Smart Buy To Let For 2022

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Buy to Let (BTL) is a smart strategy for 2022 property investment, but only if you do it right.

The old way of Buy to Let simply doesn’t work anymore.

In this video, I’m going to explain why and what is the smart way to do UK Buy To Let successfully in 2022.

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Record amounts were invested in UK build-to-rent during 2020

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Data collected by BPF, the investment property owners association, shows that build-to-rent developments accounted of around 4% of all new homes completed last year, and in London that figure rose to 20% at the end of last year.

Growth potential

Institutional investors and developers have realised the growth opportunities now available from Britain’s housing shortage. The general lack of house purchase affordability creating an accelerating the demand for renting is leading to a BTR sector seen as a safe bet.

This growth is not just confined to London either. Across the UK record positive growth in these developments offers an acceleration in housing supply. Northern Ireland in particular is showing a significant increasing in BTR activity along with Scotland and most of the major cities like Manchester, Leeds, Birmingham and Bristol.

Switch in emphasis

Institutional investors are now calculating that purpose-built and professionally managed flats, along the established American model, will in future provide a more reliable sector return than their traditional commercial property investments in shops and offices.

A record amount of cash flowed into the sector last year from banks, institutional property funds and other private finance investors. And the trend shows no sign of abating in 2022, with a continue lack of supply across the UK housing market.

According to the latest information by international property consultants CBRE, £4.1bn went into the UK’s BTR sector last year, with over half of that sum flowing in the final quarter of 2020. It indicates that the money stream is accelerating.

Most BTR developments are purpose-built blocks of flats which are professionally managed by residential specialist corporate landlords. They are typically aimed at young professionals expecting high end rentals, though some developments cater for families.

An established US model

The model is well established in the US and also across continental Europe where there has traditionally been a higher proportion of renting than has been to case in the UK, but that’s beginning to change.

Small-scale landlords still dominate the sector with a housing market estimated at 4.4 million privately rented households in England, one which has doubled over the last 20 years. The growth of BTR though, along with many other challenges, will now pose a considerable threat to the traditional small-scale buy-to-let landlord in certain locations.

New money

The flow of new money rolling into the UK BTR sector is by no means confined to British institutions: according to The Financial Times (FT), US investors including private equity funds such as KKR, Goldman Sachs and property group Greystar, along with Australian investment bank Macquarie, and German real estate investor Patrizia are all keen to get involved.

On the British side, financial institutions including Legal & General insurance, the Lloyds Banking Group and retailer The John Lewis Partnership are diversifying into what they see as a long-term involvement with ambitions plans at scale.

Lloyds Bank has said it plans to expand aggressively, with internal documents revealing its intention to build a portfolio of 50,000 rental homes by 2030. If these plans are achieved that Lloyds could easily surpass one of Britain’s biggest corporate residential property investors, the FTSE 250 listed company, Grainger PLC.

Grainger started with property investments in 1912 by the Dickinson family as the Grainger Trust. It acquired tenanted residential properties in Newcastle upon Tyne. In the 1970s and 1980s it acquired large residential estates from British Coal, British Rail and Reckitt & Coleman and became the first listed residential property company on the London Stock Exchange in 1983.

The company has since been involved in large residential developments across the UK and abroad, and it specialised in ground rent and equity release reversions for some time, but of late has recognised the growth potential in buy-to-let style investments, which are now part of its long-term strategy under former banking executive, Helen Gordon. Ms Gordon says the company is “entering our next phase of dynamic growth” with a PRS development pipeline close to £1bn which would deliver almost 4,000 new homes.

Highly attractive

“The UK private rented sector, particularly build-to-rent, remains a highly attractive sector to invest in. It proved resilient during the pandemic. Our strategy of investing in high quality, mid-market private rental homes in target cities across the UK, identified by our in-house research and aligned to sound responsible business and ESG values, remains the right strategy for Grainger, Ms Gordon says.

International growth potential

The BTL new investment trend it seems is not confined to the UK. In the US investors are also increasing their stakes in purpose-built rental developments. The Wall Street Journal reported this week that the ousted serviced offices WeWork co-founder, Adam Neumann, is using his cash pile to built majority stakes in thousands of US residential properties, estimated at over $1bn in value.

Premium rents

UK build-to-rent operators profess the benefits of professionally managed rental units with high environmental standards and facilities, but coming at premium rental costs. They claim that they have the advantage over small individual landlord managed lets, being able to offer a better rental experience compared to “unscrupulous independent landlords” where complaints are commonplace.

But this may not always pan out in practice when the premium costs are taken into account. By far the majority of small-scale landlords offer good housing at an affordable rental cost, and most have very satisfied tenants.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Record amounts were invested in UK build-to-rent during 2020 | LandlordZONE.

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The most complete rent guarantee policy on the market

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Lettingsupermarket.com are pleased to be able to offer what we believe to be the most complete rent guarantee policy on the market.

Food and energy bills are increasing significantly, with some people seeing up to a 50% increase due to the energy crisis

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HMRC reveals latest deadline for Making Tax Digital rules

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Landlords who manage their portfolio through a VAT-registered business have been warned they must sign up to HMRC’s Making Tax Digital (MTD) initiative by 1^st April.

It will then become mandatory for all businesses paying VAT to store details of their affairs digitally and file their tax returns using specialist software on a more regular basis.

Businesses with a taxable turnover above £85,000 have had to follow MTD since April 2019 as part of the overall digitalisation of UK tax.

Joanna Rowland, HMRC’s director general for transformation (pictured), says: “By signing up for Making Tax Digital, we expect most businesses to experience long-term benefits, including reduced errors and time saved in managing their tax affairs.

“We encourage businesses to explore digital record-keeping for their VAT affairs and use this time to choose the right software to support their business needs.”

Last September, the government gave landlords who fill in self-assessment forms with a business or personal income over £10,000 a year, an extra year to get ready for the switch.

This will now take effect in 2024 following feedback from property portfolio landlords and other business operators and their representatives about the additional challenges caused by the pandemic.

Many fear a steep learning curve as they get used to new HMRC compatible software and uploading routines to HMRC’s portal.

HMRC has also just announced that it will waive late filing and late payment penalties for self-assessment taxpayers for one month due to Covid pressures, giving them until 28^th February to complete their 2020 to 2021 tax return and pay any tax.

Landlords need to visit GOV.UK and choose Making Tax Digital-compatible software no less than seven days before their first MTD VAT return deadline date.

Read morea bout MTD-compatible software.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – HMRC reveals latest deadline for Making Tax Digital rules | LandlordZONE.

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LATEST: Property values jumped by 9.8% during 2021, reveals Halifax

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Record house prices in 2021 mean many landlords will have made more money out of their homes in capital appreciation than in annual rent.

The latest Halifax House Price Index reports that house prices soared by more than £24,500 last year – the largest annual cash rise since March 2003 – to hit a record high of £276,091, with prices climbing again in December for the sixth consecutive month, up 1.1%.

Wales remains by far the strongest performing region in the UK with house price inflation of 14.5%, taking the average house price to £205,579. In England, the North West was the strongest performing region (11.8%), followed by the South West, while London remained by far the weakest (2.1%).

Halifax says the stamp duty holiday and the race for space due to widespread homeworking encouraged buyers to bring forward home purchases, while a lack of available homes for sale and historically low mortgage rates have helped drive annual house price inflation to 9.8%, its highest level since July 2007.

Barely budged

Landlord demand for properties has also contributed to competition in the market. Despite the Bank of England’s surprise increase in the base rate last December from 0.1% to 0.25%, the average cost of buy-to-let fixed rate mortgages favoured by landlords has barely budged, according to Property Master.

Its Buy-to-let Mortgage Tracker found that the average rate for a buy-to-let mortgage for a typical loan was as low as 1.69% which, once fees are included, translates into a monthly cost of £262 for a two-year fixed-rate loan of £160,000, representing 60% of the value of the property.

Halifax expects house prices to maintain their current strong levels, but believes that growth relative to the last two years will be at a slower pace.

But Stuart Law (pictured), CEO of investment outfit, Assetz group, reckons there could be continued house price growth throughout the year in the region of 8-10%.

He says: “There is going to be much speculation around rising interest rates this year especially given inflation and rising living costs, but I think we will see far less in terms of actual movement over the coming year than would be needed to slow house price inflation materially.”

Read more about mortgages.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – LATEST: Property values jumped by 9.8% during 2021, reveals Halifax | LandlordZONE.

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Can I make a stand by stop paying ground rent or service charge?

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Dear all, We bought a leasehold ground floor flat (no basement below) in a mansion block a few months ago. During the conveyancing process, our Home Buyer report highlighted possible rising damp in the flat and suggested us engaging a damp specialist surveyor to carry out an independent Damp and Timber Decay survey

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LATEST: Jersey landlords fighting off ‘licensing by back door’ plans

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Jersey’s Reform Party proposals for open-ended tenancies and rent controls will only increase and accelerate the problem of tenants getting notice to vacate, says the Jersey Landlords Association (JLA).

Landlords’ real fears about rising red tape and the increasing costs of renting property are already biting, according to the group, which believes the introduction of the Health & Safety (Rented Dwellings) (Jersey) Law and its poor implementation over the last three years has caused landlords to sell their rental properties.

It now hopes to quash fresh plans to introduce compulsory licensing; despite it being voted against twice by the States, Senator Kristina Moore wants to make the current voluntary Rent Safe scheme compulsory, which the JLA has labelled, “licensing by the back door”.  

The Jersey government has also announced a shake-up of the rental market to give private renters recourse against unfair or unjustified rent increases.

Rent controls

Its Fair Rents Plan includes moves to reinstate the Rent Control Tribunal this year, giving private renters the opportunity to appeal to an independent body if they believe their rent is excessive.

The JLA says it was not consulted about the plan. Scotland has recently published similar proposals that include a controversial system of rent controls while the English government is due to strengthen renters’ rights in the upcoming Renters Reform Bill.

JLA member Emma Paul (pictured) says: “Jersey’s public health and safety legislation already provides mechanisms for rented properties which are in poor condition and present a health and safety issue to be served with improvement or prohibition notices coupled with the ability to fine landlords.

“The argument that the environmental health department does not know where these properties are, should be being addressed in that the States have passed a proposal for all property to be registered – so they will know which properties are rented.”

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – LATEST: Jersey landlords fighting off ‘licensing by back door’ plans | LandlordZONE.

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Build to rent investment hit record £4.1 billion in 2021, says CBRE

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Investors ploughed £4.1 billion into build-to-rent (BTR) last year, betting that purpose-built flats would provide more reliable returns than other sectors, according to global real estate advisor CBRE.

The firm says activity was evenly split between London and the regions with notable deals that completed in Q4 2021 including Greystar’s acquisition of a minority stake in the Fizzy Living platform, Patrizia’s £100m forward commitment of Oliver’s Place, Huntley Wharf in Reading, Cortland’s forward funding of Colliers Yard, Manchester for £158m, as well as Legal & General’s £500m investment into schemes in London, Glasgow and Southampton.

Lloyds is also aiming to expand aggressively into the sector while last year retailer John Lewis announced plans to build a residential property portfolio to offset weakness in its high street stores.

£2 billion

CBRE reports that last year’s figure is £500m higher than 2020’s previous record, while almost £2 billion worth of deals are already in the pipeline for this year, fuelling growth that looks set to continue due to a chronic lack of homes in the UK.

“The build-to-rent investment market had a stellar performance in Q4 with more than £2 billion of capital committed,” says Jason Hardman (pictured), executive director, residential valuation & advisory services.

“This underlines the growing maturity of the UK build-to-rent market and reflects the phenomenal bounce back we have seen in the occupational market over the second half of the year. 2021 represents an undeniable record for the sector and with almost £2 billion of assets under offer, we expect this momentum to continue into 2022 as the sector continues to go from strength to strength.”

Read more about BTR.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Build to rent investment hit record £4.1 billion in 2021, says CBRE | LandlordZONE.

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London borough scales back selective licensing after success so will others follow?

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Hammersmith and Fulham Council has scaled back its renewed selective licensing scheme from 128 to just 24 streets after declaring that anti-social behaviour has improved in parts of the borough’s private rented sector.

A council report says it believed that focusing on specific streets was a more targeted approach than applying the scheme to the whole borough or to whole wards.

It added that a recent consultation and its research had both shown that a number of streets in the previous scheme no longer met the threshold of need for inclusion so would not be included, but would now include eight new streets which did meet the threshold.

It added that anti-social behaviour including noise nuisance, poor waste management and public health nuisance in the 24 selected streets was above average.

Councillor Lisa Homan (pictured), cabinet member for housing, says: “Things have improved in the last five years but when we set out with our selective licensing scheme we selected 20% of our properties where we thought the biggest problems were – but 16 of those streets were in the original scheme and eight new ones are coming in, following hard work with anti-social behaviour.

“Officers have walked those streets to make sure we get the right 20% in the scheme.”

Councillors approved plans to renew its borough-wide additional licensing scheme that will include all shared accommodation and bedsit-HMOs occupied by three or more people comprising two or more households, outside the scope of its mandatory HMO licensing. Both current schemes end on 4th June.

According to Geospatial technology firm Kamma, Hammersmith and Fulham is the London borough with the highest average fines of £19,800. Watch the cabinet meeting in full.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – London borough scales back selective licensing after success so will others follow? | LandlordZONE.

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Possession claims could double this year

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I believe Possession claims will double this year, and if anyone needs assistance with evicting a tenant or debt recovery you can email me personally on paul@landlordaction.co.uk

We ended 2021 after twenty-one months since the first Covid lockdown with the new variant

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