Tax Changes and the Buy-to-Let Landlords

Over the next three years the amount of tax owed by many buy-to-let landlords will double or even triple as a direct result of the changes that are being phased in from April 2017. Landlords who have been enjoying four-figure net annual profits could sadly end up facing large losses – and it is thought that if interest rates rise, then this will make the situation even worse.

As a Landlord in the United Kingdom today, you can’t help but feel slightly battered by the Government and rather than being praised for helping to provide accommodation when there is clearly a shortage in the UK of decent housing, Landlords are being hit hard with tax changes and law changes.

If the Government keep demonising Landlords, we feel that more Landlords will have no choice but to sell up and invest their money else where and seeing as though the Government can not keep up with the demand for housing, it seems ludicrous that they insist on battering the Landlords, who are indeed only trying to help.

To read the article from the Guardian in full click here.

10 THINGS TO KEEP IN MIND BEFORE BUYING PROPERTY POST BREXIT

Don’t let the Brexit doom and gloom discourage you, Mark Lawrinson, Regional Director of Portico London estate agents has revealed the key factors you need to consider to make a sound property investment this year:

1)      Keep an eye out for big infrastructure projects
Even in a weak or unstable market, areas undergoing infrastructure investment are likely to still experience growth in terms of both rental yield and capital gains. Look at areas being transformed along both the Night Tube and Crossrail line to identify long-term investment prospects. For example – Forest Gate, Farringdon and Whitechapel are areas geared up for regeneration and a rise in property prices thanks to Crossrail.

2)      Look at the high street as an indicator of an area
The high street is a great indictor of the demographic of an area, and whether the area is in decline or has growth potential. Some of the factors you should consider include – have there been many changes recently? Are shops closing down with no sign of opening or are they closing with new names moving in? Is money being spent by the council to smarten it up?

3)      Are there good schools in the area?
Another great barometer to judge prospects of an area is the schools in the vicinity. You may not be thinking of starting a family yet and if you’re an investor schools probably aren’t on your list, but London’s population is growing fast and good schools are becoming harder and harder to come by. Therefore, having one in your area is a big bonus. People both rent and buy in these catchments to get their children into a good school, getting you a good return on your investment.

4)      A house should be a home
If buying a property to live in, remember it’s a home first and foremost – and an investment second. If you plan to live in the property long-term then you should be shielded from bumps in the market. As the market in London has shown time and time again, it’s super resilient, so what may happen in the next two years could be insignificant to you if you are still there for 10.

5)      Shop around for mortgage deals
To make a sound investment decision, you need a broker who has access to the entire market. Some brokers operate on a panel and hence may say they are getting you the best deal – but remember that is only the best deal from their panel. With lending criteria changing daily, it’s advisable to shop around. That rings true even for investors who have used the same lender or broker for years!

6)      Choose a good solicitor
This may sound obvious but cheap solicitors will inevitably cost you more. This is probably one of the single biggest purchases of your life so paying for the right advice is crucial. With a market that’s changing daily, avoiding delays with the right legal aid could be the difference between concluding the transaction or not.

7)      Choose the right estate agent
In a tough market it’s more important than ever to choose a local agent who knows their area inside out, and who will get you the best result both as a buyer or seller. An agent who just instructs and advertises your property and waits for the calls will struggle in tougher markets. A proactive agent who knows their buyers can match the right person to your home, and uses past experience to price your house right. With a ‘no-sale, no-fee’ policy, high street agents now have as much a vested interest in the transaction as both the seller and buyer. Find out how much your property is currently worth with Portico’s Instant Valuation tool.

8)      Create a two-year plan and a five-year plan
Most investors would take a two-year fix on mortgages but with the lending criteria getting tighter for investors, some of the better deals in terms of loan to value can be found at a five-year fix. No one knows what will happen to the property market in the next two years, so plan for what will happen if circumstances go out of your control. For example – if you plan to exit or re-mortgage at that stage you also need to plan for what it will mean if you can’t do either of those.

9)      Look for ways to add value to your property
From basic redecoration to new kitchens and even structural work such as loft extensions, adding value to your property will make your home a better investment. If you see your family growing or want a capital growth not market-dependant then you need to look at innovative ways to add value to your property.

10)  Be clear on your requirements
We all want a sprawling staircase in the house and a swimming pool in the backyard, but you need to be realistic with your actual needs. The big ‘C’ (compromise!) is a word most try and avoid but is something we all need to make. The sooner you are able to accept you will need to make a compromise and understand what those compromises are the easier your search will be.

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Diversity makes it difficult to reach Landlords

Browsing through our latest copy of the Landlord & Buy-to-Let Magazine (yes the hard copy that comes in the post!) we came across an article on page 2 that sparked an interest for us.

One of the opening paragraph’s states that “Landlords are such a diverse group of people that it is almost impossible to reach them all to communicate new rules and regulations” 

Rightly so Landlords are an incredibly diverse group of people but they are not a group of people that are that difficult to get hold of to communicate new rules and regulations.

Most Landlords (with the exception of some rogue landlords) will have informed the local authority in the area in which their property is located that the property is owned by a landlord but the tenant is liable for the council tax.  How difficult would it be for every local authority to collate a list of all property that is owned by a landlord but rented to someone else and communicate this to the necessary sectors with regard to law changes and regulations.

Surely it is not a case that us landlords are so diverse that we are difficult to get hold of, but that it is the lack of communication that goes on between regulatory boards and local authorities. Take for example the HMRC… they seem to be able to communicate (more often than not) with employers, local authorities, child benefit departments, National Insurance Departments etc to be able to know if there are any discrepancies, SO.. why can’t this be the case for sharing information connected to Landlords.

Equally the HMRC know whether or not we have received income from a buy to let property in our tax returns (providing you have declared everything you should have), so yet again… there is another avenue for getting information across.

In the article Kate Faulkner from Designs on Property talks about collaboration in the Private Rented Sector, which in our opinion also boils down to communication. If more letting agents, legal companies, landlord organisations, local authorities and the HMRC etc worked together as one big team then the information Landlords need would stand a greater chance of getting through.

So hat’s off to Kate for opening up the debate on collaboration. There must be a better way for ALL landlords to get the information they need and by running information websites the way we do, we are helping in our own little way to make sure landlords keep up to date.

For more information please click here

 

 

 

 

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Top 10 places to buy-to-let in London, according to Portico Estate Agents

Over the past 5 years, all 32 London boroughs (and particularly those in central London) have experienced substantial property price growth, fuelled by a combination of record levels of overseas investment and historically low interest rates.

Whilst it is true that the recent reduction in the availability of interest-only mortgages and increases in stamp duty for the most expensive properties may mean that this trend will not be sustained indefinitely, it is certainly the case that, at the moment at least, central London property prices are at an all time high.

However, whilst property prices have increased substantially, rental prices have broadly continued to track earnings growth. As a result, rental prices have not increased at the same rate as property prices and yields have steadily declined in central areas for at least the past five years that we have been tracking them.

– See more at: https://www.portico.com/yields

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How many “Buy-to-Let” Properties do you own?

We came across an article featured on Simple Landlords Insurance and in the article they talked about how many properties landlords in the UK had in their portfolio.

We have one property in our “portfolio” and this was an inherited property making us “Accidental Landlords”. At one stage we would have considered adding to our “portfolio” but with recent changes to tax etc, we are less inclined to think that adding is a good option.

According to the statistics in the article the number of landlords with only one property dropped from 78% to 63% in the past 6 years. We wonder if this figure will remain static for a few years now, as people (like us) that would have bought another property on the back of an existing property, hold back on their plans due to having to pay significant increases in stamp duty.

Also the article talked about landlords seeing renting out property as a “nest egg” rather than a business and we are inclined to agree with this statement. In a landlord meeting we attended in April we met with many landlords who did indeed have one property and who did not consider themselves to be in business with that one property. We guess that the more property you own, the more work you do and therefore the more likely you are to feel that the running of the properties is akin to running a business.

To read the article in full please click here

A revolutionary way to let a property or a recipe for disaster?

Browsing through our endless emails from Google alerts we came across an article from Simple Landlords Insurance which caught our eye – “An estate agent is paying tenants first year’s rent” and it got us thinking…. Is this a revolutionary way for landlords to let their property or is it a recipe for disaster?

It looks like it could be a win – win situation for Landlords as they get their 12 months rent upfront and their property back in its original condition at the end of the tenancy, but could this idea be open to abuse?

The “cynic” inside us says yes.. it is a strong possibility that “rogue tenants” could abuse this system which could ultimately leave the estate agency out of pocket. Granted their are rent protection schemes in place that they could pay for, but they only work if the tenants are employed and guarantors could be also used if the tenant is unemployed / on state benefits.

Estate Agencies and Letting Agencies in the UK whether online based or high street based, need to keep ahead of the competition and what a competitive market it really is. We applaud agents that come up with great incentives to entice us landlords to use their services, but the business side of our head as opposed to the landlord side, thinks that letting agents should be a little more careful about the offers they use to entice landlords in, because it may mean they have a short lived life in the land of the letting agency. We would rather us landlords have a great service from a great letting agents than see our letting agents go bust after a year and then us have to search for another one to replace them.

Click here to read the article in full

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The UK decides to vote “Leave” but what now for UK Property

The dust has settled over the weekend and we have had time to adjust to the decision to “Leave” the European Union. Whether you voted to “Remain” or whether you voted to “Leave”, we are now facing a long period of uncertainty that will have a major impact on many of the personal decisions we make moving forward.

It would seem from the articles that we have read over the weekend that although we have made a decision as a country, it is actually how things will affect us personally that are concerning most people, which is ironic being that many people voted “Leave” for non-personal reasons.

From the viewpoint of the Landlord in the UK, we are facing a huge period of uncertainty as far as the housing markets are concerned and because no country has ever left the European Union, it is difficult for anyone to actually predict what will happen to property prices or the buy-to-let markets.

However, we do know that in the hours following the announcement that we would be leaving the European Union, shares in Housebuilder’s (Persimmon, Barrett and Berkeley) dropped by more than 20%, so does this mean that the housing market will fall dramatically?

Only time will tell, but Miles Shipside, Rightmove’s director and housing market analyst, stated: “Markets typically dislike uncertainty” and being as that is what the UK now faces it, it seems highly probable that house prices could lower as we pass through the two year period of uncertainty.

As for the Buy-to-Let sector, if property prices fall then investors can enjoy the benefits of purchasing property at lower prices, but given the recent changes in Stamp Duty, it may not be as simple as it would have been prior to the stamp duty increase. So yet again we face uncertainty as to how things will play out and we will just have to play the waiting game!

For more information on how the Property Markets will be affected click here 

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UK Job Market improves leading to less rent arrears

It is always nice to post good news for Landlords and today is most certainly a good day as we read an article from Property Wire that was published yesterday about the UK Job market improving, which is thus having a positive effect on rental arrears across the UK.

No landlord in the UK wants to have money owed to them. It is a stressful situation that we all want to avoid, as the knock on effect it has on the landlords personal financial situation can have disastrous consequences. Mortgage payments can be missed, as well as other critical payments and often landlords have to dip into their own personal funds to cover the shortfalls and not to mention the costs involved in having to recover the money owed and then a possible eviction process if things go to far… it can get very messy and very costly!

We have personal experience of this and can say it is not a pleasant situation to be in, but hearing that the UK Job Market is improving thus making rent arrears fewer is music to our ears.

The statistics make good reading as Property Wire writes “In absolute terms, just 86,200 tenants across the UK are more than two months behind in their rent in the first quarter of 2016 compared to 89,300 in the previous quarter which is a fall of 4%”

Click here to read the article in full

 

 

Should Property Investors be exempt from Stamp Duty?

There has been so much in the news lately about the Stamp Duty changes, it is little wonder that there are so many opinions floating around on the subject. At the moment you are never too far away from a “Stamp Duty” article on the internet and today is no exception.

We awoke this morning to an article featured on Landlord Today which was talking about property investors asking for an exemption from the latest stamp duty charges.

According to the article “Professional investors should be exempt from the recently introduced 3% stamp duty surcharge according to the Better Renting for Britain campaign”

And…

“Some of the country’s biggest investors in the private rental sector have written an open letter to the housing minister Brandon Lewis requesting exemption from the extra stamp duty imposed on buy-to-let properties from 1 April 2016”

We have been mulling this over all day and have shared the article on various social media platforms that we manage and after seeing what people have to say, we felt that this article was worth sharing with our opinions.

Now we are merely “Accidental Landlords” and have found ourselves as Landlords through no choice of our own, however we have embraced the idea and actually quite enjoy it.. until recently when all the stamp duty changes came into effect.

We understand why it was brought in…. The Government wanted to put a halt to the buy to let investors who were “gobbling” up the market and preventing first time buyers getting on the ladder plus it will obviously make the Government a lot of money!!! HOWEVER in doing so it has prevented landlords like us from moving our family home (unless we pay the 3% Stamp Duty surcharge) because effectively our family home has become a second home, due to the first home being a buy to let (accidentally of course!)

So when we hear today in the news that Professional Investors wish to be exempt, you have to forgive us for having a strong distaste on the subject. It is because of professional investors “gobbling” up houses on the cheap that we are facing paying the extra stamp duty and yet they now wish to be exempt….

We don’t think that first time buyers stand no chance of getting on the property ladder. Landlords provide a service to people who do not wish to buy, but for those that do ultimately wish to own property, they should be given a chance. If Professional Investors are allowed an exemption, then all we are doing is admitting that the future generation will never be able to buy their own properties. Don’t give them the exemption and give young people a chance to buy if they wish too!

If we give exemption to Professional Investors then all we are doing is admitting that young people will never buy a house and that they will be condemned to a life of renting, which you may think is mad coming from a Landlord because after all we make money from renting out our property but in reality renting should be a stepping stone towards buying your own home and not just a big business for professional investors who are only looking at lining their own pockets and not to keen on the future generations being able to buy houses.

Click here to read the article on Landlord Today

 

Abandonment – Have you been affected?

Abandonment is when a tenant leaves a property (usually without notifying the landlord or agent) before the tenancy has ended and this quite often occurs when the tenant owes rent.

Abandonment is a major headache for landlords within the UK because even though the tenant is in the wrong for abandoning the property, they still have a legal tenancy and can return and demand to take up residence at any time, despite not paying rent. Taking over an abandoned property is fraught with difficulties for the landlord.

In the news today it has been said by the National Landlords Association (NLA) that 36% of landlords in the UK have been affected by abandonment. This is a staggering amount and is costing landlords in the UK vast amounts of money as they battle to regain possession of their abandoned properties.

Abandonment is not a subject that we see written about often and in fact we haven’t heard about it since we had a blog written for our sister website “Welsh Landlords” back in October last year. However we are glad that the issue has been raised by the NLA so that more landlords can be made aware of the issue.

Click here to read the article in full on Abandonment.