Buy to Let Compares Well with the Stock Market

Although I write and consult about property another “bit of fun” that I have is investing in the stock market. It gives me something else to do.
When it comes to the stock market right now, I have to say that I think there are some great dividend yields about and I have been buying up one or two of the shares of the top 200 companies to get these nice yields.
However, as the world economic outlook has weakened somewhat over the last few months, some of the share prices of the stocks I have bought have taken a bit of a dive recently.
In particular, Electrocomponents and Amstrad have done me no favours at all and I just hope they can at least hold their dividend!
So, how does this compare with property right now?
Well, looking at yields, it seems demand from tenants for rented homes is continuing to place upward pressure on rents for the sixth month in a row.
The private rented sector is buoyant as demand from tenants continues to be strong. Many parts of the community, such as students, migrants, people on housing benefit, and first jobbers, rely on rented accommodation for their housing needs, and the sector is set to continue this growth over the next five to ten years.
In a recent survey by Paragon, 63% of residential property investors reported that tenant demand was either stable or growing and that they were responding by growing their buy-to-let portfolios.
Gross rental yields have been stable at about 6% for the past year (with net yields probably averaging about 4.4%,) which is of course about the same as some top shares are paying.
The fact that rental yields are holding up is of course, in the face of rising house prices, thus providing further evidence that demand for buy-to-let is well underpinned.
Of course, a 4.4% net yield is less than the average buy to let mortgage rate, which, once you factor in lenders’ increasingly daft “arrangement fees” is actually around 6.5%.
So, while landlords are losing money on the “current account” and are hoping that capital gains will continue – which is much the same as investors in the stock market are doing!
Copyright: David Lawrenson 2007. This blog is updated about three times a week I’m David Lawrenson from property investment consultancy Letting Focus. I’m the author of “Successful Property Letting – How to Make Money in Buy to Let” the UK’s top selling buy to let book and Amazon.co.uk’s top selling property title for the last 6 months.
I’m a speaker, I contribute to newspapers and a host of property websites, write a property investment blog and am a media commentator on the residential property market.
You can read more of my property investment insights and details of my networking, advice, telephone consultancy and property investment seminar programme on my website www.lettingfocus.com.
What’s unique about lettingfocus.com is that we are unbiased and independent, because unlike most people in the buy to let and property “advice” business we are not linked to a property company, developer, agent or bridging loan financier and do not receive commissions from any of these sources.
If a property investment is lousy – We’ll tell you straight and we will tell you all about buy to let and property investment - the good and the bad.

Join a Landlords Association

If you aren't in one you are missing out on lots of information, good advice helplines, discounts on products and services and much more.
Amazingly only about 10% of landlords are thought to be members.
The cost is typically about £80 per annum and it's well worth the money.
The best three are National Landlords Assocn at http://www.landlords.org.uk/, the Residential Landlords at http://www.rla.org.uk/ and National Federation of Residential Landlords at http://www.nfrl.co.uk/
All are excellent. Join one today.
Copyright: David Lawrenson 2007. This blog is updated about three times a week.
I’m David Lawrenson from property investment consultancy Letting Focus. I’m the author of “Successful Property Letting – How to Make Money in Buy to Let” the UK’s top selling buy to let book and which has also been Amazon.co.uk’s top selling property title for the last 6 months.I’m a speaker, I contribute to newspapers and a host of property websites, write a property investment blog and am a media commentator on the residential property market.
You can read more of my property investment insights and details of my networking, advice, telephone consultancy and property investment seminar programme on my website http://www.lettingfocus.com/
What’s unique about lettingfocus.com is that we are unbiased and independent, because unlike most people in the buy to let and property “advice” business we are not linked to a property company, developer, agent or bridging loan financier and do not receive commissions from any of these sources.
If a property investment is lousy – We’ll tell you straight and we will tell you all about buy to let and property investment - the good and the bad.

Is my property in a flood risk area? Flood Risk and Property Investment -What you need to Know: Part Two

If you are thinking of buying a property in an area that may be at risk of flooding, check the Environment Agency website. On the right of the home page, there is a place where you can enter in the post code for the property you are buying or for anywhere in the UK.
This will show you a map which will highlight if you are in a flood risk area. The site also lists local developments where the Environment Agency has objected because it feels there is a high risk of flooding.
Bear in mind the local authority is the final decision-maker in planning proposals, so it can choose not to follow the Environment Agency advice if it feels other considerations outweigh flooding implications.
Of course, if you are worried, you can of course walk away and buy a property elsewhere.
In terms of insurance cover, we are actually very lucky in the UK to have flood cover at all because flood insurance cover is very patchy outside the UK.
Overseas insurers often don’t provide cover against flood as standard, or even under any circumstances in some cases.
So keep this in mind when you “jet to let” and buy property abroad.
Copyright: David Lawrenson 2007
See also part one of this guide “Flood risk and property investment” yesterday.
About the author: I’m David Lawrenson from property investment consultancy Letting Focus.
I’m the author of “Successful Property Letting – How to Make Money in Buy to Let” the UK’s top selling buy to let book and which has also been Amazon.co.uk’s top selling property title for the last 6 months.I’m a speaker, I contribute to newspapers and a host of property websites, write a property investment blog and am a media commentator on the residential property market.
You can read more of my property investment insights and details of my networking, advice, telephone consultancy and property investment seminar programme on my website www.lettingfocus.com.
What’s unique about lettingfocus.com is that we are unbiased and independent, because unlike most people in the buy to let and property “advice” business we are not linked to a property company, developer, agent or bridging loan financier and do not receive commissions from any of these sources.
If a property investment is lousy – We’ll tell you straight and we will tell you all about buy to let and property investment - the good and the bad.

Is My Property in a Flood Risk Area? Property Investment and Flooding -What You need to Know: Part One

So, we are being flooded one again.
And yet it was not so long ago - in the autumn of 2000 in fact – that no less than 10,000 properties were flooded by storm and river flooding.
Incredibly, there are more than 2 million homes at risk from coastal or inland flooding, that’s around 10 per cent of all homes in the UK.
Around 400,000 of these homes are at a “very high risk of flooding” - that means people living there have greater than 1.3 per cent chance per annum or an annual probability of 1-in-75 of waking up to water.
In the long term, the number of houses at risk could worsen. Climate change is expected to increase winter rainfall, the frequency of heavy storm bursts and sea level and storm surge heights.
If there were no change in Government policies or spending, the Association of British Insurers (ABI) - whose members account for about 85 per cent of all household policies – has estimated that climate change could increase the number of UK properties at risk of flooding to 3.5 million.
In addition, continued pressure on land could mean even more new developments being situated in floodplains like the Thames Corridor.
The cost to the insurance industry of the autumn 2000 event was over £1 billion and led to the ABI “working” with the Government to agree terms through which the industry would continue to provide cover for “the vast majority of households” in the country.
Notice I said “vast majority” because the insurance industry has not guaranteed it would cover every risk. And of course, if you buy property in a flood risk area you can always expect to pay a higher insurance premium for the privilege. (Insurers never lose money for long as a quick look at their share prices will attest!)
After the storms of 2000, what probably happened behind the scenes was that the ABI - representing the insurers - and the government had something of a row because as the insurers see it, the government had for a long time not been spending enough on flood defences.
To put it bluntly, the insurers made it clear to the government that flood insurance would remain widely available only where the flood defences were being adequately managed (by the state).
The government were suitably worried and there followed an overhaul of flood management in the UK. The result was better planning guidance and a more accountable funding arrangement down to local level.
But properties that are in flood risk areas are still being built and the insurers at the ABI recently pointed out that an astonishing one in four planning applications where the Environment Agency has objected because of flood risk still go ahead.
Also the Environment Agency is still not a “statutory consultee” for applications in flood risk areas.
So the insurers are still not entirely happy and relations between the government and the insurers are probably still a bit cool when it comes to flooding.
And all the while too, the mainly Victorian drainage system gets ever older and the risk of urban flooding from flash storms rises by the day. As I said before, the insurers will still cover the “vast majority” albeit at a price!
The ABI has said, that for properties at very high risk of flooding –that is higher than a 1.3 per cent risk per annum, but where flood defences will be improved to at least this standard in the near future, insurers who are members of the ABI will continue to provide cover to existing policyholders.
Also, if an owner of such a property wants to sell then their current insurer will continue to provide cover, subject to satisfactory information about the new homeowners.
However, in areas where no improvements in defences are planned, the insurers have said that they cannot guarantee to provide cover in every case.
Here, the best that they can do in these cases is to use their “best efforts to work with policyholders to establish on a case-by-case basis, what action they, the Environment Agency and the Local Authority can take to enable cover to be continued.”
This sounds rather like, “You are on your own mate unless the government can somehow help you!”
Tomorrow, I'll look at how you can check the flood risk for your property.
Copyright: David Lawrenson 2007.
I’m David Lawrenson from property investment consultancy Letting Focus. I’m the author of “Successful Property Letting – How to Make Money in Buy to Let” the UK’s top selling buy to let book and which has also been Amazon.co.uk’s top selling property title for the last 6 months.I’m a speaker, I contribute to newspapers and a host of property websites, write a property investment blog and am a media commentator on the residential property market.
You can read more of my property investment insights and details of my networking, advice, telephone consultancy and property investment seminar programme on my website http://www.lettingfocus.com/
What’s unique about lettingfocus.com is that we are unbiased and independent, because unlike most people in the buy to let and property “advice” business we are not linked to a property company, developer, agent or bridging loan financier and do not receive commissions from any of these sources.
If a property investment is lousy – We’ll tell you straight and we will tell you all about buy to let and property investment - the good and the bad.

Flat Conversion Allowance - How to Make Money from The Space Above a Shop - and Get the Taxman to help out too.

Here is some useful property tax advice.
Did you know that under the Flat Conversion Allowance scheme you can get income tax relief on the cost of converting or renovating the empty space above a shop, café, office or surgery and turning it back into use as residential flats?
However, as always with such a nice tax break, there are some rules.
In order to qualify for the allowance, the money spent has to be on things of a “capital nature” so whilst you can claim for the cost of dividing the property to create separate flats or installing a new kitchen or bathroom, you won’t be able to claim the cost of providing furnishings.
There are also rules about the type of building that qualifies.
The property that is being converted must be in a shopping street, have no more than 4 storeys and the building must have been built before 1980 with the original intention that the upper floors be used as residential accommodation.
The space above the shop or office must have been either empty or used only for storage, for at least the last year.
When the conversion is complete you must let the flats out to tenants and the ground floor must continue to be used for business purposes both during and after the conversion.
Finally, each new flat has to be self-contained and access to the street from the flats has to be separate from the ground-floor premises.
The rules say that expenditure does not qualify for he allowance if any flats created are "high value" flats, which the Revenue defines as flats which, “when the conversion or renovation work starts would be expected to achieve rents above set limits.” This is approximately £350 per week in London and £150 outside London.
You have to own the property and let it out for seven years after conversion because the allowance can be withdrawn if you sell the flats or the flats stop being used for letting during this period.
Making a claim is easy though.
You simply claim for the flat conversion allowance in the tax return for the year in which the conversion or renovation money is spent - and there are no special requirements beyond the usual self assessment.
The allowance is 100 per cent in the year in which the expenditure happens or if you prefer, you can claim a lower amount, with the balance of the cost spread over later years.
It’s possible to set the allowance against other income from property and if you don’t have enough property income in that year, the excess capital allowance can be carried forward and set off against future property profits.
Alternatively, excess capital allowances may be set against the person's other income for the year, or the following year.
I’m David Lawrenson from property investment consultancy Letting Focus. I’m the author of “Successful Property Letting – How to Make Money in Buy to Let” the UK’s top selling buy to let book and Amazon.co.uk’s top selling property title.I contribute to newspapers and a host of property websites, write a property investment blog and am a media commentator on the residential property market. You can read more of my property investment insights and details of my networking, advice, telephone consultancy and property investment seminar programme on my website www.lettingfocus.com.
What’s different about us is that we are unbiased, because unlike most people in the buy to let and property advice business we are not linked to a developer, agent or finance company. We just tell you all about buy to let and property investment - the good and the bad.