Offer a property or a lifestyle?

[Lady Lea]

Hello

Something I have been thinking about a lot recently - food for thought.

I used to have a portfolio of property that was based around cheaper ex local authority 2 bed flats. I realised after a fair few years that the type of tenant I was atracting was doing my nut - doing runners, not paying, not cleaning etc - and I had enough.

I ditched them all in auction last month.

I am now looking at offering tenants a lifestyle. For the same amount of money tied up in a council flat I can buy a penthouse on a gifted deposit and furnish it to a good standard. I spent the day with a chap that supplied furniture today - and they offer a design service so that you can walk into a property and say "wow I want to live here"

I like this concept of offering my tenants a lifestyle rather than a vacant flat.

any views - anyone do this?
I dont mean just furnish property -I mean buy quality property ie penthouses and kit them out in style?

Is there a market for it? or is it a waste of space?

 

[Jamie]

Hi Lady Lea,

Is this in Australia or the UK?

Jamie

 

[asy]

Ok,

I give up,

what is a gifted deposit?

(I hope I'm not the only one who doesn't know!!)

asy

 

[Jas]

Originally posted by Lady Lea


I like this concept of offering my tenants a lifestyle rather than a vacant flat.

any views - anyone do this?
I dont mean just furnish property -I mean buy quality property ie penthouses and kit them out in style?



I 've heard of people showing the place fully furnished, and then having two sets of rent, furnished and unfurnished. Apparently, it works well - most of time, the people fall in love with the TV, the lounge ect, and rent furnished.

Haven't done it myself thou, so I can't comment personally

Jas
PS. I second Asy’s q on ‘gifted deposits’

 

[Jamie]

Hi all,

The one problem Ive noticed with renting fully furnished is that it seems to attract a more short term tenant. Usually people who are moving/building/staying in an area a short while until other options materialise. In this case, be prepared for protracted vacancies - this might be a problem if the properties are "penthouses" purchased with 100% finance (as Lady Lea has asked about before). You may receive more in rent each week for FF, but the trade off is extended vacancy and its associated costs. For highly geared props. this may be costing a large amount each week out of your pocket if there are no tenants.

Just my opinion,

Jamie

 

[Kevmeister]

You might well find some tenants who are attracted to the prospect of renting a fully furnished place, but I agree that you really need to make that an optional consideration.

You might have furniture in place for any inspection but how many joe average renters don't have any furniture? For them, renting something fully furnished then becomes a problem of what to do with their current furniture (storage - $ ? ).

For those that don't have furniture (eg. people moving out of home for the first time), they don't necessarily have the wherewithal to afford your fully furnished apartment anyway.

So I think trying to rent something fully furnished actually changes the demographic of who will rent from you (as others have suggested). You may find corporate tenants attracted to it, possibly for short terms stays (eg. a couple of months) or could be lucky and get a one or two year lease.

I think a key consideration, however, has to be that your potential market is reduced by a. offering a "lifestyle" apartment (I read that to mean: expensive); b. offering a fully furnished apartment.

Just my perception.

Kevin.

 

[paulzag]

In Australia a gifted deposit means no evidence of savings history. I.e. your parents give you 20% deposit for the house purchase. That is OK for some banks.

Having rented "nicely" fully furnished units in the past I did enjoy the returns. There are higher vacancies, and often I'd agree to remove some of the furniture because the tenant had a bed or something. Storage becomes an issue.

The types of property Lady Lea is discussing are called executive rentals in Sydney. Nice returns, relatively long leases from companies with expat managers. Must be absolutely schmick, as entertaining is required. And the first market segment hit as the stock market plummeted.

REgards

Paul Zag
Dreamspinner

 

[bbruham]

G'day PaulZag,

I have an executive apartment, one bedder, 73sq,metres internal
living. Everything you could wish for, dishwasher etc.
Not furnished, too easy for people to move.
The thought of shifting friges,washing machines is often put into the too hard basket. So they stay for another year. The day I bought it, advertised it, one advertisement, been rented for four years. Never a vacancy.
Quality type people rent these type of rentals.
The best part is the rent $355 per week.

Bruce G.

Winners make it happen,
losers let it happen.

 

[Lady Lea]

Anywhere

Jamie - I am doing it in the UK - but am asking anyone from wherever they are - for a general opinion.

Asy - for me a gifted deposit is when the developer of newbuild property offers me a discount - and I ask them to do it as a gift - ie it will say the full ££ on the contract for mortgage and Land registry purposes but I wil get say 19% back to pay the deposit - money does not change hands - but its all above board and legal.

So I get a property without paying a deposit. (or several properties)

Jamie - the property is not highly geared for 100% finance - it is still only mortgaged for 85% max - as the seller pays the deposit - and I only buy discounted property, so you have a no money down deal (bar legals)


paulzaz - you got me - executive rentals - rent to nice companies - for long term - offering easy lifestyle.

bbruham - great - you are making me see it does happen!

Thanks guys for your responses

Lady Lea

 

[Sim]

Re: Anywhere

Originally posted by Lady Lea
for me a gifted deposit is when the developer of newbuild property offers me a discount - and I ask them to do it as a gift - ie it will say the full ££ on the contract for mortgage and Land registry purposes but I wil get say 19% back to pay the deposit - money does not change hands - but its all above board and legal.

Above board and legal ? mmm... I can see some people who will complain about it. But I can see how you would spin this particular example to cover yourself here...

The problem with "vendor rebates" - which is almost what you are doing here - is that they often involve inflating the contract price artificially to provide a figure that the banks might lend more money on giving an effective 100% lend. Now this is a very grey area, but most of the legal opinion on this I have seen is that it is illegal given the deception of the bank involved.

However, what you are doing here is taking a new property, which is worth what ? Who can really tell ? The developer sets a price, and then for some reason, they offer a discount to a purchaser. Now, they haven't really increased the price (it got discounted... didn't it ???) - so by agreeing to put the original price on the contract - haven't they just gone back to their original plans ?

In reality it is much the same thing - but I think it may just work given that they are new properties - and the actual asking price is an almost arbitrary number picked out of the air by the developer. The key thing here would be that the price you end up paying is no more than the price they were advertising at - so there is kind of not really any "artificial inflation" of the price.

Also, obviously the bank must be able to value the property to this price - but then we all know that valuations can (at times) be more of a stick a finger in the air and see which way the wind is blowing kind of thing (apologies to the professional valuers amongst us who I know would take a much more scientific approach - an anemometer for sure !! )

I know it's all just semantics, and I'm still undecided myself whether it is a good or a bad thing to be doing, but I do try and see both sides of an argument !

 

[Lady Lea]

really

LOL - I am not buying at inflated prices most of the time - I buy bulk so get genuine discounts. I do sometimes.

We do use the list price on the contract - but often I am getting say 30% off list price - which can equate to say 18% off real current market - established by 3 local agents asked to sell it in 4 weeks.

My own lender knows exactly what I am doing - and in my case I am above board and legal - however I am aware some people who try and do it themselves even with same lender without full facts do not do it quite so legal.

I am getting an 85% LTV not purchase loan - and still have 15% equity. I have no grey areas myself.

 

[Sim]

Re: really

Originally posted by Lady Lea
I have no grey areas myself.

Is that your hair you are taking about ?

 

[Lady Lea]

LOL - hair ok so I have one, Im 29 I think I'm meant to have one.

 

[lawsjs]

You are able to do what you do because the UK banking system has not yet been stung by what you do. You can't really get cashbacks like that in either the US or Aust because of the 'lower of valuation _or_ purchase price' clause. You can _sometimes_ get around the problem by including a 'fast completion' bonus, but that really only works on existing properties. Also the signing bonus you pay ATM (from what I have found) in UK seems a little high. I am not sure what 'bulk' you are talking about, but from my limited research you are putting up almost 10% to secure a 15-20% discount on 5-10 properties. This is a lot of money to tie up for the 1-3 years. ESP as you will be at the bottom of the market in 2-3 years. Flipping the 'option' will make you stuff all (coupla thousand at most) for a reasonable risk, so where is the short term money? IMHO the UK is about 1-2 years behind the Aust (syd-Mel) property market. I think the US is about 3 years behind BTW. Bulk deals will work better val for money wise in 2 years or so, when developers _can't_ offload properties, as opposed to charging a premium for the priviledge. Comments?

 

[brains]

I dont think the US & UK are "behind the Aust property market"
they are just at a different place in their respective cycles.

Id say London & NY real estate prices were at international levels way before Sydney &/or Melbourne.

 

[lawsjs]

Thats what I meant dopey!

We have peaked, UK is (my guess) about 1-2 years from peaking, and US started, but is only 50% (well, Ca.(except woodside/silicon valley),NY,Fl.,Nv.,and Wa anyway) above 93-94 prices. We have a long way to go as far as international values go, but you have to (as I thought would be obvious) look at percentage gains.

Given we are at least 100% 93-94 prices I would think it is fair to say they are behind us!

 

[brains]

Thats what I meant dopey!

Well im sorry, you international real estate guru you!!!....pphhhhhhhttt...............