Top Property Investment Strategies

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Investing in property can be an incredibly rewarding journey, offering financial stability and the potential for significant returns. Whether you dream of becoming a landlord, a savvy house flipper, or a successful property developer, having a solid investment strategy is the key to making your dreams a reality.

View Full Article: Top Property Investment Strategies

The Times wants to speak to the next generation of landlords

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The Times is looking to speak with the next generation of landlords who are still investing in buy-to-let despite challenges around interest rates, tax and regulation.

The piece will interview landlords who have recently invested in property for the first time or plan to grow their portfolio.

View Full Article: The Times wants to speak to the next generation of landlords

Agency boss to pay £8,000 after using ‘terrifying’ tactics to bully tenants

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A rogue letting agency boss who used heavies to scare tenants and misled them about their rights has been ordered to pay £8,000.

Four residents complained to Tower Hamlets Council’s environmental health and trading standards team about London Corporate Apartments Ltd (LCA), which at the time was based in serviced business offices (main picture) and had operated both as a letting agency and a landlord via rent-to-rent arrangements.

The council found LCA had issued licenses to occupy, rather than assured short-hold tenancies, which meant the tenants were misled about their tenancy deposit protection rights, and their rights as tenants, and were at risk of illegal eviction.

There were also complaints that aggressive tactics had been used to intimidate two of the tenants into leaving their properties.

Director Khaled Abed-Alrazek admitted two counts of misleading actions and one of aggressive commercial practice relating to his tenants from February 2017 to May 2018.

During this period his company was expelled from the The Property Ombudsman scheme for failing to return a tenant’s deposit and that year was also fined £5,000 for operating as a letting agency without membership of a redress scheme.

Fines and costs

He was fined £3,800 for the offences and told to pay £1,255 compensation for the two deposits that weren’t returned, along with a further £285 compensation to one victim relating to the aggressive commercial practice, in what District Judge Matthew Bone described as “a terrifying experience at the hands of bullies acting in [Abed’s] name”.

Abed-Alrazek was also ordered to £3,000 in costs. The company was dissolved earlier this year.

Councillor Kabir Ahmed (pictured), cabinet member for regeneration, inclusive development and housebuilding, says it was a difficult case. He adds: “Everyone has the right to rent a house without fear of intimidation and the correct legal rights.

“We encourage all our residents to report any dishonest landlords so we can take action.”

View Full Article: Agency boss to pay £8,000 after using ‘terrifying’ tactics to bully tenants

‘Give tenants some of your equity gains when you sell’ says Big Issue founder

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Landlords should give renters some of their equity gains when they sell up to stop the “giant tenant rip-off”, according to The Big Issue boss John Bird (main picture).

Bird believes it’s not fair that a tena.nt who has paid rent on time for many years ends up with nothing and could also have to find a new home after being served with a Section 21 noticordinarily have been able to participate in this giant rip-off of the tenant,” he writes in the latest issue. “The tax relief that goes with owning property you let out, a tax bonus to encourage investment, adds to this.”

Bird explains that the billions paid out yearly in rents don’t allow renters to participate in the grand improvement that property ownership brings to a landlord’s bottom line. 

Shooting fish

While he acknowledges that some landlords defend their position by arguing that if the property market had gone the other way, they would have been taking all the risks, he adds: “For the last 30 years making money out of buy-to-lets has been like shooting fish in barrel.”

It would be better to get more people into owning their own property so they can enjoy the fact that paying out money each month results in an increase in their personal estate, he adds.

“It would only seem fair to me if [the tenants] could get their hands on some of the value that they have created for their landlords. 

“Something must be done to end this turning of the basic need for a roof over your head into the biggest bonanza for some to make themselves wealthy. At the expense of the renter.” 

View Full Article: ‘Give tenants some of your equity gains when you sell’ says Big Issue founder

ALL agents say Scots rent cap has ‘forced more landlords to quit and pushed up rents’

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One hundred percent of letting agencies in Scotland say they have seen more landlords exiting the market since the country’s government brought in and then recently-extended a rent rise cap and evictions ban.

Agents canvassed by trade organisation Propertymark also reported an increase in landlords serving notice on tenants prior to selling up and that, in addition, landlords are now more inclined to raise rents in between tenancies to cover the additional costs created by new regulation, rising running costs and rising mortgage rates.

Only rent rises in between tenancies are allowed of more than 3%, with those during tenancies capped at that level, measures that were extended until March 2024 last month.

As an example of rising costs, while mortgage rate increases are well documented, the price of inventories has increase from £95 to £175 over the past four years, while electrical and gas safety checks have both increased by 25%.

Propertymark says all this is creating a perfect storm for tenants including less stock and therefore rising rents despite the Scottish Government hoping its temporary rules would keep rent increases to a minimum during the cost-of-living crisis.

Pressure

A spokesperson says: “Recent Housing Insight reports from Propertymark show that pressure on rents remains with 50% of responding agents reporting rents increasing month-on-month on average at their branch in April 2023, while the number of properties available to rent per member branch remained stubbornly low at nine in May.”

One agent reveals that: “In our experience all our landlords are looking to uplift by the 3%…many wouldn’t have other than for the legislation and many of our landlords have not previously raised rent through Covid etc and are now being penalised by the 3% cap.”

Read the Propertymark report in full.

View Full Article: ALL agents say Scots rent cap has ‘forced more landlords to quit and pushed up rents’

Number of home sales halved since last year

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Transaction levels have plummeted by -54% this year, according to a new report.

Research by letting agents Barrows and Forrester, reveals both transactions and total market values of homes sold, fell by more than 50% across every area of England and Wales.

View Full Article: Number of home sales halved since last year

Landlords should be exempted from council tax premium on empty homes, says Government

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A consultation has opened into proposals not to charge landlords who are preparing a property to let or waiting to find a tenant the empty homes a council tax premium.

The government wants to strengthen the existing long-term empty homes premium by applying this to properties that have been empty and unfurnished for at least one year, rather than the current two years.

A new second homes premium will give councils additional resources to help manage the impact of second homes. However, under the proposals, those being actively marketed for let would have a maximum of six months from the date this started, or until the property was rented before being eligible.

Reasonable price

A landlord would need to demonstrate they were marketing the property at a reasonable price on the open market.

The government suggests that homes empty for long periods undergoing major repair works or structural alternations should be exempt for up to six months once the exception has been applied or when the work has been completed.

A total exception of up to 12 months might be available where a landlord has done major repair works and then carried out active marketing of the rental property.

Penalised

Its consultation – which ends on 31st August – explains: “The government believes that where owners are using their best endeavours to bring a property back into productive use, then they should not be penalised through the imposition of the long-term empty homes premium.

“The government recognises that there may be difficult judgements to be made in determining whether steps taken to dispose of the dwelling are genuine.

“However, it does not consider that these challenges are sufficient to count against providing greater protections to those owners who are responding positively to the government’s effort to bring more empty properties back into use.”

Read more about council tax.

View Full Article: Landlords should be exempted from council tax premium on empty homes, says Government

Property Sourcers Deal Corner

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This keynote was recorded in a live online event with a group of 75 Property Sourcers and property portfolio sales specialists.

They invited Property118 to explain how working alongside our Landlord Tax Planning team could help them to close more deals by helping buyers and sellers to transact more tax efficiently.

View Full Article: Property Sourcers Deal Corner

Leasehold properties becoming harder to sell, landlords warned

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Heightened consumer awareness combined with a lack of government action has made leasehold property even harder to sell, landlords and home owners have been warned.

Despite government pledges and the introduction of the Leasehold Reform (Ground Rent) Act 2022, a new Propertymark report finds that it has not gone far enough to completely resolve the issue.

The Act restricts ground rents to zero but only on newly created long residential leases for single properties.

One of the most high-profile issues associated with leasehold property was a recent practice imposed by some developers to include an escalating ground rent in their leasehold agreements.

Struggle

Propertymark’s member poll reveals that 78% of agents said leasehold property with an escalating ground rent would struggle to sell, even if priced correctly.

It adds that 72% of agents believe homebuyers are more aware of issues surrounding leasehold property.

But 54% of agents who sell property on behalf of developers report that they don’t always provide the pertinent leasehold information, and while 51% of buyers ask about cladding before they view a property, 11% say buyers only ask after they have agreed to buy.

Extension

To further support leaseholders, agents want to see an extension of the requirements to restrict ground rents, lease lengths to be extended to 999 years, an improvement on how information can be obtained from management companies, and more clarity on processes and rights for acquiring the freehold.

Timothy Douglas (pictured), head of policy and campaigns, says: “Policymakers must do more to create a level playing field with those who already own a leasehold property, make enfranchisement easier, simplify the process for lease extensions and where there is no managing agent, freeholders must sign up to a redress scheme.

“A whole sector approach is needed to further protect consumers and bring about positive change for leaseholders.”

View Full Article: Leasehold properties becoming harder to sell, landlords warned

UK house prices falling, mortgage rates rising but some landlords still buying

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UK house prices fell by 3.1pc on an annualised basis in the first quarter (Q1) of 2023 and an increase in interest rates have a dampening effect on the market.

Inflationary pressures

With inflation currently running at 8.7pc (CPI), this is well above the Bank of England’s long-term target of 2pc. While the consumer price inflation rate appears to have peaked and is on a downward trend, more worrying for the Government and the Bank is core inflation. This measure excludes volatile costs such as food and energy, and is still trending upwards. It’s jumped to 7.1pc in May, its highest rate since 1992.

On Thursday 22 June, the Bank of England announced a 0.50pc increase in its base rate from 4.50pc to 5.00pc in order to tackle stubbornly high inflation in the UK.

What’s more, the U.S. investment bank JP Morgan is predicting that The Bank of England could, under some scenarios, be forced to increase interest rates to as high as 7pc, as it attempts to get inflation back under control.

JP Morgan Economist Allan Monks has said the risks of a hard landing for the UK economy are also rising:

“Persistent surprises have intensified the pressure on the BOE to deliver significant additional policy tightening, and we now look for a 5.75% terminal rate by November,” Monks wrote in a note to clients dated June 30.

“We assume the BOE will pivot to a ‘high-for-long’ strategy with the intention of allowing the lags in transmission to finish off the job.”

“This alone raises the risks of a hard landing next year, but we recognise that the policy rate required to control inflation is proving to be higher than most had expected,” the economist added.

People faced with difficult choices

Following the latest hike in interest rates the Governor of the BOE (which is independent of the Treasury) Andrew Bailey, told the BBC that he is aware that people were “having to make very difficult choices about what they buy, what they need for their … lives, …what I will say is, if we don’t get inflation down, if it keeps going on, it gets worse, it really gets worse, and we’ll have to put interest rates up more.”

For those landlords owning their properties outright, and those on fixed rate mortgages (at least in the short term) these changes will have little effect, but they are highly concerning for those coming off fixed rates very soon, and for those on variable rates.

Hikes in mortgage rates

According to Moneyfacts Mortgage rates have doubled, with the average two-year fix now at 6.47pc compared with 3.25pc a year ago. Savers will benefit, but it will affect some landlords who will be forced into looking at rent increases just simply to stay solvent.

UK hit hardest

The house price fall appears to be hitting the UK harder than in much of Europe: according to the latest analysis by Knight Frank the average across the board 3.1pc decline compares with just a 1pc fall in Germany, and priced rises of 2.7pc rise in France, 1.1pc in Italy and 3.1pc in Spain, all recorded in the same period.

London mortgage broker Craig Fish MD of Lodestone told The Independent newspaper that if interest rates were to hit 7pc, the mortgage market would “tank completely”.

“There would be massive consequences for the economy and for the housing market,” he said.

Mortgage borrowers are already concerned that we could soon be heading for a 6pc Bank Rate, but 7pc has not been factored in by most people, and as Mr Fish says. “If you go to 7 per cent, we will see a lot of properties come onto the market and people will be forced to sell.”

Tom Pugh, an economist at consultancy RSM, told The Independent thata base rate of 7 per cent – which would be the highest level since 1998 – would “start to break things” and he predicted house prices could fall by more than a fifth.

“Interest rates at 6 per cent would be enough to push the economy into a mild recession. But even a mild recession would quite reliably strip inflation out of the economy. So I don’t think you need to go that extra percentage point to push the economy into a deeper recession,” Mr Pugh said.

The financial markets have factored in an increase in the base rate to 6 per cent by the end of this year which heightens fears for the UK economy and household budgets, while this week saw the average five-year fixed-rate mortgage deal jump to above 6 per cent for the first time since last November. Mortgage holders have been warned that fixed-rate deals could easily jump to 7 per cent this summer.

Sharp increase in payments

Those borrowers coming to the end of their mortgage’s fixed term will experience a sharp increase in their payments over the next 18 months to two years. But as lenders have tightened their lending criteria over recent years, there’s been extensive use of fixed rate mortgages. It means that many will now avoid the pain, the worst increases in repayments to come. The impact of these increases should have less of an impact, less of a cliff edge, than in previous periods of rising rates.

More robust mortgage regulations were introduced back in 2014. Aapplicants were stress tested in order to mitigate their risks in a scenario such as we now face. The new rules stress-tested a borrowers’ ability to afford the prevailing standard variable rate (SVR) plus three percent, unless they were fixing for a five years or more.

When the Government and The Bank of England imposed these restrictions after the financial crisis of 2008, many people thought they were excessively restricting and draconian in nature. However, hindsight shows there was some wisdom in saving some borrowers from themselves.

Nevertheless, not every landlord will escape the squeeze, they may find they are operating at a loss in the short term with their finances stretched to the limit. Those lucky enough to have the resources may have to use savings temporarily to bridge the gap if they are unable to increase rents to cover the shortfall.

The need to remortgage

For those landlords coming to the end of a fixed term mortgage, needing to remortgage, the general advice from the industry bodies is to scour the whole market to try to secure the best deal available that suits your needs – this is where the tailored advice of a good mortgage broker comes in.

The good news for landlords is that rents in the prime rental markets have continued to rise though Q2, 2023, as there continues to be a general lack of good quality available rental stock. According to a recent Savills report, “levels of rental growth for prime properties across the capital moderated to +6.7% in the year to the end of June, rents rose by a further 1.4% in the second quarter of this year. That means, on average, rental values of prime homes in the capital have risen by 16% since March 2020.”

Outside of London, rental growth has picked up again in Q2, 2023 as rents rose by 2.5%. That brings annual rental growth to 5.3%, and almost 22% above where they were in March 2020, says the Savill’s report.

Savills advice to landlords, given the backdrop of the imminent Renters Reform Bill (a law destined to end the Assured Shorthold Tenancy) awaiting its second reading in the House of Commons, landlords should try to align their rents with these market movements.

Despite the gloom, opportunities will arise

When prices fall, cash buyers have the advantage. But Savills has raised concerns that cash rich overseas buyers, taking advantage of Sterling’s recent weakness, have been snapping up London properties at the expense of locals. It seems that over 70pc of “prime central London” properties sold so far in 2023 have been bought entirely in cash.

Frances McDonald, director of residential research at Savills, told The Guardian newspaper:

“The established prime markets most synonymous with equity rich buyers are holding up the strongest amid mortgage market turbulence.

“While London’s prime market continues to perform more strongly than expected, the most recent interest rate rises are likely to squeeze buyer budgets and increase price sensitivity, particularly in the more domestic outer prime locations where more buyers are dependent on borrowing. Sellers will need to price pragmatically to align with prevailing buyer expectations.”

Savills says there’s “a growing divergence between cash and equity rich buyers and other groups in their ability to transact, and between the very top end of the market and lower value segments”.

Landlords expanding their portfolios

In spite of all the difficulties and the speculation about landlords’ selling intentions in the UK property market with the advent of the Renters (Reform) Bill, a recent survey conducted by The Deposit Protection Service (DPS) indicates that a majority of those planning to purchase an additional investment property aim to do so within the next two years.

A poll of over 2,000 landlords by the DPS found that 10pc plan to expand their portfolio. Among this 10pc, 60pc of them said they could take action in the next two years. 21pc of those looking to buy within this time-frame were considering buying in areas away from where they live, while 70pc said they would be looking for a terraced house.

Despite the economic pressures that landlords are currently facing, some are looking to take advantage of the situation and many of them will be looking further afield where yields are higher.

View Full Article: UK house prices falling, mortgage rates rising but some landlords still buying