Browsing all articles from December, 2021

A Conservative Government should restrict the purchase of Buy to Let properties?

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Writing in Conservativehome a former Conservative parish councillor, Sam Clark, argues for a more interventionist approach to the housing crisis by restricting BTL rather than encouraging large scale new developments.

His fear is that Tory voters will perceive the government as wanting to concrete over their areas

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2021 the strongest calendar year for house price growth since 2006

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The final Nationwide House Price Index of the year has ended on a high with the average price of a home now standing at £254,822 an increase of nearly £24,000 over 2021.

Annual house price growth increased to 10.4%

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Capital Gains Tax On Your Home?

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The Guardian is at it again!

They’re suggesting Capital Gains Tax (CGT) on your own home, that’s what Andrew Roberts and I will be looking at in this episode of Property Breaking News.

Please click on the video below:

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Do you remember offset mortgages?

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Hi all, Do you remember offset mortgages and in particular if they are still available on Buy to Let property?

Has anyone taken one out recently, and how does it work for them? Was it worth the potential increased cost for a specialist product?

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Three ways to breakdown the buy-to-let barrier and get a mortgage

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The UK’s residential rental market has been strong for over two decades, and data from Statista reveals that aggregate annual rent paid by tenants increased by £59 billion between 2000 and 2020.

Given that the rental market is worth approximately £86 billion, it’s little wonder that people often see it as an easy way to make money.

But as any landlord will tell you, it’s not always easy. Between contract disputes, repair costs, paperwork and taxes, there’s a lot that goes into being a landlord.

Yes, the rewards can be lucrative and, overall, it’s far from the toughest job in the world. But it’s also fair to say that it’s a business with plenty of potential pitfalls.

In fact, it’s a business that most people aspire to get into but stumble at the first hurdle.

Securing your first rental property can be a lot tougher than people expect because of the upfront costs.

Everyone searching for a place to buy knows that deposits are one of the biggest obstacles to overcome. Residential buyers are often asked to put up as much as 20% of the property’s value before a bank will consider approving a mortgage.

Government schemes can help. For example, it’s possible to get a 95% mortgage. The government-backed scheme is open to first-time buyers and existing homeowners looking to get a new build property worth up to £600,000.

Buy-to-let deposits are a different ball game

This means they only have to save up for a 5% deposit. Of course, individual circumstances can affect the size of a residential deposit.

But, in general, it’s between 5% and 20%. For buy to let mortgages, the average minimum deposit is 25%. Some lenders will ask for 40% of a property’s value in certain situations. That’s a huge barrier to entry if you already own a home and you’re looking to save up and get a second property.

Indeed, the average house price in England is £271,000, according to the Office of National Statistics. Securing a buy to let mortgage on a property costing this much would require a minimum deposit of £67,750.

Saving that amount of money can be tough at the best of times let alone when you have an existing mortgage and bills to pay.
But there are ways to maximise your saving power and, in turn, your purchasing power.

If you know you’re going to apply for a buy to let mortgage, setting up an individual savings account (ISA) can be a good option. ISAs offer around 2% interest which, although low, is better than standard current accounts. Even better, a stocks and shares ISA gives you the ability to make tax-efficient investments.

This strategy can be used by savvy homebuyers who want to put their savings into investments and, potentially, earn a better return than a standard ISA. For example, some people may consider index-tracking ETFs, which are accumulative products that reinvest their dividends back into the ETF.

Alternative ways to find a buy-to-let deposit

These products ring-fence any profits from capital gains tax. As long as you’re within the annual limit (£20,000 in 2021/2022), you won’t pay tax on profits gleaned from an investment made via an ISA.

Assuming your investments are profitable, this can be an effective long-term saving strategy that can help you hit your target. Prospective property owners can also look at remortgaging options.

It may be possible to release equity from your current home to get a deposit. However, this strategy has to consider the added cost of borrowing money. What’s more, you need to know how much equity you can release.

The exact figure will vary between lenders. But let’s say you’ve got 40% equity worth £100,000. A lender might allow you to borrow up to 70% of that figure – £70,000. Again, you will have to factor in the long-term cost of borrowing this money on top of getting a buy to let mortgage.

The reality is that there are positives and negatives. Saving in the traditional way will take longer, stocks and shares ISAs don’t guarantee a return, and remortgaging can be costly.

But as long as you weigh up the options and it’s financially viable, you can overcome the biggest barrier to becoming a landlord, namely the deposit.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Three ways to breakdown the buy-to-let barrier and get a mortgage | LandlordZONE.

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Your Property Tax Advice For 2022

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Is Your Buy to Let (BTL) Property Business ready for 2022?

In this video, I’m joined by leading property tax expert Mark Alexander from Property 118, to share crucial property tax advice for the new year to help ease the pain of section 24.

The post Your Property Tax Advice For 2022 appeared first on Property118.

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How tenancy support is reducing rent arrears for landlords

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Capital Letters is a London landlord service that deals with the benefits systems so you don’t have to. Last year our team recovered nearly £1 million owed to landlords

Landlords who let their properties to families on benefits need to become experts in Universal Credit (UC) – or work with people who are. The benefits system is a regular payer once claims are set up correctly, but a change in circumstances can delay payments.

One east London landlord we work with summed up the experience: “Normally, payments start coming when they are due, but sometimes tenants cannot pursue their claims on their own. I asked Capital Letters to intervene so they could pursue a case professionally. Now the arrears are cleared, and I am very thankful for this service.”

Sometimes tenants need help sorting out their claims, and we increasingly advise landlords on the benefits system too. The number of people claiming UC has doubled during the pandemic so some landlords are letting to benefit claimants for the first time.

Capital Letters works with private landlords and two-thirds of the councils in London to find private rented properties so families can move out of temporary accommodation. By working across London, we have access to tenants ready to move into most family properties.

The council checks that families are suitable and can afford the rent, and Capital Letters pays a cash incentive to the landlord of up to £4,000 when the property is let. Unlike a deposit, the landlord keeps the payment.

But the service does not end there. Capital Letters has over 25 tenancy support advisors who help tenants and landlords sort any problems throughout the tenancy. Last year the team secured nearly £1 million in back-dated payments – most of which went straight to the landlord.

As the government funds Capital Letters, we can offer this service free to landlords and tenants. Most tenancies do not need any support, but landlords are reassured the offer is there throughout the tenancy.

One tenancy support advisor recently secured a single payment of £10,000 for a landlord after arrears built up over six months. The landlord called us because the tenant could not deal with the stress of dealing with the claim.

In fact, these long-running cases are unusual. The tenancy support team usually finds a solution before the landlord even knows the tenant needed help. Of the families we found homes for last year, just 2% of those tenancies are at risk from arrears.

With their expert knowledge, our advisors can usually sort out claims so payment can start within weeks of the tenant moving in. By responding quickly, we try to prevent any arrears from building up.

So what are the advantages of working with Capital Letters? We make the process easy by ensuring that Universal Credit applications are set up correctly, which helps to minimise arrears. We can also help with claims for direct rent payments.

Capital Letters was set up to find homes for low-income families in London, which starts with a property. But by offering support throughout the tenancy, we increase the chances of success for everyone and build long-term relationships with satisfied landlords.

Sue Coulson is Chief Executive Officer of Capital Letters.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – How tenancy support is reducing rent arrears for landlords | LandlordZONE.

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The Capital loses out as the “race for space” boosts the regions

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The house sales market has at last turned sluggish after the stamp duty holiday boost set house prices soaring during lockdowns, but finding suitable properties to rent has become a nightmare for many people.

For those looking to buy there are still opportunities around, but for those wishing to rent, especially in rural and coastal areas there’s little or no choice.

A severe shortage of rentals

According to the property portals Rightmove and Zoopla, there are listings for just over 600,000 properties in total, with less than one-fifth of these available to let. In rural and coastal holiday hotspots virtually all of the properties on these portals are listed for sale with nothing available for those wishing to take long-term rentals.

Soaring house prices brought on by stamp duty relief, the flight to the countryside during the pandemic, and a stay at home holiday “staycation” boom, all led a dramatic decline in long-term rentals market and a move to short-term holiday lettings. Landlords, already disillusioned with increasing Government regulation and “red tape”, have either been selling up or moving to short-term holiday and Airbnb style lettings.

Life for landlords with long-term tenants has been tough throughout the pandemic. With rent arrears building, difficulties in removing bad tenants and taxation increases making the business less profitable, Rightmove estimates there were nearly 50,000 fewer long-term rental properties available to let in Britain this last summer compared with 2020.

The resulting shortage of rentals around the country is pushing rents up at their fastest pace since 2008. According to Zoopla as reported by The Sunday Times, the average UK monthly rent as of September 2021 was £968, an increase of 4.6 per cent over 12 months before. It’s the strongest rental growth in the previous 13 years. And if London rents, which have generally declined, are removed from the calculation, UK rents are up 6 percent over the same period, a 14-year high.

Government policy needs a re-think

If this dramatic rebalancing of the housing market is here to stay, then the Government has some serious thinking to do on housing policy. Is it sustainable to continually discourage long-term landlords when lifestyle re-locaters are pushing up countryside house prices to such an extent that it is forcing even more middle income occupiers to seek out rentals, rentals that are just not there.

There’s not a lot the government can do about sky high house prices in the short-term, but there’s a serious need for either a crack down on short-term lettings or an investment boost for buy-to-let style housing, or both.

The pandemic rebalancing effect of house price rises has given the regions a boost at the expense of the capital, which the Government will probably see as vindication and encouragement for it’s “levelling up” agenda, but in some locations the price acceleration has been worryingly dramatic.

Regional House prices through the roof!

Take Taunton in Somerset for example, where the average house price has risen by a massive 21.8 per cent according to the Halifax Building Society house price index. Prices in many northern towns are not lagging far behind with, for example, Rochdale at 18.5 per cent.

James Forrester, the managing director, Birmingham-based lettings agency Barrows and Forrester told The Sunday Times that the pandemic has polarised the housing market over the past 18 months: “The property sales market does account for the majority of market activity across the nation and so the current landscape certainly favours homebuyers over those looking to rent,” he says.

Working from home, and workers fleeing the city to live with relatives or rent or buy in the countryside, has not yet subsided as the latest Covid wave testifies, but meanwhile locals are shut-out of their rental markets by outsiders either sitting in rentals waiting to buy or return to the city.

An unbalanced housing market

As long as landlords see the long-term rental market working against them, while they can sell-up at high prices, or favour holidaymakers over long-term tenants, the market is likely to remain unbalanced with a major shortage of homes to rent.

The Sunday Times cites Cornwall with currently over 10,000 active Airbnb listings, while in comparison Rightmove had only 60 around properties available for renting across the whole county last week. Demand for long-term renting is such that in the most seriously hit towns like Cornwall, Kent and Norfolk there are up to 80 tenants chasing every vacant rental.

For many people, those lucky enough to have a secure job and able to work from home, the pandemic has made them better off financially. They have the luxury of living and working comfortably with more space in the countryside, or even buying second homes. But for others, unable to raise the money to buy, and confined to renting, the pandemic property market unbalance is bringing nothing but misery.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – The Capital loses out as the “race for space” boosts the regions | LandlordZONE.

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Why landlords are moving from spreadsheets to apps

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These days there is an app for almost everything in life from ordering food to selling old clothes, but now busy buy-to-let landlords can utilise tech too.

Whether it’s for preparing tax returns, keeping on top of rent payments or tracking licensing compliance, all this can now be completed with a few clicks of a mouse or swipe of a smartphone.

But like any business, making the decision to utilise tech with the right platform is a big decision, albeit a pressing one as spreadsheets struggle to deal with the ever-increasing range of information that needs to be managed by landlords.

Some try to fix this by cobbling together home-made databases and accountancy software and customising them to their requirements – but this often eats up most of the time they’re supposed to saving instead of freeing them up to focus on growing their portfolio or widening their margins.

Joe’s story

A recent example of this is property developer and business owner Joe Fogel, who had been managing his rental business via a spreadsheet.

With a fast-expanding portfolio of over 100 properties Joe had tried two previous landlord apps which just weren’t up to the job. His goal was to reduce admin overheads and improve on-time rent collections, enabling him to continue to build his portfolio.

Finally, Joe came across Alphaletz.

“A great CRM system is vital for my business. When I saw Alphaletz I loved the design and simplicity. I now use it every day and it’s saving me at least 50% of my time. A great product and good value too,” he says.

Right solution

Decide what’s right for you. But look carefully. Building a property portfolio is a real business and should be treated as such. There’s now more regulation, compliance and tax changes than ever before. So much so, that ‘dinner party landlords’ are dropping out of the market while the professionals are expanding their portfolios as demand continues to soar from tenants.

Benefits of new technology include:

• A dashboard highlighting rent arrears and compliance reminders
• Real-time financial tracking with Open Banking
• Time saving on tax returns
• Automating admin and email reminders
• Optimising mortgage rates and landlord costs
• Access from anywhere including mobile
• Documents and notes storage

Joe made the move to Alphaletz based on several key factors:

1. Ability to incorporate new features based on user feedback

Customer service

“I sent my wish list to the Alphaletz team and within days they were able to do much of what I needed. Excellent support.”

Automation to improve on-time rent payments

Prompt payment of rent is key to the success of Joe’s business. “With the email reminders I’ve seen an improvement on rent payments plus it’s saving me time from manually checking and emailing tenants for overdue payments.”

User experience

The design and user experience is critical.

“The dashboard is really helpful. When the bank asks me ‘where are you with your income?’ I can instantly see how much rent I have received and how much is due. The dashboard summary makes it simple to see key information.”

By managing his property information in one place, Joe believes Alphaletz saves him 50% of his time.

Alphaletz is available with a free version so you can try it straight away, without even needing a credit card to get started.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Why landlords are moving from spreadsheets to apps | LandlordZONE.

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Can you remember why you first got into property?

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I suspect the reasons you first got into property investment were the same reasons as mine. One of the first property goals I set for myself back in 1989 was to borrow £1,000,000 to buy rental properties. When I achieved that I went on to repeat the process over and over and over.

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