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Forward thinking pays dividends

Buy-to-let investor fees imageRecent HMRC figures showed that the rush to beat the deadline for the April stamp duty rise pushed sales in March up a whopping 77 per cent on the same month the previous year; there has been rather a large number of investment properties hitting the rental market over the past two months.

Some letting agents are likely to have spent a significant amount of time vying for the business of new buy-to-let landlords, but for some smarter agents the hard work was already done – they starting courting them before they even made an offer on their purchase.

Over the past two years I have helped investors buy over 120 properties. There’s no contract or fee but we usually secure them as clients. Kim Matthews, Lime Property.

Kim Matthews imageIn Hull, letting agency Lime Property has employed an investments manager, Kim Matthews, to do just this for the past couple of years. The impetus to hire a dedicated member of staff to help investors came when out-of-town buyers began focusing on this northern city after Siemens was granted planning permission to build a wind turbine factory in Hull in 2012.

Our advice often pays in securing the instruction but even if we don’t directly benefit that time, we think longterm, not just the quick win. Charlotte Malone, JLL Canary Wharf.

Kim started with the company, which also has a sister estate agent, Zest, three years ago, working across both the letting and estate agency businesses before beginning to focus solely on helping investors buy property.

“Around the time of the Siemens announcement the manager of the letting agency started getting inundated with phone calls from investors looking for advice on where to buy and what type of property would be best, so the owner decided he would like to get somebody on board to help out in that area as he could see it would provide a good service,” says Matthews.

With tax changes, investors are being increasingly squeezed, so letting agents have to work even harder to justify their value to clients.

Investor image“People locally have a fair idea about areas in Hull but people from out of town often don’t and that’s where I step in. I can give them ideas about popular rental areas, how much a property will rent for and how long a property will take to rent. I can also give investors reports to see what the market is like in that location so they can make a decision based on not just what I tell them but also factual information.”

Kim makes initial contact with investors in a variety of ways, “Some of them are simply through word of mouth, I’ve just had one come through where I helped somebody and they’ve passed my name on. Some ring in and enquire about investing and the receptionist passes them on to me. I also do some of the viewings for properties that Zest has on that are very much aimed at investors and at the viewings I will offer them advice, give them my card and explain what I do.”

HOW IT’S DONE

Kim liaises with buyers about their requirements and helps them decide on properties to view, sometimes viewing for them, other times lining up appointments and taking them to viewings. She looks at properties across the whole of the city’s market and sends out alerts to her investor base when she sees good investment properties come onto the market.

Over the past two years, she’s helped investors buy more than 120 properties and though there’s no contract or fee involved in the service, by helping investors select the right type of property, Kim usually secures those investors as clients of the letting agency after the purchase goes through. “We don’t do any contracts as such but due to the fact that I work with them throughout the process of sourcing and purchasing we usually build a good working relationship and they feel confident in putting the letting on with our company.

“It is a service that no other letting agent or estate agent offers here and that is what people like about it. We try and build a bond so that our advice we give is something they find valuable — obviously they want to buy a property and I help them choose the right one. If I’ve recommended an area or a property, when they put it on the market with me, then they know I’ve got some responsibility to let it out for the price I suggested and within the time frame I suggested.”

A GROWING TREND

Richard O'Neil imageOther letting agents have cottoned on to the benefits of helping investors find property as a way of securing new clients. Richard O’Neill, Regional Lettings Director for Romans across five branches in Surrey and Hampshire, says that while they do not have a dedicated investments manager, they takes a proactive approach to helping investors buy property, with incentives in place to encourage branch lettings managers to get involved.

We also suggest to existing landlords wishing to sell that they do so with tenants in situ. It’s good for the landlord and the buyer. Richard O’Neill, Romans.

“About three years ago we made a decision that one of the big ways to build our portfolio was to help sell properties to existing landlords and new investors that register with our sales team,” he says. “We pick up on anyone who has registered as an investor, give them a call to see what they are after, the level of service they want and see what we can do to help them. Then we look at the whole marketplace to see what we could help them buy.

“Obviously our sales guys have properties they are trying to sell but we would like an investor to buy the best investment property so we might send them properties from Rightmove that are on with other agents and suggest they view them. Before spending a lot of time and effort on this we try to negotiate that they would use us. “At that stage it is not formal because they don’t own a property so you can’t get them to sign a contract or anything like that so you have to sort of take the rough with the smooth.

“Most of them will stick to a gentleman’s agreement but one or two do drift off elsewhere once they’ve purchased.”

O’Neill says Romans also takes other steps to bring in new business from investors. “We also call all our current landlords all the time. A project we did last year was asking all of our landlords if they were looking to buy in the next 18 months and around 20 per cent of them came back and said yes, although that hasn’t come to full fruition.”

The agency also suggests to existing landlords wishing to sell that they consider doing so with tenants in situ as this helps the letting agent hold on to existing letting properties. “Rather than when someone phones up and says they want to sell passing them through to the sales department, which we were probably guilty of in the past, we now have a conversation about selling with tenants in situ.

“It’s good for the landlord as it reduces the periods where the mortgage is being paid out but the property is empty, and it is also good for a new buyer to know the tenant’s history. In fact we had 10 of those go through in one month because people were trying to push sales through before the stamp duty came in.”

TEAM WORK IN LONDON

Charlotte Malone imageCollaboration between sales and lettings teams can help both areas of the business, says Charlotte Malone, Director of Letting at JLL in Canary Wharf. “A high proportion of our purchasers are rental investors, so whenever the sales team has a property come to market – there are exceptions – if it’s an incredible four bedroom penthouse it isn’t going to be for an investor landlord – the sales team find out from my team what the rental valuation of that property is, so if they are asked they can give that information straight away. In this market things tend to move quite quickly so purchasers like to have as much information as they can very early in the process so they can calculate and analyse the potential gross and net yields. If the sales team has to keep going back and forth to get this, it can delay their decision so we try to make sure they have everything they need in the first instance.”

Charlotte says that once they’ve decided on a particular property with the sales team, many investors then want to speak with the lettings team to find out what type of tenants the property could attract, what type of furniture they should provide and how quickly they are likely to find a tenant.

She says the office also receives a lot of calls from potential buyers of properties in new developments, as well as ad hoc enquiries from potential investors, all of which they aim to help. “A lot of the time our advice will pay off in terms us securing that particular instruction, but I think even if that particular opportunity doesn’t work out and we don’t directly benefit then in a couple of years’ time, or five years’ time, they will remember that conversation and that we were willing to help and they will come back to us. We think longterm when we are giving advice to people, we don’t just think about the quick win.”

THE BOTTOM LINE

With investors likely to be increasingly squeezed over the coming years as changes to mortgage interest relief and stamp duty hit their bottom lines, letting agents will have to work increasingly hard to justify their value to their clients. Those who play the long game and get in at the ground level may well have the edge over those that focus only on the ‘quick win’.

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