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WELL, HOW WAS IT FOR YOU?: 2016 BUDGET ANALYSIS
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THE IMPORTANCE OF DUE DILIGENCE WHEN LETTING PROPERTY
- Tom Entwistle
SHOULD YOU GO FULL TIME IN PROPERTY?
- Simon Zutshi
2016 BUDGET ANALYSIS INSIDE
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WELCOME TO THE MARCH ISSUE OF LANDLORD INVESTOR! We hope you made the most of the Easter break by having a well deserved rest.
Editorial Editor
Tracey Hanbury editor@landlordinvestmentshow.co.uk Editorial Contributors Andrew Ellinas Checkaprofessional.com Kevin Wright Leaders Paul Shamplina Peter Littlewood Simon Zutshi Steve Cox Tom Entwistle Tony Gimple
Art Dept. Design Craig Edmonds Advertising Beverley Meliniotis
Contact 0208 656 5075 landlordinvestmentshow.co.uk /LandlordInvestmentShow @LandlordInShow
CONTENTS Industry Update Expert Advice
Usually Easter is a time full of surprises but Investment Opportunities this month George Osbourne's 2016 budget caused little astonishment amongst landlords Landlord Insurance by confirming what had become widely Industry Spotlight accepted throughout the community. In this issue, Peter Littlewood from the Southern Landlords Association is analysing the 2016 budget announcement in relation to what it means for landlords and investors across the U.K, and what the future could hold for them.
Investment Legal
06 14 20 22 24 26 32
Also analysing the future is Tom Entwistle, editor of LandlordZONE. This month Tom is assessing the truckloads of legislation from last year and not only looking at how is has already impacted property, but how it will continue to affect it. Also is this issue, as the announcement this month still leaves question marks on the future of buy to let, Simon Zutshi is posing the question: should you go full time in property? We hope you enjoy reading this months issue, be sure to come along to our Surrey show next month on the 13th April at Croydon Fairfield Halls as well as our Kent show in Dartford on the 27th April at the Hilton Hotel. Happy reading!
Tenants History LTD Southbridge House Southbridge Place Croydon CR0 4HA Statements and opinions expressed in articles, reviews and other materials herein are those of the authors; the editors and publishers. While every care has been taken in the compilation of this information and every attempt made to present up-to-date and accurate information, we cannot guarantee that inaccuracies will not occur. Tenants History Limited and our contributors will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information accessed through the promoted links.
Tracey Hanbury | Editor Landlord Investor
Tracey Hanbury
March 2016
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LANDLORD INVESTOR
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INDUSTRY UPDATE
BUDGET DEBRIEF FOR LANDLORDS Tony Gimple - Less Tax 4 Landlords
STAMP DUTY SURCHARGE OF 3% This will apply on residential property investments regardless of size. The reality here is that SDLT is a transactional tax much like VAT and any ill effects will washout over time.
STAMP DUTY ON COMMERCIAL PROPERTY TRANSACTIONS It looks like the bandings will be along the lines of those for residential property, albeit with a zero rate up to £150,000, 2% of any amount between £150,000 and £250,000, and then 5% of any amount above that. By way of example, a property costing £300,000 would pay £4,500 in Stamp Duty; i.e. £0 on the first £150,000, 2% on the next £100,000 (£2,000), and 5% on the next £50,000 (£2,500). It also appears that the change will impact on related transactions of six or more connected property.
CAPITAL GAINS TAX REDUCED From April 2016, CGT is reduced from 28% to 20% for higher rate tax payers and from 18% to 10% for low rate tax payers; unless that is you’re a residential landlord, in which case there’s an 8% surcharge leaving you paying it at the old rates!
March 2016
LANDLORD INVESTOR
TAX-FREE INCOME TAX ALLOWANCE THRESHOLD From April 2017you can earn £11,500 before paying tax.
HIGHER RATE TAX THRESHOLD Increased to £45,000 from April 2017, so a more cash in you pocket.
CORPORATION TAX Decreased to 17% by 2020; yet another reason to incorporate and run your property portfolio as a business.
INHERITANCE TAX IHT is still a huge problem, and our experience shows that 95% of the landlords we’ve spoken to have IHT bills north of £500,000 and no mitigation in place (the average is considerably higher, and seven-figure sums are not uncommon). No changes this time round to this the most expensive tax of all, but one that is easy to mitigate with the right joined up help. ⌂
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March 2016
LANDLORD INVESTOR
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INDUSTRY UPDATE
WELL, HOW WAS IT FOR YOU? Peter Littlewood Southern Landlords Association
YOU MAY HAVE NOTICED THAT WE HAVE RECENTLY HAD A BUDGET. There were very few surprises for landlords; most of the bad news had been signposted in the autumn statement – unless of course you are addicted to sugary drinks, and will now have to pay more for your addiction.
SDLT
The main thing that was that the increase in stamp duty was confirmed. By the time you read this it will be too late to buy at the old rate, so in general BTL landlords will incur an extra 3% on their purchases. There are some exceptions:
That last point will be interesting as the stamp duty system is geared up to take money, not give it back!
house boats; mobile homes and caravans are exempt; as are property purchases below £40k – not sure where you will find one of those;
replacing your ‘main residence’, even if you own other properties. But note that if you buy a new ‘main residence’ before selling the old one you will have to pay the increased SDLT – however you can reclaim the extra tax if the old property is sold within 36 months (not 18 months as first announced).
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LANDLORD INVESTOR
inherited property – but certain rules apply.
One of the things that was being considered before was to exclude landlords owning 15 properties or more, but this failed to materialise, so all landlords will be affected, regardless of how many properties they own. Also, be careful if you buying property with someone else, if that other person already owns property, then the transaction will attract the higher rate. Note also that if you are buying property with a commercial element, e.g. a flat over a shop, you will pay the lower commercial rate. However, that also changed in the budget, where the rate is dependent on the purchase price:-
0% for the portion of the transaction value up to £150,000; 2% between £150,001 and £250,000; and 5% above £250,000.
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CORPORATION TAX The measure is meant to provide a boost for small businesses considering property purchases, for example, if you buy a pub worth, say, £270,000, you would have had pay over £8,000 in stamp duty. From 17 March 2016, the SDLT is £3,000.
INCOME TAX Much written about this. Boils down to: if you don’t have any borrowings, you won’t be affected by the changes to the way interest relief is allowed. Don’t forget, as I pointed in my last article, the way interest is to be treated can mean that someone on the verge of paying the higher rate of tax, might be pushed into the high rate band. It will also be possible for someone with high borrowings to pay more tax than the profit they make. So seriously considering reducing your borrowings – if you can.
CAPITAL GAINS TAX (CGT) The good news is that CGT has been lowered, significantly – the bad news (you guessed it), for everyone except residential properties. So in effect BTL landlords will in future pay an 8% surcharge over the disposal of other investments.
INSURANCE PREMIUM TAX (IPT) It was not that long ago that IPT increased (November 2015). It has now been raised again. From Oct 1st the rate will be 10% - note that a higher rate of 20% applies to appliance insurance; travel and some car insurance.
For those trading as companies there was some good news. It had been previously announced that Corporation Tax would be reduced from 20% to 18% from 2017. It will now be further cut to 17% from 2020. This article does not constitute legal advice but is intended as general guidance only. As I always say, it is critical that you get up to date information from a tax expert, specialising in rental matters, at the time you require it. Tax matters are very fluid, constantly changing.
UPDATE ON KUMARASAMY You may be aware of this case. Mr Kumarasamy was a landlord owning leasehold property, a flat on the second floor of a block. His tenant, Mr Edwards tripped on uneven paving in the dustbin area, i.e. the communal area. Since Mr Kumarasamy merely owned the leasehold of a second floor flat, he claimed that he had no obligation to repair the path between the block and the bin area, since he did not own it.
THE FIRST RULING However, section 11 of the 1985 Housing Act provides that a landlord must ‘keep in repair, the structure and exterior of the dwelling house’ and that this obligation extends to any part of the building in which the landlord has an ‘estate or interest’. The Judge ruled that the pathway formed part of the structure and exterior and that the landlord’s easement over the pathway was enough to constitute an ‘interest’. That meant he did have an obligation to keep it in repair.
March 2016
LANDLORD INVESTOR
INDUSTRY UPDATE
"EFFECTIVELY A TAX RATE OF MORE THAN 100%!"
INDUSTRY UPDATE
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APPEAL 1
THE IMPLICATIONS
The District Judge ruled that as Mr Edwards had not notified Mr Kumarasamy of the defect there could be no liability.
The implications are:-
APPEAL 2
The appeal judge reversed the decision, although largely on the basis that, in order for the landlord to be bound by his obligation in section 11, he had to have been given notice of the defect. The Court of Appeal said that the obligation of the tenant to notify the landlord of defects applies only to those within the dwelling house, i.e. only those which the tenant would be the first (and possibly the only) person to have knowledge of that defect. The landlord was able to access the exterior path itself and so could ensure it was kept in good repair. On that basis, the Court of Appeal overruled the judge’s decision and held that Mr Edwards’ claim for personal injury could stand against Mr Kumarasamy.
THE NEXT STEP: THE SUPREME COURT The Supreme Court has considered this case so important that they have given Mr Kumarasamy permission to have it heard, and that there will be 7 Judges sitting, as against the normal 5. This is due to be heard on May 5th.
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LANDLORD INVESTOR
the importance of the tenant notifying the landlord of problems; the fact that owners of leasehold properties might not be able to rely on notification from their tenant, and will need to inspect communal area’s themselves; the wording on a head lease, and/or the management company tasked with managing the duties of the head lessor; Any liability of the insurance companies – the head lessors insurance; that of the management company; and, most importantly, the flat owners insurance.
The Southern Landlords Association considers this case to be of great importance, especially to get a ruling on the owners liabilities. We have been running an appeal to collect donations to help Mr Kumarasamy in this case. Many landlords have already made a donation, but anyone wanting to donate can telephone 01732 56 56 03. ⌂
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INDUSTRY UPDATE
POST BUDGET QUOTE: THE IMPACT OF THE CLAMPDOWNS Andrew Ellinas - Sandfords
ALTHOUGH IT WAS UNLIKELY TO HAPPEN, MR OSBORNE NEEDED TO REVERSE THE STAMP DUTY CHANGES HE HAS MADE. Instead he announced that the 3% surcharge on buy-to-let properties and second homes was to go ahead next month (1st April) and that there was now no exemption for large investors. This will undoubtedly see the level of available rental stock deplete significantly. Not only will people then not be able to afford to buy they won’t be able to rent either. The Chancellor also announced reforms to stamp duty land tax on commercial property, which will kick in at midnight tonight. Over the last four years there has been an unfair amount of tax changes including stamp duty, land tax and capital gains. Landlords and homeowners have been completely restricted with these additional tax charges, all of which have been very damaging on the housing market as a whole. These so called ‘clampdowns’ as part of a spending review package are having a negative impact on the housing market. The Government has done what they always do and has been far too heavy handed causing the industry to suffer. Far from the conservative party being the property industry’s friend, they
March 2016
LANDLORD INVESTOR
have in fact been our enemy making it increasingly more difficult and expensive for people to be able to afford to buy. In addition to this, the Chancellor took another step today that will again knock the property market when he announced an insurance premium tax; an increase in home insurance payments of 1%. It's only a small rise but it's just another one to add to a long list. All of these tax changes have created a fairly static market, particularly in the London market. It doesn’t help that people are sitting on their hands until a decision is made on whether we stay in the EU or not, but something needs to change and I would have liked to have seen the Chancellor reverse some of the tax hikes he has implemented. The last thing he should be doing right now is making it more difficult for people by tightening their finances even further. ⌂
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EXPERT ADVICE
THE IMPORTANCE OF DUE DILIGENCE WHEN LETTING PROPERTY Tom Entwistle - LandlordZONE This article looks at how landlords and their agents can cope with all the new letting regulations which came in truckloads in 2015.
ONE OF THE KEY ISSUES THAT'S KEPT THE PRIVATE RENTED SECTOR GROWING FOR SO LONG HAS BEEN ONE OF CERTAINTY. Certainty that when things go horribly wrong, and only as a last resort, a bad tenant can be removed, not always quickly, but at least you know with certainty you can rid yourself of a bad tenant, nurse your losses and start over again. And thankfully, this certainty remains. Against some vigorous lobbying from the homelessness charities the Conservative government, and the Coalition before it, decided to retain the no blame Section 21 eviction process in England. With devolution, Scotland and Wales are different matters. However, don’t let’s get too complacent: last year saw new measures that have the potential to derail even the most carefully prepared eviction claim. Something of a tsunami wave of new legislation hit the lettings industry, with the result that to manage a tenancy effectively landlords and letting agents will have to learn to cope with a whole range of new rules. Will the so called “accidental landlord” stand any chance at all?
March 2016
LANDLORD INVESTOR
RISK MANAGEMENT If you have done your job properly and gone through a thorough screening and selection process you will have minimised your chances of ever having to evict a tenant. In my experience with working and professional tenants, around 95% of them give you no trouble at all: they pay their rent on time, give proper notice when they want to go, and leave your property clean, tidy and free from major damage – who could ask for more? But it’s that other 5%, the one in 20 who don’t pay rent, upset the neighbours and damage your property. Of course, sometimes there are good reasons why people don’t pay rent, like redundancies, but if they don’t seek assistance or they don’t pay when they are able, landlords usually have no alternative but to evict. So, managing risk in landlording is about coping with that “one in 20 risk”, the risk that something will go horribly wrong, and then being in a strong position to evict as quickly as is humanly possible if it comes to that.
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THE NEW LEGISLATION EXPERT ADVICE
The new legislation introduced in 2015 will cleverly use the Section 21 process as a stick to beat landlords into complying with a whole host of other procedures: issuing a 10-year Energy Performance Certificate (EPC), a Gas Safety Certificate (CP12), protecting the deposit within the statutory 30 days, serving the statutory deposit notice (s213) and providing tenants with the latest version of the government’s own “How to Rent Guide”. Other legislative changes which became effective in 2015 include changes to (updating) the deposit protection rules, the requirement to do legionella checks / risk assessments, and the requirement to install of smoke and Carbon Monoxide (CO) alarms. Don’t think that because there’s so much complication that judges will be lenient if you miss the odd item or date, they won’t: they will uphold the rules to the letter and the deadlines to the day. Technical errors or omissions in your paperwork will be thrown out at the drop of a hat, having you wait perhaps months for another go to court, with another set of court fees to pay.
BUY TO LET POLITICS Many in the industry felt relieved when a Conservative victory was declared last May, but they were in for a shock. It meant no rent control and compulsory long-term tenancies, yes, but what’s happened since is swinging tax increases for those with heavy mortgages, tax incentives for developers to build large scale in direct competition with small-scale landlords, and a whole host of new regulations to comply with.
It’s perhaps understandable that something had to give, given the pressure that governments have come under from the constant anti-landlord media comment that exists around buy-to-let. The runaway buy-to-let lending spree, the claims that landlords are driving up property prices and the rogues in the industry tarnishing the image of the PRS; it all meant that some action was inevitable. Campaigning groups and homelessness charities like Citizens’ Advice Bureau (CAB), Shelter and Generation Rent constantly highlight malpractice that rogue operators in the industry get away with, tarring all landlords with the same broad brush – the good, the bad and the ugly. Issues such as so called retaliatory (revenge) evictions, excessive letting fees, cold, damp, unsafe and illegal Houses in Multiple Occupation (HMO), and hundreds of beds in sheds in some cities, hit the national headlines on an almost daily basis. As more and more private landlords have taken on the task of accommodating tenants who previously would have occupied social housing, the government has become the head landlord, their paymaster through £billions paid out in housing benefits. With a squeeze on benefit payments and with councils struggling to maintain standards in private rented housing, central government does it’s level best to control the PRS the only way it knows how: through more rules and regulations.
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LANDLORD INVESTOR
EXPERT ADVICE
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George Osborne knows that tenants as a group, and there could be around 10 million of them, is a political force to be reckoned with. In addition there are thousands of voting parents out there who resent the fact that their offspring can no longer afford to buy a house. So the Chancellor has wasted no time in this new government, acting on what many would call a risky strategy: increasing his tax take from the better off, and discouraging small-scale buy-to-let investors from building-up large portfolios, whilst at the same time incentivising institutional largescale operators, through tax changes. At the same time the existing PRS comes under the government’s tighter regulatory grip through tough new legislation. Property Solicitor Tessa Shepperson has said: “The trouble is that many landlords, agents and tenants who may not be properly trained or up-to-date with the rules face an increasingly complicated legal framework”. This new legal framework tips the balance somewhat in favour of the tenant, particularly if the landlord or agent fails to manage the tenancy efficiently. What this article intends to do is explain what landlords and agents should be thinking about to make sure they stay in control.
DOCUMENTATION, DOCUMENTATION, DOCUMENTATION The key to a successfully managed tenancy is having documents completed at every stage. Then, should the worst happen, if you need to take a tenant through the eviction process, you have all the necessary documentary evidence you need for the courts, to show a judge categorically that you have fully complied with the rules. The accelerated possession claim is a paper exercise, where the judge assesses your claim without a hearing, hence the need for documentary precision. With the new regulations added to the old ones, if it comes to a court hearing, it gives lawyers a field day when they are defending tenants against eviction; the Mr Loophole lawyer will use every trick in the book to find those loopholes, something you omitted or committed when you brought your eviction claim. But if you have the comprehensive evidence that you need, then Mr Loophole is stymied.
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WHAT ARE THE CHANGES? Using the Section 21 (Housing Act 1988) eviction process is nearly always preferable to the alternative which is Section 8, a breach of contract action. Section 21 is a mandatory court process which has a sure outcome, providing you make no technical errors in the claim. Section 8 on the other hand carries a burden of proof; it is also open to tenant defence or counterclaim, and a potentially expensive affair if you lose and you pay both. The Section 21 notice has been changed and new rules apply to the notice for tenancies starting after 1st October 2015. For older tenancies you should continue to use the old Section 21 Notices: Fixed-Term s21(1)(b) and Periodic s21(4)(a). If you use the new Section 21 Form 6a (which is now used for both fixed term and periodic tenancies) for an older tenancy you will need to comply fully with all the new rules, see below.
THE NEW RULES The new rules say that at the start of an Assured Shorthold Tenancy (AST), under the Housing Acts 1988, 1996 and 2004, and now the Deregulation Act 2015 you must comply with certain requirements: issue the tenant/s with (a) an Energy Performance Certificate (EPC), (b) a Gas Safety Certificate (CP12), and (c) the latest edition of the government published “How to Rent” Guide. In addition, (d) any deposit taken from the tenant or another party, for example the guarantor, must be protected in one of the government approved schemes within 30 days, and the deposit notice (s213 Housing Act 2004) served on the provider. For licensable HMOs, license details are also required.
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If you fail to comply fully with any of these requirements, any section 21 notice you serve on the tenant/s will be invalid.
EXPERT ADVICE
Another important point in the letting process in England, since 1st February 2016, is Right to Rent or sometimes referred to as Right to Reside checks. Every adult residential tenant whatever their origin of birth or nationality, colour or creed must be taken through the same vetting process to establish their right to reside in the UK. This includes UK nationals as well. There are copious notes and guidelines published by the government on this running to well over 100 pages, and if you read it all you will probably be more confused: what it boils down to is that landlords / agents must do face to face checks with certain original documents. Examples might be passports and visas, to satisfy yourself that as far as is possible, the ID stacks-up, the documents are genuine and that they confirm a right to reside. Most reference agencies now confirm right to rent on documentary evidence, but regulations still need the landlord or agent to check face-to-face.
These are the processes you should be following:
The LandlordZONE® Documents Section includes a range of free forms and checklists which will help you correctly document any residential letting www.landlordzone.co.uk/documents
Inventory – use an independent inventory clerk
Property Risk Assessment / Safety Check
Tenancy Application Form
Letting Checklist - takes into account all the new regulations
An Initial Enquiries Checklist - telephone checklist
Pre-tenancy interview
Tenant’s Right-to-Rent Declaration Form Check-in and Check Out Form
How to Rent - Government Checklist for England
RETALIATORY EVICTIONS At the tail-end of the Coalition Government, a trade-off concession made by the Conservatives to the Liberal Democrats was a measure tagged onto, of all things, the Deregulation Bill: new regulations to prevent retaliatory (revenge) evictions. It all followed an aggressive media campaign by Shelter, CAB and Generation Rent. It was vigorously opposed by the landlords’ associations. But despite much evidence showing that the occurrence of this is minimal in terms of numbers (after all knee-jerk eviction without court action is a criminal offence) the measure passed into law.
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EXPERT ADVICE
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It has serious implications for landlords as a complaint about repairs and safety issues must be responded to within a limited time. It can delay a s21 eviction notice, ostensibly for 6 months, but in practice the overall delay will probably be much longer, especially when a council get involved. What worries landlords is not the repair issues, as responsible landlords want to do repairs quickly; it’s the high probability that a tenant in difficulties will be “creative” with defects and use it as a means of avoiding eviction. Then there’s the problem of refusing or making access for repairs difficult; planning any sort of tradesman access then becomes a nightmare. We have already seen instances of tenants responding to letters about rent arrears with a list of dilapidations for the landlord to deal with, so expect more of the same with this new law.
THE NEW SECTION 21 NOTICE: THE A6 NOTICE The new single (fixed term and periodic) section 21 (A6) notice applies to tenancies commencing after 1st October 2015, and whereas the old notices did not need to be in a specific form, the new notice does require statutory information. Also, whereas the old notices had no time limit, the new notice has strict time limits.
The notice cannot be served within four months of the start of a new tenancy, unless this is a renewal tenancy, and there is a six months’ limit on the length of the notice during which time possession proceeding can be brought. In the case of a periodic tenancy, if the notice period is more than 2 months, proceedings cannot start more than four months after the notice is served. So, with the government’s attempt to stamp out the rogues in the industry, combined with the Liberal democrats’ ill-conceived retaliatory eviction measure, they’ve created plenty of trips and traps for landlords and plenty of loopholes for lawyers defending tenants to use in the future. The only way to protect yourself from all of this is to be extra diligent in the way you manage your tenancies: document everything, follow the rules to the letter and make sure you always get proof of service when issuing any notices. Some late good news for landlords is that planned changes to the Immigration Bill 2015-2016 will mean that it is unlikely they will face immediate criminalisation for failing to pick up illegal tenants. Also, to reduce the administrative load on landlords and agents, the government has agreed to look into changes to regulations to enable them to provide information such as tenancy deposit schemes to tenants via email instead of in paper form, as is currently required. For more information on all of the new regulations see: www.landlordzone.co.uk/article-archive/all-articles-date Tom Entwistle is Editor of LandlordZONE® and an experienced landlord of residential and commercial property. ⌂
March 2016
LANDLORD INVESTOR
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INVESTMENT OPPORTUNITIES
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INVESTMENT OPPORTUNITIES
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5th Floor Apartment Large Terrace Master bedroom with en-suite Underground parking Close to amenities
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Two Double Bedrooms No Onward Chain Garage en-bloc Private Rear Garden Long Lease
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Two bedroom apartment Anticipated completion Q3 2016 Balcony Beach & city view Second floor, 807 sq. ft.
Yield – 6.2% Number – 01603 630671 www.leaders.co.uk
March 2016
LANDLORD INVESTOR
Yield – 5.4% Number – 01603 630671 www.leaders.co.uk
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LANDLORD INSURANCE
THINK BEFORE YOU BUY Steve Cox - Alan Boswell Group
ACCORDING TO A REPORT IN THE TELEGRAPH ONE IN FIVE HOMES IN THE UK ARE RENTED. Well, there are over 26 million houses in the UK, so that suggests well over five million homes are owned by a landlord. Our company data indicates that the average number of homes owned by a typical landlord is just over two. Add that calculation in to the mix and it’s a safe bet that two and half million people in the UK are landlords. With that kind of potential client base it is no wonder that there is now an almost limitless amount of providers offering landlord insurance. It seems to be magically getting cheaper and cheaper, with offers to beat your current premium ‘guaranteed’ and suggestions that your current insurance might not be as good as the one on offer. It must be very tempting to try and save money on your insurance, especially at a time when the Gov ernment has decided to really go after landlords with their triple whammy; the hike in Insurance Premium Tax, removal of tax benefits and rise in stamp duty. But before you shop around you should always make sure you know exactly what you’re shopping for.
March 2016
LANDLORD INVESTOR
If you went out to buy a car you’d like to think you’re going to get a steering wheel and four wheels – but you’d be foolish not to look under the bonnet, check the safety features, the warranty and the running costs. You’d also probably be quite happy to consider added benefits or optional extras. One thing is for certain, you wouldn’t just go for the cheapest car you could find. Well, you might – but you wouldn’t expect a lot in return. It’s the same story with your landlord insurance. You can get the cheapest option and you’ll have inferior cover; you might have large excesses to consider, limited cover and more often than not an almost non-existent support package. Be prepared to pay a bit more and your cover will improve accordingly. You should know exactly what kind of risk you’re exposing yourself to.
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A comparison site won’t offer you any advice; an insurance company will try and sell you their product and only their product; an insurance broker can offer advice but might be beholden to an insurance company but an independent insurance broker can take the time to listen to your needs offer you independent advice and explain what they believe is the right package for you.
Of course, it’s completely up to you how you choose to buy your car in just the same way it’s up to you how you buy your landlords insurance but we believe the best advice we can give you is to get advice. It might just save you more in the long run.
⌂
For further advice please contact Steve on: T: 01603 218031 M: 07766 715654 W: alanboswell.com/landlords E: scox@alanboswell.com Alan Boswell Group offer a range of other services including business and personal insurance, risk management and financial planning advice.
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March 2016
LANDLORD INVESTOR
LANDLORD INSURANCE
So – let’s go back to that car analogy. Would you buy that car just by looking at it? Or would you like someone to tell you about it? If you had the choice would you like someone who is desperate to sell it to you or someone who genuinely wants to understand what you need and make sure you get the right car? Let’s be honest, there is no point buying a muscle car if you’re only driving to the shops on a Sunday.
Imagine if that broker just also happened to be the ‘Independent Broker of the Year’, had a 98% service rating from their clients, were ‘Service Suppliers of the Year’ at the Landlord and Lettings Awards, had over 30 years’ experience in the sector and offered five-star rated landlord insurance products at costs which were highly competitive. You might just be on to a winner!
INDUSTRY SPOTLIGHT
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FIND A PROFESSIONAL YOU CAN TRUST
IT IS REPORTED THAT AROUND 25 MILLION PEOPLE USE REVIEW SITES TO HELP MAKE A DECISION ON PURCHASING GOODS OR ENGAGING SERVICES IN THE UK ALONE. It is becoming expected for businesses to show they value their clients custom, by providing the transparency feedback provides! The World Wide Web has over 2.4 billion users and been a great benefit to many, consumers and businesses alike, the world is really now at everyone’s finger tips. The web has transformed the way we work, play and how we interact with each other. However with this, has brought some concerns and unacceptable activity to light. Consumers are increasingly aware of how dressing a shop window can be inviting to lure in prospective clients for their custom, but the question most are now demanding answers to is, “what will my experience will be with this firm”? And “how do they treat their customers”? Especially if they have had a bad experience, or concerned about the growing reports of fake businesses, wrong advice and poor customer service.
March 2016
LANDLORD INVESTOR
The need for reassurance and third party reviews has moved on. The demand is not just for hotels, holidays, restaurants and trades. There is a growing demand for those who offer professional services, regulated or not, big or small! The public have over the years found that some larger, well known firms, have placed profits in front of service, or been reported to be taking advantage of the tax loopholes in the UK. There have also sadly been reports on those we once looked up to have been found involved in expenses fraud, or other similar activities. The result is that it has left society with a bitter taste, where trust is questioned and the ‘My word is my bond,’ kind of trust for many professions has well and truly disappeared. With reports such as these, maybe providing transparency is not a case of large or small and should not be disregarded.
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We recently heard from a client of an estate agent, who was recommended a factory type of conveyancers, they encourage their clients to use. The client was selling her property, after the eleventh week, the client reported that she had spoken with over 30 different people, she was unable to speak to the same person twice and they seemed unable to return her calls. On complaining, not one member of the company appeared accountable for the lack of service. The general quality of service was abysmal.
We are proud to say received over 2,198,600 recommendations for our members, making the Checka brand the leaders in the review industry for you and your clients! For more information regarding Checkaprofessional. com visit www.checkaprofessional.com or call FREEPHONE: 0800 093 8414 Place your business with a household brand, which receives over 1.1 million visits per month and has received over 2,198,600 recommendations for our members, making our brand the leaders in the review industry for you and your clients! ⌂
March 2016
LANDLORD INVESTOR
INDUSTRY SPOTLIGHT
There is a growing demand for reviews on professional services and over the coming years, it will become common practice for prospective clients to be looking for third party, completely independent reviews, along with profiles which they can quickly review to search and find the exact services they are looking for. It is more than just a review they are looking for, but more easily, trusted, digestible information service.
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INVESTMENT
GIVING BACK TO THE COMMUNITY Kevin Wright Ninja Investor Programme Being a property investor means that most of the time you're focused on the next deal and how to grow your portfolio successfully. Few people in the property business stop to think about those people who not only can’t get on the property ladder, but can’t even afford to rent a home of their own and are classified as homeless. I’m running some networking events around the country in April – in Leeds (7th), Birmingham (14th), London (21st) and Bristol (26th) – and the cost is £20 per person. I’ve done some research and talked to some of the charities in the area and have decided to donate ALL the proceeds to help people who don’t have a home to call their own. No time of the year is good to be on the streets, but these cold nights must be hardest of all. I thought if I could get 50 investors along to each of the four meetings, each charity would receive £1,000. I asked the charities what that would mean to them: St Basil’s in Birmingham told us: “We work with some of the most vulnerable 16-25 year olds in the West Midlands, and want to break the cycle of homelessness for good. St Basils helps 4000 young people every year and your donation would mean some of these young people will never end up homeless again.” In Leeds we’re supporting Simon on the Streets. They said: “Because of the complexity of the work we do, it costs just over £2000 per year for each of our clients to be supported by our highly trained outreach workers. Your donation will ensure positive outcomes and help the people who it need it the most.” March 2016
LANDLORD INVESTOR
In London and Bristol we’re supporting the local branches of St Mungo’s: “£1,000 could provide 40 homeless men and women with a welcome pack with clean clothes, shoes and even a toothbrush. These simple items make a huge difference to someone who may have just moved in from the streets. I hope you share my belief that homelessness has no place in a civilised society. Yet every night in the towns and cities of the UK, people are sleeping rough, in all weathers and the authorities seem unable to solve this shameful reality. Can you come along and get us closer to that 50 at the event closest to you? Can you bring anyone else with you or spread the word to other investors? As well as contributing that £1000 donation you’ll network with other property investors; you know these meetings are an oasis in a desert of negativity, where you can talk openly about property with others who ‘get it’. Plus you get to hear how to leverage the Recycle Your Cash concept so you can buy multiple properties, faster, with less cash AND help those who are homeless in your area. That is really stacking up the ‘wins’. Sign up here: www.recycleyourcash.co.uk/ ninja-networking-blitz/ If you’d like to join me for a brainstorming session each event has just 10 VIP tickets available for £47 (including your £20 donation) for a two-hour session in the afternoon. ⌂
Property Mastery : Recycle Your Cash
Is your property investment giving you the results you want? If you’re finding: • The best deals slip through your fingers to cash buyers • You want to recycle your cash but your portfolio is growing too slowly because all your cash is tied up • Financial freedom is still not within your reach
Your Ninja Trainer Kevin Wright
The Ninja Investor Programme will reveal: The Fast Funding Formula™ Discover how to buy property like a cash buyer – without a 6 figure bank account The Negotiation Transformer™ Find out how to make ridiculously low offers – and get accepted The JV Profit Retainer™ Make sure you don’t give away any of your profits that you don’t need to The Rapid Cash Recycler™ Learn how to predict post-refurb value accurately, before purchase And Ninja Investor Strategies™ Transform your mind-set to enable you to transform your property investment.
DOUBLE GUARANTEE • If you’re not happy with the course and tell us by lunchtime on day 1 - you’ll get a FULL REFUND; no quibbles. • When you bring your first deal to our bridging brokerage; - you’ll get the FULL COST OF YOUR COURSE REFUNDED at completion.
NEW for 2016 - 2 day format with even more hot tips and smart strategies. Join a Ninja Investor Programme in: London 16/17 January Bristol 14/15 6/719/20 February 20162016 London 16/17 April 2016Birmingham London 16/17 April 2016 Bristol MayMarch 2016 Leeds 27/28 February 2016 Leeds (new) 27/28 February 2016 Birmingham 19/20 March 2016 Birmingham 18/19 2016 Leeds 2/3May July2016 2016 London 16/17 AprilJune 2016 Bristol 14/15 Find out more – and book your place
07889 526979 • www.ninjainvestorprogramme.co.uk
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INVESTMENT
SHOULD YOU GO FULL TIME IN PROPERTY? Simon Zutshi property investors network
TO BE REALLY SUCCESSFUL IN PROPERTY DO YOU HAVE TO GIVE UP YOUR JOB SO THAT YOU CAN CONCENTRATE 100% ON PROPERTY INVESTING? This is a question I am often asked and so in this month’s article, I thought we could consider if it is possible to be a successful investor part time, or is it necessary to become full time to achieve financial independence.
In my experience, you don’t have to leave your job because it is very possible to quickly build a substantial portfolio, sufficient to replace your income, even doing in part time, as long as you have the correct knowledge, mind set and supportive environment.
One of the main motivations for many people to become a property investor is to become financially independent, whereby the passive income from your property portfolio is enough to replace your employed income, which means you no longer have to trade your time for money, but instead you are free to choose how you spend your time. This freedom and choice is what property investing is all about for me.
How do I know this? Well about 65% of the people who participate in my 12 month Property Mastermind Programme are in full time employment or have their own busy businesses. We explain to our delegates that as long as they can find 8 to 10 hours of time per week to implement what they learn on the programme, then they should be able to achieve financial independence in a year or two, as many of our past delegates have done just that.
The challenge that many people face however, is that they believe whilst they are in a full time job they don’t have time to build their portfolio, and so can’t generate the passive income to replace their employed income, which means they are in a Catch 22 position.
Whilst the idea of leaving full-time employment to focus on building your portfolio can be very tempting, I would suggest that you think long and hard before making any rash decisions. Before you give up your full time job there are some considerations you need to take into account:
March 2016
LANDLORD INVESTOR
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INVESTMENT
THE ABILITY TO GET MORTGAGES: WHAT ABOUT REDUNDANCY? If you have a job with a provable income of at least £25,000 then you will find it much easier to obtain buy to let mortgages, as many of the mortgage lenders do require some proof of income (excluding rental profit). Having said this, there are still lenders who do not require proof of income for buy to let mortgages, as the decision to lend is based more on the income from the rental property, than on the income of person borrowing the money. You could also use mortgage hosts and or joint-venture partners to build a property portfolio in their name but you own a share of it as described in a deed of trust. There are also other strategies such as Rent to Rent and Purchase Lease Options where you don’t need to get mortgages.
MOTIVATION When people tell me that they hate their job and are desperate to leave, I encourage them to remain in their employment and commit to utilise their spare time to invest and keep going until they reach the point where they have replaced their income. In this way you can channel the frustration from your job into taking positive action, motivated by the reward of eventually being able to quit the job you dislike. This means that at least you continue to have your base costs covered by your income. From the frying pan into the fire. Being a full-time property investor may appear to be an exciting alternative occupation, but just like anything else, property investing comes with its fair share of challenges, problems and issues. Very often the grass can seem greener on the other side of the fence. I highly recommend that you do at least 2 or 3 deals before you consider leaving work, just to make sure that you enjoy property investing and everything involved with it.
More and more people are being made redundant and as the economy struggles to recover this is a trend sure to continue for the foreseeable future. Losing your job through redundancy can be a time of massive uncertainty or you could chose to see it as an opportunity to focus on what you really want to do. Many people wrestle with the decision of whether to leave work or not, but if the decision is made for you, in the form of redundancy, then rather than rushing out to find another full time job, it could be the ideal opportunity to test out property investing as an alternative to full time employment. You could decide to give yourself a certain amount of time to prove to yourself that you can make enough money from property after which you resort back to looking for a job if you don’t get the required results.
HOW LONG TO FINANCIAL INDEPENDENCE? I started investing in 1995 but it wasn't until 2003 that I became totally financially independent thanks to the income for my property portfolio. I was building my portfolio very much in my spare time, without a strategy or really knowing what I was doing. I learnt the hard way, through trial and terror! I would not recommend doing it the way I did, but at the time, I did not know, what I did not know. The good news for you, is that even if you have a busy full time job, it does not need to take you as long as the 8 years that it took me to replace my income. There is now so much information and support available that once you make a decision, and fully commit to your own success, then you can achieve incredible results in just a year or two from now, even if you have a full time job.
March 2016
LANDLORD INVESTOR
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INVESTMENT
MAKING THE MOST OF YOUR VALUABLE TIME My observation from working with many investors since 2003, is that it is not so much a lack of time that is the problem, but rather a lack of organisation and discipline to make the most of the time available. In reality we all have the same 24 hours every day. So how come some people seem to achieve incredible results whilst others seem to never have enough time to do what they say want to do? It is all down to how you spend or invest your time. Have you heard the expression “If you have an important job to get done, give it to a busy person”? The theory being that busy people are good at getting things done quickly, because they are organised, efficient and effective, often because they do not have time that they can afford to waste. Indeed the more time you give yourself to complete a task, the more time it will take to complete. Very often I find the task expands to the time available. If other people can successfully build a profitable cash flow generating portfolio in their spare time, then there should be no reason why you can't do the same if you are prepared to adopt some of their good time management habits. I would like to share with you some simple ideas that could help you to achieve more in less time.
ACTION LISTS AND PRIORITY PLANNING As well as writing a list of all the things you need to do, it is really wise to prioritise them and work on the most important ones first. In his book “Eat that frog”, Brian Tracy suggests that each day you tackle what you perceive to be the hardest job on your list as the first job you do. This means that once you have done this perceived difficult task, everything else on your list will be much easier. He also suggested in the same book, that most people never do everything on their to-do list and so it is a much healthier idea just to accept this reality, rather than beating yourself up about not completing everything on your list. I was very relieved when I read this as I hardly ever get everything on my to do list done, then used to feel bad about it, not recognising all the things that I have achieved.
March 2016
LANDLORD INVESTOR
USE A DEFAULT DIARY When you were at school your activity was dictated by your school timetable. When the timetable says you have double maths, that's what you did, followed by history, then you have a break. As an adult we can use this concept in the form of a default diary to help organise our time and remain focused on the task in hand rather and allowing ourselves to be distracted. For example we could say that once a week we allocate an evening to furthering our property education and building our network of personal contacts by attending a property networking event. And twice a week you commit to spending 30 minutes on the Internet looking for property deals in your area. Essentially you decide what activities you want to do, when you want to do them, schedule then into your diary, and commit to do them on a regular basis. This planning and scheduling how you use your time is far more effective than just leaving it to chance.
THE SLIGHT EDGE One of my favourite books is the “Slight Edge” by Jeff Olson. I highly recommend it if you want to get things done. The concept in the book is that by doing something every day to move towards your goal you start to benefit from the compound effect. Your ultimate success or failure all boils down to the choices you make and actions you take on a daily basis. Sometimes the seemingly inconsequential decisions over time will build up to have a massive affect.
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USE OF DEADLINES
Another one of my mentors, Joseph McClendon III shared a great strategy with me on how to have an extra month of time every year! It is quite simple really. If you get up one hour earlier every day you will have 365 extra hours over the year. Based on a 12 hour day, that would be 30 days, equivalent to a full month of extra time. In that extra hour of the day you could plan your day, work on your mindset by reading or listening to some personal development material, you could exercise, or any combination of these, to set yourself up for fantastic day. Why not give it a try. I'm sure you will be surprised and delighted with how much extra you achieve everyday. If you want to find out how you can completely replace your income by this time next year through participating in our next Property Mastermind Programme, which starts in April, then why not visit our website now to register your interest. www.Property-Mastermind.co.uk
March 2016
LANDLORD INVESTOR
INVESTMENT
Personally, I work well to deadlines. When I am up against a deadline I can become very focused and efficient. One of my mentors once suggested that anyone could give themselves artificial deadlines to work towards and for most people this will improve efficiency and reduce the time required to complete tasks. How could you use deadlines to become more efficient?
WOULD YOU LIKE AN EXTRA MONTH OF TIME EACH YEAR?
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LEGAL
CHANNEL 5 LAUNCHES SECOND SERIES OF 'NIGHTMARE TENANTS, SLUM LANDLORDS' Paul Shamplina - Landlord Action
ON WEDNESDAY 9TH MARCH 2016, CHANNEL 5 LAUNCHED THE SECOND SERIES OF 'NIGHTMARE TENANTS, SLUM LANDLORDS' A ten-part series which delves into the dark side of the UK's rental market and growing housing crisis, featuring leading eviction specialists Landlord Action. The complexities and sheer amount of legislation relating to private rented housing is forcing more and more landlords to exit the buy-to-let market, fuelling the already chronic under-supply of housing in the UK. The imbalance of supply and demand also means rents continue rise, putting even further strain on landlord/tenant relationships. The second series of ‘Nightmare Tenants Slum Landlords’ once again uncovers some of the battles faced by tenants and landlords, in a market which “needs clear and simplified direction in order to maintain its current level of growth” according to Landlord Action.
March 2016
LANDLORD INVESTOR
The first 60 minute episode featured three stories, two which covered a common landlord complaint rent arrears. Successful music entrepreneur, Donovan Nelson hadn’t received rent for seven months from one of his tenants. With spiralling costs, Mr Nelson called on the help of Landlord Action, but on the day of the court hearing, Donavon was faced with news that his tenant was there fighting the eviction, claiming the hot water did not work. “This case highlighted one of my greatest concerns surrounding last year’s introduction of the ‘Retaliation Eviction’ law as part of The Deregulation Act 2015. The new measures protect tenants from being evicted when they raise a complaint about the condition of their home. Unfortunately, some tenants are using this as a loophole to avoid eviction, putting landlords under extreme financial pressure” says founder of Landlord Action, Paul Shamplina.
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The first series of ‘Nightmare Tenants Slum Landlords’ which aired in June/July 2015 attracted more than 1.5 million viewers. The second series will run for ten weeks, every Wednesday on Channel 5 at 9pm. The first episode was aired on Wednesday 9th March 2016.
Mr Shamplina says “The show is a very real insight into the plights of the buy-to-let world. There are Paul Shamplina, founder of Landlord Action, is also many professional landlords and respectful ten- co-hosting ‘The Property Hour’ on LBC radio with ants out there who move from one harmonious Clive Bull, every Thursday from 9pm-10pm for 13 ⌂ tenancy to another, but that is not always the case. weeks from Thursday 10th March. With increasing amounts of legislation, we’re seeing a rise in the number of landlords and tenants at loggerheads. Designed to offer a balanced view of the market, Landlord Action was thrilled to be invited to take part in the second series and help show landlords and tenants how to protect themBanner Advert for landlord zone W190mm x H130mm D2.ai 2 12/11/2015 16:57 selves.”
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LANDLORD INVESTOR
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Episode one also exposed an unscrupulous landlord, previously known to the authorities, who was renting his HMO to numerous tenants in extremely unsanitary conditions, which led to a rat infestation.
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for all enquiries about design work, print or digital email craig@landlordinvestmentshow.co.uk
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