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Em Morley

Proportion of Landlords Remortgaging Hits an All-Time High

Published On: October 24, 2018 at 8:02 am

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The proportion of landlords remortgaging has now hit an all-time high, according to the latest Financial Adviser Confidence Tracking (FACT) Index from Paragon, covering the third quarter (Q3) of the year.

Paragon has been capturing the experience and views of approximately 200 mortgage intermediaries on the development of the UK mortgage market each quarter since 1995.

The latest survey highlights a sharp increase in the proportion of landlords remortgaging, which is up from 49% in Q2 to 57% of all buy-to-let business in Q3.

In contrast, the proportion of first time landlord business dropped from 14% to 10% over the same period, while the amount of landlords looking to finance portfolio expansion was down from 23% to 19%.

The number of landlords remortgaging first outstripped those seeking funds for portfolio expansion back in 2015, following the announcement of significant tax changes for buy-to-let in the Summer Budget.

Since then, remortgaging has continued to rise almost inexorably and, today, six out of ten intermediaries say that the main reason for landlords remortgaging is to secure a better interest rate.

In total, buy-to-let represented 19% of intermediary business in Q3, with the remainder taken up by mortgage applications from owner-occupiers.

John Heron, the Managing Director of Mortgages at Paragon, comments: “Landlords are investing less in the private rented sector, which, in time, is going to make it more difficult for tenants to find a property at a rent they can afford. This is clearly a response to the increase in costs that landlords face, following changes to Stamp Duty and tax relief on finance costs.

“It’s no surprise therefore to see that landlords are taking the opportunity to reduce their mortgage finance costs as one part of their strategy to mitigate the impact of higher taxation. Tax bills due in January 2019 will include the first phase impact from the withdrawal of mortgage interest tax relief and landlords are preparing carefully for the next stages ahead.”

No-Deal Brexit will not Deter Landlords from Buying more Properties

Published On: October 23, 2018 at 9:30 am

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A no-deal Brexit will not deter the majority of landlords from buying more properties, according to a new study by The Property Hub.

The chances of a no-deal Brexit are looking increasingly likely, after EU leaders snubbed Theresa May’s latest offer. However, the research claims that this won’t stop a significant number of landlords from expanding their portfolios over the next 12 months.

Some industry experts are warning of chaos if the UK leaves the EU without an agreement, and yet two-thirds of landlords surveyed said that they plan to increase their portfolios over the next 12 months.

The Property Hub found that 77% of landlords will look to buy at least one more property in 2019, with 70% saying that even a no-deal Brexit would be unlikely to affect their portfolio growth plans.

No-Deal Brexit will not Deter Landlords from Buying more Properties

No-Deal Brexit will not Deter Landlords from Buying more Properties

Various reports suggest that buy-to-let landlords are being driven out of the market by the Government’s tax crackdown, as growing numbers struggle to make solid returns.

However, 84% of landlords say that they have no plans to sell any of their properties in the next three years, while 66% say that, even if the Government were to announce further tax changes, they still would not be offloading properties.

Rob Dix, the Co-Founder of The Property Hub, says: “There’s been so much talk of a mass exodus of landlords and the death of buy to let, it’s easy for some would-be landlords or, indeed, tenants, to believe the rental market is on its knees. However, it’s clear from our survey that landlords are far from retreating from the market.”

The survey also asked landlords about proposals that could have a significant impact on the industry, including the possibility of three-year tenancies becoming mandatory.

Four in five (82%) landlords say that they would be in favour of mandatory three-year tenancies if they were offered a way to remove tenants who fall into rent arrears that is faster than the existing method, while 69% say that the ability to increase rent would need to be given. 59% believe that tax incentives should be offered, such as the ability to deduct more mortgage interest. Less than 9% would oppose the policy regardless.

Dix continues: “Getting good, long-term tenants is the goal for any landlord, so it’s not surprising that less than 9% of landlords would be against this policy regardless of any concessions.

“However, landlords obviously need to be protected too, so it’s only natural that those operating in the sector are calling for some reassurance.”

Asked what they would need to see happen in order to support compulsory landlord licensing, 37% say that they would want the removal of any additional local schemes, except those applying to Houses in Multiple Occupation, while 43% would like an annual fee that doesn’t exceed £100 per property.

Some 65% want a plan to ensure that licensing would discourage rogue landlords, such as proof that non-registration could be detected and enforced, while 55% would like a tax incentive or removal of an existing anti-landlord tax measure. Again, less than 9% would be against landlord licensing completely.

Dix adds: “It’s telling that the most popular wish for licensing – more popular even than a tax break – is some reassurance that it will actually work. The majority of landlords take pride in providing a good service, and are as keen as anyone for the rogues who give the industry a bad name to be pushed out.

“Taken as a whole, the results of our survey show that the caricature of landlords fleeing the sector when the going gets tough isn’t in line with reality. Most landlords are in it for the long-term and have sound business plans – they don’t view property as a get-rich-quick scheme.”

He concludes: “The Armageddon-style headlines in much of the press over the last two years in no way reflect the way landlords are feeling. Buy-to-let is far from dead. Are investors operating in a new landscape? Certainly. Is it one they’re unable to navigate successfully? Absolutely not.”

What makes for the Best Airbnb Investment?

Published On: October 23, 2018 at 8:55 am

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By Marc Trup, the Founder and CEO of Arthur Online

Airbnb describes itself as “a trusted community marketplace for people to list, discover, and book unique accommodation around the world”. For all intents and purposes, it’s truly living that definition. Currently active in 65,000 cities across 190 countries and constantly expanding, this £23 billion behemoth has completely taken over the short-letting marketplace. Before Airbnb began in 2008, a short-term rental could get quite complicated: advertising, making payments, carrying out viewings, dealing with disputes; these processes that made running short lets prohibitive have been simplified by Airbnb, making short letting accessible to the masses.

It’s easy to see why they’ve enjoyed such a meteoric rise, short letting is THE hot topic in property investing at the moment, with many in the UK, London in particular, seeing it as the only viable rental business model in a world where chronic supply shortages and unrestricted international demand have driven house prices to record highs, crushing yields in the process. Consult the website of any Airbnb hosting company and they will likely estimate that you can earn two to three times more from your property by using Airbnb compared to standard rents.

No one can question the opportunity, but how can you make the most of it? With hotels and other pressure groups unionizing to protect their markets, this is even more pressing; the Airbnb gold rush is unlikely to last forever.

Build trust

What makes for the Best Airbnb Investment?

What makes for the Best Airbnb Investment?

One thing that all successful hosts have in common is positive reviews. As with everything that’s driven the sharing economy revolution, the entire premise of Airbnb is built on trust. Why would you invite a stranger or group of strangers from another part of the world into your home if you didn’t trust them? Or, more importantly, why would they trust you? That’s why getting positive reviews is of the utmost importance. If you’re just starting out, a few bad reviews can destroy your reputation and cut short your venture. But getting good reviews means more guests and, ultimately, more profit. And it really isn’t that hard, just common sense and being considerate (put yourself into your guests’ shoes):

  1. Give accurate and honest descriptions and pictures – no one likes a nasty surprise, least of all on holiday or away from home
  2. Communicate with your guests before arrival so they won’t be wondering whether they can even get in, particularly concerning after a long journey
  3. Check in on guests and, at the very least, check in after the first night – not just for your peace of mind, but to iron out small issues. Most issues only come to light after the first night, like connecting to the Wi-Fi, turning on the hot water, etc. Checking in also shows that you care about their experience
  4. Keep it clean – make sure the property is clean and ready for when your guests arrive. It’s obvious that clean sheets and a nice smell will have a positive impact – don’t miss out on this easy win. For longer bookings, you should consider offering cleaning services during the stay

Find the right location

The location of an Airbnb is one of the most important factors for success. Some investors have used Airbnb to take advantage of the differences in the cost of living between countries. The low cost of living in many tourist destinations can be translated to huge returns. In Bali, it’s common to find US expats who have bought a property on the island for the equivalent of a rental deposit in the US, fixed it up and hired someone based locally to manage it on Airbnb, earning a return they could only dream of back home.

Similarly, Airbnb investments in Auckland, New Zealand have proven to work out as great investments, with many hosting companies cropping up in the area. The median price to rent an Airbnb apartment in Auckland is about £100 a night – one of the highest in the world – and the city enjoys high occupancy rates.

Las Vegas is another location for prosperous Airbnb properties. As one of the most popular cities in America for tourism, many come to the city with the intention to spend big and are often happy to splash out on an upmarket Airbnb on the strip. The high earning potential cancels out the transient lodging tax that hosts are required to pay.

Top tip: If you do decide to get a remote Airbnb investment, its best to use one of the new generation of cloud-based property management platforms to keep an eye on your portfolio from anywhere in the world. Arthur Online offers one such service, enabling property managers to respond instantly and solve problems fast, be it with guests or hosting agents.

Be non-seasonal

Many Airbnbs are seasonal, with peak periods during the summer and few bookings in winter. Peak season earnings of beach houses in Spain or Portugal don’t quite make up for off-season lulls. Instead, properties that are unaffected by seasonal changes, in cities, for example, make money all year round and earn higher average returns.

Price competitively

Charging more may be tempting, but the consequent lower occupancy rates will negate any gains. Just because tourists make up most Airbnb guests, doesn’t mean they are willing to pay tourist prices. Millennials and generation Z have been quicker to embrace home sharing than other demographics; over 60% of all bookings on Airbnb have been made by millennials. The downside is that young people often travel on a tight budget, choosing Airbnb over a hotel for just that reason. For an Airbnb host to be successful, the price needs to match the expectations of the target market and the competition, which isn’t just hotels, but other Airbnbs in the area.

Marc Trup is the Founder and CEO of Arthur Online

After selling his business to BUPA in 1998, Marc started investing in rental properties in London. Over the next 15 years, Marc grew his portfolio to over 85 properties. While successful, self-managing his portfolio became increasingly difficult. With technological advances and greater connectivity, he assumed there was software available that would allow him to manage his business from his smart phone, while sipping espresso at the local coffee shop. Following a long search, he found that nothing quite cut the mustard. So, being an entrepreneur, he started Arthur Online to make not only his life easier, but also that of other property managers.

Since Arthur Online launched in 2015, it has helped thousands of property managers like Marc run their portfolios in the cheapest, most efficient way possible by using the full potential of new technology and cloud computing. Start your free trial today by going to www.arthuronline.co.uk

Private Tenants Playing a Lottery with their Deposits, Nationwide Finds

Published On: October 23, 2018 at 8:03 am

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Renters Lose £80 million per year to Deposit System

Tenants renting their homes from private landlords are playing a lottery with their deposits, according to a new study by Nationwide.

The building society found that tenants can wait months for their deposits to be returned, with some losing their money for unjust reasons.

Finding a deposit for a new rental property can be a major barrier to moving, Nationwide points out, particularly when the deposit you’ve already paid on your current home takes some time to be returned, or faces substantial deductions.

As part of its ongoing focus on the long-term health of the private rental sector, Nationwide is calling for greater consistency in the treatment and return of tenancy deposits, so that tenants leaving properties in a suitable condition get their money back quickly.

Deposit returns

According to Nationwide’s survey of 2,000 tenants, it can take almost two months (1.8) on average for a tenancy deposit to be returned. However, in what appears to be a lottery of experiences, almost half (46%) received their deposits back within a month of leaving their property, while around one in five (18%) were made to wait more than three months. A further 4% had to wait over six months.

Paul Wootton, the Director of Specialist Lending at Nationwide, says: “There must be a better way to address the gap in deposits created when one tenancy ends and another begins. To ensure all private tenants have a better and more uniform experience, we need to consider more pragmatic solutions, including transferring deposits from one tenancy to the next, providing appropriate short-term loans or a guarantee. Nationwide is already working with other organisations who are equally aware of the need for a practical approach that meets the needs of both tenants and landlords, without being an obstacle to moving home.”

Private Tenants Playing a Lottery with their Deposits, Nationwide Finds

Private Tenants Playing a Lottery with their Deposits, Nationwide Finds

Deposit deductions

While more than half (54%) of tenants had never lost a tenancy deposit, one in 14 (7%) had never actually paid a deposit, rising to one in seven (15%) of those aged 55+ (perhaps because they had rented the same property for a longer period of time).

However, over a third (35%) had previously lost some or all of their tenancy deposits, including 2% who lost all of their deposit every time they rented, and 5% who lost at least some of their deposit every time they moved home. A further 28% lost some or all of their deposits on some, but not all, previous rentals.

More than two in five (41%) tenants had experienced deposit deductions to cover the cost of end of tenancy cleaning, though this figure rose to 68% of 18-24-year-olds. Almost two in five (39%) had been charged for wear and tear, while 15% had their deposits debited for redecorating costs. 12% were charged for damage to contents, 5% for damage to buildings and 4% for previous rent arrears.

Official guidance suggests that, though landlords must keep deposits in a Government-approved tenancy deposit scheme – assuming that the tenancy started after April 2007 – before returning it, they may charge for any repairs or cleaning required to return the property to its original condition at the beginning of the tenancy. However, deductions cannot be made for ordinary wear and wear.

Wootton continues: “While our research suggests that the majority of landlords return tenancy deposits quickly and fairly, it also highlights remaining areas of confusion over what can or should be debited from deposit returns. Both landlords and tenants can take simple steps at the start and end of each tenancy to protect against discrepancies and understand their own responsibilities – resulting in a better experience for all. However, where end of tenancy issues cannot be resolved, we need a specialist housing court, equipped to provide fast and effective arbitration, as well as greater confidence of equitable experiences for all.”  

Top tips for tenants 

Nationwide has put together some helpful tips for tenants, so that they can better understand their rights and responsibilities:

  • Insist on a detailed inventory and check it with your landlord, so that you can note and agree any discrepancies at the start of the tenancy
  • Take photographs and/or video, both at the start and end of the tenancy, to confirm the condition of the property
  • Ensure that you leave the property in the same condition as it was when you moved in
  • Understand that, if you rent with others, you will all be liable to cover the cost of any damage
  • If damages occur, inform your landlord as soon as possible to agree repairs and prevent the issue getting any worse
  • Check with your landlord before redecorating
  • Understand that any rent arrears will be deducted from your deposit

Are we Beginning to see a Professional Shift in the Buy-to-Let Market?

Published On: October 22, 2018 at 10:06 am

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Last week saw mortgage advisors from across the country come together for the Mortgage Strategy Leaders Forum. This meeting in London involved a discussion about changing taxes, and how such reforms have affected the buy-to-let market.

According to senior mortgage experts, the industry is fast moving towards a more professional setting. With tax changes having an impact on buy-to-let (BTL) investors, these mortgage advisors feel that the Government’s plan to ‘professionalise’ the industry is so far working as expected.

Recent tax legislative changes have led to some accidental and part-time landlords leaving the market. With this leaving those most serious about making their investments succeed, this could be good news for improving the private rented sector for both landlords and tenants, in terms of professionalism.

The focus is shifting towards landlords who have a focus on growing and improving their portfolios, according to Rob Jupp, CEO of Brightstar Financial, the specialist lenders.

Jupp has commented: “There’s no truth to press reports that landlords are leaving in droves. But the tax changes have been the death knell for dinner party landlords.”

David Whittaker, CEO of Keystone Property Finance, has shared a similar view. He has pointed out that the majority of properties sold by landlords are then acquired by other investors. More often than not, these are professional landlords, rather than first time buyers.

He has commented: “Increased yields in some areas have mitigated the tax changes. As a long-term business plan with yields of 4.5% or 5% and mortgage rates about 3%, buy-to-let is still a good investment.”

It is argued by some experts that first time buyers are not likely to benefit from the Government’s decision to scrap tax relief for buy-to-let landlords. This is a view that was also shared by the panel at the Mortgage Strategy Leaders Forum.

However, the market for first time buyers is currently showing to be at its strongest in the UK since June 2017.

UK Finance data shows that August saw the completion of 35,500 new first time buyer mortgages, which is up 2%, compared to the same month in 2017. Lending to this group has also increased by 5.2%, to £6.1 billion.

On the other hand, it seemed to be considered by some on the panel that this jump in lending to first time buyers had more to do with assistance from schemes such as Help to Buy, rather than landlords feeling the pressure to sell up.

Adrian Moloney of One Savings Bank commented: “Help to Buy has been the stimulus for an improved first-time buyer market, not landlords selling up.”

Citizens Advice Scotland Report Shows Universal Credit to Blame for Rising Rent Arrears

Published On: October 22, 2018 at 9:47 am

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There has been a noticeable rise in advice being sought in regards to rent arrears over the past five years, a new report from Citizens Advice Scotland (CAS) shows.

This increase of 47% is thought to be primarily down to the rollout of Universal Credit.

Last week, the CAS published a paper, in which it states that the changes to the social security system is to blame for this rise in tenants finding themselves unable to make rent payments.

According to this report, benefits, a loss of income or unexpected costs are thought to be one of the most common issues contributing to rent arrear problems. In particular, it found that the occurrence of rent arrears was significantly higher among tenants receiving Universal Credit.

The overall findings of the report include:

  • A considerable growth in advice being sought for rent arrears has closely coincided with changes to the social security system
  • Almost 25% of those who live in rented accommodation have experienced rent arrears in the previous five years
  • Citizens Advice Bureau (CAB) clients with rent arrears are more likely to be in part-time employment, unemployed, living as a single person or lone parent, aged 25-44 and live in the 20% most deprived areas
  • The most common reasons for rent arrears have been found to be related to either benefits, loss of income or unexpected costs
  • Borrowing money from else where, such as from friends, family or on a credit card, or cutting back on essentials, are the most common ways of getting out of rent arrears. However, neither of these are a sustainable solution
  • Over the previous 18 months, the rent area issues of CAB clients have been mostly caused by their transition to Universal Credit, as they have experienced problems with the delivery of support to pay rent through this new scheme
  • There has been evidence provided from Scotland’s CAB network and elsewhere, showing that the incidence of rent arrears is much higher amongst tenants receiving Universal Credit.
  • Various UK housing associations have reported that 73% of tenants on Universal Credit are in arrears, compared to 29% of others

CAS spokesman Rob Gowans said: “The rise in rent arrears is one of the most worrying trends we see across the Citizens Advice Bureau network at the moment.

“While there are a number of factors driving this, we have no doubt that the flaws in Universal Credit are one of the main ones. For the past 18 months we have been calling for a halt and fix to Universal Credit.

“We have set out again today the key flaws that need to be addressed, including reducing the waiting period before payment, cutting out processing delays and reducing deductions. These are relatively simple changes that could make a huge difference to millions of people.”