Buy-to-let mortgage crackdown by the Bank of England

The Bank of England is concerned about an overheating buy-to-let market so is introducing stricter controls.....

http://www.martinco.com/news/2016/03/30/bank-of-england-announces-buy-to-let-mortgage-crackdown/#.Vvvja_krKUk

Investment Opportunity

Buying new build properties has many advantages, especially for landlords.  There are low maintenance costs, generally located in popular positions and resell well.  We have just listed a nearly 4 bedroom house at Cranbrook for sale, and it is cheaper that buying a brand new one.

http://www.martinco.com/property/for-sale/234029

Brexit is creating uncertainty in the housing market

I'm sure it will be of little surprise to learn that Brexit is causing uncertainty in the property market.  There have also been a number of other contributing factors that should also be taken into consideration...http://www.martinco.com/news/2016/02/29/brexit-adds-to-housing-market-uncertainty/#.Vt2qIvmLSUk

Should I do an inventory?

I see many landlords who have been managing their properties themselves for years, who say "I've never done an inventory, I can't see the point, there is nothing in the property and when there has been damage I have just repaired it"......http://www.martinco.com/estate-agents-and-letting-agents/branch/exeter/news/the_importance_of_having_an_inventory-7759

This months’ investment tips

Buy to Let Mortgages

·         I’ve come across one or two Estate Agents that insist that you take out your mortgage through them as a condition of you buying one of their properties. This practice is illegal and you would be well advised to avoid this unscrupulous practice. In fact please report any offending estate agents/brokers  to the Property Ombudsman   https://www.tpos.co.uk/

·         Always ask if your mortgage broker / advisor is looking at the whole market for the best and most suitable deals. Some estate agents and mortgage providers will only promote the mortgages they get the most commission on resulting in you not getting the best and most suitable deal available 

·         Some estate agents will charge you for mortgage advice. Don’t deal with them as free advice is available from a number of other companies

Have your business plan figures to hand when talking to your preferred mortgage provider. Details such as your available deposit, monthly rental income forecast, details of any other mortgages you have. A summary of any other income and expenditure you have.

The following formula is used by a number of lenders to calculate your affordability rating:  

·         Loan Amount x Stress Rate x 125% divided by 12 – the result must generally be less than the monthly rental yield.

o    So as an example, the majority of lenders use a stress rate of 5.99%, so assuming a loan amount of £100,000, the formula is as follows:

o    £100,000 x 5.99% x 125% divided by 12 = £623.95 (Minimum monthly rental yield)

Note - Always talk to your preferred mortgage provider as they may have deals that allow some flexibility in the above calculation

 (Information kindly provided by South West Mortgage Brokers)     

To calculate a gross yield, calculate the annual income, e.g £700pcm x 12 = £8400.  Divide this by the property value, e.g £150,000; 8400/150,000 = 0.056.  Finally, times this figure by 100 = 5.6%.  To work out a net yield, deduct your expenses from the annual income at the start.

Welcome to 2016 by Chris Perring

I thought I would start this year by updating you on why Exeter and the surrounding areas continue to be a good place to invest in property.

Firstly some statistics: Devon, with an overall average house price of £236,191, was similar in terms of sold prices to nearby Cornwall (£239,572), but was cheaper than Somerset (£252,023) and Dorset (£286,108).

In the past year house prices in Devon were 4% up on the year before and 7% up on 2007 when they averaged at £220,043. (Source Rightmove)

 

House prices in Exeter during the past decade have grown almost 49% more than the rest of the region.  Average yields for the Exeter area generally vary between 3.7% and 6%+.

Exeter is the capital city of Devon and provides the county with a central base for education, medicine, religion, commerce and culture.

The city is also home to the Met Office and one of the country’s top ten Universities.

Prices in the city picked up last year, in part spurred on by the shortage of houses for sale in the region. Apart from being a good growth area to invest in, buyers and tenants benefit from the excellent national / international transport links and the growth of available employment from existing businesses expansion and the reallocation of business to the area from other parts of the country.

We have a number of owners and tenants who regularly commute outside Devon to work. Mainline rail connections allow you to be in central London by 9.00 am and back again for an evening meal. From Exeter International Airport you can fly to most British and European cities.

Over recent times Exeter has seen major growth in employment the building of the Peninsula Medical School, the first new medical school for 30 years, and the Meteorological Office relocating its entire operation to Exeter from Berkshire – the largest IT move in Europe at the time. Expansion of Exeter International Airport and the development of a major new science park which has already attracted new and existing businesses relocating to the area such as the blur Group.

Exeter’s retail, shopping and food outlets continue to grow and provide for greater employment opportunities with recent opening of a new John Lewis store and projects like the refurbished Princesshay shopping area which has recently been given a £133 million revamp, the Award winning Gidleigh Park chef Michael Caines opening the restaurant Michael Caines at nearby Abode Hotel and Jamie Oliver recently opening his “Jamie's Italian” restaurant.

Further developments include the Guildhall shopping centre which is currently undergoing a £12 million upgrade to include the creation of a brand new dining destination in the heart of Exeter. Scheduled to open in May this year, and the £26 million pound planned development of the current bus station area into a new swimming pool and leisure complex, due to open in 2018.

Clearly to support the increase in employment opportunities Exeter has a number of new housing developments in planning or in progress. The biggest development is Cranbrook, a New Town sited on the eastern boundary of Exeter.

With 2000 new homes, shops and two new schools already built and a further 6000 homes being completed by 2031, Cranbrook is fast becoming a thriving community. The new Cranbrook rail station is now open, providing direct rail links to London.

Offering yields from around 4.5%, Cranbrook has been and still is a favorite for Buy to Let investors. The new properties are so popular some are being let off plan as prospective tenants look to secure a new home. The recent stamp duty changes have not so far put off investors as the developers look to “do deals” to ensure their houses keep selling.  We continue to see a high demand for these properties.

This is just a brief taste of how Exeter is growing both in employment and property investment opportunities. During 2016 we will be looking at how the Exeter property market is expanding and highlighting the ups (and downs).

In this year’s newsletters we will continue to keep you up to date on property investment legislative changes and opportunities. We will also be featuring case studies from landlords and investors looking at their investment experiences and specific housing topics starting next month with student accommodation and how this is changing.

I hope you will continue to find theses newsletters informative, please feel free to contact me with your own stories good (and bad).

Chris Perring Managing Director Martin & Co (Exeter) 

Renting: Tips for Tenants

With ever-soaring house prices, renting has become a viable – and common – option for many people across the UK. The Telegraph website states that 3.9 million people in the UK rent their property. Since the process of renting is becoming more mainstream, many tenants fail to properly read their tenancy agreements and can find themselves caught short if they aren’t fully informed.

We’ve pulled together some top tips for tenants, so that you can get the most from your tenancy.

Know your Tenancy Agreement

When signing a tenancy agreement, as a tenant you have legal safeguards to protect you, including your right to:

• Live in a well-maintained property; safe and in a good state of repair.
• Have “quiet enjoyment” of the property.
• Have your deposit registered in a Government approved scheme, which assures you that your money is held safely during the tenancy and gives you of the right to agree to any deductions requested at the end.
• Be protected from unfair eviction.

There is a lot of Government guidance available to you including a Right to Rent Guide which your Landlord or Letting Agent is now legally obliged to provide to you.  A link to the guide is here: 

Your Responsibilities

You also have responsibilities as a tenant, to protect yourself, the landlord and the property. Some of your responsibilities include:

• Access – You must allow your landlord access to carry out repairs – they must give you 24hours notice and the time must be reasonable unless in a state of emergency.
• Pay the agreed rent – even if you are in a dispute with your landlord over repairs etc.
• Damages  - Cover the cost of any damages incurred by yourself, family, friends or visitors to the property.
• Safety – You must replace batteries in carbon monoxide and smoke alarms and report to the landlord/managing agent if they become faulty.
• General repairs – You must also report any other repairs which fall under your Landlord’s obligations and become apparent during the Tenancy.   All repairs necessary should be reported in writing.
• Lodgers – You must not sublet, assign or permit anyone to live in your property without express permission from your Landlord.
• Right to rent checks – in addition to the usual reference checks, under new Immigration legislation you will need to provide original copies of documentation which proves your nationality and your right to remain in the UK.  If you have a time limited right to remain then you will need to comply with further follow up checks.

It is important to uphold your responsibilities as a tenant, as your landlord may take legal action to evict you – and cover costs where appropriate – should you fail to comply. You can read more about how to be a model tenant.

A combination of rights and responsibilities ensures a harmonious and protected tenancy for both the tenant and landlord.

Landlord Maintenance Responsibilities

As part of your Landlord’s obligations to you he/she should ensure that your property is well maintained, safe and in a good state of repair.

The legislation covering safety in rented accommodation includes the following:

• Gas safety – All gas equipment must be fitted and checked by a Gas Safe registered engineer, including boilers, gas stoves etc.  The landlord must provide a gas safety check record before you move in and further annual checks must be carried out.
• Electrical safety – your landlord must ensure that the electrics and all sockets and electrical equipment that comes with the property (i.e. ovens, kettles etc) are safe.
• Smoke alarms and Carbon Monoxide Detectors – Your landlord must provide a smoke alarm on each storey of the property and a carbon monoxide detector in rooms with a solid fuel burning appliance, such as a wood burner.
• Furnishings –  If furnishings are provided they must be fire safe
• Legionella’s Disease – your Landlord must carry out a risk assessment and, if a risk is identified, take appropriate steps to minimise or remove the risk.

Deposits

A deposit is usually paid prior to moving into a property. Since April 6th 2007 landlords and letting agents have been required to register tenants’ deposits in a Government approved scheme, if you have an Assured Shorthold Tenancy.

You should get your deposit back if you:

• Meet the terms of your tenancy agreement
• Don’t damage the property
• Pay your rent and bills

Your landlord or letting agent must put your deposit in the scheme within 30 days of receiving it.

You can rest assured, Martin & Co. are members of the largest approved scheme, the Deposit Protection Service (DPS).

If you have problems getting your deposit back, please contact the deposit protection scheme. Here are our top 10 tips on keeping your deposit at the end of a tenancy.

Assured Shorthold Tenancy

This is the most common type of tenancy agreement used in England and Wales.  It is also referred to as an ‘AST’.

The agreement sets out tenant and landlord obligations and all terms which have been agreed between them including the rent payable, length of tenancy, any special clauses agreed etc.

How Do You Know if you have an Assured Shorthold Tenancy Agreement?

You will have an AST if:

• You moved into the property on or after 28th February 1997
• You have exclusive possession of the property
• The landlord does not live at the property with you (or within the same building as it was originally built)
• You are paying less than £100,000 a year in rent.
• You are an individual
• You use the property as your only or principal home.

For more information contact your local Martin & Co office. You can also visit the Martin and Co blog, where we have a range of news and articles, specifically for tenants.