Written By Em

Em

Em Morley

Peterborough best place to invest in property

Published On: January 24, 2012 at 12:01 pm

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Categories: Property News

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A recent survey by a recognized chain of estate agents made Peterborough the surprise winner of the best place in England to make an investment in rental property.

Haart estate agents’ new Yield Index shows that typical yearly returns on one, two and three-bedroom property in Peterborough are the greatest in the country. The returns are greater even than that of London.

Data records

Haart’s findings suggest that an investor buying a one-bedroom abode in the town could expect a return of around 8.7% per annum.[1] Two bedroom properties return around a 9% profit per year, with three-bedroom homes generating an average of 6.7%[2].

On the whole, the East of England came out on top in terms of generating the best rental profits in Haart’s operational areas. The East Midlands came in second, with South Yorkshire completing the podium positions. London ranked only fourth in the findings.

Peterborough best place to invest in property

Peterborough best place to invest in property

 

A rising rental tide

Peterborough’s position at the top of the investment return standings comes as little surprise, according to Haart’s managing director Andrew Benn. London is still proving a profitable area in which to invest, with yields of between 5%-7% per annum manageably achievable[1]. However, Mr Benn believes the trends could be changing, with the country, ‘starting to see investors focus more on other parts of the country, such as Peterborough.[2]

Benn also believes that the recent rise in rental prices are also a catalyst for the increase of buy-to-let profit in town’s such as Peterborough. Benn said that, ‘rising rents, are offering prospective landlords annual returns of up to 9%, a yield they simply wouldn’t be able to achieve with other forms of mainstream investment.[1]’

[1] http://www.propertyreporter.co.uk/landlords/peterborough-yields-biggest-return-for-residential-property-investors.html

[2] http://moneyfacts.co.uk/news/buy-to-let/buy-to-let-investors-pointed-towards-peterborough230112/

 

New BTL product contains bridging and mortgage

Published On: January 24, 2012 at 11:37 am

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An exclusive buy-to-let initiative from 3mc, leading mortgage club and packager, will contain both bridging and mortgage for its customers.

How the product works

Aimed specifically at developers, along with professional landlords, the product is simple but effective in its makeup.

One lender forms the bridging element, essentially enabling the purchase to happen. The second lender is responsible for the remortgaging element of the product. This is crucial in allowing the investor to be comfortable in the knowledge that funding is in place at the end of the bridging period.

The innovative product has received backing from Aldermore for the remortgage aspect and Precise for the bridging aspect. Managing director of Precise Mortgages, Alan Cleary, is excited with the prospect of the product. Cleary said that his company, ‘believe this will be a very attractive product for many property investors.’ [1]

[1] http://www.landlordtoday.co.uk/news_features/New-buy-to-let-product-contains-both-bridging-and-mortgage

 

 

Quarter of properties in UK are at risk to flooding

Published On: January 23, 2012 at 10:24 am

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Categories: Landlord News

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The outlook for landlords who have or are looking to purchase property at risk of flooding is bleak, according to a report from property information firm Search Flow. New and existing landlords must ensure that their property is not in danger of flooding, or face their property becoming uninsurable.

Risk 

It is reported that almost a quarter of properties in the United Kingdom are classed as at risk to flooding. Findings released by Search Flow indicate that up to £214 billion worth of property could potentially be left uninsured, in the face of changing government legislation. [1]

Quarter of properties in UK are at risk to flooding

Quarter of properties in UK are at risk to flooding

 

Until the end of June 2013, the government had instructed the insurance industry to continue to offer insurance on houses vulnerable to flooding. However, it is feared that insurers will begin to up premiums and leave landlords facing sky-high payments.

Bleak

Any property that is uninsured will be greatly difficult to sell or remortgage and will also have to be marketed at a much-lower price. Reports have suggested that some insurance companies are already looking to offload properties at imminent risk of flooding.

Search Flow’s Business Development Director, Richard Hinton, predicts a bleak outlook for landlords who own this type of property. Hinton said, ‘Although buyers will be able to obtain flood insurance for the next few months, the long-term prospects of properties at risk of flooding are potentially bleak.[1]’

Hinton went onto say that the possibility of, ‘very high premiums, significant reductions in value,’ and, ‘less access to mortgage finance,[1]’ would all combine to create a negative impact, especially for buyers buying property in places with a high-risk of flooding.

 

[1] http://www.justlandlords.co.uk/news/Risk-of-Flooding-could-be-Critical-for-Insurers-1085.html

 

Falling rent and monthly decline a concern

Published On: January 20, 2012 at 12:08 pm

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Falling Rent

Rental asking prices fell for the second consecutive month in December 2011, according to figures released from LSL Property Services. The company, who own leading chains Reeds Rains and Your Move, said in its findings that rent was down on average by 0.8% in England and Wales.

Monthly decline

A fall in rental prices was evident in seven regions within the two countries. The largest declines were seen in the South-East (1.9%) and the North-East (1.4%.[1]) Rents in London were also down by 0.9%, the first time that rents have fallen in the capital since December 2010[1].

Annual rise

Despite the end of year decline, the report shows that rent has increased in all but two regions. Unsurprisingly, the biggest-rising rental increases were in London, with rents rising by 5.6% this annum.[2] The two regions where rents fell over the course of the year were the North-East and South-West.

Investors made an average yield of 5.2% per annum on their assets.[2] The total annual return per property was 3.7% on average for December, compared to 2.7% in November.[1]

If a similar trend pattern of the last three months were to be followed in 2012, then a property investor stands to make around a 4.8% annual return.[1] This would be the equivalent to around £7, 841 per property.[1]

Falling rent and monthly decline a concern

Falling rent and monthly decline a concern

Tenant payments

Late or unpaid rent from tenants was up on the previous month, rising from 9.3% in November to 10.7% in December.[2] Seasonal increase however was down from the previous year, with rental arrears at 11.7% in December 2010.[2]

Concerns

The figures released by LSL Property Services have seen concern from some members of the industry. David Whittaker, managing director of Mortgages for Business, was one of those cautious on the findings. Whittaker said, ‘the problem we may face later this year is rental affordability.’[1]

Whittaker went on to address his concerns about rental arrears. He said that, ‘there will come a point when average rents are simply too high for many people to afford. We then face the danger of rising rental arrears and a surge in demand for affordable rental property.’[1]

David Brown, commercial director of LSL Property Services, was also apprehensive about the result findings. Mr Brown said that the difficult economic climate was likely to make credit conditions any easier in 2012. Brown remarks, ‘the number of first-time buyers able to secure finance isn’t about to rocket up, and demand for the limited supply of rental accommodation will continue to rise.

“It won’t be long before rents will resume their upward march.’ [2]

Need for support

Whittaker says that it is crucial that the, ‘Government support property investors and landlords and make it easier for them to invest in multi-unit freehold blocks and Houses of Multiple Occupation. These are the property types that will help ease the rental sector’s burden and avoid a situation where people are unable to buy but also cannot afford to rent – the consequences of which would be very dire indeed.”[1]

 [1] http://www.berkshirepropertymeet.com/rents-drop-for-second-month-in-a-row/

[2] http://moneyfacts.co.uk/news/buy-to-let/rents-fall-for-second-month-in-a-row200112/

Landlords Owed Rent by Benefit Tenants

Published On: January 20, 2012 at 9:20 am

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Almost nine out of ten (87%) landlords who take tenants on housing benefit have had issues with rent not being paid on time, with one in ten (11%), claiming that they have had these tenants stop paying rent completely.

These results have surfaced due to a survey of over 1,000 landlords in the UK, carried out by flat and house share website SpareRoom. Of all respondents, more than half (59%) specified no housing benefit tenants in their advertisements.

Landlords Owed Rent by Benefit Tenants

Landlords Owed Rent by Benefit Tenants

These results aren’t shocking, taking into account that most of buy-to-let landlords (86%) surveyed are against the change in the benefit system, which automatically pays Local Housing Allowance (LHA) directly to the tenant.

This change came into force in 2008, and 51% of the landlords that take tenants on housing benefit said that rent issues had arisen since that point.

In the survey, landlords were asked why they would not rent out their property to housing benefit tenants. Almost one-third (30%) claimed that non-benefit tenants are more reliable, and almost half (47%) said they did not want the bother of dealing with payment issues.

According to the research, problems caused by tenants on housing benefit include: late payments; not paying at all; issues arising from the suspension of benefit payments; and damage to the property. Over half (58%) of respondents said that they experienced more than one of these issues.

The amount of landlords who would not take a tenant on housing benefit, even if the tenant has a guarantor, was a huge three-quarters (74%).

One-third (34%) of the landlords surveyed do currently have housing benefit tenants in one or more of their properties, and an additional 45% said that they had previously accepted these tenants.

Director of SpareRoom, Matt Hutchinson, says: “It’s clear from this survey that a shake-up of the current system of paying housing benefit to the tenant is desperately needed, and reverting back to the old structure, where landlords could receive rental payments directly from the council, would be a step in the right direction.”1

1 http://www.landlordtoday.co.uk/news_features/Nine-out-of-ten-landlords-owed-rent-by-LHA-tenants

Taxes that Affect the Buy-to-Let Market

Published On: January 19, 2012 at 3:21 pm

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Tax should be an essential part of the process for landlords, whether they own one or many rental properties.

If an investor jumped into the buy-to-let market in 1996, when it began, they would already be seeing plentiful returns. Back then, the average house price in the UK was £53,394. Now, it is £167,291, an increase of 213.3%.

If this pattern continues, and a landlord receives sufficient income from rents, covering all costs in owning and maintaining the property, buy-to-let can be a rewarding investment.

The setback with any investment is that you will be taxed on your asset. It’s also emerged that most buy-to-let landlord with just one property do not obtain specialist property tax advice. A recent survey questioned investors with more than 11 properties in their portfolio, and 89% confessed to being clueless where tax is concerned.

HM Revenue & Customers (HMRC) is cracking down on landlords who haven’t paid Capital Gains Tax (CGT) on properties that they have sold. Consequences of not doing so can be fines or even criminal prosecution.

Kate Faulkner is the Managing Director of propertychecklists.co.uk, and has found many investors who are ignorant of the requirement to pay income tax. From buy-to-let landlords who have sold without paying CGT, to those signing the ownership of their house to their children without the necessary legal or financial paperwork, these situations can cause significant problems in the future.

Taxes that affect the buy-to-let market

Taxes that affect the buy-to-let market

There are certain taxes that affect the buy-to-let market. These are:

Income Tax

Income tax needs to be paid on any rental income, minus the costs. Costs that do not need to be taxed include mortgage interest, letting agent’s fees, insurance, council tax, and maintenance.

To stay in control of taxes, keep all receipts safe and ensure everything is up to date. Additionally, remember to exclude the deposit received from each tenant when calculating rental income. If more than one person owns the property, income can only be claimed to reflect the ownership of the property. For example, if two people each own 50%, they only declare 50% of the income individually.

Capital Gains Tax

This tax is paid on the net gain of the property’s value, minus costs and reliefs. To calculate how much CGT is to be paid, take the gain figure and deduct buying and selling costs, including Stamp Duty Land Tax, solicitor’s and estate agent’s fees, any capital investment on improvements of the property, such as new windows, and then pay tax on what is left. 18% for the basic-rate tax band and 27% for any gains above this band.

If more than one person owns the property, they can each individually use their capital gains tax-free allowance, currently £10,900 per person. If the property you live in is being sold, you are entitled to Private Residential Relief and Lettings Relief. If it is your only house or main residence, you aren’t liable for CGT.

Inheritance Tax

When passing on your home, Inheritance Tax applies. However, the rules are complex, so professional advice must be sought. Property is one of the least tax-efficient assets as there is little tax relief. The estate of someone who owns more than one house will easily surpass the current Inheritance Tax threshold of £325,000.

If a property is bought with someone else, it will be asked if you want to invest as Tenants in Common or Joint Tenants. Always choose Tenants in Common, as this allows shares to be invested in a trust for beneficiaries. Joint Tenants is normally more suitable to couples that buy their home together that they will only pass on when the other dies.

To ensure your property tax is correct, stick to these tips:

  • Only seek advice from property tax specialists.
  • Be clear on your current income and assets.
  • Understand what you can claim for from an income and CGT perspective.
  • Know your objectives from a tax and legal standpoint.