Posts Tagged ‘BTL’

Lettings Agents Want BTL Market Regulated

Saturday, August 14th, 2010

Property firm movewithus has conducted research which indicated that 51% of the estate agents surveyed believe that the buy-to-let market should be regulated by the FSA (soon to be replaced by the Consumer Protection and Markets Authority (CPMA).

The survey questioned over 200 major estate agents across the UK.

Robin King, movewithus director, said: “If the advice given to buy-to-let investors had been regulated by a body, such as the FSA, we might have seen better investment advice and far fewer casualties when things went wrong in this sector. Buy-to-let is still a vulnerable market because of the type of properties being bought and so it is interesting to see that a significant proportion of estate agents themselves would like to see the sector regulated.”

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Buy-To-Let Landlords Warned To Protect Against Tenant Troubles

Thursday, July 15th, 2010

Buy-to-let landlords warned to protect against tenant troubles
15 July 2010

With the housing market still in a state of flux and predictions that house prices may fall further, many homeowners who are looking to move may consider renting their property out instead of selling.

However, moneysupermarket.com has warned homeowners who are considering this option to make sure they take out adequate landlords insurance as standard home insurance policies become invalid once you earn an income from your property.

With tenant demand for residential property continuing to rise, the proportion of landlords planning to buy new properties increasing and lenders slowly reintroducing good value buy-to-let mortgages, the number of people becoming landlords for the first time appears to be on the rise.

Whether you are moving into buy-to-let for investment, or have decided to go down this route to move home, getting the contract and paperwork right is essential and having adequate insurance in place is a must.

Last year, one in three landlords had tenants in arrears, so Brits shouldn’t skimp on their insurance. However it doesn’t have to break the bank, with standard landlord insurance available from as little as £93 a year from simple insurance, which covers loss of rent. For £134 a year, acumus will provide landlords with cover for legal expenses should they arise from incidents such as repossession, tenant default, and debt recovery.

Julie Owens, head of home insurance at moneysupermarket.com, said:

“Whether you’re looking at buy-to-let property for investment, extra income, or because you cannot sell your house, it is essential to have sufficient insurance to cover any financial losses connected with letting out a property. I advise anyone contemplating becoming a landlord to seek advice and get all of the relevant information before taking this venture on.”

“Landlord insurance which includes Rent Guarantee cover or legal expenses can be more expensive, however if things go wrong between a landlord and tenant legal proceedings can involve a hefty cost. It is important to have a good contract in place to know where each party stands should the tenant and landlord relationship fall sour.

“I advise insuring yourself against these circumstances before they arise, it is always better to be prepared and there are a number of suitable insurance policies for landlords on the market. The varying levels of cover available means it’s essential to do your research and pick the policy that is the best fit for your circumstances, policy wording can differ so it is vital to check the small print to determine exactly what is covered.”

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Buy-To-Let Will Remain A Strong Investment, Even If CGT Rises

Monday, June 14th, 2010

Leaders, a UK letting agent, are confident that buy-to-let will remain a popular investment option, even if the rate of Capital Gains Tax (CGT) rises.

CGT is currently set at a flat rate of 18 per cent but there has been widespread speculation that this will be converged with Income Tax bands at 20, 40 or even 50 per cent under the new coalition government.

Leaders’ managing director, Paul Weller, says:

“The potential of buy to let to provide an annual rental yield, as well as to provide capital gains in the long-term, has long appealed to a wide range of investors and will continue to appeal as an enduring asset class.

“We do not believe landlords will act hastily in the face of a possible CGT rise. They know that buying to let is a long-term investment which brings with it a good chance of a capital gain – unlike many other assets classes – and after all, a taxed gain is better than no gain or a loss. Besides, assets other than property that achieve capital growth will also be subject to CGT.

“At the same time, with rents now rising as they are because of high demand, the income earned through property is likely to be much higher than derisory interest payments on any cash realised through selling an investment property, particularly as only the net proceeds after any CGT will be available to invest. Interest rates are currently around 1% whilst rental yields of 6% are now achievable.”

Mr Weller also points out that CGT only dropped to the current rate of 18 per cent in 2008; prior to that, when many landlords began investing, it was significantly higher.

For any landlords considering whether they should cash in on their investment ahead of a potential CGT rise, Leaders advise caution.

Mr Weller continues:

“Firstly, you need to consider where else you would put your money right now. As well as interest rates being so pitifully low, stocks and shares are no more enticing; you only have to look at what is happening to BP, a blue-chip British company whose share price has almost halved over the last 6 weeks, and who may consider suspending dividend payments. Property values tend to rise over the long-term making bricks and mortar a more solid investment.

“Secondly, your rental property may have increased in rental value over the last few years; we have seen rents gradually rising and if you have been renting your property for some time and not had it valued recently you may be pleasantly surprised by the rent it can command in the current market.

“At Leaders we will be happy to give free, impartial and expert advice on your property’s rental value and we are not conflicted by the possible sales fee an estate agent may be considering if your property is sold.

“Thirdly, for anyone thinking about selling their property before any CGT rise and then re-investing in a new buy-to-let property, they need to bear in mind the dual transaction costs and stamp duty that may be payable on the new property. Any potential savings on CGT would need to outweigh these costs to make this course of action worth taking.”

Whilst Leaders does not believe that an increase in the CGT rate will cause sensible landlords to dismiss buy-to-let or cash in their chips, the firm is concerned about the disconcerting short-term effect the uncertainty of a possible rise is having on the market, which currently needs more investment.

Mr Weller adds:

“We have written to the Housing Minister ahead of the Emergency Budget on 22nd June urging the government to dispel the uncertainty over CGT and to give careful consideration to the UK’s private landlords.

“The Private Rented Sector (PRS) currently accommodates 13% of UK households and needs nurturing if it is to continue to provide a good choice of homes to the millions of people who either choose to rent, or rent because they are unable to buy. We are seriously concerned about the current shortage of good quality property available to rent and urge the government to do all it can to encourage new investment in this sector.”

Mr Weller points out that with demand outstripping supply, rents are rising and more tenants and would-be tenants are finding rents increasingly unaffordable. This situation will worsen if investment in the sector is not encouraged.

Mr Weller concludes:

“If there is to be an increase in CGT we would urge the government to ensure that suitable concessions are introduced alongside. Many private landlords are not wealthy people, but ordinary individuals who have chosen to invest in property to provide for their retirement so that they will not be a burden on future taxpayers.

“It would be wrong for them to be penalised by the tax system for doing so. If CGT rates do rise then appropriate concessions, such as generous taper relief, that will support long-term investment are essential.”

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61% of UK Landlords More Confident In Buy-To-Let Market

Friday, April 9th, 2010

61 percent of UK landlords feel more confident about the buy-to-let sector for April 2010, compared to March. This is the major finding from Upad.co.uk’s latest Rental Confidence Index.

This result is unchanged from the same poll conducted the previous month.

Survey respondents who left comments reflected a generally positive outlook, but stressed continuing problems with legislative changes and issues around benefit payments.

Comments from those who said they felt more confident than last month included:

- Rents are starting to rise. The new supply of rental properties will stay low until lenders start lending again.

- I had a tenant for my rental property after just one week of advertising with UPAD. Interest was keen with renters prepared to pay more than the advertised rent to secure the property.

Comments from the 39% saying they felt less confident in the market included:

- Landlords have no rights. Changes to housing benefit payments have meant tenants not forwarding the payments to the landlord.

- I neither like the proposed legislation, nor the old legislation on securities.

Upad’s founder and CEO James Davis commented:

“For the fifth consecutive month since we launched the Landlord Confidence Index, landlords have expressed their renewed confidence in the rental market. We had expected a shaky month, due to the implementation of regulatory changes, the Budget and uncertainties over the General Election, but these results show that for landlords who are prepared to treat buy-to-let professionally as a business, the market remains buoyant.”

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60% Of Landlords Favour BTL Regulation

Tuesday, March 9th, 2010

60% of landlords favour BTL regulation

Nearly 60 per cent of landlords favour proposals to regulate buy-to-let mortgage lending, believing it will provide additional protection for landlords looking for investment finance. Landlords are also in favour of regulating advice provided by intermediaries and introducers on buy-to-let loans, with 59 per cent saying it will help root out unscrupulous introducers and intermediaries.

The survey showed the majority of landlords support stronger regulation of buy-to-let mortgages and advice, although LSL Property Services, which owns the UK’s largest lettings agent network, said the Treasury and FSA must resist the temptation to impose “one size fits all” regulation.

LSL spokesman David Brown said: “It may be surprising that many landlords advocate further regulation, but this does reflect a general desire for additional investor protection, and if it leads to a greater professionalisation of the sector, it should be applauded.”

But while they support regulation to protect the inexperienced, 55 per cent of landlords with seven or more years’ experience are opposed to the regulation of mortgage products, arguing that they don’t need the additional administrative burden.

Brown said: “The majority of experienced property investors do not necessarily need nor want the added protection or burden of increased regulation. Most are able to secure their own finance and are skilful at managing brokers and lenders to obtain the products they need. Long established portfolio landlords are less likely to benefit from tighter regulation. Indeed, they see a real risk that disproportionate regulation may make force more lenders and brokers from the sector, exacerbating the current shortage of buy-to-let mortgage finance.”

He added: “Increased regulation would potentially help less experienced landlords, but it needs to be simple and proportionate. The FSA and the Treasury should avoid using a sledgehammer to crack a nut. Landlords have different levels of experience, and different requirements. With a one size fits all approach to regulation, any benefit for inexperienced investors could potentially be outweighed by the damage to the sector if it ended up making it less attractive for larger scale landlords to invest.”

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ARLA Launches Mortgage Comparison Site

Tuesday, March 2nd, 2010

The Association of Residential Letting Agents (ARLA) has launched ARLA Mortgages, a free online comparison site designed for member agents to host specifically for landlords and the buy-to-let market.

ARLA says the service will sit with sister products NAEA Mortgages for residential purchases and ICBA Mortgages for the commercial property sector.

Consumers will be able to enter their details and needs on the site and be matched with the best mortgage option for their financial situation, ARLA claims.

Ian Potter, operations manager at ARLA, said: “We’ve had a wealth of requests from our members to offer this comparison service. A healthy private rental sector is vital to the success of the housing industry and for potential landlords, being able to secure the best mortgage is key to becoming a profitable landlord.

“As with any borrowing it is essential that full information is available to a borrower in order that they can make an informed decision in connection to the potential of their purchase. This mortgage offering will enhance the services available from our members, who can assist with concerns around the suitability of a property and its likely rental figure. This should have the benefit of assisting the landlord and, at the same time, providing tenants with a better choice in the marketplace.”

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Protection From Defaulting Landlords

Tuesday, February 23rd, 2010

The Residential Landlords Association (RLA) is concerned that the courts may order outright possession to lenders if landlords fail to pay a buy-to-let mortgage.

The second reading of Bolton MP Dr Brian Iddon’s private member’s bill on 29th January – to protect tenants from losing their homes if their landlord defaults on a mortgage – is a step towards fair play for tenants, landlords and lenders, agrees the RLA

But the association still has concerns – including the clause covering a situation where a landlord has given the keys back – which could require a court order to rectify the matter – but “an amendment would be helpful to make this aspect crystal clear,” says RLA lawyer Richard Jones.

An explanatory note from the department for Communities and Local Government says that the Bill gives protection in this situation. “We hope this is the correct view,” says Richard Jones. “A court order would need to be obtained but, as the tenant is a trespasser as against the lender, the court must normally order immediate possession meaning the tenant would have to move out there and then.”

With some reservations, the RLA believes “the bill will enhance the private rented sector and assist tenants who, through no fault of their own, find themselves facing eviction at short notice.

“Past experience shows that tenants may not find out until the last minute that a property is being repossessed and we are aware of cases where the first indication is a bailiff turning up on the doorstep. That cannot be fair – and it brings into disrepute the reputation of a private rented sector that has struggled hard to gain the standing it deserves.”

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Buy To Let Landlords Face New Build Dilemma

Thursday, January 7th, 2010

There maybe trouble ahead for some professional landlords following the recent test case between Prestige Homes and a potential property landlord. The case is a landmark decision which has left one landlord with a bill of £133,282.

The case came about when the investor decided to forfeit the deposit paid to Prestige Homes and totally renege on the agreement to complete on the purchase of two new build flats.

This landmark ruling will cause problems for many potential property investors who believed they could simply walk away from their deposit and not face legal action from developers.

Problems caused by the continuing credit crisis have seen many buy to let landlords walk away from purchases of new build properties, opting instead to lose deposits rather than proceed with the purchase. One of the reasons cited is the lack of lenders willing to consider new build properties and those that are prepared to lend, have significantly reduced the level of borrowing allowed.

The other main reasons for landlords withdrawing has been the drop in the value of new properties with some dropping by over 40%, from the prices agreed at the time any agreements were signed.

The Prestige Home development in Plymouth, Zero 4 like so many other sites up and down the country experienced a significant number of buyers trying to renege on potential purchases. The Zero 4 development has seen a total of 30 people who had all paid their deposit subsequently try to cancel the deal.

Prestige Homes have managed to reach an agreement with some of the purchasers but are set to pursue a further eight investors via the courts. This landmark case is set to unleash further action by developers during 2010. Over 250 claims by developers have already been filed.

Ann-Marie O’Neill of Money For My Business commented:

“It’s very difficult for all parties involved. Many developers have borrowed significant amounts of money from banks that need to be repaid and they themselves are facing bankruptcy. We have seen a record number of developers go out of business during 2009.

“Meanwhile the potential purchaser faces difficulties in raising the finance needed to complete on the purchase of these new build properties due to a significant shortage of lenders willing to lend.

“The property market has also experienced a significant drop in property values over the past 18 months. It’s hoped by many that 2010 will be the start of a return of confidence from the lenders and whilst we won’t see a return to the old style of lending, any improvement will be welcomed.

“For any potential investors out there who find themselves in this situation it is very important to do the following –

- Review your paperwork from the developer and take full legal advice on all options
- Talk to your developer as they are often keen to reach a compromise
- Seek independent advice when arranging a buy to let mortgages

“Point number 3 is very important as the financial advisor recommended by or linked to the developer may not be able to offer the purchaser independent mortgage advice and therefore may not be placed to advice on all options, especially when you maybe trying to negotiate with the builders sales and legal representatives.”

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Buy To Let Market Sees Stronger Annual Returns

Wednesday, December 16th, 2009

The mini-boom in the rental market over the summer has paused for breath, according to the latest Buy to Let Index from LSL Property Services, which owns the UK’s largest lettings agent network, including Your Move, Halifax, and Reeds Rains

While house prices in November chalked up their seventh successive monthly gain, lifting home values 5% from their April 2009 low, rents slipped back for a second month running, falling 0.6% in November to take average rents back to levels at the end of August. This follows four months of rapid rental inflation during the summer when rents rose at an annual pace of 13%.

Rents fell fastest in the south east, down 3.3% in the month.  Half of the country’s regions saw declines, with only the midlands and east of England seeing increases in November.

With house prices having risen at twice the pace of rents over the last seven months, landlords saw yields slip to 4.9% in November, a level last seen in November 2008. Adjusted for void periods (when a rented property lies vacant between tenancies) yields were 0.3% lower.

Nevertheless, as the worst of the house price falls in 2008 drop out of the figures, annual returns continue to improve.  Investors buying property a year ago have made a total return of 4.1%, a combination of a small loss of 0.4% on lower house prices, and rental income adjusted for average void periods.

This is the best annual total return on LSL’s record (which begins with property purchased in June 2007) and now far exceeds that available on regular deposit accounts for the first time since the credit crunch began.

In November, a typical rental property made £809 in capital gains and earned £665 in rental income, a total of £1,474.

David Brown, commercial director of LSL Property Services said:

“Property bought a year ago and rented out is now making good returns for investors. Those who bought at the April low point are doing even better. Landlords are making impressive capital gains as each month goes by.

“To some extent the recent fall in rents is a seasonal phenomenon. Tenant demand slackens off in the late autumn and landlords are less able to charge a premium.  But it may also reflect an underlying recognition that rapid summer rent increases had begun to race ahead of peoples’ ability to pay. We do not expect a repeat of the relentless monthly declines in rents seen from late 2008.”

Tenant arrears worsened in November. 525,000 tenants had not paid their rent on time in November, up from an unusually low 495,000 in October. Collectively, they owed £261m in overdue rent. Serious arrears (more than 2 months) were broadly stable.

David Brown concluded: 

“Arrears usually spike in December as tenants hold back their rent a few days to help them get through Christmas. There seems to be an earlier uptick this year but the fact we are not seeing a deterioration in seriously delinquent tenants supports should give cause for comfort.

“In fact, arrears are still slightly below the average for the year.  2009 has not seen the feared explosion in tenants falling behind with their rent. Landlords have been especially diligent to collect their rent during the recession and have benefitted from an increase in high quality tenants unable, or unwilling, to buy their first home for themselves.”

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Proposed Buy-To-Let Regulation

Wednesday, November 25th, 2009

The Council of Mortgage Lenders (CML) has said it is agnostic over the Government’s proposals to extend the FSA’s scope to cover buy-to-let mortgages.

The CML believes that if the aim is to protect amateur property investors from poor property investment decisions, then regulating the mortgage process – as opposed to the sale process – will not necessarily address this.

It also said there is little evidence of consumer detriment to buy-to-let mortgage borrowers arising out of their mortgage borrowing, so the case for extending regulatory scope is not clear cut.

However, the CML does back plans for the expansion of regulation to cover second-charge lending and does understands the rationale for extending FSA regulatory scope to the acquirers of mortgage portfolios when they are sold on by originators.

Michael Coogan, director general of the CML, said the trade body will now study the Treasury consultation paper in detail, in parallel with the FSA’s consultation on potential changes arising from the Mortgage Market Review (MMR).

He added: “2010 is clearly going to be a year of regulatory change for mortgage lenders – but it is important that change should have a clear rationale and a clear set of outcomes, and not be implemented simply for its own sake as a reaction to past events that conduct of business regulation would not have prevented.”

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