Buy to let in the UK

Credit crunched, mortgages squeezed, investments wobbling... there's no shortage of reasons to feel nervous about the property market. But two professional property investors are feeling good about the future.


"The market is the best it's been for four years," says Rob Moore who, with his business partner Mark Homer, runs a property investment service, www. progressiveproperty.co.uk and is co-author of The 44 Most Closely Guarded Property Secrets, which aims to demystify property investment.

You may think Moore and Homer's upbeat stance is propaganda. But Moore tells me that in the 11 days leading up to our interview the pair have agreed sales on 10 properties. He is confident that they can still profit in hard times.

For a property investment service to be sending out such positive signals now is rare. Even Inside Track, which grew to be one of the biggest and persuasive of all the property clubs that sprung from the bull market, has called a halt to its hype-fuelled seminars.

"I'm not wholly surprised that Inside Track has stopped its seminars. Their investment model was built around buying off-plan, buying new-builds and buying overseas. Yields for those kinds of properties are down. With newer properties, the rent vs value ratio is lower," says Moore. "Mark and I jointly own 35 properties, 90 per cent of which are in Peterborough. Our rents were up between 18 and 20 per cent between October 2007 and March 2008."

Moore concedes that he benefited from a restructuring of the way in which public housing tenants' rent was paid – a one-off boost. But he says there are areas across Britain that are performing well. Moore quotes a paragraph in Mortgage Express's Buy to Let magazine, in which a spokesperson for the London-based Winkworth estate agency states that tenants renewing their agreements face increases of 5 to 10 per cent on a year ago, and that new occupants face rises as high as 20 per cent.

"It's logical," Moore adds. "When prices are coming down, there are fewer buyers but more people starting to rent. Therefore rental demand goes up, leading to a forced rental growth. It gives you the ability to charge higher rents.

So what makes his book different from the others out there? "Ours is the only property book that sets out a system showing you how to make money from property investment." But why would they divulge these potentially lucrative secrets? "Most other books are conceptual," he continues, "but we wrote ours to show readers that we are the experts and this is how you do it. If you don't make these mistakes and follow these rules, you will make money."

Sounds like there's got to be a catch, but Homer and Moore have written about their own experience of investing that's yielded a very successful business. And it's not all founded on grand, expensive gestures.

"The long and short of it," reveals Moore, "is buy small places under the stamp-duty threshold where the rental market is strong or growing. There's homework to be done, but if you trust us and stick to the rules, you'll be making £10k to 15k per property per year. When we started," he says, "we tried everything to see what worked. New-build, off-plan, overseas, but they were all a struggle. We also quickly realised that instead of having 50 properties scattered around, it was better to have 50 within one mile. It became much more manageable and contained."

"We operate in Peterborough," adds Homer, "but our model can be and has been applied anywhere in the country. We've built up relationships with all the local agents and we make 40 to 50 offers a week on properties. They know we will never pull out once we've made an offer and that the purchase will be quick. We've built up a high level of trust."

Estate agents' trust is one thing, but how do 50 cheeky offers a week translate into a growing property business? "Most offers are turned down, but one in 10 sellers doesn't have price at the top of their priorities list, because of their circumstances. That's where we make a potential 10 to 15 per cent saving. We'll then refurbish the property, taking care that every £1 we spend will add at least £3 of value.

"We'll then have the property revalued and refinanced," continues Homer, "allowing us to get our outlay back and benefit from 8 to 10 per cent gross yield in rent. It's far better now than it's ever been. Yields are working, rents have soared... it's the best it's been for four years." Ah, there's that statement again.

How do they pinpoint an area and type of property to buy? "We look for a town on the up but target low- to medium-income areas, as these will have more of a rental culture," says Homer. "Look for regeneration and investment. This could be expanding stations, a new hospital or jobs being created."

"New-builds and off-plan homes carry a built-in premium and are more difficult to cover with rental income. Stick to one- or two-bed properties in period conversions or ex-local authority. We've found these typically have voids of less than a week per year, and tenants tend to stay put rather than see the property as a stepping-stone."

Profiting from property is never a no-effort game, but Moore and Homer's book stops it seeming an unapproachable venture.

Trade secrets: how to make money in a falling market

1. Become an expert in your area
Once you've chosen an area, get to know it thoroughly. Use websites such as www.rightmove.co.uk to gather information, sticking to one- and two-bedroom properties at the lower end of the market. Get to know all the roads, streets and properties. Allow it to become your obsession.

2. Offer, offer and offer again
Put in offers on 90 per cent of what you view, and offer at least 10 per cent below the asking price. Expect that 95 per cent of the offers you make will be unsuccessful, but move quickly once an offer is accepted.

3. Make friends and influence people
Make the local estate agents your best friends. Buy them a drink, send them a bottle of champagne when you complete on a property they introduced you to, and make sure they ring you first about anything new that they are instructed to sell.

4. Know your enemy
Get to know the local lettings market inside out. Speak to the agents, find out about the areas with high demand for rented accommodation, and how much these rentals fetch. Find out how many properties the agents manage. Discover if the owner of the lettings agent also invests, and if the answer is yes, find out where those properties are located.

5. Stick to the rules
Look for smaller, cheaper properties under the stamp duty threshold, in areas where rental demand is high (so the property will hopefully be left empty for shorter periods between tenants) and yields are high, too – period conversions or ex-local authority flats are often best for this.

http://www.independent.co.uk/life-style/house-and-home/property/is-buytolet-really-dead-817825.html