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.

Stock of homes on sale halves in 10 years according to NAEA

The supply of available housing on sale has almost halved in the past 10 years according to the National Association of Estate Agents.

The average number of properties available per member branch in December 2015 fell to 37 properties. This was one of the lowest monthly figures for 2015 and almost half the number available in December 2005 when there were an average 72 houses per branch. 

Even as recently as December 2014 there were 45 houses available.

While the number of house hunters registered per branch fell to 374 in December from 403 last month - an expected seasonal trend - the number of house hunters per branch has gradually increased year on year. 

In December 2014, there were 360 potential buyers registered at each branch, up from 302 in December 2005.

“Whilst we expect figures for supply and demand to be seasonally low in December, the year 2015 overall does not paint a positive picture for the housing market. Supply of housing is half of what it was 10 years ago, yet the number of home buyers on the books has been gradually increasing. When there is such a huge and widening gap between supply anddemand, a level playing field seems further out of reach for many would be house buyers” says NAEA managing director Mark Hayward.

He says government efforts to help first time buyers enter the property market via Help to Buy and plans to build new starter homes are yet to take effect. The number of sales to FTBs stands at 24 per cent, a two per cent drop from December 2014. 

Some 44 per cent of NAEA member agents canvassed have reported seeing buyers seeking to beat the April 1 additional homes stamp duty surcharge deadline. 

“The issue of lack of supply needs to be solved, but it isn’t going to be done anytime soon. We are still waiting to see new homes being built; and whilst we wait, house prices continue to rise.  There is some potential light for first time buyers however, once the new tax rate increase in April is in place we may see less investment from buy-to-let or second home investors, which may mean less competition for first time buyers” says Hayward.

Written by Estate Agent Today

10 March – Half Day CPD Legal Updates

RICS Exeter and Stephens Scown invite you to attend this afternoon CPD session which will be commencing with a buffet lunch and followed by speakers from Stephens Scown and from Exeter City Council covering topics including: Construction Disputes, Planning Law, Development/lease issues, the Bus Station Development.

http://www.rics.org/uk/training-events/conferences-seminars/half-day-cpd-legal-updates/exeter/

28 January - Drones & InfraRed Technology

Join RICS Exeter for this foray into the future with speakers from IRT Surveyors talking about drones and infra red technology. Stuart Macrostie and his colleague Stephen Carrington are presenting this interesting and informative presentation covering the use of infra-red for identifying building defects, Quantified energy loss and predictive maintenance and the also covering a whole range of uses of drones.The event includes refreshments and the opportunity to network

http://www.rics.org/uk/training-events/conferences-seminars/flying-saucers--infrared-technology/exeter/

The Buy-To-Let Landlord Loophole

Since George Osborne’s announcement that Stamp Duty is set to be increased for landlords buying second homes, the buy-to-let industry has reeled.

The industry expects many landlords to accelerate their deals to completion before the new tax surcharge goes live in April.

However, more pragmatic investors have scrutinised the legislation and found their silver lining – corporations are exempt from paying extra.

Landlords who are seriously considering further expansions to their property portfolios can look at flipping their properties into a privately owned business, therefore swapping landlord taxes for corporation taxes.

The number of mortgages approved for companies has gone up more than 200pc since the Chancellor’s first wave of tax relief changes in July 2015. This isn’t a coincidence.

The benefits are two-fold. Firstly, you get to avoid the disappointing Stamp Duty surcharge of 3pc on top of your current rate, making purchases cheaper. Secondly, landlords with corporations will be subject to corporation tax, which is set to reduce to 18pc (currently 20pc) by 2020. Meanwhile, landlord taxes will increase to over 100pc of profit for some.

Furthermore, and perhaps more importantly, landlords will get increased security against further legislative interference into the property sector in future budgets. The Chancellor has already made significant changes to property in the past two budgets, there’s no reason to believe he won’t target it again in 2016.

Turning your portfolio into a company may seem a no-brainer, but things aren’t as straightforward as that. Landlords will only be exempt from the surcharge if they have a portfolio of more than 15 properties, therefore incentivising only those who have smaller-scale portfolios.

Also, setting up as a corporation isn’t easy, there is no guarantee that flipping your portfolio into a business will make you significantly more money, especially given the cost of start-up. Moreover, the Chancellor’s recent trend of targeting the sector may result in a focused move to punish property corporations.

Nevertheless, smaller landlords will be enticed – especially if they have the means of going into business with other small landlords. By combining two or three portfolios into one larger one, landlords will mutually benefit from smaller surcharges and also be able to build a foundation for the future – removing themselves from the bracket of ‘small’ landlord which seem to be the main target in the Chancellor’s plans.

The logic behind the move is understandable – get the accidental landlords to sell up, while also giving first-time buyers the initiative to purchase the property; landlords will pay more tax on a property even if they’ve made an identical offer to a non-landlord!

Furthermore, flushing out one section of the landlord demographic will create a more centralised and balanced private rental sector, with substantially fewer players in the buy-to-let game.

The feasibility of buy-to-let was put into question by the Chancellor’s budgets this year, but there is no reason to think that the industry is on its knees. There is plenty of leeway for landlords to adapt their portfolios in the immediate and distant future, plus the long-term benefits of buy-to-let are the same as ever.

To find out more about how you can shift your portfolio to your advantage in the coming months and years, please contact our office on 01392 254488.

Legislation & Buy-to-let Review

So, 2015 is over and if the last year is anything to go by, we can all look forward to a prosperous and eventful 2016.  If you are an Exeter homeowner, you will be pleased to hear that property prices increased by £314.77 per week in 2015*.  I always find that satisfying to hear, knowing that while having a week holiday sitting on a beach or on the moors, my property is busy earning money.  On the flip side however, for the people not yet on the housing ladder, this is making their aspirations of homeownership a distant dream.

For landlords, 2016 is going to see some tough new changes.  We have already seen in 2015 the introduction of new section 21 notices, smoke & carbon monoxide regulations, ‘how to rent’ checklists and the Deregulation Act.  2016 is set to bring the ‘right to rent’ regulations, introduced in the Immigration Act, which will require all tenants to be checked for immigration status and hefty civil fines on landlords for non-compliance, this could even be increased to prison sentences under the Immigration Bill 2015. So called ‘revenge evictions’ are now a thing of the past and landlords will have to ensure they deal with maintenance issues quickly and efficiently if they wish to serve notice.

Currently, a wear and tear allowance is available to landlords who let furnished residential accommodation. The allowance is designed to cover the cost of replacing furniture and furnishings and is available regardless of whether the landlord has actually spent any money on replacements in the tax year.

However, in the summer 2015 Budget the Chancellor announced plans to replace the allowance with a deduction for the actual costs of replacement. The new rules will apply from 1 April 2016 for corporation tax purposes and 6 April 2016 for income tax purposes.

In the Autumn Statement, the Chancellor announced that buy-to-let landlords and people buying second homes will face an additional 3% surcharge on each band of their stamp duty land tax bill, commencing from April 2016. The rate of duty will be as follows: 

Property value	Standard rate(currently)	Buy-to-let/second home rate (from April 2016)
0 -£125,000	0%	3%
£125 – £250,000	2%	5%
£250 – £925,000	5%	8%
£925 – £1.5m	10%	13%
over £1.5m	12%	15%

If you are lucky enough to be in a position to own one or more investment properties, you will have benefitted from the property value increases and rising rents, which should more than cover the expense of the extra due diligence, loss of the wear and tear allowance and extra stamp duty.  

For tenants, it is likely that rents will rise as demand continues to outstrip supply, even with the many properties that are being built at Cranbrook and other new developments.  These rises will ensure that a higher standard of property is available however, as landlords will have to make sure their properties are safe, well maintained and only let to people who are allowed to live there.

Similarly for buyers, it is likely that prices will continue to rise throughout the year.  Like I mentioned in last months’ column, this is good if you are downsizing and maybe even if you are upsizing in certain circumstances, however first time buyers will need to save longer to build the required deposit and fees.

The Help to Buy ISA has been introduced by the government to help first time buyers put money aside for that all important first property purchase. They can save up to £200 a month, which the government will then top up by 25%, up to a maximum of £3,000. For couples, this could mean a considerable £6000 towards their first home together.  

Well, that’s a bit of a mixed bag, but in general I believe most of these points will be good for the property market and will raise the quality of accommodation.  The property market continues to throw curve balls so watch this space for what’s to come in 2016!

  

*Data taken from Zoopla on 09/12/2015

Winter Property Marketing

This time of year I get no end of owners telling me that they are waiting until the New Year to put their property on the market.  This may sound familiar and could work very well for you, however potentially you could miss out on over 60,000* property searches every week and that is just from one website!  Looking on the same website from which the above figure was taken, at the time of writing, in the last 7 days there have been 87 properties listed in Exeter, 34 of these were price reductions and 53 new to the market.  I know when I have looked myself for new property to buy  I have usually already trawled through all the properties on the market so just want to see the newest ones as these are the prime targets for me  to secure a good quality property. 

When it comes to marketing property, there are usually considerably fewer properties coming to the market at this time of year, so the chances of your property being seen are higher.  I find winter photographs taken in good weather with blue skies can help to enhance some of the best features.  Although gardens may not be at their prime, internal photographs of open fires and warm surroundings could be the catch for some eager buyers.  No one particularly likes traipsing around doing viewings in the rain so it is important to make the property as warm and inviting as possible.  Call me Scrooge but Christmas will eventually come and go very quickly so looking at it as a business transaction, I would personally not postpone marketing until after it, but of course everyone has their own views, including my wife.

If you would prefer to wait to market your property until after the New Year, it’s a good idea to have the photographs and details prepared beforehand so it can be immediately put onto the market when the time is right.

Due to the large supply and demand issue we are facing in the area, prices are set to go one way.  While this may be good news if you are thinking of waiting to sell and then downsizing when you do move; if you are looking to upsize or buy your first property, time is of the essence.  If your property increases in value by 1%, excellent, however if the more expensive property you want to buy also increases by 1%, that gap is getting larger and it may just be the difference between being affordable or out of reach. 

To try to reduce this effect, if you are planning to stay in the property over the winter and then sell, use these few months to carry out all those little jobs that you have been meaning to do.  I have inset halogen spotlights in my bathroom for example and although they look nice, they do tend to blow fairly frequently so I currently have two that are out.  This doesn’t particularly bother me, however if I was trying to sell my property and someone saw this, they may think there is an issue with the lighting system or have concerns about what else may not be working in the property.  Perhaps it would be worth getting a friend to have a look around the house and for them to suggest touch-ups?

I hope you all have a lovely Christmas & New Year and if you would like more inspiration or ideas on how to make the most of your property prior to selling or letting, please do call me on 01392 254488 (yes I am in the office between Christmas & New Year), Jon.

*Number of searches carried out on Rightmove in Exeter for week ending 09/11/2015

Government confirms Wear & Tear change after 170 consultation responses

HM Revenue and Customs has published the responses it has received to its 12 week consultation on changing the Wear and Tear Allowance for buy to let landlords - only 170 responses were received, 137 of those from individuals.

The government has formally said that, in the light of the consultation results, it is going ahead with replacing the current administration of the allowance with a system whereby only actual expenditure will be reimbursed.

The official HMRC summary of the responses admits that “many respondents expressed support for maintaining a Wear and Tear Allowance, principally because they saw it as simple” but that “a significant number of stakeholders agreed with the Government that the Wear and Tear Allowance was not fair, both as it only applies to landlords offully furnished properties and because itprovides relief where no expenses have been incurred.”

In the light of the consultations, HMRC says the government is keen on “”minimising complexity” in the way the allowance is administered in future. 

To that end, the HMRC summary says the government has ruled out extending the scope of the allowance, and has decided against any transitional arrangements. However, in future the allowance will “include the cost of disposing of old assets”.

The government is now publishing draft legislation for technical consultation on how the allowance will in future be implemented. There are now eight weeks of consultation on this draft legislation. 

Details of the responses and the further consultation are here.

Article courtesy of Letting Agent Today 

The Chancellor has announced a shock 3% extra stamp duty on buy-to-let!

The full details are yet to be released but it has been announced today that George Osborne will be introducing a 3% surcharge on stamp duty for second homes and buy-to-let properties from April 2016!

Get buying your new properties now to save considerable amounts!

The Industry in a Nutshell

350,000 ‘Homeless’ by 2020

Rightmove has released figures stating that a lack of housing will result in 350,000 households being excluded from the housing market by 2020.

Those on low and middle-incomes will be affected the worst, as rents and house prices will keep going up. Households in London and the South East are particularly at risk: 26,000 households in London and 11,500 in the South East are already being priced out a year.

Worryingly, the data does not include right-to-buy property and the sale of council homes, which could actually impact house prices more severely than Rightmove have predicted.

And Only a Quarter Will Own a Home by 2025

By 2025 only 26pc of ‘generation rent’ (20-39yr olds) will own their own home.

PwC pointed out that 38pc had bought a house in 2013.

Meanwhile, 59pc of generation rent will be in private rental accommodation, up from 45pc in 2013.

The expected shift rings true – houses are getting far too expensive and only those earning well over the national average salary can realistically afford to buy a house. A typical required income would be £50,000 to fund a purchase.

Source: PwC

Buy-to-Let Mortgage Rates Plunge Again

Rental properties are in high demand. Huge demand, in fact. Rents are going up because supply is going down.

As such, lenders are climbing over each other to offer the best rates to investors. Landlord loans have fallen significantly in the past five years, from a typical 5.23pc two-year fixed term in 2010, to 3.26pc.

Five-year fixed rates have also fallen from 6.12pc to 4.06pc in the same period.*

Landlord lending was up 7pc in September, and is up 36pc year on year, according to the Council of Mortgage Lenders data.**

However, interest rates are likely to increase next year, which should bring an end to the low-cost deals.

Source: http://www.express.co.uk/finance/personalfinance/619761/Buy-To-Let-mortgage-rates-plunge-lenders-enter-loan-war

*moneyfacts

** CML

Buy-to-Luton

Luton has seen its rent increase more than anywhere in the UK this year, besides London.

Rents in Luton have risen by 10.4% this year, to an average of £722pcm. The average across the UK (excluding London) has been 3%.

Landlords could benefit from buy-to-let investments in the area as renters who struggle to meet the demands of the capital move north to commute.

Other areas around the outskirts of London have also registered big increases in rent, including Swindon and Southend on Sea (both 9.7%).

We have recently published a set of reports categorising the best buy-to-let investment locations in the UK. Download them here for an insight into where you could invest next.

Source: This is Money

Nine Ways To Maximise Your Buy-To-Let Profits

Many landlords are concerned that announced tax changes in the buy-to-let sector will wipe out their profits.

So, how can you claim against the tax? Most of the basics still apply – buying and furnishing properties are capital expenditure and therefore not claimable – but there are elements of your portfolio that are claimable.

Mortgage interest

You are currently allowed to offset your mortgage interest against your tax bill at your personal tax rate.

Unfortunately, this is set to change – controversially. Landlords won’t be able to deduct their mortgage from their rental income once the changes are implemented. Instead, you will be taxed on the rent you have received, not the profit you make. Therefore, you can be taxed on profit that isn’t there – you can be taxed more than 100% of your profit.

Mortgage fees

Broker and arrangement fees are tax deductible and claimed for the year that the mortgage was arranged.

Letting agent fees

Based on a national average rent of £749 and an average agent’s fee of 10-15pc of the monthly income, you can claim back all of these. This could equate to £1,350 a year.

Securing a tenant

Landlords who find tenants without the help of an agent can claim back the cost of advertising for tenants, purchasing tenancy agreement, credit checking and other costs. You can expect these to cost roughly £300 each time a new tenant moves into your property.

Building and contents insurance

Cover for low-risk buy-to-let properties costs around £200 a year. This is claimable.

Maintenance and repairs

Although getting the property fit for purpose is capital expenditure, keeping it that way isn’t. Wear and tear is claimable. Maintenance costs include mending windows and doors, white goods, furniture and decorating.

Furniture

Another area subject to change. Your current 10pc wear and tear allowance is being replaced by an ‘actual costs’ tax allowance. Therefore, you will only be able to claim back on the furniture you replace in a tax year.

Ground rent and service

If you are a leaseholder you probably pay ground rent to the freeholder. You can also claim back the costs of gardening and electrical costs, cleaning, heating and lighting in common areas, and security and concierge staff. Depending on how many of these you incur a year, it would make sense to claim on them.

Council tax and utility tax

If you are paying the bills that a tenant would normally pay, you can claim back the whole cost. A major benefit is that you can claim these costs even during void periods.

Others

Other direct costs such as phone calls, stationery and traveling expenses to make home visits are claimable.

You can also claim back on the fee of an accountant who prepares your tax return.

Right to Rent start date announced

The Government has announced that from 1 February 2016 all private landlords in England will have to check new tenants have the right to be in the UK before renting out their property.

Under the new rules, landlords who fail to check a potential tenant’s ‘Right to Rent’ will face penalties of up to £3,000 per tenant.

The new law will mean that private landlords, including those who sublet or take in lodgers, must check the right of prospective tenants to be in the country to avoid being hit with a penalty.

Right to Rent was introduced in the Immigration Act 2014 as part of the Government’s reforms to build a fairer and more effective immigration system. The first phase was launched in parts of the West Midlands, and the most recent announcement is the next stage of the scheme’s national roll out. 

Immigration minister James Brokenshire said: “Right to Rent checks are quick and simple, and many responsible landlords already do them as a matter of routine. We are providing landlords in England with all the advice and support they need before the checks go live on 1 February 2016.

“The new rules are part of the Immigration Act 2014 which introduced measures to reform the immigration system. Right to Rent is about deterring those who are illegally resident from remaining in the UK. Those with a legitimate right to be here will be able to prove this easily and will not be adversely affected.”

But despite Brokenshire’s assurances, Right to Rent has received widespread criticism with landlord groups claiming landlords are being forced to actas border control, and suggestions that anyone with a foreign-sounding name could be turned down for a rental property.

Under Right to Rent, landlords should check identity documents for all new tenants and take copies. The Government claims scheme has been designed to make it straightforward for people to evidence their right to rent and a range of commonly available documents can be used, including:

• a UK passport
• a European Economic Area passport or identity card
• a permanent residence card or travel document showing indefinite leave to remain
• a Home Office immigration status document
• a certificate of registration or naturalisation as a British citizen

The checks should be carried out on all new tenants and are backed up by codes of practice – including guidance on avoiding unlawful discrimination – which was drawn up with the assistance of the Human Rights Commission.

There are four steps involved in making a Right to Rent check:

• Check which adult tenants will live in the property as their only or main home.
• Ask tenants for the original documents that show they have the right to be in the UK.
• Check the documents are valid with the tenant present.
• Make and keep copies of the documents and record the date you made the check.

If a potential tenant has an outstanding immigration application or appeal with the Home Office, landlords can conduct a check on that person’s ‘right to rent’ via the Landlords’ Checking Service.

Guidance to help both landlords and tenants understand the new rules is available on GOV.UK.

Article courtesy of Landlord Today

Exeter Students

Love them or hate them, students are an integral and important part of the property market in Exeter.  From purpose built apartment blocks to privately owned multi bedroom houses, there is a wide choice of accommodation for students to choose from.

Exeter University is now ranked 93^rd in the Times Higher Education World University Rankings, placing it among the very best institutions across the globe and it is this together with a number of other factors which is providing yet another boost to the Exeter property market with more students wanting to study in the city and more private landlords looking to invest.

I have many potential landlords contacting me to discuss investing in a student property. They hear  of the high annual income that can be achieved but sometimes underestimate the work involved in managing a student property and keeping up to date with the changing legal requirements.

Potential and existing landlords should consider what may happen if the property is not let or if additional licencing comes into place preventing the ability to renew HMO licences in certain parts of the city.  Although there is no sign of the market cooling soon, it is worth having a contingency plan, just in case. It is true that in the majority of cases there are excellent annual returns to be made, last year we found all our properties let extremely quickly and demand outstripped supply, meaning landlords were also able to select the best tenants for their properties. I can see no reason why the same won’t be true this year.

I have sold many student properties over the last few years all generally achieving high gross annual yields; however it is worth factoring in to financial calculations potential expenditures, such as replacing furniture, redecorating and dealing with tenancy matters.  With changes to tax allowances coming into place and the potential abolition of the 10% furnished property allowance, it is worth talking to a financial adviser to look at your personal circumstances before you make the purchase.

Students nowadays look for properties that are well equipped, well maintained, clean and tidy.  They ask questions about the landlord and if the property is managed by an agent or the landlord, they are also knowledgeable about the requirements for Energy Performance Certificates, fire detection and licences. In other words, if a property has been neglected, the likelihood is that it will not be let.

If you are looking for information on the requirements for an HMO licence contact us or follow this link to Exeter City Councils’ website: http://www.exeter.gov.uk/index.aspx?articleid=11223.

Generally in the current market student properties do make good investments, however it is worth looking at the pricing and location very carefully. There are few properties on the market and they are currently so popular that the prices are starting to increase quickly.  If you are looking at buying or selling a student property with or without tenants in situ, please call me on 01392 254488 to discuss the current market. I am always happy to talk to potential and existing landlords.

Rental price growth slows

Rent price rises have slowed to match the pace of house price growth in the UK after nine months of sustained faster growth, according to HomeLet.

The HomeLet Rental Index shows that rent prices have slowed below double figures to an average annual increase of 8.5% across the UK.

For the three months to September 2015, every region of the UK with the exception of the East Midlands has seen annual rent price rises slow down or move into negative growth.

Nine out of 12 UK regions are still seeing rent prices rise on an annual basis, with the largest increases seen in Scotland at 8.4%, the East Midlands at 7.7% and Greater London at 6.6%. The figures also show three regions in negative annual price movement, with prices in the North West 4.6% lower than a year ago, 2.2% lower in East Anglia and 1.4% lower in Northern Ireland.

Comparing September figures to the previous month, the index reveals that only three regions have seen rent prices rise since August. In the three months to September 2015 only Scotland, the East Midlands and West Midlands have seen prices rise – by 1.2%, 1.4% and 1.4% respectively.

Every other region of the UK has seen rent prices fall modestly in the three months to September 2015, with the largest price reductions seen in the South West, the North East and North West at -2.4%, -2.3% and -2.2% respectively. 

Martin Totty, Barbon Insurance Group’s chief executive officer, said: "The UK economy has dipped into 'negative inflation' which is a boost to consumers' spending power and, ultimately, their real income. Affordability is an important factor in determining rents. Depending on what happens with inflation and real incomes over the coming months, could have a bearing on future rental price trends especially where, in certain areas of the country, the supply of rental properties is not keeping pace with demand from those wishing to be private sector renters.”

Article courtesy of Landlord Today