Archive for the ‘Buy to Let and Landlord Tips’ Category

Private Landlords Don’t Sell Their Time for Money but Must Beware of Other Risks in Letting to Achieve Success

Tuesday, June 28th, 2011

At the end of a recent speaking engagement to a group of building society buy to let lending staff in the North of England, none of whom were landlords; I asked them, “So, do you think you might be interested in becoming landlords then.”

I was a bit surprised when all said, “No”

That got me thinking. Recently a peer reviewer said something in a similar vein. Commenting on my book, “Successful Property Letting” he said that it was so honest, it could actually make someone think twice about becoming a private landlord.

Of course, to many landlords, I hope that is the attraction of my work: I do tell it like it is and I don’t pretend that being a private landlord is a walk in the park. Being a landlord can be hard work, even for those who use a letting agent (who must still check that the agent is doing a good job for them, especially in relation to the selection of good tenants.)

Digression – Secret Landlords

It’s worth saying that the building society’s staff may have been “secret landlords” and they did not want to admit their landlord-moonlighting activities in front of their bosses. If so, they would have good reason for keeping quiet. When I worked as a full time employee for a bank, for a straight glorious period of 5 years I was making a lot more money via capital growth and rental income from my properties than the bank was paying me as a salary.

I decided to keep the extent of my moonlighting hidden from my bosses, who would no doubt have figured that if I was doing so well at property, perhaps I did not need a pay rise. And after all, my bosses wanted me committed to the company, not to myself.

Setting the Record Straight

So, I feel I need to set the record straight a bit and say that whilst being a private landlord can certainly be hard work, especially when you are going through the process of letting any property to new tenants; it is still a very good business to be in. And it is one in which you will undoubtedly make a good return over time providing you do the job right and you don’t take silly risks.

And as I said in my book, it’s a business where you are in control, not your boss.

John Corey, writing in “Property Investor News” recently, hit a similar spot too. He made the point that when you are a private landlord, like any business owner, you are no longer “selling your time for money.”

Indeed, for those borrowing money to help finance property purchases, they are going a step further because not only are they no longer selling time for money, they are able to offset the interest cost (and loan fees) on mortgage loans used to buy a let property against the rental income they receive. This is of course one of the big attractions of buy to let.

Contentious Issue

Now it must be said that this ability to offset interest is a contentious one for many on the left who see it as giving landlords an unfair advantage over first time buyers. For Marx and Engels landlords were simply evil “rentiers” living off the hard work of their tenants.  In other words, landlords live off the rents of their tenants who do toil away selling their own time for money. (Cynics would point out that Engels with his Manchester factory was no doubt more than happy to offset interest costs against revenues in his business; that is when he wasn’t whinging about the laziness of his employees – something that he did rather a lot of, apparently.)

This ability to “gear up” and borrow money to buy investment property and then offset the interest on the loans against rental income received when calculating taxable income is something that the “Get Rich Quick in Property” folk are very keen to highlight.

But there are dangers. Borrow too much to buy the wrong kind of overvalued property in the wrong location that won’t let out is not a very smart thing to do. Indeed, it’s the route to bankruptcy. And there is always the danger that rising interest costs cannot be passed on as a higher rental income.

It’s these dangers that cannot be denied and the foolhardy continue to fall into the same old traps.

Doing It Right

But if landlords understand their business, learn what their legal responsibilities are as landlords and buy the right kind of property, all the while keeping borrowing levels reasonable, the risks are actually pretty minimal.

And once you have a successful property letting business with a good level of income and happy tenants, you can leave those who only sell their time for money to whinge and discuss Engels’s theories until the revolution comes.

Being a landlord can be great fun, but for me personally, it can get boring sometimes, which is why I enjoy the intellectual challenge of helping a range of clients such as banks, insurers and local authorities to sell to the private rented sector.

The point is, when one becomes a successful landlord, being at the beck and call of the same old boss can be a thing that you can leave in the past.

MORE ABOUT LETTINGFOCUS AND WHAT WE DO

LettingFocus.com is the home of Private Rented Sector Experts and advice.

Services to Businesses and the Public Sector

Primarily, we are consultants to a range of organisations including banks, building societies, local authorities, social housing providers, institutional investors and insurers. We help them develop and improve their services and products for private landlords.

We also write for property websites, speak at property shows and we are regularly quoted by the media.

Services for Private Landlords

We also find a limited amount of time to help landlords and property investors by coaching them in how to make money in the private rented sector using ways that work, which are ethical, fair to tenants and which involve minimal risk to the investor.

AT OUR WEBSITE LETTINGFOCUS.COM:

HOME PAGE OF THIS BLOG click here: Blog

To read blog posts on related posts use the tags and categories at the bottom of each post (after the list of links), or over to the top right. Here, you can click on “Select Categories” and use the pull down menu to read all the posts on any Category that interests you.

THE HOME PAGE OF OUR MAIN SITE : http://www.LettingFocus.com

For general info on our CONSULTING SERVICES and also to find a small sample of links to where our comments have been featured in the National Press please click here: Consultancy and Seminars

For ONE TO ONE PRIVATE CONSULTANCY FOR PRIVATE LANDLORDS click here: Property Advice

TO READ CLIENT TESTIMONIALS – from both organisations and private landlords click here: Testimonials

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Our book is the highest selling property book in the UK. Click here to Find Out More and Buy the Book at Amazon. If you are from an organisation and would like to bulk buy at least 50 books please ask us for special rates.

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This blog is updated once a week, usually on a Monday or Tuesday (or more frequently when “hot” news items come up.)

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Posted in Buy to Let and Landlord Tips, Get Rich in Property, Landlords as Rentiers | Comments Off

Principle Private Residence Property Letting and Tax Advice

Tuesday, November 2nd, 2010

Landlords may have seen Ken Livingstone – whom I usually quite admire – propose on “Newsnight” that tenants’ rents should be capped at no more than the mortgage is costing their landlord.

It’s an interesting concept and I wonder how Mr. L would suggest this could be policed.  I guess about as easily as the new restriction on child benefit to those on lower rate tax. (Expect to see an unprecedented rate of relationship “break ups” among the better off once that particularly daft proposal becomes law.)

All this kind of talk really shows is that we are in the depths of the silly season. But to be a killjoy I have decided to give the proposers of rent controls a little history lesson.

Pesky Demand and Supply

Firstly, I wonder if Ken has ever heard of the great classical economist Alfred Marshall and his pesky demand and supply curves. Here is a link to help Ken:

http://en.wikipedia.org/wiki/Supply_and_demand

The curves imply that if you cut the price of something, its availability, rather annoyingly tends to go down, as suppliers quit offering the product or service.

I also wonder if Ken has heard of a certain Mr. Peter Rachman. Rachman was a slum landlord who flourished in the days of rent controls by being a terribly beastly chap to his tenants. With few other options available to tenants in those days, people like Rachman would use bullying and brutal methods to control their tenants and Rachman did very well indeed. Must we also go back to those times too, I wonder?

As well as being in the middle of the silly season we are also half way through the financial year.

So I just thought that as it’s a bit of a short news week (well apart from the massive housing benefit row) landlords may like some top tax tips related to Principle Private Residence (which is a neat tax avoidance measure that our Dear Leaders in the Palace of Westminster are very adept at using*) These tips are all in my book, of course.

* Due to popularity amongst MPs you may be unsurprised to hear that among the various tax changes now being brought in, there are no plans to amend the raft of  PPR  exemptions.

Tax Tips

Tip 1: If you’ve bought a property that requires substantial construction work before it can be occupied as your main residence, the Principle Private Residence (PPR) exemption can be extended for up to a year. You can also extend it if you’re unable to occupy the property due to a delay in selling your old property. In this situation, it’s possible to have both properties covered by the PPR exemption.

Tip 2:

If you have more than one main residence you should tell HMRC which is your main one within two years of acquiring the second. Obviously, this must be your own private residence where you habitually live, not a property that you rent out. If you are lucky enough to have two homes that you can live in (neither of which is rented) and fail to nominate one, HMRC may make a nomination for you based on the facts. If you live in both, choose the one that will have the biggest capital gain or perhaps the one you wish to sell first as your PPR.  Once you have elected a property as a PPR, you can change it at any time by writing to HMRC. However, it will only be effective for a period beginning less than two years before the date of your election to change.

Tip 3

If you take in a lodger in your own home, your PPR exemption will usually not be affected but if any part of your property is used exclusively for business purposes, the PPR exemption is not available for that part of the property for the period in question. However, if you have an office at home and sometimes use it for other home uses, then the PPR exemption is still usable in full.

Successful Property Letting

Our book still remains the top selling book on property in the UK – a position it has occupied for 3 years. And this, despite being available in just a handful of high street shops (all Waterstones.) Well, after much badgering from me,  my publishers have made sure it will, once again, soon be more widely available at nearly all Waterstones branches.

But if you want a faster route to buying it, get it on line at Amazon: click here to Buy the Book at Amazon

Missing – All the Government and Quango Jobs

In our office, reading the “Sunday Times” appointments pages became something of a sport during the fag end years of the last government.

One was constantly astounded by the great largesse in pay that execs in the various quangos would award themselves (or rather their friends in the ever so “impartial” remuneration committees would set.)

Fast forward to today and I see the few government, NHS, housing association and numerous quango jobs that are advertised are suddenly remarkably coy about listing their execs pay in the few job ads advertised.

Naturally, the top execs will claim they are worth the pay, the job is as complex as those in the private sector and that they also deserve to earn 50 times what their junior staffers get.

The trouble is that I don’t think the public ever believed them.

However, I do feel a bit sorry for all the junior public sector staff and those in the quangos who could now be jobless.

MORE ABOUT LETTINGFOCUS AND WHAT WE DO

LettingFocus.com is the home of Private Rented Sector and Landlord Information.

I’m David Lawrenson, a landlord and property investor myself for over 25 years and author of “Successful Property Letting” – the UK’s top selling commercially published property book for the last 3 years. 25,000 copies sold.

Services to Businesses and the Public Sector

Primarily I am a consultant to a range of organisations including banks, building societies, local authorities, social housing providers, institutional investors in build to let and insurers – helping them with their landlord facing or buy to let product strategies, marketing and services.

For example, I help banks improve their buy to let mortgage lending practices and I help housing associations / local authorities find private landlords (private rented access schemes, local letting agency models etc.)

I also write for property websites and am regularly quoted by the media.

Services for Private Landlords

We also find a limited amount of time to help landlords and property investors by coaching them in how to make money in the private rented sector using ways that work, which are ethical, fair to tenants and which involve minimal risk to the investor. We pride ourselves on giving independent unbiased Buy to Let Advice on a one-to-one mentoring / coaching basis or through our (very occasional) group seminars.

AT OUR WEBSITE LETTINGFOCUS.COM:

TO GO TO THE HOME PAGE OF THIS BLOG click here: Blog

You can also use the tags and categories at the bottom of each post to read blog posts on related posts or click on the categories pull down menu over to the top right. (If you want to find relevant posts from before 30 April 2010 you can also click on LettingFocus’s Old Blog  - Categories, then search from the list for a topic that interests you.)

THE HOME PAGE OF OUR MAIN SITE click here: LettingFocus Home Page

For general info on our CONSULTING SERVICES and also to find a small sample of links to articles where our comments have been featured in the National Press please click here: Consultancy and Seminars

For ONE TO ONE PRIVATE CONSULTANCY FOR PRIVATE LANDLORDS click here: Property Mentoring

NEXT SEMINAR AND NETWORKING EVENT for Landlords and Property Investors (which now take place just once or twice a year): Next Property Investment Seminar and Networking Event

We have OFFERS on a few services and products here: Services and Products for Landlords

TO READ CLIENT TESTIMONIALS – from both organisations and private landlords click here: Testimonials

BUY “SUCCESSFUL PROPERTY LETTING” click here to Buy the Book at Amazon plus anything else at that Amazon sell. (If you are from an organisation and would like to bulk buy at least 50 books please ask us for special rates (which are lower than Amazon)).

To JOIN our Free QUARTERLY NEWSLETTER simply send an email to david@LettingFocus.com – Please note we WILL NOT send spam or sell our mailing list to advertisers but please put us on your “white list” to ensure you receive our emails!

IF YOU HAVE A SITE WHY NOT LINK TO THIS BLOG OR TO OUR WEBSITE?

IF YOU SELL SERVICES TO LANDLORDS, YOU COULD BE A PARTNER ON OUR AFFILIATE PROGRAMME. PLEASE GET IN TOUCH!

This blog is updated once a week, usually on a Monday or Tuesday.

For my random thoughts on property and various other things that typically make me grumpy, please see our TWITTER PAGE: Twitter

Copyright of Blog: David Lawrenson 2010.

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Posted in Buy to Let and Landlord Tips, Capital Gains Tax, Housing Benefit Row, Ken Livingstone Rent Cap, PPR, Principle Private Residence, Tax on Let Property | Comments Off

Evaluating Property Investments a Black Hole and Some Good News on Mortgages

Monday, October 4th, 2010

NEXT SEMINAR AND NETWORKING EVENT: Next Property Investment Seminar and Networking Event

When evaluating property investments, too many landlords fail to take account of the “opportunity costs” of their own money sunk into any project. Indeed I meet a lot of people in my consultancy who have hired me to assess an investment or set of investments but have forgotten to account for the opportunity costs.

I explain this in “Successful Property Letting”, but maybe my explanation there needs to be made even plainer. Buy the Book at Amazon

It’s simple really. If you have to put up say, £50,000 as a deposit for a property to let (with a bank putting up the rest) and you have transaction costs of say £6,000, then you have put up £56,000 in total.

That £56,000 could have been sitting in the bank earning say 4% (and 4% could be about right because, as a buy to let investor you are presumably putting away money for at least 5 years and 4% is attainable right now on 5 year fixed term bonds.)

4% of £56,000 is £2,240 – that amount is the opportunity cost. It’s basically like saying, “What could I have earned by doing nothing?” and it should be added to the cost side of any investment, thus reducing the potential profit for each year of the investment going forward.

Lost Money on Failed Property Transactions – The Black Hole

Very few landlords running residential property investment businesses and letting to tenants (as opposed to property traders and developers) realise that if a property purchase falls through, they cannot claims the costs of that abortive expenditure against rental property income or as a deduction before capital gains tax is levied either.

Yes, the money is lost. It’s a black hole which HMRC is aware of and it seems very unfair, but hey, that’s the situation.

Property transactions that fall through are especially common for landlords buying property at auctions for example where you can be more easily outbid. HMRC and my tax advisor are both clear on this– if this happens you cannot claim abortive costs like the cost of the survey valuation if you are a property investing landlord.

Good News on Buy to Let Mortgages

Landlords seeking mortgage finance and still smarting from Lloyds Banking Group’s odd decision to stop lending new money to landlords who have more than 3 properties across the group (which includes Lloyds, C&G, Halifax and BM Solutions brands) will be pleased to see that Paragon have started lending again. Some good news at last!

MORE ABOUT LETTINGFOCUS AND WHAT WE DO

LettingFocus.com is the home of Private Rented Sector and Landlord Information.

I’m David Lawrenson, a landlord and property investor myself for over 25 years and author of “Successful Property Letting” – the UK’s top selling commercially published property book for the last 3 years with 25,000 copies sold.

Services to Businesses and the Public Sector

Primarily I am a consultant to a range of organisations including banks, building societies, local authorities, social housing providers, institutional investors in build to let and insurers – helping them with their landlord facing or buy to let product strategies, marketing and services.

For example, I help banks improve their buy to let mortgage lending practices and I help housing associations / local authorities find private landlords (private rented access schemes, local letting agency models etc.)

I also write for property websites and am regularly quoted by the media.

Services for Private Landlords

We also find a limited amount of time to help landlords and property investors by coaching them in how to make money in the private rented sector using ways that work, which are ethical, fair to tenants and which involve minimal risk to the investor. We pride ourselves on giving independent unbiased Buy to Let Advice on a one-to-one mentoring / coaching basis or through our (very occasional) group seminars.

AT OUR WEBSITE LETTINGFOCUS.COM:

TO GO TO THE HOME PAGE OF THIS BLOG click here: Blog

You can also use the tags and categories at the bottom of each post to read blog posts on related posts or click on the categories pull down menu over to the top right. (If you want to find relevant posts from before 30 April 2010 you can also click on LettingFocus’s Old Blog  - Categories, then search from the list for a topic that interests you.)

THE HOME PAGE OF OUR MAIN SITE click here: LettingFocus Home Page

For general info on our CONSULTING SERVICES and also to find a small sample of links to articles where our comments have been featured in the National Press please click here: Consultancy and Seminars

For ONE TO ONE PRIVATE CONSULTANCY FOR PRIVATE LANDLORDS click here: One to One Advice

NEXT SEMINAR AND NETWORKING EVENT for Landlords and Property Investors (which now take place just once or twice a year): Next Property Investment Seminar and Networking Event

TO READ CLIENT TESTIMONIALS – from both organisations and private landlords click here: Testimonials

BUY “SUCCESSFUL PROPERTY LETTING” click here to Buy the Book at Amazon plus anything else at that Amazon sell. (If you are from an organisation and would like to bulk buy at least 50 books please ask us for special rates (which are lower than Amazon)).

To JOIN our Free QUARTERLY NEWSLETTER simply send an email to david@LettingFocus.com – Please note we WILL NOT send spam or sell our mailing list to advertisers but please put us on your “white list” to ensure you receive our emails!

IF YOU HAVE A SITE WHY NOT LINK TO THIS BLOG OR TO OUR WEBSITE?

IF YOU SELL SERVICES TO LANDLORDS, YOU COULD BE A PARTNER ON OUR AFFILIATE PROGRAMME. PLEASE GET IN TOUCH!

This blog is updated once a week, usually on a Monday or Tuesday.

For my random thoughts on property and various other things that typically make me grumpy, please see our TWITTER PAGE: Twitter

Copyright of Blog: David Lawrenson 2010.

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Posted in Buy to Let Mortgages, Buy to Let and Landlord Tips, Buying Property at Auction, Capital Gains Tax, Tax on Let Property | Comments Off

Mortgages and Estate Agents Plus Lloyds Banking Group’s Strange New Buy to Let Lending Policy

Tuesday, September 21st, 2010

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Lloyds Banking Group has just announced it will no longer be  offering new buy to let mortgage loans to landlords who have more than three properties or who have more than £2m worth of loans. This move will also hit buy-to-let investors that are remortgaging their current properties.

Apparently, nine out of 10 of buy-to-let borrowers with Lloyds (which includes BM Solutions) have less than three properties with the group. A spokesman told me, “We’ve never been a provider for borrowers with massive portfolios,” she said.

Well, with policies like this, Lloyds clearly has no desire to help their successful landlords grow bigger either.

So that now leaves just one big player in the buy-to-let market – The Mortgage Works, which is part of Nationwide Building Society. OK, I know there are a few other small players but most of the others are all pretty well hamstrung when it comes to new lending by the freeze in the money markets. And as The Mortgage Works probably won’t want all the new business, landlords can only expect buy to let mortgage rates (which are already high relative to standard residential rates) to go up even more.

(As an aside, we have said before at this blog that the high rates on buy to let loans compared to standard residential can be explained better by lack of competition than by worse arrears rates.)

Just the other week I wrote on this blog about some landlord friends of ours who have a few million in equity in their properties, 10 years experience as landlords, an overall loan to value ratio overall of about 50% and an annual profit of around £65K from their property business. They were turned down for a loan on a new property because it seems that Woolwich (part of Barclays) no longer likes to lend to full time landlords.

And now Lloyds Banking Group would clearly now be out of the picture too for these people.

Baffling

I find this all pretty baffling. I simply cannot understand why the UK banks would rather lend to the more novice and inexperienced landlord than to professional landlords with a long proven track record of success, strong incomes and high equity. I haven’t seen the stats, but I do know from people I meet that the more experienced bigger landlords are always better risks and would exhibit lower arrears rates.

I fully accept that there is some danger to lenders if a big landlord has a high loan to value across his portfolio. But the banks can easily weed out applicants like these.

What’s probably happened is that someone high up at these banks has issued an edict saying they don’t want to be exposed to any individual for more than a certain amount of money – and that has been passed on and down the line. They also probably just lump buy to let in with other more risky lending like sub prime and self cert mortgages.

But in doing this they did not stop to think that the fact they can control the amount of exposure they have to any one individual’s specific property actually makes their risk fully controllable with respect to the specific asset on which the loan sits.

Bank of China and the Post Office are two new lenders who aren’t stuck for funds to lend though both have a low profile in buy to let despite some decent rates (though LTV is limited with BOC).

This move by Lloyds will surely have these competitors excited. I hope so because otherwise the options are limited for borrowers.

Rogue Estate Agents and Mortgage Mischief

Estate agents love to try to force you to use their “independent” mortgage adviser. Indeed, all too often they refuse to put an offer forward until you have had your finances “reviewed” by their mortgage adviser, or in some cases they may even say that if there are two offers on a property they will only push the offer that has arranged via a mortgage thats been taken out through them.

Let’s be clear. Any estate agent that is a member of a professional body like the National Association of Estate Agents is duty bound to put all offers forward to the vendor, and must confirm the offer in writing to both buyer and seller. And it does not matter whether you have spoken to their mortgage adviser or not.

Of course, being vetted by the agent’s mortgage adviser can have advantages for you. For a start the agent can confirm to the vendor that you have spoken to their adviser, and that you are a credible buyer, regardless of whether you arranged your mortgage through them. This puts your offer in a very positive light, which is of obvious benefit to you.

But if you have your mortgage agreed in principle elsewhere, you should tell the agent and be prepared to show them proof of this, together with any deposit.

But never feel forced into arranging your mortgage through the agent just to secure the property. Most agents are straight but there are some who will not play fair. These rogues tot up the lost commission from the mortgage and that from the sale, compare it to the other applicant who did take out a mortgage with them and “forget” to put forward your offer. If you think that has happened to you then you must formally complain to the estate agent’s governing body.

MORE ABOUT LETTINGFOCUS AND WHAT WE DO

LettingFocus.com is the home of Private Rented Sector and Landlord Information.

I’m David Lawrenson, a landlord and property investor myself for over 25 years and author of “Successful Property Letting” – the UK’s top selling commercially published property book for the last 3 years. 25,000 copies sold.

Services to Businesses and the Public Sector

Primarily I am a consultant to a range of organisations including banks, building societies, local authorities, social housing providers, institutional investors in build to let and insurers – helping them with their landlord facing or buy to let product strategies, marketing and services.

For example, I help banks improve their buy to let mortgage lending practices and I help housing associations / local authorities find private landlords (private rented access schemes, local letting agency models etc.)

I also write for property websites and am regularly quoted by the media.

Services for Private Landlords

We also find a limited amount of time to help landlords and property investors by coaching them in how to make money in the private rented sector using ways that work, which are ethical, fair to tenants and which involve minimal risk to the investor. We pride ourselves on giving independent unbiased Buy to Let Advice on a one-to-one mentoring / coaching basis or through our (very occasional) group seminars.

AT OUR WEBSITE LETTINGFOCUS.COM:

TO GO TO THE HOME PAGE OF THIS BLOG click here: Blog

You can also use the tags and categories at the bottom of each post to read blog posts on related posts or click on the categories pull down menu over to the top right. (If you want to find relevant posts from before 30 April 2010 you can also click on LettingFocus’s Old Blog  - Categories, then search from the list for a topic that interests you.)

THE HOME PAGE OF OUR MAIN SITE click here: LettingFocus Home Page

For general info on our CONSULTING SERVICES and also to find a small sample of links to articles where our comments have been featured in the National Press please click here: Consultancy and Seminars

For ONE TO ONE PRIVATE CONSULTANCY FOR PRIVATE LANDLORDS click here: Property Mentoring

NEXT SEMINAR AND NETWORKING EVENT for Landlords and Property Investors (which now take place just once or twice a year): Next Property Investment Seminar and Networking Event

We have OFFERS on a few services and products here: Services and Products for Landlords

TO READ CLIENT TESTIMONIALS – from both organisations and private landlords click here: Testimonials

BUY “SUCCESSFUL PROPERTY LETTING” click here to Buy the Book at Amazon plus anything else at that Amazon sell. (If you are from an organisation and would like to bulk buy at least 50 books please ask us for special rates (which are lower than Amazon)).

To JOIN our Free QUARTERLY NEWSLETTER simply send an email to david@LettingFocus.com – Please note we WILL NOT send spam or sell our mailing list to advertisers but please put us on your “white list” to ensure you receive our emails!

IF YOU HAVE A SITE WHY NOT LINK TO THIS BLOG OR TO OUR WEBSITE?

IF YOU SELL SERVICES TO LANDLORDS, YOU COULD BE A PARTNER ON OUR AFFILIATE PROGRAMME. PLEASE GET IN TOUCH!

This blog is updated once a week, usually on a Monday or Tuesday.

For my random thoughts on property and various other things that typically make me grumpy, please see our TWITTER PAGE: Twitter

Copyright of Blog: David Lawrenson 2010.

Tags: ,
Posted in Buy to Let Mortgage Terms and Conditions, Buy to Let Mortgages, Buy to Let and Landlord Tips, Estate Agents and Mortgages, Lloyds Banking Group Buy to Let | 4 Comments »

Buying a Leasehold Flat, Guarantors in Tenancy Agreements. Plus Local Authorities Survey Private Landlords Housing Benefit Intentions

Tuesday, August 31st, 2010

Next Property Investment Seminar and Networking Event

A bit of a quiet week this week, though I was quoted in the FT again:  http://bit.ly/9o5NZ0 so, with not much news to report, I thought I would offer up some random observations from my working week as a speaker and commentator on the world of buy to let and letting property.

Local Authorities Research Private Landlords LHA Intentions

At last, I see, some local authorities have followed my exhortations and actually gone out and surveyed private landlords to find out their intentions post the new LHA or Housing Benefit changes. I received no less than two surveys in the same day from different London boroughs.

A good start, though in our view both boroughs missed the chance to ask all the right questions and because of the structure of the surveys, some of the survey results may be ambiguous. Still, the fact that the councils have done the surveys is better than sitting there wringing their hands and trying to second guess what landlords will do.

Why I Don’t Buy Flat Conversions in Single Block Victorian Houses with More Than One Other Flat

When I do speaking engagements the two things I get asked about most are problems with leases on flats and problems of tenant guarantees.

Looking at leases, if you have read my book you will know my views on these already. Buy the Book at Amazon

I say in the book that “……whilst many lease arrangements work just fine, in nearly every newspaper there is a column in the property supplement where frustrated leaseholders (and some freeholders) seek advice from the paper’s solicitor on how to solve some problem or other with the working of their lease. Their questions are usually about how to get a freeholder or managing agent to do something they should be doing anyway, how to stop other leaseholders from doing things they shouldn’t, how to extend a lease, buy the freehold or take over the management. The fact is there are quite a few flats – especially conversions – where the building is managed badly. Typical problems are noise, crumbling exteriors and filthy common areas. Given that the law on leasehold has changed frequently in the last twenty or so years suggests it needed fixing. Things today are better than they were, but for many leaseholders there are still problems.”

Most of the queries I get are from frustrated leaseholder and co-freeholders of flats which are in single block properties that have been converted from a large house or small commercial building into flats.

All too often the leases on these types of properties are badly drafted and there is no mechanism for collection of service charges or even insurance or for doing maintenance.

Enforcing your rights can be hard and time consuming and this is the reason why, as a landlord, I never now even bother look at buying flats in these types of conversions. And there are many investors and leasehold experts who share my view.

But If You Must Buy One……

Of course, I fully appreciate that, due to financial constraints, for many first time buyers and investors there is no option but to buy a flat in a Victorian or Edwardian conversion block.

If this is you, then try to buy one where there is just one other flat in the block (preferably with an amenable owner who is not mad) because you will at least have a starting chance to put things right if there are problems. If you have to get three or more other leaseholders (some of whom will inevitably be absent landlords) on your side it gets a lot harder to get the freeholder or other co-freeholders to join in actions with you or get anything done.

If you are thinking of buying this type of flat, your priority even before you move ahead on the legals is to get hold of and scrutinise the lease first. Find out how long there is left on the lease (amazingly many estate agents won’t even know which is kind of stupid as it has a huge bearing on price), how many other flats are in the arrangement and what the arrangements are for collection of service charges and doing maintenance work.

If you don’t like the answers you get, then avoid! And if you need more advice on leasehold and freehold, there is a small section in my book. Plus, you really also should get in touch with “Lease”, the Leasehold Advisory Service at http://www.lease-advice.org/

Also look at  Leasehold and Freehold which is an article where we look at why extending a lease is often better than buying the freehold.

Guarantors

The large and rapidly increasing number of queries I get about guarantors is a sure sign of the recession. As recession bites, more tenants will find it hard to prove an income to a landlord and therefore need a home owning guarantor to say they can play the rent in event the tenant can’t.

But signing up a guarantor is an area that is fraught with problems for landlords. You can all too easily make a muck-up of the guarantor process which means you cannot actually enforce the guarantor’s guarantee! In other words, the guarantee is worthless.

We will look at this again in a forthcoming blog post but you may find this short article useful at our website:

http://www.lettingfocus.com/pages/myarticles_Guarantorsintenancyagreements.html

House Share Rents Appear to be Down

According to the latest data rents are up overall but anecdotally we have noticed that the rent level for rooms in shared houses are more down than up, at least here in London.

This is another sign of recession and one we think that is caused by people who may have lost their jobs turning to letting out a spare room in their house (which is tax free up to £4,500 per annum.)  The extra supply is driving these kinds of rents down.

I would expect to see this drive down rental levels on HMOs and student accommodation. Next Property Investment Seminar and Networking Event

MORE ABOUT LETTINGFOCUS AND WHAT WE DO

LettingFocus.com is the home of Private Rented Sector and Landlord Information.

I’m David Lawrenson, a landlord and property investor myself for over 25 years and author of “Successful Property Letting” – the UK’s top selling commercially published property book for the last 3 years. 25,000 copies sold.

Services to Businesses and the Public Sector

Primarily I am a consultant to a range of organisations including banks, local authorities, social housing providers, institutional investors in the private rented sector and insurers – helping them with their landlord facing or buy to let product strategies and services.

For example, I help banks improve their buy to let mortgage lending practices and I help housing associations / local authorities by advising on LHA issues and finding private landlords (private rented access schemes, local letting agency models etc.) I also write for property websites and am regularly quoted by the media.

Services for Private Landlords

We also find a limited amount of time to help landlords and property investors by coaching them in how to make money in the private rented sector using ways that work, which are ethical, fair to tenants and which involve minimal risk to the investor. We pride ourselves on giving independent unbiased Buy to Let Advice on a one-to-one mentoring / coaching basis or through our (very occasional) group seminars.

AT OUR WEBSITE LETTINGFOCUS.COM:

TO GO TO THE HOME PAGE OF THIS BLOG click here: Blog

You can also use the tags and categories at the bottom of each post to read blog posts on related posts or click on the categories pull down menu over to the top right. (If you want to find relevant posts from before 30 April 2010 you can also click on LettingFocus’s Old Blog  - Categories, then search from the list for a topic that interests you.)

THE HOME PAGE OF OUR MAIN SITE click here: LettingFocus Home Page

For general info on our CONSULTING SERVICES and also to find a small sample of links to articles where our comments have been featured in the National Press please click here: Consultancy and Seminars

For ONE TO ONE PRIVATE CONSULTANCY FOR PRIVATE LANDLORDS click here: Property Mentoring

NEXT SEMINAR AND NETWORKING EVENT for Landlords and Property Investors (which now take place just once or twice a year): Next Property Investment Seminar and Networking Event

We have OFFERS on a few services and products here: Services and Products for Landlords

TO READ CLIENT TESTIMONIALS – from both organisations and private landlords click here: Testimonials

BUY “SUCCESSFUL PROPERTY LETTING” click here to Buy the Book at Amazon plus anything else at that Amazon sell.

If you are from an organisation and would like to bulk buy at least 50 books, please ask us for special rates (which are lower than Amazon).

To JOIN our Free QUARTERLY NEWSLETTER simply send an email to david@LettingFocus.com – Please note we WILL NOT send spam or sell our mailing list to advertisers but please put us on your “white list” to ensure you receive our emails!

IF YOU HAVE A SITE WHY NOT LINK TO THIS BLOG OR TO OUR WEBSITE?

IF YOU SELL SERVICES TO LANDLORDS, YOU COULD BE A PARTNER ON OUR AFFILIATE PROGRAMME. PLEASE GET IN TOUCH!

This blog is updated once a week, usually on a Monday or Tuesday.

For my random thoughts on property and various other things that typically make me grumpy, please see our TWITTER PAGE: Twitter

Copyright of Blog: David Lawrenson 2010.

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Posted in Buy to Let and Landlord Tips, Guarantors in Tenancy Agreements, Housing Benefit, Leasehold and Freehold Matters, Letting A Room In Your Home, Local Housing Allowance | Comments Off

Buy to Let Mortgage Rates, Institutions and the PRS and a Word On CGT

Tuesday, June 1st, 2010

A few months ago there was a ray of hope that the historically high margins that mortgage companies want to charge buy to let mortgage borrowers could be coming down.

Readers of this column will know that back in November last year, for a 75% loan to value buy to let mortgage, you could get a reversionary (or “go to” rate) of 2% over Bank of England Base rate.

But the best you could have got any time in 2010 (on 75% LTV deals) was about 4% over base, which made me question whether these resolutely high buy to let mortgage rates were perhaps a product of less than competitive conditions in this sub market (i.e. too few competitors running a cosy oligopoly).

So we were encouraged to see that in early May, talk of renewed competition from money market dependent lenders like Paragon was perhaps a signal that the high margins and high fees lenders were demanding were about to come down.

Alas, in recent weeks, inter bank lending rates have hardened again, (blame the Eurozone crisis and North Korea) and so more competitive buy to let mortgage rates are as far off as ever.

This all means that lots of potential property investments that landlords will be eyeing still do not stack up in the short or medium term.

Build to Let

I love the National Landlords Association (and I think they love me too) but I recently reminded an exec at the NLA that when I joined, many moons ago, it was known as the Small Landlords Association – the accent being on the word SMALL.

This is relevant in the context of institutional investment in the private rented sector (a thing that all governments seem to want to encourage).

The point was that landlord’s representatives at the NLA and the Residential Landlords Association (RLA) will have to tread carefully on this topic because I guess most of their members will be small landlords.

Perhaps it is time they checked their constitutions and decided if they want big landlords to me members at all, if indeed they are not already precluded?

Institutions Have Clout

Sure the big boys have clout – and I know this because I work as a consultant with some funds who want to invest in the PRS – but the landlords associations could easily be compromised by the big investors because they don’t share the objectives of the small landlords and indeed, will compete against them in the hunt for tenants.

The problem that the landlords associations have, of course, is that they cannot be seen by government to be against the expansion of the private rented sector. After all, they must join in with the message that we need more housing – whether rented or social.

But they must ensure that the tax system is not so stacked in favour of the institutional investors that the small landlord is crowded out.

That would not be right.

I’m pleased to see a statement to that effect in the latest journal of the NLA.

PPR Relief

Speaking about tax, I think one likely casualty of the changes to capital gain tax (CGT) relief could be the existing system whereby second home owners and buy to let investors can nominate a property as their main residence for a short time and claim the last 3 years of ownership as their principle private residence.

This 3 year rule was one attribute of MPs expenses fiddles. If this was to be stopped, landlords will have the activities of our “Flipping MPs” to thank for the change.

Bit of Politics – Time to Cut Off Old Friends?

Sometimes the actions of friends go too far and you have to cut off your support for the good of everyone else around.

So, I suggest it is time China cuts off North Korea, the US reviews its support for Israel and maybe the EU takes a good look at Greece. (It may be for Greece’s own good that they go outside the Euro.)

All these changes would make the world a better, more prosperous and more peaceful place.

MORE ABOUT LETTINGFOCUS AND WHAT WE DO

LettingFocus.com is the home of Landlord Information.

I’m David Lawrenson, a landlord and property investor myself for over 25 years and author of “Successful Property Letting” – the UK’s top selling commercially published property book for the last 3 years.

Services to Businesses and the Public Sector

Primarily I am a consultant to banks, local authorities, social housing providers, insurers and other organisations – helping them with their landlord facing or buy to let product strategies and services.

For example, I help banks improve their buy to let mortgage lending practices and I help housing association / local authorities find private landlords (private rented access schemes, local letting agency models etc.)
I also write for property websites and am regularly quoted by the media.

Services for Private Landlords

We also find some spare time to help landlords and property investors by coaching them in how to make money in the private rented sector using ways that work, which are ethical, fair to tenants and which involve minimal risk to the investor.
We pride ourselves on giving independent unbiased Buy to Let Advice on a one-to-one mentoring / coaching basis or through our occasional group seminars.

AT OUR WEBSITE LETTINGFOCUS.COM:

TO GO TO THE HOME PAGE OF THIS BLOG click here: Blog

You can also use the tags and categories to read blog posts on related posts. (To find relevant posts from before 30 April 2010 you can also click on LettingFocus’s Old Blog  - Categories, then search from the list for a topic that interests you and click to read all the posts we have written under that Category / Topic.)

THE HOME PAGE OF OUR MAIN SITE click here: LettingFocus Home Page

For general info on our CONSULTING SERVICES click here: Consultancy and Seminars

For ONE TO ONE PRIVATE CONSULTANCY FOR PRIVATE LANDLORDS click here: Property Mentoring

NEXT SEMINAR AND NETWORKING EVENT for Landlords and Property Investors:
Next Property Investment Seminar and Networking Event

We have OFFERS on services and products here: Services and Products for Landlords

TO READ CLIENT TESTIMONIALS – from both commercial organisations and private landlords click here: Testimonials

BUY “SUCCESSFUL PROPERTY LETTING” click here: Buy the Book at Amazon plus anything else at Amazon.co.uk

To JOIN our Free QUARTERLY NEWSLETTER simply send an email to david@LettingFocus.com – Please note we WILL NOT send spam or sell our mailing list to advertisers!

IF YOU HAVE A SITE WHY NOT LINK TO THIS BLOG OR TO OUR WEBSITE? IF YOU SELL SERVICES TO LANDLORDS, YOU COULD BE A PARTNER ON OUR AFFILIATE PROGRAMME.

PLEASE GET IN TOUCH!

See our TWITTER PAGE: Twitter

Copyright of Blog: David Lawrenson 2010. This blog is updated roughly once a week usually on a Monday or Tuesday.

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Posted in Build to Let, Buy to Let Mortgages, Buy to Let and Landlord Tips, Capital Gains Tax, Institutional Investment in the Private Rented Sector, Private Rented Housing Investment Fund (PRSI), Private Rented Sector Initiative | 2 Comments »

Buy to Let Tips in 500 Words by LettingFocus.com

Thursday, April 15th, 2010

Someone asked me what my five very top tips for success in buy to let are and would I mind summarizing the main things to do / not do in fewer than 500 words. So here goes….

One – Always buy in the right area and the right type of property at a good (i.e. low) price and buy where tenant demand REALLY exists. And check tenant demand exists BEFORE you buy. In most places you should avoid new build flats as they seldom keep their value, especially the developments where most flats have been bought by other landlords and / or are on huge estates full of the same kind of identikit flats and / or where the arrangements to manage the land around the property and the structure are weak. Look out for and buy into areas that are REALLY getting regeneration money, new employment or better transport. Preferably, all three.

Two – Avoid all Get Rich Quick in Property exhortations and / or anyone who uses phrases like “financial freedom” or “no money down.” Be very wary of the types of lease options scheme where the tenant-cum buyer buys a lease from you to purchase a property from you in the future. We think they are at best unethical and we don’t think they will stand up to legal scrutiny in the future either. We also expect them to be banned just as soon as the FSA wakes up to them – which given their usual speed won’t be for another three to five years at best.

The fact is you can get rich in property but it is not something you can do fast and if you cannot afford to invest without resorting to weird and strange financing / cash flow techniques then think hard about if you should not be in the property investing / landlord game at all.

Three – Don’t simply trust to a letting agent to do thorough reference checks on tenants for you. YOU need to make sure they have done the proper checks. If you skip this advice you will eventually get a tenant from hell. Trust me on this!

So, make clear to the agent what tenants you want and don’t want and ask to see all references and retain a veto if they aren’t good enough. Don’t pay over one months rent to an agent to find a tenant for you and NEVER pay renewal charges if all the agent does is find a tenant for you. Even better, find a tenant yourself for about £50. See our Services and Products for Landlords page.

Four – Be nice to tenants. Fix things fast, be available during working hours (within reason) and don’t be mean and sweat small pennies. Offer competitive rents to good tenants – i.e. one that’s a bit below the market average. Never forget, good tenants are worth getting and keeping! If you operate in “specialty sectors” like HMOS, students or “Benefit Tenants” you’ll need to do extra swotting up and make sure you know what you should be doing, stay within the law and get paid.

Five – As a landlord you have legal responsibilities – sorry but the days of Rigbsyesque “muddling through” are long gone. So, understand the law or risk getting fined. Have a good filing system and keep a sense of humour!

Lazy Journalism

It being the end of the tax year, I see the personal finance press was full of ISA stories at the weekend. But the best rate you can get on money tucked away for a year is actually from the National Savings and Investments (that’s the government) whose Index linked certificates are paying 1% above the RPI inflation rate. That means they are currently paying 4.7% and it is tax free. I have not seen a one year term ISA or a non ISA rate that beats that.
Too bad pretty well all the journalists that wrote about ISAs were copying from press releases from bank and building societies and were just too lazy to check out the NS&I rates.

MORE ABOUT LETTINGFOCUS AND WHAT WE DO

LettingFocus.com is the home of Landlord Information.

I’m David Lawrenson, a landlord and property investor myself for over 25 years and author of “Successful Property Letting” – the UK’s top selling commercially published property book for the last 3 years.

Services to Businesses and the Public Sector

Primarily I am a consultant to banks, local authorities, social housing providers, insurers and other organisations – helping them with their landlord facing or buy to let product strategies and services.

For example, I help banks improve their buy to let mortgage lending practices and I help housing association / local authorities find private landlords (private rented access schemes, local letting agency models etc.)
I also write for property websites and am regularly quoted by the media.

Services for Private Landlords

We also find some spare time to help landlords and property investors by coaching them in how to make money in the private rented sector using ways that work, which are ethical, fair to tenants and which involve minimal risk to the investor.
We pride ourselves on giving independent unbiased Buy to Let Advice on a one-to-one mentoring / coaching basis or through our occasional group seminars.

AT OUR WEBSITE LETTINGFOCUS.COM:

TO GO TO THE HOME PAGE OF THIS BLOG click here: Blog

You can also use the tags and categories to read blog posts on related posts. (To find relevant posts from before 30 April 2010 you can also click on LettingFocus’s Old Blog  - Categories, then search from the list for a topic that interests you and click to read all the posts we have written under that Category / Topic.)

THE HOME PAGE OF OUR MAIN SITE click here: LettingFocus Home Page

For general info on our CONSULTING SERVICES click here: Consultancy and Seminars

For ONE TO ONE PRIVATE CONSULTANCY FOR PRIVATE LANDLORDS click here: Property Mentoring

NEXT SEMINAR AND NETWORKING EVENT for Landlords and Property Investors:
Next Property Investment Seminar and Networking Event

We have OFFERS on services and products here: Services and Products for Landlords

TO READ CLIENT TESTIMONIALS – from both commercial organisations and private landlords click here: Testimonials

BUY “SUCCESSFUL PROPERTY LETTING” click here: Buy the Book at Amazon plus anything else at Amazon.co.uk

To JOIN our Free QUARTERLY NEWSLETTER simply send an email to david@LettingFocus.com – Please note we WILL NOT send spam or sell our mailing list to advertisers!

IF YOU HAVE A SITE WHY NOT LINK TO THIS BLOG OR TO OUR WEBSITE? IF YOU SELL SERVICES TO LANDLORDS, YOU COULD BE A PARTNER ON OUR AFFILIATE PROGRAMME.

PLEASE GET IN TOUCH!

See our TWITTER PAGE: Twitter

Copyright of Blog: David Lawrenson 2010. This blog is updated roughly once a week usually on a Monday or Tuesday.

Tags: , , , , , , , , , ,
Posted in Buy to Let and Landlord Tips | Comments Off