According to a recent survey from Coutts bank, some 92,000 'executive inpats' arrive in Britain every year, a figure that has almost doubled over the last decade.
They typically live in the UK for three years and they come with money to spend - their employers can fork out as much as £500,000 providing for their needs. Collectively they contribute more than £9bn a year to the UK economy.
Where do they come from? French and German execs make up the majority, followed by American, Dutch, Irish, Italian and Spanish high-flyers. Engineers and IT professionals account for more than one in ten, and women make up 40 per cent of the total.
Providing accommodation for these new arrivals is now a thriving sub-sector of the rentals market, but how can landlords or potential buy-to-let investors take advantage of their swelling numbers?
Where do they like to live, what kind of accommodation do they expect, what are they like as tenants, and what should you consider before getting into this market?
Where do they live?
London NW8 - close to The American School
Let's take location first. According to Fred Drew of
Second Opinion Property Consultants, corporate execs generally favour well-established, well-connected, locations at the higher end of the market:
"They like areas with plenty of international shops, with a cosmopolitan feel, and areas that are perceived to be historically and traditionally acceptable, but it depends to a certain extent on whether they come with families or are single.
"For those with families, education is vital and that means they'll want to be near one of the highly-regarded International Schools around London and Surrey. There are a number, catering to different nationalities that are very well-established":
- American Schools: four in Surrey, one in St Johns Wood NW8, one in Hampstead NW3, one in Holland Park W11, and one in Waterloo SE1.
- French schools: one in W7, one in South Kensington SW7, one in Clapham SW4, one in Hampstead NW3, and one in Hammersmith W6.
- German Schools: There is only one German school in London in Petersham TW10.
- Japanese: In Ealing W5, there is a Japanese school and several Japanese kindergartens.
The young professional couples, or singles, are also attracted to these areas, but unlike families, they are not averse to living in the heart of the West End, such as Soho W1 and Covent Garden WC2.
Working in the City brings them to Tower Hill E1, the Isle of Dogs E14, and Clerkenwell EC1. The Jubilee Line is a huge draw because it provides access to Canary Wharf, the City, the West End, and highly desirable North West London.
"Inpats," Fred adds, are "generally not price sensitive, especially if the company is paying. Well-appointed family homes typically fetch from £1,000 per week up to £5,000 per week plus, although only for top MD- level employees.
"Families from Europe are heavily attracted to large apartments, often duplexes or penthouses commanding a similar price. Couples and singles generally rent apartments along the duplex or penthouse line also.
"They pay anything from £400 per week to £700 per week for a two-bed and £550 per week - £900 per week for a three-bed. The high-middle to mid high-end rental market has been very strong this year."
What do they expect?
Needless to say, with that kind of money being spent, your average overseas executive expects a pretty high standard of accommodation. Prospective landlords, says Fred, should remember the following 12 points:
1.
The property should be no more ten minutes walk to a tube - the Jubilee Line is a special favourite.
2.
Lower ground or ground floor is generally unacceptable.
3.
No carpets in bathrooms or kitchens. Bathrooms must have power showers, and there should be at least two bathrooms to every three bedrooms.
4.
Kitchens should be of the highest standard with as many gadgets as possible. For families double berth appliances or two of each.
5.
Wood floors are a must.
6.
Security is absolutely vital, good locks, alarms, window locks, even CCTV. A porter and gates also go down well.
7.
A genuine London feel especially for Americans, they love Georgian streets with that Dickensian or Christmas card feel.
8.
Plenty of open space: London houses tend be thin and narrow so large apartments, especially in grand mansion blocks, are often favoured.
9.
A study is always much appreciated.
10.
Have broadband and cable pre-installed: busy executives need constant information supply.
11.
Privacy and an abundance of like-minded wealthy individuals. Exclusive areas generally have wealth density so high flyers won't feel out of place.
12.
Some outside space is preferable and a garden is vital for families.
Furnished accommodation, says Fred, is still the most popular especially for young professionals, and "that means totally furnished with absolutely everything, not just a bed and a sofa.
"Include all cutlery, all plates, all utensils, sheets, cushions, duvets, and the like. Families are more likely to have their own furniture but it really depends on the individual. A £5,000 per week furnished house will demand the best possible furniture - good as it is, IKEA simply won't satisfy."
What Are They Like As Tenants?
Well and good: you've sorted the area, you've found the perfect property. But what are these overseas tenants like? "In truth," says Fred, "hard work, but only if things go wrong.
Recently advertised: Petersham - close to German School
Featherstone-Leigh, Tel: 020 8940 2332
"Like anyone paying a great deal of money for a service they demand the best. If the boiler breaks during January in a £5,000 per week home you can't put the job off for a week. The tenants are usually of senior management level so know when and how to firmly negotiate. Still, if the landlord provides a good service both parties should generate a mutual respect.
"On the plus side, the rent is virtually guaranteed, especially when paid by a company. Indeed, large companies often pay quarterly in advance generating good cash flow for landlords.
"Companies rarely pay the traditional deposit but prefer a deed of guarantee, essentially agreeing to pay for any damages post-tenancy upon invoice receipt. Companies may insist upon using their own lease, it's best to have a solicitor check any agreement prior to move in."
So should you invest in this sector?
The demand is high, the rental price is tasty, and the tenants are unlikely to trash the place: surely this is the perfect option for the buy-to-let investor?
Well, yes and no: according to Fred there are a number of drawbacks that prospective investors should keep in mind: These are the main points to consider:
Most lenders will only lend 75 per cent of the property value above £500,000 using a buy-to-let product. Therefore a £500,000 deposit is needed to buy a £2 million property.
- Stamp Duty will generally absorb close to a year's rent - £80,000 for a £2 million property, or £1,538 per week.
- Any property you buy will almost certainly need considerable refurbishment, including: new kitchen, new bathrooms, and full redecoration to bring it to the required standard.
- Furnishing a suitable property can be extremely expensive.
- Any voids are very painful indeed: a three month void could cost up to £29,250 using our £2m property example and assuming a rent of £2,250 per week.
- Maintenance costs of a large premises far outweigh smaller units.
- Such properties are hyper market sensitive. A stock market crash, or similar economic event, could see your tenants relocated and tumbleweed rolling through the high end rental market.
- Properties at this end of the market require considerable and expert marketing, so you will almost certainly have to use an estate agent and pay between 7%+VAT and 15%+VAT to find tenants and possibly manage the property.
- "If you decide to try such an investment," Fred concludes, "and often we're talking a property costing up to £2m - seek expert advice. Such rental investments are only for the very brave, the very wealthy, and the very market savvy."
About Second Opinion Property Consultants
Second Opinion Property Consultants was set up by Fred Drew to offer homebuyers and investors in the London market impartial advice about prospective purchases or rental properties.
Is the property you are about to offer on, purchase, or rent really a good deal? Is it going to fully meet your requirements? Is it value for money?
If you're not sure which way to turn but are under pressure to make a decision, if you're getting a bad feeling but think it might just be nerves, or if you think the deal on offer is a little too good to be true, the company will offer unbiased advice to help you make a decision.
Michael O'Flynn
© Find A Property 2000-2007
