As many investors continue to debate over whether the property market is going through a process bottoming out, one of the main challenges that continues to face the industry is a seeming lack of concrete housing data to undertake truly valid analyses - largely due to the fact that there are such low levels of sales activity.  We are therefore very pleased to present a very interesting an insightful interview with David Thorpe of Acadametrics – a consultancy that provides detailed housing-related information to a range of important institutions and is regularly featured in broadsheet media sources.  We talk in detail about how the organisation undertakes housing research; the UK house price index system and its related criticisms; stress-testing the UK housing industry; the current fragility of the property market and some thoughts for the future.

1) Who are Acadametrics? We are a privately owned housing analytics company which has worked in the sector from 1988.

2) Who are the clients that you mainly work with? Banks and building societies but surveying and estate agency firms, hedge funds, property funds – indeed, with any organisation which is active in housing.

3) Can you talk through the major reports and statistical analyses that Acadametrics produce? Our flagship report is our monthly News Release and associated information, published on our website, reporting the house price trends shown by the LSL Property Services/Acadametrics House Price Index (LSL Acad HPI).  In addition, we publish on our website e.g. our House Price Calculator (HPC) enabling a known past value of a house to be updated in accordance with the data underlying our index: this is similar to the calculators provided on the lender websites but the updates are calculated at a more granular level, subject to the availability of adequate data.

4) The majority of our readers are property investors and developers – and, as you mention on your website, the main difficulty that people are having in the current climate is researching the true market value of property.  What are your thoughts / advice? We will not need to remind your readers that the property market is a market like any other and a house is worth whatever a willing buyer is ready to pay. An index, such as the LSL Acad HPI, provides a measure of monthly and annual house price inflation and an average price for a particular geography at a particular time. Indices are backward looking, as are house price calculators. Even our HPC provides only a broad brush estimate, since it uses inflation by property only at county/London borough level and may have to use inflation at regional level if not enough transactions take place of a particular property type within a particular county for reliability. A full explanation is linked to our statistical HPC. An index and an HPC are amongst the tools which can be used by property investors and developers. We also provide the Acadametrics Prices and Transactions (APAT) data used by our HPC as a monthly series, showing the average price and transaction numbers for detached, semi-detached and terraced houses and flats for each county and London borough. APAT data are used to reveal trends in market values. We are adding to APAT optional monthly data at postcode district level; in addition we offer forecasts of prices for the four property types at postcode sector level, using a “quant” procedure developed by analysts TFL whose housing sector work we have taken over. Please see our comment on house price forecasts below.

5) Can you run through the essential stages you adopt when compiling your analyses? On the first working day of each month, the Land Registry send us the average price and transaction numbers by county and London borough for all the transactions registered on their database for the immediate past and all prior months. We use the data for the immediate past month to prepare the current house price index % Monthly inflation, % Annual inflation and average price results for England & Wales, each region and each county/London borough, together with our News Release and many associated reports and data tables. LSL Property Services PLC add a practitioners commentary to the News Release which is then sent by the Wriglesworth Agency to the media and are shown on our website. Using the prior month’s data, we update the inflation and average price results provided in our earlier releases until additional transactions have no further influence on our results. At this point, we describe the particular results as LSL Acad HPI “ultimate”. We will freely send LSL Acad HPI every month to readers who care to send us an email address through the link here.

6) What do you think are the most trustworthy indices in operation in the UK? Every Index is trustworthy in that we may assume that each provider makes the best possible estimates based upon the available data. We would certainly expect developers and investors to compare and contrast the indices. Our Index Monitor, published on our website, tracks how closely or otherwise each index compares with the inflation results shown when most transactions have been reported and prices are approaching “ultimate”. Readers might well want to use Index Monitor to establish how much confidence they wish to place in a particular index.

7) You have partnered with the ‘Zoopla’ organisation – why did you choose this particular index of house prices to work for? AS well as the property website with which readers will be familiar, Zoopla provides an Automatic Valuation Model (AVM). When our statistical HPC shows that APAT revalues a property only with say two standard deviations, when revaluing a lender’s residential  property portfolio, we would recommend that an AVM be used for such a property. We chose the Zoopla as being an excellent AVM, in our opinion.

8)The National Statistics Authority is planning to investigate the house prices indices and I wondered if you could provide a response to this? We would ask to be excused from providing a public response before we have answered the ONS questionnaire. Suffice to say that we have already queried, at a Royal Statistical Society meeting, the existence of two official house price indices and three official house prices. Readers are likely to be aware of – but many people will be misled by – the concept of a “standardised” average, as opposed to a simple average, house price. A standardised average, as provided by the Nationwide and Halifax indices, takes the average calculated at a past date and updates it monthly according to the movement of the index. In the case of the lenders, the past price was calculated hedonically from the values assessed, at the time, of e.g. a bedroom, a bathroom and a garage. In the case of the Land Registry (which lacks details on numbers of bedrooms and bathrooms etc), the standardised average is that calculated at 2000, backdated to 1995 or updated from 2000 by the value of the index. CLG (like our own index) calculates a mix adjusted average price using current prices. Land Registry also calculates a quarterly simple average price which they provide for the BBC website; hence, the existence of three official average prices at national level, for February 2010, as follows:

• Land Registry simple average £224,064 (taken as a February price from the BBC Q1/10 average)
• Land Registry standardised average £164,455 (taken from the February Land Registry index)
• CLG mix adjusted average £204,359 (taken from the February CLG index)

Readers, but not all of the public, will be aware that the:  lenders use prices taken from each surveyor valuation at the time of a mortgage offer; CLG uses prices agreed at the time of each mortgage completion; Land Registry uses the reported transacted prices (but, for the index, only the circa 35% for which a price from a prior transaction is available). Also lender and CLG prices are for the UK; Land Registry prices are for England & Wales. Be these details as they may, our concern is that the public may not be able to see any reliable house price wood amongst all the house price trees. For the official statistics to report that the average house price is £224,064 – alternatively £164,455 – is confusing.  Average house prices reported by CLG are consistently quite close to those which we calculate.

9) You have many years of stress-testing various aspects of the UK housing industry - can you explain the various aspects of how you work in this regard? We take the lender’s portfolio, or the part of it upon which the lender wishes us to work, and update the value of the properties using our APAT data. At portfolio level, our tests have shown that APAT provides a very closely accurate value. Using our look- up tables providing the “hazard” or probability of redemption or possession for each property, based upon the performance of a comparable group of properties during e.g. the 1989-1991”worst case” housing crisis, we the estimate a Probability of Possession and a Loss in the Event of Possession for each loan. Our database enables us to prepare the above under different macroeconomic scenarios including “current” and the FSA ”worst case”. With our New York colleagues MIAC Analytics, we now offer users the ability to undertake this work in-house using the Acadametrics and MIAC data and software on the MIAC DataRaptor OLAP database management engine and MIAC WinOAS cash flow management tool, downloaded from our secure UK server.

10) Can you describe what the “Stress and Scenario Testing for UK Residential Mortgage-Backed Securities; The Requirement for Loan-By-Loan Testing” document is and why it should be read by those in the housing industry? Lack of funding is a key issue in today’s housing market. A revival of securitisation for residential loans would provide a part if not a full solution. Investor demand and, hence, investor confidence is, in turn, key to a revival. Our Dr Stephen Satchell (Economics Fellow Trinity College Cambridge) wrote this Discussion Paper for MIAC ACADAMETRICS LTD to describe the movement in the USA and EC towards loan level stress testing as a means to secure investor confidence. We recommend Dr Satchell’s paper as valuable reading and a guide to the future of the market for developers and investors.

11) On a general level, how fragile is the UK housing market at the present time? The UK market is a regional and even a local market as readers will know. The RICS survey is required reading for professional opinion as to local trends. At national level, LSL Acad HPI shows average house prices virtually unchanged from £221,074 in April to £220,685 in July. Whilst the July price is our forecast based upon the c.35% of transactions reported to Land Registry by month end and will be subject to change when many more July data are available at end August, our prices are true averages (smoothed over three month periods), as opposed to the “standardised” prices reported by the lenders and the Land Registry index. Be that as it may, the trend is flat and, to the extent that it could go in either direction, we would certainly say that, even at national level, the market is fragile. Our APAT will indicate local trends.

12) Can you provide us with your prediction on the short (1 year), medium (5 years) and long term (10 years) movement of house prices – and how you have come to this prediction? Readers will understand that only Paul the octopus, fresh from success at the World Cup, would provide a confident house price prediction. Forecasting models, whether based upon macroeconomics, or (such as ours) based upon quantitative analysis, are thrown off course by events such as the financial crisis from which Western economies have not yet emerged. The huge house price falls which this caused were mostly unforeseen and many economists were equally surprised by the upturn which occurred in Spring 2009 but which is now flattening out.  We provide a forecast only as a trend line to show how we would expect prices to progress, given no sudden changes to general conditions, such as in the economy or the legal framework around house purchase. Our “quant” forecasts use a very large number of economic data series and neural statistics to show how prices should move given anticipated movement in the data employed. Such a trend line should not be used to provide a definitive forecast of prices in a particular postcode sector, or other particular geography, at a particular date, but to provide a long term benchmark trend, against which to measure the factual changes which are occurring. With such a benchmark (and others, such as the much used price to earnings ratio), it is possible to make better judgements as to e.g. by how much prices are above trend (and if they are in a bubble), or below trend, and what changes might thus be expected to take place. Since our forecasts have the above caveat and particular purpose, readers will understand, we are sure, that we do not place them in the public domain lest they be misunderstood.

As an ever-increasing amount of investors are taking a non-traditional approach to acquiring property, more have placed greater importance on building their reputation not only to their peers in the industry but also the wider public.  Often viewed as an ‘indirect’ method to gain property, the role of PR has gained much ground in recent years.  Please see an interview with Miranda        Leslau – a public communications expert who has worked with a range of high end business leaders as well as several prominent property investors.  We look into the importance of developing a personal brand; ‘Secret Millionaire’ Kevin Green’s exemplary PR campaign; the various stages to build successful PR and social media as an effective tool for property investors.

1) Can you give our readers a bit of background as to what you do? I am a multi-lingual international communications expert and BA Honours graduate with 20 years experience of working with public and private sector businesses all over the world.  I started my career as a linguist, as an official translator for the International Olympic Committee (IOC) at the 1992 Olympics in Barcelona, aged 21 and also working for marketing companies in Paris and Madrid.  I have worked with international personalities and celebrity PR’s such as Lynne Franks, Jean-Claude van Damme, Catherine Oxenberg and Viviane Ventura – as well as managing promotional campaigns with Claudia Schiffer, Tania Bryer and Tamara Mellon (Jimmy Choo) to cite a few names.  Furthermore, I have launched hundreds of start-up businesses and emerging personalities, property investors and a professional training organisation, Tigrent Learning UK, as well as governments/Tourist Boards, Ryanair ‘back in the day’ and Miss World in The Seychelles.  I have also organised events, conferences and awards for anywhere between 10 and 10,000 people, I ghost-write and pen articles and also run training and crisis management programmes.  I have lectured in PR and news management for two international universities, I am a committed networker, having chaired a leading women’s networking group in London, am passionate about giving back and helping organisations such as Make-A-Wish Foundation® UK and have pretty much acquired quite a few ‘t-shirts’ over the years.

2) Would you say that many property investors view their own personal brand when developing their business? Any business only appreciates the value of their brand when things go wrong – a crisis can damage your brand to the tune of two and a half year’s worth of your marketing budget.  Sometimes the bottom line, ie sales, is considered as the only important  part of the sales/marketing/brand function.  PR can support brand (ie corporate) development, sales (the brand itself) and also the company/business owner as a respected and trustworthy industry spokesbrand.  With any business, property-based or otherwise, the people behind the brand are as important as the product you are selling – just look at the likes of brands such as Virgin (Sir Richard Branson) andInnocent Drinks (Richard Reed) etc – both extremely high impact, personality led brands.

3) How important is it to do so – especially at time where there is an ever-rising number of buy to let investors? It is essential to be seen an industry expert – excel over the competition, offer attention to detail and under-deliver and over-promise rather than the other way around.  Too often in PR and the property industry too, individuals offer the exact opposite.  The PR of both industries often need attention.  Your clients must trust you and third party endorsement through the media is an invaluable way of building trust.  Equally as important is the need to be reactive when the BTL is misrepresented in the media or when something bad happens within the BTL sector – through ignorance or otherwise.  You are the industry expert – the media isn’t an expert in your field so educate the educators.

4) Can you provide some good examples of property investors who have good PR campaigns? It depends on your definition of good as a PR campaign needs to be tailored to the required objectives/strategy etc.  A glossy image of a property investor is not necessarily a ‘good campaign’.  There needs to be roots to the tree, coupled with water and light, for it to grow and remain upright throughout the seasons.  Kevin Green, whom I work with through Tigrent Learning UK and also via his lead judging role with The Technium Challenge 2010.  I was responsible for Kevin being involved with The Secret Millionaire on Channel 4.  Kevin’s in-depth knowledge of all aspects of the property business is heightened through his affability and reputation as an individual.  As someone who cares about what they do and who gives back to the next generation of property investors and also charitable concerns.

5) What has made them so successful? In the example of Kevin Green, hard work, determination, becoming an expert in his field through education, always having a back-up strategy and working with strict systems and extensive legal and practical knowledge.  Some entrepreneurs might say that timing and luck play a part in any one individual’s success.  It depends on your belief system.  Kevin was a successful entrepreneur before he appeared on The Secret Millionaire.  The Channel 4 TV show has helped taken Kevin to the next stage of his career at a pivotal time and also made him see himself in a different way.  We all need to keep learning and can’t take anything for granted, however ‘successful’ we are.

6) What are the first stages to undertake when building PR?

• Consider your short and long term objectives;
• Learn from the PR experts – that is probably what you did when you started out in the property industry, you learnt from other property investors;
• Don’t think you can do it all yourself or that an article written by you and submitted to the editor of a national newspaper will be published – it is more likely to be laughed at and binned;
• Work with your local media;
• Understand that sound PR takes time – it is based on trust and relationship building/being a reliable source;
• Get good quality photographs taken;
• Step outside of your world, read the media and understand what will make the news on a reactive and/or proactive basis;
• When you start to write press releases, make sure you understand the difference between a trade and consumer release and also one that is targeting your local rather than national or international media sources;
• Make sure you have case studies and that these have been approved by the people you are writing about;
• If you are working with a third party PR make sure you understand what has been agreed, have a contract in place detailing terms and have regular meetings and contact;
• Accept that PR takes up time and media sources expect rapid responses – the media have strict deadlines and not all calls or emails will come through during working hours;
• Network, network, network and build relationships with other businesses to develop cross-marketing opportunities.

7) How important do you feel that social networking is for the property investor? Many people feel that social media can replace traditional PR.  It can’t.  Akin to the dotcom boom, many are jumping on the social media bandwagon at the expense of PR.  Both mediums are complementary and one should enhance not replace the other.

8)You have a one day conference happening on 15th September – can you discuss what the format is and how our readers would benefit in attending? This one day event is essential for anyone running their own business or who wants to fast-track their knowledge of the media as a PR executive.  Delegates will walk away with a tailor-made toolkit comprising the following:-

• Defining the spin versus the reality of PR;
• How to write effective press releases;
• How to sell in a story to the media;
• PR strategy, evaluation and expectation;
• Crisis management, media training;
• Marketing for start-ups and on a nominal marketing budget;
• Delegates will also get to hear from other experts including Kevin Green himself and his experience of branding and PR.

For more information about the event and to speak to Miranda personally, please see her full contact details below:

With so many housing analysis property portals on the web, it has become difficult to really know which one really isthe best at providing truly impartial information to enable property buyers to make the right decisions. Whilst a relatively new service, Zoopla has   made great strides in its analysis and research methods as well as developing one of the UK’s first online auction platforms. Please see an interview with spokesman Lawrence Hall where we discuss the organisation’s new auction tool as well as the growth of the organisation, property valuation, and the future of buying property amongst other topics.

1) Firstly, can you give us a short explanation of what Zoopla is and how it can serve the needs of UK property investors? Zoopla.co.uk is the UK’s most comprehensive residential property website, focused on empowering users with the data they need to make better-informed property decisions. We combine property listings with market value data, local information and community tools.

2) Our readers would be aware of several online portals – what makes Zoopla particularly unique? Most online property portals are focussed on property ‘search’, helping users find homes currently on the market for sale. Zoopla.co.uk combines that service with property ‘research’ providing free, instant value estimates on every UK home, sold prices going back to 1995, local value data and trends and a number of other tools to help all buyers, including investors, do their homework.

Our recently launched online property auctions (see below), which are held every two weeks, also provide a unique opportunity for investors and are helping to transition the traditional model away from ballrooms to the internet, as investors can now bid from the comfort of their homes.

3) How has Zoopla.co.uk grown and changed since its initial inception? Zoopla.co.uk has grown at a faster rate than any other property website over the past two years since its launch and has become the second most-visited property website in the UK, with almost 5 million visits per month.  We continue to lead the innovation in the online property space and remain focused on making the market more transparent and efficient for all parties concerned. Our mission is, and has always been, to provide the most useful online property resource.

4) How is the site maintained and kept current? We add thousands of new properties to search for and data points to research every single day – our data comes from a variety of sources including estate agents, the government and our users amongst others. Our value estimates are calculated using a proprietary algorithm (formula) that analyses millions of property data points including historic sales, current asking prices and property attribute data which are updated daily. We are constantly adding new features and services to make our service more useful and we recently added new search sort options along with the listings history of any properties listed for sale.

5) Many prominent housing industry commentators have, in recent times, stated that the presence of online agencies and portals is becoming increasingly important. What are your thoughts on this and do you believe that face-to-face contact between agents and buyers/sellers needs to be maintained and never out phased? Agents generally provide a highly valuable service to consumers and we see the agent intermediation of property transactions as an essential part of the process. How agents interact with buyers/sellers has and may continue to change as more and more information is readily available but there is no substitute for the knowledge and expertise of a local agent.  We also see property portals as fulfilling an essential service in the buying process. With 9 out of 10 buyers starting their search online and not wishing to hunt in multiple places to find out what is available, portals continue to be the most effective and efficient place for buyers to search and source of leads for estate agents.

6) With your home values page, can you breakdown your criteria for how you deduce this figure – particularly as it is currently very difficult to find solid house sales due to the current low activity in the market? Our valuation estimates are our assessment of the market value of a home on any given day, using a proprietary algorithm that continuously analyses millions of data points relating to property sales and home characteristics throughout the UK. Our estimates are constantly refined, using the most recent data available and a variety of methodologies, in order to provide the most current information on any home.  More information on our Zoopla estimates can be found here.

7) Can you give our readers some information as to how your auction service works? Our online auctions are transformational and have created a new way for buyers and sellers to transact openly. We hold live, online auctions every two weeks at Zoopla.co.uk/auctions and they run from a Thursday afternoon until the Sunday evening. Prospective buyers are able to view the property details several weeks in advance of the event, arrange viewings with the relevant agents and then place bids online during the event, at the end of which, the successful bidders exchange contracts, all online.

8)How would investors be able to engage in due diligence prior to bidding on the property? Our auctions are no different than traditional property auctions, except that they are online instead of in a ballroom. Since the property asset is not in the ballroom to be inspected in traditional auctions and any inspection and due diligence is conducted prior, the ballroom itself is somewhat obsolete. Investors can visit and inspect the properties in advance and also review any related information on our website including the legal pack and disclosure documents that can be found on the relevant property auction page.

9) How can the risks of buying an auction property online be minimised? Much the same as any other auction, the risks are reduced having done research in advance and understanding the asset you are bidding on. This is one of the advantages of Zoopla.co.uk, which provides access to much of the information necessary to determine fair market value and similar transactions.

One of the major off-putting factors of owning residential investment property is the risk of having nightmare tenants. Yet, the process of dealing with the issue is often over-complicated and can be relatively simple if managed in the correct manner.  The work of Landlord Action has been well publicised not only in property investment circles but also in the national media (including the Telegraph, the BBC, the Mail, the Times and the FT).  We had a chat with Paul Shamplina, Director of the organisation, on their history; the effects of the credit crisis; essential steps to be taken; tenants rights; public organisations, such as the Citizens Advice Bureau; debt recovery and more…

1) You and your service need very little introduction to the majority of our readers – but for those who have not heard about ‘Landlord Action’ can you outline a bit about yourself and how the organisation came to be? Paul Shamplina, co-founder of Landlord Action. Landlord Action was set up in 1999, founded on the principle of providing a fixed-fee service to landlords and letting agents who have problem tenants. This was in response to solicitors, who were unable to give fixed fee rates or any indication of how long it would take to evict a tenant.  Ten years later, Landlord Action have acted on nearly 17,000 instructions and become the market leader in dealing with problem tenants. We now have a free legal advice telephone line where landlords and letting agents can find out what their rights are when dealing with bad tenants.

2) Have you had to change your model as a result of the credit crisis? Have tenant problems increased, decreased or roughly stayed the same? Not really. The beauty about our model is that it provides a convenient and cost effective service to all landlords and letting agents. Of course, our services have grown in popularity over the years and, particularly, last year was quite busy due to the recession and unemployment situation in the UK. Therefore, we did see more demand for our debt recovery services, as you’d expect.

However, our services are designed to meet the needs of landlords who are having problems with their tenants. It just so happened that more landlords have been experiencing difficulties as of late and as a result, the need for our services has grown. As an indication, we have successfully acted on over 16,000 evictions to date, averaging roughly 1,600 new instructions per year over our ten year history. 2009 was a different story and we had taken over 2,500 new instructions. 2010 shows little signs of slowing down and it is very likely that we will exceed 2,500 new instructions this year.

3) What are the necessary steps to be taken prior to the signing of any kind of tenancy agreement? Without a doubt, our primary advice to landlords and letting agents is to be thorough with regards to due diligence. Many difficulties that landlords face could have been avoided if landlords and their agents were more thorough when it came to tenant referencing.  There is no substitute for methodical referencing and being on top of credit control. Many novice landlords will wait for months before chasing up a tenant properly and serving notices. During this time, they are continuing to lose rent. So, the key is to act quickly.

A few months ago we were contacted by a landlord to serve notices where the tenant was in eleven months rent arrears. What chance does the landlord have of recovery all of this money now?  If you find out mid tenancy that the tenant has lost their job or has fallen in financial hardship, make sure that you act promptly with regard to them applying for local housing allowance. Take them to the housing benefit office to make an application – this will demonstrate that you are a responsible landlord, as well as keeping any arrears to a minimum.

On the 5th August, I will be featuring on ITV’s Tonight Programme talking about bad tenants. The programme will also feature our biggest rent arrears case that we have been instructed on (in case you are wondering, it was for nearly £90,000!!).  The programme will be an eye opener for many landlords.

4) Can you run through some of the essential steps that need to be taken if a tenant is in arrears? Acting quickly is the most important thing a landlord can do. As soon as the tenant is in two months rent arrears, Landlord Action can begin issuing proceedings. Useful tip: with an AST (Assured Shorthold Tenancy agreement), two month’s rent arrears is one month and one day after the first rent payment was missed (because rent is technically paid in advance).  Landlords and management agents should also be tight with regards to credit control. On the day that the rent is due, they should check their bank accounts online to see if the funds have been credited. If not, they need to be in touch with the tenant to find out why it hasn’t been paid.

Another key step for landlords is to calculate what the worst-possible case scenario is with regards to cost. Although only in a small percentage of cases, eviction proceedings can take up to five months with the most obstinate type of tenants. What exactly would this cost a landlord? Five months mortgage payments, the cost of eviction proceedings, any bills that the landlord pays (or, in some cases, council tax etc). This amount of money should always be kept in a reserve account should the landlord ever require.

We have seen many cases where landlords are facing possession of their properties by lenders due to the fact that their tenants are in arrears and not paying the rent. These landlords are a cautionary tale for other landlords.

5) Is it always suggested to try and sit down with the tenant if there is a problem? Absolutely. Always, always maintain good communication with your tenants.  Prior to serving any legal notices it is always worth speaking to the tenant first and giving them a chance to explain or resolve the matter. If there ever is a problem, the landlord can then do the responsible thing of finding out how to help the tenant. For example, if they have lost their job, you can help them apply for housing benefit.

6) What are the most important factors for a landlord/lady to remember with regards to a tenants rights (even though they are being evicted)? It is important to note that a tenant does have rights when they are being evicted and a landlord must respect these rights. In the same way, a landlord also has rights too. This is why Landlord Action set up a free legal advice telephone line to help landlords, letting and management agents understand what they can do and what they can’t. The best thing for a landlord to do if they are unsure about their rights is to get in contact with us: 0845 881 0011

7) Many landlords would state that organisations the such as ‘Citizens Advice Bureau’, generally speaking, have a very negative view on them - but are there any ways that landlords in the predicament of having a problem tenant can utilise their services? There is a perception from some areas within the property industry that feels that the law is biased in favour of the tenant. Many people blame companies such as Citizens Advice Bureau and charities such as Shelter for this.  Landlords can use Citizens Advice Bureau if they want to. However, landlords need to keep in mind that this is general advice only. In the past, the Citizens Advice Bureau have referred landlords to our advice line since our service is more tailored around landlords and we speak their language.

8)And what about arrears recovery – is it really worth the hassle? It depends. In a perfect world, landlords will have completed thorough due diligence on the tenant prior to the start of the tenancy. Using a reputable tenant referencing company to obtain a report on your tenant is a must.  It is also important to gather key documents prior to the tenancy. For example, a copy of the tenant’s Drivers License or Passport, three month’s bank statements, a National Insurance number etc – these make it easier to trace the tenant if they abscond.

Landlords should also be encouraged to take out adequate insurance that covers malicious damage and, perhaps, another policy that offers a rent guarantee. This will ensure that, if your tenant does abscond and leave the property in a poor condition, your costs will usually be covered so you are not losing any more money.

Landlord Action also offers a fixed-fee tracing solution for landlords. Unlike other tracing products, we use ex-policeman and bailiffs who are experienced in finding people who have gone off the radar. Once we have traced your tenant, we always encourage the landlord to evaluate the cost of recovery in relation to the size of the debt outstanding – we do not want to be throwing good money chasing bad if there is a poor chance of recovery.

What is a poor chance of recovery? If we come to learn that the tenant has a string of bad debts, is on housing benefit and, generally, do not have any assets to service the debt, we advise you to drop the matter. However, if your tenant does have assets, our Debt Recovery department can put together a strategy to reclaim the outstanding debt.

9) Landlords were pleased to hear that the ‘registration scheme’ that was considered being brought into place has now been scrapped – whilst your organisation does a lot to help landlords, do you think that more measures should be in place to protect tenants who are victims to the unscrupulous ones? This can be quite difficult since there must be some sort of control and regulation to avoid abuse. Before we know it, there could be tenants and/or landlords suing each other for defamation.  Of course, there are some rogue landlords who operate and they give the rest of us a bad name. These landlords should be named and shamed. Similarly, Landlord Action flags up serial bad tenants to landlords and letting agents who are registered on our database. If we have evicted a tenant on more than one occasion and have a possession orders to that effect, we will send an email out to local landlords and letting agents on our database warning them.

Many readers will be wondering what a serial bad tenant is. Well, a serial bad tenant is one who goes from property to property without any intention of paying the rent. Most of these individuals are in fact, intelligent people who know Landlord and Tenant Law very well. We have flagged up approximately 25 of these sorts of tenants.

On 22^nd June, George Osborne – Chancellor of the Exchequer announced a number of fiscal and monetary measures intended to significantly reduce Britain’s £155 billion budget deficit. These include proposals seeking to reduce by £1.8 billion per annum, the present £20.8 billion cost of Housing Benefits. Two of the most audacious of the proposals are:-

• The capping of Local Housing Allowance (LHA) rent for one bed properties at £250 per week, two beds – £290 per week, three beds – £340 per week and four beds – £400 a week. These cuts are to be introduced from April, 2011 and the effect  will be to drastically reduce the amount of Housing Benefit payable in a limited number of high rent areas predominantly in central London. Landlords may be forced to evict tenants who cannot meet their rent in full making them homeless. These tenants will then seek housing assistance from their local Council (LHA is the name for Housing Benefits paid to tenants renting from Private Landlords);
• Use of the 30^th percentile rather than the current median (50^th percentile) to calculate LHA rates effective from 1^st October, 2011 could reduce rents across the country. The effect of this could also see tenants being made homeless, adding to an already precarious housing situation. There are currently thought to be around 1.8 million households on Council waiting lists.

In their assessment of the proposals, experienced Social Housing Investors Ben Hughes and George Nartey recognise the concerns many feel about the likely impact of these measures on investors. Critically, they also anticipate that a significant increase in demand for homes provided by Councils could introduce a host of new profitable investment opportunities for informed Private Property Investors. New schemes under which landlords lease homes to Local Authorities and Housing Associations to house their tenants’ in return for guaranteed rent could result, as could much greater use of Emergency Accommodation, better known as ‘Bed & Breakfast’ accommodation. Such measures could once again become essential tools for Councils to use in fire-fighting new homelessness challenges.

To find out more about these and other opportunities available to investors who opt for a Social Housing Investment Strategy, visit www.socialhousingexpert.com and register for Updates.

Ben and George are running a Social Housing Fundamentals Course this Saturday 24^th July, at a Brent Cross London venue, where the budget implication and opportunities arising, will be reviewed. E-mail info@socialhousingexpert.com to grab one of the few remaining seats!

Value investing has long been a methodology used across a variety of sectors in addition to property; its usage has becoming particularly pertinent over the years as a solid strategy that can be used regardless of how markets are behaving.  We spoke briefly to David Kuo, from the well established investment and finance website The Motley Fool, on a range of topics relating to this wide and fascinating subject:

1) Can you explain who the ‘Motley Fool’ are, and a bit about your history? Sixteen years ago, two brothers, Tom & David Gardner, who believed that private investors could be as good as professional at managing investments if they were given access to the right information, set up The Motley Fool in America. We call ourselves Fools (with a capital “F”) because the Fool or Jester was the only person in Shakespearean times who could tell the truth without risking his life. Our logo is the jester and we have offices in both the US and the UK. We communicate with our visitors through our daily investment articles, weekly podcasts and discussion boards.

2) What exactly is ‘value investing’? Value investing, as far as shares are concerned, means buying shares that are unreasonably cheap. So if you can buy a share that is cheaper than other similar shares, and there is no obvious reason for that cheapness other than perhaps market sentiment, then you may have a share that represents value. It may therefore offer above-average growth prospects. Put another way, if you can buy pound coin for 80p, then that represents value.

3) Can you discuss the history of the concept please? Value investing can be traced back to Benjamin Graham who is regarded as the father of value investing. Graham would trawl through mountains of company accounts comparing the intrinsic value of a company with the market price of the business. The two are not necessarily the same, and when the price is significantly lower than the intrinsic value, Graham would buy the share and wait patiently for the market to recognise the true value. These were known as “cigar butt” companies because they had a few puffs left in them.

4) One of the main principles of value investing – is that you continue regardless of what the market is doing (ie. bullish or bearish) – can you explain this a little further? Markets can be driven as much by sentiment as it can be by value. When investor sentiment is poor, there is a good chance that shares may fall to reflect this even though nothing fundamentally may have changed in the business. This is an example of how value and price are out of sync with each other. This would represent a good opportunity for value investors to investigate further, perhaps buy the share if they are cheap enough and wait for the value to be outed.

5) Is it complicated to apply? With value investing, the cheapness is measured by popular ratios, such as price earnings, price to book, yield, and other factors about the company like the level of its debt. Shares are screened to look for shares whose P/E is two-thirds of the market; the yield is 50% above the market; the shares are below the net book value of the assets and with little or no debt.

6) Can you name some prominent investors / investment companies who are using the concept today – and how? Perhaps the most well known, modern-day exponent of value investing is Warren Buffett. The legendary investor is renowned for his many quotes and perhaps the one that best encapsulates value investing is: Be fearful when the market is greedy and be greedy when the market is fearful.

7) Why has the concept be viewed as some as ‘contrarian’? That is because it flies in the face of herd mentality. We have to remember that financial markets are actually different to other markets that we may be more familiar with. For example, if the price of eggs goes up, people eventually start buying fewer eggs. But in financial markets, at least over the short to medium term, rising prices causes people to buy more, because if people think, I want to ride this tide. Disciplined value investors on the other hand will ignore sentiment and sell once the value in the share has been outed.

8)How important is the concept of ‘value investing’ to your own strategy and those at the ‘Motley Fool’? Value investing is one of many disciplines that also include high-yield investing, growth investing and momentum investing. There is no right or wrong discipline only one that is right for you.

9) Are there any risks / downsides? There is no investing Holy Grail. There are risks associated with any style of investing, for instance, high-yield investing is often perceived as one of the safest. But recent events with the banks and BP has shown that even reliable dividend payers can trim, axe and slash their dividend payouts.

10) What are the the factors to be vigilant of if going for a value based investment strategy? It is vital to build into the value calculations a health margin of safety to ensure that you buy the shares at a sufficiently low price. There is a possibility that the shares could fall further, which is why it is important to cut your losses if that should happen. Warren Buffett once said there are two important rules of investing: The first is do not lose money. The second is never forget rule number one.

11) Today, with a more realistic property market backdrop (where prices are perhaps at a more realistic level than before the onset of the recession), there are more property investors looking apply value-based concepts – how do you think it this can be done specifically for property and land? Property and shares are the only two asset classes that have beaten inflation over the long term. Consequently, there are similarities between the two. If you can buy an asset at a generous discount to its book value, manage to generate a market yield and do so without taking on excessive debt, then you may have found yourself a value property that you can hold until the value is outed. Personally, I would prefer to look at Real Estate Investment Trusts where the market is more liquid.

12) If investors wanted to read more into the concepts – what references would you recommend? The definitive book on value investing is Benjamin Graham and David Dodd’s Security Analysis.  Our resident value investing expert, Stephen Bland, writes a weekly article in which he identifies his value picks, and explains why and how he has chosen them.

Please see a short interview we recently did with Steven Hilton from the National Landlords Association (NLA) – a well established organisation that many readers would already be aware of.  We discuss their long history; the benefits / risks of being a landlord in 2010; the concept of the  ‘property millionaire’; industry ethics; the scrapping of the landlord registration system; the Local Housing Allowance (LHA) and evictions…

1) For those new to the industry, can you provide a brief explanation of what the National Landlord Organisation (NLA) is and does? Representing landlords from all over the UK, the NLA is the leading organisation for private-residential landlords. It campaigns for the legitimate interests of landlords by seeking to influence decision-makers at all levels of government and by making landlords’ collective voice heard in the media.

The NLA helps landlords make a success of their lettings business by providing a wide range of information, advice and services. It seeks to raise standards in the private-rented sector while aiming to ensure that landlords are aware of their statutory rights and responsibilities.

2) The NLA have been a long established as a central point of call for investment property owners – how has the organisation changed over time? The NLA has changed a great deal over its 37 year history, even our name was changed in 2003 to better reflect the national spread and diversity of our membership.

However, the core values and objectives of the organisation have never changed. The NLA was created (as the Small Landlords Association)  in 1973 to campaign for a more equitable legal and business framework for private-landlords and although the sector has been transformed in the time since there is still an important role to be played to ensure that the collective voice of property investors is heard.

3) What are the main benefits of being a landlord in 2010? Rental-property is still be a potentially lucrative investment vehicle. Despite the economic downturn returns have remained relatively stable for the majority and provided that you are prepared, and able, to plan for the long-term prospects have continued to be strong.

4) And, conversely, what are the risks? Investors in residential-property have to bear in mind that bricks and mortar are not like stocks and shares. Property, and more importantly tenancies, require maintenance and commitment.  During the course of a tenancy things will go wrong and in all likelihood they will cost time and money so landlords must ensure that they have sufficient contingency funds to cope.

5) Do you believe there is enough information available on the realities of owning investment property? There is a great deal of high quality information available to investors (and potential investors). However, there is also a considerable amount of very poor quality ‘advice’ on offer in the form of ‘get-rich-quick’ schemes and armchair investor workshops. It can be very useful to have the assistance of a reputable landlord association (like the NLA) to act as a filter.

6) Particularly prior to the onset of the credit crunch there was a rise in the presence of unscrupulous landlords - do you believe that there are enough ethics in the industry? Unscrupulous, or rogue landlords as they are often termed, have always existed irrespective of the economic climate. However, immediately prior to the credit crunch we would argue that there was a noticeable rise in ill-prepared property investment. This led to bad practice resulting from ignorance rather than malice so I would suggest that the issue is not an ethical one – but a matter of education and awareness.

7) What can be done to control the presence of such landlords whilst ensuring that those who do operate in an ethical manner do not feel that they are being overburdened with regulation? This is effectively the $1 million question. There are a small number of genuinely unscrupulous operators active in the sector, whom successive governments have attempted to regulate without significant success. The best thing that the sector can do is to continue to drive up standards so that those who fail to offer a decent service are highlighted as unacceptable and driven out of the marketplace.

8)To the relief of many, it was recently announced that impending ‘landlord registration’ system was to be scrapped - do you view this as a positive step or should there perhaps be something in place to protect the rights of good-willed tenants? This announcement was most definitely a positive step as it signals government recognition that the vast majority of landlords offer high quality accommodation.

In the rush to regulate it is often overlooked that there is a significant degree of statutory protection already in place providing an equitable balance between landlords and tenants rights.

9) What are the NLA’s views on the current Local Housing Allowance (LHA) system at present – particularly with regards to the fact that more landlords are becoming reluctant due to the stricter rules that were previously in place (such as rent being paid directly to tenants)? It is highly unfortunate that at a time when more and more tenants are becoming reliant on LHA inadequacies in its administration is making the housing benefit market less appealing to professional landlords.  It is essential that the Government restore a tenant’s choice to elect for direct payment of their LHA to the landlord to arrest the growth in arrears and the spread of the stigma which is becoming attached to LHA recipients.

10) It is said that the UK has one of the longest periods it takes to evict a tenant (for example one who is refusing to pay rent) -what are the NLA’s thoughts on this and what could be done to help landlords in this ever-common situation? It is a common misconception that UK landlords are forced to wait considerably longer to regain possession of their properties than their international counterparts. In fact there are a great many countries with far less agreeable housing legislation.  Never-the-less it can take an unacceptable length of time to obtain vacant possession due to the often sclerotic nature of the courts system. Ensuring that landlords understand the system and approach proceedings properly prepared is the most straightforward way to expedite matters. A landlord association can help with such preparation for a fraction of the cost of formal legal advice.

11)  Finally, how can readers find out more about what you do and become an accredited member? Please see our website at www.landlords.org.uk or call our membership team on 020-7840-8900.  Please also feel free to follow us on Twitter and join our Facebook fanpage.

Please see an interview with Paul Howard – Head of Intermediary Sales – at The Mortgage Works (TMW), one of the UK’s leading buy-to-let lenders.  Property investors were recently very interested in hearing that TMW were the only mortgage company in the current marketplace to raise their loan to value ratio to 80 percent.  We ask what was their reasoning behind this, particularly as several other prominent lenders have failed to follow suit, as well as looking into their thoughts on the short, medium and long-term; how lender behaviour has / is changing; the new Financial Policy Committee (FPC); the new build phenomenon; Local Housing Allowance lending and more:

1) Can you start by giving a brief history of TMWs’ presence in the UK buy to let market? Sure, the Mortgage Works actually began as the Sun Bank which was a subsidiary of Sun Life Canada (an insurance company).  In the mid 1990s, the company started lending in what was then termed as ‘residential investments’ (the term ‘buy-to-let’ was pretty much non-existent at that time).  The company was subsequently acquired by the Portman Building Society and, in 2002, the name was changed to The Mortgage Works.  In 2007, Portman merged with the Nationwide and the company has been a subsidiary ever since.  Today, we are one of the two largest buy-to-let lenders in the UK (the other being Birmingham Midshires) and are very comfortable in the market place.

2) Many investors were excited to hear that you were the first to offer 80 percent loan to value with a competitive pay rate after an extended period of buy to lenders taking a stricter attitude – what was the rationale behind this and, perhaps more importantly for our readers, is it a sign of things to come? The move to 80 percent loan to value was essentially a direct reflection of how our buy to let lending portfolio has performed throughout the recession.  As a company, we are proud to say that we have historically been prudent lenders and, as a result, coped well in what has been the worst economic downturn since the 1930s.  Additionally, the recent changes in the market place also influenced our decision to decrease down-payment requirements.  When compared to a year ago, the housing market on a general level has seen some improvements – for example, the drops we witnessed in 2008 and 2009 are in no way as severe as they are today.  Additionally, we are of course witnessing a very low bank base rate which has helped manage affordability and kept our delinquency levels low.  So, overall, our business model has remained successful and, consequently, we like buy-to-let and want to increase our presence.  In answer to the second part of your question, I would very much doubt we would be increasing it for a while as we appreciate that – whilst the market is improving – things remain very fragile, particularly from a broader economic perspective.

3) Generally are you lot more confident about the buy-to-let market now? Absolutely, and I think buy-to-let investors should be too.  The main reasons are that properties are much cheaper and are offering more solid returns than what was perhaps becoming the case in the build up to the credit crunch.  For those that already own buy-to-let property, most have seen an improvement in their equity position in the last year and many (such as those on trackers and variable rates) have benefitted from very low mortgage payments.  Furthermore, bringing in factors such as an increase in the amount of people looking to rent as well as lack of supply of housing in the UK – we feel it is certainly an advantage to be in the industry.

4) As the UK enters into a slow recovery period – what do you think will happen in the short/medium term buy-to-let market? Yes, the economy still remains in a relatively vulnerable position and our view is that we will remain in a low rate environment for some time to come (even they do start to rise I think it would be at a slow pace).  However, we also expect to see a continued level of subdued lending. The Council of Mortgage Lenders’ (CML) forecast on the total market size is at £150 billion for this year; last year it was £142 billion, representing a very negligible rise.  Indeed, nobody within the industry is suggesting that next year is going to be any different.  So I believe that buy-let-investors should be expected to see very slow to modest growth due to the fact that banks these days are ever concerned about their own ability to borrow from the money markets and many are also facing securitization issues.  The level of growth that the buy to let industry will witness in the medium term will depend on the willingness of more lenders to come back into the marketplace – at the moment many have the scourge of the recent past weighing over them and view buy-to-let as risky.  It should also be noted that most of what is being said here applies to the overall market and not just buy to let.

5) Continuing on this point and looking back to the onset of the credit crunch a few years ago – do you think, on a general level, that buy to let was taken far too lightly by lenders in general? I would not say in general, more by some.  I think that many practices that were undertaken are now clearly viewed as a mistake which has resulted in more usage of the word ‘toxic’ to describe them – which is a great shame as our experience of them has been everything but toxic.   One example would be the ‘day-one’ remortgage: a process where investors were able to effectively pull out their initial down payment, often with extra cash to spare in a very short space of time – whilst many were able to build their portfolio quickly using this method, when the market changed it meant that banks were exposed due to having large portfolios of clients with very little/no equity.  Another example would be lending to so-called ‘property clubs’, who largely focused on pooling investors funds together to buy over-valued stock only for the market to crash, leaving enormous debt positions and very unfortunate consequences.

6) And going on from that, how has TMW’s underwriting procedure changed since the credit crunch? I don’t think the procedure has changed hugely – as I mentioned above, we have always been relatively careful lenders but it would be fair to say that apart from stricter loan-to-value ratios we are also requiring higher payment calculations as well as placing a particular importance on any applicants credit rating (the criteria of which has also increased slightly and which also applies to existing customers).  Overall, however, we are using the same processes as before with buy-to-let: a professional surveyor will inform what the open market value and realistic medium-long term rental figure is for a property which will enable us to determine the viability of providing the loan – a fairly robust practice followed by most lenders which I would not imagine to change for some time.

7) We wanted to get your thoughts on the recent inception of the Financial Policy Committee (FPC) in relation to the future of the buy to let industry? It’s probably too early to tell but the new body certainly intends to regulate the buy to let market which will certainly affect the way lending procedures are managed across the board – this is going to be a challenge for both lenders and landlords.  For us at TMW, however, such regulation is unlikely to make that much of a difference as we already treat buy to let mortgage / further advance / remortgage and other secured lending applications in exactly the same way as we do with regulated prime applications.  Any mortgage application made through the Nationwide is already subject to the necessary controls of the FSA so we would need to adapt according to the new regulations – yet we do not envisage this as being a significant overhaul of our existing practices.

8)You mentioned new-build property clubs before – the property investment community has, in recent times, noticed a large amount of this stock come back on to the market place – perhaps more realistically priced in light of the market changes.  What are TMWs thoughts on lending on these types of property? We have, for some time, had some concerns about new build apartment blocks in particular – in fact, we stopped lending on them back in December 2004 (although we do lend on new build houses).  As I mentioned above, our reasoning for this was the glut of over-priced properties combined with several unscrupulous investment clubs effectively playing the mortgage system – another reason which eventually fuelled the collapse of the market.  Whilst you are right that this position is passing now, I still don’t think we are at the stage where we are comfortable to lend on them as yet.  I think the majority of buy-to-let lenders would concur due to the fact that it was not too long ago that eye-wateringly large sums of money were lost as a result of going too heavily into this market.  Another concern that is readily apparent is the fact that it remains very difficult, from a surveying perspective, to truly value new build properties due to, firstly, a lack of comparable sold data due to the current low activity in local market places and, secondly, the issue of many developers releasing their stock in batches – thereby changing the valuation dynamics (something that has, for a long time, effected the way we view this type stock).  Readers who are still interested in buying new build should not that there are lenders out there who will work with new-builds, but it is highly likely they would offer a product with a low loan to value and undertake fine-toothed due diligence to ensure that their interest in the asset is protected.

9) What are your views on landlords who house Local Housing Allowance (LHA) tenants? We have no issues with lending to landlords who let to LHA tenants – our position is focused around the property owners ability to maintain the loan and the fact that he/she would have carried out appropriate due diligence upon application (which we would obviously verify during our underwriting procedure).  We will undertake the necessary checks on the landlord and NOT the tenant as it will always be the former who will be looked into if things go wrong (which, in reality, they rarely do).  This is the approach we have adopted for the last 2 years and seems to be working very well.

10) What would be your advice to property investors and landlords to best prepare themselves to obtain a buy to let mortgage? The importance of keeping a spotless credit record cannot be understated, as the merest glitch at the moment can sabotage your entire application (this goes for any buy-to-let application, not just with TMW).  As important is to undertake detailed due diligence – focus on the area (schools, hospitals, shops, banks, chemists  and other local amenities); the specific location; demand / supply; what tenants you are likely to house; earnings; yield comparables; crime statistics; transport links to name a few.  One of the many advantages of the modern times we live in is that most of this information is readily available for free!

11) Lastly, what about remortgaging?  Would you adopt a similar lending policy to how you would a purchase mortgage? Our lending principles with regards to re-mortgaging remain broadly in line with house purchases – the process does often tend to move quicker due to most of the information we need already being in place (such as Assured Shorthold Tenancy agreements and other relevant documentation pertaining to the property).  At the moment, we are seeing that many existing investment property owners are not needing / wishing to re-mortgage so as to maintain the favorable terms they are currently receiving as a result of the low bank base rate.  The fact that it is not financially in their interest to remortgage has had an effect on this side of the market for us – but we expect this to gradually change over time.