I am often asked by landlords which type of mortgage they should go for. My answer is that it depends what you want to achieve.
In effect there are two ways of using mortgage, a traditional repayment mortgage where you pay down the amount of the loan over time or where you use the value of the property to raise money, known as leverage.
With a traditional interest only mortgage you have the choice of what you do with the rental profits after deducting expenses. One option is to save money in order to pay off a part of the mortgage. Alternatively the money could be put towards purchasing another property.
I have heard a lot of talk recently about the benefits of transferring Buy to Let properties to a company. While there are certain tax advantages there are other factors which may make such an option less attractive.
New rules come into effect next month which will restrict the amount of mortgage interest that can be deducted when calculating profits from rented properties for tax purposes. In addition companies also pay Corporation Tax of 20%, reducing to 17% by 2020, as opposed to personal taxation levels of 20%, 40% or 45%, depending on personal circumstances.
Clearly there are tax advantages to transferring to a company but there are disadvantages too, starting with Capital Gains Tax (CGT).
In the next five years rents are expected to rise faster than house prices in the UK.
I read that the Royal Institute of Chartered Surveyors (RICS) are predicting rents will rise by 25% over that period compared with property price rises of 20%. They also reported increased tenant demand for rental properties in the three months prior to January.
The stamp duty changes and tougher mortgage rules may be deterring some landlords from purchasing new properties. Indeed, RICS reported a drop in new properties being offered to let for the fourth quarter in a row. Fewer properties coming onto the market will inevitably lead to rising rentals.
As house buyers struggle to find affordable properties to buy, rentals look set to outstrip the sales market for the first time since before the Second World War.
I read recently that the UK’s largest estate agency chain, Countrywide, has acknowledged that the sales market cooled dramatically at the end of 2016. There was a boom in March as landlords attempted to snap up properties before the changes in Stamp Duty.
I was pleased to learn recently that, despite the punitive tax changes imposed by the government, landlords confidence in the private rental sector is on the up.
Savings specialists Kent Reliance have published their latest Buy to Let Britain report and it concludes that residential landlords are predicting a bright future.
The report covers the third quarter of the year and was carried out via a survey of 900 investors. No less than 54% of landlords are confident regarding the prospects of their property portfolios. This compares favourably with the figures for the second quarter which reported a record low of just 39%. This was deemed to be a direct result of the increase in Stamp Duty.
Far too often I hear of local authorities criticising letting agents or landlords and even prosecuting them so it was a pleasant surprise to hear of a council actually praising them.
Burnley Council has been quick to laud the professional approach of some agents and landlords in their district when organising the letting and management of residential properties. The council prides itself on actively working with private landlords and encouraging them to raise their standards.
Many things distinguish us Brits from Continental Europe but one of the biggest is our obsession with home ownership.
This obsession was fuelled throughout the 20th Century. When it began, only 23% of the population owned their own homes. By its end that figure had been turned on its head with just 35% living in rented property.
Today, however, home ownership in the UK is falling for the first time in a century. We find ourselves crammed into the smallest homes in Europe. Should renting really be so undesirable?
I heard recently about a landlord who had let a property to three students. He had reason to believe that a fourth person had moved in and wondered whether it would cause problems for him.
My most immediate concern would be that it could invalidate the landlord’s insurance policy. If the insurer has been told that there are three students in residence then that is what they expect. The fourth person might be claiming benefits, for instance, and that could create issues.
I was asked by a landlord recently what my views were on allowing tenants to keep pets in rented accommodation. My answer? It depends…
If you say “definitely no pets allowed” then you will be drastically restricting your market. A gerbil or hamster in a cage is still a pet but unlikely to cause any damage, for example.
My general rule is to say ‘pets considered’. This covers you nicely but it does mean there is a judgement call to make. Providing one of the tenants is at home at least part time then I usually have no problem with a cat or dog as they will be supervised much of the time.
I recently read of a horrific case of fraud in the world of lettings. Martin Marcus has been jailed for four and a half years after admitting five cases of fraud at Harrow Crown Court.
Barnet Council Trading Standards carried out a four year investigation into Marcus’ actions and found that he scammed tenants and landlords alike out of some £220,000 in rents and deposits.
A report has confirmed that there is an increasing trend towards renting long term over buying a property.
Scottish lettings agency D J Alexander Lettings surveyed tenants whose leases were expiring between February and May this year. Just 17% said they intended buying a property rather than continuing to rent.
A data marketing agency has published a list of the most popular phrases typed into search engines by prospective property purchasers and tenants.
The agency, Blueclaw, claims an obvious key phrase such as “houses for sale” will attract an average of 368,000 searches per month.
In this internet age Google’s Consumer Barometer Survey has estimated 84% of people say the first place they look for any information in general is online. The figure searching for property or real estate information on the internet is 79%.
I was horrified recently to hear of the case of a rogue landlord harassing tenants to such an extent that a court ordered him to appoint a managing agent.
In what is believed to be the first case of its kind, a landlord in the Midlands has been issued with a Criminal Behaviour Order requiring him to instruct an agent to manage his portfolio of properties to let.
The ruling was made by Wolverhampton Magistrates’ Court and is effective on the landlord, Jaspal Singh Sahota, for ten years.
If you are thinking about buying a property with the intention of letting it out, you are going to want to know which is likely to let quickest and with the least trouble.
While nobody can be sure 100% of the time, properties that let quickly are likely to have most of these features:
• Convenient location. Good transport connections and being close to shops, schools and parks are important to people. If you are considering student lets then quick and easy access to college or university is essential.
I was interested to read the results of a recent survey by Belvoir, a nationwide franchise operation specialising in letting properties.
Of the landlords surveyed, 68% said they had not raised rents in the last twelve months but 88% believed that the increased costs for purchasing buy to let properties introduced by the government would inevitably lead to a general increase in rents.
I fear the fallout continues following the Chancellor’s announcement of a 3% increase in Stamp Duty for buy-to-let properties and second homes in his Autumn Statement.
The increase is due to be introduced in April and there is speculation that small landlords will rush to purchase properties to let before that deadline.