Trends in the Market

Posted on May 1, 2012 by Tom

There has been a lot of talk lately about changes in the UK housing market and how consumers are going to respond to the financial crisis. With house prices showing a little more volatility than most homeowners would like, we might be witnessing a big structural change in the housing market for a long time.

What’s the situation?

In Britain there is a large, young middle class who are keen and motivated to save for the future. Traditionally, young people have saved up a deposit, enabling them to take out a mortgage and invest in a home. The capital growth on the home acts as ‘interest’. Now, however, people are less keen to invest in property and we might be seeing more people looking to rent longer term rather than buying houses outright.

What does this mean for landlords?

This will have a couple of impacts for landlords. Undoubtedly the strongest effect will be the increase in demand for rental properties. With more people looking to rent rather than buy, prices will be driven upwards. Of course, this will be coupled with a decline in demand for people purchasing properties outright which will have the opposite effect, driving down prices for property. Somewhere, the market will stabilise, but quite where is unclear.

What does this mean for me?

As a landlord with a hold on property you are in a strong position as you can manipulate both your capital growth and income growth: there should be a steady supply of tenants in the future regardless of what house prices do. It does mean that Rent Guarantee Insurance is going to become an ever more useful tool for the landlord – an extra dependency on income from your tenants means that you can’t afford to miss out if they fall into arrears.

It’s difficult to see whether the UK is going to become a nation which prefers to rent rather than buy in the future, but there are certainly going to be a few sticky years where people are just unable to buy property, whether they’d like to or not.

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Legal Awareness

Posted on April 30, 2012 by Tom

The news that the UK has dropped back into recession and that incomes are continuing to fall is only going to mean a rise in the number of people who are becoming ‘accidental landlords’. As there is a shortage of buyers in the housing market, many homeowners who are looking to sell their property just can’t shift it. In this situation, many are choosing to rent out their property rather than continue to try and sell it on – accidentally, they’ve become a landlord.

The accidental landlord

Though this might be a move for the better for many people, there are concerns in the industry that accidental landlords are not well informed about their legal obligations and what regulations they have to follow. As you’ll know if you’ve been letting for some time, every landlord has a legal responsibility to their tenants which is in danger of being neglected.

Safety and security

The two main issues are safety and security: all landlords need to be up to date on health and safety, fire safety and basic security legislation. Courts come down heavily on landlords who are found to be in breach of these and we’ve seen significant fines being issued in the past for negligent behaviour. All local authorities are happy to help out with this and will be more than receptive to any questions you have if you’re a new landlord.

Administrative responsibilities

Alongside the obvious health and safety compliance, in many areas there are requirements for landlords to register for licenses, particularly if you are letting an HMO. Things like registering to pay your tax by self-assessment and taking out the proper landlord insurance policy are easily forgotten, too, so make sure you’re protecting yourself and your tenants with the right administrative regime.

For new landlords there is a lot to do and the work is definitely not over once you’ve found the right tenant. Don’t neglect your legal responsibilities and whether you’re an accidental landlord or not, do make sure you’re keeping up to date with the requirements.

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Buying in the North

Posted on April 27, 2012 by Tom

There’s a lot of debate about where in the UK gives the highest rental yield, but recent articles have fallen to the conclusion that the North of England is a top place for property investment. With lots of potential for renovating or developing properties and an ambitious developing middle class, unlike the saturated areas around greater London. Is buying in the North for you?

House prices

One of the appeals of buying in the North is the generally lower house prices. Like anywhere, there are very expensive areas but you’ll almost certainly be able to get more for your money in Teeside or Tyneside than in most areas in the South East or the South West and there are plenty of good properties at good prices. House prices in these areas have been on the rise, too, and in the long term it’s likely that you should be able to generate some solid capital growth.

Conversions

The generally lower house prices in the North tend to mean landlords have a little more room for developing or converting property. It has been popular lately for landlords to convert larger houses into blocks of flats and some development companies have been making good use of old industrial warehouses. You’ll, of course, need to take out unoccupied property insurance if you’re looking to take on a conversion.

New industry

One of the things that is drawing lots of landlords to the north is a wealth of new industry. As the UK tried to pull itself out of recession, plenty of businesses have been attracted to well priced land and a skilled but out of work labour force. This means that there are plenty of opportunities for landlords, providing both domestic and commercial lets.

The North is a great place to invest at the moment but there’s no substitute for good local knowledge of the area. If you don’t know the area, take the time to find a good agent and to explore what is a very wide area with a diverse population.

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Euro Rates Continue to Decline

Posted on April 26, 2012 by Tom

With France in the midst of a major election, Greece, Spain and Portugal swamped with debt and still no apparent resolution to the currency crisis, the Euro is continuing to decline against the Pound and Dollar, making holiday properties on the continent look ever more attractive to investors. Is now the right time to invest in a buy-to-let property in the EU and become an overseas landlord?

Currency woes

The favourable exchange rates mean that property in Europe is, at the moment, relatively cheaper than buying in the UK – you can get more for your Euro than you can for your Pound. It also means that developments are cheaper and, for Brits, the cost of going abroad is cheaper meaning you should be able to fill your property quite comfortably.

Fiscal austerity

On the other hand, the governments in Europe, particularly in France and Spain, are starting to raise taxes on things like airline duty to try and raise money to cover deficits. This is all very well, but to minimise the impact on the already cash-strapped citizens of their own countries, many EU countries are targeting tourists, making it harder to invest abroad.

Uncertainty

The biggest enemy at the moment is uncertainty. We just don’t know whether the Euro will outlive the crisis and whether a return to Francs, Lira and the Mark would mean a stronger or weaker Europe and, thus, a better or worse property market. The French election means whatever laws are in place at the moment could easily change and things are most certainly hanging on a tight balance.

Even though the headline rate is declining there are plenty of reasons to think very hard about making an overseas investment. For now, uncertain market conditions mean it might be better to wait to make your overseas property purchase but remember there are always good opportunities so long as you cover yourself with good forecasts, good cashflow management and, of course, a good overseas property insurance policy. Be sure to keep an eye on the blog for the latest updates.

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Late Filing Landlords

Posted on April 25, 2012 by Tom

As you’ll almost certainly know by now, it’s coming up to tax-return time and Her Majesty’s Revenue and Customs are bracing themselves for the influx of returns from property owners and landlords. Where tax regimes and laws are often quite favourable to landlords, they are one of the worst groups at filing their tax returns on time. Because of this, HMRC are getting tough on late filing landlords.

What are the penalties?

A late tax return will mean a flat penalty of £100 with more or less no questions asked. The Revenue will then charge anyone who fails to file after a reminder a total of £10 per day for the next 90 days, culminating in a possible penalty of up to £1000. If you have still failed to file six months after the return was due, The Revenue will move to what are called ‘tax geared penalties’, which could mean you are charged up to 5% of your tax due. For some landlords, the total penalties could end up at around £10,000.

Problems with filing

Many landlords have problems filing returns on time and leave it until the very last moment to think about things. If you’re having problems it’s not worth worrying, get yourself a good tax advisor – the money you spend on finding someone professional could save you a lot in fines and penalties. There are, of course, additional penalties for negligence so don’t leave it too late. If you think you have been unfairly penalised you may be able to fight a case with the legal cover in your landlord insurance, but it’s far better to resolve problems with the Revenue personally.

Don’t get caught out by filing late because it will cost you and the penalties are even more severe this year than usual. Even if you don’t think you need to file, check your liability and make sure you fill in a return even if you have no income or expenditure.

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Free Solar Panels for Social Landlords

Posted on April 24, 2012 by Tom

The government’s scheme to help landlords and homeowners improve their energy efficiency and install solar panels received a lot of publicity and a lot of landlords benefited. Earlier in the year, though, the scheme was reformed which made solar panels seem considerably less attractive. Just last week, however, a new team of contractors and suppliers have come up with a way to make use of the government scheme and offer ‘free’ solar panels to social landlords.

What’s the situation?

The details of the scheme are quite complex, but the scheme offers landlords a price for energy they are able to redirect (‘feed-in’) to the national grid from their solar panels. The prices have been decreasing as solar panels have become more common and up until now landlords have struggled to find the cash to invest upfront in solar panels. The new finance plan offered by contractors Forrest and Dimplex now means that social landlords and housing agencies won’t need to stump up any cash up front.

Is this for me?

If you’re a social landlord or a member of a housing association it’s well worth exploring the details of this model and seeing whether it works for you. The returns from energy production are greater on a bigger scale so it might not be for everyone. Having said that, paying for solar panels upfront remains an option for all landlords and there are schemes which help to reduce the costs.

Practical concerns

Of course, it takes some time to fit solar panels so you’ll need a good few clear days and possibly some unoccupied property insurance if your property will need to be emptied for the work. There are now a good number of suppliers who fit solar panels so it really is a case of analysing the best possible deal for you.

If you think you’re eligible for the scheme then it’s definitely worth enquiring about the details. Otherwise, remember that energy saving is going to be very big business in the future so keep an eye out for any opportunities that might suit you.

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PAT Tests

Posted on April 23, 2012 by Tom

As you’ll know if you’ve been in the business for a while, portable appliance testing (PAT tests) is something that is all a part of being a landlord. Getting white goods and appliances like washing machines or kettles tested for electrical safety is vital, but what many landlords don’t know is that the tests expire after a period of time. If you think you might be affected then read on!

Expiry dates

PAT testing doesn’t last forever and the processes that electrical appliances go through do cause their parts to wear and degrade. An appliance that was once PAT tested and considered safe might degrade over its life and start becoming unsafe. The test does account for this, of course, and each item is given an ‘expiry’ date, usually stamped on the PAT label. After this date you need a retest – accidents which happen from electrical equipment that is not PAT tested will usually not be covered under your landlord insurance.

Getting the test done

There are plenty of options when it comes to getting appliances PAT tested; you can use large electrical companies or a smaller, local electrician. Whoever you use, make sure they have the appropriate training and licensing and never be afraid to ask for a reference if you’re unsure. The test itself shouldn’t take too long and is normally a simple case of pass or fail. Equipment which does fail may have to be discarded and replaced.

It’s prudent to keep a good log of the appliances you are providing to your tenants and when they were tested. Keep a record of the expiry dates electronically and you know you’ll never be caught out. Equally, ask your tenants to be vigilant and if there is anything that is out of date then request that they contact you and don’t use the appliance until it’s retested. Electrical safety is paramount for a landlord, so don’t get caught out.

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Social Problems

Posted on April 20, 2012 by Tom


It’s not only the risk of tenants encountering financial hardship that you need to be careful of as a landlord, often there are a multitude of reasons for tenants that fail to pay. All kinds of social problems can affect your livelihood so here are a few issues to watch for.

Couples

Couples who are going through break-ups or, worse, divorces often find that rent is the last thing they are worried about. There is often debate about who is liable for the rent and this ends up in a standoff with neither party paying. Confusion about whether either party will continue the tenancy can be dangerous as well, and as a landlord you might have to start thinking about finding some new tenants.

HMOs

There are plenty of reasons for entering into a multiple occupancy contract, but tenants in HMOs do tend to be polarised; they are either groups of students or close friends who are very keen to live with each other or independent individuals who are not interested in who they live with! Either extreme can cause problems and the closeness of such a property means there are often debates about rent, bills and other payments. Make sure your contract definitively passes on the liability to other tenants if one fails to pay.

Young Professionals

Young professionals tend to have a high disposable income but may have come straight from student life and paying rent may well be at the bottom of a very long to-do list. This isn’t so much of a problem because it usually means you will get your rent, but you need to be prepared to ask for it several times.

The only foolhardy remedy to tenants who fail to pay is Rent Guarantee Insurance, so it’s vital to make sure you’re properly covered. Good communication with your tenants is key, here, also, you don’t need to be the agony aunt but you do need to make sure you’re informed and prepared to find new tenants if needs be.

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Building Waste

Posted on April 19, 2012 by Tom

If you’re renovating a property or ever have in the past, you’ll know that building works generate plenty of waste. Old rubble, disused fixtures and scrap metal all add up and need to be dealt with appropriately and, above all, legally. Your builders should have a good idea of how to manage waste, but here’s a quick guide to what needs to be done.

General waste

You need to ensure that all waste is appropriated in a skip (or something similar) and taken off site reasonably regularly. Skips can be expensive and their uses are limited so don’t throw everything away without thinking about it – minimise your waste where you possibly can.

Scrap and recycling

Two good ways of minimising waste are through scrap and recycling. Anything metallic, be it copper, steel or anything else, might have some residual scrap value. Even if you take only £30 from the scrap yard, it might be worth a visit. Otherwise, take all recyclables to a nearby tip manually – this will save you money on skip and, of course, helps the planet too.

Fly tipping

Some building firms are notorious for fly tipping: dumping waste in unauthorised areas. This is, of course, completely illegal, and if the waste is found to come from your property then you may encounter difficulties. A good landlord insurance policy will help the cost of legal provisions but you need to take responsibility for your waste and check that any building firm you use are disposing of waste appropriately.

Waste can be a problem but it’s one that just needs to be dealt with. A good building firm should do most of the work for you, but that doesn’t mean you’re not responsible. Ensure your waste, by whatever means, is going to the proper place.

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Don’t Count on Tax Relief

Posted on April 18, 2012 by Tom

Around this time of year there is a lot of talk about tax reform and it’s very much at the front of people’s minds. Last week was no different and an article in the Financial Times yesterday warned landlords not to ‘count on’ unlimited tax relief against rental income next year as the government are planning and discussing tax reforms that might cap the level of relief landlords are entitled to. What does this mean for you?

Relieving tax

As the law stands, landlords are able to deduct certain expenses from their income for the year to determine how much tax they should pay. This includes, at the moment, mortgage interest, the cost of certain replacements and things like landlord insurance. If a cap was brought in, the value of expenses that landlords could claim would be limited.

Making losses

Those who might be hit the worst by such changes would be landlords who make losses. At the moment, loss making landlords generally pay no income tax. If a cap was brought in, this could mean some loss-making landlords are still due to pay tax, further worsening the situation for those landlords.

Good planning

As the Financial Times article suggests, landlords would be very wise not to account for pay little or no tax for the next financial year, and they should certainly provide for a tax bill. Many landlords find cashflow management tough as it is, but the taxman won’t wait and unpaid tax will accrue penalties and interest the longer it remains unpaid.

The smart landlord will be keeping a steady eye on tax reform at the moment and though there’s probably more rumour than substance to many of the discussions, it’s important to know what’s going on. Planning for tax is vital and only by keeping in the loop can you know what is going to affect you.

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