Landlord Investor SEPT 2016

BY

INDUSTRY

EXPERTS

COVERING

ALL

ASPECTS

OF

BUY-TO-LET

SEPT 2016

WRITTEN

LANDLORD | PROPERTY | INVESTMENT

THE INVESTMENT POTENTIAL OF HMOS THE HIGHEST RETURNS OF ALL?

- Tom Entwistle

DOING IT RIGHT: BEING A RESIDENTIAL LANDLORD PROFESSIONALLY

- Peter Davis

AUCTIONED PROPERTY WITHIN FIVE MILES OF WEST BROMWICH

- David Humphreys

THE

HIGHS AND LOWS OF HMOS

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WELCOME TO THE SEPTEMBER ISSUE OF LANDLORD INVESTOR! Editorial Editor

Tracey Hanbury editor@landlordinvestmentshow.co.uk Editorial Contributors David Humphreys Kevin Wright Paula Higgins Peter Davis Peter Licourinos Peter Littlewood Simon Zutshi Steve Cox Tom Entwistle Tony Gimple

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So it would seem that the holidays are over, and its business as usual at LIS towers!

CONTENTS Expert Advice HMOS

Once again we have had a great summer and a well-deserved break from the shows and magazine to plan for 2017 (much more on that to follow) and we are very excited to share our plans with all our readers soon. In the mean-time, we have four busy shows to go until the end of the year as well as four excellent issues of Landlord Investor magazine to look forward to.

Student Accommodation

In this month’s issue of the magazine, Tom Entwistle from LandlordZONE explains the potential investment returns a HMO could yield and the pitfalls that your HMO journey may face.

New Investor

Auctions Industry Update Industry Spotlight Investment Tax Advice

06 10 14 18 22 26 28 34 36

As we are travelling far and wide this month to both West Bromwich in the Midlands and to Norwich in East Anglia, our property experts have explored some of the possible opportunities in both areas.

Following up on his article from last month’s issue, David Humphreys from Buying Auction Property is assessing auctioned properties within a five mile radius of West Bromwich by taking a road trip to view over twenty properties in just two days.

And from Norwich, Peter Davis of the Eastern Landlords Association looks at how to approach becoming a residential landlord on a professional level, and how you can make it work as a business as opposed to a hobby.

We wish to see you at either of these upcoming shows and we hope that you use the knowledge in this issue to your advantage to help achieve your goals and ambitions on your property adventure.

Happy reading!

Tracey Hanbury | Editor Landlord Investor

Tracey Hanbury

September 2016

LANDLORD INVESTOR

4

MEET THE TEAM

SHOW LOCATIONS

TRACEY HANBURY EDITOR & SALES DIRECTOR T: 0208 656 5075 M: 07931 308 845

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September 2016

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EXPERT ADVICE

LANDLORDS YOUR BUSINESS DO IT RIGHT! Peter Davis Eastern Landlords Association

BEING A RESIDENTIAL LANDLORD IS NOT A HOBBY, IT IS A BUSINESS. If only one property, or hundreds, there is legislation, there is an income, there are outgoings, with bills to pay. Often one comes across the term 'accidental' landlord. This is often used when a property is inherited, and the new owner decides to let out rather than sell. It could also be where two single owners become a couple, and rent out one of the properties, living in the other. Whilst accepting that in such cases the properties were not purchased to produce an income, a conscious decision has been made not to sell, and is this really an accident?

The Eastern Landlords Association, is a regionally based membership organisation for landlords and letting agents. We were established back in 1989, being started, as many groups are, by a group of like-minded people getting together in a pub, and sharing problems. Problem solving is still much the ethos of the ELA all these years later. It is our main purpose to provide information, sound advice and support through professional help and guidance.

September 2016

LANDLORD INVESTOR

Being a professional is absolutely key, as in any business, and to understand your rights and responsibilities, and those of your tenants. Many of these are set in the numerous pieces of legislation that apply to the private rental sector. As in any business, legislation is always changing, and it is very important that landlords are compliant with the law as it is today.

Simply because something was fine years ago, it may not be in late 2016.

An example of legislation that has been in for some years, since 2007, and unfortunately there are still many landlords that seem oblivious to, is the issue of damage deposits. Whilst these do not have to be taken, we would certainly advise they are; they must be protected in one of the government approved schemes. There is no excuse, and ignorance is no defence in law.

7

Each year brings new challenges for landlords, and with the current housing situation in the country, demand for private rented property is as high as it has ever been. This is true for the East Anglia region, whether it be city areas such as Norwich or Cambridge, or towns like Great Yarmouth, Lowestoft and Kings Lynn.

Having been involved in the industry in varying guises for over 20 years, I very quickly became aware that there is no such individual as a typical landlord. As in society generally we are all different. We have members who have one property, and others have hundreds. There are landlords who have a very mixed portfolio of properties, that may include commercial.

Others will specialise in student lets, HMOs, corporate lets, flats, family homes etc. Some will have a business model that only includes property within a set radius of their home. Some will self-manage, others use letting agents. There are landlords, who due to the demographics of the area they operate in, have many tenants that are on housing benefits.

This in itself can be challenging, especially with major changes in this sector of the market. Universal Credit is a subject that on its own could fill this magazine.

The major change to the taxation regime is the withdrawal of tax relief on mortgage payments. The majority of landlords, as most business people, have borrowed for their investments, with many having Buy to Let mortgages. Although not a silver lining, this is not in one hit. From April next year, 2017, the tax year 2017/18, the private sector landlord will be taxed on rental income before any mortgage interest payment is deducted, and then will be given a tax credit for the interest. The tax credit will be gradually reduced over four years down to the basic rate of income tax, currently 20% by 2020.

For many landlords the largest cost is on the loan, and this could well mean that for many landlords they will pay tax on a loss. This is contrary to our basic taxation policy going back hundreds of years, and does not apply to other businesses.

There is a campaign ongoing to fight this Treasury treachery, 'Axe The Tenant Tax', with a application for a Judicial Review to be heard in early October. This is being lead by Cherie Blair QC on behalf of landlords.

Also the delay in this being heard is due to a request, which was granted, from HMRC, as their lawyers were not available for an earlier hearing.

When assessing a possible purchase, or even looking at a disposal, the yield is often a factor, and we know of landlords who will have a figure, say 5%, and will not consider anything under this figure. Re-iterating, it is a business, and a danger for many is letting the heart rule the head. Generally when a property is bought it will not be lived in by the landlord. The chandelier may be wonderful, and garden amazing, and the price seems good. However is this what a tenant wants? Although it is somewhat of a clichĂŠ, know your market. The property is your product, with the tenant the customer, or client.

September 2016

LANDLORD INVESTOR

EXPERT ADVICE

One element of any business is of course costs, of which taxation is a very important component. It is probably fair to say that the majority of the private sector initially, were not too dispondent last year at the result of the general election. A majority administration from a party that purports to support business and the 'smaller' companies. It soon become very clear that the now departed George Osborne and his team had other ideas, with changes that can only be described as landlord bashing.

EXPERT ADVICE

8

Unlike most legislation changes, Clause 24, as this tax change has been labelled, will have differing effects on landlords. Not all have borrowings, and those with, will have differing gearing, and many will be joint loans. Each case will be slightly different, and generic advice is not really helpful. As business people the landlord must look at the repercussions to their own business. If the property business is a company, the rules are very different from a taxation position. Lenders have quickly realised the changing market, and there are now many more company products. This is not really a great help to many, as the process of transferring to a company requires very careful consideration, with cost implications.

From April this year, us landlords also had the pleasure of another tax hike. This was the 3% levy to Stamp Duty for every purchase made of a property that was not to be a main residence. Another unwelcome and additional expense for landlords. There was a spike in purchases in March, and a clear fall after this.

Changes to the taxation for landlords, like most legislation is national, albeit slightly different for properties in Scotland and Wales. However the landlord also has be aware of changes that can effect their business locally. Local Councils have considerable powers to impose other conditions, these are notably in the form of discretionary licensing.

Over the last few years many councils have introduced additional and selective licensing, which do incur a financial cost to the landlord to buy the licence, and in many cases more expense to comply with the conditions of these licences. Some of the arguments and rationale for these are a little thin and even spurious, and could cynically be seen as local councillors even trying to justify to their electorate that they make decisions, however ill thought out.

September 2016

LANDLORD INVESTOR

Here in Norwich City there has been an apparent 180 degree turn within a period of only some 18 months by the authority. By the time this goes to print, the cabinet of the council would have met and discussed a proposal to introduce Article 4 to certain areas of the city. Such action is not welcome, and the evidence produced to date hardly compelling. Norwich is a city with an excellent relationship with students, and now the home to two universities, and may decide to introduce a form of social engineering, and restrict homes for single people.

All this was after a commitment from the same council to introduce a Property Registration Scheme for the sector, and assess this, with a policy to re-look at Article 4 after a time, and certainly not before 2017.

The scheme has been running for a matter of only a few months, and it is much too earlier for any realistic assessment.

It is quite refreshing that the ELA have had many new members this year who have been landlords for many years, and have joined us to ensure that they do know the current laws, and are updated with the many aspects of running a successful business.

Thank you very much for reading this, and please do contact, whether by email, a telephone call, or come and see us at our office in Norwich. ⌂

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HMOS

WHAT IS THE INVESTMENT POTENTIAL OF HMOS?

Tom Entwistle - LandlordZONE

WE ALL KNOW THAT HOUSES IN MULTIPLE OCCUPATION (HMOS) HAVE THE HIGHEST RETURNS OF ALL BUY-TO-LETS. Cram 5 or 6 bedsit or student rooms into a large Victorian house, or a converted commercial building such as a pub or bank building, and you have an annual yield that would make Warren Buffett envious.

Notwithstanding that you will need planning permission, a larger initial investment for the conversion, and meeting the more stringent HMO safety standards, possibly a planning application and the fee process for an HMO license. You also have a much more onerous management commitment, but given all of that your HMO can still make a handsome profit from year one.

September 2016

LANDLORD INVESTOR

However, with all the sales promotion of HMOs from property gurus such as Jim Haliburton and his HMODaddy et al, will these developments reach a point of saturation in the future?

HMOs are not popular in respectable leafy residential areas for obvious reasons, especially with student occupiers – parties, noise, rubbish etc, - and new conversions often result in planning objections. Most councils will also place restrictions on HMO numbers in any locality.

It’s little wonder though that HMO’s have become so popular with property investors. Whereas a single let might return £650pcm, given a typical market rent in a provincial town - a £7800 annual return - its income is limited to the market rent. Take away mortgage, agent, repairs and other running costs and you will be lucky to net £3,000 before tax pa.

11

If you have a void period within the year, then your return is even less and therefore it’s not all that surprising that many single lets are lucky to breakeven in income terms, certainly in the early years, if you are reasonably highly geared with finance. And of course the recently announced tax changes to be phased in over the next few years won’t help.

It doesn’t take a genius to realise that even after taking into account the annual running costs, which in any case should not top £10,000, and with the odd room void along the way, the return is astronomically higher than a single buy-to-let. What’s more, with four or six tenants you are widely diversified compared to having a single tenant, but if squabbles develop in your house it can become a major management headache.

There’s just one big problem that can spoil the party here: supply and demand. Even when you can get beyond the planning, licensing, mortgage, safety and management hurdles, can you fill the rooms and keep them filled? What’s more, do you have the time to manage if you have a day job, because getting agents to manage HMOs for you isn’t always easy?

Filling and keeping that room full is the key to success in this business. Location of course is very important, plus having your units meet the requirements of the market you are aiming at, top, middle or bottom end, again depending on the location.

If you are have problems filling your rooms then perhaps it’s time to review your marketing: your advertising strategy, tenancy length and flexibility, rent amount vis-à-vis the competition, services and facilities offered. Developing relationships with local employers, universities, and local agents who may have tenants on their books, is always a good long-term strategy. Think about using specialist websites, especially the student ones like accommodationforstudents, and even Airbnb.

Yes, there are going to be difficulties to overcome but I’m convinced there are opportunities in this lucrative HMO market for those who are willing to do their homework and put in the necessary effort to make it work. The market for HMOs has grown, tenant demand for this type of accommodation is healthy in many locations, and providing it is good quality and value, this trend looks set to continue.

HMOs are popular not only with students and social tenants, who form the core of these types of occupiers, but also there’s a growing market for professional tenants, especially in the big cities where rents can be prohibitive in single lets for many people. HMOs have other attractions for these professional tenants: socialising, close proximity to transport links, pubs, restaurants and food outlets.

September 2016

LANDLORD INVESTOR

HMOS

On the other hand, take an average HMO with 4 or 6 separate rooms, all brining in on average around £450pcm, which would give you between £1800 and £2700pcm or between £21,000 and £32,000 pa, assuming all rooms are fully occupied for the whole year.

As with all property investment, research is the key, but finding the right location where tenant demand is strong and likely to remain so, for an HMO can be very lucrative. Competition though is something you need to look out for. There’s likely to be a spate of large scale rental developments just now, particularly in university towns, aiming at the student market.

Although institutional and large-scale landlord investment represents not much more than 2% of the UK lettings market at present, that proportion is likely to increase considerably over coming years.

But the attractiveness of these sorts of yields, as has been said, is not only attracting more small-scale landlords into this market, it’s got the attention of the large scale ones as well.

12

HMOS

Landlords looking to enter this market need to be aware of the rules and regulations surrounding planning and licensing issues. Many local authorities include these rules on their websites, and I would say the starting point for any proposed HMO development or conversation must be having a word with the local authority concerned.

Any property is classed as an HMO if it is occupied by three or more people forming two or more households, where more than one of these households shares amenities - toilet, bathroom and kitchen. Although these may come under a selective licensing scheme, they are not necessarily licensable HMOs. The latter are currently defined as properties with five of more unrelated tenants, on 3 or more stories, meaning that the property falls under much stricter management regulations (The Management of Houses in Multiple Occupation (England) Regulations 2006) HMOs have their own designated planning category under the Town & Country Planning Act 1990 (TCPA), which is C4. The Act states that any change of use of a property requires planning permission, unless it has “permitted use” - permitted by General Permitted Development Orders (GPDO), which includes these two categories: •

C3 Dwellinghouse - a house or flat occupied by a single person, couple or family.

•

C4 House in Multiple Occupation (HMO) - a house shared by between 3 and 6 unrelated individuals as their main residence. They must share facilities such as kitchen and bathroom, toilet.

September 2016

LANDLORD INVESTOR

So, with HMOs it is usually permitted to change the uses between C3 to C4 unless the local authority imposes a restriction known as an Article 4 Direction, which has the effect of removing these permitted development rights.

A point sometimes missed by landlords is that for planning purposes shared properties are now split into two categories: those with up to six occupants and those with seven or more, known as sui generis HMOs (of their own kind). Sui Generis HMOs always require planning permission.

If you intend to let to more than five unrelated tenants over three stories you will need to obtain a mandatory license for your HMO, unless you are creating completely self-contained flats, where tenants do not share facilities such as kitchen, bathroom or toilet. To obtain the license the manager of the property must show they are a “fit and proper person” to act as a landlord, and the property must meet the necessary safety standards.

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Traditionally, lenders view HMOs as commercial properties and impose the fairly strict criteria they would with any other commercial loan, with higher lending rates than those you can get with simple buy-to-let mortgages. However, lenders are now beginning to respond to the demand for HMO mortgages emerging HMO market. Nevertheless, they will be looking for a successful track record of property investing by the borrower.

The HMO market is without doubt one which has potentially high returns, but don’t underestimate the work involved in achieving this, and the potential competition you may be up against. Will HMOs reach saturation point in the future? I think the answer is probably yes in some locations, but that could be some way off in others. ⌂

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14

AUCTIONS

AUCTIONED PROPERTY WITHIN 5 MILES OF WEST BROMWICH David Humphreys Buying Auction Property

SEPTEMBER 21 FINDS THE LANDLORD INVESTMENT SHOW IN BIRMINGHAM WITH THEIR MIDLANDS SHOW AT THE HOME OF WEST BROMWICH ALBION FOOTBALL CLUB. Within 5 miles rich pickings are to be found at the auctions, particularly Bigwood’s & Cottons, who each stage six auctions a year at rival Football Club Aston Villa.

Bigwood’s is by far the largest offering over 120 Lots in their September 8th auction, Cottons generally have a catalogue of around 50 Lots.

For this reason the PAE Auction Masterclass, limited to 12 students, is run in association with Bigwood’s with Masterclass Students viewing auction properties meeting pre-set criteria over 2 Bigwood-scheduled viewing days. Briefly, the Masterclass viewing criteria is, location between Walsall & Brierley Hill, guide price sub 100K, condition in need of work/ modernisation/renovation, no commercial mix, if let AST only.

September 2016

LANDLORD INVESTOR

Out of the 120 lots, 44 made the initial Viewing List which was subsequently halved to 21 after initial online Due Diligence and so we set out on the 1st day,

by Executive Coach, to view 12 properties, 4 internally and 8 externally only.

The internal viewings are all at times set by Bigwood’s for general public viewing and last 15 minutes, common auction viewing time. The external viewings mean that generally we can’t gain internal access because the internal viewing is scheduled for another date but, because it is often not possible to view heavily distressed/derelict property or AST-let internally, auction buying investors should develop the skills necessary to view externally-only and still reach a buying decision including calculating the maximum bid.

15

We were able to roughly measure the depth of the front room and therefore probably the main bedroom by shooting a laser measurer through the front window between the vertical blinds slats.

Next to be viewed, Lot 14, Shaw Rd, a 3-bed semi in Coseley WV 14 guiding at 49-54K. Another external but we were able to access the side and back for measurements as the side gate was insecure. A lot to take note of, the street was on a hill and the position of the house was just where HGVs would be pressing the loud pedal, almost opposite was a bus stop. Both were contributing to traffic noise which was why previous owners had fitted double glazed sliding doors in front of a ground floor recessed window. Two properties away, the red brick building in the pic in the catalogue, housed a late-night pizza takeaway, not my ideal neighbours, as much as I like pizza I don’t want to live near their ovens. Interestingly next door is/was for sale at 142.5k. Whilst this property had extension potential it won’t be making my next shortlist.

Back in the coach and on to the next viewing, another external, Lot 109, Wallace Rd, a 3-bed Semi again in Bilston WV 14 only 1.5 miles from the first viewing.

A tidy semi on a corner plot with a rear garden possibly accessible from the street, again we were able to accurately measure width & depth of both the house and plot.

And so we move on to another property in Coseley WV 14, Lot 45, Harvington Rd, a 3-bed detached which was listed as external only but surprisingly had an insecure side gate so we were able to take a full set of external measurements. No problems except that the property was in too good an order for our purposes, not stinky enough.

Of concern is no first-floor bathroom facilities plus the visible streetlight and invisible bus stop, it’s adjacent to the side gate, with a variety of buses stopping approximately every 10 minutes. Judging by surrounding properties, this property had development potential either with a single/2-floor extension or possibly split into 2 flats, each with good access and off-street parking, always with the necessary planning consents.

Another external viewing, Lot 10, Ivyhouse Lane, a 2-bed detached with development potential in Bilston WV 14 guiding at 29-34K. As can be seen from the plot plan in the catalogue, this property had good side & rear land both of which are potentially suitable for extensions.

On to Lots 107, Wentworth, & 108, Nessun Dorma, two very good examples of why viewing is so essential, both these properties are opposite heavy engineering commercial premises, as is the road to and from. We only viewed externally but did not need to view internally and as neither property would make the next shortlist, Costing Works.

Lot 27

Lot 109

Lot 107

Lot 108

Lot 14

Lot 45

September 2016

LANDLORD INVESTOR

AUCTIONS

First stop was a 3-bed semi in Bilston WV 14, Lot 27, Kendrick Rd, which was external only guiding at 34-39K. We were still able to get the measurements we wanted because we could access the width of the house from the front and its depth by measuring down the side. Interestingly we were concerned about a streetlight, to the front-right, which will inevitably shine into the first-floor bedrooms and which we think has been airbrushed out of the catalogue picture. A good example of why it is necessary to view these properties. We found other examples of edited catalogue pictures.

AUCTIONS

16

And now to our first internal viewing of the day, Lot 104, Grace Rd, a 3-bed semi on a larger-than-average plot with development potential. Often you really don’t need to view internally because if the potential of this Lot is going to be realised it will inevitably involve extension or redevelopment of the plot both of which inevitably mean that the existing property would be renovated and put in first-class order.

Second internal viewing Lot 126, Moat Rd, a 2-bed end-terrace in Tipton DY 4 needing “extensive modernisation” throughout. This is a very good example of a “distressed” property needing courage to view given the stink internally which was exacerbated by clear evidence of the presence of both mice, possibly rats, and definitely flees, all of which are included in the guide price of 34-38K. Again, back to the “necessity to view” Moat Road is a cul-de-sac ending in a vehicle turning circle for all the vehicles accessing these properties of which Lot 126 is the first on the left. It would seem possible to knock down the boundary wall and create and off-street parking space but this would need to be discussed with planning before the auction. Another potential problem which you can’t see but should be on the lookout for is at the rear where there is a gate in the fence between the two properties in the catalogue picture. This indicates that there might be a right of way across the back of all the properties in that terrace and up the side of this property. The legal pack should include reference to this gate and if it doesn’t you should make further enquiries, again before the auction, because if you found out after the auction that there was a right of way it would be too late to change your mind or bid price given that such a right away would devalue the property.

We wait with bated-breath for the Legal Pack as this property definitely has potential and makes the Cost of Works Shortlist.

Lot 10

September 2016

LANDLORD INVESTOR

Lot 104

Lot 126

Lot 57

Lot 30

Lot 122

Having spent too long on Lot 126 we missed the chance to view internally Lot 57, Swancote Rd, a 3-bed semi with development potential, possibly non-standard construction, guiding at 45-50 K. But no matter, we were able to access all the garden around the house taking all external measurements and it was evident that the “development potential” referred to extending the property on the side & rear, the catalogue picture is of the rear of the property.

The front of the property is down to grass extending to a path which leads into parkland without any fencing or other obstructions. Problems, you can’t park at the front, at least not officially and there doesn’t appear to be any allocated parking at the rear though this should be checked in the Legal Pack.

I haven’t made any mention of bidding strategies but there is one that could start to become relevant at this point in the auction, Lot 57. The strength of the bidding which is reflected in the amount of the bid and number bidding varies through the auction starting with Lot 1 which is often very slow with noone prepared to commit themselves and join the party, in fact it can take 3 to 5 Lots before the party starts to warm up so very early Lots, 1-5, can often prove to be bargains. Thereafter the room warms until about 50% of the catalogue has been sold when it progressively cools down and this can be seen by the number of people who leave the auction, often packed at the start, as the number of available Lots reduces. So around lot 57 out of a catalogue of 120 the room starts to progressively cool leaving, in the main, only traders as bidders. Of course this halfway point isn’t set in stone but, as the auction progresses, the number of punters in the room, reduces, so treat auctions like a marathon, not a sprint.

17

My advice to anyone considering buying properties with structural problems is to make sure that you understand the problem and how to fix it and then find an expert who probably has more knowledge that you both in respect of understanding the problem and fixing it. That said it really isn’t necessary to buy problems in auctions and often fixing a problem doesn’t necessarily make for more profit, so if you don’t have a great deal of experience remember the acronym KISS, Keep It Simple Stupid.

In the next newsletter I will look at the results of checking the Legal Packs which have yet to be published and hammer prices achieved. If auctions interest you, consider the next PAE Auction Masterclass starting on November 14 to coincide with Bigwood’s December 8 auction which should include another 120-140+ Lots of interest with a good selection guiding at less than 100 K. For full details go to www.

PropertyAuctionExpert.com Why buy through auctions? Because they are a reliable regular source of distressed property needing fixup from a quick makeover to a full gut renovation/ modernisation which can result in both a Tax-Free Rent & Little or No Money Left In the deal (TFR & NMLI), two basic Buy To Let Objectives.

Want to know more, talk to us at the Landlord Investment Show Birmingham Sept 21 and/or come to my Free Seminar. ⌂

LandLords IncentIve scheme West London Boroughs require good quality properties in the South East and the West Midlands.

A range of generous incentives are available dependent on the type and size of the property.

FreeLance agents We are also looking for freelance Letting Agents working on commission.

For more details, email: zaheer.iqbal@rbkc.gov.uk

September 2016

LANDLORD INVESTOR

AUCTIONS

Now at the end of our viewing day, we come to 2 properties for the brave, Lots 30, Priory Rd, being sold into a hot room & Lot 122, Oakham Avenue, being sold into a cool, predominantly empty, room.

Reason “for the brave”, both are suffering structural cracks. Lot 30 a 3-bed semi in Dudley DY 1 guiding at 64-60 8K which could very easily be extended over the garage and is “in need of further modernisation” but has a very visible crack below the front bay window. Then we come to Lot 122, another 3-bed semi in Dudley, DY 2 this time with substantial cracks internally & externally.

18

INDUSTRY UPDATE

PROPERTY MARKET: THREE MONTHS ON FROM THE BREXIT VOTE - WHERE ARE WE NOW?

Paula Higgins - HomeOwners Alliance

NEARLY THREE MONTHS ON THE HAZE OF UNCERTAINTY SURROUNDING HOW BREXIT WILL PLAY OUT APPEARS SLIGHTLY LESS OPAQUE THAN BEFORE, AS CONSUMERS REMAIN CONFIDENT. But just where are we now in terms of house prices, construction and mortgage finance?

Here’s a quick round-up from Paula Higgs, CEO of the HomeOwners Alliance on how things stand in mid-September 2016:

HOUSEBUILDING AND CONSTRUCTION Some of the UK’s biggest housebuilders insist it’s all back to “business as usual” this month. That’s chiefly because long-term housing under-supply has meant that the hiccup following the uncertainty of Brexit was just that – a hiccup. The demand for housing throughout the UK remains unaffected.

September 2016

LANDLORD INVESTOR

CONSUMER CONFIDENCE Fewer houses were purchased both pre-Brexit and in its immediate aftermath, as potential buyers waited to see what effect the decision would have on house prices, employment and the economy at large. Sellers, fearful of this lack of interest, lowered prices in order to secure a sale. The ball has landed just inside the buyer’s court for the first time in years and it looks likely to remain there for some time.

Also, as predicted, the introduction of the three per cent Stamp Duty on second homes in April this year has played its part in curbing the enthusiasm (and finances) of many buy-to-let investors.

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IMPACT OF FOREIGN INVESTORS

FINANCE LENDING The Bank of England’s reduction of its base rate to 0.25 per cent in August has meant mortgage rates are the lowest they’ve been for a number of years (it was 5.25 per cent back in 2008 at the start of the Credit Crunch). This means it’s an extremely good time to remortgage. The biggest bargains are on the two, five and 10 year mortgages currently on the table.

First-time buyers may not feel quite so buoyant, however. That’s because the number of 95 per cent mortgages has fallen considerably (although admittedly this began a couple of months pre-Brexit).

According to Moneyfacts, lending on small deposit mortgages has fallen 3.5 per cent compared to the same time last year.

HOUSE PRICES

The focus of these Asian, American and European investors isn’t the same as it was this time last year though. They too are feeling the effects of the Stamp Duty charge on second homes to the extent it has encouraged many to lower their property price point. This means many overseas investors are proving strong competition for first time buyers from the UK, as well as existing property owners looking to move up the property ladder.

CONCLUSION How will things work out for the property market as the Brexit juggernaut continues? It remains difficult to tell. From where things currently stand, there doesn’t look to be a lot of change and if there is, it may take time to filter through. Life does look to be a bit more comfortable if you’re a buyer than previously, especially with those impressive fixed rate mortgage deals out there at the moment. One thing is for sure, if you happen to have a house to buy or sell, there doesn’t seem any point in hanging around – unless you have a spare 2-3 years to see how things have worked out post-Brexit. ⌂

Prices are similar to what they were before the Referendum, but the number of transactions continues to decline. But continued under-supply means they are expected to rise in the coming months, says the Royal Institution of Chartered Surveyors (Rics) – albeit at a much slower rate than at the beginning of the year. The member organisation predicts an increase of 3.3 per cent per annum over the next five years.

The cost of an average home in the UK in August was £213,930. This was an increase of 6.9 per cent compared to the same period in 2015.

Prices in the upper regions of London housing continue to experience a drop while the rest of the city is expected to remain stable for some time (up to a year, according to some property analysts).

September 2016

LANDLORD INVESTOR

INDUSTRY UPDATE

With the pound Sterling performing poorly in terms of the exchange rate, UK property – and that of London in particular – continues to remain extremely popular for foreign investors – especially those from China and the Middle East.

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22

INDUSTRY SPOTLIGHT

5 LESSONS THAT WILL LEAD YOU TO SUCCESS! Peter Licourinos Prospect Investors Club In this article, I’m going to share with you five of the many life lessons that have helped me achieve success and if you take them on board, you could do the same.

I OFTEN GET ASKED HOW I'VE ACHIEVED SUCCESS THROUGHOUT MY CAREER AS A PROPERTY EXPERT AND HOW OTHER PEOPLE CAN ACHIEVE SUCCESS THEMSELVES. Well, I’m going to share my answer with you now but first, I need you to understand something... Tips, advice and knowledge I will happily share but you are the only one who can ensure your own success! You determine your level of success. Not me, not anyone else, only you!

Now that we’re on the same page, here’s my five lessons that have helped me become a successful property investor and industry authority but they’re lessons that you can apply to whatever profession you choose to pursue. So let’s begin:

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LANDLORD INVESTOR

1. EDUCATION IS A MUST This might seem simple, but it isn’t! I know a lot of property investors who are ‘self-taught’ and although they are making money off property, it’s clear to see that they are needlessly losing money through simple mistakes. It would be easy for them to see this too, if only they had invested in external education.

This is why I couldn’t wait to become a property mentor, so I could help aspiring investors avoid the same mistakes I made, and those I would have made had I not been mentored.

Personally, I try to attend as many training seminars and networking events as possible, to ensure I’m learning from other successful investors and experts. I also try to attend (at the very least) one property training course a year, to make sure I’m up to date with the latest strategies and legislations. I recommend you do the same. Everything can change at any time!

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4. RESEARCH EVERYTHING

My mentor, James May, constantly reminds me of something that I think of every day. He says “You are the sum of the five people around you.” This is something you need also to understand. It’s important that you surround yourself with the right people, people who inspire you, people who encourage you to chase your dreams and people who hold you accountable to the goals you set yourself. With the right people around you, you can achieve any goal you set your mind to. With the wrong people, or dream stealers as I call them, you’re going to struggle – and that’s a fact.

This point is one I really can’t stress enough! It’s painful to see so many people dismiss research and do the bare minimum. You need to research! I’ll admit that I’ve purchased a few properties off of my gut feeling thinking “This is a great property!” or “Who wouldn’t want to buy this one?” and yeah, sometimes I did make a nice profit but that was earlier in my career and I ran the risk of falling short.

Obviously, you’ll need to surround yourself with more than just five people. You’ll need to surround yourself with a strong and reliable team of people (I mentioned how you can do this in my last article – you can read it here). Surround yourself with the right people because the people you align yourself with will affect how successful you become.

Move away from the dream stealers!

3. UNDERSTANDING YOU MARKET Everyone who is successful, regardless of their specific field, is a master of their market. You won’t come across a single entrepreneur who lucks their way to success. Every successful businessperson studies their environment vigorously. They understand what’s going to happen before anyone else, or are certainly the first to understand changes, and as a result are the first ones to the punch. The early bird really does catch the worm!

You need to be the first in your field to take advantage any opportunity before the rest of the market can react to what’s happened. You need to be proactive and act fast, you can only do this by understanding your market!

Now, I don’t leave anything to chance, and I’m a much better businessman for it. I research vigorously! I research the local area and property market, so I know what state it’s in. I look at the property types available in that area and what’s in demand, so I can select the best investment strategy and almost guarantee. I research every element of my investments and it has let me go from achieving returns of 5-6% for rental properties to achieving returns in the region of 1012%. That’s the power of research! But on a more broad scale, you also need to research your market or industry as a whole, so you can stay ahead of the game.

There are always twists, changes and shocks in the property market and all we can do is anticipate them.

Most recently, we’ve seen the change in Stamp Duty, which was easy to prepare for, if you had done your research ahead of time. I myself purchased several properties in the lead up to the changes in April, as did many other investors. Some unfortunately left it a bit late and were unable to complete on their new purchases in time, resulting in them either having to pay a lot more stamp duty or pulling out of the sale and losing all money they’ve spent so far. Neither is a particularly attractive position to be in. An easily avoidable position though.

The other, which no one could have fully prepared for, was Brexit. No one could have been prepared because such an event has never happened before but I, like many others, took precautions.

Change is inevitable. You need to be in charge of your own journey by understanding your industry, market and environment and evolve with it. So my advice is this: study your market, learn from it and evolve with every change, allowing you to rise to the top of your industry.

September 2016

LANDLORD INVESTOR

INDUSTRY SPOTLIGHT

2. PEOPLE ARE POWER

INDUSTRY SPOTLIGHT

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I was able to do this off the back of countless meetings and conversations with other investors and property experts, by attending networking events and be researching and reviewing as many credible updates and reviews as I could get my hands on. Each of these conversations, legislation updates and reviews have each been a single jigsaw piece that have allowed me to paint a bigger picture (one that is constantly changing and growing – which is why I need to continually research) from which I can plan my next move. You need to paint your own picture to work from and you can only do that by researching and accumulating real data from dependable sources.

Good research will lead to good decisions and they will lead to success and wealth. And that’s what you ultimately want, isn’t it?

5. LONGEVITY IS KEY We’ve all seen them, those get rich quick adverts that somehow follow you everywhere you go. With ridiculous tag lines like “You could make £3,298 a day without leaving your bed” or “Even lazy people become millionaires in 90 days”. They’re all lies, scams, frauds! It’s near impossible to achieve riches and success over night. The truth is, if you want riches, wealth and success, it’s going to take time and a lot of hard work but you can achieve it! You just need to be realistic. Take property for example: many people think that they can invest in a property, refurb it and walk away with £100K in their pocket. Unfortunately, that’s rarely the case.

A friend of mine, who is very successful in his professional life, owns two investment properties. He rents them out through Prospect Estate Agency’s fully managed lettings service and doesn’t have to do anything with them. On one property he makes £30 a month, on the other he loses £30 a month. You might think this is a bad investment strategy. However, he’s playing the long game. These two properties are his retirement plan. He bought one three years ago for 195k (a 2 bedroom property), valued at £300K today, and the other 18 months ago for 130K (a 1 bedroom flat), now worth £190K. When he retires, he’ll sell both properties for an excellent profit from his initial investment and he’ll have a large cash sum for his retirement. I’m not saying that’s the strategy that I would use but my point is that he’s focused on the long game and it works for his goals.

When you realise what your ultimate long term goal is, and if you exercise patience and discipline, you’ll be able to achieve it. Make sure you don’t lose sight of your ultimate goal because of short term rewards and bumps, things will always move forward, you just have to plan accordingly and make sure you’re ready when opportunities show themselves.

Your success really is in your hands and if you’re ready to take action then you’re one step closer to achieving your dreams. If you think property investment is the right vehicle for you to achieve your goals, I’d love to hear from you with your own experiences, lessons and top tips!

Regardless of your journey, I wish you the best of luck and success in everything you do! ⌂ Peter Licourinos – Director of the Prospect Group & Prospect Investors Club For over 16 years, Peter Licourinos has been involved in every aspect of buying, selling, renting, letting and investing in property, as well as being a successful mentor to 100’s of property investors. Peter Licourinos is now sharing his expertise and knowledge of property with you! Learn more about investing in property at www.prospectinvestorsclub.co.uk.

When you become a member of Prospect Investors Club, you can arrange a courtesy one-on-one meeting with Peter to discuss your investment goals, portfolio and strategy.

September 2016

LANDLORD INVESTOR

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26

STUDENT ACCOMMODATION

LETTING TO STUDENTS: WHAT YOU SHOULD KNOW

Steve Cox - Alan Boswell Group As parents up and down the country prepare to pack their children off to university this month, Steve Cox from Alan Boswell Group takes a look at the pros and cons of letting to students – and how you can protect your investment.

A NEW ACADEMIC YEAR IS JUST ABOUT TO BEGIN... ...and students new and old are flocking to college towns and cities across the UK and the least organised amongst them will be searching for somewhere to live. While some will be in university halls of residence, the majority of UK students rent privately, particularly after their first year.

Indeed, letting to students is generally seen as a safe bet for property owners. While other rental markets go up and down with the economy, the demand from students remains constant, is remarkably resilient and surprisingly lucrative.

And while the majority of students can’t afford exorbitant rents, they generally don't expect too much in return either. A roof over their heads and somewhere warm, dry and secure where they can sleep, study and socialise are their main priorities. It’s likely they will expect a property to be at least partly furnished too, with beds and desks in each bedroom and a sofa and chairs in the communal lounge. These items don't have to be brand new, just robust; indeed, you should be prepared for an above-average level of wear and tear with a group of young people living together away from home for the first time.

September 2016

LANDLORD INVESTOR

PROS AND CONS Students' reputation for rowdy and destructive behaviour is generally over-stated; The Young Ones was only a TV show (and is more than 30 years old to boot!). Most of today's students are respectful and reasonably conscious of their responsibilities. However, you need to make allowances for youth, inexperience and occasional over-exuberance. Noisy parties are an occupational hazard and complaints from neighbours must be dealt with fairly but firmly.

On the plus side, if you get a reputation as a good landlord with the university accommodation agency then you'll have a regular flow of tenants without needing to advertise. Remember, you'll generally only be renting for nine months of the year, but the assurance of new tenants should make up for this, and you can use the summer months to carry out repairs and refurbishment.

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STUDENT ACCOMMODATION

MEETING YOUR RESPONSIBILITIES Be sure to check with the local council about your specific obligations as a student landlord before you do anything. Most student accommodation counts as houses in multiple occupation (or HMOs) in respect of gas, electric and fire safety regulations, and you should familiarise yourself with the laws regarding these types of properties.

You will also need comprehensive landlord insurance, including contents insurance for items you provide, like furniture, plus buildings, liability and rent guarantee insurance cover. While some insurance companies are wary of insuring student properties, don't be tempted to conceal the nature of your tenants. If you do have to claim, this could be considered as withholding a material fact, and your insurers could refuse to pay out.

Alan Boswell Group is a leading independent insurance broker specialising in Landlord Insurance. We can help arrange suitable cover for your buy-to-let properties, whether you’re letting to students or not.

Call us today on 01603 216399 to find out more. ⌂

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September 2016

LANDLORD INVESTOR

28

SHOULD YOU AVOID BUYING PROPERTIES WITH STRUCTURAL DEFECTS? INVESTMENT

Kevin Wright - Ninja Investor Programme

EVEN FOR VERY EXPERIENCED INVESTORS SEEING A PROPERTY WITH CRACKS RUNNING DOWN THE WALLS IS ENOUGH TO MAKE THEM RUN IN THE OPPOSITE DIRECTION.

UNDERPINNING

A property with structural defects could be a bottomless pit in terms of the cost of solving the problem, in order to make a property with structural problems mortgageable again.

Of course, there will be circumstances where underpinning is the solution, and that’s not a problem as long as you build it into the cost when you’re doing your due diligence.

This is overlooking a potential goldmine.

Sometimes a structural engineer will need to be engaged to provide a report to provide clarity up front. This will provide the definitive requirement of what the solution will be.

However, it’s not an investment area that you want to jump into blindly. You need a bit of expertise on board. To exploit the opportunity that this type of property presents you either need to have specific building or construction background and knowledge or access to someone who does.

Investors who have a building background eyes light up when they see a building with a structural problem. This is simply because they know that while it looks dire, the reality is that it’s a solvable problem that will cost substantially less than you would expect.

Clearly if you don’t have this construction knowledge you should only consider this type of property with the benefit of a professional behind you. Either as a joint venture partner or contractor.

Cracks in the walls of a property, in the minds of the general public and investors alike, conjure up one word:

September 2016

LANDLORD INVESTOR

Underpinning can be horrendously expensive with costs running into the tens of thousands of pounds.

However, a builder will tell you that cracks in a building often don’t indicate that need for underpinning. That knowledge doesn’t need to be shared. This allows you to negotiate from a position of strength.

As a potential buyer of a property with cracks in the walls it’s a great opportunity to do the classic sharp intake of breath and say “Ooooh, that’s going to cost a lot!”

This type of unmortgageable property is one where all but a few buyers fear to tread, which opens up a great opportunity to profit. A 50% below asking price offer is not out of order for a property of this nature.

The good news is that, while buy-to-let lenders won’t touch a property that has structural defects, bridging lenders are quite happy to lend on this type of property.

Once you know what you’re dealing with – and that would be part of your due diligence – making good the structural defect is not as big a deal as people tend to believe. When the work has been done, get confirmation that the problem is solved with a structural engineers’ report - and what was unmortgageable is mortgageable, allowing you to apply for a BTL mortgage or sell the property on. ⌂

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30

INVESTMENT

THE BEST INVESTMENT YOU CAN MAKE! Simon Zutshi property investors network

THIS WOULD BE A RATHER SHORT ARTICLE IF I SAID THAT EVERYONE SHOULD JUST TRAIN WITH US, BUT YOU MIGHT BE SURPRISED WHEN I SAY THAT ACTUALLY I DON'T THINK THAT IS THE CASE. For example, no one can just pay to attend our 12-month Property Mastermind programme.

Whereas most training companies would be more than happy to accept anyone’s money, we have a very good track record which we are keen to maintain, and so we want to make sure that we get the right people on our training for everyone’s benefit. In this article I will explain how you can find the very best training for you (whoever that might be with) and how to avoid making the expensive mistakes by picking training that is not right for you.

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LANDLORD INVESTOR

I would love to say that all training is good for you but unfortunately there is some better than others.

Whenever the property market starts to boom, up pop a host of people who want to try their hand at teaching other people to invest, often only with limited success themselves. There is a lot of Hype and BS in the property training world which is why it does sometimes get a bad name, but equally there are many people who have done very well from their property training and often put their success down to the training they have attended.

If you have a look at some of the property forums there are some people who think that anyone else who spends money on their own education is stupid and foolish, because they think that you can gain all of the information you want for free on the internet, and so why would you ever pay someone else for that.

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So let’s look at some of the factors you should consider when identifying the best training for you:

WHAT DO YOU WANT TO ACHIEVE? You should make sure that the person delivering the training has achieved what you aspire to achieve.

For example, if you want to replace your income, then the person training you should have practical experience of having done it themselves.

THEY SHOULD STILL BE INVESTING THEMSELVES The market changes and so what worked five years ago or even two years ago may not work now. I became financially independent at the age of 32 thanks to the passive income from my property portfolio in 2003.

I don’t need any more investment properties but I still actively invest for two reasons:

1)

2)

I want to make sure I keep up to date with what is happening in the property market, There are some great property deals out there which offer fantastic returns so why would you not do it?

I also think anyone running any sort of education or training, should also be investing in themselves to continually develop their skills, knowledge and mindset. I am a life long learner and I have found that the more I invest in my own personal development, the more successful I become.

ARE THEY ACTUALLY ANY GOOD AT TRAINING? It is not enough to be a successful investor, they also need to be very good at teaching you what they have done, so that you can replicate their success.

The best way to assess if someone is a good teacher or not, is to see what results their students have achieved. They might be incredibly successful, but that is no good for you unless they become good at teaching what they have done and how they have done it. You want to make sure they have a great track record of successful students.

Go online and attend property network meetings to find other investors who have trained with that person to see what results they have personally achieved and what about other people they know who have also achieved as a result of attending that training. Make sure you speak to people who have actually attended the training rather than people who have just heard about it from someone else.

September 2016

LANDLORD INVESTOR

INVESTMENT

Whilst I agree that there is a huge amount of valuable information available on line for free, there is also a lot of rubbish and if you don’t know what you are doing how do you work out what is good and what is not good information? The main problem with this “learn for free” approach, is although you may not need to spend any money, you do need to spend a huge amount of time, which is actually your most valuable resource. Some say that education can be expensive but compared to what? I would suggest that ignorance is even more expensive. I have certainly made a huge number of mistakes in my first few years of investing, which I may not have made if I had had the opportunity to learn form someone else’s mistakes. This is why I think it is so valuable to attend seminars where you can learn a huge amount of information in a short space of time and so accelerate your success. That is as long as you pick the right training for you.

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INVESTMENT

DO THEY HAVE A SUPPORT NETWORK? There are lots of individuals who could offer you mentoring or coaching to help support you in your property journey but this can be dangerous if they are a one-man band. If they are really successful, then there will be times when they are unavailable because they are on holiday, busy working on their own property deals or maybe something might happen in their personal life which means that they are not available to help you when you need it. This is one of the reasons I do not do personal coaching anymore because I am too busy. Instead we have 25 coaches who have all been through my training, achieved incredible results and then trained in coaching skills. These coaches then support people on our training programmes. This means that if for any reason there was a challenge with one of our coaches, we could replace them with another one to make sure that there is continual service for the client.

IS THERE A MONEY BACK GUARANTEE? I believe that if you are paying for training, then it needs to deliver everything as advertised, or you should get your money back. This would counteract some of the hype that some people use to sell training seminars. To ensure the quality of our training, we offer a 100% satisfaction, money back guarantee, on all of our one, two and three day seminars. This means that anytime up to half way through any of these events, any delegate can hand in their course material and receive a full refund. Needless to say we don’t get many people asking for their money back because we deliver more value than the delegates have paid to attend the training.

HOW MUCH SHOULD YOU PAY FOR TRAINING? This really depends. There are some people who offer very low cost or free training but then you should not be surprised when they deliver less content and make more sales pitches to try and

September 2016

LANDLORD INVESTOR

sell you further training. After all they need to make their money somehow. We prefer to charge a reasonable amount for our training seminars so that we can spend more time delivering valuable content. Besides if something is low cost or free it has no value and so people don’t value it. We have noticed that the more we charge, the better results our students get because they want to make sure they implement the valuable information we share with them to maximise the return on the investment in themselves.

Rather than consider training as a cost, look at it as an investment in your future. The knowledge you gain you will have for the rest of your life, and if you put it into practise, should pay for itself many times over.

PICK SOMEONE YOU RESONATE WITH! Ultimately, as long as they meet all of the above criteria, you should pick someone who you personally resonate with as they will probably be the best person to train with you.

IT'S ALL ABOUT PERSONAL RESPONSIBILITY And finally it does not matter who you train with, it will come down to you to put that valuable information into practise. No one is going to do it for you, so you need to be prepared to take action on what you are taught otherwise you might as well save your money and not bother.

WHAT'S NEXT? Why not attend your local property investors network meeting and speak to other people who have done the training you are considering doing to find out for yourself if it meets the above criteria and is suitable for you. There are 50 pin meetings around the UK so there is bound to be one close to where you live or work. You can find your local meeting here. www.pinmeeting.co.uk ⌂

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34

TAX ADVICE

TICK TOCK THE TAX CHANGES CLOCK! Tony Gimple - Less Tax 4 Landlords Investing in property is one of the best ways of making money; and since the 1980s more people than ever have chosen to buy residential BTLs. Post Brexit the market is robust if not booming and, according to HMRC, 1.75m of us see property as an attractive method of wealth creation.

Yet, whilst many people have significantly increased their net worth, few have received joined up professional advice as how to balance the contradictory demands of Income Tax, Capital Gains Tax, Corporation Tax, or Inheritance Tax. With only 200 days or so to go before the changes to the tax regime start to bite, time is rapidly running out to successfully offset the onslaught. It’s difficult to say how much more tax would be due as the reduction in mortgage interest and wear & tear allowances come to bear, but even with an average size portfolio you could be tens of thousands of pounds worse off.

Moreover, anybody who is or close to becoming a higher-rate taxpayer will suffer even more; and as soon as your total income gets to £100,000 then there’s the 63% tax trap to worry about. Even if you’re not currently making an operating profit, the tax changes will soon add up and leave you even further in the red.

Many people are rushing to incorporate (putting everything into a limited company), or are setting up LLPs with a view to using S162 to the same end some two or three years later, but what no one’s telling them is that existing lenders may not play ball, lending to limited companies can be highly restrictive, that it undoubtedly will cost you more and, most painfully of all, that it’s virtually impossible to take the money out without paying tax at every turn. It also makes inheritance tax far more difficult to manage, as investment companies don’t benefit from business relief and are fully subject to IHT at 40%.

September 2016

LANDLORD INVESTOR

Between now and the 5th of April 2017 at the Landlord Investment Shows and our own limited place events, we’ll be demonstrating to landlords why immediate or staged incorporation is NOT the answer.

You can find out more and reserve your place on our next event at lt4l.co.uk/propertyevents Less Tax For Landlords is a specialist tax and estate planning service dedicated to the needs of those who are involved in owning commercial property, residential buy-to-lets, HMOs, investment property, or property development. Our goal is to help you get wealthier whilst minimising tax leakage insofar as the law allows, and to pass it on to those you care about most whilst keeping you in full control of your affairs today.

There’s no charge for our initial conversation or detailed high-level report that helps you to decide what to do next. Unlike the majority of other advisory firms, 100% of our clients are property owners, and our work is fully indemnified. ⌂ For information please visit the website at: www.lesstaxforlandlords.co.uk or give us a call on 0203 303 0157

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NEW INVESTOR

ESSENTIAL ADVICE FOR NEW LANDLORDS Peter Littlewood Southern Landlords Association In the last magazine Peter Littlewood from the SLA wrote on what you need to do the property to get it ready to let.

THIS ARTICLE WILL CONTINUE THE ESSENTIAL ADVICE, THIS TIME CONCENTRATING ON HOW TO SET UP AND RUN A LET. Next time we will look at the Housing Health and Rating System (HHSRS) and responsibilities and liabilities for the landlord.

USE OF AN AGENT I am often asked ‘should I use an agent?’ There is absolutely no problem as long as that agent belongs to: •

an independent redress scheme – now a legal requirement;

•

an accredited body to ensure client money protection. This is not yet law, but the Government has the ability to introduce this via the 2016 Housing Act.

September 2016

LANDLORD INVESTOR

However landlords/owners should realise that they will always remain legally liable for the property, and the way it is let. So a most important document is the contract between the landlord/owner and the agent – I believe this to be more important than the agreement between the landlord and the tenant, as most of the tenancy agreement is implied in many laws. Protection for the landlord/owner is not implicit, and it is vital that it is laid out in a contract. And if you get an agent who says the contract is non-negotiable; find another agent, because all contracts are negotiable.

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Why do I keep putting landlords/owners? Because the landlord does not have to be the owner, not does the owner have to be a landlord. So one of the first things to sort out is if the agent is acting as the landlord, or as agent on behalf of the landlord. The next thing is exactly who does what, and if there are any matters that might get overlooked.

And you don’t have to use an agent in traditional way.

You might be might be fully able and willing to fully manage your property, but what do you do when you go on holiday? You might have an agreement that means the agent will do full management whilst you are away, and you do the remainder of the time. If so, it is best to have an overlap to allow for handing over.

PERMISSIONS TO LET •

If the property is leasehold you will probably have to make the free-holder aware you are planning to let. Check the terms of the lease and ensure you abide by all the terms, or try to get the amended.

NB, this is also an important point to check if you are buying a leasehold property, else you might end up owning a property you are not allowed to rent.

•

Inform any joint owners;

•

Inform the mortgage lender. Almost certainly there will be a section in the contract, or T&C’s to ensure you inform them, and failure to do so would be construed as fraud;

INSURANCE Not a permission per se, but ensure the insurance company are aware the property is being let, else insurance might be null and void and any claims not honoured – i.e. you will have wasted your money.

It is also critical that you ensure you have appropriate insurance, not only covering the structure of the property but also any landlord contents there may be (e.g. white goods in the kitchen); and all landlord liabilities. Note that cheap is usually not good when buying this insurance as cheap insurances will often find a way of not paying out on the basis ‘that is not covered by our policy’.

It is the tenants’ responsibility to cover their goods.

Not advisable to get your insurance extended to cover their contents, as they might make lots of claims and put your premium up.

COUNCIL TAX

At one stage I would have been able to give uniform information about Council Tax, but under the 2011 Localism Act Councils were able to amend the terms and conditions for council tax, and most have done so.

September 2016

LANDLORD INVESTOR

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Generally the tenant(s) will be responsible for this tax, but it is important you understand it to ensure you don’t get an unexpected bill: Voids At one stage a landlord could get 6 months exemption from paying council tax if the property was empty, this is no longer the case and all Councils have reduced this period. If you are very lucky you might get 1 month exemption. All too frequently this has been removed completely and the landlord will have to pay for any void period.

A political point (with a small p). I can’t see the justification of this as it not only gives the landlord no time to do any work on the property; nor indeed is it financially worth them raising a bill for a few days as the cost of the bill will be more than that being demanded – i.e. they will be out of pocket, even if the landlord pays on time, they will definitely be out of pocket if the bill has to be chased. If you want to question these points raise them with the responsible Councillor, not the council official – they are only doing what they are told.

September 2016

LANDLORD INVESTOR

Students Usually will be exempt from council tax, but they generally have to apply for an exemption certificate from the tertiary body; get this in on time; have to 100% occupancy by students. Be careful of this last point, because if a student drops out but continues living in the property, the exemption may well be null and void and the landlord might end up with the bill.

Band A Some Councils are taking the opportunity to re-categorise rooms in an House of Multiple Occupancy (HMO) so each room becomes a Category A rate liable individually for tax. This shifts the responsibility for paying the tax in an HMO to the tenant, but puts the tenants overall expenditure up.

HOUSING HEALTH AND SAFETY RATING SYSTEM (HHSRS)

All properties are subject to this regime, and we will be going over this in the next issue. ⌂

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