Li Magazine 48th Edition by Landlord Investor Magazine

LANDLORD INVESTOR

WRITTEN BY INDUSTRY EXPERTS COVERING ALL ASPECTS OF BUY-TO-LET

LANDLORD | PROPERTY | INVESTMENT

48TH EDITION | 2019

Boris Johnson as Prime Minister? What could this mean for the rental market. S E E PA G E 2 8

ALSO IN THIS ISSUE... Section 21 to be scrapped - what's the latest?

Remember, remember the 5th of November.

Are deposit passports for tenants the future?

When autumnal weather causes tenancy deposit disputes.

Lessons learned from 24 years in property.

T T he Po he Ti As M m f Tr st, P ail es eat ib r O , T ur es op nl he ed , p er ine T in lu ty , H ele : s m 11 u g an 8, P ffin rap y ro gt h, m p o or er n e. ty ..

Dates for your diary...

MANCHESTER OLD TRAFFORD Returning to Man United FC for a 6th consecutive year. Manchester has a thriving buy-to-let market and this fantastic one day event offers: 20+ seminars delivered by leading industry experts, 60+ exhibitors offering all kinds of useful services and excellent professional networking opportunities.

OLYMPIA LONDON Hot on the heels of the Brexit deadline this is our last show of 2019. Join us for 100+ exhibitors covering all areas of buy-to-let, 40+ seminars by leading industry experts and 3 panel debates featuring expert panelists from government, media and the property industry. Expect fireworks!

The UKâ&#x20AC;&#x2122;s leading landlord and property investment exhibition. Our shows are 100% committed to the UK landlord and investor market. The National Landlord Investment Show connects 1000s of property professionals at venues throughout the country and is the UKâ&#x20AC;&#x2122;s leading buy-to-let event. Our shows give landlords and investors the chance to connect with suppliers, network and increase their knowledge.

To find out more and register for FREE admission go to landlordinvestmentshow.co.uk Main Sponsors:

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I'm thrilled to welcome you to the 48 Edition of Landlord Investor Magazine.

IN THIS ISSUE...

SHOW UPDATE

Returning to Old Trafford for the 6th consecutive year.

6 Welcome back! I hope you've had a good summer and managed to catch a few rays of sunshine between deluges. The changeable weather seemed appropriate given its been pretty chaotic on both the world stage and at home. The lurch away from the EU is set in stone now, and as we thunder towards October 31st we're all wondering what impact it will have upon the UK housing market. We have a new tenant at 10 Downing Street and I'll be looking at what impact we think Boris Johnson's tenure may have upon the BTL market. Also in this issue: Simon Zutshi reflects upon lessons learned from 24 years in property. Paul Mahoney explains why you shouldnâ&#x20AC;&#x2122;t go to your accountant or solicitor for investment or mortgage advice. Sandy Bastin looks at why autumnal weather can cause tenancy deposit disputes. Reece Meenie reflects upon the last Landlord Investment Show at Olympia London in our new column Mennie Points of View. The ladies from Baya Financial return for an interview in our September Spotlight. Peter Littlewood has his usual round-up in Market Update, and I discuss the ascent of CapitalRise with their CEO and co-founder Uma Rajah, before looking at the possibility of deposit passports for tenants, plus the latest regarding the scrapping of Section 21. On the Landlord Investment Show trail we're in Manchester on October 8th, with a cracking line-up at the hallowed ground of Old Trafford. There's a chance to win a tour of the ground and have your pic taken with some silverware in a prize draw. All you have to do is register. Following that we return to London on November 5th with a fantastic line up of seminars and debates. Full details can be found in the Show Update section, being so close to the deadline for leaving the EU you can expect some fireworks. As always our events are completely free to attend, all you have to do is register. Visit www.landlordinvestmentshow.co.uk to find out more and to subscribe to LI magazine. Again I hope you've had a good summer and wish you all the very best on your property investor journey.

SHOW UPDATE

Remember, remember the 5th of November.

INVESTMENT

Lessons learned from 24 years in property.

INVESTMENT The right fit.

INVESTMENT

The ascent of CapitalRise.

SEPTEMBER SPOTLIGHT

Tracey Hanbury speaks to Baya Financial.

TENANCY AND DEPOSITS

Leaf it out: when autumnal weather causes tenancy deposit disputes.

MARKET UPDATE

The latest industry news.

Tracey Hanbury

PRS UPDATE LANDLORD INVESTOR MAGAZINE Editor Tracey Hanbury

Editorial Contributors

Design Marc Riley

Paul Mahoney Peter Littlewood Reece Mennie Sandy Bastin Simon Zutshi Tracey Hanbury

Advertising Beverley Meliniotis

Contact

Marketing Holly Maslin Ben Michaelis

Printeding: IOP Marketing

Are deposit passports for tenants the future?

MENNIE POINTS OF VIEW

Smart people. Alternative thinking.

Telephone: 020 8656 5075 landlordinvestmentshow.co.uk

@LandlordInShow

Tenants History Ltd, 27 Stafford Road, Croydon CR0 4NG

@LandlordInvestmentShow

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.

PRS UPDATE

Boris Johnson as Prime Minister?

PRS UPDATE

Section 21 to be scrapped - what's the latest?

Meet the team TRACEY HANBURY EDITOR & SALES DIRECTOR T: 0208 656 5075 M: 07931 308 875 tracey@landlordinvestmentshow.co.uk

STEVE HANBURY DIRECTOR T: 0208 656 5075 M: 07429 683 046 steve@landlordinvestmentshow.co.uk

ALICIA CELA ACCOUNTS T: 0208 656 5075 accounts@landlordinvestmentshow.co.uk

KIERAN McCORMACK BUSINESS DEVELOPMENT MANAGER T: 0208 656 5075 M: 07950 284 615 kieran@landlordinvestmentshow.co.uk

BEVERLEY MELINIOTIS ADVERTISING SALES MANAGER T: 0208 656 5075 beverley@landlordinvestmentshow.co.uk

MARC RILEY DESIGN MANAGER T: 0208 656 5075 info@landlordinvestmentshow.co.uk

HOLLY MASLIN MARKETING MANAGER T: 0208 656 5075 info@landlordinvestmentshow.co.uk

BEN MICHAELIS HEAD OF MARKETING T: 0208 656 5075 info@landlordinvestmentshow.co.uk

LES HANBURY NON- EXECUTIVE DIRECTOR

OLLIE HANBURY HEAD OF SECURITY AND ENTERTAINMENTS MANAGER

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 10 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 landlordinvestmentshow.co.uk/li-magazine Published by LI Media, organisers of National Landlord Investment Show

LANDLORD INVESTOR 48TH EDITION

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SHOW UPDATE

Returning to Old Trafford for the 6th consecutive year O C T OB E R 8 T H 2 019

LANDLORD INVESTOR 48TH EDITION

SHOW UPDATE

National Landlord Investment Show, Manchester United Football Club, Old Trafford, October 8th 2019

Manchester has a thriving buy-to-let market and this fantastic one day event offers: 20+ seminars delivered by leading industry experts, 60+ exhibitors offering all kinds of useful services and excellent professional networking opportunities. Our shows are aimed at helping you on your landlord investor journey. The National Landlord Investment Show connects Landlords, Investors, Developers & Property Professionals with industry leaders & service providers, and offers highly informative seminars which offer guidance in a constantly evolving marketplace. Our 2018 Manchester show was a huge success: with over 2000 Landlords/Investors attending in just one day. Register now for FREE admission and receive up to 5 CPD points towards your accreditation.

and meet new people. If you are in attendance of the morning property networking event you will receive a complimentary copy of our Landlord Investor Magazine. Your host

Morning Networking Event, Hosted by Sean Hughes Come and meet Landlords, Investors and Property Professionals along with other like-minded industry leaders to meet new contacts and widen your own network of customers and suppliers. This networking event is held prior to each National Landlord Investment Show and is designed to give you an opportunity to meet and discuss local issues, share best practice and experiences, with landlords, investors and property professionals. It’s a great way to start the day

Sean Hughes CTA, is a Chartered Tax Advisor with over 10 years of experience to draw upon. His company, Comprehensive Tax Planning, based in Manchester, specialise in providing a range of tax advice services to property investors. As host of the morning networking event Sean will welcome you, and is looking forward to answering your questions.

Win a VIP tour of Old Trafford How do you fancy checking-out Old Trafford's turf? Would you love to see the first team dressing room? If the answer is yes, then join us after the show for an unforgettable tour of one of English football's most historic venues. Go behind the scenes at Old Trafford and see the stadium through the eyes of Manchester United's greats. From the dizzy heights of the Sir Alex Ferguson Stand, to the atmosphere-soaked players’ dressing room, every moment will seem to carry the roar of 76,000 fans in your ears none more so than the ultimate honour of emerging from the players tunnel and following in the footsteps of so many legendary reds. All you have to do to stand a chance of winning a place on the tour is register to attend. Registration is completely FREE and you’ll be asked if you’d like to be join the stadium tour. If you tick yes you’ll be automatically entered into a prize-draw with the chance to win a place on a VIP tour of legendary Old Trafford. PLUS! Follow in the footsteps of the greats and have your photograph taken with a piece of silverware. Just register for your free show ticket and be automatically entered in the prize draw. To find out more and register for FREE admission please visit www.landlordinvestmentshow.co.uk

Manchester has a thriving buy-to-let market and this fantastic one day event offers: 20+ seminars delivered by leading industry experts & 60+ exhibitors offering all kinds of useful services.

LANDLORD INVESTOR 48TH EDITION

SHOW UPDATE

Remember, remember th the 5 of November OLY M PI A L O N D O N

LANDLORD INVESTOR 48TH EDITION

SHOW UPDATE

The National Landlord Investment Show returns to Olympia London for the last show of the 2019 calendar, Tuesday November 5th 2019. The proximity to the deadline for exiting the EU stands to make this a landmark event.

Join us at Olympia London for: 100+ exhibitors covering all areas of buy-to-let, 40+ seminars by leading industry experts, and 3 excellent panel debates featuring panelists from government, media and the property industry. If you have an interest in the UK buy-to-let market, or the private rented sector, then this is a mustattend event.

Morning Networking Event Come and meet Landlords, Investors and Property Professionals along with other like-minded industry leaders to meet new contacts and widen your own network of customers and suppliers. This networking event is held prior to each National Landlord Investment Show and is designed to

give you an opportunity to meet and discuss local issues, share best practice and experiences, with landlords, investors and property professionals. It’s a great way to start the day and meet new people. If you are in attendance of the morning property networking event you will receive a complimentary copy of Landlord Investor Magazine.

Panel debate One. Auditorium, 10am - 11.15am

Fireworks of Brexit: the UK’s Divorce from the EU Chaired by Andrew Neil Due to the massive success of our 2019 Panel Debates we are delighted to announce their return for the 3rd time this year. Kicking-off the November 5th debates we have Fireworks of Brexit: the UK's divorce from the EU. As the agreed date for the UK’s departure from the EU (with or without an exit deal), October 31st is a date which is likely to go down in history. With the EU's decision to delay the UK's departure twice already, EU leaders insist that, by this point, the UK must choose whether to ratify the exit treaty, opt for a no-deal Brexit, or cancel its departure completely. What will happen is anyone’s guess, but the possibility of a no-deal Brexit is highly possible. A mere mater of days post the departure date, this panel debate will take place right in the eye of the storm: so you can expect some November 5th Fireworks.

LANDLORD INVESTOR 48TH EDITION

Expert Panel We’re also delighted to announce the return of the expert panel, chaired by Political Broadcaster Andrew Neil and featuring (at time of going to print) Economics Editor of The Sunday Times, David Smith and MD of High Street Residential, Gavin Fraser. You can submit a question for the panel when registering to attend the show. This is an open panel debate where 500 UK Landlords can voice their opinions on the subject of Brexit. To find out more and register for FREE admission please visit www.landlordinvestmentshow.co.uk

ANDREW NEIL Publisher and Broadcaster

DAVID SMITH

Economics Editor of The Sunday Times and PropertyNotify Columnist

GAVIN FRASER MD, High Street Residential

SHOW UPDATE

Panel debate Two. Auditorium, 1.30pm - 2.30pm

Investing in Property? North Vs South Is the North vs South divide getting bigger? Is it better to invest in the North or in the South? These questions and more will be discussed in this debate. 500 UK Landlords and Investors will be discussing the best areas to invest in, what's hot what's not, avoiding the pitfalls plus much more. Please submit a question to the panel when registering to attend the show.

Expert Panel Our second panel of the November 5th Olympia Show features (so far) Reece Mennie, CEO of Hunter Jones and Landlord Investment Show regular, Kam Dovedi of Premier Property Education.

REECE MENNIE

Hunter Jones

KAM DOVEDI

To find out more and register for FREE admission please visit www.landlordinvestmentshow.co.uk

Premier Property Education

Panel debate Three. Auditorium, 3.30pm - 4.30pm

Living by Numbers Tax, Finance & Legal Debate Chaired by Paul Shamplina Discussing what it says on the tin, attendance at this panel debate is free and on a first-come, first-seated basis so get to the auditorium early to avoid disappointment. Are you an accidental Landlord? Have you inherited some money? Are you thinking about getting into property? Then this is the seminar for you. Come with your questions and have them answered by industry experts who are willing to help you on your Landlord / Investor journey.

Expert Panel Our third panel of the November 5th Olympia Show is chaired by Paul Shamplina, and (so far) features Vincent Burch of Vincent Burch Mortgage Services. To find out more and register for FREE admission please visit www.landlordinvestmentshow.co.uk

PAUL SHAMPLINA Landlord Action

VINCENT BURCH Vincent Burch Mortgage Services

LANDLORD INVESTOR 48TH EDITION

INVESTMENT

SIMON ZUTSHI

Lessons learned from 24 years in property

LANDLORD INVESTOR 48TH EDITION

INVESTMENT

This month marks the 24th anniversary of my first property purchase back in August 1995. Back then, I really didn't know what I was doing.

At that time, there was no property training. There were no property network meetings, no webinars, no YouTube videos, no Facebook, in fact no internet. I had to learn the hard way, on my own, through trial and terror.

properties and did not know the area, I had to use local letting agents, some of whom where not great. So if buying out of your area, work out who will look after the property and tenants for you.

I managed to stumble my way through and I've done pretty well from property. Although I've made a huge number of mistakes along the way. The purpose of this article is to share with you some of the big lessons that I have learned over that time, so that you can avoid the mistakes many investors make, and become an even more successful investor.

I have also bought investment properties overseas where it's much harder to do thorough due diligence. My conclusion is I only really want to buy here in the UK, where it's very easy to do all of the necessary research, using the internet, and speaking to local estate agents and local letting agents to make sure there's a really good demand for the property that I want to purchase.

No 1 Importance of Diligence One of the mistakes I have made is buying property without doing sufficient due diligence to check the rental demand in the area. Very often, we make buying decisions based on our knowledge and experience at the time. In 2006 and 2007, when I was buying properties all over the Country, which at the time seemed like a good idea because they were no money down, I made some purchases that given a second time around, knowing what I know now, I probably wouldn't buy again. One of the main problems was, although I was able to buy the property at a good price, it would be difficult to rent out to quality tenants over the long term. This meant that I might have had higher than average void periods, which seriously affects your cash flow. Also, as I was not local to the

No 2 Value your Time There's a great saying by Robert Kiyosaki the Author of Rich Dad, Poor Dad, he says “Poor people will spend their time to save money, whilst rich people will spend their money to save time” I completely agree with this. I see many investors who will spend their time in order to save money. not realising that time is actually their most valuable asset. You can always earn more money, but you can never get your time back. A classic mistake I see many investors make and indeed I made it myself, is falling into what we call “The Landlord Trap”. In my early investing years, I was self managing my property portfolio. This was because I didn't want to pay a letting agent a fee to manage them because I needed all of the rental income as I was trying to replace my earned income. Secondly, I felt that I could probably do a better job and

thirdly, I wanted to get to know my tenants. The novelty of the third one soon wears off. The main problem was that I was having to spend increasing amounts of time managing my property portfolio, as I bought more properties. This meant that I had less time to actually go and buy properties, because I was so busy managing the existing portfolio. It's pretty easy to manage a few properties part time. But as your portfolio builds, it becomes more and more time consuming. Let's face it, you make more money actually buying property than you can save by managing then yourself. Really, you should invest your time focusing on buying property. I would suggest that you want to get someone else to manage them for you. Finding a good agent can be a challenge. So asking around at your local property networking meeting and getting recommendations is probably the best way to find someone who's really going to look after your property and your tenants.

No 3 Joint Ventures The concept of working with other people to achieve more than you can do on your own, can be a great idea. I've had some amazing joint ventures. But I've also had some joint ventures that haven't worked out very well. There are one or two things you need to make sure that you do to ensure the success of future joint ventures. The first and the most important thing is you must really get to know your potential Joint Venture partners. You need to make sure that you have aligned values and that you could work

LANDLORD INVESTOR 48TH EDITION

INVESTMENT

together no matter what happens. Because in property, sometimes things will go wrong. That's the real test if you have the right partners or not, so take your time to get to know people before you decide to work with them. The next thing is you must always have a written agreement in place that clearly states who is doing what in the joint venture partnership, when do they need to do it by, and what happens if they don't do it. Too often, people decide to work together and don’t have a written agreement, because they think they don’t need one because they are friends. Where there's no formal agreement, and then something goes wrong, as often happens in property, that's when the problems start. Do yourself a big favour, and get an agreement in writing. Then everyone's clear what's going on. Finally, you need to make sure your joint venture partners are fit for purpose. You need to make sure that if they are supposed to be bringing certain skills to the table, that they actually have those skills and that they have the capacity, time wise, to actually deliver their side of the bargain. If your partner's putting in the money, you need to make sure they have sufficient money available, when it's required and they're not going to run out. This might sound obvious, but I've seen this happen all too many times in joint ventures. Joint Ventures can be incredible, but please do be careful when you do them.

No 4 Invest in Yourself Most people think they can learn how to invest in property by working it out themselves. Watching a few videos online, and reading a few blog articles. Whilst this might be useful, it can take a huge amount of time. The other problem about trying to learn for free online, is that there is a lot of conflicting information out there and some of it is just wrong. How do you work out who is right and who is wrong? You can save yourself a huge amount of time by finding someone who has already achieved what you want to achieve and learning from them. There are lots of people who now run training courses, mentoring, and coaching, which will help you get there much quicker. And remember, time is

LANDLORD INVESTOR 48TH EDITION

your most valuable asset. It's worth investing in yourself to save yourself a huge amount of time and accelerate your results. When you invest in yourself you get a psychological upgrade because it shows that you value yourself. It also makes you more investable, which is important if you want to attract joint venture partners and private investors. Why would they back you and invest in you, if you are not prepared to invest in yourself? Each year, I invest a huge amount of time and money in my ongoing personal development to make sure that I keep on getting better and better at what I do.

One of the best ways to keep informed, is plugging into your local property investors network meeting,where each month you get an update from a mortgage broker as to what's happening in the mortgage world, and a local letting agent, as well as the opportunity to connect and network with other investors in your area to learn from them and find out what they're doing. Unfortunately, many landlords, particularly those who've been investing for a while, think they know everything and don't bother to update themselves and so get into difficulties later on down the line.

No 6 Speed of Implementation

Poor people will spend their time to save money, whilst rich people will spend their money to save time. Robert Kiyosaki

No 5 Keep up to date The property market is constantly changing. It's important to make sure you understand what is happening in the market, so that you can adjust your strategy if need be. You also need to understand and keep up to date with the changes in legislation to make sure you're conforming with all the new regulations. It’s amazing how many landlords don’t really know about new HMO regulations, Right to Rent checks, or even Section 24, which is the most significant change to the property industry for many years.

My final lesson is that when you learn something, or come up with a great idea, the quicker you put that idea into practice, the more likely it's going to happen. Often we have an idea, a good intention, for some reason we put it off and delay taking action and we talk ourselves out of doing things. I am sure like me, you have done this. The same is true in property investing. Let’s say you see a property ‘For Sale” close to where you live or invest. You think “I must call the Estate Agent about that property” but you don’t do it straight away and then life gets in the way and you don’t make the call. Then a few weeks later a SOLD sign goes up and you realise that you have missed the opportunity. You need to strike while the iron is hot! When you find a really good property deal, you need to move quickly. Of course you need to have done your due diligence to check that it is as good as you think it is. If it all stacks up, then great you need to move quickly. Otherwise, someone else who's quicker than you, will be able to secure the deal. And you'll miss out and end up frustrated that you're not getting where you want to be. Always look to implement the knowledge you've gained as quickly as possible. I do hope these lessons that I have learnt over the past 24 years of investing, will help you to save time and effort on your property journey. Invest with Knowledge, Invest with Skill. Simon Zutshi Author of Property Magic Founder of property investors network

INVESTMENT

PAUL MAHONEY NOVA FINANCIAL GROUP

The right fit

LANDLORD INVESTOR 48TH EDITION

INVESTMENT

Why you shouldn’t go to your accountant or your solicitor for investment or mortgage advice!

The title of this article may offend some accountants and solicitors but they are the ones to avoid! A good professional knows and openly communicates the limitations of their advice and that in most cases for these two professions, does not include investment or mortgage advice. Unless of course, they have qualifications and regulatory registration to give both. Therefore, when it comes to assessing whether an investment is right for you and its mortgage-ability, property or otherwise, the limitations of advice taken from an accountant or solicitor should be with regards to tax and law, assuming of course that they are familiar with property tax and law as many general practice professionals aren’t. Your accountant can perhaps review your cash flow numbers as you’d expect them to be a numbers person and your solicitor on the process for legal buying but that is it. It is of utmost importance that the advice stops there! When formulating a property investment strategy, reviewing locations, types of properties, the market, and expected returns and getting a mortgage, unless your accountant or solicitor is an accomplished landlord themselves and is giving you informal guidance to take or leave, they are not the right person to give you that advice. So next time you’re think of making an investment and you’re given advice by an investment and/or mortgage advisor and you respond “I need to get the ok from my accountant and/or solicitor”, please limit their advice as described. Case in point, we recently engaged with a client who had quite a lot of spare funds in his business account. He wanted to invest it in property so came LANDLORD INVESTOR 48TH EDITION

to us for advice, which we provided and he loved it, but he gave the above, fairly common response of wanting his accountant’s approval. His accountant told him that he should buy a home before investing. Confused as to what he should do, the client very kindly asked me to speak with his accountant, which I did. The accountant does not have any property or investments in the UK and is a general practice accountant, not qualified to give advice on anything other than tax which is what he told me whilst at the same time, discouraging our mutual client from investing. This accountant gave investment advice, when he should not have. I communicated this to the client and he agree to proceed with the investment in the spite of the wrongly given accountant’s advice. But the story doesn’t end there, based upon the accountant’s advice, the client decided to buy a home at the same time as buying the investment property. This wasn’t a problem as his financial position allowed it. However, the conveyancer he engaged with told him that buying both at the same time will cause issues with getting a mortgage. This conveyancer is not a mortgage advisor and their advice was simply wrong. This spooked the client and he pulled out of the investment, forgoing a great opportunity that was very suitable for him and his situation. What is the moral to this story? When you’re sick, go to a doctor. When you need your taxes done, go to an accountant. When you need conveyancing advice, go to a solicitor. When you need investment advice, go to an investment advisor. When you need mortgage advice, go to a mortgage advisor.

Make sure you’re very clear on where the professional’s level of expertise, qualifications and regulatory registration begins and ends and limit the advice in that way. For qualified and independent property investment advice and mortgage advice, contact Nova Financial Group on www.nova.financial, info@nova. financial, 0203 8000 600.

Your accountant can perhaps review your cash flow numbers as you’d expect them to be a numbers person and your solicitor on the process for legal buying but that is it.

FINANCE

TRACEY HANBURY

The ascent of CapitalRise Tracey Hanbury interviews Uma Rajah

LANDLORD INVESTOR 48TH EDITION

FINANCE

Landlord Investor Magazine speaks to Capital Rise CEO and CO-Founder Uma Rajah, and asks why she was drawn to the property industry, what the next 12 months look like for business and her two top-tips for investing.

Was the property industry a sector that you'd always wanted to be a part of? I didn’t know I’d end up in property, as I’ve spent most of my career developing and scaling consumer facing finance solutions. However, I have also been a private landlord for many years, with a keen interest in the property sector. When we launched CapitalRise in 2016, we saw a significant gap in the market for quick and efficient prime property finance and taking on this challenge helped combine my expertise and passion for financial technology with my interest in the property market. Since the launch of Capital Rise in 2016 what has been the biggest challenge to date? The biggest challenge for CapitalRise is keeping up with high investor demand. We operate in a very niche property finance market and our due diligence process is very stringent. Whilst we’ve screened over £1.9 billion worth of loan applications over the last 6 months, only a small percentage have made it onto our platform as investment opportunities. From our very first investment opportunity, funding a development loan for a prime property in Belgravia, we’ve seen huge demand from our investors, often fully subscribing opportunities in a matter of hours. However, our approach remains the same, we’re committed to maintaining high credit quality over loan quantity and are proud of our track record, with no losses or defaults to date and an average investor return of over 10% p.a. across all redeemed investments.

LANDLORD INVESTOR 48TH EDITION

What does the next 12 months hold in store for Capital Rise? The last 12 months have been spectacular for CapitalRise on both sides of the business. We have significantly increased the size of our investor community, whilst meeting our target of launching a new investment opportunity of at least £1 million every month. Following our recent successful equity fundraise on the Seedrs platform, our growth plans for the next 12 months will focus on providing even bigger loans and therefore more opportunities for our member base to invest.

I would say, is to conduct thorough due diligence on the firm or platform providing the investment. Make sure you are familiar with the people behind the firms and that the terms and structure of the investment are clear and credible. Wherever possible, it’s worth checking any track record data provided by a platform with an independent market data provider like Brismo. Secondly, since no two investors are the same, it’s crucial that investors balance risk and reward according to their risk appetite. Finally, if you’re not an investment professional yourself, it’s always a good idea to seek independent advice from a qualified adviser.

If you could make one change to the property sector what would it be? It would be great if the wider property development industry embraced tech-enabled processes, in order to make end-to-end transactions more streamlined and efficient. Transaction times seem to be slowing down rather than speeding up and with the technology available today, this feels counterintuitive. Using technology to work collaboratively with partners will simplify processes and help to speed things up. We hope that ongoing education around the benefits and efficiencies of tech solutions in our industry will help to increase the number of property businesses using them.

The biggest challenge for CapitalRise is keeping up with high investor demand.

What are your two top investment tips for the Landlord Investor Magazine readers? This really depends if you’re looking to invest through a platform or directly, but the most important thing

ADVERTORIAL FEATURE

The Abacus guide for using a SIPP to buy commercial property

LANDLORD INVESTOR 48TH EDITION

ADVERTORIAL FEATURE

What is a SIPP? A Self Invested Personal Pension (SIPP) is a personal pension that enables you access to a wider choice and type of investment when it comes to saving for your retirement. Can I use a SIPP to buy commercial property? A SIPP provides the opportunity to buy and invest in UK commercial property directly. This can be a popular method for small business owners to hold or purchase commercial property in a tax efficient way, however the commercial property does not have to be connected to your own business. It can be a property that generates income from a commercial tenant. Your SIPP can borrow up to 50% of the value of your plan, less any existing borrowings, to assist in the purchase of the property. In most cases, the lender will be a bank or a building society. Both you and other SIPP plan holders can pool the funds held in the SIPP to buy commercial property jointly. You can also use your SIPP to part-buy a commercial property where the other purchasers are not SIPP investors.

Here are just some of the key considerations: •

The rent paid into the SIPP, less any loan payments, generally grows free of income tax and capital gains tax.

All transactions must satisfy HMRC and other regulatory requirements.

•

You can transfer different pension pots into a SIPP.

•

A SIPP can take a mortgage of up to 50 per cent of the net value of your pension fund.

•

The mortgage can be paid off through commercial rental. Once cleared, any income is then reinvested in the SIPP to provide tax-efficient growth free from tax.

•

Any growth in the property value is free from Capital Gains Tax (CGT). If the property increases in value then no CGT is payable when the pension disposes of it.

•

If your business is leasing the property from your SIPP, the rent your business pays is an allowable business expense.

•

Tax free rental income – if your SIPP charges £1,000 per month in rent to a business using the commercial premises, that £1,000 payment would not be subject to any tax as it is re-invested in the SIPP therefore increasing its value.

•

No Inheritance Tax Liability (IHT) – in the event of your death, the property invested in your SIPP should normally be fully exempt from IHT.

What type of property can I buy with my SIPP? Your SIPP can buy freehold, leasehold or commonhold commercial property in the UK. This means any property that will primarily be used for commercial purposes. If your SIPP is buying land immediately next to land that is owned by you or someone connected to you, a valuation will always be needed to confirm that your SIPP is paying a fair price for the land. Valuations will be required in all cases.

LANDLORD INVESTOR 48TH EDITION

Commercial property can include offices, shops, industrial units, hotels or farmland. It does not include residential properties, buy-to-let properties or holiday homes.

•

Are there any tax advantages? When using the funds held within your SIPP to buy a commercial property to be used as your own business premises, you will have to pay rent at commercial rates to the SIPP. However in the usual course of business, rent should be considered an allowable business expense and so will reduce the tax you pay on your profits.

the property is sufficient to meet the repayment costs.

What do I need to consider when buying or leasing through a SIPP? •

The property will need to have a tenant in place on or before completion. If rent isn’t collected, in the event of the lease being to a 'connected party', an unauthorised benefit could arise, potentially resulting in personal tax charges.

•

A commercial lease will need to be in place either before or on completion with a market value rental figure.

•

If VAT is payable in addition to the purchase price, sufficient funds must be contained within the SIPP.

•

The SIPP provider will usually require full searches including an environmental report. The property owner must be fully aware of potential environmental liabilities and be confident that the property is suitable for SIPP purposes.

How can we help? Our Commercial Property team works in close partnership with experienced financial advisers, who can give you professional and strategic advice to help you successfully navigate this often complex transaction. Together, we will help you thoroughly understand the market and any risks involved, as well as providing the specialist legal advice you will need to assist you with your purchase. We have experience in handling all aspects of commercial property, from simple and straightforward leases through to large property development issues and disputes between commercial landlords and tenants.

•

Don’t forget to factor in legal and surveyor costs as well as potential Stamp Duty Land Tax and VAT charges.

Get in touch when you decide to make your leap into commercial property investment. Our solicitors will be able to offer expert advice, guidance and assistance during the acquisition of your commercial property, through to dealing with leases and any future issues you may face.

•

Your SIPP provider will need to be satisfied that the rental income from

www.abacus-law.co.uk 0161 833 0044

SEPTEMBER SPOTLIGHT

Jackie HouguezSimmons (right) and Ellie Broadhurst (left).

TRACEY HANBURY

September Spotlight We are back with the ladies from Baya financial, and this month they are going to tell us a bit more about a case they have worked on recently.

LANDLORD INVESTOR 48TH EDITION

SEPTEMBER SPOTLIGHT

Ellie, why did you choose this case in particular? EB: For a couple of reasons. Recently, we have seen an increase in enquiries regarding more complicated refurbishment projects and this shows how we can fund this sort of largescale refurbishment. As a specialist broker, we feel this is a good example of the sort of project we can help with. It’s a growing area in our business as clients look to grow and diversify their portfolios. So, tell us about this case EB: A regular client of ours came to me last August with a property he had found at an auction in Derby. He’s a client with a large London based portfolio, which is mainly low yielding. He had decided to look further afield at properties that would allow him to add value, as well as offer a higher yield. With the changes in the London housing market, he wanted to start to spread his portfolio.

completed at the end of April and we had a new valuation instructed, ready for refinance. The layout is as follows: Flat 1: Ground Floor front studio, 1bed of 32sq (mezzanine bedroom level), separate kitchen and shower room. Market value circa £60,000; rent £450pcm. Flat 2: Ground floor Rear, 2 bed flat with open plan kitchen/living room. Total of 40sqm with direct access onto own 70ft rear garden. Market value circa £90,000; rent £600pcm. Flat 3: First floor 2 bed flat with open plan kitchen/living room. Total of 42sq m. Market value circa £75,000; rent £525pcm. Flat 4: First Floor rear, was a 26sqm 1 bed flat but now a 2 bed, split level flat of 50sqm with large open plan living/ kitchen. Market value is circa £85,000; rent £575pcm.

Originally, the property was a Victorian town house. It was later converted into five flats, but the works had not been completed to a good standard and had not made the best use of the space. The client could see plenty of potential with this project with it being in such poor condition.

Flat 5: Top floor 2 bed flat. Total 38sqm. Value circa £75,000; rent £525pcm

He bought it for £198,000 at auction, with the regular 28 days to complete. Everything was going well with the bridging lender until the valuation came in at £130,000. Therefore, we had no option but to change lenders with a week to go! At Baya financial we love a challenge, and we have never missed an auction deadline, so true to our word we found an alternative lender and completed on the final day. With a new desktop valuation, we were able to lend the client about £130,000 on a rolled-up bridge. It wasn’t the lowest cost option, but sometimes you must look at the bigger picture and work your figures into the whole project.

So Jackie, how does this sort of project work in terms of the refinance?

The client had his build team ready and carried out extensive works to the property. He applied for planning permission to convert the basement into a sixth flat and to add a dormer extension to one of the first floor flats. This brought it above the minimum 30m2 lender preferred size. He took the property back to brick and chose a high-end finish to attract professional tenants. The total refurbishment cost came to a total of £130,000. This inevitably went over his original budget and planned timescales, but he

With smaller projects, some lenders will offer the bridge and term exit as one package and our clients are keen to utilise this as the costs are much lower. The potential issue with this is that the valuer will underestimate the end value as they cannot be sure of the quality of the finish and we often see a new valuation giving us a higher figure.

LANDLORD INVESTOR 48TH EDITION

Flat 6: Basement flat, one bed, accessed via own front door. Total 35sqm with separate kitchen, bedroom as well as a large lounge. Market value circa £60,000; rent £475pcm

JHS: With the commercial lenders we work with, there is no need to wait 6 months to refinance, although with this project due to the time taken over the planning it was over that anyway. We will always carry out a new valuation, and the lender will work from this figure. The valuation came in at £450,000, so only a slight reduction from the aggregate value of the property. It was exactly as the client had estimated and he was over the moon!

We were able to refinance at 75% loan to value as this property has enough rental income, giving the client an additional £200,000 after redeeming

his bridge. This means that he is going into his next project having taken all his money out of this one, and with some money in the bank. It is so important that clients let us know what they are looking to do with the funds, as lenders can put restrictions on its usage. Generally releasing it into the client’s bank for future property investment is acceptable. This client was looking at this property as a long-term investment as well as a good short term return. The rental for the flats comes to a total of £3,150 per month, the mortgage is roughly £1300 a month so even with deducting 15% for voids, and maintenance there is still over £1300 profit each month. What would you say are the lessons to take from this project for our readers? EB: I think the biggest learning point is to be realistic with your timescales and budgets. Underestimating your timescales particularly can have an enormous impact on your costs, and therefore your profit. This client is an experienced investor, and he still did not account for all eventualities with this project. Planning delays and problems with builders caused a delay of about 3 months, which made an impact on not only the finance costs, but also lost earnings as there was a delay in rental income. That leads onto the importance of your power team. This is especially important in a new area, and when your project is different from what you are used to. It’s so important to conduct as much due diligence as you can and make use of every networking opportunity. There are property networking events you can go to in the local area and these can be a great resource. We are also finding that social media is becoming a bigger networking space that property investors are using more. Of course, your mortgage advisor is such an important part of the power team, and as we can see in this example, it is how they deal with the situation when it does not go to plan that is the real test of someone who knows what they are doing! Thank you for your time Ellie and Jackie, I look forward to seeing you in Manchester! Come and meet the Baya financial team at the National Landlord Investment Show at Old Trafford, Manchester, 8th October 2019. Tracey Hanbury 19

TENANCY AND DEPOSITS

SANDY BASTIN HEAD OF TDS ADJUDICATION SERVICES

Leaf it out

When autumnal weather causes tenancy deposit disputes. 20

LANDLORD INVESTOR 48TH EDITION

TENANCY AND DEPOSITS

Whether it’s frozen pipes in winter or tenant change-overs in summer, each new season brings its own unique challenges for letting agents and landlords when it comes to tenancy deposit protection. As autumn arrives, landlords need to be aware of the problems that can arise from leaves.

Clearing the guttering – whose responsibility is it?

No award was made, and the tenancy deposit was returned to the tenant.

In this landlord’s situation, Autumn conditions led to a tenancy deposit dispute over repairs to guttering and drains blocked by the falling leaves.

What landlords need to know

The landlord claimed £240 for clearing the guttering at the property at the end of the tenancy and submitted a quotation to support the claim, which was based on a site visit by a thirdparty contractor.

•

Repairing obligations – Know the extent of the repair and maintenance of a property that are a landlord’s legal responsibility, which cannot be transferred to a tenant.

•

Provide evidence - It is essential that a landlord provides objective evidence showing the condition of the item that they are claiming for, both at the start and end of the tenancy. If a landlord wishes to make a claim from the deposit, the tenancy agreement must obligate the tenant to be responsible for the item claimed. In this case, the tenancy agreement stated that it was the landlord’s responsibility for the maintenance of the property exterior, including the upkeep of the gutters.

The tenants disputed the landlord’s claim saying they had reported issues with the guttering during the tenancy. In support of this statement, the tenants provided a copy of an email they sent to the agent during the tenancy in which they told the agent that the guttering around the house was full of leaves and stagnant water. While both check-in and check-out reports were compiled at the start and end of the tenancy respectively, neither report recorded the condition of the guttering at either end of the tenancy. The tenancy agreement stated that it was the landlord’s statutory responsibility to repair and keep in good order the structure and exterior of the property, to include drains, guttering and external pipes Furthermore, the evidence presented showed that the tenants had complied with their obligation to report any issues that arose during the tenancy, and the landlord was therefore placed on notice that the guttering required attention.

•

Act on reported matters - It is important for a landlord to act upon any matters reported by a tenant in a timely manner to avoid damage getting worse. Similarly, most tenancy agreements provide for a tenant to report any issues during a tenancy in a timely manner and should provide evidence to support any statements upon which they wish to rely e.g. an email showing the reporting of any issues. Whilst the tenant may be responsible for reporting problems identified within the fabric of the building such as heating, the structure or

drainage in this case, it remains the landlord’s responsibility irrespective of whether they wish to pursue the tenant for damage cause by negligence. •

Periodically check exteriors - It would be sensible to check the condition of drains and guttering regularly, especially before the autumn or winter seasons where the weather can cause problems with the exterior of the property. Water trapped in gullies, for example, can cause damp to the property in the long term.

Know the extent of the repair and maintenance of a property that are a landlord’s legal responsibility.

If you want to read more dispute case studies, visit www,tenancydepositscheme,com/case-studies. To find out more, please visit: www.tenancydepositscheme.com. Our dedicated Tenant Fees Act resource can be found at www.depositcap.com.

LANDLORD INVESTOR 48TH EDITION

INDUSTRY MARKET UPDATE UPDATE

PETER LITTLEWOOD iHowz

Market update It’s changing of the guard time We have a new Prime Minister and a complete change at the housing ministry. Robert Jenrick replaces James Brokenshire as overall head (Secretary of State); Esther McVey replaces Kit Malthouse as the housing minister; and Luke Hall replaces Heather Wheeler as the under-secretary. It’s a shame that Heather Wheeler has moved as she had a good grasp on homelessness; Kit Malthouse was spending most of his time making his name on Brexit, rather than housing matters; James Brokenshire was starting to have an impact. So we are now on the 9th housing minister in the last 9 years; how can we expect to get a cohesive strategy for housing when a minister lasts an average of 1 year? The only good news is that the housing minister actually has a seat at the cabinet, as well as the Secretary of State, so possibly the new Prime Minister believes housing to be an important issue. Hopefully the Minister will be there long enough for her to realise how important the PRS is, and how landlords are providing a good service at their own risk. Yes there are poor landlords; either they have insufficient knowledge to carry out their duties correctly – mandatory accreditation/training for all managing landlords will help that. And there are a very small number of criminal landlords (not rogues!) – prosecute them and remove them from the industry if necessary. iHowz also hopes that the Minister will also seriously consider the impact of

indiscriminate licensing of landlords brought in by local authorities purely to boost their dwindling budgets, not to control poorly managed properties – as the legislation was originally intended.

Procedure for a S8 as currently used for the S21, especially when a S8 is uncontested by the tenant. Having to always go to court is a waste of courts time as well as the landlords.

We have written to her seeking a meeting, as I suspect have many organisations.

Use the correct Section 21

Section 21 & 8 The Government have launched a socalled consultation on the future of the Section 21. So-called because they quite openly say that the S21 will cease to be a valid notice to quit in the future. We don’t know when; the previous Prime Minister said it would be by the end of the year, which is unlikely as the consultation doesn’t close until October 12th; they will then need to consider the answers and put out their own response. That will take us until at least the end of the year, during which there is a strong chance we will have an election. If Labour gets in they will want to make substantial amendments to the Section 8 – all in the tenants favour. Labour are already saying they will remove the new ground being suggested of allowing an eviction if the landlord wishes to (genuinely) sell the property. So please take time out to take part in the consultation – details can be seen on our web site iHowz.co.uk. It is a quite complicated consultation so make sure you have the time to take it properly, and that you understand the grounds for the current Section 8. We at iHowz are pressing the Government to introduce an Accelerated

With the introduction of the Tenants Fee ban the Section 21 form (6a) has been amended to allow for the new Act. It is important that you use the correct form. I always recommend that you get any important form from the web every time, rather than saving it on your computer, that way you can be sure to get the correct version if it has changed and you’ve not realised. And as always, when you fill in the form 6a always follow the instructions, else it could be deemed to be incorrect, and therefore invalid. Report on Letting and Managing Agents Lord Best has been chairing a working group looking at the way Property Agents should be working in the future. Its main recommendations are: Anyone carrying out property agency work be regulated, but the current exemptions would be (but to be extended in the future if required): 1. property portals (e.g. Rightmove) – which do not perform agent functions, 2. the short-let sector (e.g. AirBnB), 3. and local authorities acting as letting or managing agents (though they expect their staff to be appropriately qualified).

LANDLORD INVESTOR 48TH EDITION

MARKET UPDATE

The Government should establish a new regulator to oversee, and run these changes. It should not be one of the existing bodies, but should be fully funded by the industry. All Property Agents should be licensed by this new regulator before they can trade. All agents must agree to adhere to a (new) code of practice.

Giving all renters and landlords access to better support and dispute resolution services; and Increasing landlord-to-tenant notice periods to four months. Some of these are already going through, but the threat of rent control is a worry. Outcome of review into HHSRS

Agents must be qualified to a minimum of level 3 of Ofqual’s Regulated Qualification Framework (equivalent to A Level); company directors and managing agents should be qualified to a minimum of level 4 (equivalent to BTEC Professional Diploma level) in most cases.

Earlier this year the Government carried out a brief review of HHSRS which iHowz participated in.

The next move is whether the Government (i.e. MHCLG) accept and or all of them, and what time can be found to implement them. As already mentioned, an election at the end of the year could cause this kind of legislation to be held up.

Review and update the current HHSRS Operating Guidance.

The ministry have also said that they would be looking at more legislation for landlords next year. I can’t see a change of Government altering that, merely accelerating it. The Mayor of London issues new report on Private Renting reform. Sadiq Khan is calling for powers to establish a universal register of landlords and rents, which a new London Private Rent Commission would use to: Design an effective system of rent control, including its own role in implementing, monitoring, and enforcing the new approach; Set out how existing rents should be gradually reduced and their subsequent levels limited within and between tenancies; and Recommend incentives to encourage investment in new and existing rental housing supply. The report (Reforming private renting: The Mayor of London’s blueprint) also outlines recommendations as to how the law on tenancies should be overhauled, including:

The Government have just published their comments on the review, and have announced they are to:

Develop a comprehensive set of Worked Examples which encompass the range of hazards, illustrate the utilisation of standards and provide a spectrum of risks.

measures recommended in that report: give clearer information to consumers on how to buy and sell leasehold properties; consider the Committee’s views on common hold in light of the Law Commission’s report; work with developers on a standardised ‘key features’ document so consumers have clear details on the lease before they buy; remove any financial value from future ground rent; ensure the Law Commission is able to fully consider the application of unfair terms; update planning guidance to state there should be clear and transparent agreement between developers and local authorities on public areas and utilities to be adopted;

Review the current HHSRS assessor training, the training needs of assessors and other stakeholders and establish a HHSRS competency framework.

consider the Committee’s recommendations on permission fees, major works (including a code of practice) and other charges in light of Lord Best’s report (due later this summer);

Identify a simpler means of banding the results of HHSRS assessments so that they are clearer to understand and better engage landlords and tenants.

explore further the best means to challenge unjustifiable legal costs, including what changes to legislation are needed;

Extend current and develop new standards that could be incorporated into the HHSRS assessment process.

explore legal changes to forfeiture by asking the Law Commission to update their work on forfeiture;

Amalgamation and/or remove of some of the existing hazard profiles.

extend mandatory membership of a redress scheme to all freeholders of leasehold properties;

Investigate the use of digital technology to support HHSRS assessments and improve understanding and consistency for all stakeholders. Review existing guidance for landlords and property-related professionals and consider the introduction of a separate guide for tenants. Review and update the current HHSRS Enforcement Guidance: Housing Conditions and Part 1 of the Housing Act 2004.

implement improvements to enfranchisement as soon as possible. Clive Betts, chair of the HCLG Select Committee, welcomed the Government’s response but said:

“We believe that the Government need to do more to intervene on behalf of leaseholders who continue to be trapped in leasehold properties they cannot re-mortgage or sell.” Note there has also been a new ‘How to Lease’ booklet released.

Introducing open-ended tenancies;

Leasehold reforms

And finally...

Ending ‘no fault’ evictions by removing section 21 of the Housing Act 1988;

On 3 July 2019 the MHCLG published its response to the HCLG Select Committee’s report on leasehold reform published on 20 March 2019. The Government agrees with the following

With all that is going on it is most important that landlords are very diligent about running their properties, especially when deciding upon new tenants.

Scrapping break clauses in tenancy agreements;

LANDLORD INVESTOR 48TH EDITION

PRS UPDATE

TRACEY HANBURY

Are deposit passports for tenants the future?

LANDLORD INVESTOR 48TH EDITION

PRS UPDATE

With it recently being revealed that the government is considering ‘deposit passports’ to help tenants save money when moving home, we ask whether this is the future for the rental sector.

More people are now renting than ever before, with the private rented sector the second largest form of tenure in the UK and the largest in London. All the available evidence points to this growing further in the coming years as home ownership continues to be out of the reach of many, and many others choose to rent for lifestyle reasons. The growth in the number of people renting has inevitably led to more focus on helping tenants from a financial point of view. Earlier this year, the Tenant Fees Act 2019 was introduced, while the government recently announced it is considering the concept of a deposit passport for use by tenants when they move from one property to another. What was announced? In late June, a call for evidence was issued by the Ministry of Housing, Communities and Local Government on tenancy reform, with agents and other interested parties encouraged to submit their suggestions by the early September deadline. In a statement at the time, MHCLG said: “More than four million people live in the private rented sector, yet when moving home, some tenants can find it a struggle to provide a second deposit to their new landlord – risking falling into debt or becoming trapped in their current home.” It added: “Ministers are inviting proposals to make it easier for renters to transfer deposits directly between landlords when moving from one property to the next. Freeing up deposits and allowing a renter’s hard-earned cash to follow them from property to property will create a fairer housing market that works for all.” In a foreword to the 35-page call for evidence document, then-Housing Secretary James Brokenshire – who has since been replaced by Robert Jenrick – said he wanted to look more widely at whether innovative approaches could help tenants move more easily, ‘including allowing tenants to passport their deposit between tenancies’.

LANDLORD INVESTOR 48TH EDITION

He also added that good landlords need to have the confidence to let their properties safe in the knowledge that a deposit will provide them with reasonable protection from damages to their property.

According to the RLA, the scheme could potentially also allow tenants to save more into their deposit account, enabling them to save a deposit for a larger or more expensive property - or even save money towards a deposit on their first home.

“Any improvements to the way deposits are returned at the end of a tenancy will need to ensure that deposits still serve this purpose and that deposit protection continues to work well for both tenants and landlords,” Brokenshire said.

“Deposit passporting could be an effective way of tackling the affordability issues faced by many tenants, particularly those in the capital, where the average deposit is now £1,750,” David Smith, the RLA’s Policy Director, said.

How would deposit passporting work in practice?

Meanwhile, campaign group Generation Rent said tenants in England and Wales could save almost £800 when moving between rental homes if they were able to ‘passport’ their deposit from one tenancy to another.

In many cases, tenants have to raise a deposit twice when moving home – with one deposit tied up in the property they are leaving behind, while the second one is required to secure the home they would like to move into. Tenants who are unable to stump up this ‘second deposit’ upfront could be forced to either borrow the money or miss out on the home altogether. Landlords can be impacted, too, with tenants sometimes failing to pay their last month’s rent to use it instead as a deposit for their new home. This is why some back the idea of a deposit passport, by ensuring a tenant’s deposit could follow them from property to property, with the tenant making up any shortfall caused by deductions. The Residential Landlords Association (RLA) put forward the idea of deposit passports as part of its 2017 election manifesto. Under the proposals, existing deposit schemes could provide a new deposit model to offer this service. The tenant, at the end of each tenancy, would provide their new landlord with a certificate from the deposit scheme. If that was acceptable to the new landlord, it would continue to be held.

Under the group’s plans, tenants would be able to transfer some of their deposit to a new tenancy once they’ve paid the final month’s rent on their current home, helping them avoid having to borrow money to cover a new deposit. Tracey Hanbury

Deposit passporting could be an effective way of tackling the affordability issues faced by many tenants. David Smith, RLA

At the end of the first tenancy, deductions would be dealt with as they are currently, with the scheme adjudicating on any disputes and the tenant asked to make up the difference.

MENNIE POINTS OF VIEW

TRACEY HANBURY

ME N N IE P OI N T S OF V IE W

Smart people. Alternative thinking Tracey Hanbury speaks to Reece Mennie

LANDLORD INVESTOR 48TH EDITION

MENNIE POINTS OF VIEW

For this edition of Mennie Points of View, Hunter Jones CEO, Reece Mennie reflects upon this year’s National Landlord Investment Show at Olympia, London. What were the key themes? And the key lessons to take away… ?

So, Reece, what immediately grabbed you about the event?

And what advice did you offer them?

I think it was the scale and quality of the show that most impressed me. It was very well attended, by both visitors and exhibitors, plus there was a very strong seminar schedule.

The fact of the matter is, individual investors operating as BTL landlords are simply not going to be able to maintain their returns levels going forward. So, when you bear in mind all the blood, sweat and tears that now go into being a BTL landlord – and we all know what that involves day to day – it's not fairly compensated by those dwindling returns.

And how did that affect your presence at the event? Well, we were fortunate that the Hunter Jones stand was positioned right at the entrance way. As a result, we got to talk to just about everyone who attended the event. And what were the views and questions you were encountering? It's important to say that we spoke with a large number of wellinformed, savvy investors, many being active Buy-to-let (BTL) landlords, or with recent experience. Naturally, therefore, the min topic for discussion was often regarding how the BTL market is changing... and how investors should best position themselves for the future. Tell us more, specifically… Well, I got a genuine sense that the market is really turning. The recent changes relating to BTL – in terms of tax relief, stamp duty and allowable expenses – are very significant and investors are really beginning to feel the pain. They know that the repositioning of mortgage interest for tax purposes in particular is going to have a huge impact on their net returns if they're paying the higher rates of tax. And the smart investors are actively looking for alternative strategies to preserve their past levels of return from property.

LANDLORD INVESTOR 48TH EDITION

So, what’s the alternative? Well, it's a fairly predicable response, given that my firm Hunter Jones is the largest introducer of these products in the UK, but Property Bonds really are the way forward. Investors can lock into the returns generated by the country’s leading property developers, and fix their returns at 12% pa and upwards, all with 'bricks and mortar' security. We even have a new portfolio offering, called HJ Collection, which adds diversification to the mix by including multiple developers within the same property bond.

five developments in the Yorkshire, Lancashire and Greater Manchester area, it returned 27.2% - equivalent to about 13% a year. I am afraid to say that there won't be many BTL landlords enjoying that sort of return in the future. And, so far as the Landlord Investment Show is concerned, are you coming back? Absolutely! We have already committed a big presence to NLIS Manchester in November, and confirmed our involvement again at Olympia, London next year. We like this event. It allows us to spend time talking with smart investors looking for alternative investment strategies, which hits at the core of what I believe in, and what Hunter Jones is all about.

What sorts of returns have you achieved for these investors?

If you want to learn more about Hunter Jones and its range of Property Bond offerings, please call us on 0207 117 2913, e-mail us at info@hjinvest.com or visit www.hjinvest.com One of our specialist investment managers will be delighted to help you.

One of the property bonds to which we've introduced a large number of clients has recently matured after two years. Offered by Empire Property Holdings, and comprising

You can also follow Reece Mennie and hear more of his thoughts on property, investing, entrepreneurship and life success generally, at www. reece-mennie.com

We spoke with a large number of well-informed, savvy investors, many being active buy-to-let landlords.

PRS UPDATE

TRACEY HANBURY

Boris Johnson as Prime Minister? What could this mean for the rental market. 28

LANDLORD INVESTOR 48TH EDITION

PRS UPDATE

Following Boris Johnson’s election win and move into Number 10, we explore what his promotion to Prime Minister could mean for the private rented sector.

As we all now know, Boris Johnson is the new Conservative Party leader and, more importantly than that, the UK’s new prime minister. Johnson, formerly the Mayor of London and the Foreign Secretary, handsomely beat leadership rival Jeremy Hunt to take over the reins from predecessor Theresa May. He is a famously divisive figure, but what could his time in Downing Street mean for the rental market? The Brexit effect Theresa May’s premiership ended up being completely consumed by Brexit, and it was her failure to get her Withdrawal Agreement Bill through Parliament that eventually saw her depart. Johnson has promised to succeed where May failed by getting a deal through the Commons before the October 31 deadline. Failing that, he has said he’s more than willing to withdraw from the European Union without a deal. The prospect of no deal is now considerably higher, despite considerable opposition to this course of action from MPs, including many in the Tory Party itself. As well as the prospect of a no-deal Brexit, there is also the chance of an early general election if no deal is blocked by Parliament and Johnson loses a vote of no confidence.

own – as such, an end to free movement of people (which would likely be the case in a no-deal scenario) could have an impact on tenant demand, especially in the capital. There has also been talk of a recession, the pound plunging to lower levels, and serious economic issues if Britain leaves without a deal on Halloween. Former chancellor Philip Hammond claimed during the Conservative leadership race that a no-deal Brexit could cause a £90 billion hit to the economy, while the Office for Budget Responsibility (OBR) has warned that a no-deal exit could plunge Britain into recession, shrink the economy by 2%, push unemployment above 5% and send house prices tumbling. If the expected repercussions of a nodeal Brexit were to come true, this could affect the ability of tenants to pay their rent, dent the profits of letting agencies and make landlords nervous about investing in the rental sector. Alternatively, there are some who believe that Brexit uncertainty and the prospect of a no deal have already been factored in, that the market is ready for anything and will cope with things as it did in the aftermath of the referendum result in June 2016. What’s more, in troubled times, people look for safe havens – and, at present, property is one of the most reliable, steady and lucrative asset classes. What are Johnson’s views on renting?

Until Brexit is sorted one way or another, of course, uncertainty will continue to reign, and that goes for the private rented sector as well. Landlords, already impacted by a sea of new regulation and legislation in recent years, may hold off on further investment until the Brexit situation is clearer.

In the past, the new PM’s proclamations on housing have suggested he favours home ownership over renting. Within the lettings sector itself, he prefers a non-interventionist approach – he voted against the ban on letting agent fees charged to tenants twice, for example, and has previously suggested he is against rent controls.

A no deal Brexit could also have an impact on EU tenants living in the UK. EU nationals, who are particularly prevalent in London and other major cities, are far more likely to rent than

In 2012, while still London Mayor, he said: “It is clear that top-down regulation, including rent controls, will only serve to deter investors at a time when more, not less, investment is needed.”

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His past remarks also suggest an aversion to over-regulation. In June 2014, during Mayor’s Question Time, he said: “We need to expand the supply of private rented accommodation in London and we need to encourage investors to help us build hundreds of thousands more homes in London, many of them for private rent as well as for affordable rent.” As Mayor, he introduced a blue badge ‘kitemark’ for landlords and rental homes, and the London Rental Standard – but neither delivered very much and were in part voluntary. During his leadership campaign, he focused plenty on stamp duty – suggesting he could abolish stamp duty for all first-time time buyers and even switch the burden to the seller. But he hasn’t made any similar stamp duty pledges for the buy-to-let market as of yet. Tracey Hanbury

If the expected repercussions of a no-deal Brexit were to come true, this could affect the ability of tenants to pay their rent.

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PRS UPDATE

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Section 21 to be scrapped what's the latest?

LANDLORD INVESTOR 48TH EDITION

PRS UPDATE

Four months on from the government’s announcement that it plans to abolish Section 21, what’s been going on and what do landlords need to know?

Earlier this year, the government made the surprise announcement that it intends to remove Section 21 from the Housing Act 1988, casting doubt over how landlords will be able to regain possession of their properties in the future. Section 21 notices currently allow landlords to regain possession of their property without providing a reason. However, in its place, the government is proposing a new system under which landlords would be required to serve a Section 8 notice, providing a 'concrete, evidenced reason already specified in law' in order to regain possession of their property.

The trade body recently carried out a large survey of landlords and letting agents and found that 91% of respondents support the idea of a dedicated housing court.

use the correct channels to evict problematic tenants, meaning that they do not have to circumnavigate the right processes to ensure a timely and efficient outcome."

It then sent a letter to new Justice Secretary, Robert Buckland MP, warning that scrapping Section 21 with no changes to the court system could cause serious problems.

Are benefits tenants set to suffer from Section 21 removal?

RLA policy director, David Smith, said that the plans to abolish Section 21 are some of the most 'far reaching the private rented sector has ever seen'.

It's now been over four months since the original announcement in April, so what has been happening since?

"With landlords and tenants failing to secure justice in a timely fashion when things do go wrong, anything other than wholesale changes with proper funding to support it will lead to chaos," he said.

Rental repossessions taking an average of four months

Could scrapping Section 21 encourage long-term tenants?

According to the latest figures from the Ministry of Justice, it takes private landlords an average of 22.5 weeks from making a repossession claim to regaining possession of their property through the courts.

The lettings sector debate around the removal of Section 21 has largely been negative, with many landlords, agents and industry suppliers voicing their concerns about the government's proposals.

This figure has risen from 21.6 weeks at the beginning of 2019 and the Residential Landlords Association (RLA) claims that it demonstrates a flawed system.

One letting agency, however, has said it is taking a 'more balanced view'. Paul Sloan, operations director for Haart, said that the proposals could increase security for tenants, allowing them to feel 'truly at home' and 'establish roots' in their community.

"The courts are unable to cope when landlords seek to repossess properties for legitimate reasons," said John Stewart, policy manager at the RLA. He said that scrapping Section 21, which will lead to increased pressure on the court system, means the system must be reformed 'as a matter of urgency'. Passionate calls for dedicated housing court continue The RLA, among other organisations, has been passionate in its calls for a dedicated housing court, claiming that the existing system is inadequate.

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"It is of course in a landlord’s best interests to have long-term, good quality tenants, so the value of this cannot be underestimated," said Sloan. He added the caveat that the Section 8 process needs to be changed quickly or it could cause problems for the industry. "We are convinced a faster and more streamlined system will spell good news for the sector," he said. "A reformed Section 8 notice will essentially mean that landlords can

Meanwhile, another landlord organisation, the National Landlords Association (NLA), has claimed that renters on state benefits could be the biggest losers if Section 21 is scrapped. Its survey of nearly 3,000 landlords found that 43% of respondents said they would become more selective when choosing tenants if they are no longer able to regain possession of their properties via Section 21. The NLA says that due to high numbers of landlords who let to Universal Credit and Housing Benefit tenants experiencing rent arrears - currently a key reason for eviction via Section 21 - renters on state benefits could fall victim to the government's proposals. "Rent arrears are the biggest problem that landlords face, and the main reason why they use Section 21 to evict a tenant," Richard Lambert, NLA chief executive said. "So, if the government removes what they see as their only safety net — Section 21 — they will have no option but to become more selective." "That will hit people on Universal Credit, Housing Benefit and other state benefits which have fallen way behind rents," he added. At present, there is no timeframe on when Section 21 could be scrapped. However, it has been made clear that the government is keen to make the changes quickly. The speed and formation of the new evictions system will now rest with the new ministers and team at the Ministry of Housing, Communities and Local Government. Tracey Hanbury

ADVERTORIAL FEATURE

Time to split? Kuflink CEO, Narinder Khattoare, looks at the options. 34

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ADVERTORIAL FEATURE

It’s a complicated market for landlords right now, and many of us are reconsidering our approach. Do we sell up and move on? Do we take steps to make our portfolio more tax- efficient? Do we wait for Brexit to play out before deciding on a next step? Unfortunately, there is no ‘one size fits all’ answer, but there are several factors at play that all landlords should be aware of. The right course of action for you will depend hugely on the size, location and nature of your portfolio, and of course your assessment of what’s to come. As a landlord myself, I started making tweaks to my portfolio a couple of years back, and below I’m sharing some of the key considerations I thought about when making those decisions. Limited Companies For some landlords, setting up a Special Purpose Vehicle (SPV) to hold their property portfolio is old news by now but, to others struggling to balance tax liabilities with profit, it could be the answer they have been looking for. The key benefits to structuring new setups in SPVs are better tax breaks for mortgage tax relief, the ability to use shareholders’ dividend allowance, and the ability to keep profit within the company thus avoiding income tax on that amount. Lenders also tend to offer more lenient rental coverage to limited companies, and you’ll find that only specialist lenders currently offer SPV mortgages. The mainstream lenders have been eyeing this space for a while and should they decide to enter in the future, we should see more competitive interest rates and fees although there are already affordable options out there. Of course, there are some drawbacks, and in my opinion the biggest is higher stamp duty. However, I’d argue that the benefits to longer-term profitability outweigh this. The Brexit Effect It would be hard to ignore the effect that Brexit has had on the BTL market, and there are hordes of landlords hesitant to make a move before we understand more about the circumstances of our exit. The exact shape of the property market post-October is impossible to define but, by looking at the data so far, we can get a good idea of how the market is responding to this change.

According to data from Which?, the average UK house price fell each month from August 2018 to April 2019. This dip has been most pronounced across London and the South East, although several prominent Northern cities have enjoyed decent house price growth since the Brexit referendum. Of course, it is hard to say how much Brexit is responsible for either of these trends, with many arguing that the market is simply experiencing a correction following the astronomical growth it has experienced over the past five years or so. Regardless of whether we leave with or without a deal, the whole property market is very much stagnant due to this uncertainty and probably will be over the next 12-18 months, but it isn’t without hope. Many towns across the UK are still achieving impressive growth, with Berkhamstead, Reigate and Epping taking the top spots for 2019 so far. Regionally, the West Midlands has performed best for growth this year and presented a fantastic case for investment to those that have traditionally favoured bigger cities or southern locations. Even if the market does dip further, there is an opportunity for investors to buy cheap property and wait for Brexit to pass before enjoying longer-term profitability. The viability of this strategy for you obviously depends on your risk appetite and how quickly you need to see a return on your investment. Moving outside of your comfort zone Many of the areas that are enjoying decent growth have one thing in common; good universities. The take up on property in these towns will always be good and so will the margin. Student housing and HMOs are often seen as more work than traditional BTL property, but that’s not always the case. Being ready and willing to adapt your approach to letting will usually make your portfolio more resilient to market

changes, although it’s also important not to make rash decisions in light of a difficult few months. As with most things, student and HMO letting is best considered on a risk vs reward basis. Earning another £200 per month in return for an extra 30 hours of work isn’t a good use of your time, but if diversifying across property types might secure your portfolio in the long- term and makes financial sense, then it could be a wise move. Alternative routes to property-backed profit* It’s important to remember that this isn’t the first time the market has been uncertain, and there are a whole range of options to consider. Kuflink was set up by experienced property investors that watched as the market became harder and harder to get into following the financial crash and thought; there has to be an easier way to invest in property. The solution we found was peer to peer lending, which gives borrowers fast, affordable access to finance for their property projects and then offers investors the chance to fund these loans. The huge upside for investors on our platform is that you can earn a good return by helping others* without the headache of tenants, solicitors or the costs associated with them. You can simply choose a project you believe in and want to help fund, then sit back, relax and enjoy your interest. If you’d like to know more, check out kuflink.com or speak to a member of our Investor Relations team, who will be happy to talk you through our award-winning platform. If you do choose to invest with us, remember that your capital is at risk and Kuflink is not covered by the Financial Services Compensation Scheme. Narinder Khattoare CEO - Kuflink

*This is Narinder Khattoare’s opinion. Please seek independent financial advice. Securing investments against UK property does not guarantee that your investments will be repaid and returns may be delayed. Kuflink Bridging Ltd is authorised and regulated by the Financial Conduct Authority (Ref No. 723495) Registered office: 21 West Street, Gravesend, Kent DA11 0BF. Company Registration No. 07889226 LANDLORD INVESTOR 48TH EDITION

NATIONAL LIS AWARDS 2019

Following the huge success of last year's event, the National LIS Awards returns for 2019. The National LIS Awards, organised by the National Landlord Investment Show, celebrates the success of private landlords & buy-to-let services. These special awards bring together the key players in the Private Rented Sector including landlords/investors, developers and all professional services including: finance, legal, tax, developers, letting agents, online agents, auction houses, local authorities, landlord insurance, proptech, innovation, landlord associations, plus much more. Connect with the very best in the industry at the National LIS Awards on Thursday 21 November 2019 at the Grosvenor House Hotel, London. Agenda of the evening

Award categories include

See below overview of timings for the evening.

Best Accounting and Tax Services for Landlords

18:00 Arrival Drinks Reception

Best Landlord Insurance Provider

19:15 Dinner is Served & Entertainment

Best Landlord Legal Services Provider

21:00 Awards

Developer of the Year

22:30 Casino Opens

Best Lettings Agency

12.30 Carriages Dress Code: Black Tie

Best Online Agency

E-invites will be sent out to registered guests in the weeks leading up to the event. Please note that all timings are subject to possible change.

Specialist Finance Provider of the Year Best Property Education Provider Proptech Company of the Year

Venue and how to get there

Best product for Landlords

The National LIS Awards 2019 will take place at the Grosvenor House Hotel, 86-90 Park Lane, London W1K 7TN.

Best Short Term Letting Agent

The closest main-line station is London Victoria and from here you can take a bus or a taxi. The nearest tube station is Marble Arch, which is a 10 minute walk to the venue.

Best Property Investment Provider Best Buy-to-Let Mortgage Broker Best Seminars @ LIS Shows 2019 â&#x20AC;&#x201C; as voted for by attendees of the shows

Companies who supported the 2018 LIS Awards include:

To find out more or submit your entry please visit www.national-lis-awards.co.uk 36

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N AT I O N A L L I S AWA R D S 2 0 1 9 T H U R S DAY 2 1 S T N OV E M B E R G rosve n o r H o u se H otel , Pa rk L a n e, Lo n d o n W 1 K 7 TN

C E L E B R AT I N G

C AT E G O R Y

EXCELLENCE

AWAR D

I N T H E P R I VAT E

SUBMISSIONS

RENTED SECTOR

C L O S E 3 1 J U LY

Brought to you by the National Landlord Investment Show, the National LIS Awards celebrates excellence & professionalism in the private rented sector for both landlords, property investors and services throughout buy-to-let. To find out more please visit our dedicated LIS Awards website: www.national-lis-awards.co.uk