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After breaking down sales jargon I thought I had to do one for lettings as there’s many phrases that I find myself saying, and realise it’s the first time the other person has heard it. The upcoming terms will be relevant to both tenants and landlords.

Holding Deposit

Commonly mistaken for the deposit. This is a deposit a tenant would have to pay to secure a property for rental. This is most often non refundable so if you are looking to pay this, please make sure you are absolutely sure about the property before paying this, unless you have money to blow. Once you have paid a holding deposit the agent should not be showing the property to anybody else and start referencing. One referencing is complete they will ask you to pay the rest of the move in monies. Holding deposits can only be a maximum of 1 weeks rent under the new law after The Tenants Fees Act was passed on June 1st 2019.

Deposit

This is most often paid after the referencing is complete along with the rest of the move in monies. Sometimes can be referred to as a security deposit. This deposit is meant to cover the landlord for any damages to the property or loss of rent. As part of The Tenants Fees Act, security deposits are also limited to 5 weeks rent if the annual rent is 50k or less. If the annual rent is more than £50k the limit is 6 weeks rent. The deposit must be protected with a government approved scheme within 30 days of receiving, if this isn’t done, you can be fined.

As a landlord you want to understand the next 3 terms well so that you know what you’re getting yourself into when you take any of these services. As a tenant it’s good to know what service your landlord has taken from the agent so you know how to report things and who to pay rent to after you move in.

Let only

Sometimes known as tenant find or introduction. But how much can you expect your agent to do in a tenant find service. A good agent will try and do all of the following. 

• Arrange certification including gas, eicr and epc. 
• Advertise the property on the portals to give it maximum coverage
• Carry out viewings and reference potential tenant
• Negotiate terms and arrange bespoke tenancy agreement
• Possibly arrange pre tenancy work to be carried out to the property
• Carry out right to rent checks
• Arrange inventory check in report

Rent collect

Sometimes known as part managed. This service would include everything in Let only as well as the following:

• Protect the deposit with a government approved scheme
• Collect and remit the rent throughout the duration of the tenancy
• Negotiate tenancy renewals
• Pursue non payment of rent and advise on rent arrears action

Fully managed

This service would include everything in the first two services combined with the following:

• Instruct approved contractors on landlord’s behalf in the instance of any works needed at the property
• Insure you comply with any changing legislations
• Carry out regular inspections
• 24 hour emergency service for tenants
• Arrange maintenance and repairs 
• Pay contractors on landlords behalf
• Act as liaison between you and your Tenant 
• Negotiate deposit release 
• Manage your property through vacant periods

Guaranteed Rent

This is a term that has become very popular in London, especially in the East End over the last 10 years or so even though it has been around for much longer. It generally refers to an agent guaranteeing the rent to a landlord for a specific number of years at a certain agreed rent regardless of its occupancy. This is usually a lower than market rate rent as the agent that’s taking the risk needs to have enough of a margin to take that amount of risk. For example if the market rent for a certain property is around £2500 pcm, then the agent may guarantee around £2000 per month to the landlord and that £500 a month is where the agent makes their margin.  Remember if the property is empty for even one month, that could cost the agent his or her whole year’s commission. So they need to be careful about what they offer and understand the market well.

Rent Guarantee

Sounds very similar to the previous term, but this usually refers to a policy that can be bought from insurance companies. The cost is usually upfront for each year and there may be an excess for each claim. Unlike guaranteed rent, the onus is on the insurance company and pressure is taken off the agent. For a successful claim, landlords would need to make sure all of their tenants are fully referenced.

HMO

Short for houses of multiple occupation. This refers to multiple people living in the same home who are not related to one another. In the old days this would only refer to room rentals, where properties will have multiple tenancies attached to it, because the rooms are individually rented out. These days, according to most councils, even if a property is rented out using one tenancy, if the individuals are not related to one another then the property can be considered a HMO. For example in Tower Hamlets, a 3 bedroom property rented to a group of 3 friends can be considered a HMO, on the flipside a 3 bedroom property rented to a family of 10 would not be considered a HMO.

That’s it for this edition of jargon busters. I’ll be back with more soon, if there’s anything specific you want to know, don’t hesitate to contact me via any social media.

I find myself using a lot of these words very carelessly, sometimes forgetting that not everyone speaks estate agent. People in every industry are guilty of this and can find themselves getting carried away with their lingo. So I thought I’d put together a few words and terms that I think are handy for you to know the meaning of, especially for those of you that are on the market right now whether you are selling or letting, this should hopefully make things easier to understand. 

Sole Agency/Multi Agency

These terms can apply for sales and lettings and you will most likely come across it when you are looking to sell or rent your property. Sole agency would mean that you are agreeing to market your property through one agent and giving them exclusivity. Multi agency would be (you guessed it) when you allow multiple agents to market your property. Multi agency usually carries a premium as for the agent the risk is higher of putting in work and losing out. Sole agency is therefore cheaper as there is less risk.

OIEO

This stands for ‘Offers In Excess Of’. You may see this on adverts where it says, OIEO £400,000. This is sometimes used by agents where they want to eliminate low ball offers, meaning offer 400 and above nothing under please. This might also be used when the agent/vendor is not sure how to price the property due to there being not many comparables on the market. Sometimes the advertising price is very low to generate interest for the property.

OIRO

You will also see this on adverts as well, this stands for ‘Offers In the Region Of’. This is also used when an agent/vendor may not be sure on the price and wants to encourage offers.

Guide Price

On adverts you will see this written something like ‘guided between £400,000 and £450,000. This usually means they are trying to achieve something in between. This is also sometimes used to generate interest where they were able to by advertising at £425k, so by advertising at a guide from 400 you get a whole new set of eyes looking.

POA

This stands for, Price On Application. This again is a tactic used to draw people in by creating a bit of mystery about the property/advert. Your left thinking I wonder how much this property is, so you enquire and then your details are with the agent, now even though price may not be something you are willing to pay, its created enough of a buzz and possibly brought in a buyer for the agent.

Subject to valuation

This term is very widely used, and I urge everyone to use it when making offers on properties. whether you are getting lending or not. If you are getting a mortgage then your lender will surely send a surveyor to make sure the value adds up. As a cash buyer I would still urge you to get a homebuyers survey done so that you are comfortable that the property you are buying is worth what you are paying for it. Either way, if the value doesn’t stack up then you may want to rethink your offer. That’s why it’s important to make offers saying ‘subject to valuation’.

Subject to contract

This is mainly used when accepting an offer. This means you are happy to accept the offer but it’s subject to the contract obligations. This can also be used by the buyer making the offer. 

Exchange 

This is when you may be buying or selling your property and you have reached the second to last stage where your solicitors exchange contracts. The main thing to note here is that the buyer will have to transfer 10% of the purchase price to their solicitor which will be sent to the seller’s solicitor whether the sale completes or not. For a £400,000 property this would be £40,000. If the sale happens to fall, due to the buyer, this amount will be given to the seller and the seller would pay their agent from this. This is why all agents charge their fees on exchange rather than completion.

Completion

This is when the property sale transaction is complete. Exchange would have already happened and on this day all the funds get transferred to the seller. If the seller has a mortgage then that gets paid off first and the surplus is transferred into the seller’s bank account. For the buyer, this is essentially when you get to pick up your keys. Exchange and completion can happen simultaneously but are more common to happen a couple weeks apart. In my experience chain purchases with homemovers like to have a gap after exchange. This allows the seller and buyer to be much more confident that the transaction will definitely take place and prepare for the move, whereas BTL purchasers tend not to worry about a gap so much as they don’t need to move. Moving homes is after all one of the most stressful things we do.

I hope this proves useful to some of you. If there are other words/terms/phrases you’ve come across and do not understand, don’t hesitate to ask (email abul@cityrealtor.co.uk). I’ll be happy to explain, and I’m sure I’ll be writing part 2 very soon.

On this edition of Buy to let Gems I’m travelling to Mile End, E3 and focusing on the student rental market in that area.

The covid years have been tumultuous for many East London landlords, even those that own properties near universities. But in the summer of 2021 that all changed and rents went back to normal and some agencies have even said that they had seen all time highs in fact.

This is why we have come to Mile End and why I believe people should invest in something like this property.

This is a 3 bed maisonette in an ex-local authority building within walking distance of Queen Mary University. 2 double rooms and a single. To rent this property to students or even professionals that form more than 1 household, you will need an additional licence from Tower Hamlets council. This should allow up to 4 households and even be allowed to convert the living room to a bedroom, provided the smallest room is larger than 6.5sqm. 

Disclaimer: This information was correct at the time of writing this article. If you are purchasing this property or a property like this, please do your due diligence before buying or even reach out to me for the most accurate information at that time.

This property should rent for around £2500 pcm to students in August/Sept time and that’s being  conservative. From the pictures this property looks like it’s been decorated to a very nice standard unlike many others on the market right now. In the summer of 2021 my team had achieved £2500 pcm for much lesser properties, therefore I’m very comfortable with this appraisal.

As usual, here’s my breakdown of costs, yields and ROI’s:

The total initial spend is £132,250.00 however the gross yield from that is over 7% and a net of 5.29%. I assumed a service charge of around £1800 per annum as I went to see several properties in that neighbourhood which were around that and some lower. Gross return on investment over 22% and net at almost 17%. These are the types of investments I would hope to be making this year.

There’s definitely capital appreciation to be seen on this property even within the next 2 years I would say, as we are currently experiencing a price dip in many parts of East London. My prediction is that a property like this will sell close to half a million in the next 3 years.

If you would like a deep analysis on any property that you are looking to buy, don’t hesitate to contact me for a FREE no obligation impartial opinion by emailing abul@cityrealtor.co.uk.

I come across many self-employed people who collect money in cash, many of whom are very successful in their fields, be it builders, gardeners or makeup artists (not for me, although I can do with one). In a good wedding season makeup artists can make up to £5,000 a day which is definitely not a bad day’s work by anyone’s standard. But let’s say you even make £1,000 a day and it’s all cash every working day of the year, you would have racked up a whopping £261,000 (enough to buy a lovely house in Grantham or a nice little flat on the outskirts of London) however, this cash means nothing when you’re buying a property. 

Firstly you should be paying your taxes anyway otherwise the taxman will eventually get you. Secondly, when it comes time to buy your flat/house you will have to explain where your money came from. You will first have to explain to your solicitor why you have £261,000 stashed away under your mattresses in old 20’s and 50 pound notes. Next, if you are getting a mortgage, your lender will definitely want to know how you accumulated this small fortune. They will also want to know that you will be able to pay your monthly mortgage payments going forward. With your monthly takings you should have no problems paying that mortgage, however it needs to be on the books to prove that you can pay it. That means either through payroll, dividends, benefits in kind or a mix of them all. 

There’s a misconception generally that if you’re a higher rate taxpayer, then you would pay 40% of your entire income in tax, it doesn’t quite work like that. There’s a picture that went viral online recently which describes the UK income tax system quite well. I’ll attach it here and of course do your own research as the picture does not take into account dividends and NI etc. But still a very good visual for many.

Just to give you a brief idea about how much you would need to earn and have as a deposit I’ll give you an example of a £500,000 house. When buying a house like this to live in, you would need a residential mortgage where the bank (lenders) would typically ask you to put down at least 15% (lower deposits are available but usually with undesirable rates) which equates to £75,000. This means you will be borrowing £425,000 from the lenders, but for them to lend you this amount they want you to be earning somewhere between £85,000 per annum and £106,250 per annum (this depends on the lender’s criteria, generally it’s 4 or 5 times your salary). Therefore if you’re a highly paid self-employed person, you need to be able to display that you can earn this much and pay taxes to reflect this.

To buy a rental property, it doesn’t work quite the same way. It is favorable to have at least a 25k salary, however you still need to prove where your deposit came from. And generally lenders will ask for a minimum of 25% deposit however there are products available with less deposit (again with less desirable rates usually). If you become a professional landlord, then you may not even need a £25k salary. Anyway, before I digress on a tangent, get yourself a good mortgage broker who can advise you regarding the best products and rates on the market.  

Nobody likes paying their taxes, who wouldn’t like to keep all the money they earn, but if you are looking to buy a house/flat then I would advise that you get yourself a good accountant and start paying your taxes (disclaimer: even if you’re not buying a house, you should still pay your taxes). A good accountant will find smart legal ways to pay as less tax as possible, while earning the most possible. 

So to all my self employed readers out there, if you are looking to buy a house or a BTL property, get yourself a good accountant and pay your damn taxes, and start soon, as lenders can (not always) ask for your last 3 years accounts.

In my years as a lettings agent I come across 2 types of misconceptions a lot. 1 is that renting a property is so overly simple, and the other is “oh my god, this is so complicated, what did I get myself into, I should’ve just invested into crypto”, like that’s any simpler. And the truth is its somewhere in between. It’s definitely not simple, but with a little guidance and preparation you will be fine.

The things I will go through in this article will be accurate to Jan 2022 and will probably apply to most of England, however please do check with your local boroughs regarding anything particular to your area, most likely licensing.

It’s around noon, you’ve been waiting for the call since you woke up. You’re anxious, excited and most likely upset with someone in the process of this purchase (most likely your solicitor, joooke). And the call finally comes, the voice in the phone says “congratulations, you’ve completed, please go and collect your keys from the estate agent” somewhat unceremoniously. After collecting your keys you walk out the door and start thinking to yourself “what the .. next”.

First thing you do is go and see the property to see if it’s in the condition you expected or at least just check what condition it’s in. It may be that the property needs light touch ups as a property can look very different when the keys are handed over to when you saw it lived in. A lot of the marks on the walls and damage to the sealant is somehow covered up. However, fear not, you’ll be amazed what a quick lick of paint and some sealant can do.

If there is no major renovation work to do, then you need to next look at getting the compliance certificates done. This would be the following:

• Gas Safety Certificate (GSC)
• Electrical Installations Conditions Report (EICR)
• Energy Performance Certificate (EPC)

All three of the above are mandatory. It’s likely you would have an EPC if you have just bought it. But in any case, all EPC’s are held on an online database that anyone can access on the following link: https://www.gov.uk/find-energy-certificate

The GSC and the EICR are not on online registers so if you don’t have them then you need to get them done. When getting the gas safe done, you should also ask the engineer to install a carbon monoxide alarm and there should be a minimum of 1 smoke alarm in every hallway. While your gas engineers there get him to check the heating to see if it’s all working ok.

Other tests you may need to do are:

PAT test – Portable appliance test, if you are providing portable appliances. 

Legionnaires test – This is to check that the water coming through the taps is safe to drink. Generally speaking, tenants should always try and run the taps for at least 20 mins to avoid legionnaires disease. Problems can happen when there is a large gap in between tenancies.

Next is licensing. This is dependent on your local authority and can sometimes get quite complicated. Being ‘The East London Blog’ and all I will use 2 East London boroughs as examples. In the London borough of Barking & Dagenham (LBBD) it doesn’t matter how many rooms a property has, they all require something called a selective license. In Tower Hamlets however they have 3 different types of licensing; Selective, Additional and Mandatory HMO. I will go into this in detail in a future article. I would advise speaking with a local property professional if you find it difficult figuring out which one you need. Lettings agents would usually offer this as a processing service. 

Next, get it ready for advertising and viewings. If you are using a letting agency it’s likely they will take professional photos and floorplan. Staging the property helps advertising immensely. 

You may want to ask your agent about whether it’s worth furnishing the property. It can depend on what area the property is in, or what type of property is. Certain areas need the properties to be furnished as it may only attract young professionals who may move the following year whereas other properties may only attract families who may already have their own furniture or want to buy their own. Same goes for the white goods.

Referencing your tenants. If you are using an agent, ask them who they use to reference their tenants and make sure it’s a reputable company, as there are many companies that do not do full checks.

I would strongly advise that you appoint a clerk to do an inventory, this is the best way to cover both yourself as a Landlord and your tenant. This can only be charged to the Landlord now after the tenant fee ban in June 2019.

Make sure that you and your tenants both sign a tenancy agreement so that you are both aware on your obligations.

And lastly, protecting the deposit. As a landlord you have to protect the deposit within 30 days of receiving it. Be sure to do this in time otherwise you can be fined for it. You have a choice of 3 government approved companies to do this with:

• TDS
• DPS
• MyDeposits

And that’s it, I told you, somewhere in between.

Welcome to the first ‘BTL Gems’ article.

This series of articles will follow the BTL market in East London where I will pick out good deals that you can invest in. I will break down the yield, upfront costs and running costs, so as a BTL investor you can fully know what you are getting yourself into. 

In this months edition I have chosen the following property: 

This is a 2 bedroom property in Shadwell, E1 and marketed by Smart Property. As you can see it’s on the market for ‘offers over £325k’. It’s been on the market since 10th September 2020 and reduced on 12th March 2021 from £350k. When a property has been on the market this long, it means 1 of 2 things. Either the seller is not a serious seller or its been on the market too long and the adverts become stale. If it’s the latter then a deal may be there to be had. 

Although I think there is some negotiation to be done here, let’s go with the £325k purchase price to calculate the figures you need to know.

This property will rent to the local authority for £1585 fairly easily. And if in a decent condition will fetch around £1700-1800 pcm on the private market.

It needs some light cosmetic work and because theres no kitchen and bathroom pics, its hard to tell how much work is needed there. Usually when theres no kitchen and bathroom pics its because its better you don’t see them.

Before I get into the numbers take a look at the table below. This is something I fill out every time I’m interested in a property. Seeing the numbers laid out like this always helps me see things a bit more clearly. 

At £1,585 pcm you are looking at a tidy 5.85% yield. As a HMO I believe you can hit the 7-8% mark no problem, where rooms are rented between £700 and £800 pcm including the living room. This is good as the average in London is below 5% at the moment.

Always remember to factor in the service charge for leasehold properties when working out your net profit. I would also factor in a small margin on lettings agency costs and building maintenance costs. 

1 bed Properties in the same building on the market for £300k so buying a 2 bed for £325k is not so bad when we usually see at least a £50k difference between 1 and 2 beds like these.

At £325k a BTL investor would typically look at putting down £81,250 as a deposit and a £16,000 stamp duty fee. 

I expect properties like this to see great capital appreciation over the next few years when we see the real bounce back from covid and Central London is back in full effect. Not so long ago, 2 bed ex local properties in this area were marketed between £400-425k.

I hope this article brought you some value or insight into the East London BTL market. I will aim to get you at least 1 BTL Gem every month so do let me know if there’s a specific property that is on the market right now that you would like me to break down.