One-on-one interview: Graham Davidson, managing director of Sequre Property Investment
Continuing his weekly series of interviews with senior figures in the UK housing industry, Marc Da Silva poses the questions to Graham Davidson of buy-to-let investment specialist Sequre Property Investment.
What are the current buy-to-let property market conditions like for investors?
The market is currently buoyant and in good health, thanks to a combination of factors. Mortgage rates are at an all-time low and there is strong demand for quality rental accommodation owing to an increasingly mobile demographic of young professionals for whom renting is the best option.
The northern market in particular, where we generally operate, is performing very well and there is a real appetite from ‘hands off’ southern investors for property here; in 2014 over two-thirds of our investors were from the London and the south east.
Why are a growing number of people choosing to invest in the buy-to-let property market?
Looking historically, bricks and mortar has consistently outperformed nearly all other forms of investment such as ISAs, bonds and equities. Today’s consumers are more financially savvy than ever and want to make their capital work harder for them – and buy-to-let is a stable and rewarding way to achieve this. Not only do they get a regular income, there is the added benefit of actually owning a physical asset which can be kept in the family later in life.
Is there a concern that the booming buy-to-let market could pose a risk to financial stability?
The lending criteria for buy-to-let mortgages is slightly more relaxed than for owner-occupiers but we find that the majority of those entering the market are financially savvy and have calculated the risks and returns, hence the perceived threat is in fact minimal. In regards to pushing up house prices, the impact buy-to-let has on the market is negligible when compared to the effects caused by a shortage of new housing stock being built.
What sort of investment returns should investors expect to receive?
Returns vary hugely across the country but we primarily operate in northern areas such as Manchester, Leeds, York and Chester, where entry prices are far lower, meaning better yields. Average gross yields of 7.5% in Manchester for example compare to 4.5% in London, while a typical two-bedroom investment property costs in the region of £90,000 versus £400,000 in the capital.
How can a landlord find the perfect tenant?
It is now standard practice for tenants to be properly vetted before renting a property. Reference and credit checks should always be considered as well as proof of a steady income. There is never a guarantee of a “perfect” tenant but by going through the correct procedures then it is likely to make life much smoother for all involved. Letting agents are ideal as they specialise in property management and are well suited in spotting ideal candidates. They can also provide one point of contact of communication between both tenant and landlord, which avoids miscommunication and keeps both parties updated as necessary.
Is landlord insurance necessary and how does if differ to normal home insurance?
There are two main types of landlord insurance: buy-to-let, for a single property; and multi-property which can protect a portfolio – both specifically designed to provide cover for buildings that are owned by one party and let to another. We would always recommend landlords seek out specialist insurance, especially if they have provided furnishings for the property as there are policies that can cover this. Home insurance won’t suffice in some circumstances that a landlord may need to consider - i.e. loss of rent, legal cover and property owner’s liability cover, and tenants will have to seek out their own separate insurance for their personal belongings.
What are the golden rules to investing in property?
Rental demand is the golden goose for buy-to-let; no demand means no return on investment. Taking that into account, we advise on looking at property in buoyant areas where there is strong demand thanks to investment in infrastructure, job creation, universities and a positive economic outlook.
As with any form of investment, doing your homework and conducting due diligence is essential.