Dear Lady Lea - Property Investor News - March 2003

1)I am thinking about doing "off plan". But am wary of the claims made by some "finders". What should I look for to make a proposed deal is sound? I know there are no "guarantees" of course!

You are right to be wary as finders are mostly taking their money up front. So once they have been paid, they are in the clear. They do not have to depend on the market for their payment.

I invest in off plan myself and have experienced lots of feedback where investors need to sell or rent their property, but are unable too as there are too many on the market on the same time. I have also had to hold some plots myself because of this.

Even if a finder tells you they have invested themselves - it may be that they have made so much money on finder's fees, that they can actually afford to invest and make a full loss. I would, as an experienced investor, NOT take this information to support claims of the development is good to invest in.

Firstly, to do your own research, I would totally ignore EVERYTHING the finder has said, other than the price you have to pay and his fees. Any information they give you is likely to be to sell this property to you.

You are looking at an investment, do not let them sell it to you. You do your sums and see if it is what you want. Do your own research. If you don't know where to start, have a look on Housemouse, we have an information centre with an online research section, to help you do a step-by-step check.

Be VERY wary if you have been offered gifted deposit properties. These mortgages have been phased out by most lenders that were doing them, and unless you have an offer in place BEFORE you reserve make sure you are able to get funds to cover a 15% deposit. Do not just believe people if they tell you that you can get mortgages of these type, and that they have brokers that will do it - get an offer.

Some of the things to look for:

• How many plots have gone to investors V regular buyers.
• How many developments are going to be ready at the same time in that area?
• Is there actually a demand for rental property of that type, or is the builder building to investor's demands?
• Does your finder present a full market appraisal and valuation to you before you reserve?
• Are they offering a rental guarantee? If so, why do they need to?
• Have they structured the deal as a gifted deposit? Can you get a mortgage of this type? Do you have an offer in place?
• Is the finder taking any other financial gains in this deal ie cuts from the developer or are they passing it through and adding a bit to the price?

There are some VERY good finders out there also. I tend to pick people who have supplied good deals to me in the past, and build a relationship with them. I also prefer to work close to them, supplying details of developments, and getting them to negotiate for me.

2) What would you regard as a sensible yield in the current market when considering a buy to let investment?

A very interesting question - but what market? Are you looking at family homes in suburban locations, 2 bed flats in the inner city or 2 bed terraces for DSS tenants in less desirable areas? North or South of the UK ?

You need to assess every single property on an individual basis. "Market" is very vague and does not point to any type of investing.

Yield is your return on what you have invested. I would look at what YOU want to achieve for your money. Some people are happy to accept 6% yields in London - whereas in some parts of the North West you can achieve 15%.

I personally do not work on yields I work on positive cash flow per month. I assess every deal separately and as long as I am comfortable with the profit per month on that plot I will buy it.

3) I have had a very frustrating experience with a so called "professional" mortgage broker. What should I look for when choosing a broker?

I have had a lot of experiences with different types of brokers, including one man bands, small teams and massive nationwide companies. It took me a log time to find someone who listened to what I said, treated me with respect, and who kept my information confidential.

I found that working with a large firm like Mike Perrin FPD Savills, that they have a pc based relationship manager that logs all calls and correspondence, sets to do's and tracks the case between written exchanged and completed. It also enables them to contact clients when special rates expire.

4) Is it best to furnish a BTL property for tenants or not?

This would depend on the demand at the time your were renting your property out. You would do well to call up your letting agent before you furnish it, to see what type of demand there is for furnished V unfurnished property. And also weigh up the rent you will achieve for each to see if it is actually financially worth your while to furnish.

Renting property with furniture can be fantastic; it offers tenants a lifestyle if you do it well.

It can also be very hard work furnishing and some tenants want to supply their own bed or sofa, and you may have to find a storage place for surplus furniture. You also need to strictly follow fire regulations and maintain anything that breaks.

Demand and personal choice will tell you if it is best.

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