Tuesday, September 30, 2008
BINGO! Just over a week after the survey I get a big fat envelope from The Mortgage Works advising me that I have joined the select club of successful mortgagees. Lets face it getting a buy-to-let mortgage these days is a bit like winning the pools.
I put the champagne on ice...a nice bottle of Dom Perignon.
Not quite believing the reams of paper stuffed into the A4 envelope I double check on the Moneybackmortgages dedicated client website. It's confirmed. A message from the lovely Michelle stating that the buy-to-let mortgage had been offered.
Now to test the temperature of the Champagne!
The Energy performance certificates are required by law as of tommorrow ( October 1st) - I'm sure most landlords already know this but as recorded by countrywide lettings many landlords haven't got around to sorting it out yet.
Anyway Ive now finally got round to sorting out this government inspired ( it's not often you can marry the terms 'government' and 'inspired'.
One dilemma I had is on a block of flats I own, was, whether to cough up for all eight flats in one go or whether to do them on an as and when basis as they became vacant.
As the Energy Performance Certificate lasts for 10 years I saw the opportunity to bargain on an all eight flats one shot price.
I got all eight flats done for a straight £300 which didn't seem too bad at £37.50 each, but I will have to wait and see if the next Tory government decides to scrap them in two years time. If it does then maybe I won't see this as such a shrewd move.
Apparently many of these Inspectors aren't seeing the volumes that they were hoping for and are competing hard against each other, so landlords should be aware that it's worth pushing for bargains especially on multiple property deals and smaller properties.
With a lot of the Bradford and Bingley mortgage debt coming from its Mortgage Express buy-to-let arm ,who have been a major funder to a lot of the buy-to-let mortgages that have been used by landlords to invest in the new build city centre developments, that are doing so badly.
As many of the keys are handed back by bankrupted landlords on these failed property investments, could the government not look to hand these keys straight to tenants in the council's housing queues.
In a way it could be a way of solving the council housing shortage, and at the same time, preventing a flood of these investment properties on to the market which may help reduce the potential for a complete housing market collapse.
Just a thought. Desperate times - desperate measures.
Your darling Margo
As we watch the economic meltdown continue what does the future hold for landlords.
Well that's a good question and as we've said many times on the site - impossible to answer.
But having just read Rigsby's comments about rodent management it got me thinking about another element to the equation.
- Hassle and tedium.
As you know I handed the keys over to letting agents a few years back having spent years self managing my portfolio.
Now to be honest I got fed up with the endless maintenance phone calls, the re-letting etc . I suppose I'd done too many circuits of the letting cycle.
I never really saw myself as been born to be a landlord. I kind of just fell into developing property and the property management followed on from that.
Now we see a lot of new landlords and property investors who have dropped into the world of property management as a quick route to riches and securing their financial freedom, others who were sold the dream of quick fortunes by Americanised dream mongers peddling property through evangelical seminars have been forced to self-manage property as a way of making ends meet .
Alas, many of these landlords are either just scraping by or running at a rental loss. The promise of continued capital growth from increases in property values seems like a 'sick joke'.
They are now looking at a future of trying to meet btl mortgage payments with the hope that they can claw back their finances to the point they started at.
Now will these landlords hold onto their dreams, will they continue to work through the endless tasks of property management or will they get fed up with the endless grind of property maintenance and letting tasks?
So hassle and tedium can be seen as another component to the potential run on btl property.
Will this new influx of landlords want the hassles of property management, when the medium term future for financial returns will be small if any.
Who wants to work for nothing, especially when it involves fighting off rodents whilst trying to clean out the drains.
Your darling Margo
Monday, September 29, 2008
Global credit crunch, dodgy tenants, predatory roofers. That's nothing.
I've got mice. On the face of it landlords might think our furry friends are harmless enough. Miss Jones wants to adopt them.
The electrician has just advised me that these cute little critters are actually chewing their way merrily through half the cabling system in one of my apartments.
In the current hard times and with meat prices soaring landlords might consider trying to catch them to add them to the vegetable gruel to add a little bit of meat to the pot.
The pest control guy from the council is booked in 'take a look'. My next challenge is to find away to tell Miss Jones that those mieces she loves to pieces have suddenly gone away. Holiday...?
She knows she is very lucky to have her job. She is the only employee left. To steady their nerves the joint franchisees like to have a day off at the weekend and, as the appointments have almost dried up completely, Property Sparrow is there on her own most of the time. She has plenty of time to read PropertyHawk and the work is fun.
Last Friday a local builder/landlord should have exchanged on a two bed Victorian terrace. He already has two other houses in the same street and apparently these were let very easily. It needs a bit of work but it’s got two parking spaces and a garden and it’s a 20 minute walk to the station with mainline services to London. This seemed like a dead cert sale and even a small sign that builders are starting to buy houses again.
Not so, he is a cautious man. At 11.00AM he changed his mind.
At the estate agency, we are experts in not counting your chickens before they are hatched. We lost £4000 in anticipated fees as the vendor was due to buy another house on our books, a vacant house repossessed back in May.
The Victorian terrace is now advertised at £120,000. In July it was £144,995. The builder who was going to buy it would have paid £110,000. These sorts of fluctuations give Property Sparrow a headache.
The vendor was tearful first thing on Saturday morning and hadn’t had any sleep. She is left surrounded by cardboard boxes and with no hope of selling her house. The other local developers and landlords know about this house but they remain silent.
Property Sparrow could only make tea and soothing noises.
Sunday, September 28, 2008
Shoeboxes for sale any reasonable offer accepted - landlords and property investors wanted. Sizes 6 - 13 still availiable.
For landlords looking to invest in shoe boxes any reasonable offer accepted.
Oh, sorry I mean luxury 2 bed apartments.
Prices continue to fall on the glut of city centre apartments.
But they look so homely - why aren't they selling?
'little boxes, on the hillside and they're all made out of ticky tacky'.
FREE landlord inventory software
Saturday, September 27, 2008
Old versus new Character cottage or new-build? Belvoir Lettings takes a look at what makes the best rental investment
Looking to invest in a rental property but don’t know whether to buy that run-down character cottage or the brand new estate house with its modern appliances and state-of-the art kitchen?
Whether to invest in an old or new property is one of the many tough decisions that have to be made by landlords – and it’s one that can seriously affect an annual rental return too…
“Old and new properties are both popular with buy-to-let investors,” says Craig Walker, proprietor of Belvoir Camberley. “But, as both have such different benefits and down-sides, it’s extremely important for an investor to think carefully about what would best suit them – and what would attract the most potential tenants - before signing on the dotted line.
“New builds often attract those landlords who are ‘cash-rich’ but ‘time-poor’,” continues Craig. “Often bought at a premium these properties will need little renovation or maintenance and are ready for the new tenant to move in straight away - they are often built near schools and major transport links too, so should attract plenty of tenant interest.
“However, these properties lack individual character and some landlords prefer to invest in a slice of history, even if it means putting in a lot of hard work to modernise the property before it can be marketed to let.
“These older properties can be financially effective solutions as they can often be picked up under market value, especially at auction. And, they usually command higher rental yields too. But, landlords should watch out for hidden costs – initial modernisation, on-going maintenance and rent lost while all this is carried out must be taken into consideration.
“Buying into an old or new property is a big decision which requires a lot of thought for any buy-to-let investor. Think carefully about all the costs you will incur – both obvious and hidden. Plus, speak to your local Belvoir office before investing - they will have direct knowledge of the market and will be able to recommend what’s currently renting well in the local area.”
• To find your nearest Belvoir office, visit their website at www.belvoirlettings.com
Friday, September 26, 2008
Landlords may look to the past to help forecast the future.
As events unfold around the world, there is the realisation that we have continued to neglect the lessons of the past and instead make the same fundamental mistakes based on greed and neglect of logic.
The worrying thought is- 'Does this victorian cartoon hold any truth to a future UK economy in a downward spiral?'
As landlords know - there's no avoidance for landlords on mortgage repayments and as times get tough and more and more tenants struggle to meet rental payments, it might mean some grim choices for landlords.
As more and more tenants lose their jobs in this downward economic spiral some harsh realities might have to be confronted by the new breed of landlords.
Landlords aren't in the majority bad, evil people. Many landlords have appeared from the middle professional classes in recent years. Caring, upright members of society who were looking to advance their retirement provisions, or some are the accidental landlords who have rented out un-sold property.
However as the credit crunch bites more and more tenants won't pay, and many landlords will be forced into evicting tenants.
How far will modern landlords go to get their rents?
More importantly - how far would you go?
One things for sure the solicitors are rubbing their hands together with the thoughts of bankruptcy and eviction.
Which reminds me, rats did very well in Victorian England .
Darling Margo - 'strike a light gov'nor.'
BTL mortgage advice
Landlord Insurance links
I received the first bit of bad news in relation to my search for buy-to-let mortgage. Whilst the valuer had valued my buy-to-let property at the figure I had submitted in the mortgage application. He disagreed with the rental level I had put forward. Luckily the differential wasn't great.
"I said £575" my surveyor said "£550"
The downside of our £25 variance was to knock £1500 of the size of my original buy-to-let mortgage application because of the impact on the required rental cover. To be honest I was relieved that it wasn't more given the shaky state of the housing market and just how jittery mortgage companies are. I cast my mind back to the conditions after the 1988 house market crash. Getting a valuer to agree a valuation in the 1990s was like 'trying to get blood out of a stone'. We obviously haven't quite got to that stage yet. I suspect though that we are rapidly approaching it.
I gave a nod to the mortgage broker money back mortgages to go ahead with the reduced mortgage of £81000. Then it was just a case of wait and see to find out what pronouncement the 'big mortgage god in the sky' or the mortgage underwriter would say........
A landlord might not realise that a landlord cannot have unreasonable terms in their tenancy agreement.
For instance if your tenant is disabled, the landlord must take reasonable steps to change the tenancy agreement if a term of the tenancy agreement makes it impossible or difficult for you to live in the property because of a tenants disability.
Landlords who don't take reasonable steps to change the tenancy agreement are discriminating against their tenant as a disabled person and they are breaking the law. What's reasonable will depend on the circumstances but, for example, you as the landlord must agree to change a term of the agreement so that you can make disability-related improvements to the property or so that your tenant can have an assistance dog.
For more information about what are unfair terms.
Thursday, September 25, 2008
The story of a highly ambitious young landlord. At the age of 26 he proceeded to buy 27 properties in eight months then watched the impact of the credit crisis make it blow up in his face.
His property company has now gone into administration so if any landlords are looking to invest in rental property in Carlisle and Penrith there might be some auction opportunities coming up.
At the same time this busy young landlord still has six other property businesses running that he claims are not in any difficulties.
Good grief at twenty six I was learning to drive.
I hope this unfortunate blot on his career doesn't effect his chances for 'Young Entrepreneur of the Year.'
Anyway read more here.
Your darling Margo
Get an EPC now
Wednesday, September 24, 2008
Over the years of been a landlord and renting out property one of the things that has caused me much annoyance and time is the 'stuff 'tenants leave behind.
The lesson I have learned is that it's important for landlords to check all available space when checking out a tenant from a rental property.
That means landlords checking attics, basements, cupboards, garages, sheds and any potential 'cubby holes' where tenants could of stored 'stuff'.
The reality is that often tenants leave 'stuff' by mistake and not deliberately, but it still results in the landlord having to either get rid of the stuff or get it back to the tenant.
Unfortunately in my experience, this 'stuff' - never has any value as it's usually the 'stuff' that we all carry around with us that we don't really want but haven't got around to throwing out yet.
Anyway at least I haven't experienced the levels of stuff left for two landlords I have just read about, one a landlord from Marlow who was left over a thousand fast food cartons by a tenant , and another landlord from Portsmouth who was greeted by 200 needles and other drugs paraphenalia at his vacated property. Nice.
So my tip to landlords is check your property thoroughly for a tenants 'stuff' when checking out tenants.
I'd better go and get on with 'stuff'.
Your darling Margo
Landlords insurance - special discounted rate
Tuesday, September 23, 2008
The poor landlord featured was fooled by the world of the hard sell property sales team.
The success of all these so called property seminars has been the way they 'hot house' attendees and over the course of a day or two convince people with historic data that property is a 'no lose' situation.
(by the way our advice at property hawk is never go to a property seminar about making money out of property - property is not rocket science, you can learn all you need to know by reading the content of this website and maybe a few books, know your area and your market - do your research and then do more research, followed by a bit more research - to put it into political speak - Its Research, Research, Research - anyway back to the post! )
Which of course it was 5-10 years ago which is where the majority of the property buying seminars anecdotal evidence comes from. Back then it was a no-brainer (as the yanks like to say),I spent my time telling everyone I knew to buy property.
But for the last five years I have told everyone to proceed with caution.
It's easy to say that this poor woman was stupid, and Im sure she would be the first to hold her hands up for it.
But the darker truth is that she was 'mis-sold' property and really the likes of the FSA should be looking into this mis-selling.
However a lot of the mis-selling has involved in some way or other the large house builders and the government is in fear of upsetting the housebuilders especially as their supposed housebuilding targets are already in meltdown.
If you feel you have been mis-sold property please post and share your thoughts.
Specialist Landlord Insurance Brokers
We've just received an email in the office promoting an upcoming exhbition / conference for mortgage brokers entitled "The Mortgage Broker is Dead".
This dramatic title clearly underlines the extreme difficulties that many mortgage brokers are experiencing at the moment.
Unable to secure decent credit terms for many landlords who are beyond a 60% loan to value, alongside the fact that property isn't been bought and sold they are suffering. No opportunities for commission!
So they are looking to diversify their offerings through pushing other financial product, such as equity release schemes, insurance, debt management and IVA's. I suppose it's a sign of extreme times within the financial sector.
It's less of a case of ' let's help you buy a house' and more a case of ' let's try and keep your shirt'.
Anyway landlords should look out for men pushing 'equity release'. The next few years should be a time of consolidation and reducing credit levels for landlords.
Landlord should remember that any financial adviser works on commission so tread carefully.
'Cash is king'
See our BTL mortgage help pages.
My next posting will be sharing our deepest sympathies with the poor suffering estate agents - ONLY JOKING!!!
The one thing the current crisis should have taught landlords is not to be greedy. It should also of underlined that landlords need to understand fully from bottom to top how a rental business will work before risking money.
I have lost money in the past, invested in equities that to be honest I didn't really understand. I researched lots of information telling me that they were a 'BUY' but I didn't actually understand what it was I was buying.
I have tried to learn from these painful mistakes and moved on ( no doubt at some point in the future I will forget these lessons and get hurt again - people are stupid - or forgetful - or plain greedy if the truth be told).
This same human greed and stupidity consumed the chief executives at many of the major financial and banking corporations. They didn't actually understand what they were actually investing in, they were looking at numbers that seemed to keep going up but didn't really know where they came from. ( as it turned out it was the poor of America who had been sold houses they were never going to afford).
On a smaller scale the British bank ( that we all now own - great heh ? I always dreamed of owning a share in a badly run bank in the North East) Northern Rock was laid open to self certifying claims of six figure salaries by many supposed 'marketing consultants' that were in reality only on £22,000 and a Ford Mondeo. All this questionable debt finally bought them down because fundamentally nobody including themselves knew how stable their debt was.
Anyway finally to the landlord bit. I was watching the tv last night with a program regarding property in Manchester and specifically the buy-to-let property boom in 1 and 2 bed city centre apartments.
It focused on a poor lady landlord who had visited a property seminar and had then signed up for 7 apartments with a value of £1 million.
The landord didn't know Manchester, she had no experience in renting out property but had been assured by a smart suited sales guy that they would make her a fortune.
A year or two down the line, the landlord has been running at a rental loss on all seven apartments that she can no longer sustain so is been forced to sell all seven apartments. All of them as you will probably predict are worth less than the landord paid for them.
This poor desperate landlord was forecasting a loss on her property investment of £400,000. Which in my mind might be on the optimistic side.
As with the whole sorry mess from the top to the bottom it has been fed by greed, which has thrown all caution and logic out the window.
I called the top of the housing market 5 years ago as prices in relation to rents stopped the majority of property investment as been a viable business. The team at Property Hawk have from the very start called for caution from landlords on any property investment.
( NB we have never pushed any property seminars or city centre property developments because we knew they were bad opportunities for our users).
However prices have continued to rise. But now they fall and my advice to any landlord or potential property investor is, do your research and understand your business from top to bottom.
The Guardian newspaper’s IT Editor, Jack Schofield, described cloud computing in August 2008. After mentioning simple to-do lists he talks about “specialised business services such as accounting” which is exactly what our software, Property Manager, does for landlords. Your property and tenant details, full tenancy and rent information, inventory, loans and cashflow. It’s all there.
And it’s free. Google is free, and they’re doing well. We’re following in their footsteps. Landlords aren’t necessarily cash rich, particularly at the moment, so free landlord software is definitely the way to go. It’s pleasing when a landlord emails us, saying “great site,” even if that’s followed by reporting “a tiny little glitch.”
That glitch was a problem with the expiry date of the tenancy – we will soon make the software save a blank date rather than 00-00-0000 which we’ve seen more than once. Like the majority of problems reported, this one was resolved in under 24 hours.
We’re always adding to the site and improving it. The inventory software we released recently brings in a better, clean look and has drag-and-drop for a quick and user-friendly way of working. These changes will be spreading through the rest of the system in the next few weeks.
Interested? Register on our site and computerise your rental business for free.
Monday, September 22, 2008
He came round and did his surveying once over. I don't think he was at my buy-to-let property for much longer than 30 minutes. I thought I was pretty cute in that I managed to mention that next door which was sold relatively recently was sold as a one bed as opposed to mine which was a two bed.
I know how mortgage surveyors work. They value property on the basis of comparibles. In other words how much similar property was sold for. In the current falling market surveyors are obviously taking a cautious view on property values and will take with a 'pinch of salt' the value of a property sold more than a few months ago.
I know that rental demand in the area is pretty strong so hopefully my rental valuation of £575, which was probably a little on the high side should be ok. Now it's a case of waiting and seeing and hoping that the mortgage valuation comes back ok!
Here's a thought for landlords.
Remember the days when tenants would be pleased to find a property that was clean and dry with no signs of 'rising damp'.
Those days seem to have gone and the knock on effect is an increase in maintenance costs.
With the over supply of 'shiny and new' new build flats on the market those landlords holding established rental property have now been forced to compete with these havens of polished stainless steel cookers ( buffed up with baby oil apparently).
Landlords are finding that the typical toll of 'wear and tear' on rental property by each set of tenants is forcing them to constantly re-decorate and re-fit to keep up with the competition.
Where as before a quick clean and a few dabs of paint to cover any major marks in the paint work would of sufficed between lettings. however in the current competitive climate landlords are been forced to re-decorate and replace to retain rental levels.
As landlords know the nature of many tenants is to bang and bounce around in a rental property , the question 'would you treat your own property like this?' often falls from my lips.
The reality of the situation for many landlord is that these added costs required to retain rental levels and to let property quickly is eating into rental profits.
It is also another factor that for many new landlords who have bought over the last few years, might find to be the straw that broke the camels back as regards keeping hold of potentially non profitable rental property.
Especially as those 'shiny and new flats ' start to lose their sparkle over the coming tenancys 'wear and tear'. Landlords might find that however much baby oil they rub into their appliances and worktops the shiny and new will become tarnished and will require refurbishment to compete.
My advice is to create a detailed inventory when letting a property - try our new FREE landlords inventory software to create a bespoke inventory quickly.
Anyway I'm off to buy a new work top and taps for a kitchen in an empty flat I'm trying to let.
Tenants have become such fussy buggers.
Love darling Margo.
An e-mail from her lettings agent about her tenants in one of her studio flats. The young couple are expecting a baby in February. They are worried that Property Sparrow will want to give them notice. They want to stay there with their little chick.
This reminds her of what Margo and Bettie said on 23 July.
Property Sparrow replies to let them know that she will not be giving them notice. The tenancy agreement makes no mention of children: they have paid the rent without fail and by all accounts they are quiet and courteous to their neighbours. Do good tenants make good parents? Property Sparrow thinks so. She is pleased to be able to provide a safe little home for them.
On the first day of Autumn it's nice to feel that it won't be long before Spring is here.
Thursday, September 18, 2008
I downloaded my basket of forms and duly started filling them in.
How to beat the credit crunch - 4 expert brokers - 1 FORM
The main document was the mortgage application form which was not quite as ownerus as i remembered. There was the usual details about who I am, where I live, details about the property to be mortgaged, hobbies and interests (only joking).
Once i'd filled in the form which I guessed took me about an hour and a quarter I had to send it back with a a completed direct debit form. I also had to send a cheque for the valuation fee. of £300. This concerned me a little because should the application not succeed then this fee was unreturnable. I also had to prove who I was by sending my passport, and a recent utility biil to confirm my address.
Then it was a case of sitting back and waiting for a call from the surveyor.
Landlords, there is no doubt we are living through extraordinary times.
As I tracked the fall rise and subsequent gyrations of HBOS shares in the market yesterday, thoughts of reality, normality disappear in a sea of conjecture, speculation, fear and panic.
The outcome is that HBOS our biggest mortgage bank will be taken over by Lloyds TSB. As a recent shareholder in both, this is good news for me. The reality is that this is the start of massive financial rationalisation process that will take out a large amount of capacity out of the bloated financial and lending markets as they make the painful adjustment to much less lending and reduced profits for many years to come.
What does this mean for landlords?
Landlords will be undoubtedly impacted by this process. A few years ago Landlords were spoilt for choice with the range of buy-to-let products from a myriad of buy-to-let mortgage providers. This has in the last year shrunk to hundreds of products from a much smaller number of lenders as many have exited the market, unable to access funds in the wholesale markets (ala Northern Rock) or fearful of exposure to a house price crash.
This means that things will get tougher for landlords in the sense that there will be less lenders with less products who will inevitably seeking to extract a higher price for lending as they seek to rebuild profits onto their battered balance sheets.
Looking at HBOS and Lloyds, both have specific specialist buy-to-let lending subsidiaries. HBOS prior to the merger had already announced that The Mortgage Business which was the 7th largest buy-to-let lender by outstanding balances (CML H1 2008) was to cease lending on new business. HBOS also has the Birmingham Midshires brand which was 2nd largest. Lloyds on the other hand owns the Cheltenham and Gloucester which was 5th biggest. The chances are that the new Lloyds will rationalise their lending, cutting out brands and products.
Beat the credit crunch - 4 leading buy-to-let brokers - 1 FORM
This will not effect existing lenders or their outstanding buy-to-let mortgages. However, lending for new landlords and for those looking to remortage will never be quite the same as we move into an era of consolidation and contracting credit.
Wednesday, September 17, 2008
So good so far in my search for a buy-to-let mortgage. I received an e-mail from Money Back Mortgages asking me to login to my money back mortgages client area. Having logged in to my client account there it was. Some good news about my application for a buy-to-let mortgage.
The Decision in Principle had been agreed by The Mortgage Works. Now on to the next stage the full mortgage application. Form filling ....oh joy!
Tuesday, September 16, 2008
I've said no. I've said to the student tenant that the tenancy agreement clearly states that the room is let to him and know one else. I don't want any of that student hanky panky shinanigans going on under my roof.
I've read my rights. I know that if I wanted to change the rent I couldn't without getting his agreement or by serving a section 13 notice on him.
Therefore I don't see why I should let him indulge in his carnal fantasies.
Mrs Jones has a very strict rule of no sex before marriage, something that of course I support very strongly. I wonder what she would look like....without her bedsocks, jumpers and dressing gown.....
Monday, September 15, 2008
This is the kind of green light from the mortgage provider that it is worth me the landlord and applicant putting in a full mortgage application.
A landlord needs to complete the decision in principle form with just basic information about the size and type of mortgage required and their personal details. I faxed these through to Money Back Mortgages. Unfortunately, my faxing skills were not up to the task as it turns out the faxed documents were faxed upside down meaning that Money Back Mortgages actually received 2 blank pieces of paper.
Beat the credit crunch - 4 leading brokers - 1 FORM
I was duly informed of my mistake. I faxed the two pieces of A4 through this time the right way up and then forwarded the hard copy by post along with my driving licence, a utility bill and bank statement to prove I was who I said I was. Difficult when you are the undercover landlord......but some how I managed to over come this potential dilemma.
This begs the question how would the likes of Zoro, Batman and other various superheroes get on in this ID obsessed world.........
This week, I'll go through liquidation or share sales.
A couple of definitions first.
a/ If you sell the company to someone else, you are selling the shares in the company.
b/ If you liquidate the company, the share cease to exist and you become the owner of the company's assets.
In either case you will realise a capital gain. The difference between the cost of your shares and the price you get for them. Or the value of the company's assets in the case of liquidation.
Capital Gains are taxed as if they were income, but there are some relief's that will reduce the taxable amount.
The most obvious one is the 'annual exempt amount', currently £9,600, which increases each year.
A lesser known one is ;entrepreneurs' relief that depends on how long you owned the shares and whether the company was a 'trading' company or not.
In the case of a trading company, the capital gain is reduced by four-ninths if you have owned the shares for one year and there is a lifetime maximum of £1M of gains to which this relief applies. The definition of a 'trading company' is strict and unfortunately a property investment company is not a 'trading company'. However, property development companies (which buy or build properties for resale), or property management companies (which don't own properties but deal with rent collection, finding tenants, repairs etc.) can be trading companies, so there are some tax planning possibilities there.
SO SHOULD I USE A COMPANY OR NOT?
Here are two general guidelines.
a/ If you don't expect to be paying income tax at the higher rate, there is no real advantage in using a company. Corporation tax is scheduled to rise to 22% by 2009, whereas income tax is to be reduced to 20% this year.
b/ If you expect to be a higher rate tax payer and you intend to reinvest some of your profits to grow your business rather than taking them all for personal use, you may well be better off by using a company. The 21% rate of corporation tax is a real advantage if the profits are to be retained in the company rather than taken out using one of the methods described earlier.
I hope this series of short articles has helped. As usual, I can answer questions by email at firstname.lastname@example.org or through this blog.
Friday, September 12, 2008
Many landlords will soon check in their new student tenants. Time to think about the check out!
The recent news story about a tenant rapist who was jailed for imprisoning and raping a teenage girl and then was not unreasonably locked out of their rented property by the landlord who had assumed that the tenant had done a bunk just highlights how strong a tenants rights are. Once granted these rights by a tenancy agreement how ever clearly the tenant may be an evil and undesireable person, this will not overide the rights granted to them by the tenancy agreement.
All of us as landlords from time to time have felt like taking the law into our own hands and using our property rights to dispense what is clearly some form of justice.
This case just highlights how dangerous this can be for the landlord. One of the most common cases where this happens is where a tenant appears to have disappeared or abandoned their tenancy often after a period of non payment of rent. There is unfortunately no such concept of abandonment in law . Therefore a landlord needs to go through the correct legal process to gain possession if they are to avoid the double indignity of being dragged through the courts by a 'scum bag' tenant!
Thursday, September 11, 2008
It been a while since my last post, I appologise. It is a full time job keeping up with such a fast moving turbulent market. Having said that this presents some great property share investing opportunities.
One share that I have been keeping my eye on and topping up my holdings in is ING REAL ESTATE INCOME TRUST (IRET).
It is capitalised at its current share price of 45.75p at just over £150m. In its recent results to the end of June it reported net asset of 97p putting it on a current discount of over 50%. The great thing for Income Monkeys is that its current dividend which is 88% covered by income receipts mainly in the form of rent is 6.25p. With my ropey maths that equates to over 13.5% yield.
That to me is worth taking the risk that commercial property values fall further especially given that it already trades at such a discount to underlying asset values.
The share price has currently hit a trading range up from its year low of 41.75p in the mid to low 40p share mark. Any drops below 45p I will definitely be picking up more.
More ideas coming along soon...
Tuesday, September 09, 2008
LETTING PROPERTY? - you need an EPC BY 1.10
Those landlords brave enough to ignore the 'doomsayers' should check out over 400 properties in the forthcoming Allsop residential auction to be held on the 18 & 22 of September. One striking factor is the frequency of the term BY ORDER OF MORTGAGEES. This is indeed a very sad indictment of the current housing market but equally it represents an opportunity for those landlords able to raise sufficient finance.
Expert buy-to-let mortgage advice - 4 brokers - 1 SIMPLE FORM
For Portfolio landlords Allsops are also selling a portfolio of residential investment blocks previously owned on behalf of the receivers. For those landlords that can raise big bucks then this could be an opportunity to step up to the big time by acquiring hundreds of rental properties in one fell swoop.
For more auction opportunities have a look at EIGs website and also auctions property for sale
For more advice have a look at this article on buying at auction
Monday, September 08, 2008
This should have come before the last post...!
With the warm and muggy weather of late, I would like to share that I am a huge fan of putting in ceiling fans for urban properties in particular: much prettier than air conditioning units, less noisy, no maintenance and work a treat when it's warm and muggy. I've put several in my own home (sitting room to give a colonial feel with wooden floors; in the bedroom for a good night's sleep) Also, I have them in the properties I rent out and tenants are very happy to have them in my experience; in fact I got some wine from one as a thank you. They don't cost the earth either - all you need is a good product (don't skimp here as cheap ones look just that...) and a decent sparkie. Job done, big improvement and a good investment I think. http://renovationrants.blogspot.com
Here's a small slice of positive news dear landlords, thanks to Alistair Darling, darlings.
The news of the stamp duty holiday means that for many landlords eyeing up an investment property opportunity they might find themselves saving another £1750.
So the stamp duty holiday might provide you with a nice FREE holiday
So if you are cash rich and can grab a bargain it might be time to take advantage of this lovely little present from the darling, Darling.
Read more in the Financial Times
Your darling Margo
Luckily I was away in Italy last week whilst the Government revealed it's latest pathetic approach to stimulating the housing market.
Apparently they are going to get the housing market moving by giving tax breaks aimed at first time buyers. In their typical half baked approach the government will give house buyers a 'holiday' from paying the 1% stamp duty for properties under £175,000, but only for 1 year mind!
The Financial Times over the weekend probably correctly predicts that this measure will benefit the numbers of landlords and property investors who are looking at picking up a bargain in the current climate. This is because the threshold is at a level that many landlords look to pay up to when purchasing an investment in order to obtain the necessary rental yields to make the investment to "stack up".
Expert advice on buy-to-let mortgages - leading brokers - 1 FORM
The stamp duty holiday which was part of raft of measures could save a buyer up to £1750 on the cost of buying an investment property to let out. The flip side for landlords looking at selling at a price just above the threshold could now be forced to cut their price in order to appeal to buyers in the depressed market.
Advice to the Chancellor
Here some advice for the Chancellor. Good governments anticipate problems before they happen. Everybody new we had a housing bubble, any body who read Andrew Farlow's excellent research for Credit Suisse First Boston back in January 2004 would have seen what was coming. Could it be that old Prudence himself - Gordon Brown who was rather keen to reap the tax benefits of the house price boom through increasing taxes on Stamp Duty and Inheritance Tax turned a blind eye to the inevitable. May be he had no choice, in order to spend as he has been he needed the money.
A smart government would have bought measures in to restrict lending by banks in the way that existed under previous governments. This way landlords would not have been exposed to the boom and bust of the current housing market. I'm sure all of us would have preferred a steady growth in the value of our assets rather than be forced to deal with the huge peaks and troughs that we are now exposed to.
My advice to this government is that concentrate on getting the big decisions right - that way you want have to embarrass yourselves and us the electorate with piffling gesture politics that does nothing to stop the horse after it has bolted!
This can be a complex subject, but I'll give a brief outline here but would advise discussing the subject in some detail with your accountant or advisor.
First, it is wise to lend the company the money it needs to get started, rather than putting it in by subscribing to shares, because the company can repay that loan in the future with no income tax charge on the lender.
It is also unwise to borrow money from the company, because the company itself has to pay a form of 'deposit' of 25% of the amount loaned to the taxman that is repayable when the loan is repaid.
If the company lends more than £5000.00 to you, you will be charged to income tax on the difference between the interest on the loan you pay to the company and the 'official rate' (currently 6.25%). So, if you have an interest free loan of say, £5001.00 for a year, you will pay income tax on £312.50, meaning £125.00 for a higher rate tax payer.
That may sound like a good deal, but be aware of COMPANY LAW. More sophisticated planning involves the company lending money and then writing off the loan. BUT this is an area where you must take specialist advice to avoid getting into serious trouble with both the tax man and COMPANY LAW.
Next time we'll cover the subject of 'liquidation of shares', but if you want the whole series of articles (including next weeks), please email email@example.com with subject matter "taxfacts 7" and we'll send it.
Thursday, September 04, 2008
Property Sparrow wants to say thank you to PropertyHawk for her ticket to London Landlords’ Day. She enjoyed it.
Property Sparrow was pleased to see that there was a lot of basic practical advice for small landlords and an emphasis on scrutinising all of your costs. To anyone who wasn't able to go, she recommends this event for future years to anyone who wants to see the range of service suppliers on offer to landlords.
Was anyone else there this afternoon? What did you think?
These statistics continue to support the PropertyHawk teams theory that rental levels may not increase at the rate many of the more bullish ( self interested ) commentators have forecast.
The reality of the rental market is that it is at the whim of a number of major economic factors all that are battling against each other.
Read the full Article from the Mail
Landlords in Sandwell are invited to attend the latest Landlords’ Forum at the Sandwell Training and Development Centre next week.
There will be opportunities for questions and advice and a guest speaker at the meeting, to be held from 2pm to 5.30pm at the centre in Popes Lane, Oldbury, next Wednesday (September 10).
The forum is open to all landlords and agents operating in Sandwell and will provide latest information from the Council's Private Rented Sector and Landlord Support section.
Liz Mooney, Landlord Support and Development Officer, said the Council was encouraging people to become an accredited landlord in the borough.
She said: “Once accredited, landlords get the opportunity to advertise free of charge in Sandwell Property Shops and the chance to work with housing vulnerable people.”
Anyone wishing to attend the form or find out more about the accreditation scheme can contact Private Sector Housing on 0121 569 5232.
Tuesday, September 02, 2008
According to Kevan Keegans’ report “the End of Sell and Rent Back” if the OFT acts on the recommendations of noteworthy organisations (Shelter, Citizens Advice, CML and IMLA) it could either stifle BMV entrepreneurship, or stop it all together.
Implication for Landlords
IMLA / CML
Tax subsidised company buying at full market value
Elimination of all BMV trades
Only Housing Associations to be permitted to own rent backs
Stifling bureaucracy; capital gain opportunities eliminated
Ban all advertising; allow only social landlords
Kills demand; end of the free market
Bring under full FSA control
Authorisation, minimum solvency and capital; Monthly reporting, compliance inspections
Table reproduced from Kevan Keegans Article
Manchester based lender Auction Finance Limited is recommending that landlords plan ahead for the introduction of Energy Performance Certificates (EPCs) in the private rented sector.
From October 1st residential landlords will need to provide their prospective tenants with an EPC for the property to be let or re-let at their earliest opportunity. Practically, this means that EPCs will need to be obtained before a property can be marketed.
Auction Finance, whose clients include many buy to let investors purchasing property at auction, says that preparing for the deadline now will enable landlords to minimise impact of the legislation on their marketing activities and help to counter the possibility of void rental periods.
Scott Hendry, New Business Manager at Auction Finance Limited said:
“If landlords fail to provide an EPC they could incur a fine from Trading Standards, but there is speculation that the number of accredited energy assessors will not be sufficient to meet the demand for certificates. This may mean that landlords have to delay the marketing of a property whilst they wait for an EPC to be produced, increasing the chance of a void period with no rental return.
“It makes sense for landlords to act now and commission any certificates that may be required well in advance. They should then be able to avoid any costly delays and there is no risk of a fine if the requirement for an EPC slips their mind at a later date.”
An EPC will be valid for 10 years when used for rental purposes (as opposed to the 12 month validity period for sales). This means landlords should already have a valid EPC for any property acquired since the introduction of Home Information Packs. Hendry continues:
“If refurbishments that improve a property’s energy performance are carried out before it is rented, the original EPC can still be used. It will be up to individual landlords to decide if it is worth commissioning a new certificate with an improved rating that will be more attractive to tenants. However, if a landlord splits a newly acquired property into several self-contained dwellings then an EPC will be required for each one. We would advise all landlords to visit www.communities.gov.uk as soon as possible to find out precisely how the new regulations will apply to their individual properties.”
Gordon's announced a stamp duty holiday to rescue the housing market. All properties £175,000 and below will be exempt for the next 12 months.
I have to say that from where we operate in London, that is about as useful as a chocolate fireguard. Great if you live up north, but the capital's economy won't benefit in the least.
It would have been far more useful to have raised the 3% threshold from £250,000 to £300,000 - that would have really helped first time buyers in the cities.
More from http://www.secureasale.co.uk
Monday, September 01, 2008
I've been looking round for some good news stories to offer to landlords and to be brutally honest, I haven't been able to find any.
Until now that is.
Now it might not be the kind of good news that landlords were hoping for, but beggars can't be choosers. (lets hope that landlords aren't having to resort to begging quite yet)
Anyway heres the good news - it turns out that Landlords in Plymouth have clubbed together and raised £4000 for the Children's Hospice South West.
Ahhh - aren't we a nice bunch, and we get a terrible press for been money grabbing opportunists.
Welldone to the The South West Landlords' Association.
If you would like to read more on this heart warming story then visit the Plymouth Herald.
It makes you feel warm and fuzzy inside,......... doesnt it?
Your darling Margo
Yes, charged with the task of bringing good news to landlords I have to admit that I'm failing terribly.
Now I m bringing landlords stories of repossessions.
According to new data repossessions have doubled since the start of the credit crisis, with buy-to-let loans rising to a repossession rate of 0.16%.
With the rates of landlords in arrears with their btl mortgage payments rising to 1.1% the indications that the repossession rates for landlords will continue to rise from this relatively low rate.
More on landlords repossession and how to avoid it can be found in this article in the Telegraph.
Lets hope for some more positive news for landlords over the coming months.
Your darling Margo.
No it's not a lesser known Monty Python sketch but a real strategy implemented by a New York landlord wanting to empty his investment property of tenants.
Read more here
This is not an endorsement for landlords to follow in the UK - we find dead fish to be far more effective.
This week we'll have a look at a subject that has gone through some fundamental changes;
Benefits in kind.
This used to be a good way of extracting value from the company, because no National Insurance contributions were due on benefits that were not in the form of cash, but the company could still deduct the cost from its profits. Now the rules are much tighter and generally the company will have to pay NIC on the value of any BIK it provides, so no there is no real point serious 'BIK' planning. However, there are still some benefits that are tax free and worth considering.
a/ Childcare up to £55.00 per week subject to various conditions
b/ Car parking at the workplace
c/ Mobile phones, but now only per employee
d/ Staff parties up to £150.00 per head per annum.
If you'd like to read the remaining parts of this article, please email helpdesk@taxrefundmoney and we'll send you the rest by email, fax or post.
The difficulties for landlords in the current harsh economic climate are not been eased by local authorities. In a bid to meet targets on homelessness they are encouraging tenants to stay put beyond the two month period after the serving of a section 21 notice.
Landlords are having to battle the advice of local authorities when serving tenants with a section 21 notice to leave a rental property.
Many councils are advising tenants of private rental property to stay until they are forcibly evicted by bailiffs.
Some local authorities are encouraging tenants who approach them to stay on beyond the Section 21 notice because, they argue, they want to reduce cases of homelessness by giving tenants longer to find alternative accommodation.
The National Landlords Association says that 'gatekeeping' is not unusual. 'In some cases local authorities are advising tenants to stay until bailiffs throw them out. This would then make the tenants unintentionally homeless and qualify them for council assistance,' says Elizabeth Brogan, senior policy officer at the association.
'This whole practice is absolutely abhorrent. The government clearly does not agree with this practice. In its guidance to local authorities, it clearly states that where someone is in rented accommodation and there would be no reasonable defence for them to stay, "it is unlikely to be reasonable for the tenant to continue to occupy the accommodation beyond the date given in the Section 21 notice".'
Read more in this Guardian article.
I saw this article about Pete Doherty's poor landlord ( before you feel too much pity - it is the Earl of Cardigon) but it did make me question what rights a landlord has if their tenants decides to have a bit of a knees up.
Do any landlords know about the rights of a landlord who discovers that there tenants are about to hold a party in their rental property.
Is there a way of installing a criteria within the tenancy agreement and how can a party be clearly defined?
ie, Is it a party when a tenant invites a few friends around for a sherry a cucumber sandwiches? (cue joke about Earl of Sandwich)
Anyway I'd love to hear any fellow landlords experience of partying tenants and what if any rights a landlord has to be a party pooper.
If anyones heading to the Pete Doherty gig , I'll see you there. Party on , dudes.