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Em Morley

Number of Limited Company Fixed Rate Mortgages for Buy-to-Let at Record High

Published On: April 25, 2018 at 9:33 am

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Categories: Finance News

The number of limited company fixed rate mortgages for buy-to-let landlords has hit an all-time high, according to the latest figures from moneyfacts.co.uk.

Last year, mortgage interest tax relief for individual buy-to-let landlords began to be phased out, a gradual reduction that will be completely implemented in 2020. This helpful guide provides more information for investors that may be affected: https://landlordnews.co.uk/government-guide-tax-relief-changes-residential-landlords/

Since the changes were first brought in back in April 2017, landlords have started assessing their options – becoming a limited company is one of them. Limited company landlords are exempt from the reduction to mortgage interest tax relief, meaning that some investors will avoid higher costs by swapping their property portfolio over to this structure.

With more demand for this type of mortgage, moneyfacts.co.uk has found that providers have stepped up to the mark and are now offering more fixed rate products to limited companies than ever before.

In April 2013, just 17 limited company fixed rate mortgages were available, which rose to 80 in 2016. However, since the tax changes were first brought in last year, the number available soared to 212. This year, 235 are on offer to this type of borrower.

Charlotte Nelson, the Finance Expert at moneyfacts.co.uk, comments: “The figures from moneyfacts.co.uk show that the number of fixed rates available to limited companies has almost tripled in the space of just two years. Reaching 235 in April, this is the highest number on moneyfacts.co.uk’s records.

“The reality of last year’s tax changes hit landlords hard, as they were unable to claim tax relief. However, with things working slightly differently for limited companies, many landlords have started to shift their focus from individual ownership to this type of private company.”

She continues: “Providers who are still eager for buy-to-let business have put their best foot forward and are now offering more products than ever to meet this extra demand. Yet, despite there being more products on the market, under a quarter of the buy-to-let market offers this option.

“Borrowers considering this type of mortgage should be aware that they could find themselves on a more expensive deal compared to the rest of the buy-to-let market. For example, the average two-year fixed rate buy-to-let mortgage, for those applying as a limited company, stands at 4.29% today. Whereas the average two-year fixed rate for the rest of the market is significantly less at 3.01%.”

Nelson concludes: “With all the extra legwork that becoming a limited company entails, and how widely the costs can vary depending on circumstances, any borrowers considering it should consult a financial adviser and do the sums before committing to this option.”

Property Owners Could be Hit with Unexpected Tax Bill in less than a Week

Published On: April 25, 2018 at 9:06 am

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Categories: Finance News

UK-based and offshore companies that own residential property in the UK could be liable to pay Annual Tax on Enveloped Dwellings (ATED) on 30th April 2018, due to new valuation requirements, warns accounting, tax and advisory firm Blick Rothenberg.

Paul Haywood-Schiefer, the Assistant Manager at the practice, says: “There are [less than] two weeks left for property companies to complete their ATED return for the 2018/19 year and pay any tax due by 30th April 2018. Failure to complete the return could result in penalties, even where there is no tax payment due.

“There has been a significant change for this ATED filing that may catch owners and directors of property companies unaware. Because of the revaluation mechanism, they now need to consider the value of properties at 1st April 2017 (rather than 2012) to determine which tax band is applicable for the next five years. There are going to be plenty of people who simply aren’t aware of the need to revalue the property.”

He adds: “ATED applies to residential property valued at more than £500,000. With the revaluation, a property company that was not previously within the ATED regime could now be liable to file the returns and pay any tax due.

“There will be many situations where a company’s property has increased significantly in value, moving them into another tax band with an increased tax bill, and shareholders of these companies may have absolutely no idea!”

Property Owners Could be Hit with Unexpected Tax Bill in less than a Week

Property Owners Could be Hit with Unexpected Tax Bill in less than a Week

The period for an ATED return runs from 1st April to 31st March each year, and returns must be submitted by 30th April in the year that the period relates to. For the ATED period 1st April 2018 to 31st March 2019, the return must be submitted by 30th April 2018, with the tax due by that date. The amount of tax a company must pay will be dependent on the valuation of the property at 1st April 2017.

The chargeable amounts for the period 1st April 2018 to 31st March 2019 are as follows:

  • £500,000-£1m: £3,600
  • £1m-£2m: £7,250
  • £2m-£5m: £24,250
  • £5m-£10m: £56,550
  • £10m-£20m: £113,400
  • £20m+: £226,950

Example

A property that had a value of £1.9m on 1st April 2012 and a value of £2.2m on 1st April 2017.

Using the old rules (2012 valuation), an ATED charge of £7,250 would be due. However, as the 1st April 2017 valuation must be used, the charge would increase to £24,250, which is more than 330% of the previous year’s tax charge.

Rebecca Goldring, the Tax Manager at Blick Rothenberg, advises: “It’s not all doom and gloom though, as there are certain reliefs and exemptions from the ATED charge. For example, where the property is let to a third party on a commercial basis, where the property is being developed for resale by a property developer, or where it is owned by a property trader as stock of their business for the sole purpose of resale.

“Owners and directors may be aware that they don’t have to pay tax, but many will not know that they still have to file a UK ATED tax return to claim the relief. Failure to submit a return and to pay the tax charge by the due date will lead to penalties.”

Penalties range from £100 for a late filing and interest on the underpayment, to tax-based penalties of up to 100% of the tax due.

Make sure to have your taxes in order and seek expert advice if required.

MPs Call for Local Authorities to Gain Power to Confiscate Properties

Published On: April 25, 2018 at 8:13 am

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Categories: Landlord News

A committee of MPs has recently come together to further discuss the issue of rogue landlords and what prevention methods should be put in place. The latest idea that they have come up with is to permit local authorities to confiscate properties from landlords who break the law.

A new report from the Housing, Communities and Local Government (HCLG) Committee calls for greater protection to be provided against the unlawful treatment of tenants. From unreasonable hikes in rent costs, to spiteful evictions, there is certainly a problem within the UK, and measures need to be taken in an attempt to put a stop to it.

There was a general agreement within this committee that the recent changes in legislation have improved the protection available for tenants. However, they also believe that local authorities need to have more resources available to assist with the enforcement of such legislation.

Clive Betts, chair of the HCLG Committee, has commented: “Local authorities need the power to levy more substantial fines against landlords and in the case of the most serious offenders, ultimately be able to confiscate their properties.”

The HCLG Committee believes that funding should be made available in order to allow local authorities the opportunity to undertake informal enforcement activities. Having local authorities publish their enforcement strategies online is also a progression that the committee would like to see.

Betts also said: “Stronger powers, harsher fines and a new commitment to cracking down on unscrupulous practices will go some way towards rebalancing the sector and protecting the many thousands of vulnerable residents who have been abused and harassed by a landlord.”

It is worth considering as well that landlords are not always the only issue. Nightmare tenants can be equally as much of a problem for landlords. Measures can be taken to prevent situations such as rent arrears and the extreme damage of properties, for example the undertaking of thorough background checks. There are also plans for a six weeks cap on security deposits for private rented housing, however the Residential Landlords Association (RLA) have suggested extending it to eight weeks. This extra financial assistance to landlords might make all the difference.

Letting Agents could Benefit from Build to Rent Schemes

Published On: April 24, 2018 at 9:42 am

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Categories: Lettings News

Letting Agents could Benefit from Build to Rent

Letting agents should consider the benefits of participating in the growing Build to Rent (BTR) phenomenon, according to PayProp. Since 2012, Build to Rent schemes have aimed to provide thousands of units of purpose-built rental accommodation. The sector has government-backing – to the tune of up to £1 billion – and is already supported by institutional investors.

Extensive investment, rapid growth

BTR developments are managed by specialist operators and are typically designed to cater to the needs of modern tenants with on-site gym facilities, high-speed internet and concierge services.

Over the last few years, investment in the sector has been widespread and extensive. A report from the British Property Federation (BPF), Savills and the London School of Economics estimates that BTR will create almost 250,000 rental homes by 2030.

According to the BPF, there are now almost 100,000 BTR units – either completed, under construction or awaiting planning permission across the country.

Meanwhile, two of the sector’s largest operators, Grainger and Legal & General, have BTR investment capabilities of £850 million and £1 billion respectively.

“It’s clear from these figures that Build to Rent is a serious proposition with big financial backing from respected industry names,” says Neil Cobbold, chief operating officer of PayProp in the UK.

“With approximately 20,000 BTR units now completed across the country, and a number of schemes having officially opened their doors to tenants, now could be the right time for agents to consider how they could use the growth of this sector to their advantage,” he says.

Letting Agents could Benefit from Build to Rent

Letting Agents could Benefit from Build to Rent Developments

How can letting agents get involved with Build to Rent?

A growing number of letting agents are already involved with BTR, and Cobbold says more potential remains for agents to investigate the options available to them.

“Some agents may see the growth of BTR as a threat to their business, but we believe it has opportunity for new partnerships,” he explains.

“Whether that’s positioning yourself as a rental market expert, offering advice to institutional investors, building beneficial relationships with developers and management companies or sourcing land and finding tenants, there are plenty of options.”

“The agents that don’t shy away from Build to Rent and look to be early-adopters could benefit the most and get access to the best opportunities,” he adds.

Replacement revenue for up-front fees

As the ban on up-front letting agent fees charged to tenants moves closer – being introduced next spring at the earliest – Cobbold reminds agents that they need to prepare to mitigate the effects of lost revenue.

“Whether it’s by streamlining or automating processes, pursuing alternative revenue streams or diversifying services, those that act decisively and with clarity of purpose are more likely to prosper in the long-term.”

Cobbold adds: “The government recently advised agents to ‘consider’ their business models in relation to the fees ban and exploring the opportunities Build to Rent might have to offer is one way of doing this.”

The future of affordable rental accommodation

Following the latest English Housing Survey, which revealed in January that the private rental sector now accounts for a fifth of all households and is the largest tenure in London, it’s clear that private renting is more important than ever to Britain’s housing landscape.

“The Build to Rent sector could be integral in providing affordable rental homes for the nation’s growing population of private renters,” says Cobbold.

“With no signs that the growth of tenant demand is going to let up any time soon, letting agents who involve themselves with BTR could be presented with more professional opportunities, come into contact with a higher number of tenants and make their business a valuable part of the nation’s housing future,” he concludes.

Letting Agents may be the Answer for Many Overwhelmed Landlords

Published On: April 24, 2018 at 9:27 am

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Categories: Landlord News

Being an independent landlord is becoming increasingly more difficult, due to the constant changes in laws and regulations.

There has been a boom in the buy-to-let property market over the last decade, with a flood of new landlords entering the market. With this in mind, it does not come as a surprise to us to hear that there is a struggle to maintain a high level of compliance to laws and regulations.

Despite the best efforts of news websites, such as our own and that of Just Landlords, to keep property professionals up to date with the latest updates and changes, not everyone is successfully reached.

Landlords have over 145 individual laws and more than 400 regulations to follow, as well as the on-going updates and changes. With this in mind, we were interested to find that research from TheHouseShop, the property marketplace, has revealed that 1 in 5 landlords said they find it “impossible” to keep up with constant regulation changes. A further 29.9% stated that they find it “very difficult” and another 31.2% find it “quite difficult”.

It seems clear that the overall consensus is that landlords are being overwhelmed by the volume and complexity of rules and regulations in the rental industry. This specifically was listed as the most challenging aspect of managing a rental property by 63.4% of the landlords involved with the research.

Letting Agents may be the Answer for Many Overwhelmed Landlords

Letting Agents may be the Answer for Many Overwhelmed Landlords

Despite landlords wanting to maintain their independence as a property professional, some may find this strain greatly relieved by the assistance of a letting agent. Many are reluctant to go to them for help, as such a partnership can cost 10-15% of their rental income for the benefit of a full management service. With the upcoming introduction of the Tenant Fees Ban, landlords are left wary of these costs increasing further. To find out more about this ban, take a look at Just Landlords’ article, discussing the change.

Research from ARLA Propertymark has found that on average tenant fees amount to one fifth of letting agents’ revenue, and two thirds of letting agents would make up these losses from the fees ban by increasing the costs due to landlords.

This is leaving landlords feeling trapped, with a blow to their finances inbound whichever way they turn.

However, alternatives are being devised, with an aim to keep all sides content. As an example, TheHouseShop has recently launched a fixed price property management service. It claims to offer the same comprehensive level of service you would expect from a traditional letting agent, but for a fraction of price.

Nick Marr, co-founder of TheHouseShop, has commented: “It’s a really difficult environment that landlords are operating in at the moment. The government have undertaken a range of measures to try and drive up standards in the rental industry, and while this is by no means a bad thing, it does mean that landlords have increasingly complex and wide-ranging responsibilities to deal with.”

“After speaking with our landlords, it became clear that compliance was a huge concern, but many of them simply weren’t prepared to hand over 10-15% of their rental income to have a professional manage their properties for them.”

“We wanted to do things differently and give landlords a new way to professionally manage their properties without breaking the bank. Our fixed price model means that landlords no longer have to choose between losing out on rental income and spending hours and hours dealing with compliance issues.”

Is Crowdfunding the Latest Craze for Millennial Property Investors?

Published On: April 24, 2018 at 8:09 am

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Categories: Property News

New research from Shojin Property Partners, the property investment and development company, is showing that increasing numbers of millennials are investing in property crowdfunding to get a foot on the property ladder.

Since launching the platform last year, the company has seen a 20% increase in millennials aged 18-30 investing in property crowdfunding projects. Millennials now account for almost a fifth of all those who choose to invest in property through the firm in this way.

Their data shows that the largest group of crowdfunding property investors are aged between 30 and 39 years (44%), followed by those who are aged 40 to 49 (23%). A decline begins to show in the number of crowdfunding investors after the age of 49.

Crowdfunding in general has proven to be a popular choice for investments amongst millennials. Sites such as Kickstarter and GoFundMe encourage the backing of a variety of projects, from providing financial support for someone’s pet operation, to helping to fund the start of a new business. It allows the average person to become involved in someone else’s potential success, or simply earn some good karma by helping out those in need.

In this case, millennials are able to invest in property for a relatively low amount, without the need for a large deposit. Unlike in previous generations, many young people don’t want to tie themselves down to major life commitments such asa mortgage so early in their lives.

Jatin Ondhia, CEO of Shojin Property Partners, has commented: “With interest rates so low, millennials are losing money, keeping it in a bank due to the rate of inflation. This, combined with out-of-reach property prices, is driving an increase in 18-30 year olds investing in property crowdfunding.

“This age group will increasingly embrace crowdfunding, as they are early adopters of new and emerging technologies and are keen to try innovative ways to invest.  Being able to invest smaller sums of money is also very attractive to millennials, enabling them to dip in and out of property. They have potentially large investing power and crowdfunding offers them an opportunity to spread risk.

“We have developed a variety of crowdfunding projects, allowing investors to make a minimum investment of £5,000. These projects provide a hands-free investment, without the tax and legislative burdens.

“Our new buy-to-let crowdfunding product enables landlords and investors to come together and buy into a small portfolio of residential property for rental purposes, sharing the income and capital growth.”