Category Archives: Property Investing

Energy Performance Certificate Nonsense

Energy Performance Certificates or EPCs have been around for a number of years now and you are legally obliged to have one if you want to sell or rent a property in the UK. They cost around £50, are valid for ten years and tell anyone who is interested how energy efficient your property is.

Like most people, I have paid little attention to EPCs in the past and a poor EPC would never be something which would put me off buying a property. Indeed, I purchased an apartment last year with an ‘F’ rated EPC (almost as bad as you can get – the scale goes from ‘A -G’ with ‘G’ being the worst and ‘F’ not far behind!), To be fair, I did take more notice of the EPC on this purchase than I had in the past as the law is due to change and from 2018, it will be illegal to let a property which has an EPC rating of ‘F’ or ‘G’. This might well be something which would put many buyers off and rightly so, but it didn’t faze me and I pushed forward with the sale for two main reasons. Firstly, I knew that the worse case scenario was that I might have to spend a couple of thousand pounds to change a few things to improve the ‘F’ rating. And secondly, I didn’t believe the ‘F’ rating was justified or anywhere near accurate. Which brings me to the point of this article.

I can see exactly why someone has seen fit to penalize ‘F’ and ‘G’ rated properties – when I think of such buildings, I think of old, cold, musty properties with poor or no heating and full of draughts. The apartment I purchased couldn’t have been further from this example – it was only twenty odd years old for a start and was lovely and cosy. No draughts, not cold, no condensation or mould – basically a really comfortable property and certainly not one which you walked into and thought, ‘Oh yes, this definitely deserves an ‘F” But regardless of my opinion, the thing which really made me think that the rating was wrong was the fact that the eleven other properties in the block all had different EPC ratings, despite being identical. They ranged from ‘B’ to ‘F’ – a pretty wide range by anyone’s standards.

Now, I can see that a mid-floor flat will be deemed to be warmer than, say, a ground floor property because heat will be rising from below and retained from above due to the insulation of the upper-floor flat but how much difference does that really make? All other aspects of the individual apartments were basically the same – they all used the same heating (electric) and all had the same windows. The only real differences I could see where that some had low energy light bulbs fitted and some had a standard electricity meter as opposed to a dual-rate meter (so that electricity can be used and charged for at night at lower rates). I decided to give my EPC assessor a ring and talk things through.

My initial opinion was that the rating of a property was subjective and the luck of the draw, depending on how your assessor viewed certain aspects. For example, one assessor might think that electric storage heaters should be rated ‘Good’ whereas another may think they are only ‘Average’. It appears that this opinion was completely wrong! My EPC assessor explained that his job was to input all of the relevant information into his software, ie. type of property, type of heating and so on, and then the software would decide what was good and what was bad. This was slightly confusing to me as I had noted that my heating was graded as ‘Very poor’ even though the exact same heating in other apartments in the block were graded as ‘Average’. A simple one to explain – it all depended on when the EPC was carried out as the way in which different things are graded seems to change on a fairly regular basis. My EPC was over eight years old and therefore didn’t take account of many more recent software changes of opinion.

The EPC assessor advised me to buy a jacket for my hot water cylinder and some low energy light bulbs and we arranged a date for him to reassess the property. His opinion was that this would be enough to get the apartment into the ‘safety zone’ of an ‘E’ or even a ‘D’ rating. I also noted that the flat now had a dual-rated electricity meter which hadn’t been installed when the original EPC was completed. So my total outlay was less than £50. The old EPC recommended all sorts of changes from new fan-assisted storage heaters to flooring insulation, with estimated costs in the thousands (it would take years to recoup that lot based on cheaper heating energy bills).

As soon as the assessor walked into the property he agreed that, ‘No way is this an ‘F”. This made me feel much better because, well, I knew it wasn’t, that’s why I bought it in the first place! After half an hour or so, he left, armed with the necessary data and promised to send me the new EPC later that day. A few hours later and the new certificate popped into my inbox and showed that my apartment was now graded as a ‘C’!

Of course, I was over the moon and this was far better than I had anticipated but it made me wonder how many other properties there are in the country who have wildly inaccurate EPCs? How many landlords are going to spend thousands of pounds unnecessarily in order to try and bring their buildings up to spec? It also made me wonder how beneficial an EPC really is if a few lightbulbs, a £9.99 cylinder jacket and a dual-rate meter can be the difference between an unlettable ‘F’ rated property and an above average ‘C’ rated one?

If you have a rental property with an ‘F’ or ‘G’ rated EPC, it is worth considering what you need to do now to increase the rating so you don’t fall foul of the new law in 2018. If your EPC is a few years old, you might only need to make minor changes and you might get away with just having a new assessment done. Regardless, before you rush out and make any of the changes suggested on the old EPC, I would pick up the phone to an assessor and have a chat. The assessors are best placed to advise and recommend on what you need to do – all sorts of things could have changed since your EPC was issued and a quick phone call could save you a small fortune. – Review

The first property I ever let out was a two bed semi which I had been living in for a year or so. I didn’t want to sell it as I was about to move in with a new partner and I wanted somewhere to go back to if things didn’t work out! This was back in the ’90s and I enlisted the help of a local independent letting agent called Bob…

Bob was fab. He was very fussy about who he would let my house to though his methods for selecting a suitable tenant certainly wouldn’t be considered politically correct these days. Bob managed my buy to let without problem for several years before he eventually retired and sold his book to another local agent. The new managing agent was a much larger and more corporate organisation and were, quite frankly, a pain in the neck to deal with. I had so many problems with them that, when the current tenant gave notice to leave, I decided to sell the house and end my landlord career.

Fast-forward to 2015 when I decided to get back into the game and I was faced with a decision: use a letting agent or handle things myself. I don’t have a very high opinion of letting agents or indeed estate agents in general. In my experience, they add little value to anything and usually have a poor knowledge of whatever it is they are selling/letting. In my home town there are probably twenty different agents. Of those twenty, there are two individuals who I have any time for whatsoever and the worrying thing is that the thing that makes these two chaps stand out is that they are honest! Doesn’t say much for the rest of the bunch. Anyway, when one of my tenants gave notice to leave my one bed apartment, I decided to handle the process of getting a new tenant and the associated paperwork and ongoing management myself.

The most effective way to advertise a property for let is to get it on the big portals such as Rightmove. Rightmove won’t allow individuals to advertise on their site so you need to enlist the help of a suitable online service to achieve this. There are plenty of options out there but after a fair bit of research, I chose who offer to advertise your property for up to three months for £59 (+ VAT). I had a few questions so I gave them a call and ended up having a pleasant chat with one of the directors who answered all of my queries and gave me confidence in using them (if the 5* TrustPilot rating wasn’t enough).

Uploading a description of my apartment and some photos was a quick and easy process and within an hour and fifteen minutes, I received an email to say my property was now live on Rightmove, which it was. Within a couple of hours I started to receive texts and emails with details of people who were interested in viewing the property. All enquiries are directed through The Online Letting Agents offices and they send you the contact details of interested viewers so you can follow up the leads. I had several viewings booked in within 24 hours and two offers on the table within 48 hours. Once I had chosen which of the two offers I wanted to accept, The Online Letting Agents handled the referencing process. They charge £99 per tenant and this covers the cost of a full, detailed reference. As is normally the case, the tenant pays this cost. I also took the precaution of taking a holding fee of £250 in order to get a financial commitment from the new tenant.

Referencing took about four days for one tenant and slightly longer for their partner (entirely due to the individual’s employer being slow and unresponsive) and confirmed that both had decent credit ratings and should make suitable tenants. It was now time to get a tenancy agreement signed. The Online Letting Agents will draw this up for you and the cost is included in the original £59 however, I opted to use an agreement which I had downloaded from the National Landlords Association website. I also got a standing order mandate signed and took the deposit and first month’s rent. The Online Letting Agents can also arrange rent guarantee insurance through a partner site and I am going to put this in place to cover me in case the tenants do decide to stop paying me – it’s a no-brainer really and even with the additional annual cost, my total fees are still way less than I would have paid a traditional letting agent.

All in all, the process of finding new tenants myself has been pretty painless and it has saved me several hundred pounds. My new tenants have also saved about £300 on admin fees etc when compared with renting through a high street agent. Admittedly, I now have to manage the ongoing maintenance etc that goes along with owning a buy to let property but in fairness, I do this anyway, even with properties which have been looked after by managing agents (I don’t see the point in paying for their trades to go in and do minor repairs when I can do it myself for nothing).

Traditional high street letting agents are really going to have to up their game and start offering a decent service at a fair price if they want to compete with online and ‘do it yourself’ type services. I certainly won’t be using a local managing agent again in a hurry; I just don’t see the point and I fail to see what they add to the deal. If you are in a similar situation and are considering going it alone, I can’t recommend the services of TheOnlineLettingAgents highly enough – they are a friendly bunch and can’t do enough to help. If they can do this for £59, why can’t local agents do it for ten times the money?

Buy to let stamp duty to increase – initial thoughts

So George Osborne has decided to add an extra 3% stamp duty charge on second home purchases. The idea being that this move will bring some much needed cash the Government’s way and it should slow down the buy to let frenzy which in turn will enable individuals to purchase homes to live in. The theory here is that better-positioned buy to let landlords have been snapping up all the ‘first time buyer’ type properties to rent out thus meaning that there is nothing left for first time buyers to buy. There also seems to be a theory that buy to let has pushed housing prices up to beyond the reach of many first time buyers. I’m not convinced…

Let’s take the first point – landlords have been snapping up all the buy to let property because of their favourable position over first time buyers – I don’t really see why a landlord would necessarily have any advantage over any first time buyer. In fact, I think the first time buyer has several advantages over a landlord. For starters, a buyer looking to take out a residential mortgage (rather than a buy to let mortgage) will have access to much lower rates and almost certainly higher loan to value products. This instantly means their mortgage costs will be lower, they won’t need as big a deposit and may be able to borrow more than their landlord competition. How is a landlord in a better position to purchase a property than a first time buyer? I accept that landlords will tend to hold onto property once purchased and therefore this takes the house/flat in question off the market and means someone else can’t buy it but increasing stamp duty for future purchases isn’t going to help here. Anyone with a portfolio of properties is even more likely to hold onto them going forward, since selling one to buy another will result in a large tax bill. And yes, the number of potential landlords trying to buy means more competition for other buyers but again, I can’t see that increasing stamp duty is going to stop landlords from buying. It might put the odd one or two off but most will just consider the extra cost an irritation.

What about BTL pushing up house prices? Well, in the south east where I live, it certainly isn’t BTL which is forcing prices skyward, it is the London effect. Prices in London have risen dramatically in recent years largely because of foreign investment. Many property owners in London are now having their eyes opened to the fact that if they sell their two bedroom central London flat, they can use the money to buy a substantial detached house with grounds less than an hour from town. It’s a no-brainer and estate agents are wise to it (obviously). I have spoken to several agents in recent months who have admitted that they have properties listed for in excess of £1m when they are really only worth £750k/£800k but they know there is a good chance that a London buyer will see them as an absolute bargain at £1m+. You think that BTL landlords are pushing prices up? They may have a small impact on pricing but they certainly aren’t the main culprits in my opinion.

In the short term, I see house prices increasing, certainly for properties up to around £300k, as landlords try to get the deals through before the April deadline. That won’t help first time buyers one bit. After April things will settle down but, as I’ve already said, I doubt that a bit of stamp duty will put career landlords off – it’s just an additional cost of doing business which will need to be absorbed and, ultimately, passed down the line in the form of higher rents. I’ve seen many comments online since the changes were announced saying that it serves landlords right and that people shouldn’t be allowed to own more than one home, it’s not fair etc. At the end of the day, if an individual has earned the money to be able to buy an investment property, why shouldn’t he/she be allowed to do so? I saw one individual comment that you shouldn’t be able to make a profit on something which is basic human right (a home). Are we going to stop the supermarkets selling food for a profit then or the water companies selling their product at a premium? No of course not. Many new landlords are merely trying to secure their financial future in a time of low interest rates and poor pensions. Property is just an alternative form of investment which, in the past, has done very well over the long term.

Annoyingly, it is the small/medium sized landlords/investors which will be hit by this change. Corporates with more than fifteen properties in their portfolio won’t be affected. Surely if the BTL market is doing so much damage, these are the very people/businesses who should be paying the highest price, not being let off completely? It would seem that the view is that ‘corporate’ landlords are helping the Government with their housing problems and should be assisted whereas smaller, private landlords are not.