UK Property Investment

[cornerman]

Hello, Last week myself and my Dad went to the Manchester to look at property for "buy to let" purpose. My Dad is retiring soon and is interested in perhaps purchasing property in the UK for rental income. The main reason he is looking here is that property prices are more affordable.

Following up on an advert my Dad saw in a newspaper he contacted this company in the UK. We visited last week and were met by a guy who brought us to view houses in the Burnley/Nelson area approx. 30 miles north of Manchester.

These houses are mortgage repossessions and some were in fairly bad shape. The idea would be to purchase a property, refurbish and then rent the property.

Prices quoted were in or around £520000 with £3000 for refurbishment. Rental income can be in the region of £80 to £200pw. There are health board contracts that are available at £150pw, if you can get one. Working this out it looks like a 15% return on investment pa. Pretty incredible if you were to believe it all, which brings me to my question. Can you believe it?

Does anyone have any experience of this type of investment in the UK or even taken a trip over with the view of investing. I'm, uneasy about the whole thing for a number of reasons.

1. Property must be bought in cash and then a UK mortgage can be arranged.
2. No guarantee of getting a health board contract, although we were told they could get us one.
3. When I pushed them on Irish client references, they said they had some who were currently in the process of buying, but none yet receiving rent. They could give us some English references however if we required them.
4. Did an online credit check on the company and it seems to be an off the shelf company, activated in the last 18 months. No accounts filed as yet. When I put these questions to them I got some reply about them being in the property business since 1908, but bought the company 18 months ago, as the company had certain advertising rights!
5. I didn't like their sales technique. One guy met us and showed us around. He actually called himself "the taxi driver who tells the truth" . Later, we were introduced to a “Property Consultant”, who talked about prices, mortgages, insurance etc.


Apologies for the long post, but wanted to give good account of what we experienced. Any feedback much appreciated.

 

[Audrey]

Firstly, I take it that the purchase price is actually £52,000 and not £520,000? Otherwise it's a no-brainer!! Anyway, assuming it's £52,000 I can tell you that I went across to view properties in Stoke last year and purchased one for around £50k. It had been bought by a developer, prettied up a bit (central heating etc) and then let out. The idea was that I bought it already let, which I did. I have had a change of tenant since then (just once) because I had some trouble with the first tenant (health board tenant). The tenant I now have is a private tenant - working out much better. The rental you mention has me a bit stumped. I am getting the lower figure (£340 per month) which is enough to pay the small mortgage (which I took out on my own home in Dublin) and any expenses (letting agent's fee, house insurance). However, I can't imagine a rent of £200 per week to be honest - not for a property of this sort of value. If you want any more info (ie the agent that I went through etc) you can send me a private email if you wish. I know that the agent who arranged the Stoke property for me has expanded a bit (certainly he sells in Liverpool, but it may be that he sells in Manchester also). Probably worth a look anyway.

 

[cornerman]

Appreciate that. Yes your right, purchase price is £52,000 . I suspect what you say regarding rental income return is more realistic i.e. £80pw. Sounds like you've had a fairly positive experience all in all though.

 

[RainyDay]

The main reason he is looking here is that property prices are more affordable.

He's focusing on the wrong issue. The actual purchase price of the property is not relevant. What is relevant is the potential rental income and the potential capital gain, relative to the purchase price. Don't buy because it is cheap - buy because it is a good investment (or not). To me, a lot of the concerns you mention (and in particular the reference to buying 'in cash' would have me very concerned.

 

[Audrey]

Cornerman
I should have mentioned that the agent who is advertising the properties that I'm talking about is Irish and reputable, so there's nothing to worry about in terms of trusting etc. I can give you the name if you wish. I would feel more comfortable doing it the way I did, than doing what you're talking about. This way I felt much more 'at home' with the people involved. I know what Rainy Day means in terms of focussing on the wrong issue. Of course rental income and capital appreciation are very important. But I also realise that some people (me included) can only afford (or are only willing to part with) a smaller amount, and are prepared to accept a smaller gain in the long run. The one I bought for 50k in July 2004 is now valued at around 65k-70k sterling. A couple on the same road sold in recent months for 80k sterling, but they had double glazing (which mine doesn't have) and may have been in better condition throughout. Even still, 65k sterling would give me a gain of around Eur22,000 in a year. Not bad!! Even after legal fees etc it's the guts of 20k profit for a smallish risk. Let's know what you/your Dad decide to do.

 

[DonKing]

Cornerman,

I'd stay well clear of these shady agents. I bought property in Hungary through an estate agent in Ireland which had a substantial business in Ireland. (Youngs of Ranelagh)

I do believe that if something serious did go wrong it would be in their interest to assist me to protect their reputation. I also believe that it would not be in the interest of a well established agency to get involved in something which was a bit dodgy.

If you were going to buy of small agents, I think you would really need to have local knowledge and confidence that the property would rent well.

I'd be very concerned about the paying cash and remortgaging later bit!!!

 

[cornerman]

Thanks for all the feedback. I think the approach of having an Irish connection may reduce the risk of dealing with agents that you don't know in another country.

 

[dam099]

Thanks for all the feedback. I think the approach of having an Irish connection may reduce the risk of dealing with agents that you don't know in another country.

You may pay extra for the privilege though. It might also be worth considering doing some research and figuring out who are considered the reputable agents in your target market and using them.

 

[shipibo]

Why don,t you get a mortgage from Irish Bank ( Think Ulster will loan you money for property in England), and buy house then get letting agency of your choice to do donkey work .....


Spendin, your cash , then a gettin, mortgage later ......

Interest rate announcement in Britain tomorrow at noon, spending slowing there at present, house market heading south n certain areas, will need to do your homework.

 

[markowitzman]

Avoid the fly by night companies recently set up to flog these houses in need of renovation. Was cold called by one (name cannot remember) who were based in newcastle. You buy first property for cash, then they renovate it and they let it for you. Once let they strongly push you to now take mortgage out on second property to build your "portfolio" quickly etc etc. Got my UK solicitor to do some research. Legal set up very much set up against the client. He emailed me a few months later to say they went bust and fraud office now entertaining them. It seems they were accepting clients money to buy the property, taking out insurance on the client's behalf to guarantee rent in the case of voids..........but they were doing no renovation as they had not good legal title on the leasehold properties! Instead the clients were buying nothing of much value and receiving rent for properties that were empty and they did not own!........until insurance company was found to be the company selling the "property"!! Wouldn't you guarentee rent if you could get the capital value of a property with no legal title up front?
Anyway beware........as previously advised go through a reputable agent .....and visit these areas at night!!......some are none to pleasant.......high yield yes but high risk also. Family friend is an Irish developer in Manchester. His advice was in general negative as most of the areas very rough although he said try to look at areas with new roads and commercial development (if it is good enough for tesco etc then should be good enough for residential development).