property investors network

Does it matter what your rental property looks like?

Yesterday I was one of the guest speakers invited to be on the property expert panel at The Money Show, discussing if it was a good time to get back into property.

There were some really interesting questions asked including should you buy ex council properties in London. My answer was yes because you could pick up an ex council flat for less than £250k in London, with four rooms which you can multi let and get a great cash flow. Often these are in a great location and being ex council usually the rooms are a good size.

However, you do want to make sure that at least 50% of the development is privately owed and you need to be aware that is it difficult to get mortgages on some ex council property particularly if they have balcony access, are high rise or non standard construction.

After the panel discussed a lady approached me and said she liked what I said but that she though most ex council properties were ugly and she would not want to live there. Personally I believe she was making two big mistakes than many amateur investors make which is what inspired me to write this post.

I asked her: “Are you planning to liver there yourself?” She replied “no of course not it is a rental property”. So then it does not matter if she would not want to live there, as long as there is a strong rental demand in the area with plenty of other people who are prepared to live there?

Secondly the outside of the property may not look very attractive. That is not as important as what it looks like on the inside. Most tenants do not care what it looks like outside as long as it is good inside. As an investor it is the numbers that need to work for you.

The lady took on what I said and then asked me “Well what about when I want to sell it on?”.

“Good question” I responded “ But why would you want to sell it if it is making money for you”

The lady agreed and said that she was going to revisit some properties she had previously dismissed because they did not look very nice from the outside.

What are your thoughts on this?

Kind regards,

Simon Zutshi

16 thoughts on “Does it matter what your rental property looks like?

  1. Ed Fowkes

    Hi Simon,
    I like ex-locals in London.
    The numbers stack very well in comparison to lovely period properties whose sales prices are at a premium. The Returns on an investment are therefore often greatly increased.
    But these two types of properties are found in the same locations, so are subject to pretty much the same stability of price change.
    If you are in it for the long term, and as you say, there is rental demand, then it can only be a good thing.
    Thanks for the good content, Ed Fowkes

  2. Gaynor

    Hi Simon, this is all very true what you are saying. Can I add an observation from the finance point of view, as a Commercial Finance Broker. I have recently come across both a Bridger and BTL companies refusing to mortgage an ex-council flat which had good rental income, but was in a very poor area. Their reason was that it would not be saleable on in the future because of the bad /poor area it was located in, therefore they did not wish to take the risk. So the best way to make sure is to get it valued prior to purchase and ask the valuer for an expert opinion on this, because the Lender will base his judgement on what the valuer says. Cheers, Gaynor

  3. daniel blake

    very good advice. When I started out, my accountant (who has no experience in property whatsoever) advised me to buy ‘where YOU what want to live’. I’m so glad I never listened.

  4. Jason

    Hi Simon,

    Nice blog article. Thanks, how do you work out if 50% of an ex-council block is privately owned?

    Is there a quick way or tip you could share apart from doing a land registry search for each door number.

    Many thanks

    Jason

  5. John Scott

    Totally agree with this Simon. Am currently looking at a 4 room mult-let in Widnes Cheshire, £56K. Outside is ugly, area not too good, but cash flow postive £500 pcm. Capital appreciation minimal in the short term but return on investment is 40% plus. So in short be prepared to look at unlikely properties and have imagination.

  6. Rick

    Hi Simon. Absolutely correct. Not every one was brought up in a six bed mansion in Oxford, with electric gates. Every body has their level and virtually every property has its market. Perhaps with the exception of some I looked at in Hull a few years ago. The key is to ensure the property is safe, warm and dry and in a condition which ensures the investment is maintained. I prepare my properties to a level that is neautral, crisp and above all clean. I have very few problems with tenants. Not all of the properties I deal with are mine but the standards and style are consistant.
    Have a great day. Rick

  7. Rudi

    As someone who is looking at properties to rent, what it looks like on the inside is a large part of my decision to take it on or not; there are properties I have dismissed because they weren’t very “nice” looking. However as long as the property is energy efficient and is well looked after I think this is something I could potentially look past.

  8. Jack

    I agree to a certain extent. however, it can be hard to find strong rental demand because alot of ex council properties are located in run down areas.

  9. Simon Zutshi

    Unfortunately may professional advisers do not invest in property and so are not really qualified to comment on such things but often do. Make sure your power team and advisors are all investors as well so that they understand what you want to achieve? A great place to find clued up advisors is at your local property investors network meeting. Full details at http://www.pinmeeting.co.uk

  10. trupti

    Extremely good article . As an agent based in east london i would like to have your opinion or advise on how to sell ex-council blocks quickly which has a competitive sale price (as the vendors are distressed sellers )with good rental returns.
    Because we have couple of such blocks with good rental returns and buyers do like the property but banks are not lending funds on ex council flats as its high rise too. Can you please advise to shift this lot quickly? Would appreciate your help and thank you in advance.

  11. Sean Elliott

    Very interesting. I was wondering exactly the same thing about ex-council properties; whether they react in the same way as the victorian/edwardian stock to any local area uplift (or fall 🙁 ). I cant quite get my head around it.
    Thanks for the tip to check out the cars on the estate, obvious when you think about it. Now I wonder how old the streetview pics are from that promising little SW estate…

  12. doug barber

    i own several council type multi let properties in london and have sourced through a fantastic letting agent called Ben Temple of Temples in clapham. Ben does the finding, refurb and then lets them out through his professional agency Temples. Its very ‘hands off’ which suits me and the properties over time have all produced excellent returns on my investment , currently generating a monthly profit of around 4k after all bills on 6 flats. the only comment i would make is that you have to be aware of any works the council may want to do to the property. they can regularly decide to update the blocks in any way from windows to roofs and communal areas etc and you can be hit with a large bill for what is in reality a fraction of the work as it is shared out amongst leaseholders. Make sure you know of any costs likely to be incurred over the next few years from the council and negotiate this off your purchase price.

  13. Dreena

    A note of caution.
    I have an ex council flat in Cambridge which I have, for the last year, been letting to post graduate students, however the council have been checking all the letting agents adverts for any ex council propertes. Apparently as per the leases, no ex council leasehold properties are allowed to be used as multi lets. Obviously this may vary from council to council. Having only just spent money putting in fire retardent doors and locks etc. I’m pretty fed up about it. Guess I should have read the leasehold terms more thoroughly. Maybe other councils aren’t so diligent in their attemps to establlish who is occupying their ex properties.
    Anyway, perhaps it’s something for anyone about to buy an ex council, leasehold property to investigate and consider.
    Kind regards,
    Dreena