UK Real Estate- Buy, Sell or HOLD?

[OVERTALK]

I've got a nice exec 2 storey brick 4BR residence in York that's worth about £320 - 350K in today's market (see www.geocities.com/jinweel) but I'm not sure whether I'm doing the smart thing selling it - albeit as the UK market approaches its peak and Sterling remains relatively high against the OZ dollar.

It's a fully paid up relic from a former life and sits about 4mls as the crow flies from the Minster in a quiet little village, near a marina and just a few doors down from a quaint little pub (the Blacksmith's Arms) and 5 mins from McArthur Glen Shopping Centre. It's a unique detached property on sizeable grounds and with a huge conservatory. It was bought on a whim and probably because it was the sort of place that myself and the wife envisaged settling down. But that was a few wives and a few jobs ago.

I'm far too busy to put a lot of thought and further research into it and, as anybody reading these pages can see (or will tell you), the quality of the advice that you can get just sucks. Each UK firm I've approached (Wilfrid Fry, Towrey Law etc) commends me to something that clearly sounds as though it will be more beneficial to them than to me. I'm already supporting one more hopeless financial adviser (in OZ) that I really want to be. But Real Estate in OZ is hopelessly overpriced and anyone buying in is going to be chucking away about 20% of their investment. And I think the markets world-wide are going to bounce along going nowhere until someone invents the next internet-style e-widget.

I've always believed in Real Estate and had good executive tenants for years. It was renting at £865 a month until a few days ago and I'm really not sure whether chucking new tenants into it is the way to go (or just leave it vacant and actively market it). Reason? I can vividly remember what happened to all my Brit mates as they drowned in their negative equity back in the early 90's. In other words I think that UK Property will probably take a bath and anyone holding should have minimal debt and be prepared to hold on for ten years.

So two questions: Being more in the picture than I,

a. What would you do? (and why?)

b. How would you go about advertising said property - if the intention was to sell? (it's presently with Halifax but I found out a while ago now that they'd been web-advertising it in the wrong town - why? because they're hopeless).

[P.Pilcher]

It depends on your circumstances and whether you are shortly to retire or are happy to leave your money invested for some time.

I started in the U.K.property market about three years ago and spent my life savings. If I had given this to a financial institution I would probably have lost money now due to the fall of the stock market. As it was I sold my stockmarket investments then and bought real estate to gain (then) a 10% p.a. capital gain and a 10% p.a. rental income. Since then I have doubled my money and seen my rental return drop to about 6% p.a. as have you. I think it is unlikely that the market will collapse as it did in the early 90's - the steam is already dropping out of it slowly and mortgage repayments are still well below the portion of average income that they were in the early 90's due to the much lower interest rates we have today. So, unless you need your capital to buy a very very nice pad in Oz or for retirement, I would hold, get another tenant and think about how much rent you could earn if the market permitted you to charge in the region of about 10% of the current capital value of your property!

I lost my aviation job a year ago (usual problem of a b*****d of an employer). I have managed to exist on a my rental income since then and don't have to panic about where the next aviation job is going to come from.

regards,

P.P.

[OVERTALK]

Not worth the Hassle

P.Pilcher
Thanks and that's probably good advice. The main reason why we decided to sell was the hopeless (and dishonest) property managers that we experienced. After the "good" executive tenant that I mentioned above, R.M. English of Pocklington put another "executive letting" in and that gent then turned the property into a software factory complete with imported Asian and Indian labour on 3 month Visas). That gent also managed to rip off and destroy expensive lead-lined kitchen cupboard doors, break tiles and light-fittings etc etc. I was told after he'd departed that the cupboard doors had been replaced using the bond money but they wouldn't send me photos. Unbeknownst to them, my son was in the UK and pitched up and checked and surprise, surprise - no cupboard doors (just straight fraud). The woodpile and Porta-GAS tank had been full and they were left empty. It had been reported to me, by the tenant, that my A$600 fax had broken down and was unrepairable - they wanted it replaced because it had come with the house. It was only because I insisted and paid £60 for it to be shipped to me in OZ that I found that it had been dropped from a great height or thrown. The tenant destroyed the spa-bath and shower-stall by overloading and of course I had to meet the cost of that because insurance wouldn't cover it. The whole garden (front and back) had been beautifully manicured and that was allowed to go to rack and ruin. I couldn't even find the garden seat in its little coterie up the back garden. All these things cost a lot to fix. We thought that by going for an executive letting we'd avoid such landlord hassles. We put it in the hands of Copleys as property managers and their first trick was to charge 10% (on top of their 10% maintenance fee) for the £8000 odd (just in prime cost items alone) that it cost to repair the first tenant's damage. So that was a nice £800 easily "earned" in their pocket - despite the fact that our contract said that any such arrangement (paying a percentage for ceramic and white-goods replacement) had to be agreed by me in writing. So you take it to the lawyers and they tell you it just wouldn't be worth your while pursuing it because there is no justice to be had in the local small claims court (particularly not as the R.M. English guy was tugging his forelock to the York bigwig (a local hotel owner) and would have supported him to the hilt (such being the prevailing parochial nepotism). Result is that the first tenant has taken out a lien over any future sale of the property - for the full amount of his bond.

So at that point I'd had enough and it had cost me time and money to go myself to the UK and sort it (which was actually impossible because one fiasco merely precedes the next). I put it on the market with Jackson Stopps and Staff. I only found out two months later, well into the selling season that they'd done nothing about marketing the property because the tenant wouldn't correspond (they do it all by letter) - and hadn't thought it worthwhile to tell me. So I took it out of their inept hands and went for Halifax Property (who'd held our mortgage and so offered a whole £250 inducement). The responsible Halifax employee went on leave (maternity, annual, who knows) - and forgot to do anything about it - left the file in a drawer where it was discovered after I much later rang and asked what was occurring (A York friend advised me, after about six weeks, that no brochure was in their window, no For Sale sign was up and I couldn't find any details on their web-site). The selling season was now over and the Principal at Halifax offered me in writing a £1250 rebate on their 1.5% selling fee just to shut me up, stop me from complaining to Head Office and in order to compensate for the fiasco). That was over 12 months ago and it's still in their hands awaiting sale after further fiasco's with the Property Agents (Copleys) refusing to communicate, the tenants refusing to cooperate with property showings and the Halifax Principal being totally hopelessly inept. Even when I pointed out that the property wasn't to be found on their web-site (for [annually] the second time around) he claimed that it was actually under a category that I proved didn't exist. He claimed that the category he cited was "an inhouse thing" and he didn't know what it went under on the website. Hopeless is really too deficient a description. Anyone looking for a detached house in the York environs couldn't have stumbled over it.... and that was the acid test that it failed. The tenants and property agents insisted that I take the For Sale sign down and when they later decamped, no other property agent would look at letting it while it remained on the market for sale.

The clincher was that in 1994 it was valued at £220K, 1998 £275K, improved 7.3% over the next three years to £295K (end of 2000) until last year (13 months ago) when it was increased 8.5% to £320K and now they maintain (because it hasn't sold!) that it should continue at £320K-£330K (i.e. an increase of only 45% over nine years), although they concede (Nationwide, the Halifax and Abbey National) that property prices in the York Area are up between 24% and 30% in the last year alone. So that doesn't add up at all. The reason it hadn't sold was because it hadn't been marketed and they'd only been able to show it twice in the last two years.

So I hear what you say P. Pilcher and your arrangement is obviously a "hands on" one - but I'm forever wondering "What's next" in this endless round of hopeless agents, destructive "executive tenants", intransigent and uncooperative tenants, lawyers who charge large fees for telling you that their hands are tied and courts that are less than useless in meting out any justice. The only justice that a landlord is going to get in this scenario is via a local ruffian wielding a baseball bat. And as far as an absentee landlord goes? Forget it. Does it sound to you that I've made lotsa money out of it? Not much at all, certainly not worth the hassle.

[P.Pilcher]

Sounds like you've had a real baaad experience and I really don't know what to suggest. The important expression in your alarming tale of woe is "hands on" yes- I am very much hands on, I know all my tenants personally and either do or supervise the repairs when they are required. It is true that letting agents in general seem to have a bad press, but there must be some good ones. I regret that it sound to me as though you need to spend some time over here sorting it out personally before returning to Oz. As you say, you have made a substantial capital gain, and because you are not here there are others in the property business who are determined to make as much as they can for themselves out of it.

Private message sent

regards, P.P.

[franksnbeans]

Hey.

I don't have any real estate experience - yet - only what I've read in various investment books. But being the tender age of 19, I don't feel I need to rush things.

Anyway, the way I see it, you could do a number of things.

1) Find a new property manager

2) If all of these property managers are no good, then maybe start your own property managing business on the side! Okay, maybe that is easier said than done. But if they really are as bad as you say, you may not be the onlt one that has been ***** on. So there maybe a market for you there already!

3) Meet them half way. Take care of some of the 'details' yourself. Maybe research your future tennents. Get a questionair filled out. Look at their job history (ie: lots of job hoping, or same job for last 4 yrs). Get references, both personal and professional. Find out how much they earn. Tie them down renting for two years by offering them all of the white goods (ie: fridge, washing machine) at the end of the term, as they are all tax deductable (so they pay for themselves anyway). Find out what market value the weekly rent is in the area and charge $5 -$10 less. This means you can pick and chose your tennents a lot easier (which if I recall correctly, was your main problem).

3) Sell. Although you should get a second opinion on the value of the house first.

4) Borrow against the house and purchase a second investment property - and all the hastles that come with it. When the second house goes up 10 - 20% in value, borrow against that, and get another one, and so on. In 10 years, you'll have $1m in debt, but 1.5 - 2m in equity, if the market stays okay. Down here, there will probably be an increase in renters within the next 2- 3 yrs (probably not much movement this fin yr), due to the interest rates that are said to rise, so mortgages won't be paid, which means properties go cheap, and families are back renting.

My professional advice, based on my years of hands on experience and endless research into the industry in question (ie: none what so ever), would be to hold onto the property and keep renting it out. Sometimes you will get a tennent who is wonderful. They will organise servicing themselves - even pay sometimes, or even do the gardening. On the other hand, you may get another member from Hell's Angles. But researching past employers/rented houses that the potential tennent has done/used, along with lowering the rent to a few dollars below market value, will see your chances of getting the latter example decrease exponentially.

Or you could chose to disregard what I have written.

either way, KR

fnb

[OVERTALK]

(1) <Find a new property manager > Did that and from R.M. English to Copleys was a transition from ignorance to avarice.

(2) <become your own property manager> I'm in OZ old mate - too hard.

(3) <Establish Tenant's references> The tenant who did most damage, including deep-sixing the VCR, TV, fridge, washer, drier lawnmower, edger and fridge over 3.5 years, owns a large hotel in York, and is now a village resident ten doors up the road. He also owns and manages a large software company.

(4) <Sell and get a second opinion on house value first> Tried both and the agents vary considerably in estimates of value. Won't go through my selling experiences again (read them above).

(5) <Borrow and buy another property?> You've got to be joking. Once they know you're 12,000 kms away, RIP-OFF Britain rules are eagerly applied.

(6) <Wait for the Dream Tenant> People who would fit into such a category tend to be the types who own and take pride in their own home - so landlords are always stuck with the dross - opportunists who will normally constitute a nightmare - simply because they can and the courts defend to the hilt their right to do so.

[Amazon man]

OVERTALK

On a slightly different note maybe you can offer some advice, I have been considering buying a new home in Australia initially as a holiday home and then perhaps to retire to.

What would your advice be given that you think Australian proerty is overpriced at the present time.

Many thanks

[Few Cloudy]

OT, your first and second post tell different stories - an idyllic property in a perfect place - I actually thought then, that you were making a bid to sell. Then the misuse and aggro you have had with it.

Based on the first post I would have recommended leasing out - I was lucky doing that once - found nice people etc. - even threw in a small car for their use. Based on the second post however, it is clear that this property is causing you anguish. In that case I would recommend a sale - even if it meant a trip to Europe to set up a good agent - or have you thought of the internet sales possibilities?

I really feel for you and think the best advice would be to take the money and run old mate.

[jumpseater]

I say Hold! we had a couple of properties that we wish we had struggled with and held on to!. If you don't need to sell, then rent or lease to cover any mortgage/costs of the property.

I agree that the Halifax don't know their @rse from a hole in the ground too!. To get an idea of value try assertahome.co.uk, its a buyers search tool. Type in your location and property details and you'll get stuff in the area which will give an idea of the value of similar properties.

No connection here but try fdpsavills.co.uk, they have an office which deals with your price band of property and have a York office, also a oz division too fdpsavills.com.au, which might give you the link you need, whatever you do. They are probably not the cheapest agent though. We used them for a search in the east mids (Finningley are) and they were quite good.

Tennents; lose any emotional ties with the property you might have, its just business! it makes the crap ones easier to tollerate, and makes the good ones seem like angels!

[OVERTALK]

Amazon Man
All the industry insider pundits here are saying that, particularly on the East Coast (Syd,Melb, Brisb etc) that prices will decline about 20% once the crunch comes. In essence it's going to be very much like the stock market after a booming bull-run comes off the boil - and reality bites. Buy to Let became a catch-cry here - but noe people in the middle to low segments of the market are finding it difficult to get anyone to let to. Rental vacancy factoprs are over 6% and you need to give some weeks of free rent plus throw in a gardener.

Few Cloudy
It actually is a beautiful property in an idyllic area but that doesn't keep the creeps out (as tenants or agents). Just found out that the last lot of tenants decamped with some of the nice furniture we left there. Cannot ascertain what exactly because the agents (Copleys) refuse to communicate. Take the money and run isn't an option because Halifax never really marketed the property. Each time they had a prospect neither the tenant or Copleys would cooperate in showing it. Two showings over two years is all they achieved.

JumpSeater
Thanks for the advice. I might give Ashtons and Lawtons a ring tonight and see who can offer what (sale or retenant). I am familiar with FPDSavills. Going to the UK again is not practical because I did that last time around. It's costly in terms of time and dollars and you get all the reassurances in the World - but it doesn't pan out later. I am more or less determined to take Copleys to task for charging me 10% of the replacement White Goods and ceramic-ware. That was really a new one on me and I thought that I'd seen them all (all the nasty little dreamt up charges, fees, commissions and extortions).

[boofta]

Have had similar tenant problems over the years. Be cold blooded
never have a personal relationship with tenants. If things stay
the same world-wide obviously you should hold the property.,but
shares have fallen and must recover, property is overpriced just
about everywhere and must fall. I don't have the bollucks myself
but we all should consider cashing out of property and going back
NOW against the tide into shares.
The population demographics point to an enormous rise in the next 5-10 years in shares, all the baby boomers have to invest
somewhere! Then as the boomers die (50 percent of most western countries population) property will die with the boomers.
There will in fact be a lot of empty houses around the western
world unless migrants make up the missing boomers.
Personally I would sell your property ASP and even sit on the
money to feel the water with your next move. It's impossible to
control agents/tenants interstate let alone overseas, cash out my
friend, re-invest locally in OZ in an equally overheated market that
at least you can keep proper control of tenants/agents.
Good luck.

[OVERTALK]

Boofta
It's always hard to make sweeping statements stick.
Shares have been known before to bump along and not take off - for over a decade. I doubt that inner city property will ever decline in value however. It will always be ticking along at some positive figure. OZ where I am now is expecting an upswell in population as a number of state infrastructure projects come on line over the next three years. Buying and selling property only enriches the R.E. Agents and swells the State and Fed coffers because of capital gains and stamp duty. These slugs are of sufficient proportions now that by comparison a couple of grand in land tax once a year plus council rates and water rates and insurance is mere chicken feed by comparison. I was going to use that UK money to develop some property in OZ but why not borrow to do so. Money is likely to be cheap for some time yet.

So I've more or less decided to hang onto that York place (see above) because there is such a thing as N-S catchup in the UK property market and cashing up would require other timely decisions on investment. Once the catch-up has happened it will just mark time but still bring in £860 a month in rent. My track record isn't good in the area of investing other than in property and my wife is only a spender of dough... so she's no help in decision-making. Very much like flying. When in doubt, sit on your hands.

[Green Bottle 2]

Whilst you have had some bad experiences with your property letting it isn't always the case. You can reduce your risk in a number of ways. Perhaps sell your house and buy smaller houses in the order £100K. This spreads the risk. With property agents it can be a lottery as to how good they are.

There are agencies that buy property and offer a full letting service on your behalf even abroad. I would suggest you further minimise your risk by not furnishing the house and not buying expensive fittings - you can afford less attractive fittings with a cheaper house.

I echo previous comments made in this thread that you have to remain detached in your dealings. Property letting over a long term does not suffer as many vagaries as the stock market but the downside is that there are potential pitfalls as you have found.

I am only drawing on my experience and I have experienced a number of hiccups but none as bad as yours and my letting agent to date has been quite good.

HTH

GB2

[zoru]

personally i would put it through an auction and cash in your chips
or persuade your mate in York to take on the mangement of it for a reasonable fee...at least you can trust your mates!good luck.

[reynoldsno1]

Try

I have had professional dealings with other branches of this company, and its HQ in Grantham, and they have a strict code of practice. The branches are owner operated franchises, and they only do lettings.

I strongly recommend you rent unfurnished.

[OVERTALK]

Back to that Rental Route

reynoldsno1

Thanks for the info. I'll give Belvoir a call.
I've just decided to rent it out again anyway. I've been told that there's a reasonably solid market for

rentals within that bracket in York.

SO:

Executive standard residence in a very nice inner village of York, close to the A64 and the new Shopping

Complex. £865 pcm (same rent that it's been achieving for the last three years) 61 8 94746436 (telefax)

or [email protected]

There's a web-site for it at http://www.geocities.com/jinweel/
with loads of photos

[Sensible]

Very nice little property OVERTALK, but just to give food for thought, two bedroom ex-council flats in the South East, asset value £ 120,000 to £ 155,000 let out very sparsely and cheaply furnished to single parent families with the rent paid by Housing Benefits direct to landlord easily achieve a minimum of £ 600 per month. No commission or letting fees, that’s all done by the local housing trust at no cost to landlord (and they are grateful).I grant that they are not executive pads and I grant that they are not quite what one would wish to occupy oneself but, the return and risk is better.

And no risk of upsetting Capt. PPRuNe by advertising on his forum either!

[OVERTALK]

Down and Out in Down-Under

I'm sure he won't mind a poor desperate out-of-work fellow pilot from down-under seeking to get out from under (but I've been proved wrong before).