Property buying agents explained
To locate residential property, consumers are now using property search engines such as Rightmove, Zoopla, Prime Location and others to find properties in their area, but there are also now countless online property investment companies all promising to find you the best deals.
So how do you know which ones to choose? Here, we look at a handful of the firms on the market and analyse what they offer and how they work.
The buying agents
If you are short of time or lack the confidence to negotiate with estate agents, you could hire a buying agent who specialises in investment properties. Although you’ll pay a fee, they will have access to properties that are not on the market yet and you could recoup some, or all, of the money you’ve spent if they have good negotiating skills.
Focusing on prime London areas, Temple Field Property specialises in searching for investment property. Its Yield Plus London Opportunity aims to add value to ex-local authority properties it finds for its clients through refurbishment.
“We are getting most interest in ex-local authority property built in the Sixties and Seventies, which is the cheapest property you can buy in London,” says co-founder Dominic Field. “You can buy a three-bedroom, 850 square foot flat for around £500,000, which is a lot of money, but that’s pretty much where it starts.”
The company, which only buys low-rise, low-density property, near to public transport, typically looks for properties where it can move the kitchen into the sitting room to create an additional rentable bedroom. This boosts the rental yield while still leaving a common area for people to congregate.
“The properties we go for are generally bordered by period houses, which trade at a premium of 30% to 40% more. What we like is to find an in-fill development of 20 flats, which are ex-local but in fabulous locations such as Fulham, Battersea or Clapham,” says Field. “Tenants are young professionals who want clean, safe accommodation and they don’t want to pay too much for it.”
Temple Field charges an initial fee of £600 and 2% of the purchase price after exchange. “That’s in line with what estate agents charge, but we do so much more,” explains Field. “We hold their hands throughout the process, the legal work, the survey, all the way through to exchange. When we go to buy a property, our clients are taken very seriously. We’d like to think we save at least 2% on the purchase price by acting as their representative.”
And it’s not just London’s trendiest areas that are attracting investors. Henry Sherwood, managing director of The Buying Agents, has seen a growing interest in properties close to Crossrail.
The Buying Agents, which generally carries out light, cosmetic refurbishments – perhaps a new kitchen, new flooring, painting and decorating – seeks out properties throughout the UK, as well as in Paris and the South of France. It charges £600 initially, with the fee deducted from its commission, which is around 1.5%, if a purchase goes through.
“On average, we are usually around one year ahead of the general public when deciding where to invest. We started buying on the Crossrail route around 2008 to 2009, long before anyone else. This was at the height of the credit crunch so some clients bought at the bottom of the market and then saw the huge Crossrail effect. We have been buying properties near Crossrail 2 for about nine months now.
“In London, the more central you are, the lower the yield, but higher yields can still be found further out of the capital – in Tottenham, for instance. A lot of people missed jumping on the Crossrail 1 bandwagon, so are now looking at Crossrail 2.
They now have a greater appetite for risk and don’t mind going into more ‘emerging markets’.”
Another company that looks beyond London is buy-to-let estate agent Assetz for Investors, which finds and pre-negotiates investment-grade, buy-to-let property for private investors, offering a wide range of properties including new-build, student, off-plan and resale property. Each property comes with online data that clearly spells out what an investor will pay, including the fee, mortgage costs, and rental yields.
Stuart Law, chief executive of Assetz for Investors, says: “Some properties are commission-free for the buyer as the vendor/developer will pay all the fees, while for others the buyer would need to pay part or all of our fee, which is typically around £3,000. Given our properties are off-market and have already had negotiated prices, this is a valuable overall cash saving to an investor and also a lot more time-efficient for busy property investors.
“We have always focused more on rental income than speculation on house prices and have a quality investor base with cash to deploy rather than supporting speculators with just a small, high-risk deposit.”
A quick browse of its site reveals a wide range of properties across the UK. For example, at the time of writing a selection of apartments in a development in Leicester’s city centre was priced from £127,355, with a rental yield of 7% and a projected return on the investment of 14.4% – Assetz’s fee was £4,000 plus VAT.
Invented by a Frenchman in 1954 and ironically introduced in the UK on 1 April 1973, VAT is an indirect tax levied on the value added in the production of goods and services, from primary production to final consumption and is paid by the buyer. Its levying is complex, with a number of exemptions and exclusions. For example, in the UK, VAT is payable on chocolate-covered biscuits, but not on chocolate-covered cakes and the non-VAT status of McVitie’s Jaffa Cakes was challenged in a UK court case to determine whether Jaffa Cake was a cake or a biscuit. The judge ruled that the Jaffa Cake is a cake, McVitie’s won the case and VAT is not paid on Jaffa Cakes in the UK.
The general term for the rate of income from an investment expressed as an annual percentage and based on its current market value. For example, if a corporate bond or gilt originally sold at £100 par value with a coupon of 10% is bought for £100 then the coupon and the yield are the same at 10%, or £10. But if an investor buys the bond for £125, its coupon is still 10% (or £10) and the investor receives £10 but as the investor bought the bond for £125 (not £100) the yield on the investment is 8%.
An off-plan property is one sold to the buyer before it has actually been built and so the prospective buyer relies heavily on architect drawings, scale models and the assurances of the property developer in order to “see” what they’re buying. For investors or speculators, in a rising market, buying off-plan means you buy at this year’s prices and, when you take possession, the market value will have increased. The biggest risks with off-plan are the developer will go bust or not complete the project or that the market will fall and the completed property will be worth less that the agreed purchase price.
Everything you own: all your assets (property, cars, investments, savings, insurance payouts, artwork, furniture etc) minus any liabilities (debts, current bills, payments still owed on assets like cars and houses, credit card balances and other outstanding loans). When you’re alive this is called your wealth; when you’re dead, it becomes your estate.
Generic, loosely-defined term for markets in a newly industrialised or Third World country that is in the process of moving from a closed economy to an open market economy while building accountability within the system. The World Bank recognises 28 countries as emerging markets, including Argentina, Brazil, China, Czech Republic, Egypt, India, Israel, Morocco, Russia and Venezuela. Because these countries carry additional political, economic and currency risks, investors in emerging markets should accept volatile returns. There is potential to make large profit at the risk of large losses.
The catch-all term applied to investors who buy properties with the sole intention of letting them to tenants rather than living in them themselves, with the proceeds from the let usually used for the repayment of the mortgage. Buy-to-let investors have to take out specialised mortgages that carry higher interest rates and require a much bigger deposit than a standard mortgage. Other expenditure can include legal fees, income tax (on the rental profits you make), capital gains tax (if you sell the property) and “void” periods when the property is unlet.