Property Business Structures For Investing In 2023

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2022 has been an incredibly turbulent year with Interest rates rising, the economy crashing and recession on the way.

Now is as important a time as any to make sure that your property business is structured properly for the times ahead.

View Full Article: Property Business Structures For Investing In 2023

Are you selling – or have you sold – your BTL?

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The Telegraph’s personal finance reporter, Alexa Phillips, is looking to speak to landlords who are selling (or have recently sold) their buy-to-let properties.

This includes either people who are reducing the size of their property portfolio or leaving the rental market altogether.

View Full Article: Are you selling – or have you sold – your BTL?

HMO regulations will prevent landlords helping tenants during economic downturn – claim

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Landlords trying to help tenants out during the cost-of-living crisis could fall foul of licensing and planning laws, a leading landlord group has warned.

It’s been prompted by the story of Nottingham landlord Frank Knowles who thought he was doing a good deed by allowing a tenant’s partner to move into a two-bedroom flat after she struggled to find a property.

He says his letting agent suggested she was put onto the tenancy agreement and that he increase the rent. However, during a surprise inspection, Knowles discovered the property was now deemed an HMO and that he needed an additional rather than his current selective licence.

The landlord then found out that he would have to apply for planning permission to change the use into a HMO, which comes with a £452 fee, with no guarantee this would be approved. He now must decide whether to ask the tenant’s girlfriend to leave or evict them all.

Planning and licensing

EMPO’s business development director, Giles Inman (pictured), says this illustrates how landlords could face both planning and licensing barriers when they let tenants’ partners move into properties. They could also unwittingly find themselves breaching laws due to tenants’ actions.

“With the cost-of-living crisis, tenants will take in friends and lodgers to help pay the rent – in many cases, without landlords’ knowledge – inadvertently creating HMOs which produces problems around Article 4,” he tells LandlordZONE. “The fact the letting agent wasn’t aware in this case shows how confusing and clumsy the system is.”

He adds: “Councils don’t advertise Article 4 directions as widely as licensing schemes as they can’t levy a financial penalty in the same way.”

Nottingham’s current selective licensing scheme is due to be replaced in July 2023 and EMPO has tasked NRLA property lawyer David Smith to draw up a formal response to the plans for the Secretary of State on its behalf.

View Full Article: HMO regulations will prevent landlords helping tenants during economic downturn – claim

Overgrown Magnolia tree results in loss of view!

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Hello, I am told that in English law there is no such thing as a legal right to a view, (established in Aldred’s Case 1610). However, if a tree is allowed to grow uncontrolled and too large, resulting in the loss of a valued view

View Full Article: Overgrown Magnolia tree results in loss of view!

INTERVIEW: Why one of UK’s biggest PRS landlords sold off their properties

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Scots entrepreneurs Graeme and Leanne Carling were one of the most successful landlords of the late noughties, taking advantage of the weakness in the property market following the global financial crash to build a bricks-and-mortar empire worth £200 million.

This made their company, the Carling Group, at one point one of Scotland’s biggest private residential landlords.

But while some landlords in their shoes would be happy to rest on their laurels, Graeme tells LandlordZONE that it was always their plan to pivot into other areas of business related to property once it was no longer possible to extract value from the private rented sector (PRS).

He says the Scottish Government’s greater regulation of the PRS hastened these plans and in 2019 the couple decided to start exiting the market.

“We’d seen our net income per unit dropping and realised we were going to have to double the size of our portfolio to make the same income as we were back in 2009-2011,” he says.

“It was just getting too tough and we’d been to some meetings with the Scottish Government during which you were frowned upon as a small-time landlord, and to a certain extent you still are, and it was clear that legislators wanted to professionalise the sector and squeeze the smaller landlords out.”

So after an initial attempt to scale up was thwarted by a lack of properties for sale that offered appropriate margins, the Carlings began to sell off their PRS properties.

They still ahve some left which are mostly those with long-term tenants, along with some student and workforce accommodation.

PRS halted

“We’ve halted the PRS stuff and I am glad we did,” he says. “I think the market ‘going corporate’ was and is the right way to go for the PRS – it needs professionalising including via better regulation and anyway in Scotland, we’re up against a huge social housing sector which has access to cheaper funding and grants.”

So how is the Carling Group going to make its profits in the future? The firm has been using its property disposal cash to buy up building services companies in Scotland and England, all part of a plan to create a large group with competencies across the board that can help the UK upgrade its buildings across all the different sectors including residential.

“It’s a big opportunity because there are not many buildings in the UK that won’t need some sort of work done to them to meet the new EPC standards,” he says.

“We see that as a huge market and something we know about as a substantial property owner including maintenance and upgrades. You can say we’ve flipped sides.

“Despite the distractions of the economy and politics, that 2030 EPC date is still there and that’s why we’re looking to acquire buildings services operators across England so we can combine these businesses and tender and quote and win some of the substantial government works within the existing built environment 

“We want to become a national operator – that’s out real focus at the moment.”

View Full Article: INTERVIEW: Why one of UK’s biggest PRS landlords sold off their properties

Michael Gove hints at cash help for tenants to pay rent

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Families struggling with the cost-of-living crisis could receive a cash boost so they can pay their rent, Michael Gove has hinted.

The Levelling Up secretary was speaking on the ‘Sunday with Laura Kuenssberg’ show when he revealed that ‘targeted support’ could be on the table to help families pay their private landlord.

View Full Article: Michael Gove hints at cash help for tenants to pay rent

Help! I didn’t protect the tenancy deposit

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Hello, We let our property to a couple with a baby in 2019, with 90% of their rent paid by the council through a housing benefit.

They immediately fell into arrears, not paying the rent at all, so the council told me they would pay the 90% direct to me.

View Full Article: Help! I didn’t protect the tenancy deposit

Guarantor Issue?

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Hello, We agreed to be guarantor for our son’s ex-girlfriend as she was having his baby. Subsequently, it has turned out not to be his.

My question is, we are now getting to the end of the first year of tenancy and I contacted the agent to say to we will no longer be guarantor and could they confirm this.

View Full Article: Guarantor Issue?

Would you like a Success Blueprint to follow?

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Would you like your next property acquisition to be a high cash-generating HMO (House of Multiple Occupation), but don’t know how to do it?

You should be considering HMOs because they are a recession-proof strategy and also generate high cash flow

View Full Article: Would you like a Success Blueprint to follow?

Comment: how will the turmoil in the finance and energy markets affect buy-to-let landlords?

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The fallout from Kwasi Kwarteng’s mini-budget sent the money markets into blind panic and few short weeks ago, and the knock on effect was felt right than across the buy-to-let mortgage marketplace.

The episode was a short lived panic following the “mini” budget announcement. But now, around a month later, with a new Chancellor and a new Prime Minister, although the money markets are still reeling from the fall out, there are signs the mortgage market is beginning to stabilise.

A world economic problem

Of course, a hike in interest rates was already on the cards before Kwarteng made his appearance, mainly led by the American central bank’s policy of steadily raising interest rates to combat inflation, which is raging at around 10 per cent in most Western countries. The unfortunate consequence of this, the consensus of expert opinion suggests, is that economies will slow down and go into a recession.

The Bank of England Base Rate has been following suit with steady rate rises and more to come, but the mini budget, with it’s promise of big tax cuts and huge unfunded spending commitments, had the effect of sucking the confidence out of the UK money market. The result was a rapid rise in the SWAP rates upon which fixed-rate mortgages and pension funds are pegged.

With the appointment of a new Prime Minister, both his and the Chancellor’s plans for the economy have brought some confidence back into the UK market, which in turn has meant the rise in SWAP rates seen after the mini-budget has been largely reversed. In consequence there’s a good chance we will see fixed-rate mortgages pricing drift lower again.

However, don’t raise your hopes too high, we’re unlikely to see the lows in mortgage rates that we’ve become accustomed to in recent years. As economies continue to battle inflation and a cost of living crisis we won’t see these low rates any time soon. But there are nevertheless some signs that rent-to-interest (RTI) calculations will soften again with a more settled fixed rate mortgage market environment.

Challenging times ahead for landlords

It’s abundantly clear that landlords and property investors are in for a tough ride over the coming months and perhaps years ahead. Not only will they endure volatile money markets – the cost of living explosion will put pressure on tenants’ incomes and therefore rent payments – but there’s an ever-changing political and fiscal backdrop – new legislation is coming along to challenge even the hardiest small-scale landlord.

Yes, the tail end of 2022 will be a challenging. Bbut then opportunities will arise for those enterprising landlords who are ready and prepared to take advantage. There’s a huge shortage of suitable reasonably priced accommodation for tenants in many parts of the country. The demand is there. This will underpin the investment risk for a buy-to-let investment, and should still give a competitive return compared to alternative investments types, when properly managed.

Rents continue to surge

It’s fair to say that most landlords – contrary to popular belief – don’t increase rents during the tenancy term or even over the lifetime of a tenancy in some cases, and some even fail to increase when re-letting, but safe to say average market rents have risen steadily, reflecting the shortage.

New-build numbers are still well below government targets and it will likely take years for build-to-rent developments to fill the void and even out the supply-demand imbalance.

Landlords leaving the sector

With income and regulatory pressures causing some landlords to leave the sector, and the flow of new rentals coming to market well below the long-term trend, there are real signs of a looming housing market crisis facing Government – something this new Government team should take urgent notice of.

The regulatory challenge

Putting aside the challenges posed by the Renters Reform Bill: the banning of section 21 and fixed term tenancies, one of the biggest financial challenges and causes of concern for the future of buy-to-let is the changes being introduced to the Energy Performance Certificate (EPC) requirements, governed by the Minimum Energy Efficiency Standard (MEES) regulations.

This is the set a minimum energy efficiency standards of EPC ratings currently set at “E” for domestic as well as commercial private rented properties in England and Wales. But the government has committed to upgrade as many private rented sector (PRS) homes as possible to Energy Performance Certificate (EPC) Band “C” by 2030, where this is practical, cost-effective and affordable, and this could be introduced sooner rather than later.

Raising the energy performance standard to Energy Performance Certificate (EPC) rating “C” will not be easy in many of those cases of traditional build (solid wall) older properties, and consequently will be expensive.

A revised phased process for achieving these improvements for new tenancies from 2025 and all tenancies from 2028 is the latest indicator the Government has proposed, taking into consideration issues of financing, enforcement, measuring energy performance and exemptions.

The Government’s aims for improving the energy performance of privately rented homes include:

• Cutting bills for low income and vulnerable tenants
• Lower energy bills for tenants in general, providing warmer homes
• Boosting the quality, value and appeal of landlords’ assets
• Providing improved energy national security through lower energy demand on the grid and reduced fuel imports

In support of this the preferred policy scenario would follow these four key principles:

• Raise the energy performance standard from EPC from “E” to “B” and “C”
• Phase-in improvements for new tenancies from 2025, and for all tenancies from 2028
• Increase the maximum investment requirement for landlords from £3,500 to £10,000
• Introduce a tackle ‘fabric first’ approach to energy performance improvements.

These are some obvious practical ways that landlords can improve the energy efficiency of their properties:

– Upgrade loft insulation – perhaps the most effective energy saver, preventing heat loss through the ceiling and roof

– Add cavity wall insulation or where the walls are solid, insulate the walls – perhaps the second most effective way to preserve warmth in the home

– Add double glazing – to reduce heat loss and noise pollution

– Upgrade heating boilers – will improve heating efficiency, create a warm home, reduce condensation and damp and reduce bills

– Upgrade draught proofing – to minimise the loss of heat by preventing warm air escaping and cold air streams coming in the home

– Fit LED lighting – it’s more energy efficient and cuts electricity costs

– Add smart heating controls and meters – aids to energy conservation and monitoring

Energy efficiency and mortgage applications

Mortgage lenders are now much more aware of the importance of energy efficiency ratings to the marketability of rental properties. Mortgage companies are increasingly adding EPC ratings to their lending criteria.

This is because, if they need to re-possess a rental property they want to be in a position to achieve the best possible price when they put the property on the market, or more likely auction it off. Some lenders are now stipulating less favourable mortgage rates for rentals with EPC rating below “C”, and in other cases loans have been refused altogether.

View Full Article: Comment: how will the turmoil in the finance and energy markets affect buy-to-let landlords?