Written By Em

Em Morley

Will the Tenancy Deposit be a Thing of the Past?

Published On: July 24, 2016 at 8:44 am

Tags: deposit protection,deposit protection scheme,fair wear and tear,tenancy deposits

Every year, £3 billion worth of tenants’ money is registered with one of three deposit protection schemes, as is legally required of landlords. But is there an alternative for savvy investors?

In most cases, a tenant’s deposit is handed back to them – less than 1% of the money is disputed. Reposit, a new service that could help landlords, believes that tenancy deposits not only put a financial strain on tenants in an increasingly expensive rental market, but also breed distrust.

“Ten years ago, you would have been laughed out of the room if it was suggested the idea that people would allow complete strangers from across the world to use their homes for accommodation while they were on holiday,” the firm notes. “Now, Airbnb has pioneered the sharing economy model and proved that, with a few exceptions, we can trust people.”

This led Reposit to ask the question: “So why do landlords take a deposit?”

It is generally understood that if a landlord holds a tenant’s deposit, the renter will be more inclined to look after the property.

However, Reposit has a different idea.

The new, innovative product seeks to abolish the need for a landlord to take a tenancy deposit.

The CEO of Reposit, Curran McKay, explains: “A tenant moving into their new rented home must find a month’s rent up front – six weeks’ rent as a holding deposit – as well as letting agency fees. On the other hand, a landlord wants some assurance they will be covered in the worst-case scenario. We believe trust, with a little help from Reposit, is all that it takes.”

So how does the product work?

Will the Tenancy Deposit be a Thing of the Past?

A tenant pays one weeks’ rent to Reposit as a fee, saving significantly on the average six-week deposit.
If the tenant damages anything during the tenancy (save for fair wear and tear), or has unpaid rent arrears or cleaning costs at the end of the tenancy, they will be liable to pay this amount up to the maximum of six weeks’ rent to Reposit.
Reposit will then pay the landlord or appointed agent the full owed amount.
If there is a dispute, the firm has an independent Alternative Dispute Resolution (ADR) specialist to look at the case, using the same professionals as the three Government-approved schemes.
If the tenant breaks anything, they pay for it. Simple!

Under the current deposit system, landlords must, by law, register the tenant’s deposit within 30 days of receipt, or face a fine of three months’ rent. This can also cost the landlord time and money.

Under Reposit’s system, landlord would not need to take a deposit, while still being protected with cover equal to six weeks’ rent as standard.

For more information, call Reposit on 020 3868 4070 or visit https://getreposit.uk.

Landlords, Clear Out Your Property and Help a Good Cause!

Published On: July 23, 2016 at 8:12 am

Author: Em Morley

Categories: Landlord News

Tags: furnishings,landlords,rental property,tenants

Landlords, Clear Out Your Property and Help a Good Cause!

As a landlord, there will be many times when your rental property is full of clutter that you need to get rid of. Now, there’s a new way to clear out your property for free and help a good cause along the way!

Gone for Good is a free smartphone app (available on iPhone and Android devices) that allows you to get rid of any clothing, furniture, or other household items that may be left over in your property, while helping out local charities.

Whether your tenants have left their belongings behind, you’re replacing furniture in your property, or a tenant is moving in but doesn’t want a furnished property, there are many instances when a landlord will need to remove unnecessary clutter.

Gone for Good allows you to donate these items to local charities and doesn’t cost a thing.

The award-winning app (Gone for Good was recently awarded the Best Not For Profit Project at the Big Chip Awards) helps you turn your clutter into something good for the environment and for those in need.

The service aims to re-channel 6% of the saleable clothing and other items that currently end up in landfill. If it does this, charity shops will receive double their income, which will go towards helping important causes.

Gone for Good also aims to double the amount of stock for those living below the poverty line that rely on charity shops for clothes, children’s toys, furniture and other items.

How can you use the app?

Download the app – From Google Play or the App Store (or go to www.goneforgood.org.uk).

Snap it, give it – Take a photo of your item on your phone using the app, so that the charity knows what to expect.
Your donation, collected – Your chosen charity will collect your item(s) direct from your door.
Give more, for free – Opt in to Gift Aid and your charity gets more at no extra cost to you.
Reduce theft – If your charity knows what to expect, you reduce the chances of your donation being lost or stolen.
Share the love – Tell your friends and family about your donation and encourage them to give too.

Mark Charnock, the Managing Director of Gone for Good, says: “Landlords can play an important role in increasing the amount of goods donations that charities receive. The app has a house clearance function that should appeal to them. And the app also ensures a donation is offered out to other charities if the donor’s chosen one can’t take it. This ensures a donation offer can be dealt with quickly, which is important to landlords. It’s a win-win situation for them. It solves a problem and saves them money.”

If you have any leftover items in your rental property, remember that they need not go to waste; you can get rid of clothes, furniture or other objects for free while helping out those in need and protecting the environment.

Don’t waste money on a removals van – try Gone for Good at www.goneforgood.org.uk!

New Housing Minister Urged to Build More Homes to Rent

Published On: July 22, 2016 at 11:26 am

Author: Em Morley

Categories: Property News

Tags: homes to rent,housebuilding,housing associations,housing minister

The new Housing Minister, Gavin Barwell, is having a busy first week in his new post.

Earlier in the week, the newly appointed minister was questioned over his commitment to building one million new homes, saying that homes will only be built on greenbelt land in “special circumstances”.

Now, he is being urged by industry experts to support the building of more new homes to rent by relaxing the rules around public funding in the sector.

New Housing Minister Urged to Build More Homes to Rent

The appeal has been launched following an independent report, published this week by the Centre for Economic and Business Research and commissioned by the National Housing Federation (NHF), which predicts that the UK economy could shrink by £145m in the next ten years if the rate of growth in new housing completions falls at the same rate as it did in 2008.

Spokespeople for the NHF and the Chartered Institute of Housing (CIH) argue that building more homes to rent or for shared purchase would help keep housebuilding and the economy steady during a time of economic austerity.

The NHF believes that up to 300,000 units could be built by housing associations by 2020 if funding is made available – even in times of economic uncertainty.

CIH data shows that during the last recession, the number of homes built by non-profit housing associations rose by 22% between 2007-09, while private development dropped by 37%.

The call from the industry bodies for the Government to redirect some of the current funding to allow construction of new housing association homes to rent is likely to be welcomed by would-be tenants, as demand currently outstrips supply.

Reallocation of the central budget to allow housing associations to build more rental properties would also alleviate the negative impact of a general slowdown in the housebuilding sector, which is a widely anticipated result of the Brexit, according to James Howard, a partner in Clarke Willmott LLP’s social housing development team.

He believes: “A change in funding strategy to switch the balance to building more for rent than for sale should allow for a supply of new homes to continue, despite the gap private sector housebuilders might leave behind.”

Clarke Willmott’s Head of Housing and Asset Management, Jonathan Hulley, adds: “The Government’s flagship Starter Homes scheme would lead to the undermining of sales of more affordable shared-ownership properties and fails to address the urgent need for more affordable homes to rent. The social housing sector argues that housebuilding is needed now more than ever – people are in need, waiting lists are still growing – so the policy of building more homes for sale only needs to be revised and adapted to allow for the building of more homes for rent.

“There is also a worrying lack of capacity on the ground to deliver, which needs to be addressed, and a question-mark over what appetite there is for outright purchase of houses on a large scale. On the other hand, the kind of shared-ownership offered by housing associations puts homes within the reach of the many people who would otherwise be unable to afford them.”

He concludes: “It’s high time for a change in Government policy to support greater flexibility to deliver not just on homes for sale, but also allowing more to be built to rent.”

Landlords, Consider the Effects of Tax Relief Changes Now

Published On: July 22, 2016 at 11:01 am

Author: Em Morley

Categories: Landlord News

Tags: Buy-to-Let,finance,landlord taxes,mortgage interest tax relief,tax

Buy-to-let landlords are being warned to consider the effects of mortgage interest tax relief changes for residential property, which will be introduced in April 2017.

London chartered accountants, Blick Rothenberg LLP believe that some landlords could be in for costly tax consequences if they don’t pay attention to the changes now.

The tax relief changes were announced in last year’s summer Budget, although the Government has only recently released its guidance on the new rules.

The 3% Stamp Duty surcharge for landlords, which was introduced in April this year, has dominated discussion within the sector over recent months. However, the firm insists that the forthcoming tax relief changes are more of a concern for buy-to-let investors.

Landlords, Consider the Effects of Tax Relief Changes Now

The measure will restrict the amount of interest that a buy-to-let landlord can deduct to calculate their income tax liability. The reduction will be phased in over four years from April 2017, with interest restricted by 25% each year until it takes full effect in April 2020.

A partner at Blick Rothenberg, Nimesh Shah, states: “Investors in residential property need to be aware of this marked new change and need to start planning for their portfolios now.

“Whilst the additional 3% Stamp Duty has created the most anxiety amongst buy-to-let investors, the restriction to interest relief may have been overlooked, but this is likely to have a greater longer-term effect after tax returns.”

The recent guidance from the Government on the changes includes some worked examples to illustrate how landlords will be affected.

Shah comments: “HMRC say in their latest guidance that ‘all residential landlords with finance costs will be affected, but only some will pay more tax’. The statement is quite misleading, as the changes could have quite a far-reaching effect, which most buy-to-let landlords will not appreciate.

“A number of individuals have picked up a buy-to-let property in recent years, whether that is an investment property to supplement earnings, a second home which is occasionally rented out, or a property which they have inherited and decided to let out.

“It is wrong for HMRC to say ‘only some will pay more tax’, as entitlement to child benefit, personal allowance and the pension annual allowance will all be affected indirectly through how this new measure operates in practice. It would also not be an unreasonable assumption to say that the majority of buy-to-let landlords will be higher or additional rate taxpayers and they will be affected without question. This change will capture a large proportion of the buy-to-let landlord population.”

When the change was announced in the summer Budget, it was described as a restriction to interest relief to the 20% basic rate. However, the actual mechanism of how the reduction works has a wider impact.

Shah explains: “Currently, buy-to-let landlords can deduct all their interest cost to calculate rental profits. When the new measure takes full effect, the interest cost will be completely disallowed in computing rental profits, and, instead, a tax credit equal to 20% of the interest will be given against the person’s income tax liability.

“Whilst this may sound like what the Government intended the measure to achieve, the fact the interest is completely disallowed means the individual will have higher overall taxable income.

“This could push an individual into a higher rate of income tax (40/45%), start to reduce their personal allowance (if their income now starts to exceed £100,000), affect their entitlement to child benefit and restrict the amount on which they can claim tax relief for pensions.”

The following two examples highlight some of the issues:

Example 1

Susan is retired and owns a number of residential buy-to-let properties. Her only source of income is the rents from her residential property portfolio, which total £60,000 per annum. She has mortgages on the properties and she pays annual interest of £25,000. Therefore, her net profit before tax is £35,000.

Susan’s income tax position and net profit after tax over the next five years are as follows:

Tax year	2016/17	2017/18	2018/19	2019/20	2020/21
Rental income	£60,000	£60,000	£60,000	£60,000	£60,000
Loan interest	£25,000	£18,750	£12,500	£6,250	–
Net rental income	£35,000	£41,250	£47,500	£53,750	£60,000
Less: personal allowance	£11,000	£11,000	£11,000	£11,000	£11,000
Taxable income	£24,000	£30,250	£36,500	£42,750	£49,000
Income tax payable	£4,800	£6,050	£8,200	£10,700	£13,200
20% tax credit for interest cost	–	£1,250	£2,500	£3,750	£5,000
Total income tax payable	£4,800	£4,800	£5,700	£6,950	£8,200
Net profit after tax	£30,200	£30,200	£29,300	£28,050	£26,800

Although Susan could be excused for believing that she is not affected by the change, as her net income after deducting the personal allowance is within the 20% tax rate, the table shows that Susan’s tax bill increases by £3,500 (over 70%) when the restriction takes full effect in April 2020. This is due to the way the restriction operates, which pushes Susan into the 40% rate of income tax. Her overall effective rate of income tax rises by almost 10% because of the changes.

Example 2

Peter is employed and earns £80,000 in salary and bonuses per annum. As well as his employment income, Peter owns a buy-to-let residential property from which he receives £40,000 a year. Peter has a mortgage on the property and pays £25,000 interest per annum, so that his net rental profit before tax is £15,000.

His income tax position and net profit after tax over the next five years are as follows:

Tax year	2016/17	2017/18	2018/19	2019/20	2020/21
Employment income	£80,000	£80,000	£80,000	£80,000	£80,000
Rental income	£40,000	£40,000	£40,000	£40,000	£40,000
Loan interest	£25,000	£18,750	£12,500	£6,250	–
Total income	£95,000	£101,250	£107,500	£113,750	£120,000
Less: personal allowance	£11,000	£10,375	£7,250	£4,125	£1,000
Taxable income	£84,000	£90,875	£100,250	£109,625	£119,000
Income tax payable	£27,200	£29,950	£33,700	£37,450	£41,200
20% tax credit for interest cost	–	£1,250	£2,500	£3,750	£5,000
Total income tax payable	£27,200	£28,700	£31,200	£33,700	£36,200
Net rental profit after tax	£9,000	£7,500	£5,000	£2,500	–

The above examples are just two ways that the measures have a wider effect than simply restricting the tax relief on mortgage interest costs.

Buy-to-let landlords must urgently review their portfolios and mortgages, and calculate the exact impact on their businesses after tax returns. Some may decide that buy-to-let is no longer a viable investment option…

Could You Make a Profit on Your Property with Home Improvements?

Published On: July 22, 2016 at 9:19 am

Author: Em Morley

Categories: Property News

Tags: decor,home improvements,homeowners,house prices,renovation

A new study from Plentific reveals that homeowners in the UK believe that they can make a significant profit on their property through home improvements.

The survey, conducted by Opinium, found that 35% of homeowners in the UK think they could make a profit on their property from a £50,000 investment in home improvements, such as decoration, extensions and renovations.

Could You Make a Profit on Your Property with Home Improvements?decoration, extensions and renovations.

However, just 10% of the respondents expect home improvements to increase their property’s value by £75,000-£100,000. Lower profit expectations were forecast from homeowners in Wales, Scotland and northern England, with almost half saying they do not expect a £50,000 increase in their property’s value.

Homeowners in London and the South East were most confident, with around half expecting a return on improvement costs.

Half of homeowners in the capital expected to make a return on their £50,000 investment, while 21% predicted an increase of £75,000-£100,000 on their property’s value. Some 10% of homeowners in Bristol and London believe that they could see a rise of over £100,000 in house price following a £50,000 investment.

The survey also looked at the reasons why property owners make home improvements. It found that a huge 79% are more interested in improving living space, while just 17% are hoping to increase their property’s value.

Young first time buyers – those aged under 34 – expressed more of a desire to make money on their improvement projects, with 32% carrying out renovations to increase their property’s value.

The co-founder of Plentific, Cem Savas, comments: “Our latest consumer research highlights homeowners’ confidence in the value of home improvements. It does also paint the picture that young owners and those in the South East are more fixated with increasing property values. This isn’t a surprise considering the rise in recent times, highlighted this week in the ONS House Price Index, which revealed that properties in the South East had an annual growth of 12.8%.

“A home is an asset, but the majority of homeowners undertake home improvements simply to improve their living space and home life.”

As a landlord, making home improvements could increase both your rental income each month and your property’s value when the time comes to sell. If you are looking for a financial boost, invest in some renovation work!

Annual House Price Growth Plateaus in June

Published On: July 22, 2016 at 8:35 am

Author: Em Morley

Categories: Property News

Tags: Brexit,EU referendum,house price growth,house prices,London

Annual house price growth plateaued in June, at 10.2%, the same level as May, but still ahead of the 6.9% rise recorded in June last year, according to the latest Hometrack UK Cities House Price Index.

Bristol remains the fastest growing city in the UK for house prices, with a yearly inflation rate of 14.7%. However, annual house price growth in London and other cities in the south of England, such as Cambridge, Southampton and Bournemouth, started to slow between May and June.

Annual House Price Growth Plateaus in June

In contrast, large cities in northern parts of the UK, such as Glasgow, Manchester, Liverpool and Leeds, have recorded strong growth over the past quarter, due to more affordable house prices, lower interest rates, improving local economies and higher rental yields, making purchases particularly attractive to landlords.

Following the UK’s vote to leave the EU, attention has turned to the impact of Brexit on the economy and property market. However, time lags mean that official data is slow to pick up on changes to housing. The final pre-Brexit house price data, from the Land Registry, found that house prices have risen by 8.1% annually.

The Hometrack data, which covers recent market activity up to the middle of July, shows changes in the balance of supply and sales, providing an early insight into whether housing supply is starting to expand, which could in turn reduce price growth.

In the three months to mid-July, sales momentum in regional cities and higher house price growth appear to have remained steady. However, the headwinds facing the London market ahead of the EU referendum on 23^rd June have resulted in a rise in supply and relatively fewer sales, indicating that house price growth may slow in the coming months.

Hometrack also found that new property listings have grown faster in the last three months than the average for the past year. For all cities in England and Wales, excluding London, new listings have increased 10% faster than the 12-month average, rising to over 15% in the capital.

In contrast, an 8% relative fall in sales was seen in London over the last three months, compared to the 12-month average. Sales in Bristol did not change over this period, while sales growth has been positive in larger regional cities, at up to 7% in Manchester.

The Insight Director at Hometrack, Richard Donnell, comments: “The headwinds that were facing the London market in the lead up to the EU referendum have intensified on the back of the vote to leave, and are resulting in slower sales rates. It is still early days, and seasonal factors also need to be considered, but the growth in new listings and slower sales points to slower price growth in the months ahead. This growth in supply reflects a mix of new homes filtering through from London’s expanded development pipeline, investors looking to take capital gains, or selling to de-leverage their investments following the reduction in tax relief on mortgage payments for buy-to-let investors.

“In contrast, in many large regional cities, sales appear to have held up, thanks to a combination of much better housing affordability, improving economic growth and record low mortgage rates helping to stimulate demand.”

He concludes: “The reality is that it is still very early days to assess the true impact of the Brexit vote on the housing market. Our view remains that sales volumes are likely to slow and price growth will moderate over the second half of the year. The severity of a slowdown will depend upon the response of consumers and businesses to the uncertainty created by the decision to leave the EU and the impact this has on the economy. The early market activity data confirms our view that London will bear the brunt of any slowdown.”