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From The Sunday Times

July 15, 2007

Tales of a landlady: Avoiding the agents

A tough market calls for enterprising strategies

Rosie Millard

With profits wobbling, interest rates up again and yet more rises predicted, a cold wind is blowing around the toes of us landlords. But most of us are reluctant to give up – and who can blame us after the pleasant and prosperous decade we have enjoyed?

As a result, devoted landlords who are keen to keep on buying, but don’t want to share their dwindling margins with agents or developers, are being obliged to be much more enterprising. Take Paul Ainsworth-Lord. At the tender age of 38, he has a £5m portfolio of 39 houses around the Lancashire town of Darwen, where he lives. Constantly on the lookout to expand, but with an allergy to estate agents, he has come up with a clever way of doing the former while steering clear of the latter.

“I own a newsagent, which is also the biggest lottery outlet in the town,” he tells me. “It is handy, as it gives me key access to a lot of locals.” Essentially, Ainsworth-Lord canvasses for new properties via the paper round – offering to pay for information about a house coming up for sale, provided there are no estate agents involved. “I have a leaflet that goes to every house with a delivered paper, saying ‘£500 in your hands, no strings attached’,” he says.

It seems to work a treat. “We have an army of people watching and listening out for anything that is about to come onto the market. I had a phone call only this morning, offering me two properties.” In the past 18 months, Ainsworth-Lord says he has paid out on 19 tip-offs that have turned into sales.

Another, even more ambitious initiative was to write to everyone living in the neighbouring village (population 3,500) asking to buy their house. How did he get on? “Very well. We bought six in the end.”

Some of these sales were from people who were happy to sell their own houses, then rent them back off Ainsworth-Lord. So, not only did he add to his portfolio, he was spared the hassle of finding a tenant. He thinks more owner-occupiers will look at this option.

“Because of interest-rate rises, I think many people will be attracted to sell and rent back, because rents will be cheaper than the mortgage,” he predicts. “If rates continue to rise, sale and rent-back means you can stay where you are with nothing changing.” Except for the rather obvious disadvantage of no longer actually owning your home or benefiting from future rises in its price.

My friend Philip Stewardson, and his brother, Mark, have a portfolio of 72 properties in the West Midlands, valued at £13m. He believes wholeheartedly that landlords have to be enterprising and undercut agents. Even to the extent of putting up their own boards?

“Absolutely. We always buy dilapidated properties and refurbish them,” he says. “With every property we do up, we put a board outside that says, ‘Acquired by Stewardson Development. Property wanted in this area’. It also gives our phone number.

“It seems to work. We have got 15 to 20 properties from people coming straight to us. People know they can save money by avoiding the estate agent.”

Stewardson also does direct mailshots of brochures, and has a permanent 20ft banner on the outside of his building that reads: “Houses, flats, land and development sites wanted”.

Now, I know that slamming a giant banner on your home is not something that most buy-to-let landlords would either want or be able to do. However, it’s a good example of how to be adventurous, not least because of the rapacious nature of the market.

“Over the past two years, you have had to be proactive,” says Stewardson, who has clearly spent a lot of time reading American self-help books, “because everything that has come up for sale from an agent has been sold as soon as it has hit the market.”

Is all this frantic activity unnerving the estate agents? I’d like to say yes. I’d love to, in fact, but the truth is that it hasn’t dented their confidence one iota. “There’s plenty in the market for lots of types of buyers and vendors,” says Justin Hannam, branch manager of Jackson-Stops & Staff in Wimbledon, southwest London.

“A lot of people mailshot roads where they would like to live. But a lot of them will come back to negotiate via an estate agent because they want someone working on their behalf. And the thing about the great British public is that it is not very good at negotiating. Unlike, say, the Chinese, who are used to haggling in markets or on the street.”

So we need a sharp-suited estate agent to hold our hands? That’s about it. But what about the competition from enterprising landlords – does that make Hannam nervous? “Not at all,” he says. “If they can do it that way, fantastic. But it’s a lengthy way of finding properties. And in terms of green issues, direct marketing is not great, is it? Think of the melting icecaps. E-mail drops would be much better.”

Blimey. An estate agent with a conscience. That must be a first.

buytolet@sunday-times.co.uk

LORDING IT

More advice from Rosie Millard: timesonline.co.uk/ investmentproperty

The simple answer to your question Sally is leaverage. You can't leaverage a savings account.

BTL will survive so long as the supply of housing lags demand and the dream of accquiring capital assests outwieghs the need to protect them.

Chris Quin, Haslemere, Surrey

What will it take for landlords to realise that the buy to let party is over. It's possible to get 6.5 - 7% risk and hassle free from savings accounts now and savings rates may well increase over the next six months. In the meantime, although property prices have gone mad, rents have not kept pace. A two bedroom flat in Brentwood, which cost Â£60000 five years ago is now worth Â£180000, but the rent it can command has not changed. You can still rent a two bedroom flat here for Â£650 per month. The question is why would you risk Â£180000 of capital to achieve just over 4% a year when you can earn so much more from a bog standard savings account?

Sally Copperwaite, Brentwood,Essex, England