Dear Lady Lea - Property Investor News - Feb 2003

1) Lady Lea, I am looking at investing in property but don't know where to start. I have been told about properties in the North fetching high yields and property in the south getting high growth. How can I pick what is best for me? Is there a formula?

When looking at investing in property you will hear a lot of different views, in the Press, on Internet discussion boards and at Events. I always feel that it is good to subscribe to every magazine, newsletter, read every board and go to every event you can do. This should give you enough incite to be able to choose yourself what path to follow. Choosing between North High Yielding property and South Growth property would really be down to what you were looking short or long term returns. South may give you high cash return if buy right. The North may give you a good income if you invest in the right price band and area, looking at fulfilling demand from agents.

2) I have bought a house to live in on a residential mortgage, I am not able to move now as my job has been extended and wanted to rent it out. My friend told me that I cant rent it unless I convert it to a Buy To Let mortgage, is this right Lady Lea?

If you are not able to move into your property and want to keep it, you will need to contact your lender and tell them, this is getting permission to let. Once you have permission to let - it is no longer a residential mortgage.

Lenders will usually advise you of the next step to take when you contact them. I have done this several times and found that most lenders require a letter requesting to rent the property out. They have then sent me a form to complete, and asked for a copy of my tenancy agreement. In most cases I have paid about 1% over the current interest rate to convert to a commercial mortgage, and paid a £70 admin fee for them to update their files that I am now letting the property.

It has always been a fairly straightforward procedure for me.

3) I have been to a property show and seen that people are charging finders fees to supply property that is off plan. What is a reasonable fee Lady Lea? And how do I know I am getting a good deal?

A reasonable fee is what you are happy to pay when you have done your sums to see what you are left with when you have bought the property. It is a very tricky question as some people charge 1% some charge 3%. It is really down to what the quality of the deal is to you - and if it is saving you a lot of time, and money.

I pay my finders on a sliding scale according to real market discount. Say I was offered a true 15% off market value I would look at paying 1% if the deal was tied up and ready to go. If I was offered a deal that was off plan, 2 yrs away and I had a true 30% off I might pay 3% or 4% fees. You really have to do research on the market - and look at other future development in the area as well.

To see if you are getting a good deal is down to your own research. If there are 100 flats in a block, and you know all of them are offered to investors who want to rent them out, and you also know that there are 4 other developments close by with a total of 300 units - all of a similar type, you may think that today it was a good deal, but looking at the future prices, if 400 2 bed flats all come up for rent or sale at the same time, the prices are likely to drop, as there is much to choose from.

4) I have a lot of money in my bank and really don't know what to do with it Lady Lea. How safe is investing in property?

It depends what you mean by safe. I look at property as being safe for me if I buy right. I am looking only to buy in below current market value, of 15% or more. This means that even if the market were to drop 15% I should be still above board.

If you are looking at renting, the rents can change very fast, you need to really look at your target area before you buy. I had a recent experience where I had bought in a very good area for rents in 1999 but had to sellearly this year a 3 Bed townhouse. In one part of East London they were

fetching £1500 a month, yet now they struggle to fetch £850. I bought well for capital growth as we paid £147,000 and sold for £200,000, but bought bad for rentals. I think that property will continue to rise steadily, and think that no matter what happens in the UK , people will always need a place to live.

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