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

admin    Uncategorized     agents

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.

View Full Article: Three ways to breakdown the buy-to-let barrier and get a mortgage

Your Property Tax Advice For 2022

admin    Uncategorized     agents

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.

View Full Article: Your Property Tax Advice For 2022

How tenancy support is reducing rent arrears for landlords

admin    Uncategorized     agents

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.

View Full Article: How tenancy support is reducing rent arrears for landlords

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

admin    Uncategorized     agents

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.

View Full Article: The Capital loses out as the “race for space” boosts the regions

Why landlords are moving from spreadsheets to apps

admin    Uncategorized     agents

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.

View Full Article: Why landlords are moving from spreadsheets to apps

Can you remember why you first got into property?

admin    Uncategorized     agents

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.

The post Can you remember why you first got into property? appeared first on Property118.

View Full Article: Can you remember why you first got into property?

Nightmare tenants – Aren’t they always?

admin    Uncategorized     agents

Hi everyone, I’m new to the forum. I renovated my daughter’s house (Scotland ) which was uninhabited for some time and in poor repair. I footed the bill myself as she was unable to, and I didn’t want her mortgage free asset to deteriorate further.

The post Nightmare tenants – Aren’t they always? appeared first on Property118.

View Full Article: Nightmare tenants – Aren’t they always?

An extraordinary year – the big stories that hit the headlines in 2021

admin    Uncategorized     agents

What a year it’s been for landlords who, as well as coping with the Covid fall-out of rent arrears and court delays, have faced new regulations and an extended evictions ban as well as growing Universal Credit headaches and burgeoning licensing schemes.

With 2022 shaping up to be equally challenging, we take a collective deep breath and pause to look back at the sector’s biggest stories of 2021.

Pets

In January, Housing Minister Christopher Pincher launched an update to the Model Tenancy Agreement to prevent landlords from issuing blanket ‘no pets’ bans. Instead, consent for pets would be the default position, with rejections only made where there was good reason such as in smaller properties or flats where owning a pet could be impractical.

Portfolio sale

In what was thought to be the country’s largest-ever mortgage transaction, one of Britain’s biggest private landlords, Alastair Kerr, transferred ownership of his 330 rental homes in west London into a company structure in February, saving himself more than £10 million in tax and mortgage interest, to take advantage of incorporation relief rules.

Fallen guru

Property guru Glenn Armstrong, of Property Millionaire Academy, was declared bankrupt, owing £4.9 million to at least 38 creditors, who were queuing up to claim back huge amounts of up to £537,000. Armstrong also had 10 unpaid county court judgements against his related companies as well as 10 unpaid personal county court judgements.

Electrical report

Landlords were warned not to expect a grace period or extension to the deadline for properties to conform to the new electrical safety standards. They had been told that after 1^st April, all existing tenancies would need an EICR (electrical installation condition report) but argued that this would be difficult given the challenges of accessing properties and finding approved electricians to do the work during the pandemic.

Rogue agent

Dozens of landlords were thought to have been affected by rogue property developer and agent David Walters who was believed to be illegally working as a property agent with 4PropertyUK – formerly Lettings4All – despite being kicked off the Property Redress Scheme. (Walters was later handed penalty notices worth £3,000 by Oldham Council’s Trading Standards.)

Unlimited fines

HMO landlords and their managing agents were told in March they could face unlimited fines if caught obstructing or impersonating a fire inspector, or if they breached fire safety regulations under the upgraded Regulatory Reform (Fire Safety) Order 2005 legislation.

Stamp duty

Chancellor Rishi Sunak announced that the extended stamp duty holiday would end on 30^th June instead of the end of March, but made no immediate change to Corporation Tax or Capital Gains Tax in his spring Budget. Corporation Tax would increase to 25% in April 2023, while small businesses with profits of less than £50,000 would remain at the current rate of 19%. The government also announced that owners of second homes or holiday lets would soon have to rent their properties out for at least 70 days a year in order to pay the cheaper business rates tax, rather than just making the property ‘available to rent’. 

Right to rent

The government reassured landlords that they wouldn’t need to evict a tenant without settled status under the EU Settlement Scheme unless issued with a ‘Notice of letting to a disqualified person’ by the Home Office. In April, new guidance stated that from 1st July, if a tenant couldn’t produce evidence of their continued right to rent, landlords had to make a report to the Home Office to maintain their statutory excuse – or face a civil penalty.

Green end

The government axed its much-maligned Green Homes Grant in May, six months after it was launched. It was plagued by a lack of tradespeople willing to go through the Trustmark approval process to join the scheme, Covid restrictions, confusion over which upgrades and improvements qualified under the scheme and a lack of applications.

Ban extension

The evictions ban was extended by a further two months until at least 31^st May, after being repeated several times during the Covid pandemic. It meant that a landlord who gave notice of eviction on 31^st May would not be able to physically evict the tenant until November, while those who already had warrants lined up, now had to wait a further two months to evict.

Breathing space

From 4^th May, landlords, agents and their solicitors were told to include details of the government’s breathing space debt scheme within paperwork when seeking to gain possession of a property, or risk the eviction being rejected – giving someone in problem debt the right to legal protections from their creditors for up to 60 days.

Renters reform

Eighteen months after she first announced the Renters Reform Bill, the Queen’s Speech included the government’s intention to abolish Section 21 ‘no fault’ evictions, as well as plans to strengthen repossession grounds for landlords and proposals for a new ‘lifetime’ tenancy deposit model. The NRLA’s Ben Beadle said that within 18 months, landlords in England and Wales would have to register with a redress scheme, be recorded on national database and embrace a new, portable ‘lifetime deposit’ for tenants in order to be legal.

Tax simplifcation?

The Office of Tax Simplification recommended that those selling property should be given 60 rather than 30 days to report and pay their Capital Gains Tax (CGT), to give the 150,000 people who report their property sale to the tax authorities each year more time to work out if they are due to pay CGT, and for the 85,000 who are usually liable to pay it more time to file their UK Property tax return.

Mick’s offer

Nottingham landlord Mick Roberts offered to pay his tenants’ deposit so they could buy their homes, after becoming disillusioned with the sector. In June Mick blamed government policies, licensing schemes and a tortuous Universal Credit system for his decision after 24 years as a landlord housing mainly benefit claimants. 

Huge fine

Landlord couple James and Catherine Doig were ordered to pay more than £34,000 in back rent to six tenants after sub-letting their unsafe, unlicensed HMO via a rent-to-rent deal – despite insisting that they didn’t know about licensing rules covering their property in Fordwych Road. Camden Council also uncovered numerous safety issues including obstructed fire escapes.

Form relief

Landlords who own leasehold properties in low and medium-rise apartment blocks affected by the cladding scandal would no longer have to supply an EWS1 form when selling or re-mortgaging their properties, the government announced in July.

Landlord register

Housing minister Eddie Hughes told a Conservative party conference fringe meeting in October that both a landlord register and a lifetime rental deposit scheme in England were set to go ahead. However, he indicated the White Paper was unlikely to be published until the New Year and said he was keen that the new measures would “not have unintended consequences” for either landlords or tenants.

Alarming changes

Revisions to the smoke and carbon monoxide detector regulations in November made it mandatory to fit smoke alarms in all rented accommodation regardless of tenure, and required carbon monoxide alarms to be fitted when new appliances such as gas boilers or fires were installed in any rented home. All landlords – in both private and social sectors – also now had to repair or replace smoke and carbon monoxide alarms once told they were faulty.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – An extraordinary year – the big stories that hit the headlines in 2021 | LandlordZONE.

View Full Article: An extraordinary year – the big stories that hit the headlines in 2021

XMAS SURVEY: Have your say on ‘lets with pets’ as government mulls changes

admin    Uncategorized     agents

LandlordZONE readers are being urged to help academics discover what the sector really thinks about renting properties to tenants with pets.

The topic has been a hotly debated one this year as several campaigns and services have launched to persuade landlords rent to rent to tenants who want to live with cats or dogs.

But now Northumbria Law School and the Open University are conducting research into landlord concerns about ‘lets with pets’.

“We are asking that any Private Landlords who currently rent out property in England complete this survey, which should only take 15-20 minutes of their time,” says Dr Rachel Dunn, Senior Lecturer in Law at Northumbria University’s Faculty of Business and Law.

“The purpose of the study is to investigate the issues and/or barriers private landlords have when renting their property to tenants with cats and/or dogs.

“This research will therefore contribute to the growing debate over pets in private accommodation and what realistic reform to this area would look like for all parties.”

The survey is therefore an unusual opportunity for landlords to have their views on pets in rented property recorded. This is particularly important because ministers are mulling how rental deposit legislation and the Tenant Fee Act could be amended following hard lobbying by MP Andrew Rosindell and others.

The survey is being undertaken by the Society for Companion Animal Studies (SCAS).

It was set up in 1979 by a group of psychiatrists, psychologists, social workers and veterinary surgeons to promote awareness and understanding of human-companion animal relationships.

This survey closes at midnight on 14th January 2022.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – XMAS SURVEY: Have your say on ‘lets with pets’ as government mulls changes | LandlordZONE.

View Full Article: XMAS SURVEY: Have your say on ‘lets with pets’ as government mulls changes

Gove holds fresh talks with lenders to help leaseholders caught up in cladding crisis

admin    Uncategorized     agents

Housing Secretary Michael Gove has held fresh talks with lenders to thrash out how to fix the cladding safety crisis.

Sky News reports that lenders including Barclays, Nationwide and Lloyds Banking Group discussed ways to help thousands of homeowners and landlords to sell their properties, offering them some potential Christmas cheer.

As we reported exclusively in March, some 750,000 landlords are believed to be caught in the crisis.

It adds that a Whitehall source said Mr Gove was “in listening mode”, while one bank insider described the meeting as “constructive”.

It was reported earlier this month that the government was exploring ways to penalise companies implicated by the public inquiry into the Grenfell disaster.

Suggestions were said to include barring those developers responsible for dangerous cladding from public contracts and for an extra £1bn to be released for medium-rise buildings.

The Financial Times also recently reported that the Bank of England’s prudential regulatory arm was asking banks to audit their exposure to homes that might be unsellable.

Earlier this year, the major high street banks agreed to modify their mortgage-lending assessments of some tall buildings in order to unblock thousands of prospective property transactions.

Risk aversion

A DLUHC spokesman said Michael Gove had met with a number of lenders to discuss building safety and explore potential solutions which would drive out excessive risk aversion from the market.

He added: “Leaseholders are innocent parties in this. As the secretary of state has made clear, we are committed to ensuring they are supported and protected and we will be setting out further proposals in due course.”

Read the Sky report in full.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Gove holds fresh talks with lenders to help leaseholders caught up in cladding crisis | LandlordZONE.

View Full Article: Gove holds fresh talks with lenders to help leaseholders caught up in cladding crisis