Jackie’s summary: What a year it’s been!

Happy Friday everyone… and it does feel like the one way ticket to ending lockdown is really on its way. It’s been a long time coming but finally there’s light at the end of the tunnel!

As we are now starting to get our vaccines and life is about to get back to normal, I though I would reflect on how the business has been for the last year.

Lockdown started on 23rd March and investors were super busy trying to get properties through and start buying new ones, we had a lot more at auction than usual too.  Perhaps having had Brexit for 3 years, followed by the election; COVID wasn’t going to stop you any longer. Usually, during a downturn, property and finance are hit hard; this hasn’t happened during COVID at all.

Apart from the initial valuation issues and lenders pausing lending for a short period, it bounced back very quickly. For those of us who remember previous economic problems, it has taken a lot longer for normality to resume historically so I think this took us a bit by surprise. The days of the last lockdown full of confusion of what we can do seem like a distant memory thank goodness.

What has inspired me through this is just how inspiring our clients are. It’s very easy to batten down the hatches when things get tough, but the courage and energy of our clients really has blown me away.

We have funded everything from the vanilla refinance, through small refurbishments and all the way to full on development – and everything in between. There were challenges with each deal, and it’s been our solid relationships with lenders which has enabled us to deliver on what our clients have needed. Each day brought new lender decisions and criteria so it really was a tricky time!

With all the issues from furloughed staff, lack of seeing and speaking to people, then coping with part time staff around home schooling (of which I helped with), it’s certainly been one of my most challenging years. There have been so many positives though, for example I have never had so many conversations with underwriters and lenders. Perhaps we all needed more than a quick chase up conversation.

As you will know from my previous blog, it has also given me the push I needed to start my own development. As busy as the year has been, I have spent more time listening to people and being mindful of just what we can still learn. Having something else to focus my time in has been really important, and I’ve thoroughly enjoyed it so far – although I’m sure the hard work is to come we haven’t started the development yet!

The lenders have also become so competitive. After the initial drop out of some, so together with the bullish attitude of others, we are able to now offer better deals than ever.  Also, by spending the time in lockdown conversations, we have really benefitted by having sensible discussions that can help with getting a deal across the line or working through getting a better LTV.

Overall, this year has really shown us just how amazing our industry is at bouncing back – both from a lending point of view and investors. We feel so privileged to be part of the industry who have been able to take advantage of this situation which has caused so many problems for so many. I really hope that this year will change the way we view situations too; we are all becoming more understanding of each other’s difficulties and challenges and I hope that we will continue.

There are always winners and losers in tough times.  I really believe that the tenacity of the investor community has shown just how resilient we are.  Onwards and upwards to June 21st and stay safe.

How Covid has changed the property market

We are half way through lockdown, hopefully! How are you all finding it – is  it tougher than previously? This week I am talking about how Covid has changed the investment property market. I spoke about this at last week’s PIN meeting, but I wanted to go into a lot more detail on the blog as I think it’s such an important topic at the moment.

There are two aspects to this; the types of investors who are now coming to the market, as well as the types of property and tenancy.

Who could be the new investors on the block? 

There are plenty of reasons why people may be looking to get into property at the moment. We have had such a massive change of lifestyle and direction this year; many people have spent more time with their family and have realised that they want a career that is more flexible around that. We have all had time to stop and reassess what is really important to us – stepping off the hamster wheel can make you reluctant to get back on it!

Property can offer so much more flexibility in your life, it can be YOUR career on YOUR terms. It will be full of challenges, but also comes with autonomy…  and, of course, the potential for growth.

Grabbing an opportunity…

With plenty of working people having been furloughed for possibly a lot of months, then being made redundant, this may give some the push to use the money and put down a deposit on a property.

A lot of you will also have gained some extra time with less social activities, therefore allowing time to spend dedicated to researching potential areas to invest in and work on strategies.  Netflix or new career research…..????

Also, I think that having gone through this year and the uncertainty it has brought, it has increased the importance of having a diversified income stream. Property can be something to add to your income pot, adding an asset to any savings and/or pension, but importantly it gives an income to take the pressure off in a changing jobs market.

There are also a number of ways in which Covid has changed the way we view particular tenant profiles.

Students

This is a far more resilient market than I think anyone was expecting! Back in March lenders were worried that this academic year would be completely online learning from home; yet we have seen students return or go to university. They are craving any kind of normality it seems! There are also benefits to house sharing in HMOs over student accommodation at this time. It’s generally smaller bubbles and you have got more communal space if you are limited with your external social life. There’s also the option to encourage a two year letting period taking away the need to find and view somewhere new to live. This gives you the option of somewhere to stay during the summer if you’re not able to go home.

Long leases 

In this uncertain market, lenders and landlord are crying out for some guarantees, and that’s what this can offer. For a long time any lease over 12 months was a big problem, but now we have at least three lenders who are looking at this, and at competitive rates, on a 75% loan to value, interest only product as we discussed previously. The yield may work out slightly lower, but when you take out voids and repairs you aren’t far off what you would get for a professional tenant. This is definitely a growing market and something I’m sure we will see more of.

Holiday let’s

UK holidays are going to be the way forward for the next few years. I’m sure many of us (myself included!) enjoyed a fantastic UK holiday this year, and it’s made us all realise how many places there are for us to explore in the future. It’s a cheaper option, and for many that will be a big consideration next year. It’s also far more flexible with bookings and pets – abs is far more environmentally friendly!

As an investor, your self contained unit is going to be far more attractive than a hotel or B&B in these covid times. Lenders are becoming more open to these options too. We have a lender who will now allow you to purchase on a bridge to carry out some works and then move to a term mortgage in 9 months so you don’t need to worry about initial rental voids. This gives you some time to get it all ready to hopefully open once the weather improves and restrictions are over (big fingers crossed on that one!).  Also, there is a market for working away from home – which gives potential for the times of the year not traditionally busy.

We are again seeing lenders more open to holiday let’s, using both the market rent as a 12 month tenancy or the passing holiday let income if we have a proven track record.

Cities vs Suburbs

Priorities are changing for tenants. It’s no longer so important to have access to cities and towns and tenants are now favouring larger spaces both inside and out. Outdoor space has become far more desirable, and a home office or space to work is now a massive selling point. Other, more rural locations are becoming more attractive, which may open up new opportunities as investors – perhaps your local area, or something which is affordable that wouldn’t have worked previously for an investment property.

With change comes opportunity, and as a resilient group of investors I really feel that over the next few years we will see so much of both.

As always, call if you have any questions. Look after yourselves, only two more weekends to go – fingers crossed!

Stamp duty changes and portfolio drawdowns

Hi everyone, I can’t believe it’s Friday again – time really does go super quick in a pandemic…..

As you will all know, the Chancellor has given some SDLT help by increasing the threshold to £500k.  It hasn’t removed the fee completely for second properties, but It has significantly lowered the amount needed to be paid.

This really does help, because the new rules will continue through until March 2021.  This will allow investors to take advantage of the downturn, with time to monitor the market rather than rushing into decisions.

So how does that work with lenders regarding capital raisin?

I appreciate this sounds like a cracked record, but lenders are changing their appetite constantly.  As we all know, we as individuals don’t always get the pick of the bunch when it comes to lenders – you and your property dictate your panel and some are restricting capital raising.

There are, however, lenders who will allow you to capital raise and what you as investors need to work out is the cost versus reward – is it worth borrowing in order to look at other opportunities?

Now is the time to look at your existing portfolio, and really look at the opportunities available

  • Do you want to refinance now, or start looking at the options in 6-12 months? What do you think might happen in that time?
  • What could you do as a ‘cash buyer’? Will capital raising and putting yourself in that position help you grow your portfolio?
  • Could you take advantage of the market changes over the next 6 months? Especially with the SDLT holiday until the end of March 2021
  • Could you use this time to diversify your portfolio? Do you think that for example HMOs or serviced accommodation could be more appealing over the next few years and if so, what can you do about it?

As sad as the current situation is, as an investor we must look at the opportunities– and how we can take advantage of those.

Good ground work is key to being in the position to act, or others will!