‘I own three buy-to-lets and have never visited’

More landlords are buying far from where they live in the hunt for high yields. Ruth Bloomfield learns how to be a long-distance investor

2023-01-21T08:00:00.0000000Z

2023-01-21T08:00:00.0000000Z

Daily Telegraph

https://dailytelegraph.pressreader.com/article/281599539620579

Property

Long- distance relationships are notoriously disaster prone. But increasing numbers of buy-tolet investors are ignoring the potential pitfalls and buying rental properties hundreds, and in some cases thousands, of miles from home. “Remote landlording” is becoming an increasingly popular option for investors based in high-value locations aware of the much higher yields to be made if they venture out of their geographical comfort zone to buy somewhere cheaper. According to new data from estate agency Hamptons, almost two thirds of London- based investors bought rental properties in the regions last year, up from 26pc in 2012. Landlord sales slumped in the South East and South West, but shot up in the North East to the highest level since 2013. More than a third ( 36pc) of properties in Sunderland were sold to investors drawn by high yields last year, up 27 percentage points from 9pc the year before. Middlesbrough and Gateshead also recorded sharp rises in landlords snapping up properties. But while the profits to be made with this strategy are alluring, there are also challenges to be met, according to those who have tried and tested the model. ‘ YOU HAVE TO BE PREPARED TO GIVE UP YOUR WEEKEND’ Mark Wilkinson, 52, and his wife Emma, 44, are serial entrepreneurs, who entered the buy-to-let game five years ago. “At that time you could buy a three- bedroom house in South Wales for less than £50,000,” says Mr Wilkinson, who also works as a success coach. “If you bought 10 that would be £500,000, which was about the price of a London flat. And the thing with having several properties is that if you do end up with voids it doesn’t really matter.” Over the past five years the couple, who live in Esher, Surrey, with their French bulldog, have built up a portfolio of eight three-bedroom houses in the town of Tonypandy, just north of Cardiff. Their first house cost £45,000 and their most recent purchase set them back £62,500. The couple used a property sourcer to help select houses, although Wilkinson went to view each one before committing. In order to rent properties in Wales, landlords need to be licensed and Wilkinson had to attend a training course in order to qualify. “If you want to succeed you have got to be prepared to do the things that other people are not, like giving up your weekends to go to Wales to look at a house or do a test,” he said. They spent £ 25,000 upgrading their first property, got it revalued at £100,000, and remortgaged it in order to take capital back out and buy the next one. The couple use a letting agent to manage their properties, which means that their day-today involvement is limited to decision making if something needs fixing in one of the properties. Their tenants, said Wilkinson, have been exceptionally reliable and the yields are good. A three- bedroom house in Tonypandy currently rents for about £600 per month. Less mortgage costs and agent fees the monthly income is around £450 ( before any maintenance work required). Multiplied by eight properties, the annual income from the portfolio is more than £40,000. Wilkinson says that managing the homes involves little more than a monthly call with the agent. “I know you get horror stories, but I think that some people get into buy-tolet with the wrong attitude and expectations,” says Wilkinson. “I want to be professional and for my tenants to be happy because then they will not be a problem. You get what you give.” A RENTAL THAT WILL BECOME A LIFESTYLE CHANGE Vic Paterson, and her husband Greg Pritchard, are long- distance property investors – somewhat accidentally. The couple live in Spalding, Lincolnshire, where they run a pain and injury rehabilitation clinic. In the depths of the pandemic the pair headed to the Scottish Highlands for a staycation. “It was just incredible,” says Paterson, 48, a hypnotherapist. “I had the strangest feeling that I had come home.” They decided to purchase a holiday let and rent it out for a few years, with the medium-term goal of being able to relocate, mortgage-free, to Scotland. In December 2021 they paid £180,000 for Tig Cottage, a two-bedroom worker’s cottage near the coastal town of Ballantrae, 70 miles south-west of Glasgow. It was badly in need of some TLC – a new boiler, damp work, redecorating and new doors were all required. But finding people to do the work was not as easy as they thought it would be. “I thought it would be like in Lincolnshire – we would just go online and find people,” says Paterson. “What I didn’t realise was that distance was going to be such an issue. At home 10 miles isn’t far, but in Scotland, up hills and over rivers, people would tell me they didn’t want to come to the cottage because it was too far away.” The couple befriended their new neighbours and joined Facebook groups seeking recommendations for reliable local tradespeople. The process was slower than they had hoped, and Tig Cottage opened for business around six months behind schedule in September 2022. They use holiday let rental platforms like Airbnb and Booking.com to find guests. The other challenge the couple faced was finding a local person to manage the cottage, taking care of cleaning, maintenance and handovers. They found, again on Facebook, a capable husband and wife team. The rental runs like clockwork, says Paterson, earning between £ 95 and £120 per night. This covers the cost of their £ 635 per month ( interest- only) mortgage and basic costs for bills and maintenance. In the meantime, the couple are saving up to repay the £120,000 they have borrowed. They hope to be owners in around five years and are enjoying being able to visit the cottage when it is empty. “All we wanted was to cover the mortgage and we are doing that,” says Paterson. “Once we had a team in place it wasn’t stressful at all, although I do have the occasional nightmare about our housekeeper leaving.” OWNING PROPERTY – AND NEVER VISITING While the couple are hoping their buyto-let will lead to a lifestyle change, for Lawrence Barry, whose name has been changed, investing in property was very much a business proposition. In 2007 the market was flying and Barry and his business partner decided to invest in three new- build flats. The properties are in Middlesbrough, Wigan, and Ilkeston – towns that Barry who lives in Richmond, south- west London, has never visited. The developers were offering to cover buyers’ deposits as an incentive and there was no stamp duty payable because the values were below the threshold, so the entry cost of buying the three properties amounted to a few thousand pounds on legal fees. Barry, 61, uses local lettings agents to manage the flats, with mixed results. Two firms he found have been excellent but the third, in Middlesborough, has been less successful. In hindsight Barry admits the firm had always seemed “erratic”. Things came to a head when they let the flat to a new tenant without proper checks on his source of income. Predictably the tenant defaulted on the rent, damaged the flat and had neighbours complaining about drug use. Lawrence needed to take legal action to evict him. The whole adventure cost roughly £ 10,000 over a three-year period. But this is not the only bad news. Each of Barry’s two- bedroom properties originally cost around £110,000, but over the past 16 years their values have plunged. He estimates that the flat in Wigan is now worth about £90,000; the other two are worth less than £60,000 each. This drop is because of factors beyond Barry’s control, notably the financial crisis and Brexit. Flats have become generally harder to sell since the pandemic, as buyers want outside space. And, he now realises, their addresses are not as desirable as they could be. Another factor that he must contend with is soaring interest rates. Since the summer, monthly mortgage repayments on each flat, which are rented out at about £595 per month apiece, has almost doubled from between £ 200 to £ 250 per flat, to around £400 to £450. “We have got no positive cash flow on them,” he says. “What would I do differently now? Buying somewhere that is not close to home is not an issue but I think that having a good understanding of the area you are buying in is absolutely key.” LETTING OUT THOUSANDS OF MILES AWAY Tania King- Mohammad takes “long- distance landlording” to an extreme. In 2021, the former radiologist, her husband and their daughters, six and three, relocated from Plymouth, Devon, to Ibiza. A few years before making their big move King-Mohammad, 38, decided to sell the family home, in Plymouth, rent, and start investing the proceeds of the sale in a UK property portfolio to provide the family with a future income to subsidise their new life in the Balearics. As well as a £67,000 Plymouth flat, she bought four holiday lets in Britain and set up a company to manage them. She now works as a property and wealth business strategist (@freedomwithtania). She also manages the Plymouth rental, which, after £15,000 worth of renovation, is rented out at £900 per month. Costs – including mortgage, insurance and maintenance – eat up around £400 per month, but she is still left with a gross yield of around 9pc. Meanwhile, the flat has recently been valued at £120,000. Her advice to others is to do plenty of due diligence before committing to an unfamiliar area. Look out for a history of strong capital growth locally, good amenities and excellent transport links, nearby employment hubs and an active local rental market. Once you have bought a property you need to get networking, she advises, particularly if you are going to manage it yourself to save on agents’ fees. “You need to build up strong connections and relationships with letting agents and you need to build up a ‘power team’ of handymen, boiler engineers, plumbers,” says King-Mohammad. “Recommendations are best and local Facebook groups are great for that, and get started right away – don’t wait until you have a problem.” Her other key piece of advice is not to stint on the initial fit out. “To reduce the level of headaches make sure the property is renovated to a high standard,” she says. “It is always worth investing in good, solid foundations. You will have less maintenance to do down the line.”

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