Category Archives: Letting and renting

Information and advice for Landlords and tenants.

The Buy-To-Let Boom Is Over

To Let 3The conditions are right for a ‘perfect storm’ for buy-to-let landlords. Higher taxation will reduce net rental yields, new statutory regulations will add to costs and the imminent increase in interest rates will lead to falling property prices, creating a stampede of landlords desperate to sell, forcing prices even lower.

One in ten people over 50 now own a buy-to-let property, bringing in an average “profit” of £700 a month. A third of these became a landlord during the last five years with one in seven inheriting and 7% buying a home for one of their children or grandchild to live in, according to a survey of more than 10,000 landlords by Saga Landlord Insurance.

But a buy-to-let investment is not all it is cracked up to be?
The Saga survey also revealed that:
 One in ten over-50s landlords are only just breaking even or are actually losing money every month.
 Over 30% of those surveyed feared renting to bad tenants.
 Around 20% are worried about managing their rental property as they get older.
 Over 30% had issues with unpaid rent, a quarter had suffered damage to their property and one in ten are taking legal action against tenants.

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Summer Budget – Buy-To-let Landlords To Lose Their Tax Breaks

Budget2015Boost for first-time buyers as buy-to-let landlords’ profits are slashed in crackdown on mortgage interest tax relief. Thousands of buy-to-let landlords will see their earnings hit after George Osborne cracked down on mortgage interest tax relief in his summer Budget. These were the headlines but the reality is a bit different.

Whilst the proposals are a welcome start to end the unfair tax relief enjoyed by buy to let landlords, nothing is going to change any time soon. The Mañana Chancellor ,George Osborne hits buy to let landlords in his latest Budget – but not until April 2017 and even then the measure will be phased in over four years! This is to give landlords time to “sort out their affairs.” More likely, it will enable many UK landlords to side-step the new measure by choosing to own properties through corporate structures to continue to benefit from relief on mortgage interest payments with lower corporation tax, cut to 18% by 2020, another incentive according to mortgage brokers.

In the budget, tax relief for landlords on mortgage interest payments is to fall and they will only be able to claim the basic rate 20% tax relief on mortgage interest payments rather than 45%, or their highest rate. The Chancellor said the move will “level the playing field for homebuyers and investors”. The current tax break for landlords is estimated to cost the Treasury £6.3billion every year a Freedom of Information request revealed.

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The ‘Buy to Let’ boom ends as new rules come into force

‘Buy to Regret’ as Landlords face even more red tape

The popularity of Buy to Let may be coming to an end as new rules and regulations come in force and rental yields and property prices stagnate.  Add in the increasing numbers of tenants “misbehaving” and many landlords may soon decide enough is enough.

Landlords are being forced to delay rent increases:   Until recently, rents were rising by as much as 8% a year in London. But now across most parts of the country rent increases are being either reduced or postponed as achievable affordable rents have now reached a peak. However, attractive homes in areas of high demand do still command high rental yields.

Property prices rises levelling out:   Recent monthly reports of property prices show that rises are slowing down. This means landlords’ easy paper profits on their property portfolios are coming to an end and may even go into reverse when (not if) the property market falls.

Large fines for not checking tenants are legally allowed to be in the country:   The Immigration Bill 2014 which comes into force next month, means landlords must check that their tenants have a legal right to be in the country before giving them the keys. If they do not, landlords can face fines of up to £3,000.

Problem tenants on the increase:   The number of “tenants behaving badly” is on the increase.  Insurer AXA reports that a number of tenants are making life difficult for landlords.  Nearly 20% of tenants admit they have kept pets in the property and broken the terms of their leases.  A third regularly pay their rent late and one in ten do a moonlight flit at the end of their tenancy to skip paying any final bills.  Nearly one in six tenants has had noise complaints made against them, with 10% of tenants having had the police called to the property.  Landlords can even face prosecution if their tenants are producing cannabis or any other banned substances in their property under the Misuse of Drugs Act 1971.

Other regulations and red tape landlords are now required to do:

  • Comply with fire prevention rules on the type and standard of furniture.
  • Carry out Annual gas safety checks on boilers and gas appliances.
  • Test electrical appliances.
  • Supply an Energy Performance Certificate if a tenant requests one.
  • Landlords must use a government-backed deposit protection scheme within 30 days of receiving it from the tenant. Failure to do so could result in a fine of up to three times the value of the deposit.
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A Tenant’s guide to renting a home

To Let 3For many, owning their own home is a distant dream, with many renting as they realise they are priced out of the housing market. But renting can give flexibility and an opportunity to live in an area that you might never be able to afford if you were trying to buy a home and you don’t have to worry about maintenance costs and interest rates! 

So here are a number of things those renting will need to consider:

  • When viewing properties to rent thoroughly look around before making a decision. View in the same way as you would if you were looking to buy, after all it could be your home for some time and it needs to be right for you. 
  • Be aware that all tenants have certain rights. The landlord is required to carry out repairs the property and act immediately if the boiler breaks down for example. However around 70% of tenants actually arrange and pay for any repairs themselves rather than asking their landlord! It is estimated that as many as 60% of tenants who do ask their landlord to make repairs are met with an obstructive or indifferent attitude. Tenants cannot be forced out during the first six months of the tenancy agreement and both sides must give two months notice before ending the tenancy. However, if you have broken the agreement (by not paying rent for example) the notice can be as little as 14 days.  Continue reading
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Advice On Becoming A Landlord

With nine million people caught by the double-whammy of soaring house prices and stagnant wages, landlords have a ready supply of lifelong tenants. Even with the government’s Help to Buy subsidies, many are still struggling to save the required 5% deposit and face renting for the foreseeable future. 

To Let boards Residential landlords are also able to take advantage of various tax breaks that are not available to owner-occupiers. The main break being that all costs for owner-occupiers are paid out of income after it has been taxed, whereas landlords can claim generous allowances via self-assessment to offset their tax bill. The generous tax treatment of landlords equates to a total subsidy of £5bn a year from every taxpayer. It is no surprise therefore; that around 4% of UK adults are landlords and 17% of our MPs are landlords, meaning it is unlikely the landlord’s current tax breaks will change anytime soon! 

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Why Buy To Let Need Landlord Insurance

Why normal home insurance will not cover a rental home?

One of the most frequently asked questions when people first start letting out their main home is whether or not they need to change their home insurance, and if ordinary home insurance will provide cover for a rental home.

If you are intending letting your home, you need to tell your insurers straightaway, as your normal insurance would be invalidated. Your insurer will need to adjust your policy (and probably charge you a higher premium) even if you are just renting a room to a lodger.

When you rent out your home to a tenant, you need to take out landlord insurance. This is similar to home insurance, in that it can cover both the building itself as well as your contents such as any furniture, but not your tenant’s possessions. It also covers several important things that ordinary home insurance does not. For example, landlord insurance provides cover for any third party risks that you may encounter as a landlord. It will reduce your level of risk, and will ensure that you do not lose out financially if anything goes wrong.

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Government invites house builders to apply for £400million Build to Rent fund

House builders are being offered a share of a new £400 million government investment scheme, to help encourage the building of new homes specifically for private rental. Now for the first time, the government is offering support for developers and investors looking to move into the private rental market.

OLYMPUS DIGITAL CAMERAHousing Minister, Mark Prisk recently said this new ‘Build to Rent’ scheme, will encourage people to invest in the untapped private rental market and offer a better choice and quality of homes for those looking to rent a home. Whilst acknowledging the housing market was “turning the corner” he said: “I want to go further, which is why I’m inviting bids for a share of up to half a billion pounds to help build a bigger, better private rented sector.”

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Why Britain has become a nation of renters

Britain has become a nation of renters. This is demonstrated by figures showing home ownership is now at its lowest level since 1987, at 65%. Correspondingly, the number of families living in rented accommodation has risen 126% since 2006, with 874,000 families now renting their home.

Buy to Let

To Let 3With strong demand from tenants, rents are high and rising and the cost of a buy-to-let loan is low. With most other investment yields at an all time low it is unsurprising that more people are becoming landlords. In the second three months of 2013, 40,000 buy-to-let mortgages were approved, a 21% rise on the previous quarter. Over 17% of the population now live in private rented accommodation, mostly provided by small landlords.

Saving a 5% deposit

It is becoming more difficult for first time buyers to save for a deposit, especially as many may also end up paying stamp duty as well. The combination of rising living costs and negligible pay rises is making it even harder. The ONS say that real wages are now at 2003 levels. In addition, all savings rates are below inflation so any money saved for a deposit is losing its real value. For the current UK average house price, a 5% increase in house prices means buyers need to save an extra £450 deposit.

The increased demand for rental properties has resulted in ever-higher rents. The average rent in England and Wales is now £738 a month, in London it is more than £1,100. For those on the national average wage (£26,500), rent consumes half their monthly take home pay. In addition to rent, letting agents often charge tenants high fees in some cases up-front fees can amount to £2,000 to cover the deposit and various administration fees for credit checks, inventory and contract paperwork.

Different attitudes towards saving

Whilst it is hard to save a deposit, it is not impossible. For the average UK house price of £170.500 a 5% deposit would be just £8,500. If people cannot save this over a few years, they are likely to be ill equipped to manage their finances to meet mortgage payments and the bills that come with home ownership. The problem is that the UK has a ‘want now – pay later’ generation who are not prepared to wait and sacrifice their overseas holidays, new cars and designer clothes to save a deposit for a home. It is not uncommon for this new generation to get through £100 on a ‘night out’ (£5,200 a year) even a modest four or five pints of beer a week amount to £750 and going without that morning coffee would save another £750 a year. A 20-a-day smoker is spending around £3,000 a year.

Government interference

Low interest rates and government taxpayer subsidies are pushing houses prices ever higher, improving mortgage availability for some, whilst making owning your own home ever more difficult for many. House prices are now increasing at pre 2007 rates, rising around £500 a month during this summer.

help to buyThe Government’s Help to Buy scheme has resulted in new home prices increasing 7% over the last 12 months, along with huge increases in house builder’s profits – Barratt’s profits are up over 70%! In the five months to the end of August, a total of 12,500 reservations have been made using Help To Buy.

Housing Minister Mark Prisk said this week: “The housing market has turned a corner since the end of the unsustainable housing boom. There are more first time buyers than at any time since 2007, while housing supply is at its highest level since 2008 and growing at the fastest rate for three years.”

This would appear to be at odds with the huge increase in demand from families renting a home. There is too much emphasis on making buying a home affordable by increasing the availability of low cost loans. Most people would prefer to own their own home, but until enough new homes are built to increase supply and drive prices down, which house builders are unlikely to do voluntarily, priority should be given to building decent homes at rents people can afford rather than subsiding house builders.

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