Adam Feather, 27, is an estate agent at Kellers & Co, West Hampstead, London. He has worked in the property industry for ten years - during that time, he has seen property prices treble in parts of north-west London.
Having accumulated some savings, Adam – who was also a first-time buyer - finally managed to buy his first investment property in March last year. He bought a purpose-built studio apartment, located a stone’s throw from St John's Wood tube station. The flat is ex-local authority, and cost just £140,000.
Adam says: “I decided to buy a property in St John's Wood because it is an area which is always going to attract people, due to its close proximity to Central London, lovely surroundings and excellent transport links.
"Consequently, there is huge demand for property in the area and so property prices have historically always recorded strong growth.”
However, he encountered some problems when trying to secure the finance for his first investment property.
Difficulties
“As a first-time buyer, I found it difficult to get a mortgage,” explains Adam. “This was not just because I was buying an ex-local authority property, but also because the flat is situated within a purpose-built block arranged over four storeys. Some lenders are not prepared to lend money on such a property.”
He eventually managed to secure a two-year fixed-rate mortgage with Birmingham Midshires at an annual borrowing rate of 5.5%. He was required to put down a cash deposit of £21,000 (15% of the purchase price). In addition, he paid an arrangement fee of £1,000, £750 for legal and surveyor fees and £1,400 stamp duty (1% of the property price). A major condition of the loan was that he secured a minimum annual rental return of 6% per year.
Adam says: “I think it’s ridiculous that mortgage lenders charge such a high arrangement fee. It makes it far harder for first-time buyers to get on to the property ladder.”
Before letting his property out, Adam spent in the region of £10,000 upgrading his flat. He is now receiving £823 per calendar month in rental income and is paying £750 each month towards his mortgage, on an interest-only basis.
He explains: “I am repaying only the interest, because I bought the property hoping to benefit from capital growth.”
Adam recently had his property revalued by a surveyor and was informed that it is now worth in the region of £220,000.
He concludes: “I now plan to pull out the profit I have made, by remortgaging the property and buying a second home. In fact, I intend to buy one property every year for the next 20 years.”
Interview by Marc Da-Silva