricter planning rules and often require planning permission for more minor developments.
Ways to Improve Your Home Without Planning Permission
There are a number of different that you can do to improve your living space, some which do not require planning permission. Renovations that don’t require local authority consent are called ‘permitted development’ and include:
- Installing or replacing windows and doors throughout your property.
- Renovating your kitchen and bathroom.
- Incorporating an integral garage into the main house space.
- Building a single storey conservatory no higher than 3 metres high.
- Building a loft conversion with dormer windows no higher than the roof slope.
- Adding a two-story extension to the rear of the property, no more than 3 metres in depth.
- Building a basement conversion, as long as no engineering works are required.
- Building an outbuilding, as long as it is not used as a separate residence.
- Building a porch at the front of your home.
- Constructing decking less than 30cm from the ground.
- Building a swimming pool that is no larger than 50% of the area surrounding your house.
- Adding solar panels to your roof, as long as they do not project 20cm from the roof slope.
Make a Big Difference to Your Living Space
Updating rooms such as the kitchen and bathroom of your home can make a big difference to your living conditions, as well as adding value and appeal to your home. If you are trying to sell your home, it can also be important to replace any windows and doors that have become damaged or rotten. You can usually replace these without planning permission, but if you live in a listed building or conservation area you may have obtain planning permission and replace these fixtures like for like so that you don’t change the overall look of the building.
Check the Building Regulations
With any renovation project that you decide to undertake it will be important to check the building regulations associated with it. The building regulations are there to make sure that the finished work is structurally sound, complies with energy conservation laws and is safe to use. This is particularly important in renovation work that changes the weight that is placed on load-bearing walls and upper floors, such as when removing internal walls or creating a loft conversion. For example, if you remove an internal wall to create an open-plan living area, this could affect the structural integrity of the house, so you will need to take that into account in your renovation plans.
Building a Conservatory or Outbuilding
If you are planning to create a conservatory or erect an outbuilding at the back of your home you will have to ensure that it is at least 2 metres from the property boundary and that it is built from fire safe materials. You will be unable to build an outbuilding or extend your home towards the front, including the addition of a veranda, balcony or raised platform without planning permission.
Obtaining Planning Permission
If your renovation does require planning permission, you should find out as much about the relevant building regulations and planning rules as you can before you make an application to the local planning authority. Once you have a good idea about what you are planning to do, you should speak to your neighbours about your plans, as they are likely to be concerned about developments that might affect them. Any renovations should be in keeping with the design and building materials used in your property and should take into account fire safety, environmental health and any nature and wildlife in the area. When you are ready, you can apply online for planning permission.
Getting Additional Insurance
If your planning renovation work does not require planning permission, it is unlikely that you will need additional building insurance. However, if you are undertaking building work that will involve changes to the foundations, structure or load-bearing walls, you should obtain insurance that covers the work that will be done. This will give you some protection in the (hopefully unlikely) case of shoddy workmanship.
Planning Rules for Flats and Maisonettes
The rules for ‘permitted developments’ for houses are different than those for flats and maisonettes. In many cases where a renovation is permitted without planning permission in a house, the owner of a flat or maisonette will have to apply for planning permission. This means that changing the windows of a flat may require planning permission, as will extending a ground floor flat into the garden, or even (in some cases) installing a satellite dish. You will have to contact your local planning authority to check what will be permitted in you area. If you are a leaseholder, you may also have to get the permission of the owner of the freehold before you can carry out renovation in your flat.
If you plan to convert a house into separate flats, planning permission will be required even if this does not substantially change the exterior of the building. However, it may be possible to convert a space above a shop into flats without planning permission, as long as this space is not already classified as an office or shop and you will not change the exterior appearance of the building.
It is very important that you know the planning rules and adhere to them, because carrying out renovation work without the required local authority permission is a criminal offence.
Choosing a Property Auctioneer
Choosing an Auctioneer: 8 Simple Tips to Find the Best Auction House
If you have a property or land to sell you will want to get the best possible price for it. One of the best ways to ensure that happens is to sell it at auction.
In a rising market, sellers can benefit from the competition for properties at auction. Choosing the right auctioneer can ensure that your property is noticed by the right people in the right places.
So, how you find the best auctioneer for your property? Here are a few simple tips to consider:
1. Look for Local Knowledge and Contacts
The best auctioneers will have a team of staff with extensive local knowledge and contacts throughout the property industry.
If you are selling a residential home, their experts should understand what makes your property valuable, whether that is a good school catchment area, excellent transport links, aspects of the property itself, or local amenities nearby.
They will also have close links to local estate agents, so they understand the bigger picture of the local market, and can provide the best possible advice about valuation.
2. Explore Specialist Auctioneers
Some auction houses will specialise in certain types of property, such as residential homes or agricultural land, so it is worth taking the time to check the expertise of any firm you are considering.
Look for a specialist if that’s what you need to get the most for your property. Some auctioneers will have a team of staff, each with a different area of specialisation.
One member of staff may be an expert in selling commercial buildings, while another may focus on investment properties. These specialists may not be found locally, but could work for larger auctioneers who cover the whole of the UK.
To get an idea of the types of property that an auctioneer sells routinely, ask for copies of recent auction catalogues. Pay attention to the quality of information provided in the catalogue.
The number, valuation, and type of properties in the catalogue will give you an idea of how experienced the auctioneer is in selling property like yours.
If the auction house doesn’t have a catalogue, they may not have been established for a long time. You may need to check they are trustworthy (see tip 8).
3. Ensure Staff are RICS-Qualified
Auctioneers who specialise in property sales should have staff with qualifications from the Royal Institute of Chartered Surveyors (RICS).
This qualification means they will be fully aware of all the rules and regulations around property and can advise you about any structural, boundary or legal issues that may be related to the sale.
4. Consider In-House and Online Auctions
Many modern auction houses offer two different kinds of auction: in-house and online.
A traditional in-house auction is scheduled at a set date and time, and prospective buyers look through the catalogue of stock on offer, view in advance and bid (in person, by phone, or online) on the day.
Sellers can benefit from the excitement of the auction room and the competition between buyers to obtain each lot.
Some auctions now offer Ebay-style online auctions, where buyers can browse the auctioneer’s catalogue online and bid on lots. These auctions have a time limit, and if the reserve price is not met the property will go on to be sold at a tradition auction.
The advantage of an online auction is that properties in demand can sell quickly and securely, with online bids as legally binding as those made in person.
5. Find Auctioneers who can Market Your Property Widely
All good auctioneers have links to estate agents, trade publications and property websites who can market your property to the largest possible audience.
This can mean placing advertisements in estate agents’ windows, buying classified advertisements in the specialist trade press or adding property images and information to the most trusted property websites.
All of these methods will make sure that anyone who might be searching for a property like yours knows when and where it will be auctioned. This increases the chance of a good sale.
6. Think about Location and National Reach
While it may be tempting to choose an auctioneer close to home, this may not always be the best decision for your property.
Some local auctioneers offer excellent local knowledge that can help your property sell for the best price. However, local auctioneers often hold auctions in smaller venues. These auctions will attract mainly local people, which may mean that the pool of buyers is limited.
National auction houses, on the other hand, will include hundreds of different properties from around the country in a single auction. The auction will usually be held in London and is likely to attract a larger number of buyers (though perhaps not as many people who know your local area).
Some national auctioneers have regional centres where they sell property from each area, but advertise all up-coming auction lots nationally. Their auction houses may be in easily accessible locations and for this reason they can attract a variety of buyers.
The auctioneer that you choose will depend on how important these factors are for the sale of your particular property.
7. Check out the Terms of Appointment
Another important factor to consider when choosing an auctioneer is their terms of appointment. There can be quite a bit of variation in the small print, so make sure you understand what you are agreeing to.
Some auctioneers will insist on being the only agent for your property before the auction, others will allow you to continue advertising it in a variety of places before the sale.
In some cases you may have to pay extra fees for commission, if the property sells early, or if the property does not sell at the auction. If the terms of appointment do not suit your circumstances, don’t be afraid to look for another auction house.
8. Pick a Member of NAVA
All reputable auction houses are members of the National Association of Valuers and Auctioneers (NAVA). All NAVA members have obtained a formal qualification and should have the knowledge and experience to provide an excellent service.
The NAVA website offers advice to sellers on finding an auctioneer, as well as a search function to help sellers find a NAVA-qualified auctioneer in their area.
Investing in Right to Buy council property
Whether you are starting out as a property developer or considering expanding your property portfolio, you have probably considered buying ex-council property. Former social housing can be an attractive prospect for investors, as homes often sell for 80% of the price of privately built property in the same location. This offers landlords a reduced risk and a potential for high rental yields and steady capital growth. There have been more than 1.3 million council homes sold through the ‘Right to Buy’ scheme since 1980, which means that there are a lot of opportunities for landlords and developers to find ex-council homes at lower prices in some of the best locations.
Buying Property from Tenants through the ‘Right to Buy’ Scheme
Council tenants who have lived in social housing for more than five years have the right to buy their home at a discount of up to £75,000 (or £100,000 for those living in London). In areas of high housing demand investors and developers have approached council tenants to encourage them to take advantage of the ‘Right to Buy’ scheme and sell on their properties. Anyone considering this approach should be aware that former tenants who sell their home within five years of buying it from the council will have to repay a percentage of the discount they received at the time of the sale, on a sliding scale of 100% of the discount within a year of the purchase, to 20% of the discount in the fifth year after the sale. It is possible to avoid this penalty by transferring ownership to another family member before the sale, but the council has to agree to the transfer and legal advice must be sought.
In addition, any ex-council property must first be offered to the council or social landlord from whom it was purchased before it can be put on the open market. If the former landlord doesn’t agree to buy the home within 8 weeks it is then open to any buyer. The value of the property is either agreed with the former landlord or is valued by a District Valuer and the home must be sold at full market value. The asking price shouldn’t be a block for potential investors, as former council housing usually commands a 20% lower value than privately built homes in the same area. However, buyers should be aware that just as social housing comes at a reasonable price, it is often subject to a price ceiling, which will undoubtedly affect the resale value. In this case it is very important to do your research on similar properties within the area to make sure you are paying a competitive price for your investment.
The Advantages of Investing in Former Social Housing
Other than price, there can be many advantages to purchasing former social housing. Properties built before the 1970s are likely to be larger than more modern properties and will benefit from good design and lots of natural light. These features will make them desirable to tenants, especially in prime locations close to transport links and local amenities. In addition, the properties are likely to have been well maintained over time, which should avoid costly repairs and renovation. Often property located on social housing estates benefits from broader estate management, such as maintenance of the surrounding grounds and common repairs, which are often ongoing if some of the tenants in a building still rent from the council or a social landlord.
Former social housing can be a particularly attractive option for investors in the London property market, where ex-council homes in Zones 1 and 2 can command rents of up to £2000 per month with little risk of loss. In Q4 of 2012 landlords in London reported average yields of 7.0%, with 7.5% average yields in the East Midlands and 5% yields reported in Yorkshire. The Buy to Let market has undergone consistent growth over the last two years, and by Q4 of 2013 landlords were reporting record average yields of 8.9%. With significant housing shortages in many parts of the UK, demand is high and average rents across England and Wales rose to £867 in December 2014 (a 6.6% increase on the previous year, according to the Home Let rental index). At the same time most lenders have recognised that large yields can be made through Buy to Let mortgages for property in the right location, so canny landlords can take advantage of a range of competitive deals.
Ex-Council Housing: Things to Consider
While there are a lot of advantages associated with investing in ex-council properties it is wise to undertake careful research before buying. Remember that location is the key asset of any investment property. Many former council homes will be in a location with established demand, but consider the percentage of people living in the area who are still social tenants. If the numbers are still high, it may be that the area is less attractive to professional people, as they may feel unwelcome in the area. Make sure that you take into account the rent that you will need to charge to cover your mortgage payments. If the rent seems high for the location, you will not attract the tenants you want and may not be able to pay the mortgage. In areas of high demand, such as London, this should not be an issue as long as your property is near transport links and has access to amenities.
There are also important legal issues to consider when buying ex-council homes. If you buy a former council house you should be able to buy the freehold, but councils often tend to retain the freehold in the case of flats. This means that ex-council flats are likely to be leasehold properties, which means you will be liable for service charges and fees for planned maintenance. If you are considering buying a flat, check what the service charges cover and ask to see previous bills to get an idea of how much annual costs will be. In addition, check for any scheduled maintenance or renovation. A good way to discover important issues is to find out whether there is a local Residents’ Association, and if there is, to get in touch. They will be able to provide information on any planned maintenance and other current issues.
Do Your Research and All Should Be Well
If you are considering investing in ex-council property you should be given an assignment pack from the council in question detailing any works that are required to the building. As with any other property, make sure you do your research and carry out the usual surveys and legal searches prior to exchanging contracts. If the case of ex-council flats, be aware that it can be more difficult to obtain a mortgage on a property in a building with more than 5 floors. With careful research and a clear knowledge of all of the facts, you should end up with a fine investment that offers high yields and steady capital growth.
Buying land at property auctions
Buying land has always been an appealing investment for those with cash to spare, and in recent years there has been strong demand for good quality land because it is seen as a safe haven for investments. The value of land has risen 15% year on year, compared to UK housing market (+10%), the FTSE 100 (+5%) and gold (-9%). This trend looks set to continue, with Knight Frank reporting a 55% increase in the value of land over the last five years (October 2014).
Buying any kind of property at auction is quite different from buying it through an estate agent. Before you consider buying land, try to attend a few auctions to get an idea of what the process involves. The biggest and most important difference is that buying at auction is legally binding, so you must do your homework about the property before the sale. Unlike buying through an estate agent, you cannot change your mind later. It is your job to find out everything that you can about the land before the auction begins.
Finding Expert Advice
Buying land at auction requires a lot of thought and planning. You should employ a solicitor with experience in land purchases in order to help you negotiate any potential pitfalls. Just as when you plan to buy a residential or commercial property, you must consider what you intend to do with the land once you have bought it.
Not all land is equal, and some land may not be suitable for your intended purpose, so you will have to consider issues such as the location of the land, its ground conditions, ease of access to the plot and the land’s area and dimensions. If you intend to build on the land you will have to consider the additional issues of planning permission and connection to utilities (which is not always possible if the location is remote). An experienced solicitor will help you to make the right choices and avoid costly mistakes.
Finding Land to Buy
If you would like to buy land it can be difficult to find it advertised on the high street. It can often exchange hands privately between farmers, developers and existing landowners, but recently more land has been offered for sale at auction. Whether for self-build, investment or recreation there has been a growing interest in the market aided by information provided in specialist publications. If you are interested in hearing more about available land, sign up to the Future Auctions mailing list, which can provide you with information on auctions in your area.
A lot of information about land for sale at auction is available from the auctioneer’s catalogue, which is available online 2-3 weeks before the sale. Guide prices may change right up until the day of sale, land can be sold before the auction or it can be withdrawn. Make sure that you get a copy of the auction catalogue as soon as possible and register your interest in the land with the auctioneer (there is usually a form to complete) to ensure that you are kept up to date with any developments.
At this stage you should also be aware of your budget. When you consider land, remember that lots often sell for more than the guide price, and that guide prices can change until the day of the auction. Be realistic about how much money you have to spend and whether the property price is right for you.
As when you are buying a house, the location of any land that you buy will affect its value. Land that is suitable for grazing horses within a short distance of a city or town can reach prices of £30,000 per acre, while a piece of land suitable for grazing sheep in rural Wales may be worth as little as £1,500 per acre.
If you wish to purchase land for leisure in order to get away from it all, such as buying woodland, you should be aware that this type of land could command high prices. Also note that it is highly unlikely that planning permission would be granted to build in such a location.
If you are looking for land in order to build your own house, location will be particularly important. Brownfield sites in an urban location may be ideal for self-build projects and may also benefit from prior planning permission, ease of access to the plot and straightforward connections to utilities.
It is important that you arrange to view land before the auction. The ground conditions will make a huge difference to the land’s value and utility. After viewing you should arrange for a land survey for any plot you might like to buy. The focus of the survey should reflect the use you wish to make of the land, for example, for agriculture or to build a house.
If you plan to use the land for agricultural purposes you will need to assess the soil type and quality, drainage and flooding issues and any possible contamination of the soil through the use of agricultural chemicals, industrial pollution or infill. You should also make sure you are aware of the ALC grading of the land. The best (grade 1) land is suitable for intensive arable crops, while the worst (grade 5) will only provide rough grazing with rocky outcrops. You should consider that there might be restrictions placed on the use of the plot, such as the range of crops that can be grown, the yield levels and the cost per yield. Land grades also play a part in the development planning process, with land graded 1-3a usually protected for agricultural uses.
If you wish to purchase land to build on you need to be aware that steep slopes will require more labour and materials to build solid foundations. An unsuitable soil type may require a large amount of work to make it ready for building, and if the land is situated on a flood plain this could jeopardize your new home and make it difficult to insure.
The most important thing to consider when viewing a plot of land is the issue of access. Does it have direct access to a public road, or do you have to cross someone else’s land? Some vendors hold back a strip of land between the access point and your land. This is known as a ransom strip – the owner of the strip can prevent you accessing the land and hold you to ransom. Your solicitor will check for this.
Sometimes landowners have a private road (which they must maintain at their own cost) that provides access to their land. You need to ensure that access is safe, and that any private road has room to drive, turn and park. If you share the road with another landowner, you may have to share costs, but the road will also have to have passing points and clear visibility. You will need to check that this access doesn’t affect neighbours or harm existing trees.
It is also very important when viewing the land to consider the shape of the plot that is available. Is it the right size and dimensions for your purposes? Consider that the area of the plot may provide the space required, but an awkward shape can quickly end any plans you might have. Building plots should be at least 1/10 of an acre and you should allow space for off-street parking and room to turn your vehicle to prevent reversing onto a main road.
Some plots of land for sale already have planning permission, but be aware that this will increase the asking price by up to 500%. While the process of obtaining planning permission can be time-consuming it can mean a huge saving at the time of purchase and an increased profit once planning permission has been granted. Remember that planning permission is more likely to be granted if the land is next to an existing building.
You should make sure that any planning permission has not expired, and will not expire between the day of the transaction and when you get started. Your solicitor will make these checks and will cover previous planning applications so you can see what has been applied for in the past and whether it succeeded or failed.
Another important consideration (for plots of land intended for self-build projects) is the issue of connection to utilities and services. If your home will be next to an existing building it will mean cheaper connections to water and electricity supplies. Consider that in remote locations it may not be physically possible to connect to the mains water supply or the electricity grid.
Finally, if you want to buy some woodland, be aware that you will be responsible for its management. Organisations such as The Small Woods Association provide information on woodland management, ensuring that people know how to care for their woodland and do not break laws or cause excessive damage to the woods.
Before the Auction
At this stage you must get the legal pack from the vendor’s solicitor and ask your solicitor to look through the special conditions of sale, title deeds, leases, office copy entries etc. Your solicitor will also do the usual property searches, checking planning permission status, and also checking whether planning permission has been granted nearby which may affect you later on. Make sure that you have read and understood all the information provided by the catalogue and the legal pack. Ask your solicitor or surveyor if you are unsure. The sale of a property is binding, so make sure you know what you are buying in advance.
If you really want to buy the land it is possible to put in an offer via the auctioneer before the auction date. In this case it is essential to have your finances in place, as you must move quickly. You should put your offer in writing to the auctioneer, who will liaise with the vendor. If the vendor accepts your offer, contracts will be exchanged immediately and you will have to pay a 10% deposit, paying the remaining 90% within 20 working days. If you haven’t paid in full by the day of the auction, the vendor may not withdraw the property and you could lose your deposit (and the property) to the highest bidder.
By the time of the auction you should have a lot of information about the land. Before you go to the auction, check that the property is still available. It may have been sold beforehand or the vendor may have withdrawn it. If the sale is going ahead, you can either attend the auction in person, make bids on the telephone or online, bid by proxy up to a limit agreed in advance with the auctioneer, or send your solicitor or surveyor to the auction to bid for you.
Make sure that you know the lot number of the land you want to buy, and are familiar with all the information in the catalogue. Get a copy of the addendum sheet, which will include last minute changes to the catalogue information, including the guide price, withdrawn lots or prior sales. If you are the successful bidder, the addendum sheet forms part of the contract of sale.
Remember to stick to your budget. In the heat of the moment you could get carried away and could bid more than you can afford. Once you arrive, or in advance, complete a registration form and make sure you have brought relevant ID documents, proof of address and a cheque or banker’s draft to cover the deposit on the property.
The auction will generally proceed with lots in the order they are listed in the catalogue. The auctioneer will announce each lot and the lot number should be shown on a screen. Make sure you are clear which lot you are bidding for, and sit somewhere where the auctioneer can clearly see you.
Do not make the first bid, as the auctioneer will lower the starting price if no one makes an initial offer. When you do bid, make clear movements, such as raising your hand or nodding your head. The auctioneer may not see smaller movements, and has the final say on whether to accept bids. The bids will go up in increments and you must stop bidding if the asking price is above your budget. The auctioneer will offer the bid to the room twice before bringing down his gavel to indicate a sale. Once the gavel has been sounded, the sale is over.
If the property you are interested in does not meet its reserve price, you can contact the vendor after the auction and see whether you can still come to an arrangement. An advantage of auctions is that it is a level playing field and you can see who is interested and how much they are willing to pay for the property. This means you can avoid paying over market value.
If you are successful, a member of the auction house staff will approach you to complete the paperwork. The 10% deposit is due immediately, and the remaining 90% is due within 20 working days. You will be asked to provide ID and your solicitor’s contact details and you will sign the contract of sale. Your part of the contract will then be passed to your solicitor and the auctioneer will retain the vendor’s part to pass to the vendor’s solicitor. Assuming the funds are in place, the sale will be completed within a month.
However, if your funding falls through, you will lose your deposit (plus any solicitor’s and survey fees etc), so try to make as certain as you can that your finances are in place before the auction.
Assuming it all goes well, you will be the proud owner of a plot of land.
Converting an outbuilding
Major life changes can have unforeseen effects on your living arrangements: whether because of a growing family, a change in working patterns or a family member moving in. What once was spacious may now be a home that feels small or unsuitable for your lifestyle. While many people in this situation simply decide to move, for others this is not an option. A popular solution for those homeowners reluctant or unable to move is to convert an existing outbuilding into a new living space.
While most people associate outbuildings with stables and barns in rural locations, outbuildings actually include garages, outside toilets and coal sheds that can be found in many smaller urban properties. Since the Government relaxed some aspects of local planning regulations in 2008, it is now possible to convert an outbuilding in your garden into a residential annexe without planning permission, as long as the building does not become an independent residence. This means that you can build a guest room, garden room, home office, greenhouse or children’s playroom without planning permission, although you will have to make sure you comply with building control regulations. This law only applies if the outbuilding has been on the land for at least four years and has not been used as a residence during that time.
While you can use your outbuilding for many purposes, if you intend to convert it into a habitable room it must be upgraded to meet the building regulations requirements for ‘a material change of use’. This means that you will have to insulate the building structure, and that doors and windows will have to be double-glazed. If you intend to install heating, plumbing or electrics all of these will also have to comply with building regulations. In order to make sure this is the case, you will have to inform the local authority, complete some paperwork and pay a fee.
Types of Conversion
The amount of time, money and effort that you will need to convert your outbuilding will depend on the type of building that you hope to convert and what you intend to use it for. The cheapest options can be a summer garden room or a greenhouse (which would not need heating, plumbing or electrics). In these cases the existing fabric of the building will need to be structurally secure and have proper ventilation.
If you plan on using the outbuilding all year round the building may also need to have a functioning heating and lighting system. If the outbuilding will be used as a guest annexe or as a home office, artist’s studio or children’s playroom you might also want to install electric sockets, internet access and running water, so that you can make a cup of tea and use computer equipment or other electrical goods.
You should make a careful assessment of what amenities you think you will need before you proceed. Calculate the costs of buying and installing all of the services you will require, including the cost of qualified tradesmen to install electric sockets, plumbing and drainage systems if required. Be aware that extending heating and electrical systems are likely to require earthworks through your garden and will cause disruption.
If you would like to convert your outbuilding into an independent residence (with a proper kitchen and bathroom) you should be aware that you will have to apply for planning permission. Once the conversion is completed you will have to pay separate council tax bills for it (at the lowest band). The bills are payable even when the building is empty, although they drop to 50% of a full bill once the property has been empty for more than 6 months.
Insulation and Damp-Proofing
The more you insulate a building the easier and cheaper it is to heat, so investing in good insulation will save costs in the future. Insulation should be added to the interior of a single-skinned building between the original structure and the plasterboard interior. Although this can reduce the living space slightly, it will make the new room much more pleasant to spend time in, making it warmer in winter and cooler on hot summer days.
Damp-proofing will also make the room or building much more pleasant to spend time in, and will help to stop problems such as mould and rising damp developing inside the building. A damp course should be installed during the construction of the inner layer of the building. For timber structures a concrete base with a damp proof membrane can be used, or perhaps the wooden structure can be raised off the ground on blocks with a slate barrier in between the two materials.
Water and Plumbing
If you are planning to use your converted outbuilding as an annexe, studio or home office it will be very useful to have running water or a bathroom. This means plumbing into the drainage and sewerage system, a job that is better left to professionals unless you know what you are doing.
You will need to use a blue plastic water pipe buried under ground, and it will have to be connected to the mains supply somewhere near the stopcock for the main property and have a separate isolating tap. It will be important to install the drainage pipes at the right gradient and connect pipes properly to the correct system.
If you are installing a sink for occasional use you might be able to send the wastewater away with the downpipes the gutters feed into, but in that case you will have to be very careful only to use organic biodegradable soaps and detergents.
Whatever you decide to do will have to comply with building regulations, so check the rules before you install your plumbing.
Installing electricity and heating can make a big difference to ways you can use your conversion. In most parts of the UK you will have to employ a qualified electrician to do the work. Before you start, think about the lighting and electrical needs might be (depending on how the building will be used) and estimate the socket points and lighting that you think you will need. Your electrician will estimate the cost of wiring and installation of the system.
You can choose to do the preliminary wiring etc. yourself, locating the sockets and switches where you think you will need them, but if your electrician disagrees with the location of power points or objects to the quality of your work you could waste time and money getting it fixed.
If you don’t want to connect your electricity supply to the grid, you could use solar panels to power lighting and small electrical goods. Whether you choose to use systems like these depends on how much electricity you will need and whether you will need to use the system all the year round. Solar panels may not be as reliable for producing long hours of electricity and lighting in the winter months, but they may provide all that is needed during the summer.
Unless your outbuilding is next to your house, you will be unable to extend your central heating system to include your conversion. In this case you could choose to have a portable heater to top up in the winter months, such as a fan heater or an oil-filled radiator. It might be possible to install a wood-burning stove, but you will have to consider the fire risk, especially if the building has a wooden structure. The better insulated your building is, the easier it will be to heat and keep warm.
If you are considering using solar panels to provide heating in your outbuilding, remember that light can only provide heat during the day. This kind of system will work well during the long days of late spring to early autumn, but will not work during the winter months. If you do want to use a solar panel-based system, the best way is to use fluid-filled solar panels that circulate heated water through under floor heating pipes. If the floor is thick and well insulated it will retain the heat well and provide heat for an extended period of time during daylight hours. No matter how you decide to heat your conversion, remember it will have to comply with local building regulations.