Li Magazine 31st edition

LANDLORD | PROPERTY | INVESTMENT

LANDLORD INVESTOR MAGAZINE 31ST EDITION | 2017

NOVEMBER SHOW UPDATE / THE BIGGEST DANGER / ARE RENT CONTROLS THE ANSWER TO OUR HOUSING CRISIS? / ARE WE AT THE LAST CHANCE SALOON? / THE MISUNDERSTOOD STRATEGY / PROPERTY PRICE VS DESIRABILITY / AGREED DEPOSIT DEDUCTION?

IAIN DUNCAN SMITH LOOKS AT THE BIGGEST DANGER TO UK LANDLORDS

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Welcome

Welcome to the 31st edition of Landlord Investor Magazine

Contents

Welcome to the 31st edition of Landlord Investor Magazine Autumn is now kicking in and we’re about to embark on a busy few months for three remaining shows of the year – in Manchester, Cardiff and London.

This month sees Iain Duncan Smith MP (IDS) return as our new columnist with his take on both the positives and negatives for landlords now and in the future.

IDS will be delving deeper into these issues at the Expert Property Panel, to be held on Nov 7th at the National Landlord Investment Show at Olympia, London.

The Expert Property Panel is free to attend for landlords and investors and is a chance to have your say and get feedback on the pressing issues you face in the industry at the moment. See more on page 6.

This issue sees Tom Entwistle speak about rent controls and how they may affect both landlords and tenants – let us know what you think on this issue.

Peter Littlewood, from the Southern Landlords Association, writes about regulation and how this will affect so-called rogue landlords and stop them operating in such a negative way for the industry. Simon Zutshi covers purchase lease options and why this misunderstood strategy can benefit investors.

Paul Mahoney from Nova Financial writes about how errors can be made determining the prices of properties and the options to consider and whether going for a lower price when buying a property automatically means it’s a less desirable option. Tenancy Deposit Scheme offers a case study to help landlords understand how they make adjudication decisions and this can help you losing money.

For additional complimentary advice on the buy-to-let market, visit our Cardiff or Olympia shows on 25th October and 7th November respectively for complimentary advice, networking and to meet leading suppliers of property investment services.

To register for show tickets to any of our events please visit www.landlordinvestmentshow.co.uk

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Contact Telephone: 020 8656 5075 landlordinvestmentshow.co.uk Tenants History Ltd, 27 Stafford Road, Croydon CR0 4HA

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Show Update The Expert Property Panel is back

Political Comment The biggest danger

Industry Update Are rent controls the answer to our housing crisis?

Industry Update Are we at the last chance saloon?

Investment The misunderstood strategy

Finance Property price vs desirability

TDS Agreed deposit deduction?

Editor Tracey Hanbury editor@landlordinvestmentshow.co.uk Editorial Contributors Iain Duncan Smith Tom Entwistle Peter Littlewood Simon Zutshi Paul Mahoney Mike Morgan

Design Marc Riley Advertising Beverley Meliniotis Marketing Anna Jackson

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.

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Meet the team TRACEY HANBURY

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STEVE HANBURY

BEVERLEY MELINIOTIS

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Published by LI Media, organisers of National Landlord Investment Show

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Subscribe to LI Magazine Landlord Investor Magazine gives property professionals, landlords and investors monthly advice and information on the topics, news and legislation that matter to the industry.

Your subscription gives you the latest industry information in 11 issues per year.

Subscribe today for just £65.00 per year to get news, advice and comment on all areas of buy-to-let: • legal services & tax • insurance • investments • deposit schemes & landlord associations • property hotspots

Call the subscription hotline on 020 8656 5075 today or visit landlordinvestormagazine/subscribe Published by LI Media, organisers of National Landlord Investment Show

SHOW UPDATE

LONDON OLYMPIA 7 NOVEMBER 2017

The Expert Property Panel is back by popular demand at the flagship London Show, November 2017 National Landlord Investment Show has announced the return of its speaker panel, which is to be held at the flagship London show at Olympia on 7th November. The Expert Property Panel will once again feature Rt Hon Iain Duncan Smith MP, as well as a host of renowned property and buy-to-let experts.

Since the inaugural debate this June sparked off lobbying to Parliament by guest speaker Iain Duncan Smith MP, the show gained national and industry press coverage around prohibitive landlord laws. This time, Iain Duncan Smith MP will speak further about the recent tax changes, the affect this is having on landlords currently in the market and which conditions can work in the favour of the landlord now and in the future.

Marie Parris, MD of George Ellis Property Services, will be chairing the debate,

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which will focus on tax, mortgages and analysis of the current buy-to-let landscape.

Also speaking as part of the panel is Fionnuala Earley, Chief Economist at Countrywide, who will be able to give insight into her predictions in housing and BTL market. Vanessa Warwick from Property Tribes will also be joining the panel - and is a sought after property commentator, regularly contributing to BBC Radio 4, The Telegraph, This is Money, The Sunday

Times and many more on and off-line publications, as well as speaking at property events all over the UK. Also speaking is Simon Zutshi, experienced investor, successful entrepreneur and best- selling author, who is widely recognised as one of the top wealth creation strategists in the UK. Having started to invest in property in 1995 and went on to became financially independent by the age of 32.

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SHOW UPDATE

Marie Parris explains, ‘The interactive debate will give landlords the opportunity to ask questions to the panel on tax, Brexit, rent arrears, Universal Credit, immigration plus lots more within the private rented sector. Attendance at the Expert Property Panel is complimentary and on a first-come, first served basis for all registered visitors.’

expert advice on opportunities available.

Companies exhibiting include Royal Bank of Scotland, Valuation Office Agency and Ikea Business, as well companies such as Nova Financial, Mortgages for Business, Total Landlord Insurance, LOFT Interiors and Together Money who offer local or niche buy-to-let services in areas from tax, to mortgages to legal.

In addition to the property panel, there are 37 additional complimentary seminar sessions, covering the entire spectrum of buy-to-let and presented by UK buy-tolet specialists including Paul Shamplina, Founder of Landlord Action, speakers from Clive Emson Land & Property Auctioneers, Nova Financial, Shawbrook Bank, Southern Landlords Association, Together and Main Sponsor, Less Tax for Landlords.

There is also a complimentary networking event in the morning of the show for visitors to meet new contacts and discuss local issues. Tenancy Deposit Scheme, has exhibited at all 52 shows, attests to the popularity of the show, ‘National Landlord Investment Show is a really well run event and has gained the popularity it deserves within the industry.’

Visitors will be able to meet 80+ leading suppliers of property investment, tax, legal, insurance and mortgage services.

It’s also a perfect opportunity for those thinking of entering the market to get

LANDLORD INVESTOR 31ST EDITION

The event takes place from 09.00am and the Expert Property Panel runs from 10.00am – 11.30am.

About Landlord Investment Show National Landlord Investment Show is the UK’s leading property investment exhibition, providing solutions, networking and advice for new seasoned and investors in the buy-to-let market. Established in 2013 and operating in property hotspots throughout the country, it has now run 52 shows successfully, and has provided property investment solutions for over 25,000 landlords in the last 12 months alone, a growth of 31% since 2015. landlordinvestmentshow.co.uk

Landlords and investors can register for complimentary tickets at landlordinvestmentshow.co.uk

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POLITICAL COMMENT

THE RT HON IAIN DUNCAN SMITH MP

Some months ago I attended a previous National Landlord Investment Show, on the issues surrounding the buy to let market and I am now returning to discuss the issues that still affect the market and to what degree the tax changes have made to the market and those operating in it on Tuesday 7th November at London Olympia.

The biggest danger The buy-to-let market is undergoing some significant transformation. Last time I spoke, people were worried that in a bid to strengthen the position of firsttime buyers, the government has taken a number of measures in order to tilt the scales in favour of first-time buyers and against BTL landlords. After the general overhaul of the stamp duty system in 2014, the government added a 3% surcharge on second homes in April 2016.

Furthermore, starting from April this year, BTL landlords will no longer be able to reclaim the full amount of mortgage interest paid on their tax return. As landlords will all be aware, until 2020, the amount of mortgage interest that can be deducted will be gradually be reduced to zero and replaced with a 20% flat

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rate rebate. This move will impact the profitability of investments for a large number of private landlords, particularly if inflation rises.

As if that wasn’t enough, the Prudential Regulatory Authority’s tightening in underwriting standards for mortgage lenders will also have an impact on the industry. I understand why they are doing this as they are stressing the importance that in these transactions, all parties involved take risk assessment seriously. They seem particularly worried that previously, investors and lenders haven’t evaluated the profitability of the investment carefully enough. With the Bank of England putting this market in its sights, now the stress is on the integrity of the market.

However, while recent developments in the sector certainly pose challenges for private landlords, strong demand for rental units and capital appreciation still work in favour for those carefully selecting a buy-to-let property as an investment for the future.

For example, I see that the total amount of rent paid to private landlords in Britain is now more than double the amount of mortgage interest paid to banks by homeowners, as rising house prices push more people into the rental sector. Over the 12 months up to July, those renting paid about £54bn to buy-to-let investors. This is because I suspect that the number of people renting property across the country rises and rents rise.

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POLITICAL COMMENT

Strong demand for rental units and capital appreciation still work in favour for those carefully selecting a buy-to-let property as an investment.

LANDLORD INVESTOR 31ST EDITION

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POLITICAL COMMENT

Mortgage rates are at record lows and are helping buy-to-let investors make deals stack-up and population growth means that there is a growing demand.

However it remains the case that the group most affected by the Government's changes are the smaller landlords. There is no question but that it is this group who are experiencing the squeeze. The latest figures seem to show that the bigger landlords, those with 4 or more properties are still investing, whist the smaller ones are far less likely to. I see also that HMRC are now saying that some 40% of private landlords are not now dealing with their tax requirements correctly.

It is difficult to know where this is going to end up but it seems to me that there is a drive to professionalise the operators in the market place with these regulatory and other changes complicating the tax treatment and changing the cost base.

It is interesting that the market is adjusting to this and I notice that there seems to be a significant move to buy properties outside London, in areas where the price is low but the rental demand is strong. University towns are a good example of this. After all younger people are responsible for about half of Britain’s total rent bill, paying around £24bn to landlords over the past year.

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So although there are genuine issues making it more difficult for the buy to let market, particularly for the small property owners, there are offsetting positives.

Mortgage rates are at record lows and are helping buy-to-let investors make deals stack up and population growth means that there is a growing demand from tenants. Also, rents that should rise with inflation and the long horizon for interest rate rises mean many investors should find the market attractive enough.

Nonetheless, I will still press the Chancellor to think again about the tax changes made by George Osborne which have affected the amount of rental property on the market and I hope with some progress at the next budget.

However for me the biggest danger for everyone would be the arrival of Jeremy Corbyn and his very antiprivate property ownership policy agenda. Not only would that be a disaster for this marketplace but also for the UK. Yet that is one for me and my colleagues over the next five years.

Be part of the UK’s largest landlord panel debate at the National Landlord Investment Show on Tuesday 7th November at London Olympia. This is a great opportunity for landlords and investors to voice their concerns and get valuable feedback from this specialist panel.

Register for your tickets at landlordinvestmentshow. co.uk

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UK’s leading property investment event OUR FINAL TWO SHOWS OF 2017

WEDNESDAY 25 OCTOBER - CARDIFF Cardiff City Stadium

TUESDAY 7 NOVEMBER - LONDON Olympia Conference Centre

For further information regarding our 2017 shows please call 020 8656 5075 or visit our website: www.landlordinvestmentshow.co.uk

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INDUSTRY UPDATE

TOM ENTWISTLE LANDLORDZONE

Mr Corbyn promises to end tenants’ misery by introducing rent controls to the English property market. This follows similar schemes with varying degrees of control being introduced in the Irish Republic and in Scotland, with other schemes having operated in other countries around the world for many years.

But will they really end the housing crisis, or just make matters worse?

Are rent controls the answer to our housing crisis?

“Jeremy Corbyn is right: we need rent controls, and we need them now. It was great to hear the Labour leader rally to the cause of tenants. For too long we have been at the mercy of greedy landlords and the agents who facilitate them.”

So goes a recent Guardian headline following Labour’s party conference in Brighton, where Mr Corbyn made some very popular promises, and where Labour seems increasingly confident of an election victory soon!

This is an understandable sentiment if you are a long-term reluctant tenant and especially given you haven’t got the slightest notion of economic theory or any knowledge of the chequered history of rent controls around the world. In fact most economists agree, rent controls are as bad if not worse for tenants than they are for landlords.

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What do the experts think?

As one commentator famously observed, if you were to lay all the economists in the world end to end they would fail to reach a conclusion, so for them to reach almost unanimity on the rent control issue, then it really must be a bad idea.

The state is good at many things, but for the UK government, or local authorities on its behalf, to set or control rent levels, and set-up an army of bureaucrats to micro-manage them, is not likely to be the panacea that a future Labour government or indeed tenants envisage.

Little detail is given over Labour’s plans, but rent controls usually go hand in hand with increasing security of tenure, so expect some form of extended tenancies or even as seems likely in Scotland, lifetime tenancies.

The last time lifetime tenancies were introduced, by a previous labour government, through the Rent Acts (Regulated Tenancies), the UK rental market shrank to a fraction of what it is today.

Since the introduction of the Assured Shorthold Tenancy (AST) in 1988 the UK has had a simple, straightforward and frictionless transfer of dwellings between owner-occupation and the private rented sector (PRS). This is because there are no planning controls for single lets, and because of short-term leases. The AST produced a flexible and responsive housing sector, and allowed for growth of the PRS to meet demand from existing housing stock.

To recap the current situation on tenure security in England, the default tenancy is the AST.

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INDUSTRY UPDATE

It usually lasts for 6 or 12 months, but most go on for at least 2 years. Although private landlords have the right to possession with two months’ notice at the end of the term, or anytime thereafter, most landlords encourage good tenants to stay as long as possible because changing tenancies is expensive. Good tenants who pay their rent on time and look after the property are valued by landlords, will rarely be asked to leave, and many landlords leave their rents below market levels.

If a tenant remains and no new lease is signed, the tenancy becomes a periodic or month-to-month tenancy. This is at the same rent and on the same terms as the initial AST, though a landlord can ask for an increase during a longer term periodic tenancy, given sufficient notice.

For those tenancies agreed post 1st of January 1989 (i.e., after the Rent Acts) there is no regulation of initial rents or of rent increases within a periodic tenancy. However, there is some de facto regulation of rents where tenants are on housing benefit as support is limited to the bottom 30% of the market.

For all ASTs, landlords in England and Wales may use a Section 21 notice at the end of the fixed term or anytime during a periodic tenancy, which gives the tenant two months’ written notice to leave. The landlord does not need to give any reason for requiring possession. This one safeguard for landlords has been largely responsible for the regeneration of the rental market in England & Wales since 1988.

LANDLORD INVESTOR 31ST EDITION

If the tenant fails to leave when the two months’ notice expires, then the landlord must apply to the county court for a possession order. The tenant can then be required to leave within 14 days, or a maximum of 42 days given hardship, failing which the landlord must apply for a court bailiff to evict.

Were a tenant is in breach of its contract there is also a court procedure where the landlord must demonstrate this and the Housing Act 1988 sets out eight mandatory and ten discretionary grounds for eviction.

What kind of rent control?

Of course, the devil will be in the detail and if as has been proposed, increases will be allowed up to the level of inflation, then this could actually work in landlords’ favour as rarely do private landlords keep rents in pace with inflation – this would perhaps give all landlords a legitimate excuse to do so.

And remember, under Harold Wilson’s Labour government in 1975 inflation reached around 26.9%, a time which later led to the country being bailed out by the International Monetary Fund, and reduced to working a threeday week. I can’t imagine any tenant welcoming anything near a 25% annual increase in rent under the next Labour government?

It was at this time that the government introduced The Prices Commission under the Counter-Inflation Act 1973, alongside the Pay Board, in an

attempt to control inflation. Did it work? Absolutely not. At the time I was working for an international company supplying components to the retail market. Funnily enough, all of a sudden, “specifications” on the components changed quite regularly, with of course new prices.

Governments cannot control the ingenuity of entrepreneurs and this will be the same with rentals.

Controlling rents distorts the market and leads to inflexibility in the labour market. It means that tenants are reluctant to move and as landlords’ profits are squeezed, they allow their properties to deteriorate.

Whole areas can degenerate over time in these circumstances, hence economics Nobel Prize winner (architect of Sweden’s welfare state) economist Prof. Gunner Myrdal’s famous comment: “Rent control has in certain Western countries constituted, maybe, the worst example of poor planning by governments lacking courage and vision.” His fellow Swede, economist (and socialist) Assar Lindbeck said, “In many cases rent control appears to be the most efficient technique presently known to destroy a city—except for bombing.”

For those interested in a full discourse on rent control, this is a superb article https://goo.gl/gKw9ju Tom Entwistle is Editor of LandlordZONE and an experienced landlord.

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INDUSTRY UPDATE

PETER LITTLEWOOD SOUTHERN LANDLORDS ASSOCIATION

Are we at the

last chance saloon?

Many years ago the financial industry was fairly unregulated, and they were warned to self-regulate or the Government would do it for them.

The industry didn’t; so Government obliged with a lot of the regulation and red tape.

Are we in the same position?

Landlords are complaining about the amount of legislation piled on them in recent years making the industry ‘unsustainable’; but how does it compare to what we might get in the next decade, especially if we get a Corbyn Government.

It is true that we have had a whole load of laws; rules and regulations piled on us, but the problem appears to be that the very people who are charged to police it have no money – the Local Authorities. So their constant answer is to go after the ‘low hanging fruit’ and hound decent landlords who are making their best attempts to get it right, and who will pay licensing fees; agent fees and the like in an attempt to stay legal.

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Those criminal/rogue landlords who the Local Authorities should be finding are precisely those who are not interested in following any kind of law, and look upon the occasional fine as an occupational hazard.

But these two groups represent the two ends of the spectrum, and represent less than half the industry.

Between these lies the centre ground who don’t really know what they are doing and are not interested in finding out - they are not professional.

I run a landlord association; I also train landlords; and I go to many forums/ shows etc. So I only tend to meet the people who are trying to do the right thing. They are the ones who will license immediately, even though they believe it just to be a money making exercise from a Local Authority going after an easy target.

No-one knows how many landlords there are in the country, but we who run landlord associations believe at the best some 20% of landlords belong to an association, and perhaps half of those (i.e. 10%) are trained and accredited – and this is a generous ‘guestimate’. Perhaps some unaccredited landlords bought into the industry because of a random conversation around a dinner table years ago; or want to augment a failing pension pot; or possibly are accidental landlords.

However, landlords do have a social responsibility - it might be their house, but it is someone's home.

In a previous life I was also an energy assessor, so I got to visit owner occupier houses as well as rented houses. And some of the sites I saw are unbelievable, properties needing work doing; overcrowding; old tired facilities in desperate need of modernising.

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It is true that some Local Authorities don’t help the situation by not allowing the suspension of Council Tax for a month during void periods. So they are not encouraging landlords to do any work – even assuming they know about the conditions; can be bothered to do anything; are too tight to do anything.

Harsh you might say; but let me give you an example. A colleague of mine has a daughter going to university, so her parents helped find appropriate accommodation. And the situation they found was appalling – damp and mould; dirty facilities; dirty mattresses, and to make it worse he is a student landlord so knows exactly what needs to be supplied.

I am writing this Sunday October 1st and two things have happened today to back up my views. Firstly there is a long article in the Sunday Times property section echoing precisely this view – you might

LANDLORD INVESTOR 31ST EDITION

be able to read this on-line. In this article they cite several students who have found the most appalling conditions including some undesirable things on mattresses.

Strongly suggest you read it.

• keep their properties at least to the minimum legal standard;

Secondly the Secretary of State, Sajid Javid, has made a speech to the Conservative conference in which he has stated:

To Central Government I ask:

• “We will make it mandatory for every landlord to be part of an ombudsman scheme, either directly, or through a letting agent."

• "We will create new incentives for landlords who offer longer term tenancies.”

So I implore the industry to ensure: • all landlords should be trained and accredited;

• aren’t worried about an inspection – because the welcome the chance to put right any unforeseen problems.

• bring forward the banning orders, and rogue database outlined in the last Housing Act To Local Authorities I ask: • prosecute criminal landlords, and get them out of the industry; • stop hounding decent landlords trying to get things right, and help them instead; • allow landlords at least a month ‘holiday’ from Council Tax to allow them to carry necessary works.

• only use agents who are fully qualified and belong to a money protection scheme;

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INVESTMENT

SIMON ZUTSHI

There is massive uncertainty in the UK property market right now, which means there is a huge opportunity for those of us who are educated and ready to take advantage. I believe that this could be the buying opportunity of the decade!

The dootsrednusim strategy Due to the current market conditions, there is one particular strategy which I believe is one of the best strategies to use. However, it is also one of the most misunderstood strategies, so is overlooked by many investors.

Whenever I ask an audience of investors about this strategy, about 50% of the room put their hands up to say that they have heard of it, but only a few people have actually used it. If you are not using this particular strategy yourself, then I believe that you could be missing out on a great opportunity.

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So what is this amazing strategy?

It is called a PLO or Purchase Lease Option. When reading the rest of this article, I encourage you to have an open mind and forget anything you think you might know about this strategy. Let me show you how you can start profiting from them.

A Purchase Lease Option (PLO), is where you find a motivated seller who would like to sell you their property, but rather than purchasing it straight

away, you agree to rent it from them first for an agreed period of time.

You enter into a legal agreement, which gives you the right to purchase the property, but not the obligation to. You fix the purchase price now, and agree a period (option period) during which you can buy the property at that price, this could be several years in the future. In the meantime, you pay rent to the property owner each month and take on the responsibility of maintaining the property.

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INVESTMENT

Over the last 6 months, I have noticed an increasing number of long term landlords who are considering selling up.

At the end of the option period you can either:

Common misconceptions about Purchase Lease Options

1) Exercise your option to buy at the agreed price, even if the property is worth more at that time.

1. I see many investors trying to use a PLO when it is not appropriate. The main thing to remember here, is that a PLO only tends to works if the seller does not need the money from the sale now. If they are selling their property in order to access the equity, then a PLO probably won’t work and a straightforward sale might be a better solution.

2) Flip the property to another buyer, by assigning the benefit of the PLO agreement.

3) Re-negotiate an extension to the Option Period, if you don’t want to buy at that time. Note the seller does not have to agree to this.

4) Walk away from the deal.

On an ethical point, I think you should only enter into an option agreement if you genuinely intend to purchase the property, at some point in the future.

So why would you want to do this?

This is similar to the very popular Rent 2 Rent strategy, whereby you pay rent (monthly option fee) to the property owner, repurpose their property as a multi-let or serviced accommodation, and then rent it out for a higher rent making a profit on the margin. However, unlike Rent 2 Rent, whereby you give the property back to the owner after 3 to 5 years, with a PLO you have the right to purchase the property during the option period, and so you could benefit from capital growth in addition to cash flow on a property that you don’t actually own.

Because you have not purchased the property (yet) there is no need for a large deposit, or even a need to get a mortgage.

The benefit to the property owner is that they no longer have the hassle of maintaining or renting out the property, and although it remains in their name, you take care of all of the costs such as the mortgage. For some motivated sellers this can be a perfect solution. As you will read later, this can also work really well for tired or retiring landlords.

This is a great strategy for new and experienced investors alike, but unfortunately most investors don’t really understand how or when they can utilise this powerful strategy. I want to clear up some of the common misconceptions.

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2. Many investors think that PLOs only work when the owner of the property is in negative equity, whereby the value of the property is less than the debt on it.

Whilst a PLO can help in this situation, the amount of equity has no bearing on whether a PLO is an appropriate strategy or not. In fact, PLOs can work really well when there is 100% equity i.e. no debt on the property. Let’s face it, if someone sells a property then puts the sale proceeds into the bank they are not going to make much money on it, with the current interest rates. Instead of selling the property, you could put a PLO in place and pay the owner a monthly option fee, which would be more than they could earn in interest from the bank.

3. When I mention PLOs to some investors, they think that I am talking about the Tenant Buyer strategy, which is probably the most widely known strategy which you can do with PLOs. However, Tenant Buyers is just one of the many strategies that you can do, and most people seem to over complicate it.

The buying opportunity of the decade Over the last 6 months, I have noticed at the pin meetings and property exhibitions which I speak at, that there is an increasing number of long term landlords who are considering selling up their portfolios and retiring early. This seems to be due to the Section 24 tax changes, whereby higher rate taxpayers will now pay more tax on properties which they own in their name. For many long term landlords their full time job is to manage their property portfolio, and their exit strategy is to one day sell their portfolio and then sit on a beach, with a big pile of money. The Section 24 tax changes will mean that over the next few years these landlords will have to pay an increasing amount of tax for no extra benefit, which is why some of them are considering retiring early.

However, if these landlords sell all of their properties in one go they will have to pay a huge amount in Capital Gains Tax (CGT). It therefore makes more sense for them to stagger the sales over a number of years, so that they can fully utilise their personal CGT allowance.

But the downside is that they will have to hang around until the last property is sold before they can retire, unless they can find someone to take over the management of their properties for them.

This is where you could step in. If you can find some landlords that want to retire early, you could use PLOs to take over the property so that they can retire, and then you can buy the property over a number of years. This means you can benefit from the cash flow and potential equity growth on property, that you don’t even own.

The other benefit of doing PLOs with landlords is that they will probably have interest only mortgages and low interest rates, which means you could make even more cash flow from the properties.

So how do you find these landlords? You could meet them at property networking events, find them through letting agents & estate agents, contact them directly through responding to their adverts or write to them with landlord’s letters.

I really believe that the next 12 to 18 months will be the buying opportunity of the decade. There will be two groups of people in 5 years time. The first group will be those who have recognised and acted on this opportunity, with the result of building a profitable cash flowing portfolio, and then there will be those who just thought about doing it but failed to take action and will be kicking themselves for missing the best buying opportunity of the decade. Which of these two groups are you going to be in?

Want to learn more about Purchase Lease Options?

If you want to learn more about how you can use and profit with PLOs, then why not join Simon Zutshi on a complimentary 90-minute online training Master Class.

On this training Simon will explain how you can use PLOs to control property to give you positive cash flow and equity growth, without the need for a deposit or a mortgage.

You can register for this complimentary training here: www.pinwebinar.co.uk/PLO

31ST EDITION LANDLORD INVESTOR

I really believe that the next 12 to 18 months will be the buying opportunity of the decade.

LANDLORD INVESTOR 31ST EDITION

24

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LANDLORD INVESTOR 31ST EDITION

26

FINANCE

PAUL MAHONEY NOVA FINANCIAL

Property price vs desirability Seeking value is important when it comes to making any investment but especially with property. Some property can be overpriced and others underpriced and I know which side of that equation I’d prefer to be on.

Determining the price of a property isn’t an exact science as even experienced surveyors generally determine property valuations based upon comparable sales in the area and a bit of good old fashioned guess work. Websites such as Zoopla and Rightmove provide quick and easy valuation services however they often prove to be inaccurate especially if there haven’t been many comparable sales to your property in that area.

When determining price, it is important to compare apples with apples. By that I mean, a brand-new property with all the latest bells and whistles as well as the top of the range fixtures and fittings isn’t comparable to a 100-yearold property on the other side of town. Searching lowest to highest on Zoopla is a terrible idea as you’ll first

27

be presented with the cheapest and nastiest properties in an area.

Balancing price with desirability is very important. The abovementioned cheap properties are generally cheap for a reason which is usually due to a lack of demand driven by a lack of desirability. This is the opposite of what you want when investing in property as an undesirable property won’t rent or sell well. If you’re an experienced builder or fancy yourself as a “homes under the hammer contestant” then of course you could change that with a major renovation but for most “mum anjd dad investors” the focus should be on passive income not the business of property development. Renovating properties to add value might be made to look easy by the likes of Sarah Beany however it is a profession and

should not be taken lightly or assumed to be the easy road to riches. Many an investor has been burnt by dodgy Dave builders, perceived fixer uppers properties that cost way more to fix than they are worth and estate agents that over promise and under deliver so buyer beware.

Balancing desirability with price is important. If you have the most desirable property in the most desirable location, it will rent and sell very easily but that property will often be expensive. We like to target areas with strong rental yields, affordable property prices in comparison with average incomes, strong employment and employment growth as well as infrastructure in place as well as infrastructure spending underway.

Essentially all the ingredients that equate to a market moving in the right direction.

31ST EDITION LANDLORD INVESTOR

TENANCY DEPOSIT SCHEME

MIKE MORGAN TENANCY DEPOSIT SCHEME

Agreed deposit deduction?

This month we look at a recent decision by a TDS Adjudicator and set-out the reasoning behind it in order to help tenants, landlords and agents better understand how we make our adjudication decisions. This is only a brief summary of the dispute and the names of both the landlord and tenant have been removed.

Amount of deposit in dispute: £750.00

Dispute initiated by: Agent

Award made Tenant £0.00

The agent’s claim covered items of cleaning damage and decoration, which amounted to £750.00, the full amount of the deposit. The agent also had a claim for unpaid rent arrears that were more than the value of the deposit.

that they were happy for the deposit to be paid to the agent for the rent arrears, but not if it was for the other claims made.

When presenting their case for adjudication, the agent made it clear that they wanted TDS to deal with the claims for cleaning damage and decoration only.

Their client landlord intended to take any remaining claim – especially that relating to rent arrears – to court.

So what are the key points here?

The tenant disputed the claims made to TDS, but agreed that they owed the arrears of rent. They responded to TDS

29

The adjudicator was unable to make any award from the deposit.

This was a frustrating case for the agent, who clearly sought to approach the deductions in a logical and orderly manner.

In order to deliver proportionate and efficient adjudication decisions, TDS’ adjudicators will look at multiple claims exceeding the deposit in overall terms to

Agent/landlord £0.00

assess whether the deposit is clearly due for a single item (usually rent). This can mean that a deposit is awarded to the landlord for a single claim, but this may not reflect the order of claims set out in the tenancy agreement deposit use clause.

Where agents/landlords particular want the adjudicator to consider the claims in order, they can give this instruction – as happened in this case. Notwithstanding this, where there is a clear agreement from the tenant for the deposit to be released to the landlord, even if the agent/landlord had previously been unaware of this agreement, we would regard the deposit as no longer in dispute.

31ST EDITION LANDLORD INVESTOR

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Are you a Ninja Investor?

I help property investors to use little-known strategies to put their investments on the fast-track. There are three main strategies and, if you read on, I’ll share these with you here.

What makes a Ninja Investor?

These are the property investors who aren’t sitting around waiting for their bank balance to grow enough to fund the 25% deposit – and refurb – on their next property purchase.

They know the secrets of buying properties faster without the need for a huge bank balance, perfect credit or a big income. They operate just like cash buyers.

How is this possible? That’s easy – they are using one or more of the Ninja Investment strategies.

Ninja Investor strategy #1 This is simple – buy 50% below market value (BMV), but get finance based on the current market value of the property by using bridging finance.

Buying properties that are unmortgageable can be a very profitable strategy, simply because there is less competition and the vendors are aware

that they’re not going to be able to sell at full price. It’s not unusual to buy at 50% BMV. Be conscious that not ALL unmortgageable properties are good buys – know which ones to grab and which ones you should walk away from at any cost.

Don’t get carried away – always do your due diligence properly. Sometimes a deal looks too good to be true, and frequently carrying out rigorous checks reveals it to be so – but there are always deals that are highly profitable too.

Ninja Investor strategy #2 Strategy #2 is based on a 90% flip. It’s usually applied to a buy-to-sell strategy, but in some circumstances it can be used for buy-to-hold properties.

The key is to choose bridging finance based on the current open market value rather than the purchase price. This can significantly shrink the deposit required to complete the deal.

This means you tie up less cash, it also means you can get into much bigger deals.

Most bridgers will lend 70%, so your deposit is just 30%. When that 70% is of the true current value, and you have negotiated to buy 20% BMV, that means you only have to put in 10% yourself.

The bigger the percentage BMV you can negotiate the buying price down to, the

less money you need to put in. This fact alone will set you apart from the vast majority of property investors who believe that properties can only be bought with a 25% deposit.

Ninja Investor strategy #3 This is based on you completing the refurb before completion. The strategy needs you to have great negotiation skills to get the vendor onside. Then it’s simply a straightforward process: • Agree exchange with key access and delayed completion • Refurb between exchange and completion • Value at OMV not purchase price • Sell or refinance from the day you complete • Use less of your cash to complete the purchase • Get back more of your cash - quicker Could you find deals like this?

Even if you can’t get a mortgage because of your credit record – you could use this as a buy-to-sell strategy to build up your bank balance.

There are many ways to operate a property investment business and knowing how to finance more properties, whether BTL or buy-to-sell, means your investments will grow much quicker.

Kevin Wright is always happy to discuss how best to finance your property deal. Call him on 07889 526979. Kevin runs the Ninja Investor programme teaching these strategies www.ninjainvestorprogramme.co.uk.

33

31ST EDITION LANDLORD INVESTOR

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