BUY-TO-LET ADVICE FROM THE NAEA

Buying a property to let isn't as straightforward as some may think. Buy to Let is very different from buying your own home.

There is a certain kind of dinner party where the favourite topic of conversation is who has invested in a buy-to-let investment property, who has yet to take the plunge, and where the next best place to become a landlord is likely to be.  Yet buying a property for investment purposes is very different from buying a home, and there are a number of hazards to avoid.

TOP 10 TIPS FOR WOULD BE BUY TO LET LANDLORDS

• Do some research - Buy to let can be a legal, practical and financial minefield, and you will need to do your homework. Research the market, with the help of your local NAEA estate and lettings agents, who will be able to advise on demand and any other issues in the area you are considering.

• Know the demand - Buying where there is no rental demand can be fatal to the buy to let investor, yet it is a surprisingly common mistake. Make sure you are not investing in a market which is already saturated with the sort of property you have to offer, and do not be misled by stories of fast profits.

• Understand your finances - Keep in mind whether you are in the market for capital gain when you sell or simply monthly rental income. This will help you decide what to buy and where, and what kind of mortgage you need.

• Buy carefully - Make sure you buy a property which allows for sufficient profit margin. Do not go for a 'bargain' property which may turn into a money pit very quickly. Major repairs require much time and effort and paying more for a property which is in better condition can be a wise move.

• Decorate to demand - Don't make the mistake of decorating and furnishing the property to your own tastes - keep it simple, with clean lines and do not fall into self indulgence. You are there to make money out of the property, so keep your market in mind but do not treat it like a dolls house.

• Check for safety - By law you must make sure that the property you are letting complies with various safety regulations, like furniture and furnishings fire safety, gas safety, electrical equipment safety and that it contains a smoke detector. You'll also need certificates to prove these regulations have been met.

• Be aware of new and updated regulations as and when they arise. Failure to comply with the law can result in serious consequences. The best way to make sure you are kept up to date is to use an NAEA agent who can make you aware of them, while also ensuring you comply.

• Know your responsibilities - You, your letting agent and your tenant have different responsibilities, and it is important to know where these lie. As the landlord you will be expected to pay buildings insurance, ground rent and service charges and insure any items you leave in the property. Your letting agent will be able to advise on others' responsibilities as part of your contract.

• Prepare for voids - Your property may be empty and not generate any income for periods of time, and you need to be ready for this. Advertising for new tenants, painting walls and replacing carpets can take months off your lettings calendar and you should have a plan in place for when this happens.

• Move with the market - Know that, if the market softens, you will have to lower your rent in order to stay competitive, no matter how desirable your property. If you are in it for the long term this should not matter, as the important thing is that your property continues to generate a fee for you.

• Recruit a managing or letting agent - Knowing where to advertise your property, how to vet your tenants and the kind of lease you should use can be tricky if you have no experience. Being a landlord is a full time responsibility, 365 days a year and is best not left to friends or family. A good agent who is affiliated to the NAEA will find tenants, do background checks, draw up the lease, collect rent, and inspect the property, thereby removing much of the hassle involved.

Tenant Monitor, Free Eviction & Rent and Legal Protection – going the extra mile to keep our landlord’s safe

In today’s economic climate most landlord’s agree that it makes sense to carry out some background checks on prospective tenants before handing over the keys – with many using letting agents with access to professional tenant vetting companies to do the job for them because they have access and can give information about credit history and debt. But many landlords and letting agents don’t know is that every 5 min 12 sec someone is declared insolvent or bankrupt in the UK, and over 1,900 County Court Judgements are now issued every day. These figures include tenants, and beg the question how does a landlord or letting agent keep track of tenants that are falling into financial difficulty after they’ve moved in?

Martin & Co Exeter believes they’ve found the answer to making their tenant background checks more than just a snapshot in time. Working with The Landlord Hub, they have access to a product that not only carries out full comprehensive checks on income, rental history and credit run at the outset, but also monitors the tenant’s credit record throughout the tenancy term and alerts them to any changes – something that up until now hasn’t been possible with other providers.

Martin & Co Exeter said ‘Every month we’re provided with an update on any tenants that have had new detrimental credit information about them – these are tenants who have previously passed referencing checks, but you can’t predict the future and it helps us and our landlords to be informed. We find that most letting agents offer referencing as a ‘snap-shot’ in time – but we wanted to offer more than that. We’ve seen a huge increase in the numbers of tenants entering into IVA’s or being registered with CCJ’s or Bankruptcies over the last 12 months. So we want to ensure that our landlords have a ‘snap-shot’ that constantly updates itself – in some cases it’s an early warning of potential problems’.

An early warning sounds like a sensible idea, especially given that the number of tenant evictions in England and Wales are also reaching record highs. Last year alone 37,739 eviction court cases went the full distance to requiring a bailiff to remove the tenant.

Luckily, Martin & Co Exeter also provide Free Eviction cover for landlords, should tenants default on rental payments, to ensure that landlords can gain possession of their property again as soon as possible.

Chris from Martin & Co Exeter said ‘Free Eviction is a great feature of our service – along with Tenant Monitor it means we’ve got all bases covered for our landlords. It’s great to be able to provide solutions that really help - when we’re talking to our landlords we can assure them that if there is a problem tenant that won’t pay, we can get them out of their property with no additional costs for them – it’s why so many landlords trust us, because one of a landlord’s biggest worries is having a tenant who won’t leave – especially when the average cost of a tenant eviction currently sits at approximately £1, 650’.

With such robust offerings like Tenant Monitor and Free Eviction available, it made sense for Martin & Co to offer an equally attractive rent protection product to complement their offering. In late 2014, they launched their Rent and Legal Protection – an innovative and high quality product that a landlord can register an interest in that has competitive pricing and easy administration.

Many other products on the market will only cover the landlord if the tenant fails to pay rent whereas Martin & Co’s Rent and Legal Protection covers many other aspects, in fact cover includes:  

·         repossession to gain possession of the property from the tenant, legal assistance up to £75,000

·         payment of rent arrears for an UNLIMITED time whilst the tenant still occupies the property, upto a maximum of £75, 000

·         Nil excess

·         75% of rent paid for up to 2 months after vacant possession if property is damaged and needs repairing and is therefore not able to be re-let.

·         Any breach of tenancy, now including anti-social behaviour

·         Eviction of squatters

·         Legal assistance for defended actions

·         Rents upto £8,000 and 6 or 12 month options

All of these elements make sure that Martin & Co customers are provided with the highest level of protection from a unique market leading package.

For more information on Tenant Monitor or Free Eviction or Rent and Legal Protection from Martin & Co Exeter, contact 01392 254488 or email exetersales@martinco.com. 

Can Buy to Let in Exeter add to your pension pot?

We are finding that we are increasingly dealing with first-time landlords who are looking at property as an alternative to, or to run alongside, a pension scheme. Landlords can currently look to achieve average gross yields of around 5% in Exeter and if bought in the right area, they can then hope to sell the property for a profit. Capital appreciation is an important factor to take into account when looking at Buy to Let.

Many people turn to the property market for long-term investments when gains from other investments are not proving fruitful. In the current climate we are seeing a lot of new landlords because they are not getting the returns from the traditional stock market or bank investments routes.

A property is a tangible asset, which many people like, and the combination of income and capital growth is attractive to most – whether a landlord wishes to sell on retiring in 10, 15 or 20 years, historically property prices have risen over a significant time-frame. You have to be prepared to weather the storm with the property market and works better when you invest for the long term. If the property market does take a hit, providing you hold your nerve, you could still come out of it at the end with a profit.

I would suggest that when people are thinking about their future and retirement that it’s good to have your money invested in a variety of ways and not purely rely on a pension. Investing in property is another option that should be considered.

Always ensure you are properly informed and, if in doubt, feel free to come in and see me, Chris or the team in our office on South Street.

6.76% Gross Yield!

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Monopoly in Exeter... How would you play?

During the week I spoke with a number of local landlords regarding the property market in Exeter, when the subject of risk against returns arose.

All landlords are different in the way they play the property game. Some landlords prefer to accept a modest yield/return on their investment for an increased certainty of finding a quality tenant. Others are interested in high returns, with a greater risk with regards to the quality of the tenant and void periods. Before you start playing, it is a good idea to have a game plan.

For a low risk investment, you could buy property in the areas of Exeter which are perceived as being more desirable, such as St Leonards and Pennsylvania, where you may be able to achieve an annual yield of around 4-5%.  These properties tend to let very quickly and achieve a high rent, however they are expensive to purchase, which then pulls down the rental yield.

If you are after annual yields of 5-7% and over, you could take more of a risk with houses of multiple occupancy in the popular student areas, however you have more of a risk of wear and tear and potential damage on the property.  Similarly if you have read our previous articles about capital growth over yield you will know that generally the less you spend on a property, the higher gross yield you should be able to achieve, however you will likely achieve a lower capital growth.

If you would like any advice on choosing properties, come and see us at our office on South Street or email exetersales@martinco.com

Pensions reforms April 2015

This April’s Pension reforms have already increased interest in buy to let investments from the over 55’s as they free up their pension pots and look for alternatives to annuities which I have to say in my view are a poor investment.

This is supported by the increased number of enquiries coming into to our office from over 55’s looking to invest in the Exeter buy to let market.  Most of those who contacted me knew some of the challenges, quite a few didn’t, so I would advise anyone looking to enter the buy to let market to seek professional advice first. Buy to let investments are normally a very good investment if put together correctly so potential new comers to the market should not be put off. 

For those of you not aware of the pension changes taking place this April the following is a summary:

The Taxation of Pensions Bill will change the tax rules to allow over 55’s to access their defined contribution pension pots with more flexibility from April 2015.  Under current rules, savers who want to take their pension as a lump sum can take 25% of their pot tax-free and put the remaining 75% in a drawdown account. Any amount withdrawn from the drawdown account is then taxed at the marginal rate of income tax.

From April 2015, there will be the option to take multiple lump sums from a pot without having to open a drawdown account. 25% of each lump sum will be tax-free and the remaining 75% will be taxed at the individual's marginal rate.

You can get further information / guidance from your own tax advisor or by visiting the government website: https://www.gov.uk/government/publications/pension-flexibility-2015

If you have already decided to invest in the buy to let market please come and talk to me for unbiased advice on the best locations and property types in the Exeter area. I can be contacted on 01392 254488 or by email at exetersales@martinco.com