Tips to Make Short-Term Lets Work for You

The life of a successful landlord is full of decisions and hard work. Among the many decisions to make, is the type of tenant you want to attract – short- or long-term ones. There’s a lot to be said for both kinds of agreements. But they also both require quite different approaches if you want to make them work financially and for your tenants.

In this post, we’re taking a look at how to make short-term city lets work for Landlords and keep attracting the best tenants.

“Short-term lets can be hard work, but once you have a system in place that works, you could find the reward is well-worth the effort,” said Battersea estate agent, Eden Harper. “The convenience factor of short-term lets mean they come with a higher rent.”

Getting the Location and Services Right

The market for short-term lets is more diverse than you might think. They include business, holiday and in-between home renters. We’re going to focus on city lets in this post, which includes all of the above but not the coastal, countryside or homes for large groups.

For short-term city lets, there are some details that are non-negotiable. They include:

  • Location – it must be central and convenient for transport, popular office districts and/or site-seeing.
  • Easy-to-maintain – this includes the inside and outside. If the property has a garden, it should include a patio and a small easy-to care for lawn.
  • Cleaner – this could be offered as an option or simply be included as part of the services included in the rent.
  • All bills included – short-term tenants don’t want the inconvenience of registering for services and amenities. Help them avoid that with a single, all-inclusive rental charge.
  • Furnished – this goes without saying. Modern and neutral will work best, with items that are easy-to-replace.
  • Clean, simple décor – if you feel you want to dazzle your short-term tenants with some amazing décor then of course you can. But, when it comes to touching up the imperfections left by every tenant, it’s easier to match plain colours than replace a specific wallpaper design.

“Short-term lets are all about creating a property that’s easy and straight-forward to live-in and manage, for the tenant,” said Central London estate agent, LDG. “Whether the tenant is here for work, play or while they wait for something specific to happen, they don’t want to deal with tonnes of paperwork or hiring furniture.”

Never ending Maintenance

We’ve already mentioned this detail, but that’s because it’s pretty important and shouldn’t be overlooked in the world of short-term let investment and management. If you have a high-turnover of tenants, no matter how considerate they are, you will need to replace and repair details of your rental property in between each and every tenant you get.

This means you need to put a reliable system and network in place that you can trust to keep your property in excellent condition. If you can do that, then tenants will return and recommend you to others, giving your investment a better chance of remaining profitable.

When it comes to the cleaner, try to employ one who will do a regular clean and a thorough one before every new tenant. While most cleaners offer this, not all are equal so try a few out and shop around. It’s something you need to get right and that your tenants will appreciate.

With your décor, fixtures and fittings, try and have well-made, good-looking items that can be easily replaced with something similar, if the exact match is no longer available. Better still, where possible, buy some extras on your initial shopping trip so you have a stock of decent bath and bedroom linens, lamp shades, soft furnishings and kitchen accessories.

Yes, it might be a bigger outlay at the start, but it will mean you can get the property up-to-standard quickly and without any problems, in the future.

“Short-term lets do require planning and thought, but if you get it right, the tenants will be queuing up to rent it and tell all their friends about it too,” said Andrew Reeves. “Being a landlord is about providing housing for those who need it, but it has to work financially too. It takes hard work to do that, but the rewards do justify the means.”

This article was provided to us by Property Division who are a specialist PR company for Estate Agents.

Is holding your buy-to-let property in a “Hybrid Structure” the way to go?

As of the 6th April 2017, Landlords will no longer be able to deduct all of their finance costs from their property income to arrive at their profits. Instead, they will receive a basic rate reduction from their income tax liability for their finance costs.

What does this mean for my profit?

It’s difficult to say how much more tax would be due as the reduction in mortgage interest and wear and tear allowances come to bear, but it will certainly be a hit for higher-rate tax payers. If you don’t have a mortgage or if you’re a lower rate payer, good news: you will not be affected at all.

So what are my options if I’m a higher rate taxpayer?

We recently attended an interesting talk by Tony Gimple from Less Tax For Landlords, who said, in practical terms, landlords now have four options – including holding your property in a “Hybrid Structure”. We’ve listed the options he gave for you below – and also included some FAQs at the end of the article.

  1. Sell up

The first option is to sell up and either invest your money elsewhere, save it or spend it. Yes you will have to take the Capital Gains Tax hit and mortgage penalties (if there are any), but if you are thinking of retiring anyway this could be an option.

This isn’t something that the majority of landlords will want to do right now however, as though the market is suffering a post-Brexit slump, property is still a very good bet. As we recently blogged, when compared to other asset classes, property is definitely the best vehicle for achieving wealth.

  1. Make a positive decision to do nothing

Option two is to do nothing. This will be a default decision for the majority – which is absolutely fine so long as you have explored the different options available to you and are aware of how you’ll be affected by the new tax changes.

This option will most likely mean however that your tax bill is increased and your disposable income is decreased, but it will not severely affect those with only one or two properties.

  1. Incorporate

The much touted “only way to get over Section 24”: sell your personally held investment property or properties to a limited company which you own.

Tony made it crystal clear that he doesn’t think that full incorporation, or incorporating temporarily through a Limited Liability Partnership is the best move, and we’ll explain why in the next couple of sections.

Likewise, he said that trusts are also not an effective solution, and their use for property is far more limited that it used to be. They are over-complex, especially when it comes to mortgage flexibility and inheritance tax mitigation, and generally not the best option for landlords.

What’s Section 162 Incorporation Relief?

Section 162 incorporation is available to help negate the requirement to pay Capital Gains Tax or Stamp Duty when transferring existing personally held investment properties into a limited company. You can only claim S162 if you’re ‘working in the business’, or as Tony put it, dealing with tenants and toilets yourself!

The pitfalls…

However, Tony went on to say that there are more downfalls than pros to incorporating.

Companies are great if you’re selling the whole company, as the buyer doesn’t pay stamp duty on the individual assets, only on the shares at 0.5%. If you’re disposing of individual properties, you’ve still got to pay the equivalent of Capital Gains Tax, but in this case it will be Corporation Tax which is slightly lower. A negative is that you may require the lender’s consent to use your loan account, and if they lose their lending appetite, you’ll need a new company and a new lender for every new property!

The big problem with limited companies however is getting your money out. In fact, Tony said it’s virtually impossible to take the money out of a company without paying tax at every turn, which often results in double taxation – Corporation Tax, Dividend Tax, Income Tax, National Insurance – and if it’s an investment company, 100% subject to Inheritance Tax.

  1. The Hybrid

The final option Tony gave was “The Hybrid”, which he described as ‘truly running your portfolio as a property business whilst at the same time reducing tax leakage to the legal minimum.’

This option means holding your current or future investment properties through a Personal Ownership / Limited Liability Partnership (LLP) and Limited Company mix – a recognised corporate structure.

Tony said that owning investment property this way generally offers the most balanced solution as it allows you to legally separate ownership from enjoyment from control via multiple legal personalities, so as to minimise tax insofar as the law allows and keep as much profit and legally possible. You also will not suffer the loss of mortgage interest relief or wear and tear allowances, plus tax from your property income at 20% maximum.

There were a few questions from the floor:

If I go down the hybrid route do I have to tell Land Registry?

“No – because there’s no change of title. You don’t even need to tell the lenders as there’s no fundamental breach of mortgage conditions – the lending remains in your name. We’re not using beneficial interest company trusts, it’s perfectly acceptable.”

When it comes to LLP, how do you differentiate between distribution profit and return of capital?

“It’s what you decide to call it. With LLPs or a partnerships generally, you’re allowed to once a year say we’ll distribute profit, or this year we’ll return capital. It’s up to you. The law allows you to call it either, just one will pay tax on it and one you won’t. Sometimes you will want to pay tax on it. Why? Because in two years’ time when I want to build that house and borrow a million and a half quid in my name, I’ve got to show a lender a SA302 to say that I can afford it and that it’s my money not my businesses.”

Would you have to pay Capital Gains Tax or Stamp Duty?

“In broad terms, CGT and SDLT would only arise if there were a change of title, i.e. the owner (Bill Bloggs) transfers the ownership to another legal personality (Bill Bloggs Property Holdings Limited).  As in the case of hybrid arrangements there is no change in title (Bill Bloggs still owns them), CGT and SDLT events do not occur.”

So what should you do?

Unfortunately, there’s not one right answer. If you’ve got one or a couple of properties and you’re a higher rate taxpayer, you’re going to feel a little sting from the new tax changes. But is it probably not worth getting into something complex. Instead, a better idea may be to cut your interest costs by re-mortgaging and getting an up to date rental valuation on your property. Your lender will therefore have to recalculate your LTV, and a lower LTV generally ensures a better interest rate and a larger selection of lenders.

If however you are a seasoned landlord or you want to make a positive decision to run a highly tax-efficient, professional property business, then Tony suggested you may need to start looking at how you’re going to structure it.

We strongly advise you seek independent professional tax advice before getting involved in any schemes or structures.

This Article is courtesy of Portico London Estate Agents

65% of students ‘live in squalor’ due to Landlord neglect

Student advice site Save the Student asked 2,095 students to reveal the realities of living in rented accommodation around the UK. The results are pretty grim.

  • Almost 50% of students say their accommodation suffers from damp
  • 42% left without any running water
  • 26% are lumbered with unwanted guests including rats, slugs and bed bugs
  • … yet 1 in 4 reported problems are never resolved by landlords
  • EXTRA: Halls of shame – ten instances when student accommodation totally sucked

The cliché of students living in squalor may be closer to the mark than you think: two-thirds of them are paying through the nose for ‘horror homes’ more suited to rats than renters, Save the Student has found.

The National Student Accommodation Survey 2017 reveals students around the UK pay an average deposit of just under £300 each to secure a place to live, with 80% coughing up for fees as well.

Many have to pay a month or whole term’s rent – that’s anything from £500 to thousands of pounds – in advance. This means that students are being asked to put down big money for accommodation even before their first loan instalment comes in at the start of the year, putting pressure on budgets (and the Bank of Mum and Dad).

Paying more rent and upfront costs DOESN’T guarantee students an easier ride, either. The majority (65%) experience serious housing issues, including rodents, bed bugs, damp, inappropriate landlord visits and security concerns.

Claudia, a 2nd-year student in Yorkshire, lives in university accommodation. She says:

“[My] bedroom would get extremely damp and I would have a build up of mould … I can only have my bed positioned against that damp wall since the room is too small to switch things around. I bought a small dehumidifier (one I could afford) and would clean up the wall regularly … I did call the university in the first semester. They just recommended to leave the window open (which I always do) and not to dry clothes on the radiator (which I don’t). Then they said they’ll send someone over to have a look at it but no one ever did.”

NHS advice states that “if you have damp and mould you’re more likely to have respiratory problems, respiratory infections, allergies or asthma” – yet Claudia is just one of hundreds of students going without help from their landlords.

3rd-year Bryony adds:

“I am asthmatic and it was [damp] in the bedroom. Landlord simply refused to get it looked at.”

In fact, although half of those who reported housing issues said they were sorted within a week, 22% said it took a month – and 25% said their problem was never resolved.

One 3rd-year student in the East Midlands comments:

“We struggled to lock our front door and they didn’t come until two days later. Our house was not secure and they just kept saying they would send someone out but they never turned up.”

Other complaints include a gas leak being repeatedly shrugged off by the landlord; noisy neighbours; and agents, maintenance staff or landlords walking into houses (and even bedrooms) without warning.

Jake Butler, Save the Student Editor, comments:

“People tend to think that living in substandard conditions is just part of being a student, but it’s time we realised it simply isn’t acceptable, especially when many students and their parents are shelling out plenty of money.

We hear from stressed out students with housing issues pretty much daily. Far too many landlords and even university accommodation providers will just shrug off major issues. And who can they turn to when that happens? There should be more obvious support available to students for matters like this.”

Halls of Shame

Ten times student accommodation totally sucked.

We asked students to name-and-shame the worst aspects of rented accommodation. Here’s what they told us in their own words:

  1. Slugs in our kitchen on our plates.
  2. The shower drains out to the back of the house … at some point a frog got wedged in the drain and died. So whenever you had a shower, the smell of sewage and death stunk out the bathroom. This got resolved after 3 visits from the landlord and a month of waiting.
  3. Landlord handing out our key to other estate agents without telling us so that we get unexpected visit from a complete stranger claiming to be working with landlord. When we asked landlord to tell us next time he made threats saying that he doesn’t need our permission to let strangers into our home and that if we don’t cooperate he won’t fix the broken pipes and damp in our house.
  4. Mould in bedrooms and shower areas, broken front door lock, a backyard that rats would avoid and general hell.
  5. Millipede infestation in the bathroom following a flood from exploding radiator which wasn’t fixed for over a month.
  6. No hot water for 5 days in the middle of winter. Also we had no shower for two weeks. Landlord was abysmal in sorting it.
  7. Being fined £45 after accommodation tried to take my rent out of my bank early and could not access it.
  8. 1 hour heating per day for 40 days, even after several emails, reports, calls and in-person visits. Ridiculous!! In the north east!! It was winter!!
  9. Not feeling safe when people could get into our accommodation without any ID or a fob. They came and smashed up our ceilings in the corridors and switched off all my electrics and water.
  10. Maggots in sofa.

Source: National Student Accommodation Survey 2017, savethestudent.org

About Save the Student (www.savethestudent.org): free, impartial money advice for students

Written by students and recent graduates, Save the Student aims to get you clued-up about cash and in less debt. Featuring the kind of straight-talking advice you won’t get at school, the site has everything you need to know about managing money without the migraines: student finance explained, banking & budgeting, insider info on careers and making extra cash, plus ways to save and scrimp without the stress.

Save the Student was founded in 2007 by Owen Burek during his first year at The University of Manchester. Created in response to the growing costs of higher education, the site is now the leading student money website in the UK, serving 2.5m visits a month.

Facebook: https://www.facebook.com/savethestudent

Twitter: https://twitter.com/savethestudent

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How will Article 50 affect London’s property market?

Mark Lawrinson, Regional Sales Director of Portico London estate agents, has spoken out about the possible effects of Brexit on the London housing market, saying, “I don’t think the triggering of Article 50 will affect the property market directly from yesterdays announcement. In one sense it removes the uncertainty surrounding when Britain’s withdrawal process from the EU will start, but in another way it will create economic uncertainty until we know what deal we will strike and therefore what Brexit actually means for our country.

Mark continues, “Brexit will no doubt mean a turbulent two years for the London and UK market as we begin to hear what negotiations and proposed deals are being put forward for our exit of Europe and the single market. I think we will see a continued slowdown or lethargic London market when it comes to sales volumes, and as we reported toward the end of last year, transaction volumes across London are already more than half of what they were before the 2008 crash.

London has a significant part to play in businesses who trade and operate across Europe and the world, and a buoyant property market relies on the UK’s economic health. If Brexit negotiations go well this could cause further price growth as the economy grows and we see the nation’s confidence lifted, but equally, if a good deal isn’t reached then the international companies who operate here or look to relocate here might change their minds, reducing the number of residents who live in the capital and again further reducing the transaction levels, which could ultimately lead to price decreases.”

It’s therefore important that you make property decisions based on your personal situation and what you want to do, rather than gambling on how the market will play out.

Robert Nichols, Portico’s Managing Director, makes an important point, stating, “Right now we may experience some uncertainty, but as the negotiations progress, we will regain some much needed stability into the housing market, as people realise that the effects of Brexit are not catastrophic and go on with their lives. We’ll hopefully see transaction levels increase as a result, which are currently dangerously low and affecting price growth across the capital.

He continues, “Yesterday’s events are likely to have a much more profound effect on foreign investment however, with the weakening pound expected to fuel demand from overseas buyers and investors.”

Many are also speculating that yesterday’s events will mean that the Bank of England will be hesitant to increase their interest rates, in spite of the recent inflation increase. This will it will remain cheaper than ever to borrow and get on to the property ladder.

Many are also speculating that today’s events will mean that the Bank of England will be hesitant to increase their interest rates, in spite of the recent inflation increase. This will it will remain cheaper than ever to borrow and get on to the property ladder.

Article kindly provided by Portico, who are a residential estate agent with offices throughout London, specialising in flats and properties to rent and for sale. For landlords, they offer a range of unique packages which include monthly fees, a rental guarantee, complimentary maintenance between tenancies and assistance with tax return. For property sellers, they offer a dedicated property concierge and a complimentary interior styling service.

Please call 020 7428 5310 if Portico can assist you and your property portfolio.

Discount Landlord launches key insurance scheme

Discount Landlord has recently launched a new key insurance scheme for both its landlord and home insurance brands. The broker has partnered with Keycare, the UK’s leading expert in the recovery of lost and stolen keys, to be its exclusive provider of key insurance.

The policy offers its landlord customers the chance to protect both their and their tenants’ keys for just £19.99 per annum.

Benefits of Keys2Let Insurance include:

  • Peace-of-mind cover for up to £1,500 for replacement of any lost or stolen keys, including call out charges and costs
  • Quick access to help and support via a 24-hour assistance line
  • A nationwide network of locksmiths delivering a quick, reliable, high-quality service
  • A white labelled branded key fob, which offers a £10 reward for finders. The branded fobs generate up to a 40% recovery rate for lost or stolen keys.

Steve Verrall, Director of Discount Landlord, comments: “Losing your keys can cause great anxiety and inconvenience, so the peace of mind that this cover offers is significant. We chose Keycare as the insurance provider because of their experience and knowledge working for the likes of Endsleigh and for their knowledge of insurance in the buy to let sector. They also have a reputation for exceptional claims and customer service.”

David Robertson, CEO of Keycare, adds: “Whether you are the person living at a property or a landlord, the inconvenience and anxiety of losing the keys to your property are immeasurable, but the cost alone is reason enough to see the value in key insurance. The average cost of a locksmith call out and replacement today is often more than £228, and given that nearly half (40 per cent) of us have lost our keys in the last five years, we know that customers value our product very highly. It’s a relatively low-cost way for insurers and brokers like Discount Insurance to improve customer loyalty and goodwill.”

For further information on this new product please contact:

Discount Landlord on 0800 294 4522

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.

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

landlord-blogger

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

 

Tenancy Voids hitting Landlords Pockets

Over the weekend we heard in the news that Direct Line for Business had released information about how tenancy voids affect Landlords across the UK and highlighted the areas where Landlords are most affected by Tenancy Voids and those that least affected by the voids.

Cardiff came out on top of the list as the most affected as it saw tenants remaining in properties for 11 months on average and in contrast Birmingham was mentioned as the place where tenants were most likely to stay, with average time in tenancy being 2 years and 4 months.

Wales online image
Image courtesy of http://www.walesonline.co.uk

Many people may look at this news and dismiss it, but it is quite important to realise how tenancy voids affect landlords. Landlords with larger portfolio’s may find absorbing the costs of voids easier to do, but accidental landlords with one property or landlords with smaller portfolios may find it hitting their pockets harder. 

From our personal experience of tenancy voids we find it an inconvenience because in addition to having to find a new tenant, and losing rental income, you also have to pay for extra expenses including standing charges on electricity and gas meters, empty house insurance and in some areas you are liable for full council tax rates (although some do offer free rates or reduced rates depending on where you live)

The least amount of time our property is empty the better and this can be said for all landlords… No landlord wants an empty house do they? But articles like this may for good reading as if you are looking to invest, then you may be more inclined to select an area where your tenants stay longer, unless of course you don’t mind the voids!

To read the article in full please visit the Daily Mail Website