I’m going to do something a little bit different today, because I’m going to dissect an article, which was published on the front page of a well-known tabloid newspaper a couple of weeks ago, because it’s all about the property market. It’s quite unusual for a national tabloid to devote the frontpage to a property article.

Now, it does happen sometimes. The Daily Express, for example, quite often has articles about the property market. While I say quite often, regularly is perhaps a better way of describing it. Once every 3 or 4 months, The Daily Express will often have an article about the property market. Generally speaking, depending upon what’s happening in the world and in the economy, it happens to be quite a positive article. Now, this is a different tabloid. I’m wondering, if I should name it. Okay, well, you’ve twisted my arm, it’s The Daily Mail. On August 16th, The Daily Mail rant a sort of a shock horror, “The Property Market Is About To Crash” type article on the frontpage. We’re going to look at that. We’re going to dissect it. We’re going to think, are there actually grains of truth in this, or is it just hyped? Because the interesting thing, is that, The Daily Mail is much less likely to write an article on the frontpage than The Daily Express. 

So, I’m just wondering why they did that. The answer, is probably, because it was published on August 16th. If you think about that, that’s the height of the silly season. The silly season is when all the Politicians are away on holiday. Nobody is really arguing about Brexit. Donald Trump’s probably been a bit quiet, and hasn’t twitted very much recently. The journalists who aren’t on their summer holiday, who are left in an almost empty office to keep the show on the road, and to keep pumping out newsprint, are looking around for something to publish. What do they see? 

Well, it was a report by the Office of National Statistics all about the property market. Very, very interesting. Because the thing which strikes me, is, it’s interesting, isn’t it, how we can take the same statistics, but give them a completely different spin, depending upon our mindset, and depending upon perhaps even our political leaning. Because all of the newspapers definitely have a different political leaning we know that. But it’s also evident when they talk about properties. So, for example, The Guardian, which is quite left leaning doesn’t like landlords. The Daily Express as I say, is usually quite positive and encouraging the property market. The Daily Mail in this particular instance, was quite negative.

So, let’s have a look at the article. This is on the front page. As I say, this is their prime real estate in terms of newsprint. So, they obviously want to make a bit of impact with this. It says, As Property Sales Fall Across The UK, Are House Prices Set To Take A Tumble? A big dramatic headline, is, the body of the copy. Fears are growing that Britain’s once red-hot property market has run out of steam. A string of indicators yesterday triggered warnings, that it could be heading for a correction, or even a crash. Oh, my word, gosh? Prices in London are falling at the fastest pace since the financial crisis! Really, okay. Well, we’ll certainly look at that. But the declines are not limited to the capital. Houses are also losing value across the North East as well as in towns and cities such as, Winchester, Oxford, Wycombe and Blackpool. Pockets of Devon, Derbyshire, Lincolnshire, Hertfordshire, Berkshire, Staffordshire, Cumbria and Surrey are also affected. 

My word, I wished I’ve stayed in bed this morning. The number of property sales has also tumbled, by as much as 65 percent in some areas as buyers worried about rising interest rates baulk at the ‘silly money’ demanded by sellers. House prices have enjoyed almost a decade of strong growth since the financial crisis, but experts fear that this has left property overvalued. Estate agents said prices are now being cut to tempt buyers back in, particularly those worried about rising interest rates as they struggled to raise enough money to secure a mortgage. 

Reuben Young, Director of Priced Out, which campaigns to make housing more affordable said, there can be no doubt that we are in a bubble. Okay, Reuben, there is no doubt. We’ll take your word for it. We might look at that a little bit closer though. People buy housing not just for security, but in expectation that prices will rise in the future. At some point, the bubble will burst. But in a warning to first time buyers hoping to take advantage of lower prices, he said that the fall seen so far does not mean it’s bursting now. It’s a very interesting point. 

A report by the Office for National Statistics and Land Registry yesterday showed:

  • Overall UK house prices rose by only 3 percent to £228,384 in the 12 months to June – the slowest increase since August 2013. 
  • London prices fell 0.07 percent, or by £3,400 to £476,752. I say that again, £476,752, the sharpest decline since September 2009, when the UK was in deep recession in the wake of the financial crisis. Interesting, £3,400 on a £500,000 property is the sharpest decline since 2009. Very interesting.
  • Prices fell by 23.8 percent or £220,000 in the City of London. 13.9 percent or £187,000 in Kensington and Chelsea. 12.1 percent, or £132,000 in Westminster. 
  • Prices were also down year-on-year in the North East, by 0.6 percent, or £825 to £127,271. 
  • There are also falls of 5.3 percent in Purbeck in Dorset, and 4.9 percent in South Buckinghamshire. While home owners in Winchester, Wycombe, Stroud, Oxford and Blackpool saw declines of between 2 and 3 percent. 

Experts warned that prices have risen too far in parts of the country, resulting in a dramatic collapse in a number of sales as buyers are put off by sky high asking prices. Many sellers face with demands to cut their prices have refused to do so, instead withdrawing their house from the market. Again, a very interesting point actually. 

Across England, the number of transactions fell 19.3 percent between April last year and April this year. Sales were down 13.9 percent in Wales. A similar amount in Northern Ireland, and 9.4 percent in Scotland. But in parts of the UK, the falls were even more dramatic. In Newham, in London, they were down 65.6 percent. A shortage of supply has helped prop up prices in some areas as a large number of houses hunters chase unlimited number of properties. A crucial point. Experts warned that when sellers accepted the market has softened, and are willing to accept lower prices, a flurry of homes coming onto the market could push prices down further. 

Howard Archer, and let’s face it, they always will borrow Howard out, didn’t they, to comment on everything. Howard Archer, Chief Economist to the Ernst and Young ITEM Club said, the downside for house prices is being limited by shortage of houses for sale. If a significant amount of supplies starts to come on to the market, you would expect to take away some of the support for prices. Lee Pendleton, Founder Director of Independence Estate Agents James Pendleton said people have been asking for silly money. Sellers need to be realistic. If a house is not selling, it is usually down to price. In South West London, where we operate, house prices rose 180 percent in 10 years. It’s insane!

Separate figures from the UK Finance revealed that there has been a sharp fall in the number of landlords buying properties. Let me just repeat that. Separate figures from the UK Finance revealed that there has been a sharp fall in the number of landlords buying properties. Some 5,400 buy-to-let mortgages were completed in June, down 19.4 percent on the same month last year. Both the Government and the Bank of England have launched clampdowns on landlords in recent years through higher taxes and tough lending rules. Paul Smith of Haart Estate Agents said, areas of the market are suffering. Government Policy on buy-to-let is clearly having a detrimental effect. But he added, the UK property market remains buoyant. Middle England is thriving. 

So, that’s the end of the article. There we are, at the very last paragraph of this doom and gloom article actually, finishes on quite a positive note. It says the UK property market remains buoyant. Middle England is thriving. Now, contrast that with the headline, which is, Are We About To Have The Mother Of All Crashes? There we go. this is the press for you, isn’t it? It’s a very interesting article though.

So, it starts out suggesting the whole market is completely bombed, isn’t it, and that we’re heading for this horrible crash. But actually, there’s not a lot in there to support this. So, there’s interesting phrase like, Reuben suggests that we’re definitely in a bubble. He also, sort of, said that, as if that’s just taken for granted, taken as red, is a bubble. We’ll come back to that. But one of the things, which I thought was very interesting, which did come out through this article, is the fact that, there is a shortage of properties in the market at the moment, and that’s supporting prices. 

This is one of the things, which we’ve seen since the credit crunch I think, that there’s been a scurrilous game of cat and mouse, between buyers and sellers. The reality seems to be that many people who would have sold house and moved perhaps, prior to 2007 have decided that they’re going to stay put, and they’re not going to move, and they’re going to improve the property therein. You’ll see, if you look at the figures for finance, for example, the number of re-mortgages has gone up, because people are re-mortgaging their homes to undertake, well, get finance their home alterations and improvements rather than selling properties, and taking out new mortgages to buy new properties. That seems to be the case. 

Now, one of the things, which this article does highlight, is, the fall in values for the very, very top values stuff in London. It talks about properties in the City of London, and Westminster, and Kensington and Chelsea, where hundreds of thousands are being knocked off the price of a property. But the reality, is that, probably hundreds of thousands being knocked off properties which worth multiple millions. So, as a percentage of the asking price, it’s probably not a lot. I mean, it’s obviously to you and me, it’s a fair chunk of change, but in terms of the actual overall value of the property, it’s probably not telling us an awful lot. You’ll probably expect that, there are fairly niche markets with only a limited number of buyers. If there’s only a handful of properties sold in a month, that probably distorts the market. You could easily see that, if in an extra few properties were sold next month that could distort the market, in the way they could go up disproportionately. It’s a bit of a strange market. You certainly couldn’t put behind your hat on that, as being evidence of anything within the property market. 

But what I think, is happening here, is that, as so often happens, I mean as I’ve said right at the beginning, The Daily Mail, they’ve got to sell papers. They’re trying to be a bit dramatic. But it’s a very London-centric view, isn’t it? Because, if you look at the property indices, which I would say, produce the best evidence, and if you’ve been to the Masterclass, you’ll know which one I’m talking about. I’m not going to talk about it now. Come to Masterclass. But there’s a particular index, which I love, because it’s one which is used by valuers and bank valuers. Interestingly, that came out today. 

One of the reasons why I wanted to record this podcast today, is because I wanted to look at that index, to see what’s actually happening. Because it’s a monthly index, and it shows values across the whole of the country, but not regionally. It actually talks about specific towns. If you look at it, it’s quite clear what’s happening. London is taking a breather. But outside of London and the South East, probably the rest of the country is pushing on particularly, in the Midlands and the North. That’s classic of what happens with the ripple. If you understand the ripple, you’ll understand what I’m saying. Because ripple theory is this: London values go up, and then values ripple out from London, and the value of properties increases almost in a line coming out of London. Over time, that line moves across the country from North up to the north, and values increase in the wake of that. It’s a bit like literally, dropping a stone in a pond, and seeing it ripples out, or the stone would sort of drop on London and the ripples, the values ripple out of London, and they wake up. I’m sure you understand what I’m trying to say.

That’s what we’re seeing, because values in the North, values in the Midlands are still pushing on. I invest up in the North East so I’m particularly interested in what is happening in Newcastle. According to my favourite index, and this isn’t why it’s my favourite index, by the way, because I had to take bad news as well as the good news. But the good news, is, this month it’s reporting that values are not only going up in Newcastle, but they’re actually going up slightly faster than they were last month. So, we’re not seeing this sort of rush towards a crash. We’re seeing outside of London, things were actually doing pretty well. But I thought it would be interesting to contrast that article with the one produced by the RICS. 

So, I have in front of me the July 2018 UK Residential Market Survey produced by the RICS, The Royal Institute of Chartered Surveyors, my eminent body of which I’m a member. If you want to find it, you can Google it. Just Google RICS UK Residential Market Survey. You’ll find not just the one for July, which is the latest one, but you’ll find back copies for previous months, which you can read, should you wish to. Anyway, the July one has a headline of “Landlord Instructions Fall As Rent Forecasts Edge Up”. So, let me just go through this. As I go through them, I’m just going to highlight some other points, because I thought it will be quite interesting to contrast this, which is kind of be like, with that one, it sounds naughty, but the professional viewpoint, which we can contrast with the sort of the media hype. So, this is what the RICS say..

They say, the most striking feature of the July 2018 RICS Residential Market Survey is the worsening trend in new instructions in the letting sector. This was something that was highlighted in the June Report on the basis of monthly non-seasonal adjusted data. However, a broadly similar pattern is visible in the preferred indicator. Whatever that means, it basically is saying, that the number of New Instructions in the letting sector is going down, less landlords. We’ll come to that. The results show that New Landlord instructions in the latest 3-month period has slipped to a net balance of -9 percent. This is the 9th consecutive quarter, in which this indicator has recorded a negative number, albeit only modestly on some occasions. This pattern is symptomatic of the shift in the mood music in the buy-to-le market in the wake of tax changes, which are still in the process of being implemented. Significantly, the drop in instructions is evident, in virtually all parts of the country to a greater or lesser extent. 

So, what they’re saying, is, they’re saying basically the number of landlords bringing properties to the market has decreased quite significantly, since the Government start to bring in the tax changes. What tax changes? Well, it’s our old friend, Section 24, which is stopping us from offsetting mortgage interest against our rents when we’re calculating our income tax, if we own properties in our own name. Also, of course, stamp duty. Now, if you think back to The Daily Mail article talking about the big falls in the London prices in that little inner ring, at the most central part of London, which is Westminster, Kensington and Chelsea and the City of London. That’s where the changes in stamp duty is going to have the biggest effect, isn’t it? Because that’s where the highest value properties are. So, that’s no surprise. The RICS are confirming that, that and Section 24 are beginning to bite in the investment market and the buy-to-let market overall. 

Let’s carry on with what the RICS have to say. While the implication of this feedback, is that, the supply of fresh rental stock of the market is increasingly constrained, the Tenant Demand indicator remains resilient. So, well, you’ve got an imbalance. The number of properties to rent out is diminishing, but we’ve still got a very strong demand from tenants. The upward momentum in the latter appeared to have slowed in recent quarters. But the numbers remain in positive territory at the headline level, +11 percent in the latest 3 months’ period. One consequence of this imbalance, is that, expectations for rental growth appear to be strengthening once again. Over the next 12 months, rents are projected to increase by a little short of 2 percent nationally. But the shortfall in supply pipeline is more visible over the medium term with a cumulative rise of around +15 percent expected by the middle of 2023. East Anglia and South West are viewed as likely to see the sharpest growth over the period. So, there we go.

So, in the short term, because of this imbalance between the number of properties coming onto the market, but with strong tenant demand, they’re expecting +2 percent, an increase in rent of +2 percent as an average across the country. But over the next 5 years, they’re expecting a 15 percent increase in rents. Now, here’s the thing. If rents are going to go up 15 percent, what’s that going to do for property values? Because the two can’t be in isolation, can they? It’s very hard to imagine it. So, all good stuff. If you’re thinking about, if is this the time to be in property? Well, maybe that’s suggesting, that now is the time to be in property. Very interesting that the RICS are highlighting that the Government measures to try and disincentivise buy-to-let investors. It’s clearly beginning to work. Let’s carry on.

Turning to the sales market, the underlying message is a little different from that reported in June. The headline price balance edged up from +3 percent to +4 percent in July, following two months when the results were very slightly negative. There we go. The Daily Mail, you haven’t mention that at all. The RICS is saying that actually far from being in a position, where prices and values are about to fall, they are actually edging up. They’re edging up more quickly. They’ve gone from +3, +4 percent. Okay, it’s not great shakes. But it’s certainly not indicative of an imminent crash, is it? It’s actually going the other way. Meanwhile, the Newly Agreed Sales net balance remained close to zero for the 4th month in succession. These results are consistent with a broadly stable housing market when viewed through the prism of the national perspective. 

There we are. The RICS aren’t predicting a crash. These are the people who own the estate agencies. These are the people who are out doing valuations for mortgages. They’re saying that the market is actually broadly stable. That’s very interesting, I thought. As we’ve highlighted previously, the feedback to the RICS Survey continues to suggest a stronger market in Scotland, Northern Ireland, much of the North of England, the Midlands and Wales. There you are. That’s the ripple effect that I was talking about. Outside of London, things are doing pretty good. Thank you very much.

The London Price balance was little changed over the month at -40 percent. But it does represent a shift from the reading of -66 percent in April. Now, to better explain, that’s not saying that prices in London have gone down 40 percent. It’s just saying that 40 percent more surveyors expect to see a price fall than a price increase. But that’s less than we’re expecting a price decrease in April. So, if anything far from concurring with The Daily Mail, the RICS are actually saying things are coming back in London a little bit. So, there we go.

It’s perhaps no surprise that as speculation built ahead of the August Bank of England meeting, which was to see a quarter point rise in base rates, the headline New Buyer Enquiries series was a little changed over the month with a net balance of +2 percent. The New Instructions measures similarly signalled a flat picture of following 2 months in a row of very modest increases. We acknowledged last month, harbouring some doubts as to whether the pipeline of new supply into sales market would continue to improve in the light of the feedback received on appraisals being conducted by valuers. For the record, the appraisal balance in July, was once again firmly negative. As a result, our judgement is that the average inventory on the books of the estate agents, is likely, to remain close to historic lows. Let’s say that again. As a result, our judgement is that the average inventory on the books of the estate agents, is likely, to remain close to historic lows. The impact of this is visible, in both of the 12 months’ sales and the price expectations, while the former recorded a reading of -7 percent, is most negative number since October last year. The latter was much firmer at 25 percent. 

So, what are they saying in all of that? Well, they are saying, despite the fact that The Daily Mail are telling us, that buyers are scared, because of interest rates. They’re saying that actually, the number of buyers went up slightly only by 2 percent. But this going is into positive territory, not negative territory. So, there’s slightly more buyers out there. But because the number of new properties in the market hasn’t increased, they’re expecting that prices are going to increase. The net balance of the price expectation graph is +25 percent. More surveyors expect prices to go up than there are surveyors expecting prices to go down, in other words. The RICS, putting it crudely, are expecting prices to go up, because there’s slightly more buyers, and there’s no extra sellers. We continue.

Each quarter an additional question is inserted into the survey in an attempt to capture the trend in the gap between asking and sale price. The latest set of results tell a broadly similar story to that seen in April, and generally, reflects of regional skew in the performance of the housing market. So, for properties put on the market at a price in excess of £1 million, roughly one in 10 are sold at a discount of more than 10 percent. Okay, that’s what The Daily Mail are saying. Those are really high value properties in London, taken a bit of a hit. The RICS are saying that properties, which worth more than £1 million, expect to have to discount the price by 10 percent to get them sold. Actually, that’s not an unusual thing, because there are far fewer buyers at that level. But obviously, one of the things, which we’re struggling with, is, with this whole stamp duty, in which we’ve already alluded to.

In addition, around 3-quarters of survey participants cite there being some negative gap between the initial asking and an eventual sale price. For properties put on the market between £0.5 million and £1 million, the comparable numbers show only 2 percent of respondents seeing prices achieved coming in more than 10 percent below asking although a still sizeable 62 percent contributors report sales prices coming in below the initial asking price to some degree. 

So, basically, what they’re saying, is, they’re saying that between £0.5 million and £1 million, you’re going to have to discount a little bit, but not nearly as much as for the properties over £1 million. You’re going to have to knock a little bit off, but it’s not going to be the 10 percent that you’re going to have to knock off, if you’ve got a property of more than £1 million. 

Meanwhile, and this is probably, most of us are going to be interested in. Meanwhile, for the mainstream market, which is, homes priced under £0.5 million, the largest share of respondents noted asking and sales prices being at the same level. The same level! Significantly, the feedback in this area of the market actually shows one in 5 properties with a completion price, above the asking price. 

So, there you are. Daily Mail, certainly no evidence of a crash in that. So, what are they saying? Well, if we sort of pick out some of the main headlines from that article, they’re saying it’s a relatively stable market. It’s doing better in the Midlands, and the North, and Wales, and Scotland than it is in London. If the properties are below £1 million, you’re probably not going to have to discount them, because there are more buyers. There has been no increase in the number of sellers, which means that it’s kind of a sellers’ market in a way although the buyers may disagree with that, because we’re told there’s not that many buyers. But there’s enough buyers for there to be a slight imbalance, which means, that prices are stable, and that below £1 million, you probably don’t have to discount. You may even be able to get more than the asking price. 

So, there we are. That’s what the professionals think. I thought it’s very interesting just to contrast that with the article in The Daily Mail. If anything, it just proves that you need to know what you’re talking, and get your own information. Do your own interpretation. Don’t let The Daily Mail, or the press, or anybody else interpret the data for you. Don’t let me interpret it for you. You get your own data. You come to your own conclusions. But certainly, don’t just read the headline, and think, ah, that must be true. Because when you start digging into it, there’s an awful lot going on, which isn’t reported, and which isn’t said unless you go to the right sources and information. 

So, I recommend that you perhaps, get a hold of the RICS Residential Market Survey every month, just to keep an eye on what they’re saying. Because, whether you agree with them or not, what they’re saying is going to be clouding the judgement, or influencing the judgement of valuers who are going out to value your properties, if you’re applying for mortgages. If you’re wondering why you’re being down valued, you’ll find it in here. If you’re wondering whether you’re going to get a more positive valuation, you’ll find it in here. So, it’s always good to see what they’re thinking.

Peter Jones

Peter Jones

Peter Jones is a Chartered Surveyor, an author and a serial buy to let property investor. He has been involved in property for over 30 years having graduated from the College of Estate Management, Reading University, and then qualifying as an Associate member of the Royal Institution of Chartered Surveyors in 1983, before being elected a Fellow in 1992.

By the age of 35 he was a Salaried Partner in a well respected firm of Chartered Surveyors, and was managing partner of their West End of London Office. His specialty was commercial property but during the recession of the 1990’s his specialisation became redundant, and so did he.

Peter Jones

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What Questions Must a Real Estate Investor Ask While Finding Hard Money Lenders?

Finding Hard Money Lenders

Finding hard money lenders is easy, but they aren’t all created equal and it’s very important to be selective.

In order to do your homework, these are the key questions you must ask when seeking out a hard money lender and submitting your loan application:

1) How Much Experience Do You Have?

Make sure you choose an experienced hard money lender for your project. With an experienced lender that has been in business for years, they understand the cyclical nature of the industry. These individuals can suggest an appropriate loan for your real estate investing business, including some advice on avoiding potential risks and pitfalls in your business.

2) Are You a Licensed Lender?

If a lender is licensed and State approved, that individual is bound to follow state mandated rules which provide customer protection. Their website must display their license ID, which can be researched on the licensing state’s website. One example is the Texas Real Estate Commission website, which allows you to check the licenses of Texas real estate lenders.

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3) Can You Show me Your References or Testimonials?

A good hard money lender should not hesitate to show you the reviews and testimonials by his/her previous clients. These reviews are often on  lender’s own website, but better reviews can be found from third party sources. Considering the lender’s length of time in business, if he or she doesn’t have enough satisfactory reviews, you should be on high alert.

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4) How Do You Fix Your Interest Rate?

Generally, hard money interest rates are determined by the property type, risk analysis, and your credit rating. Hard money loan interest rates are higher than bank rates and range from 8% to 18%. There is greater flexibility in hard money loan rates and you should keep this in mind when you negotiate with the lender.

5) How Fast You Can Approve My Loan Application?

Hard money lenders are known for their quick approval of loans as they have very few requirements. The lenders approve loans within a week (or in some cases, the same day) if they determine you’ve provided satisfactory information. Asking about the lender’s funding timeline, and indicating your own need,  is crucial when you want to close the deal on time to increase your cash flow. Providing proper documentation, project status, and a solid exit strategy will improve turnaround time on this approval.

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6) How Much Loan to Value (LTV) Can You Offer?

Since property values are the key driver of a hard money loan’s value, it’s important to talk about the Loan to Value (LTV) on your investment. The LTV is the funding amount a lender provides on the basis of the existing value of property. It will vary from lender to lender.

LTVs are typically lower on land, commercial property, and rural houses due to the greater risks involved in these projects. Some hard money lenders provide funds on the After Repair Value (ARV), which is the value of the property after remodeling.

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7) What Types of Loans Do You Offer?

Some lenders are specialized in a niche loan category, while others have a broad loan portfolio. If you need a loan for buying and remodeling a property, you will want to select a lender that is more accustomed to a broad loan offering. You are more likely to see success working with a lender that is more aligned to your project’s needs.

The Last Word

By asking these questions, you can get a good sense of the lender’s services and criteria, helping you to find just the right one for your investment property.

Author Bio

David Mixon, owner of Loans 4 Investors, has been in the real estate business for 20+ years. His company specializes in Private Hard Money Lending for Real Estate Investors and Home Builders. He and his wife also have lots of fun traveling across the US in their RV exploring new markets and developing their power teams as they go! David was raised on motorcycles and it is still a huge passion of his to ride his Harley Davidson for the pure pleasure of it.

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What Do I Do When My House Floods?house floods

Dealing with the aftermath of a house flood is always difficult. It is an emotionally difficult time for everyone – both landlord and tenant. Damage from flooding only gets worse as time goes on, thus it is important to act quickly! As an owner of a rental property there are several things you should know and understand about your responsibility as you begin the recovery process. The most important fact is, home flood coverage is typically NOT included in a property policy. Flood coverage can be purchased, but it requires a separate policy and most times the flood policy requires a 30 day waiting period before it takes effect.

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Most landlords are not responsible for insuring their tenants. However, a landlord could be responsible for covering replacement of items if they are responsible for the damage. But in most cases, your tenants should have their own renter’s insurance policy to cover their belongings. Renters insurance is generally fairly cheap and something all landlord’s should recommend their tenants own.
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Landlord’s Responsibilities

  1. The landlord is responsible for the building structure itself as well as flooring, wiring, plumbing, and appliances; i.e., pretty much anything you provided to the tenant as part of their rent.[su_spacer]
  2. The landlord has responsibility to repair the unit so that it’s habitable and livable once again and this means that the repairs must be made as quickly as possible. If the repairs are not made within a reasonable time, the tenant could withhold rent, hire the work to get done, or even notify local authorities.[su_spacer]
  3. When a flood happens and you learn there is damage, immediately report the claim to your insurance company. (Please note: most insurance policies require you pay for home flood coverage separately from your regular policy.)[su_spacer]
  4. Whether you have home flood insurance or not, it will be very important to carefully track the expenses incurred as a result of the flood, including all material purchases, labor, travel, etc. If your insurance covers the flood, you will need to submit your expenses to them for reimbursement. If your insurance does not cover the flooding expenses, at the very least you will need the receipts for the next tax filing season.[su_spacer]
  5. In most states, landlords must provide 24-48 hours notice before entering the rental property; however, in the event of an emergency this does not apply.[su_spacer]

Tenant and Renter Insurance Information

  1. Renters insurance, most known for providing coverage for replacement of personal items if your stuff is damaged, ruined or stolen, also has other benefits.[su_spacer]
  2. Most renter insurance policies cover the cost of temporary relocation and normal living expenses in the event the location where the renter lived was damaged in such a way to make it unlivable. When the house floods, if the renter’s insurance policy does not specifically include home flood coverage, the damage and loss associated with flood will not be covered. Each policy has different limits and terms. It is important your tenants understand the limits of their policy. Regardless of how the event occurred resulting in damage, the landlord should encourage the tenant to report the event to his/her insurance company.[su_spacer]
  3. If the tenant has to relocate as a result of damages due to the house flooding or other significant damage, the tenant is not responsible for paying rent during that time.[su_spacer]
  4. The tenant will have the opportunity to cancel the lease at that time they are displaced due to the damages. However, they must notify the landlord or property manager soon after leaving the property.[su_spacer]
  5. If the damage does not require relocation but is a significant inconvenience, the tenant may request a rent adjustment.[su_spacer]

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[bctt tweet=”Home flood coverage is typically NOT included in a property policy. 10 things you need to know as a landlord.”]

This is a broad-level overview of the things to know about being a landlord when your house floods. Every situation will have its own nuances. When in doubt, go to your attorney, accountant, or insurance agent and get the guidance you need.

Here are some additional links that provide some good information:

What’s My Flood Risk?
What to Do When Your Apartment Floods
Post-flood Tips for Residential Landlords
What Are My Rights If My New Jersey Apartment Floods?
Natural Disasters – Who’s Responsible?
The 6 Most Important Clauses in a Landlord Insurance Policy

Happy Investing!

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illegal rental duplexThe almighty rental duplex. It’s such an attractive option for investors because you get two tenants under one roof.This reduces some of your management and logistical efforts, and increasing your rent per square foot…a 50% increase in some cases. Some rental duplexes are almost like complete units that are only sectioned off by a firewall; for example, a newer condo duplex. Other duplexes may just be a house that has been specially converted to a rental duplex. In this case, owners split off one of the bedrooms and one of the bathrooms, add a kitchen, and call that an efficiency that is able to house another tenant.


An investor, who we’ll call Tom, picks up a 3 bedroom/2 bathroom (later referred to as a 3/2) apartment in Miami and is able to rent it for $1,700 per month. This investor has a great understanding of his market and knows that 1 bedroom studio efficiency apartments in the area can rent from $1,000-1,200 a month. He decides to add another kitchen, put a wall in, and carve off a separate 1 bedroom/1 bathroom (or 1/1) unit for a second tenant. Now, he essentially just created a new unit out of “thin air” that rents for $1,150. Of course, his original 3/2 apartment is now a 2/1 apartment after the conversion.
[bctt tweet=”How to Avoid Purchasing or Rehabbing an Illegal Rental Duplex”]
What is the net effect? Well, in a larger city like Miami, you often pay a premium just to live there. In Tom’s case, the $1,700 per month 3/2 has been converted to a $1,550 per month 2/1 apartment, creating a second unit within that property.

Put it all together and you have a 2/1 for $1,550 and a 1/1 for $1,150, which adds up to the original 3 bedroom/2 bathroom house that Tom purchased. The total rent for this house, which was originally just one 3 bedroom/2 bathroom house (at $1,700), is now $2,700 per month of rent! If Tom already bought this rental unit for positive cash flow, he just kicked this puppy into overdrive. It just sounds perfect doesn’t it?

Until you realize that Tom’s unit is now an illegal rental duplex…

Why is that? Well, Tom did the conversion without notifying the proper authorities. He also didn’t ensure his improvements were fully up to code by having them inspected. You might argue that Tom was a little negligent here, but it could’ve just been an accident.

Let’s look at another investor, Jessica. She is looking for a rental duplex and Tom just so happens to be ready to sell his. Jessica thinks it’s a great deal, even after Tom’s inflated the price to account for the new income the duplex offers. It is a really nice looking property and the numbers look great. Nothing to worry about, right?
[bctt tweet=”Watch out for illegal rental duplexes that have been incorrectly converted, especially in large cities.”]
Jessica works with her Realtor and buys the property. The Realtor ended up pushing the appraisal through with the seller anyway, despite the fact that it was illegally converted (this is based off of a true story–beware of this and make sure to have those units checked out.) After purchasing the property, Jessica did notice one problem–she had to pay utilities of that unit because there was only one meter in the building and they couldn’t be separated out by tenant. Furthermore, someone could report her to the city. Other questions such as “what happens when I have to sell it?” crossed her mind. She’d either have to hope that the appraisal was approved again (which is taking a huge risk) or find a cash buyer that wouldn’t try to get an appraisal.

So what happens if the city found out? The bad side is that the units would have to be converted back to original drawing specs. This means tearing down the added kitchen and opening up the walls that connect the illegal unit to the main residence. Often this would also mean evicting the tenants from the illegal unit while all of this is going on.

So what’s someone like Jessica supposed to do to avoid this situation from happening? Here are four ways you can help ensure you aren’t getting an illegal rental duplex like Tom sold and Jessica purchased.

1. How many units does the property have?
2. How many bedrooms and bathrooms does each unit have?
3. Are any of those units illegal units?
4. Does each unit have their own water and electricity meter?

Asking these questions will make sure you don’t run into problems in the future. Having these illegal units may seem profitable at first, but they really aren’t worth the risk! Due diligence, as always, is important, but when you buy a rental duplex, you definitely want to make sure you take extra steps to ensure you aren’t stuck with a huge mess on your hands!

Helpful Links:

Find out any changes, repairs, and taxes from your local assessor’s site.
National Assessor’s Site

Get an estimate on how much rent you can charge. This is also an average.

Infinite Returns,

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Upad are always looking for ways to help landlords and tenants understand each other better. We are grateful for all the help we receive with our surveys and for the insight it gives us.

These are the results from our most recent tenant survey to find out how tenants are searching online for their next rental in 2018

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Should You Invest in Real Estate or Pay Off Your Student Loans?

Someone once asked us, should you invest in real estate or pay off your student loans? Many people who have student loans wonder whether they should focus on repaying their student loans or use any additional money to invest. One type of investment that often comes up is real estate. That’s partly because many people dream of owning their own home or of buying investment properties to rent out in order to generate income.
But does it make sense to do this before being debt-free?

Investing vs. Repaying Student Loans

Most financial advisors will tell you it doesn’t make sense to wait to until you’ve repaid your student loans. That’s because student loans generally charge a relatively low-interest rate while many types of investments provide greater returns than that.

Here is an example. If your student loan is charging 5% interest, but you can make 7% by investing in the stock market – then it makes more sense to repay your student loans slowly and invest any additional funds in the stock market or another investment opportunity. 

Is Real Estate a Good Investment?

Real estate is an investment that has the potential to offer great returns. How big those returns will be, depend on the market you’re buying into and the purpose of your investment. If the real estate market is growing in value at a rate greater than the interest charged on your student loans, than investing in real estate makes sense. Unfortunately, real estate is cyclical and so it’s hard to know whether that growth will continue.

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If you plan to live in the home that you’re buying, such as a duplex, your return could be greater. The money that you would otherwise have been putting towards rent would now go to your mortgage. This would reduce the real cost of your investment and the equity you build would mean that your return will be better.

But when you’re investing in real estate, there are a number of other costs involved which could reduce your return. For example, you’ll have to pay taxes, buy insurance, and cover repairs on the house. Each of these expenses will increase your cost. That means even with a 5% price increase on your property annually, the actual return on your investment is less. 

One of the safest approaches to this technique is to buy strictly relying on the cash flow the rental property will generate. This way if the home value fluctuates, you will still be able to pay for all your expenses and weather the market changes. The real estate market will vary greatly depending on which part of the country you live in.

It is critical that you do your due diligence and run the numbers to ensure your rental property is generating positive cash flow at the end of each month. This will pay great dividends later on. The more times you run the numbers, the better you will be at understanding your local real estate market.

Ultimately, the only way you will really know if you should buy real estate or pay off your student loans is to run scenarios. Use our free Student Loan Vs Rental Property Analysis tool by clicking on the image below or using the menu by clicking the Tools -> AssetRover Downloads link, to help you decide which scenario makes the most sense for you.


Fees and Interest Rates

Another important factor to take into account is how long you plan to hold the investment. Unlike stocks, it is sometimes difficult to sell real estate investments quickly. There are also high costs involved in buying and selling real estate such as agent fees, taxes, and closing fees. If you don’t plan to keep the property for a long time, then those fees could eat into your returns.

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If you have a high-interest rate on your student loans, it could also make it more difficult to make enough by investing in real estate. Should that be the case, you should think about refinancing at a lower rate. This could save you thousands of dollars and make it more beneficial to invest rather than repay your loans.

The Bottom Line

Many people who have student loans want to repay their debt as soon as possible. But if you wait and repay your student loans before investing, you lose valuable time that could be used to grow your net worth. In the end, you need to take your time, and do your analysis to make sure you are making the right decision to invest in real estate or to pay off your student loan.

Happy Investing,


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If your tenant wants to stay in your property at the end of their contract and you are happy for them to remain, you have two options. You can issue them with a new Assured Shorthold Tenancy (AST) or you can simply allow their original tenancy to become ‘periodic’, in other words it will roll on from week by week or month by month, depending on whether they pay their rent weekly or monthly.

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Please note this article will be updated regularly to reflect updates in the movement of the Tenant Fees Ban legislation through the Government.

November 2017 Update

Since the tenant fee ban was debated in Westminster last month, draft legislation was released this week to reveal the finer points for the implementation of the ban. Landlords will face a fine of up to £5000 for charging tenant fees and if they breach the ban twice in 5 years, they could face criminal prosecution or a civil penalty of up to £30,000.

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Real Estate 101: How to Tell the Difference Between a Buyer’s or Seller’s Market

What is the difference between a buyer’s or seller’s market?

Are you in search of a new home, investment property, or the perfect office space for your business? Before looking for a property that will meet all of your needs, be sure to determine whether you’re currently in a buyer’s or seller’s market. Knowing what type of market your area currently has will give you insight as to how much bargaining power you will have.

To save you time, we’ve put together some of the best pieces of advice we can think of when it comes to determining your current market status.

Know the difference between a buyer’s or seller’s market

According to Certified Commercial Investment Member (CCIM) Brian Rosteck, “there is not a universally accepted upside to either [market].” While there are perks and challenges to each market, knowing the status of your area’s real estate market can be crucial when scoring the property you’re looking for. Your realtor is the best source for this information and you can ask them directly for this.

Buyer’s market

Before you can determine what type of market you’re in, you have to first know the difference between the two types. In a buyer’s market, there is more supply than demand in a neighborhood. In this type of market, you’ll have great negotiating power since there will be a need for properties to sell. When making offers, you’ll find that the seller is more likely to work on your terms in a buyer’s market. Essentially what you find is:

  • Inventory is higher than when compared to previous months or years
  • There is more than 6 months or more of inventory available on the market. You can determine this through the absorption rate and the month’s supply of inventory calculation. Your realtor can help you with this information.
  • Listings stay up longer and you will see higher Days on Market (DOM) numbers
  • Current listing prices are lower than previous comparable sale prices
  • Overall housing prices are falling
  • Likely to see more advertisements and bigger advertisements
  • It takes a long time for the “Sold” sign to go up

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Seller’s market

Conversely, in a seller’s market, there’s more property demand than supply and you will see the following characteristics:

  • Inventory is lower than when compared to previous months or years
  • There is less than 3 months of inventory available on the market. You can determine this through the absorption rate and the month’s supply of inventory calculation.
  • Listings do not stay up as long and the DOM is generally lower
  • Current listing prices are higher than previous comparable sale prices
  • Overall housing prices are rising
  • Likely to see fewer advertisements
  • “For Sale” signs don’t stay around long

What to do as a buyer for a seller’s market

As a buyer in a seller’s market, you’ll have a difficult time low-balling offers during negotiations. By doing so, you may lose the property you’re interested in. Because there is a limited supply of properties, sellers can turn to other buyers very easily without entertaining your offer. For more information on what mistakes to avoid during a seller’s markets check out this article by Trulia.

Most often people hear the two terms applied to real estate, but in reality, they apply to any type of product market.

Do your research

Now that you know the difference between the two definitions, an effective second step is to do your research on the property that’s captured your attention. For instance, you’ll want to take a look at how many days the property has been on the market. In a buyer’s market, it’s common for properties to stay on the market for some time since there is a lot of competition. However, if you’re in a seller’s market and you notice that a property has not sold after a significant amount of time, that could be a good sign to stay away. In this case, it’s possible that the seller overpriced the property. As a result, it became stale. People then assume there’s a problem with it. If you’re unsure about a property or your current market, ask your realtor. They can provide more information and advice before you make your offer.

If you’re concerned about how long a property has been sitting on the market, check with your real estate agent. He or she can give you an idea as to how long their properties typically sit on the market before being sold.

You’re also going to want to look at the neighborhood – are price cuts common in this neighborhood? In a buyer’s market, price cuts will be common and the competition will be few and far between. Whereas in a seller’s market, properties may maintain their selling prices or they may be sold for more than their asking price.

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Let interest rates be your guides

Ah, interest rates, the least fun part about purchasing a home or building. Interest rates are important not only because they can indicate how much cost will be added to the property, but also because they can indicate the type of market your area currently has.

If interest rates are high, buyers will have a difficult time getting mortgages. In this case, you’ll most likely find a lot of properties at discounted prices. You’ll also notice that prices will decline, indicating a buyer’s market.

When interest rates are low, however, money will be easier to come by, therefore buyers will be flooding the market.

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Check in with Freddie Mac and Fannie Mae

Government entities are great tools when it comes to determining the current status of your real estate market. Buyers can always rest assured that it’s a good time to purchase a home when Fannie Mae becomes involved. Fannie Mae pushes first-time homebuyers to take the property plunge by offering incentives for them. If you see Fannie Mae and Freddie Mae becoming involved, you’ll know it’s a good time for homeowners to buy.  

To better assist homeowners, Freddie Mac launched a financing program called HomeSteps, and another called HomePath. Both participate with a 3% closing cost assistance and lower money down. Whenever these two Government-sponsored enterprises become involved in your market, you’ll discover that it’s best for sellers. And in case you have any doubts, these deals were not around during the housing crash of 2008. Sadly the Freddie Mac and Fannie Mae programs do not apply to property investors, but they are great resources to recommend to homebuyers you work with.

Pay attention to your submarket

When looking for the perfect property, it’s important to know how either type of market will apply to you. When people are on the benefitting side of a market, they “can get cocky and overplay their hand,” says Rosteck. Ultimately, this will lead to losing the property you’ve had your eyes on.

If you’re a buyer and you’ve determined that your area currently has a buyer’s market, it’s possible that things “can be measurably different in the submarkets,” according to Rosteck. An example of this would be your local office space market.

Take the office market in the downtown Cedar Rapids area, for example. Rosteck says that when examining it closely, you’ll find that “the office market as a whole is a buyer’s market with an abundance of properties to look at.” This means that the downtown submarket can be even more competitive than other areas of the city.

In looking at office spaces in the New Bo district or on the northeast side, it’s important to keep in mind that it’s “less of a buyer’s market,” says Rosteck. In these areas, “properties are a little harder to find with owners a little less likely to deal.” In other words, if you’re taking a serious look at an office location in the downtown area, you may want to put in your offer sooner rather than later to avoid losing your chance.

Keep track of the months of inventory

Another way of determining your area’s market status is to look at the months of property inventory. In a buyer’s market, there is typically six or more months of inventory. In a neutral market, you’ll find three to six months of inventory, and in a seller’s market, you’ll discover less than three months of inventory.

Whether you’re a buyer in a buyer’s market or a seller’s market, it’s important to know that either market can work for you as a property investor. Before making an offer on a property, be sure you’ve conducted research on the neighborhood as well as the property itself. It will also be beneficial to keep track of whether or not governmental agencies are making special offers to homebuyers, as this can indicate a buyer’s market. As always, we highly recommend you run the numbers before making any purchase.

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With summer in full flow, thousands of British landlords will soon be waving goodbye to their tenants for another term… Whilst they’re gone, a refit may be desirable. It’s as good a time as any to raise the value of your property.

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