Steer clear of any investment in ex-office blocks

by Readers Question

11:53 AM, 11th April 2019
About A week ago

Steer clear of any investment in ex-office blocks

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Steer clear of any investment in ex-office blocks

Office Blocks, converted to Residential Occupation, fulfil an immediate need but are not a sensible investment for Private Sector Landlords (PSLs) in Provincial Towns! My advice is do not buy a sub-lease in a Housing Warehouse. Planning consent is not required for such conversions and they are filled with drug addicts, alcohol addicts, and so on.

All the time there is insufficient housing to meet needs then Housing Warehouses can fill a gap but it is all rather basic stuff. They are run commercially to make a profit and provide accommodation that meets acceptable needs. No frills. You get what you pay for Stack them High and Rent them Cheap!

All too often they house single mums in much despair with little hope in life! Mothers with small children need a small terraced house with a garden for a play area. All the time there is a Housing Shortage then those with money will take the better houses either as owner occupiers or tenants.

If the tenant has no money where does the tenant go? London Boroughs offer cash incentives to take non-conforming tenants. Very many have a range of problems but others do not. They are in a poverty trap.

Most landlords have one house where the tenants change every four years. The landlord goes to sleep.

The ‘sardine approach’ of dealing with so many tenants is just one up from being on the street. Mothers have little choice but to accept! The Duty of Care rests with the Local Council but it can be exercised by offering a placement in a Housing Warehouse which many call a living prison.

What can be done to alleviate? Well nothing!

London Boroughs throw money at it to get rid of their problem tenants. Currently £5,000. London Councils seem to think all PSL have their price. Offer enough money and they will accept. It is an Auction situation. Who will offer the most? We are a caring society, but common sense must prevail. Of the tenants in Private Accommodation only 20% are on Housing Benefit with PSL focusing on the 80% non-HB tenants. Everyone seems to forget about the vast majority of private sector tenants not on HB.

Everyone is entitled to a roof over their heads. That basic entitlement is the responsibility of Local Government. It is a Base Line.

The PSL comes into the picture at a level above that. Most PSL own a house and not a flat. Of those owners many inherited the house some years ago when they could not sell due to the credit crisis!

This week I have sold two houses to tenants. They have ceased to be tenants and are now first time buyers. Indeed owner occupiers! The label has changed from tenanted house to an owner occupied house! It makes no difference to the number of houses!

Fergus Wilson



Comments

Ian Narbeth

11:01 AM, 12th April 2019
About A week ago

"My advice is do not buy a sub-lease in a Housing Warehouse." Good advice, Fergus.
So-called "investments" where you "own" one room in a hotel or one flat in a block but the management is in the control of someone else are massively risky for numerous reasons. The managers may own unsold units and so have a conflict of interest - will they even show your unit instead of their own? If your unit is on the less attractive side you may have 60% occupancy whilst desirable units are at 95% but your service charge is the same. They may have escalating ground rents. They are not readily saleable and usually not mortgageable. Units will be leasehold so liable to forfeiture if you don't pay the bills.

They are sold in this fashion not as a "great opportunity to invest in a fantastic building with a guaranteed 9% pa return for the first two years", but because the developers can't refinance them. Do not touch with a barge pole.

Alison King

18:24 PM, 12th April 2019
About A week ago

Thanks for explaining that Ian. I thought Fergus meant "don't do a commercial to resi conversion and then rent it to the council", which I would think was a good way to partner with the council over the housing crisis.

AGC

12:42 PM, 15th April 2019
About 6 days ago

What is this?
This poor quality reader comment should never have been promoted as worthy of the newsletter. As a male reader I completely disown a guy telling single mothers that they are often housed "in much despair with little hope in life!" or that "Mothers with small children need a small terraced house with a garden for a play area."

Equally, stating that Housing Warehouses are universally "filled with drug addicts, alcohol addicts, and so on." is not based on any empirical evidence or reports. It's the kind of opinion that makes landlords in general look bigoted, privileged and out of touch with renting society.

I really expected more from Property118.

Neil Patterson

13:26 PM, 15th April 2019
About 6 days ago

Reply to the comment left by AGC at 15/04/2019 - 12:42
This is a readers question/article and not the views of Property118


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