Li Magazine 28th Edition

LANDLORD | PROPERTY | INVESTMENT

LANDLORD INVESTOR MAGAZINE 28TH EDITION | 2017

IN THIS ISSUE SO MUCH FOR PREDICTION POLLS! / PROBLEMS, PROBLEMS / UNCERTAINTY & OPPORTUNITY / THE SHAWBROOK BTL REPORT / THE R.E.T.I.R.E. INVESTMENT JOURNEY / DEATH OF THE ‘ACCIDENTAL’ LANDLORD / WHAT IS THE BEST INVESTING STRATEGY FOR YOU? / SO YOU’RE THINKING OF SACKING YOUR AGENT? / INDUSTRY SPOTLIGHT - THE HAPPY TENANT COMPANY

so much for prediction polls

Election special with unique insight from leading industry experts.

#LIMAGAZINE

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

UK’s leading property investment event Our next National show is

WEDNESDAY 6 SEPT – EAST LONDON Crowne Plaza Hotel - Docklands WEDNESDAY 13 SEPTEMBER

TUESDAY 26 SEPTEMBER

SUSSEX

KENT

Brighton Racecourse

Kent Showground

THURSDAY 12 OCTOBER

WEDNESDAY 25 OCTOBER

TUESDAY 7 NOVEMBER

MAN C H ESTER

C AR DI FF

LO N DO N

Old Trafford - Manchester United Football Club

Cardiff City Stadium

Olympia Conference Centre

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

@LandlordInShow

@LandlordInvestmentShow

Welcome LANDLORD INVESTOR MAGAZINE 28th Edition 2017

Editor Tracey Hanbury editor@landlordinvestmentshow.co.uk Editorial Contributors Tom Entwistle Peter Littlewood Simon Zutshi Richard Bowser Paul Mahoney Karen Bennett Adam Joesef

Welcome to the 28th edition of Landlord Investor Magazine!

Welcome to the June issue of Landlord Investor Magazine. We have been extremely busy preparing for our biggest show to date which will take place on Thursday 15th June at London Olympia. Over 100 Exhibitors from the Private rented sector will be on hand to help you grow and retain your property portfolio. Attend up to 40 seminars on the day which will be presented by leading industry experts. The seminars will cover everything from Brexit and how this will potentially effect Landlords & Investors, Finance updates, how to build a property portfolio, to exit strategies.

Also inside is an election special which has been written by Tom Entwistle founder of LandlordZone, Richard Bowser, Editor of Property Investor News and Peter Littlewood from Southern Landlords Association.

Richard Bowser explains…. The outcome of the General Election has left the Government in a much weaker position than was expected when Theresa May made the controversial decision to seek a fresh political mandate less than two months ago. Notwithstanding the upcoming Brexit negotiations, we should have expected five years ahead of political stability until the next scheduled Election in 2022, but that now seems very unlikely…. see Richards full article inside.

Design Marc Riley

Magazine update

Advertising Beverley Meliniotis Marketing Anna Jackson Contact Telephone: 020 8656 5075 Website: landlordinvestmentshow.co.uk Facebook: /LandlordInvestmentshow Twitter: @LandlordINShow

From the June issue onwards we are very excited that we will be printing 10,000 copies of our magazine every single month! The magazine reaches over 44,000 UK landlords on a digital platform, we also print 38,000 copies which are distributed at our National Landlord Investment Shows throughout the UK each year and now we will be printing 10,000 copies which will be posted to UK Landlords.

If you would like to receive a print version of the magazine please subscribe at www.landlordinvestormagazine.co.uk For FREE tickets to any of our upcoming events then please register via our dedicated show website: www.landlordinvestentshow.co.uk

Tenants History Ltd 27 Stafford Road Croydon CR0 4HA

Happy reading!

Contents

4 10 14 16 21 24 28 32 44 Election Special

Election Special

Election Special

Problems, Problems

So much for prediction polls!

Uncertainty & Opportunity

Finance

Finance

The Shawbrook btl report: a past, present and future view

The R.E.T.I.R.E. Investment Journey

Tax Advice Death of the ‘accidental’ landlord, or a blessing in disguise?

Investment What is the best investing strategy for you?

Property Management

Industry Spotlight

So you’re thinking of sacking your agent to self manage?

Happy Tenant Company

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.

LANDLORD INVESTOR 28TH EDITION

1

Meet the team TRACEY HANBURY

RYAN DENNINGTON

T: 0208 656 5075 M: 07931 308 875 tracey@landlordinvestmentshow.co.uk

T: 0208 656 5075 M: 07931 308 856 ryan@landlordinvestmentshow.co.uk

STEVE HANBURY

BEVERLEY MELINIOTIS

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

T: 0208 656 5075 beverley@landlordinvestmentshow.co.uk

EDITOR & SALES DIRECTOR

SALES & EVENTS MANAGER

DIRECTOR

ADVERTISING SALES MANAGER

ANNA JACKSON

MARKETING MANAGER

LES HANBURY DIRECTOR

T: 0208 656 5075 anna@landlordinvestmentshow.co.uk

FRAN ROBINS

MARC RILEY

SALES & EVENTS MANAGER

DESIGN MANAGER

T: 0208 656 5075 M: 07950 284 615 fran@landlordinvestmentshow.co.uk

T: 0208 656 5075 marc@landlordinvestmentshow.co.uk

ALICIA CELA

CHARLOTTE DYE

ACCOUNTS

SALES SUPPORT

T: 0208 656 5075 accounts@landlordinvestmentshow.co.uk

T: 0208 656 5075 info@landlordinvestmentshow.co.uk

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

2

28TH EDITION LANDLORD INVESTOR

ELECTION SPECIAL

TOM ENTWISTLE LANDLORDZONE

With election recriminations flying, Theresa May’s position hanging by a thread, Jeremy Corbyn and her own ministers snapping at her heals, and all the while the Brexit negotiation clock ticking, it’s hard to see which way is forward at the moment?

Problems, Despite the Conservatives getting the biggest share of the vote since the 1980s in the June the 8th General Election, by one of those quirks of our electoral system they did not achieve a majority in Parliament. As a consequence, they now need support from other parties. As I write this it is likely to be coming from the right-wing Northern Ireland’s DUP, an opportunity for them to extract favours, more than likely lots more cash, among other things.

The disastrous Conservative campaign resulting from an inept personal performance by May and serious manifesto policy failures by the Conservatives is juxtaposed by a

4

remarkable turnaround in Labour’s fortunes under a resurgent Jeremy Corby.

The result is a country divided, a country slit between a hard left Corbyn, who has consolidated his position in his party, and a centre right May who is damaged and weaker after this result; a far weaker Brexit negotiating position in Europe and an uncertain outcome, be it hard or soft Breixt?

What looks like a return to two party politics in the UK leaves the Lib Dems languishing, UKIP pretty well extinct, the Scottish Nationalists battered and bruised with their independence (Indy 2) referendum vote blown clear out

of the water. The Conservatives have emerged battered and bruised, but still the largest party, with Labour’s hard left Jeremy Corbyn’s hold over his party and young voters, surprisingly resurgent.

So far the Conservatives look set to continue in government, with Theresa May as Prime Minister, at least for now.

But there is no doubt, with such a slim majority, watering down policies, an extremely hard time in Parliament, and the EU, will be the order of the day. There will inevitably be a knockon effect to other legislation affecting the private rented sector (PRS) as other priorities compete for time in the parliamentary schedule.

28TH EDITION LANDLORD INVESTOR

ELECTION SPECIAL

Problems.

LANDLORD INVESTOR 28TH EDITION

5

ELECTION SPECIAL

Economists on the left and the right and report after report agree that rent controls are a bad thing.

With the Housing Minister Gavin Barwell having lost his seat (now chief advisor to Theresa May) it could kill off, at least for the time being, a long list of housing legislation changes currently in the pipeline. Barwell’s lacklustre Housing White Paper, introduced in February, could be one major casualty.

The danger here is that with an increased majority and Conservative weakness, Labour’s calls for mandatory long-term tenancies, with rent controls, and country-wide landlord licensing, will be on the agenda again.

We will have to wait for the Queen’s speech on Monday the 19th of June to find out what is to be dropped from the Tory agenda as a result of the disastrous gamble May took, losing a comfortable majority of 17 and plunging the party and the country into an uncertain few months.

Uncertainty now surrounds the PRS more than ever. Investment in rental housing and house building, the planned introduction of the minimum energy efficiency standards due next April, and the extending of mandatory

6

HMO licensing to two-storey shared houses, with minimum room sizes, all now up in the air.

Rent caps form a major part of Labour’s new housing plan, along with mandatory long-term tenancies.

Any experienced landlord will tell you that both of these policies alone would have a dampening effect on buy-to-let, and along with the recently introduced Tory landlord taxes, will only serve to drive landlords out of renting at a time when rented housing is desperately needed.

Supporters of rent controls (whether a rent cap, or rent stabilisation which limits rises over time) argue that it helps ensure that households on low and middle incomes are not squeezed out of cities when housing costs are soaring. There is no doubt that in many cities, London in particular, growth has pushed up rents, and over time this changes the composition of neighbourhoods in favour of those who can afford the higher prices.

A case is made that rent controls provide long-term security for renters, that they tilt the balance of power from landlords towards tenants. That,

they make for a fairer housing market, in which households with lower incomes cannot easily be pushed out by landlords keen to maximise income by letting only to the well off.

But rent controls have been roundly discredited for years, and experience of them both in the UK and abroad has shown that they do not work and they have highly undesirable long-term effects on a housing market, not to mention the cost of administering the controls by government agencies.

Economists on the left and the right and report after report agree that rent controls are a bad thing. Economist Prof Paul Krugman writes: Rent control is “among the best-understood issues in all of economics, and—among economists, anyway—one of the least controversial”.

The economists agree that a restrictive price ceiling serves only to reduce the supply of rental property to the market.

When rent prices are capped, people have less incentive to maintain and rent out their accommodation, or to invest in and build more rental property.

Slowly, over time, supply growth makes the rent prices higher, not lower.

28TH EDITION LANDLORD INVESTOR

ELECTION SPECIAL

The long term effects of rent controls are dire as we saw under previous Labour governments.

Those landlords who continue to rent out their properties under a rent control regime will no longer maintain them because when supply and turnover in the market are limited by rent caps, landlords have little or no incentive to compete to attract tenants. Rent controls also mean that landlords become even choosier, and once tenants are ensconced on a lower rent, they will stay in properties longer than makes sense, excluding others more in need of accommodation.

The long term effects of rent controls are dire as we saw under previous Labour governments in England in the 1960s and 70s. Labour’s voodoo economics will no doubt have the same effect if they (rent controls) are ever introduced again.

Long-term tenancies are another disincentive for landlords to invest. The one thing that really invigorated the rental market in the UK was when the 1988 Housing Act introduced the short-hold tenancy. The Assured Shorthold Tenancy (AST) guaranteed possession of a property when a landlord wanted it back, no blame, no questions asked.

Not that most landlords ever want their properties back. Most landlords want tenants to stay as long as possible, so

LANDLORD INVESTOR 28TH EDITION

long as they pay their rent on time and look after the property. But when things go wrong, when the rent is not paid, the tenants trash the property, or they make life a misery for neighbours, the landlord wants the surety of getting them out.

The section 21 possession procedures meet that need and, although it can be quite long winded, taking up to 9 months to remove a delinquent tenant, it does work very well and has done for the past 30 years, witness the growth of the PRS. An initial 6 months tenancy is par for the course for most experienced landlords as they want the flexibility to evict if the tenant fails that “probationary” period. If Labour’s policy were introduced, you can bet that removing a bad tenant would be a lot more complicated and difficult.

There is little evidence that rent controls or long-term tenancies are either beneficial or desired. Many tenants in cities want the flexibility to come and leave at relatively short notice, and longterm tenants are welcomed by most landlords; they already have a fair amount of legal protection.

unworkable, and will, long term, do absolutely nothing to help families and the vulnerable people they want to help. In fact, I predict the exact opposite would be the case.

The real (the only) answer to high rents is to increase the supply of housing, something that takes time and investment, and something that governments of all shades have failed to achieve in any satisfactory sense in recent years. However, there is currently underway a massive building programme that should pay dividends for the future, but only if it is not stymied by policies which discourage more investment in properties for rent.

What small-scale buy-to-let landlords need more than anything from government right now is a review of the recently introduced “landlord taxes” and the return of real incentives for landlords to invest in rental property and help solve the housing crisis.

Tom Entwistle is Editor of LandlordZONE® and an experienced residential and commercial landlord.

Labour’s proposals on renting legislation are, in my view, highly misguided and

7

THE THE METALWORKS METALWORKS AT PUMPFIELDS, LIVERPOOL AT AT PUMPFIELDS, PUMPFIELDS, LIVERPOOL LIVERPOOL

RESHAPING URBAN LIVING RESHAPING RESHAPING URBAN URBAN LIVING LIVING

The Metalworks, at Pumpfields, Liverpool, is a residential development The Metalworks, at Liverpool, is development The provides Metalworks, at Pumpfields, Pumpfields, is a a residential residential development that all life’s essentials Liverpool, in one efficient, elegant and beautifully that provides all life’s essentials in one efficient, elegant and beautifully that provides all life’s essentials in one efficient, elegant and designed building. The right space, the right style and in thebeautifully perfect designed building.

The right space, the right style and in the designed building.

The right space, the rightlife style and in the perfect perfect location.

We believe in making simpler. location.

We believe in making life simpler. location. We believe in making life simpler.

Units from £99,000 Units from £99,000 Units from £99,000

7 % Assured Rent for 7 % Assured Rent for First 2 Years 7 % Assured Rent for First 2 Years First 2 Years

Insurance Protection on Insurance Protection on 30% Deposits Insurance Protection on 30% Deposits 30% Deposits

Low Deposits Low Deposits Low Deposits

Fully Managed Fully Managed Fully Managed

Optional Car Parking Optional Car Parking Optional Car Parking

www.bestofbuytolet.com | 0203 8000 606 || info@bestofbuytolet.com www.bestofbuytolet.com www.bestofbuytolet.com || 0203 0203 8000 8000 606 606 | info@bestofbuytolet.com info@bestofbuytolet.com

ELECTION SPECIAL

PETER LITTLEWOOD SOUTHERN LANDLORDS ASSOCIATION

So much for prediction polls!

I write this early Friday morning, before all the results are in, and before any anticipated resignations, but we are going to have another Hung Parliament.

I was going to start by making a plea to the Election Gods; please, please, please don’t let me see the inside of another polling booth for a long time – at least 5 years! But I really can’t see how anyone can govern under these conditions, at such an important and difficult time that we are to experience in the next few years.

So although we’ve now had 4 elections in 3 years (one was a local election, and one was a referendum) are we going to have a repeat of 1974 when we had two General Elections in the same year?

10

And it’s been a Tortoise and Hare election. With Theresea May haring off in all different directions; and Tortoise Corbyn plodding steadily along behind, not actually quite knowing where he is going, but determined to get there. Mrs May advocating a strong leadership, but actually turning out to be Mrs U Turn; against Brexit one minute, then thinking it will be the best thing for the UK in a long, long term; not going to hold an election until 2020, then calling one for ‘the good of the country’; proposing the so called ‘Dementia Tax’ one minute, then saying she always wanted to cap it the next.

They’ve been cheered on by Tim Farron (who Jeremy Paxman described as ‘being pleased if he is recognised at a family dinner’!), who doesn’t seem to realise that we have actually had a vote on Brexit; Nicola Sturgeon, although a much reduced majority will still be determined to upset the applecart whoever is in power; and a rag tag of other leaders including UKIP – remember them?

The good news is that more people are actually voting.

28TH EDITION LANDLORD INVESTOR

ELECTION SPECIAL

The good news is that more people are actually voting.

LANDLORD INVESTOR 28TH EDITION

11

ELECTION SPECIAL

This graph shows that we have been getting more and more apathetic towards voting.

General Election Turnout Since 1950 90%

So what does this mean for the Private Rented Sector (PRS)?

80% 70%

The only thing we know for certain is that we will have a new Housing Minister. Gavin Barwell, the previous incumbent, lost his tiny majority of 165 meaning he will not be an MP this time round. The Secretary of State, Sajid Javid has retained his seat but is most unlikely to retain his job, even if Theresa May remains Prime Minister – by the time this is published you might know the makeup of the Government.

60% 50% 40% 30% 20% 10% 0%

And it would appear that a lot of young people are voting, which is good. They complained that the ‘old vote’ cost them Brexit, but in general didn’t bother turning out to vote.

Perhaps this time they have.

1950

1955

1964

1970

1974

1983

1992

2001

2010

2017

It’s been dropping since the 1950 election when 84% of eligible people voted. That has been steadily dropping to the around 65%, but this election is about 69% (the final figures won’t be known for a few days).

I’ll stick my neck out and predict that Licensing is now here to stay; Gavin Barwell was the only person really against it. Labour are in full support of this, and many Tories are lukewarm, so it probably won’t figure too high on the negotiating stakes that are going to be taking place during June.

Not only are we due to start Brexit negotiations on June 19th, but we would appear to be scrapping amongst ourselves for a place at the High Table.

Unfortunately the Conservative manifesto was high on words for housing, but low on actual policy; big on ambition, but low on detail. They have loftily said that we need to build more houses, putting the emphasis on local councils supplying the extra 1/4 million houses by 2021. This completely ignores the fact that we have fallen woefully short of house building targets for decades, since just after the war in fact. Right to Buy for those living in housing association property is mentioned, but would be a drop in the ocean.

Labour has made similar vague proposals, with many of their manifesto covering matters already in place, such as ‘ensure homes are safely wired, free from damp and in general good repair’ already covered by existing legislation.

And as mentioned they do give strong

12

support for Licensing, citing Newham as a success story.

Theresa May was right that we need a period of stability to allow us to negotiate a good Brexit result as well as getting on with the normal governance of the country, but by calling this election early her gamble has failed spectacularly. Will she follow David Cameron into the history books as a Prime Minister having to resign after shooting themselves in the foot?

Perversely the only winner out of this is Jeremy Corbyn. He has managed to keep his cool whilst everyone around him has lost theirs; managed to keep his Marxists tendencies under control, and is now in a much stronger position. How will he use his new power? Only time will tell.

So not only are we due to start Brexit negotiations on June 19th, but we would appear to be scrapping amongst ourselves for a place at the High Table.

Strong and Stable? I don’t think so.

In 2017/18 there is a strong chance of a Conservative leader contest; another election year, and a slight chance of another referendum. If you thought you were punch drunk on party politics, ‘you ain’t seen nothing yet’ (to paraphrase Bachman-Turner Overdrive).

The views expressed here are purely those of the author, and not necessarily those of the SLA nor of the Landlord Investor Magazine.

Peter Littlewood

28TH EDITION LANDLORD INVESTOR

SPECIALIST LANDLORD INSURANCE YOU CAN TRUST As one of the UK’s leading specialist landlord insurance brokers, our wide range of solutions covers all types of residential property, commercial property and tenant status. Whether a single property or a portfolio, we’re sure to have it covered.

To find out more, call 01625 348114 or visit www.bollington.com/landlord-investor

Insurance Times

Awards

WINNER

BOLL255 01/17

AUCTION SALE The leading London Residential Auctioneer offering and selling more lots than any other

Over 220 lots throughout the UK from no reserve to £1.5m including: Lot 1

London, NW1 – Shell (flat) £200,000 Lot 37

Chatham – Shell (flat) £49,000

Lot 2

London, W2 – Shell (flat) £240,000 Lot 62

London, N22 – Flat £125,000

Lot 8

London, E17 – House £585,000 Lot 139

Godalming, Surrey – Land Without Reserve

Start: 10.30am Tuesday 20th June Grand Connaught Rooms, 61-65 Great Queen Street, Covent Garden, London, WC2B 5DA Lot 34

Hawkhurst, Kent – Development, £385,000 Lot 150

County Durham – House £15,000

We are now taking instructions for our next auction on 25th July 2017. Contact us now for a free auction appraisal: T: 0208 741 8088 E: auctions.hammersmith@sequencehome.co.uk W: www.barnardmarcusauctions.co.uk *Guide Prices must not be relied upon as a valuation or assessment of value of the property. But are intended to provide an indication of the region at which the reserve may be set at the time of going to press. The guide price may be subject to variation and interested parties are advised to make regular checks and should be aware that the reserve price may be either below or above the quoted guide price.

LANDLORD INVESTOR 28TH EDITION

13

ELECTION SPECIAL

RICHARD BOWSER

The outcome of the General Election has left the Government in a much weaker position than was expected when Theresa May made the controversial decision to seek a fresh political mandate less than two months ago. Notwithstanding the upcoming Brexit negotiations, we should have expected five years ahead of political stability until the next scheduled Election in 2022, but that now seems very unlikely.

Uncertainty & Opportunity It’s now evident that many previously alienated younger voters turned out in greater numbers to express their anger and frustrations in respect of the Brexit referendum result, university tuition fees and of course the high cost of housing. The implications from this resurgent ‘youth vote’ will surely not be ignored when all the political parties reflect on their future policy-making.

However, many in the Private Rented Sector (PRS) will understandably be somewhat sceptical of any politician’s stated intentions given the ‘tax attack’ on individual landlords in recent years which was not disclosed in advance by the Conservative Party prior to the 2015 Election.

14

A concerted lobbying effort is on-going by the main landlord associations (NLA/ RLA) and by other groups to attempt to make Government ‘see sense’ and to reverse the changes under Section 24 which - over the next three years - will see individual landlords lose their ability to offset all finance costs against their rental property income. However with the need to reduce the Budget deficit I would be very surprised if any reversal of Section 24 occurs any time soon given the hugely uncertain political landscape that we now have.

As such we in the PRS have to accept and plan ahead in the knowledge that these tax changes are likely to be in place for the medium term and ensure that the

right decisions are made to ensure that our property businesses are trading profitably.

We may well now not have five years until the next General Election but it is a reasonable period of time to set some potentially achievable goals in respect of your property investments, and your investing choices ahead will be dictated by the resources that you can draw upon. Your ability to finance deals, your investing skills and previous experience along with those of your chosen team will all influence the likelihood of you achieving success but in my experience having the right mindset to succeed is absolutely crucial.

28TH EDITION LANDLORD INVESTOR

ELECTION SPECIAL

There is now without doubt some degree of uncertainty around compared to a few years ago.

If you are just starting out or perhaps have one or two investment properties, then particularly in London and the inner south-east region, it is now becoming tougher to acquire more property due to the high values in many locations and with lenders being more cautious due to recent regulatory changes. Net yields have dropped to historic lows and much larger deposits are now required.

Recent evidence from Homelet would also indicate that average residential property rents in many locations are either similar or slightly less than a year ago, which is due to a combination of factors including the large boost to rental property supply in Q1 2016 prior to the introduction of the 3% SDLT charge on buy to let properties. The London property market in particular saw a supply

LANDLORD INVESTOR 28TH EDITION

boost in the first half of 2016 added to by the number of new-build apartment completions along the Thames, many of which have been acquired by foreign investors.

There is now without doubt some degree of uncertainty around compared to a few years ago mainly because of the Brexit vote and the residential sales outlook for London property might appear less positive than two or so years ago, particularly for higher value stock, but this could well lead to some buying opportunities as the year progresses as there are always people who are motivated to sell.

As I have been explaining in my recent seminar presentations it is locations such as Manchester and Liverpool which have been seeing an investment surge from

both UK and overseas investors who believe that better yields are available in the north of England. However yield is not always the most important factor when considering your investment options and history shows that those who sell property in London often regret the decision ten or fifteen years later.

Given the above, it is not unsurprising that some people might be deterred from investing in property in the next year or so but my view is that there could be a period ahead of real opportunity for those who are prepared to adapt their approach and who are aware of market trends and evolving strategies.

Richard Bowser, Editor of the monthly magazine ‘Property Investor News’ – www.property-investor-news.com

15

FINANCE

KAREN BENNETT SHAWBROOK

The Shawbrook btl report:

a past, present and future view

16

28TH EDITION LANDLORD INVESTOR

FINANCE

The private rented sector (PRS), and in particular buy-to-let, is in a state of flux with the impact of new affordability rules and a changing tax-regime high on the agenda.

At Shawbrook, we recently commissioned economic think tank, the Centre for Economics and Business Research (CEBR), to take a current and future view of the private rented sector, and in particular the buy-to-let market. The full report is available on the Shawbrook website but some of the key issues are discussed below with more to follow within over the coming weeks.

A new landscape New rules introduced last year mean landlords now pay an additional 3% Stamp Duty Land Tax on their house purchases. In many cases this adds thousands of pounds to the cost of an already expensive transaction, causing many to rush through contracts before the deadline of April 2016 to avoid the levy.

The report shows transactions had been steady at around 100,000 per month from 2015 until February 2016 before dramatically increasing to 170,000 in the month before the changes were introduced. After the deadline, transaction levels more than halved and they are yet to recover.

LANDLORD INVESTOR 28TH EDITION

That was just the first of a series of new obstacles which private landlords have to negotiate. When combined with additional challenges such as changes to wear and tear allowances, the abolition of mortgage interest relief, and stricter underwriting rules, some are now questioning the longer term viability of parts of the buy-to-let industry.

These all have serious implications for landlords. Yet there is clearly still demand for property as an investment; the Government collected some ÂŁ1 billion in Stamp Duty tax receipts in the second half of last year alone, even after the new levy was introduced. But additional costs raise concerns about affordability for private landlords and there is a growing fear that this group of investors is being penalised, while institutional landlords are exempt from many of the incoming changes.

17

FINANCE

Changing strategies Higher costs are forcing many private landlords to re-evaluate their strategy.

Some are looking to alternative locations, outside of London and the South East, for example, where lower house prices reduce the burden of stamp duty and the size of deposit. Some brokers say that, while the number of loans they are processing has remained steady, the size of the average loan has fallen, whereas others are seeing landlords explore different asset classes altogether.

than remain a private landlord – limited companies will be unaffected by changes to mortgage tax relief and are likely to be able to achieve higher levels of borrowing as a result. However this strategy presents its own problems; transferring a property from individual ownership into a company is treated like any other property sale and incurs the usual raft of stamp duty expenses, not to mention the associated capital gains implications.

Another area landlords are exploring is whether they should incorporate rather

The Shawbrook BTL report shows that some landlords are, instead, showing

an increased appetite to become mortgage-free as an alternative way to avoid the impact of mortgage tax relief changes, which could eat away at all-important rental income. Indeed, this may be another reason why properties outside the South East are becoming increasingly attractive. In the North of England house prices in many regions are yet to recover from the trauma of the financial crisis. In these areas landlords can snap up desirable properties for as little as £60,000; in London they may need that amount just for a deposit.

Average house prices, mix adjusted, by region, £ £500k £450k £400k £350k £300k

REGIONAL AVERAGE

£250k £200k £150k £100k

UK AVERAGE

£50k

In many cases, for instance, the two types of buyer are looking for very different properties; homeowners

18

Lo nd on

H um be Ea r st M id la nd W s es tM id la nd s So ut h W Ea es st t of En gl an d So ut h Ea st

&

W es t

Yo rk sh ire

N or th

W al es

Sc ot la nd

N or th er n

N or th

There is a growing view that affordability challenges don’t actually exist outside of the capital. Many brokers and landlords alike are frustrated that the national debate about buy-to-let has become far too London-centric. There is also a sense that landlords are being blamed for changing behaviours in society, but there are lot of factors changing the industry and it is perhaps far too simplistic to look at the property market as “landlords versus homeowners”.

Ire la nd

£0k Ea st

In the North of England house prices in many regions are yet to recover from the trauma of the financial crisis.

typically prefer to buy detached houses whereas landlords are more likely to buy flats or a property in need of renovation. Research from Shawbrook shows around 36 per cent of buy-to-let mortgages are for the purchase of flats while 34 per cent of loans are for terraced homes.

As mentioned, additional findings are available within the full report including other hot topics such as the impact of attitudinal shifts amongst the younger demographic, the view on government incentives, and the need for education throughout the industry. In the meantime, it is worth noting that the research

conducted shows an overarching sentiment of positivity in spite of some adverse headwinds affecting this market. Those adopting a long term, sustainable approach to their investment strategy, and surrounding themselves with specialist advice and robust lending partnerships are best placed to prosper. This market still has much in the way of opportunity for the savvy investor and we have a healthy appetite to support this key component of UK housing and the economy.

Karen Bennett Managing Director Shawbrook Commercial Mortgages

28TH EDITION LANDLORD INVESTOR

SECOND CHARGE MORTGAGES • BRIDGING LOANS • COMMERCIAL FINANCE • DEVELOPMENT FINANCE SECOND SECOND CHARGE CHARGE MORTGAGES MORTGAGES • BRIDGING • BRIDGING LOANS LOANS • COMMERCIAL • COMMERCIAL FINANCE FINANCE • DEVELOPMENT • DEVELOPMENT FINANCE FINANCE

brighter outlook AA Abrighter brighteroutlook outlook for property investors for forproperty propertyinvestors investors and Landlords and andLandlords Landlords who need nance who whoneed need  nance nance

We build nance around you, so you can build on success We We build build nance nance around around you, you, soso you you can can build build onon success success As a landlord or property investor looking for finance, the suitability As aAs a landlord or property or property investor investor for fifor nance, fi nance, thetothe suitability suitability oflandlord the advice and products youlooking arelooking offered is critical achieving of the of the advice advice and and products products youyou are are offered is critical to achieving to achieving maximum return on investment.

Sooffered talkistocritical The Loan Partnership. maximum maximum return return on investment. on investment.

So talk So talk to The to The Loan Loan Partnership.

Partnership.

Our close relationships with a wide range of lenders means funding OurOur close close relationships with aanwide aimpressive wide range range ofchoice lenders of lenders means funding funding options arerelationships sourced with from of means products that options options are are sourced sourced from from anextend impressive an impressive choice choice ofportfolios, products of products thatthat provide opportunities to and improve make provide provide opportunities opportunities to extend to extend and and improve improve portfolios, portfolios, make make investments work harder, and raise capital for improvements and investments investments work work harder, harder, andand raise raise capital capital for improvements for improvements andand new purchases. newnew purchases. purchases.

With decades of industry expertise and access to unique products, With With decades decades of industry of industry expertise expertise andwith and access access to unique torate unique products, products, including competitive terms, plans interest discount and including including competitive competitive terms, terms, plans plans with with interest interest rate rate discount discount and greater flexibility with criteria, you’ll see why we can help you and take greater greater flexibility flto exibility with criteria, criteria, you’ll you’ll why why weadvisers we cancan help help youyou taketake success thewith next level.

Talk to see onesee of our today. success success to the to the nextnext level. level.

TalkTalk to one to one of our of our advisers advisers today. today.

Call Us Now 01923 250 090 Call Call UsUs Now Now01923 01923250 250090 090 www.theloanpartnership.co.uk www.theloanpartnership.co.uk www.theloanpartnership.co.uk info@theloanpartnership.co.uk info@theloanpartnership.co.uk info@theloanpartnership.co.uk

Fund your investment opportunities...

Fund Fund your your investment investment opportunities... opportunities... » Specialist BTL across a range of property types » Specialist » Specialist BTLBTL across across acompany range a range of lending, property of property types types including limited HMOs, blocks of including including limited limited company company lending, lending, HMOs, HMOs, blocks blocks of of flats and portfolios. flatsfland ats and portfolios. portfolios. » Bridging finance – acquire property quickly, add value » Bridging » Bridging finance finance – acquire – acquire property quickly, quickly, add value value through refurbishment andproperty conversion oradd provide through through refurbishment andand conversion conversion or provide or provide time refurbishment to sell. timetime to sell. to sell. » “Bridge to Let” – one lender to help buy the property » “Bridge » “Bridge Let” to Let” – the one – buy one lender lender to mortgage help to help buybuy the the property property andto provide to let without andand provide provide the the buybuy to let tomortgage let mortgage without without additional arrangement fees as soon as the property additional additional feesfees as soon as soon as the as the property property is readyarrangement to arrangement let. is ready is ready to let. to let. » Commercial Investment – lending options for both » Commercial » Commercial Investment Investment lending – lending options options for both for both semi-commercial and–commercial property. semi-commercial semi-commercial andand commercial commercial property. property.

FINANCE

PAUL MAHONEY NOVA FINANCIAL

R.E. T .I.R.E. Investment Journey The

I. Ready to get started At this stage of your life you are just starting to think about investing. For most this is between the ages of 25 and 35 but don’t worry if you are outside this bracket as many successful people started earlier or later than this. This is the beginning of financial awareness, it is the time when you realise that working long hours to earn more money but then spend it all or not do anything useful with it isn’t enough. You want to be able to utilise your money and you want to learn how to do that. Congratulations this is the first step in a long process.

II. Education In this stage research and education is of utmost importance, you need to build your knowledge base and ideally seek the advice of a trusted advisor to

LANDLORD INVESTOR 28TH EDITION

assist you to get started on the right path. This is essentially the cornerstone of your investment journey, as often the first investment will either give you the confidence to keep going or you’ll get your fingers burnt which could affect your progression. Do your research but try not to self-diagnose; this is comparable to going online and looking up why you have a sore throat. Often you will end up thinking you have a lifethreatening disease when in fact you just have a cold. Seeking advice on what is right for your situation and what you are trying to achieve is akin to going to the doctor. This doesn’t mean that you shouldn’t do your own research but there is a lot of conflicting information out there that can often result in paralysis by analysis. You can spend far too much time going around in circles but remember that until you’ve invested you haven’t achieved anything so far as improving your financial situation.

III. Testing the Water Starting with a low risk investment that you are very confident in steady returns are advisable at this stage. All too often, I see first time investors trying to be too creative to create “fast equity” which they’ve often heard about at a “get rich quick seminar” or similar event and fortunately or unfortunately such investments tend to be high risk often profess unachievable returns or in some cases are just non-existent solely for the purpose of selling a seminar or training course. My advice is to start small and low risk and build from there as your confidence and wealth and therefore your ability to weather a loss builds.

21

FINANCE

If the previous phases have been done right, then this phase is about enjoying the fruits of your labour.

IV. Investing Further In this stage, you’ve already made your first investment and hopefully that went well, you’re now looking to build an asset base and move closer toward your long-term goal. You may start to make larger investments or take on more creative projects are your confidence and wealth builds. Don’t get carried away and start to think that you’re an expert (unless you are), an over-confident investor is often an unwise investor so don’t just jump into things. Maintain in-depth research and due diligence at every turn to ensure you don’t get burnt or make the wrong decision for your situation.

This phase should focus on capital growth investments, whilst income is important to support costs when your building an asset base, you are much more likely to reach your goal sooner through growth then through income.

A quick example below; A £50,000 investment into a 10% NET yielding asset (the upper end of what is achievable) will give you £5,000 per annum. If it doesn’t grow in value, then £5,000 is all you will ever get in a year.

The same £50,000 invested into a £200,000 property with 75% leverage that doubles in value in 10 years means that they £50,000 is now worth £250,000. Do that a few times and you will be much more likely to achieve the income you want in the subsequent phases of your investment journey.

22

This can be likened to growing and squeezing an orange; when you have a small orange, there isn’t much point in picking and squeezing it because you’re unlikely to get much juice. When that orange has grown big and juicy then is the time to squeeze. The orange is your asset base and the juice is cash flow.

Your investments should be chosen accordingly dependant on the type of return that is most suitable for your stage of the investment journey.

V. Retirement Transitioning This phase is when you’ve reached the required asset base to generate the income that you require however often the investments you’ve made have been capital growth focused and may not be generating you sufficient income. This is a common shift to which there are a few solutions; you could sell up and completely shift into income focused investments or you could liquidate part of your portfolio to accommodate the shift.

The answer will differ depending on your situation but it is important to remain commercially minded and not get attached to investments regardless of how well they’ve performed if they are not generating the right type of income for you.

A family friend recently inherited a reasonable sum and invested in ten

factories in a regional town of the UK. Aside from being slightly offended that he didn’t ask me for investment advice on what he should do with the money, I thought he was crazy, what could 10 factories in a small town have going for them as an investment? They’re never going to grow in value and surely there isn’t that much demand from tenants, is what I thought. I asked him why he did it and his response was that he had pre-leased them for 20 years at a 10%+ yield and given he is 60 years of age, he couldn’t care less about growth as the kids can worry about that. Little did I know that my family friend clearly understood that he had the asset base required to generate the income that he needed and wasn’t worried about the exit strategy or growth as that will be beyond his timeframe of caring. Not so crazy!

VI. Easy Retirement If the previous phases have been done right, then this phase is about enjoying the fruits of your labour.

Whatever your goals were they should now be achieved and you are able to enjoy life and appreciate the work that you put into getting you here. Now of course you may need to tweak things here and there based upon economic or legislative changes but ideally they can be looked after by someone else.

Paul Mahoney

28TH EDITION LANDLORD INVESTOR

TAX ADVICE

TONY GIMPLE LESS TAX FOR LANDLORDS

Death of the ‘accidental’ landlord, or a blessing in disguise?

Most people think that politicians are dumb and out of touch, and these days it’s all too easy to see why.

Yet in my experience the dumb bit is far from true, especially when it comes to Chancellors.

Let’s take the case of George Osborne’s infamous S24 Tenant Tax. Far from being a one-off attack, perhaps gorgeous George set up those landlords who incorporate for an even bigger onslaught, in that it would be very easy for his successors to introduce a higher rate of corporation tax for property investment companies (HMRC will class you as that), in exactly the same way he did when lowering CGT rates for everyone except landlords.

On the plus side, it’s finally become clear that if you want to maximise your profits and legally minimise the loss to tax, then now really is the right time to become a professional property business.

Moving on. Investing in property is one of the best ways of generating income and capital growth; and, whilst not everyone will be affected by Section 24, most landlords are generally paying more tax than the law obliges them to, both during their lives and in inheritance tax on death.

Likewise, nearly every landlord we see doesn’t have a plan that sets out their tangible goals and how to achieve them, which in large part is because almost every landlord is an ‘accidental’ one.

24

LANDLORD 28TH EDITION INVESTOR LANDLORD 28THINVESTOR EDITION

TAX ADVICE

Whatever your personal situation, when considering your future as a landlord, in practical terms you only have four options: 1. Sell up. Take the CGT hit and mortgage penalties (if any), and either spend the lot or invest the money elsewhere.

2. Decide to do nothing. Investigate the options as best you can and decide to stay as you are even though that may increase your tax bill and lower your disposable income.

Option 3 - Incorporation • CGT (up to 28%) and Stamp Duty (up to 15%) if you can’t prove entitlement to S162 Incorporation Relief • Requires a change of legal title (ownership) and thus a likely remortgage, with all the associated costs such as early redemption penalties, legal, broker, and lenders fees • Limited number of lenders, higher interest rates, restrictive commercial terms such as loans being repayable on demand, additional cash requirements if property prices fall increasing the loan to value, and mortgage lock-in if the lender loses their appetite. Moreover, lenders frequently take a debenture (charge) over the company’s balance sheet, which means that you can’t withdraw your own capital or repay directors loans without their consent.

Companies and individuals taxed seven ways:

3. Incorporate. Move your personally held investment properties into a limited company to get over S24, albeit the hidden costs and restrictions will likely cripple you as shown below.

4. Run a highly tax efficient professional property business to achieve your life and wealth goals.

For most Landlords, and especially those affected

by Section 24, options 3 and 4 are the only practical choices, so let’s look at a direct comparison.

Option 4 – Run a highly tax efficient professional property business Typically, this involves holding the current or future investment properties through a Personal Ownership / Limited Liability Partnership (LLP) / Limited Company hybrid; a recognised corporate structure and business management tool.

When properly arranged and managed, hybrid tax and property ownership delivers: • No need to remortgage or change title, thus no CGT or Stamp Duty • Tax from your property income at basic rate • No Inheritance Tax and seamless succession planning • Two layers of limited liability and protection against family/marital break up

• Corporation Tax (19% falling to 17%)

• Maximum commercial flexibility and choice of finance

• Capital Gains Tax on personal withdraws of capital resulting from selling assets (10%, 18%, 28%)

So how do you run something as a business?

• Directors Loan Account Tax (32.5) • Dividend Tax (7.5%, 32.5%, and 38.1%) • Income Tax (20%, 40%, 45%, and 60% on the slice between £100,000 and £123,000) Employees and Employers NIC (12% and 13.8% respectively) • Inheritance Tax (40%)

LANDLORD INVESTOR 28TH EDITION

it is you really want by answering how much, of what, by when, by whom, and most importantly, why? By the way, it’s perfectly OK to have goals like holidays, Rolex watches, spending more time with the family, or doing good works; just as long as they’re quantified by time and money.

With this understanding, you can then plot your route from A to B, and begin to look at the best structure by which to achieve your goals.

And whilst we can’t give specific advice about which way you should go until we’ve met and engaged, typically, if you want to maximise the potential to grow your net worth by truly running your portfolio as a professional property business, whilst at the same time reducing tax leakage to the absolute legal minimum, and maintaining maximum flexibility to achieve the greatest returns, then most likely you’d be best served by a hybrid structure.

What next?

First things first, a business only exists to make a profit, and not as a vehicle to save tax!

Our aim, insofar as far as the law allows, is to help you build and run a highly tax efficient professional property business that sees you achieve your goals with the minimum tax leakage possible, and to eventually pass it on intact to those you care about most whilst remaining in full control today.

Meanwhile, a good place to start is by having a written thought through flexible business plan that starts where you want to finish, both in the short, medium, and longer term. To do that though, you’ll first have to decide what

If you would like to find out how our team can help you to run your portfolio as a professional property business, then please call 0203 463 8641, or visit www. LessTaxforLandlords.co.uk/ freeconsultation.

25

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

We help our HMO clients get £100-£150 more rent per room, each month than the spareroom.com average.

Experts in interior design, plans, procurement, installation of furniture and fittings for rental properties, HMOs and Serviced Accommodation.

With space planning, smart interior design and supplying contemporary, long lasting, comfortable furniture we create houses that get noticed.

BTL that isn’t renting out?

Our property staging hire service rents furniture, furnishings & accessories at an affordable price and styles by the room or property to get results.

26

m 0776 7756 468 w flippainteriors.co.uk e info@flippainteriors.co.uk

28TH EDITION LANDLORD INVESTOR

Tenants found for £77 Tenants found for £77

With unlimited advertising on top property portals With unlimited advertising on top property portals and unparalleled tenant screening processes. and unparalleled tenant screening processes.

www.prosico.com www.prosico.com

Free 358 3232 3232 FreePhone: Phone: 0333 0333 358 Terms and on various variousportals portalsincluding: including: Terms andconditions conditionsapply. apply.Properties Properties are are listed listed on

GetGet Further £11 usingDiscount DiscountCode: Code:L LI M I M1 17 7 Further £11offoff- Create - Createan anadvert advertat atwww.prosico.com www.prosico.com using

INVESTMENT

SIMON ZUTSHI

For many investors, finding the most appropriate strategy can be one of the biggest challenges, especially if you are new to investing, or if you have been successful for a number of years using one strategy, but recognise that maybe you could achieve the success you want quicker, if you use some of the new strategies you keep hearing about.

What is the best investing strategy for you?

Each month Landlord Investor Magazine is packed full of inspirational case studies and articles about investors using all sorts of interesting and profitable strategies. There are so many strategies to chose from, that sometimes it can be overwhelming and lead to analysis paralysis. We want to help you avoid this.

might be the most appropriate one for you. I wish there was one perfect strategy that was ideal for everyone. It would make my job as a property trainer and mentor much easier but everyone is different. What works for you may not work for someone else and that is good because it means we are not all chasing the same kind of deals.

For this month’s article, Landlord Investor Magazine have asked me to help you to work out which strategy

First of all let me share a free resource with you, which is www.

StrategyProfileTest.com. It is a very

28

quick test where you answer just five questions and it will generate a 6 page pdf report which will help to identify the most appropriate strategies for you. I recommend you take the test now. It is completely free and it could save you a huge amount of time and effort by avoiding doing the wrong strategy. For example, if you are short of time, then picking a strategy such as Rent to Rent may not be a suitable strategy for you because it is generally a labour and time intensive strategy.

28TH EDITION LANDLORD INVESTOR

INVESTMENT

The most appropriate strategy for you will be influenced by a number of factors.

There are many different ways to make money in property. There is no one strategy that fits all. The most appropriate strategy for you will be influenced by a number of factors such as: what you are looking to achieve, your time scales, your experience, and the resources you have available to you, in particular time and money.

The Strategy Profile test has been designed to help you identify which property investing strategies might be most appropriate for you, given your personal circumstances in relation to

LANDLORD INVESTOR 28TH EDITION

the amount of time and money you have access to.

There are four different Strategy profiles which are: Funder, Finder, Connector and Elector. Once you know your Strategy Profile and understand the other 3 Strategy Profiles, then you will be in a better position to identify other property investors who may have access to resources that you don’t have, which means that you can reach your goals faster than you would otherwise with just your own resources, which may be

limited. You can be far more efficient at property network meetings finding the right people who you can help and who can help you.

At some point you will run out of your own resources. Successful investors achieve much more by working with other people for mutual benefit. So let’s look at each profile in turn. You might well identify yourself from these short descriptions but there is a lot more detail in the 6-page pdf report which you get access to when you take the test.

29

INVESTMENT

FUNDER

CONNECTOR

A FUNDER is someone who has some money but not much time. Time is the resource that could limit their property acquisition. The best way for them to succeed in property, is to leverage other people’s time. They could work with all the other FINDERS and CONNECTORS by providing the money to finance property deals. They could help by lending money as a private lender for a fixed return, or become a Joint Venture partner for a share of profits. If they want to get more involved in the property investing, Freehold to Leasehold Title Splitting could be a great strategy for them as it does not take much time, but does require some capital, and can be very profitable.

A CONNECTOR is someone who does not have much time or money. For this reason, they have to leverage other people’s time and money. The best strategy for them is to find FUNDERS who have money, but not much time to find their own projects, and connect them with FINDERS who have the time to find projects but not enough money to do the deal themselves.

In this way the CONNECTOR acts like a middle man introducing the different profiles who can work together for which the CONNECTOR is rewarded by either getting paid a fee or a certain percentage of the project for facilitating the deal. The best thing a connector can do is get to meet lots of different people, build trusting relationships with them and then facilitates deals with the other profiles.

FINDER

ELECTOR

A FINDER is someone who has some time but not much money. As such, they should have enough time to find great investment properties, but maybe not enough of their own money to buy them.

Money is the resource that could limit their property acquisition. There are two possible choices here. They could use strategies which don’t require much capital such as: Souring properties, Assisted Sales, Rent to Rent, and Purchase Lease Options. Or, alternatively, they could work with FUNDERS and ELECTORS to buy properties, using other people’s money in the form of private investor loans or Joint Ventures finance.

An ELECTOR profile is someone who has both time and money and so they have the choice of how they invest. Although this might sound like the perfect scenario, often these people get overwhelmed because they have too much choice. They can choose any strategy they want, although buying their own properties to use as Houses of Multiple Occupation (HMO) or Serviced Accommodation should maximise their return on investment. They can also work direct with FINDERS who can source deals and join ventures. Or they can work with CONNECTORS who can introduce them to FINDERS who can source deals. Even ELECTORS will eventually run out of their own funds and so they may want to also work with FUNDERS.

No matter what your profile, it is all about making the most of the resources you do have and finding other people to work with who can help you.

Having identified your profile, you can focus in on the strategies which will give the best results the quickest.

Take the test now You probably now have an idea of what your Profile Strategy might be, but we recommend you take 60 seconds to take the Strategy Profile Test now to confirm exactly which profile you are, and learn more about how you can make the most of your strengths and how to find other investors who can make up for the resources you lack. You will learn more about the strategies which are best for you and also how to move forward. You also get access to some free online training all about the strategies most appropriate for you.

Take the test for free now: www.StrategyProfileTest.com

Landlord Investor recommends It can be a lonely journey as a property investor, especially if your family and friends just don’t get it and think that you are actually a little bit crazy. You don’t have to do it on your own. One of the best ways for you to: gain support from like minded people; be inspired by what

30

other people like you are achieving in your area; and learn some of the specialist knowledge you need to help you achieve your property goals, is to commit to your own success, and regularly attend your local monthly, property investors network (pin) meeting.

There are 50+ pin meetings all over the UK so there is bound to be a pin meeting close to where you live, work or invest.

Why not book you place at this month’s pin meeting now: www.PinMeeting.co.uk

28TH EDITION LANDLORD INVESTOR

Need a mortgage?

We can help.

Home-buyer | Buy to Let | Commercial Auction & Bridging Loans | Property Development Finance

Call us: 0345 345 6788

Visit us: mortgagesforbusiness.co.uk Email: enquiry@mortgagesforbusiness.co.uk ANY PROPERTY USED AS SECURITY, WHICH MAY INCLUDE YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE. Mortgages for Business Limited is authorised and regulated by the Financial Conduct Authority (no. 313537) to transact regulated mortgages.

Registered in England No. 2502713. The FCA does not regulate some investment mortgage contracts.

PROPERTY MANAGEMENT

MARIE PARRIS

So you’re thinking of sacking your agent to self manage – can you really succeed?

Long term successful property management requires applied knowledge, it is a skill acquired by passionate professionals. Make the wrong decision and you could eventually lose your investment With the current proposal of banning tenant fees by agents (still being consulted at the time of writing) – which will have ramifications for landlords who use agencies to find their tenants, combined with the harsh tax rules will mean that most landlords with mortgaged buy-to-lets will now be seriously looking to see if their figures still tally. You must resist the opportunity of a knee-jerk reaction by some landlords to sack the agent until you have carried out a proper risk assessment. So the

32

question will be, will you carry on with your existing agent? Dis-instruct one in favour for another or opt to self-manage?

Whichever way you go you must ensure your objectives are met and you do your due diligence.

The private rented sector is predominately made up of one to three owned buy-to-lets property landlords.

Most have full time jobs and do not understand the copious amount of paperwork and detail that you need to

have in place to stay compliant. As the owner of your investment you will need to ensure that joining forces with the right management agency is paramount.

As a landlord you need to ask the right questions and these could include some of the following. How comprehensive is their referencing? When agents or landlords fail on this highly important element, it is like not building the foundations of a house securely and the impact is likely to spell disaster.

28TH EDITION LANDLORD INVESTOR

PROPERTY MANAGEMENT

How transparent are they? Start with their tenancy agreements are they clear and easy to read. What type of contract do you have with them? Do their contracts tie you in for a very long time? Do they send you copies of the trade invoices? What is their management procedure on check ins, inventories, deposit registration, interim inspection visits, repairs the entire spectrum. In essence if you required possession of your property, will their procedures let you down? Do they have client money protection? (this will soon become mandatory for letting agents).

No one has a crystal ball but you have to make sure you can do everything to protect your landlords. Why would you not have CMP as a standard benefit of an agency service? What level of expertise do they have? Do they go

LANDLORD INVESTOR 28TH EDITION

the extra yard? Any agency (online, shop-front or otherwise) can advertise a property on the main portals for a discounted fee, open a door with a key and show prospective tenant(s) around and decipher which room is a bathroom from a kitchen. This is NOT what any self-respecting landlord should be looking at when deciding which agency to manage their property in 2017 and beyond. When agents get it wrong because they are clueless, the implications are huge for the landlord and their family. Behind every private property there is a human element, a story, a person, a dream, a vision. When that vision becomes distorted the pain is very real.

Sub-standard referencing can lead to rent arrears, this could potentially put

an already struggling landlord in a precarious position and not be able to pay the monthly mortgage. Not understanding licensing requirements could expose the landlord to fines and penalties, tenants can apply for a rent repayment orders - the list is endless.

I could quote so many situations that could lead to financial hardship/ruin, just because your objectives were mis-guided, or the agent failed to do something so simple it can wreak havoc on your tenancies. If a lender starts to embark on legal action, that ultimately could result in the loss of your very expensive investment. Or at best you lose control of your property and a LPA receiver now controls it and you get no rent! www.georgeellis.london

33

PROPERTY MANAGEMENT

So you think you can self-manage and do it yourself?

The main element that any individual must have is applied knowledge understanding the “why” and the law and to infuse both into an ethical, compliant and profitable business framework of which any buy-to-let business (regardless of size) should be about. When you are able to do this in an expert way litigation and rent arrears no longer become your main issues.

You also need to consider whether you have the right temperament, traits and time to manage your investment. An honest self-appraisal must be carried out. Consider these points:

1. Does your lifestyle mean that you could cope with sudden interruptions to deal with a leaky roof, or the boiler not working?

2. Do you have the right “A” team that you can call on? Perhaps if you only use certain trade professionals, every now and again, the emphasis will not be for that trade to give you priority, or even a bigger discount.

3. How will you cope with rent arrears?

If a tenant does not pay and your paperwork is not in order and you are already on a suspended repossession order from the courts on your BTL and you need to make this mortgage payment how will you deal with that situation? Will your stress levels reach

fever pitch and your next move is one of regret that could see you in problems with certain authorities.

4. How organised are you? Are you good at documenting or are you really a “wanna-be ace organiser” going to get there soon, but not soon enough.

5. What will you do when you are ill, or on holiday who is the support team when these every-day life occurrences happen?

6. Are you a people person or people pleaser? Can you adapt?

You sure will need to know when it is necessary to switch and wear the right hat when the situation dictates.

Examples Here are a handful of situations some of my consultancy clients have endured, before they have contacted me for help.

These situations, any landlord could face, when you take your foot off the gas and life gets in the way. The disaster zone is only a thin line away.

Tenants are claiming compensation against landlord with regards to the deductions in the deposits. Can you prove that the tenants do owe this? How can you prove it? Are you aware of the important procedures you need to do at the beginning of a tenancy?

A career driven landlord allowed her ex- boyfriend to rent out her property.

She trusted him, but had no dealings with any of the paperwork. When they broke up she realised she did not even know the surname of the tenant. Tenant now is claiming to have a tenancy agreement, copy sent, not with any landlord signature. It also shows that there was a deposit taken. He has been living at the property for four years and paying rent directly into her bank account. The current tenancy is within the Deregulations Act. If you are selfmanaging would you know where to start and what element of the law you could use in your favour? Are you aware of the De-regulation Act and what it entails? He is also claiming that there has been no valid CP12. Do you know what that is?

Landlords opts for a cheaper letting service and then decides to self-manage.

After 9 months their bad boy tenant has been sent to prison and all the agency ever had was his name and telephone number. Shocking but this is not an isolated case. No rent has been paid for the last two months. What would be the easiest way to remedy this situation?

Four sharers rented a property for two years, there was no formal end of tenancy check out. The tenant(s) told the landlord repeatedly they were moving out, but the landlord never replied, as he missed the email because he was on holiday. Once the landlord had been able to get to the property it was noted that there were a number of issues that then resulted in deductions from the tenant’s deposit.

34

The point I am trying to make is that it is all in the paperwork, do not understand it, leave it, get it wrong will have harmful consequences and all of the energy you put into the creative financing of this investment or the upscale decoration will mean nothing if you move into the disaster zone. All of the above could have been avoided if certain steps were taken, procedures were implemented and documented and your tenant referencing was robust.

Perhaps you can succeed but your lifestyle does not allow you to selfmanage. Perhaps it really is not for you. What I know for certain is that no landlord should opt for no-management.

Either you seek out the best or you become the best. Clearly there has to be something in place and it is more

prevalent at this time than ever, that you do not penny pinch on good management.

As the tax rules start to bite over the next three years and with the hunch that most London boroughs will introduce landlord licencing across the board for all privately rented landlords, interest rates likely to go up, this will see profit margins reduced even further. Do not fall foul of the minefield of paperwork that landlords must comply with. We have adapted so well to the raft of legislation and regulations since the introduction of the Housing Act 2004. Governments will continue to bash us, but remember the vision and hold on, it is going to be a rocky ride for a while, but make sensible decisions and keep going.

At George Ellis we offer a Document Proof your Paperwork Service (DPP) see our website for more details. www.georgeellis.london Marie Parris is CEO & founder of George Ellis Property Services, the company operates across six disciplines to include lettings & management across London, an independent tenant referencing service, inventories and sales. Marie also provides personal landlord tuition courses – see website for more details. She is the only London based letting & management agent to consistently speak at property events for the past 11 consecutive years.

28TH EDITION LANDLORD INVESTOR

ADVERTORIAL FEATURE

KEVIN WRIGHT NINJA INVESTOR PROGRAMME

Short lease – no mortgage If you buy a flat with a lease less than 70 years, mortgage lenders aren’t usually interested. A very few may consider the proposition, but finding them is tough.

Does that mean that a short lease means the property is unmortgageable?

The Section 20 regulations (in the Landlord and Tenant Act 1985) gives the leaseholder the ability to force the freeholder to negotiate an extension once the lease drops below 80 years, as long as they have owned the lease for at least two years.

As you have to hold the leasehold for two years in order to negotiate an extension, you can’t get a mortgage and you can’t negotiate with the freeholder to extend the lease for two years.

So you’re in a Catch 22 situation!

Is there a solution?

Bridging lenders will lend on leasehold flats.

However, sitting on bridging finance for two years until you can issue a Section 42 notice is expensive and likely to jeopardise any profit in the deal.

If you were a leaseholder, living in the flat watching the lease tick down and the value of your property decline, and you know the solution is to improve the value by extending the lease – why haven’t you done that?

Usually the answer is – they simply don’t have the money. This is where you get smart!

You make them an offer. You pay the legal costs of negotiating the extension to the lease, whilst deferring the actual extension of the lease until after the purchase is completed.

This means you buy a short lease unmortgageable property, with an agreement to an extended lease including a clause that the lease extension contract is assignable to any new buyer. Problem solved!

Bridging finance can be used for the purchase and, with the extended lease in place, the property that was unmortgageable is now mortgageable.

You can apply for a mortgage based on the full market value and repay the bridging loan; or sell the property on at full market value.

Unmortgageable properties are the preserve of the cash buyer and bridging finance puts you into that group. A few words of warning though:

Don’t overpay for the property and get clarity on the biggest variable of this kind of deal, which is the cost of extending the lease, before you agree the price to purchase at.

You might also be thinking ‘Hang on a minute, if I pay the leaseholder’s legal fees and we get a lease extension agreed back to 125 years – which I pay for – the leaseholder could just go off and sell the flat at full market value with a long leasehold.’

Part of the initial negotiation with the leaseholder should secure your position as the buyer in exchange for meeting the legal costs. Typically either: 1. Lease option.

A time-bound lease option agreement for 12 months (or longer if needed) prohibits the leaseholder from selling the flat to anyone else, while giving you the right, but not the obligation to purchase at an agreed price.

2. Conditional exchange of contracts.

Exchange of contracts doesn’t mean you must complete or forfeit the deposit.

Conditional exchange gives you a get-out clause without forfeit if an agreed event doesn’t happen.

If you’ve got the right agreements in place buying a short leasehold property makes perfect and profitable sense.

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.

36

28TH EDITION LANDLORD INVESTOR

Birmingham 24/25 June London 15/16 July Leeds 21/22 July

The perfect blend.

One of the UK’s leading online estate agents

Award-winning team

Legal cover as standard

Advert live on Rightmove, Zoopla and Primelocation in 24 hours

Thousands of properties sold and let, saving our customers millions of pounds in fees

Open 7 days a week, 362 days a year

Five star service (Trustpilot)

We’ll fully reference your tenants

Tenant Finder package just £95

ARLA-qualified staff

£10 OFF for LANDLORD INVESTOR readers . Please quote CODE : LIS 6

ADVERTORIAL FEATURE

MARCO ROBINSON FREEDOM INVESTOR

Marco’s journey to financial freedom began in direct sales. In 2000, a twist of fate saw him lose his job, his marriage collapse and suffer a heart attack at the age of 29.

The naked With nothing but a beat–up Volvo and laptop to his name, Marco wrote his first book titled ‘Close the Deal & Suddenly Grow Rich’.

It chronicled his life as a salesperson and went on to become a Number 1 bestseller.

Dumbfounded by its success, but barely surviving on its royalty, Marco began asking himself the common question of how he could turn himself into a millionaire.

The possibilities were infinite but it was not until one year later when the light bulb in his mind went off.

Dad-of-two Marco said: “I didn’t have the easiest of upbringings, at one point my mother and I were forced to sleep on a park bench, but through extremely hard work I have been fortunate enough to reach a position where I now own a number of properties around the world.”

“I asked for help and I got it from unlikely people. They helped me believe in myself. “I started investing profits into property and learned where were the best places to buy.”

Using his intuition to guide him, history to forewarn him and an open mind to constantly push him, he made a personal fortune of $12 million in 2009 from

developing the first Vacation Incentive Company in the world, which attracted big clients such as Citibank, BMW, Mercedes and many others.

“He is no stranger to the public speaking and motivational talk circuit and has made countless appearances in a number of radio and television networks in the United Kingdom and the pages of renowned publications such as Forbes and Bloomberg.”

He now owns 150 properties around the world and wants to give away a topfloor flat in Preston, Lancs., and will even stump up cash for the council tax bill for as long as necessary.

I didn’t have the easiest of upbringings, at one point my mother and I were forced to sleep on a park bench.

40

28TH EDITION LANDLORD INVESTOR

ADVERTORIAL FEATURE

salesman He recently completed filming ‘My Great Property Giveaway’ with Channel 4 in the UK (prime time 30 million viewers) and has spent the last 12 weeks searching for the people most deserving of this brand new home.

His aim is to find a suitable owner who would benefit from having their own permanent residence.

Channel 4 will follow local Preston landlord Marco who is giving away a flat worth around £120,000 allowing a person the chance to get on the property ladder –for free.

As a successful property investor Marco has won the People’s Choice Best Real Estate Investor & Tatler’s best restaurants and made his fortune through business & property investment.

He was the only person willing to offer one of his properties – mortgage free – to a deserving underprivileged family.

His second book, ‘The Financial Freedom Guarantee’, is an awardwinning retirement plan that outlines the strategies adopted by him to amass his own fortune in property.

Marco also owns a number of businesses operating under his global franchise NAKED. They include companies in the travel, food and beverage, property, cosmetics and entertainment sector More information can be found about him at www.marcorobinson.com

Channel 4 will follow Marco giving away a flat worth around £120,000.

LANDLORD INVESTOR 28TH EDITION

41

Investing in in Property?

Property?

Investing

Talk to Let Letmortgages mortgages Talkto tous usabout about Buy Buy to

• Purchase a new property or remortgage an existing Buy to Let • Borrow up to £3 million • Borrow up to 75% of the properties’ value • Please contact your local branch for full terms and conditions Your property may be re-possessed if you do not keep up with your mortgage repayments.

You are responsible for making monthly repayments even if your property does not have a tenant.

SBI UK Buy to Let products are not regulated by the FCA or PRA. Your property maybe re-possessed if you do not keep up with your mortgage repayments. You are responsible for making monthly repayments even if your property does not have a tenant.

www.sbiuk.com 20,000 STATE BANK GROUP BRANCHES IN 37 COUNTRIES • 500 MILLION CUSTOMERS • IN THE UK SINCE 1921 Personal Banking I Corporate Finance I Trade Finance I Debit Cards I Internet Banking I Money Transfer I NRI Services HARROW 020 3114 1027

COVENTRY 02476 234 900

EAST HAM 0208 470 2992

ILFORD 0800 532FINANCE 532 CORPORATE

LEICESTER 01162 830 TRADE428 FINANCE

WOLVERHAMPTON SOUTHALL MANCHESTER 01902 716 050 NRI SERVICES 020 8574 9833 0161 817 2530 DEBIT CARDS INTERNET BANKING MONEY TRANSFER

20,000 STATE BANK GROUP BRANCHES IN 34 COUNTRIES I 190 MILLION CUSTOMERS I

IN THE UK SINCE 1921

Authorised and regulated by Reserve Bank of India and Prudential Regulation Authority. Subject to regulation by the Financial Conduct Authority (FCA) and regulation by theBIRMINGHAM Prudential Regulation Authority.

Details about the extent of our regulation by the Prudential Regulation Authority and CITY OFlimited LONDON COVENTRY EAST HAM GOLDERS GREEN HARROW Financial Conduct Authority are available from us on request. FCA registered number is 139156. For more information and clarification, visit us at our HOUNSLOW ILFORD LEICESTER MANCHASTER SOUTHALL WOLVERHAMPTON website www.sbiuk.com or visit your local branch. The contact centre is open Monday, Tuesday, Wednesday and Friday 9.00am to 6.00pm, Thursday 9.00am to 5.00pm, Saturday 9.00am to 3.00pm and Sunday closed.

Authorized and regulated by Reserve Bank of India and Prudential Regulation Authority. Subject to regulation by the Financial Conduct Authority

(FCA) and limited regulation by the Prudential Regulation Authority. Details about the extent of our regulation by the Prudential Regulation Authority

K/C252/Jan16

HOUNSLOW 0800 532 532 PERSONAL BANKING

GOLDERS GREEN 020 8458 3856

BIRMINGHAM 01215 150 400

SBIUK/C252/May17

CITY OF LONDON 0800 532 532

INDUSTRY SPOTLIGHT

ADAM JOESEF THE HAPPY TENANT COMPANY

The Happy Tenant Company (THTC) was set up in 2012 to provide landlords with a professional and totally transparent alternative to selfmanagement, yet a more cost-effective option than the often-expensive property management offered by traditional letting/managing agents.

Happy Tenant Company In February 2017, Adam Joseph became CEO of Happy Tenant Company and has big plans for expansion. Having gained 20 years residential property experience, including owning his own estate agency in Finchley for the last 13 years, Adam was attracted to the unique proposition of offering landlords an alternative to managing property which truly cares for their investment. His experience has given him a deep understanding for landlords’ requirements and the type of service that is required to confidently look after, what is in most cases, their most valuable asset.

44

The Happy Tenant Company is not a letting agent, they are a Residential Asset Management business, providing professional property management services for a fixed fee.

Managing over ÂŁ500 million worth of property, The Happy Tenant Company uses group buying power to negotiate discounts with its panel of approved letting agents, maintenance services and inventory clerks. These discounts are then passed on to landlords.

28TH EDITION LANDLORD INVESTOR

INDUSTRY SPOTLIGHT

LANDLORD INVESTOR 28TH EDITION

45

INDUSTRY SPOTLIGHT

Adam Joseph comments “The residential property market is changing fast. Landlord and tenant expectations are ever increasing, which is why The Happy Tenant Company model has proved so successful. As an Asset Management company, we’re focused on gaining the best returns for landlords and at the same time respecting their duty of care to tenants. We use our size to secure trade prices for our members across all property service suppliers - including letting agents – leading to substantial savings and a big increase on our clients’ return on investment. We can confidently say that we save our clients more than we charge them.”

Benefit to Landlords – Many landlords do not have the time or inclination to self-manage, but are often put off taking up a managed service through an agent because of the high monthly fees and renewal costs involved.

Through The Happy Tenant Company, landlords gain access to a panel of

46

approved letting agents who will find suitable tenants for their property.

Member landlords are charged a reduced finders fees of between 5%8% in the first year, and never pay renewal fees thereafter. Landlords then pay an annual fee to The Happy Tenant Company (fixed for 24 months), in return for having their property professionally managed and all property maintenance services passed on to landlord members and their tenants at a discounted cost price.

The Happy Tenant Company will also take care of all legal responsibilities for a landlord.

Benefit to Letting Agents – For most letting agents, their core business and skillset is finding tenants and having local knowledge, many don’t have the capacity to offer a comprehensive managed service. So, we have agreements with more than 250 approved agents across London, on a let-only basis. With a shortage of stock in the market, agents are heavily competing for landlord instructions.

The Happy Tenant Company provides high quality available stock to their panel of letting agents who market and let the properties. The Happy Tenant Company oversees the entire letting process so that landlords don’t have to and then takes over management.

The Happy Tenant Company fees are based on fixed fee levels dictated by the rental income, starting from £1000 (plus VAT) per annum. Their team of Property Managers are either qualified to a Level 3 Technical Award in Lettings & Management or are in the process of gaining qualification.

The Happy Tenant Company is also regulated by the National Approved Letting Scheme.

Looking forward to the second half of 2017, Adam Joseph has partnership affiliations, acquisitions and network expansion plans, enabling The Happy Tenant Company to offer more landlords an alternative property management solution.

28TH EDITION LANDLORD INVESTOR

Exclusive access to investment opportunities at your fingertips 20% – 30% less than market value

Be the first to see Investment opportunities that are specifically sourced below today’s current market value.

Exclusive to Purplebricks

Our range of investments are marketed on a strict sole agency basis and therefore not available through any other broker or introduction agent.

Off market opportunities

Access properties that are not advertised to the general market, giving you the very best opportunities to secure the right investment.

Scan the QR code to download the app for free or search for MIE’ in your app store

09:00 - 15:30

FREE ENTRY

6 SEPT 2017 EAST LONDON

UK’s leading property investment event 6 September | Crowne Plaza Hotel | Docklands | London E16 1AL

Join 4,000 landlords and investors to network, learn from property experts and source services from leading suppliers.

37 SEMINARS

100+ EXHIBITORS

NETWORKING

Learn from property experts

Source leading property services covering tax, legal, finance & more

Share knowledge with landlords & investors

Other shows for 2017 include, Sussex, Kent, Manchester & Cardiff.

Register today for your free show tickets at: landlordinvestmentshow.co.uk Follow us :

@LandlordInShow

@LandlordInvestmentShow

6 September | Crowne Plaza Hotel | Docklands | London E16 1AL | 09:00 – 15.30

Landlords Insurance Specialist Landlords Insurance Specialist

Maximise Maximise your profits! your profits!

Portfolios • Buy Buy to to Let Let ••Unoccupied Unoccupied Portfolios •

Blocks Tenure••Commercial CommercialProperty Property Blocks of of Flats Flats • • Multiple Multiple Tenure

Buy online online now nowat at

www.propertyquotedirect.co.uk www.propertyquotedirect.co.uk or call us on on 08081 08081682 682843 843