guaranteed rental income insurance | Is this why you can’t buy your first London home?

guaranteed rental income is what we do | Is this why you can’t buy your first London home?

A very interesting story from the evening standard, as average rents in the capital reach a record high, an investigation reveals estate agents are targeting wealthy investors. Joshi Herrmann reported the original story

According to the articla, in the summer of 2011, at an internal presentation by the directors of a London estate agent, the staff were told about a strategy that promised to improve the bottom line. The company was facing an unfamiliar situation. The post-crash rentals boom had seen the lettings department offloading properties in hours and lining their pockets with fees, while their counterparts in sales struggled.

Want guaranteed rental income then call 3Let on 020 8694 8098 now

The strategy announced would brilliantly turn the new market conditions to their advantage. A former employee has told the Standard that the directors instructed their agents to target the small but growing group of wealthy investment buyers with their for-sale properties. This would allow the firm to take its usual sales fee then rent out the property for the buyer and manage it on their behalf — turning properties they would once have sold to families and young professionals into long-term cash cows.

Alex Weekes, 26, was until last year an agent at the firm, Ludlow Thompson — a major property player which claims to have let and sold £1 billion worth of property in London in 2012. Buyers chasing popular properties have long suspected that they are being outfaced by wealthy investors for the homes they want. But Weekes’s story, and investigations by the Standard, can reveal that agents have responded to the booming rental market by making investment buyers a conscious priority over ordinary buyers looking to own and occupy.

“They showed us why it is better to sell to landlords who you can then rent the flats or houses for,” says Weekes. “The idea was that we would manage the property, which gets higher fees and means we know when it is going on the market again. It worked really well, I know that there were more properties to instruct.”

Weekes says his former colleagues at other London estate agents had been told to pursue the same strategy and the Standard understands that Ludlow Thompson is by no means the only firm now making a special effort with investors.

At Ludlow, Weekes says the policy was announced in front of the whole company, including managers from both sales and lettings. Was it a novel idea to him and his colleagues? “Yeah, it was,” he says, “it was a policy that we hadn’t even thought of.”

That may be because it was a plan very much of its moment. After the downturn began in 2007/2008, hard-to-come-by mortgages and nervous sellers meant the numbers of Londoners renting rose sharply. More than a quarter of Londoners rent from private landlords now — in 1991 the figure was 14 per cent. And last month came news that rents had risen eight times faster than wages (7.9 per cent up on last year) to record levels, with the average monthly rent now at £1,106.

The rental boom has enticed investors into the buy-to-let market again. The number of investor-buyers has increased by 30 per cent in the past four years according to Ed Mead, a director at Douglas & Gordon, which he says “certainly would not specifically target investor landlords”. And the Council of Mortgage Lenders says buy-to-let mortgages accounted for 13 per cent of all mortgages outstanding at the end of last year.

This is not the first time the buy-to-let market has boomed but the combination of that and hugely inflated prices offered agents like Ludlow an opportunity they weren’t prepared to miss.

“As far as the public were concerned, everything was exactly the same,” explains Weekes, who wrote a book after he left Ludlow called How to Beat Your Agent: A Complete Guide to Residential Property Letting.

Part of the agents’ strategy was to offer big discounts on management fees. “So we said ‘If you buy a house from us and let it out through us we will give you five per cent off our management fee [of 17 per cent]’,” says Weekes.

The most useful service they provide for investors, though, was “off-the- record” calls to give them a head start when a property hadn’t yet been listed. Timing is everything in a market characterised by scarce supply and plenty of overseas interest with ready money and lawyers in tow.

Weekes says: “Unofficially if they [the sales team] knew something was going to come on the market the agent would call the [investment] landlord and say, ‘Look, I’ve got something coming up but it’s not on the market yet’. ”

This account was confirmed when the Standard posed as a potential investment buyer and called one of the company’s branches earlier this week. We asked if it gives advanced notice to investment buyers. “Yes of course,” replied a sales agent. “So if we’ve gone out on a valuation and are 80 per cent sure that it’s going to come on, then we can inform you about that ahead of time before it’s actually on the web portals.” Before ordinary buyers? “Exactly, yeah.”

Thinking he was talking to precisely the type of buyer the firm goes after, the agent revealed: “Both me and my other colleague, we have 10 investors we deal very closely with,” clarifying that “they would be like our priority buyers”.

He went further, saying that investors, whom agents often favour for their known buying credentials, could have an advantage over other bidders if several offers have been made. Would that happen? “Exactly, yeah, and it’s better for the company as a whole.”

He even admitted that the firm can begin the lettings process before the sale is complete: “It’s not unheard of for people to start doing viewings if the property is vacant between exchange and completion, so when you do complete you have no void period straight away — we can do that all in-house.”

A Foxtons agent also confirmed on the phone that for investors with a “close relationship” with the firm “we will be sending you properties before they are put on the website”.

Avoid the headaches and get guaranteed rental income with 3let, call 020 8694 8098

The law states that “you must not discriminate, or threaten to discriminate, against a prospective buyer of the seller’s property because that person declines to accept that you will (directly or indirectly) provide related services to them”, and says discrimination includes “giving details of properties for sale first to those who have indicated they are prepared to let you provide services to them”.

rent guarantee scheme – Do you want to receive monthly rent even when the property is unoccupied?. Please contact us on 020 8694 8098 for extensive references to see how we can help you today.