Take a step on to the new property ladder
Buyers, sellers, investors and even ‘spotters’... all can be winners in an ever-changing market
THE route to home ownership is often expensive, stressful and for some out of reach. But there are new opportunities for property seekers – whether the plan is to buy, invest, make money or save it. Here, The Mail on Sunday looks at the deals on offer, from vouchers for spotting empty properties to purchasing a buy-tolet with hundreds of strangers.
BUYING A HOME
TOMORROW night sees the launch of yet another television programme about home ownership.
Called ‘Honey I Bought The House’, it will go out on entertainment channel Watch and will pit a couple looking to buy their first home against each other.
They will be given £15,000 towards their deposit and a three-week deadline to secure a deal. But, in a twist designed to cause friction and disagreement, only one of them will be able to search the market, undertake viewings and make the final decision on what home to purchase.
If the other half doesn’t like the property chosen, they will lose the deposit. The first episode features Paul Hopkins and Sophie Riding.
There are far less nail-biting routes to home ownership. A more boring but prudent approach is simply to save.
From the beginning of December, people who want to buy their first home will be offered a special savings account to help them achieve the deposit they need.
For every £200 a month squirrelled away into a ‘Help to Buy’ Isa, the Government will add £50, up to a maximum £3,000 for £12,000 worth of savings. Couples buying together can have one account each.
It will be available to first-time buyers of properties worth up to £450,000 in London and £250,000 elsewhere. Help to Buy, the Government’s flagship home ownership scheme, currently allows people to buy a property with just a 5 per cent deposit. But a new scheme from company Joint Equity is being launched tomorrow to give those who rent privately a leg up on to the property ladder.
It is targeting ‘reluctant renters’, retired people who are renting and divorced or separated tenants.
Buyers need to put down a 5 per cent deposit on a home worth up to £250,000. They then obtain a mortgage to fund 45 per cent of the purchase price via Joint Equity’s panel of approved lenders.
The remaining 50 per cent will be funded by a Joint Equity loan, priced initially at 6.2 per cent fixed for three years.
Joint Equity says it will not take on a buyer if the combined monthly cost of the mortgage and its loan is £100 or more than what the borrower would have paid in rent.
Lenders involved in the new scheme are Buckinghamshire Building Society and Kensington Mortgages, but more are expected to join. The Joint Equity loans will be raised from private investors via mini-bonds who will receive an initial annual income of 4.5 per cent, fixed for five years.
The bonds are not covered by the Government-backed Financial Services Compensation Scheme and are likely to appeal to sophisticated investors or high net worth individuals.
INVESTING WITH STRANGERS
CROWDFUNDING is the new investment craze that marries businesses in search of funds to savers looking to obtain a decent rate of income.
It has now penetrated the buy-to-let market, enabling people to enjoy returns by investing as little as £50 in rented properties. Property Partner, Property Moose and Property Crowd have all enabled people to do this.
Lending money through crowdfunding – often known as ‘peer to peer’ lending – is not without risk or a downside.
Swedish ‘peer-to-peer’ company TrustBuddy, has just had to suspend operations as a result of the misuse of clients’ money.
But companies offering this type of investment in the UK – with business usually transacted via the internet – are regulated by City regulator the Financial Conduct Authority. And demand for this type of investment is strong.
Property Partner has revealed that from among dozens of offers on its books it has nearly 1,000 investors with individual stakes in a single flat in Whitechapel, East London. All of the company’s listed properties are let out to tenants, and the rent they pay forms the return paid to investors.
Investors effectively become landlords, but purchase arrangements and ongoing property management is handled by Property Partner – for which a 12.6 per cent fee is taken from the rental proceeds. There is also a 2 per cent initial fee when an investment is made.
The t wo-bedroom flat in Whitechapel pays investors an annual income of 2.35 per cent, after fees and taxes.
Investors can exit after five years with their share of profit or loss determined by the flat’s market value. Or they can sell earlier on a secondary market if there are oth-
ers who want to buy. The average sum invested is £522, while the maximum from one customer is £25,000. Most have invested between £50 and £250.
The oldest investor in the Whitechapel property is 83, while the youngest is just 19 and the average age is 38.
All had to declare they understand the terms of their investment before being allowed to part with their cash – because of the risks involved.
One of the thousand ‘landlords’ is Ben Wakeham. The 25-year-old insurance underwriter lives in Kensington, West London, an affluent location where he says he would probably need 20 years’ worth of savings if he wanted to purchase a buy-to-let property on his own.
He was looking for an opportunity that would complement his cash savings and stocks and shares investments when he noticed Property Partner’s offer.
Ben has invested £5,000 in two properties. Back in January he invested £2,000 in a third house in Croydon, South London. But he recently sold his stake on the company’s ‘secondary market’ for an extra £600 – a 30 per cent return.
Dangers of a ‘property market bubble’ was something Ben took into consideration before parting with his cash, but he hasn’t put all his eggs in one basket and says stocks and shares are no less risky anyway.
He adds: ‘I had always thought of Volkswagen as a pretty reliable company to invest in, but its shares have fallen sharply as a result of the diesel emissions scandal.’
SAVING MONEY ON SELLING OR LETTING
CONSULTANT neurologist Claire McCarthy sold her three-bedroom detached home in Cambridge after seven days and 12 viewings – and for £20,000 more than the original asking price.
But it was not a hot-shot estate agent eager to earn a big fee who secured the sale.
Claire and husband Scott, both 36, enlisted the help of online estate agency HouseSimple and paid £695 – saving themselves more than £6,000 compared to typical fees charged by high street agencies.
The fee included professional photos, advertising on major property portals such as Rightmove, sales management, a ‘for sale’ board and an energy performance certificate.
Viewings were requested and then approved by the McCarthys via HouseSimple’s online booking system.
The couple showed potential buyers around the property although they could have got HouseSimple to do this for an extra fee.
Claire says: ‘At first I was concerned about handling the viewings myself. But it turned out to be a good thing because Scott and I know our home better than anyone else.’
Online estate agents have yet to dominate the market but are becoming more popu- lar. Other brands include Tepilo – the brainchild of TV property guru Sarah Beeny – eMoov, My Online Estate Agent and Purplebricks.
Landlords too can save big money on letting agent fees.
Jonathan Monjack, chief executive of The Happy Tenant Company, a lawyer by trade and a landlord himself, says letting agents need to be brought into line. He says: ‘They can charge anything between eight and 12 per cent of the annual rent as a finder’s fee. Some even charge a renewal fee on the anniversary of a tenant moving in.
‘Then there’s the fee for being on the end of the phone to deal with complaining tenants.’
His company was formed by a group of landlords who had all experienced poor letting agent management and high fees.
He says: ‘The aim is to make tenants happy, leading to happy landlords, with all work and fees set at a fair rate.’
It uses scale of business to get fair rates from contractors and has a list of recommended, trusted and insured professionals, such as builders and plumbers, that it uses.
Local letting agents are hired to find tenants, something Monjack says they are good at doing but overpaid for.
He says there is a tenant finder’s charge of around 5 per cent with no renewal fee.
The Happy Tenant Company charges a fixed annual fee and then any repair or administrative charges are levied at cost. So, when a plumber is called to fix a leak, the landlord pays exactly what is charged for the repair. Fees depend on weekly rental income. Landlords receiving weekly rent of up to £400 pay £750 excluding VAT for the year.
Weekly rent of between £4,001 and £5,000 means an annual fee of £5,550 excluding VAT.
The company helps landlords in the South East and predominantly London, but has plans for expansion.
For help in finding a reputable company that will manage accommodation, visit the website of the Association for Residential Letting Agents at arla.co.uk.
Its members all belong to an independent redress scheme in the event of a dispute and they adhere to minimum standards set by the organisation.