Posts Tagged ‘Buy to Let Mortgages’

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Longer Term Tenancies and Getting the Right Buy to Let Mortgage

Tuesday, February 7th, 2012

In this LettingFocus blog post, we discuss our research into the potential for buy to let mortgage lenders to allow borrowers to offer longer term assured shorthold tenancies. We also look at the questions borrowers should ask themselves to ensure they get the mortgage that’s right for them.

Currently, at LettingFocus we are doing research into the potential for buy to let mortgage lenders to allow their landlord borrowers to offer longer term assured shorthold tenancies.

This is becoming quite an issue in the media and government as many interested (and often uninformed) parties regularly criticise landlords for not offering longer term tenancies than the current standard six month or 12 month ones.

The answer is simple. Landlords who have mortgages on their properties are usually restricted by their lenders’ mortgage terms and conditions which say landlords cannot offer ASTs which have longer than a 12 month fixed term. (Some landlords have other reasons why they don’t want to offer longer term tenancy agreements too, but the “lender restriction” is a key problem.)

A lot of the work we are doing this week involves looking at the issues that concern lenders and seeing if these can be adequately addressed either within the current legal framework or by changing the mortgage terms and conditions, whilst still complying with the relevant Acts of Parliament in this area.

We may not be able to share the results of our research work beyond our corporate clients but we think that landlords, government and the media would be happy to know that this issue is now being addressed.

Getting a Mortgage – Questions You Should Ask

Speaking of mortgages, I’m in the process of re-mortgaging on some of my existing buy to lets as well as at the same time, raising more money for a residential purchase.

I have mentioned many times at the blog, my extreme irritation that the media hardly ever quotes “the follow on rates” when they discuss mortgage rates.

For example, it’s all very well knowing that the rate is 0.5% above Bank of England (BOE) base rate for 2 years, but, unless you are planning to pay it off at the end of 2 years, it is kind of important to also know that at the end of the 2 year term the rate will be 6% over base or whatever the lender’s current Standard Variable Rate (SVR) is!

Deciding which mortgage is best for you will come down to a lot of issues:

1.      How long you want the loan for and when you want to or expect to be able to pay it off, either in part or in full.

2.      How important fixing a rate is to you and if so, how long to fix it for.

3.      What you think the outlook for Bank of England Base Rate is over the term of the loan.

4.      Whether you think the lender’s mortgage margin over the BOE base rate will be less or more in X number of years’ time than it is now. And whether  you think mortgage application fees will be lower or higher then.

5.      What the lenders’ stated “loan to value (LTV) ratio” is and whether opting for a lower LTV ratio could reduce the mortgage rate charged.

Other Issues to Consider

Also important are:

1.      What is the “starter” and what is the “follow on” interest rate. How are those rates calculated – are they pegged to the BOE or is it whatever the lender feels like setting it at?

2.      What is the set up mortgage application fee? What fees are charged for valuations (they can vary a lot)? Are there any exit penalties or early redemption penalties and, if so, how much are they? Are there any fees for making lump sum repayments and how much are these?

3.      When must the mortgage be redeemed? (On residential in particular, some lenders will not allow you to have a mortgage after the normal retirement age.)

Mortgage Broker or Direct Only?

Borrowers should also be aware that lenders are increasingly offering some products that are only available direct and not available via mortgage brokers (though this is less common on buy to let mortgage products.) So look online too.

However brokers are very knowledgeable. They know the ins-and-outs of each lenders criteria / underwriting approaches and this can save you a lot of legwork.

And don’t forget brokers receive commission from lenders on most products they sell, so you may not need to pay them at all.

ABOUT LETTINGFOCUS AND WHAT WE DO

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

Services to Businesses and the Public Sector

We are advisors 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 events (send an email to david@LettingFocus.com to find out about our next event) and we are regularly quoted by the media.

Services for Private Landlords

We also help landlords and property investors by showing how to make money in the private rented sector using ways which are 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 right of this page – where, 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

Four our main home page click here:  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: 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

BUY “SUCCESSFUL PROPERTY LETTING”

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

TO JOIN OUR FREE NEWSLETTER and get our latest Newsletter which goes to over 3,000 people (as at December 2011) just send an email to david@LettingFocus.com

We do not spam or sell our mailing list to advertisers, though we occasionally  mail landlords about good products from third parties. Please put us on your “white list” to ensure you receive our emails.

OFFERS ON PRODUCTS FOR LANDLORDS and TO ADVERTISE YOUR PRODUCTS to LANDLORDS click here: Landlords Resources

PERUSE LAST TEN BLOGS BY GETTING THE RSS FEED: Click Here

NEXT SEMINAR EVENT FOR LANDLORDS: Landlord and Property Letting Seminar

Copyright of Blog: David Lawrenson 2012. Please link to us here or quote us.We actively pursue copyright infringements. The blog is updated once a week.

TWITTER PAGE For my thoughts on property, personal finance, plus other random things from sport, to 80s and 90s Indy Music, to tsunamis to musings on boardroom pay, plus my (usually) centre left “take” on politics please see our Twitter page.

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Posted in Buy to Let Mortgage Strategy, Buy to Let Mortgage Terms and Conditions, Buy to Let Mortgages, Longer Tenancies, Longer Term Tenancies, Mortgage Brokers, Tenancy Agreement Length, What Is the Standard Variable Rate | Comments Off

Private Landlords, Local Authorities and Buy to Let Mortgages

Tuesday, January 17th, 2012

We thought it would be useful to publish the October 2011 Newsletter right here on our blog. (Our latest, January 2012, Newsletter was published on 29th December and is available free now to those who sign up to receive our newsletter. Just send us an email if you would like to join the mailing list!)

Here is the Newsletter…..

“….. The continued upward trajectory of rents in most areas means the PRS is now attracting some serious press attention.

Each month, as soon as the LSL Rental Index comes out showing further big increases in private residential rents, the press frenzy starts once again.

Questions such as: “How can people afford to pay their rents, why are people not buying houses instead, whose fault is it, aren’t landlords driving out potential first time buyers by snapping up the little housing stock that does come on the market etc?” are hurled around the media.

And in response to the rising rents, there have been an increasing number of calls from some, for controls on rents (most unlikely to happen) and / or a review of the tax regime affecting landlords (still unlikely in the short term, but more chance of happening.)

Rising Rents

Rising rents are happening at the same time as the cuts to the way housing benefit is calculated are starting to bite.

One outcome of this is that that councils are finding it even harder to find landlords who are prepared to let to tenants who are on housing benefit (or Local Housing Allowance as it’s called when landlords are involved.)

Another side consequence of housing benefit cuts is a reduction in the amount of accommodation available from private landlords to house homeless or potentially homeless people. And so, with few private landlords coming forward, councils now have to spend increasing amounts of taxpayer cash on temporary accommodation to put potentially homeless people in B&B type properties.

Years ago we predicted this would happen unless strategies for the private rented sector at the town halls were radically re-shaped and revised. But alas, back then the opportunity was missed.

Wasteful Duplication at Some Town Halls

At our blog, we have often highlighted the sometimes wasteful duplication of products and services for landlords at local authority level, the lack of targeted marketing to recruit landlords by councils, the poor administration of housing benefit payments (a particular bug bear of landlords), the lack of understanding of the PRS by councils and some of their advisors and the obsession with well meaning accreditation type schemes which can cost a lot to promote but which too often lack any features that private landlords value.

Unfortunately, with many vested interests at some of the UK’s town halls – both in terms of sunken political capital and occasionally in terms of council and housing association jobs – we think change here will not come fast.

However, a parliamentary group of MPs and peers has now been set up to look at the private rented sector. We are talking to the MPs and making our views known.

Little Evidence that HB Cuts are Driving Down Rents

Many housing experts thought that the cuts to housing benefit rates could drive average rents in the private rented sector down. But this does not seem to be happening apart from for the most basic housing stock – the type of stock which never had much appeal to the non LHA tenant anyway.

And with rents in most areas rising, the key drivers remain the same as ever – a lack of sufficient housing supply and a rising population driven primarily by increases in net inward migration. (Last year alone net inward migration increased the population of the UK by 230,000, which is roughly the population of Derby.)  With further expansion of the EU on the agenda and the widespread use of the English language I don’t see that particular trend changing any time soon.

Job insecurity is also continuing to push potential house buyers – especially first time buyers – to rent instead of taking on the risks and high entry costs that come with home buying and servicing a mortgage. Some think the tight lending criteria from lenders are not helping first time buyers either (and this may be counteracting the relative affordability that’s now emerging.)

Buy to Let Mortgage Update

However, the fruits of our consultancy work advising buy to let mortgage lenders, will mean that the days of the “one mortgage fits all landlords” model be replaced in time, by a set of lending criteria that fully takes account of a landlord’s net asset and liabilities position, their level of experience and the risk inherent in different property types / locations as well as the intended target tenant market.

We may see more innovation in the buy to let mortgage product design too.

Landlords who know their business will benefit from this but landlords who sign up to the latest “get rich quick in property scheme with no money down” may find their choice of lenders becoming more ever reduced and their mortgages ever dearer.”

ABOUT LETTINGFOCUS AND WHAT WE DO

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

Services to Businesses and the Public Sector

We are advisors 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 events (send an email to david@LettingFocus.com to find out about our next event) and we are regularly quoted by the media.

Services for Private Landlords

We also help landlords and property investors by showing how to make money in the private rented sector using ways which are 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 right of this page – where, 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

Four our main home page click here:  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: 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

BUY “SUCCESSFUL PROPERTY LETTING”

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

TO JOIN OUR FREE NEWSLETTER and get our latest Newsletter which goes to over 3,000 people (as at December 2011) just send an email to david@LettingFocus.com

We do not spam or sell our mailing list to advertisers. Please put us on your “white list” to ensure you receive our emails.

OFFERS ON PRODUCTS FOR LANDLORDS and TO ADVERTISE YOUR PRODUCTS to LANDLORDS click here: Landlords Resources

PERUSE LAST TEN BLOGS BY GETTING THE RSS FEED: Click Here

NEXT SEMINAR EVENT FOR LANDLORDS: Landlord and Property Letting Seminar

Copyright of Blog: David Lawrenson 2011 and 2012. Please link to us here or quote us. We actively pursue copyright infringements. The blog is updated once a week, usually on a Monday or Tuesday (or more frequently when “hot” news items come up.)

TWITTER PAGE For my thoughts on property, personal finance, plus other random things from sport, to 80s and 90s Indy Music, to tsunamis to musings on why people cannot drive well if they are wearing a hat or a cap, plus my (usually) liberal “take” on politics please see our Twitter page.

LINK TO THIS BLOG OR TO OUR WEBSITE

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Buy to Let Mortgages, the SVR and Follow On Mortgage Rates

Monday, September 12th, 2011

Landlords (or indeed anyone buying a property) face ever rising costs to buy and sell property.

On the buying side, stamp duty and the now ubiquitous “mortgage arrangement fee” are both much higher than in days gone by and local councils also charge more for searches. On the selling side, estate agency fees continue to rise. On both buying and selling, solicitors’ conveyancing fees have increased a lot too.

With these rising costs in mind – and in order to “amortise” them over time – most house buyers now move house less often than in the past. And, for the same reasons, most serious investors in buy to let (as opposed to developers) are “in it for the long term” too and – mindful of entry and exit costs – tend not to buy and sell houses too often.

Also, even if you are not planning to sell a property, the rising cost of the mortgage arrangement fee also makes it more costly to switch mortgages.

Reversionary Mortgage Rate

So, as this is the case, I think there is a case for press articles on mortgage rates to tell readers to at least look at what the “follow on” or “reversionary” mortgage rate will be at the end of the discounted or fixed rate period – because they are not all the same.

Often the short term discounted rate looks great, but the follow on rate at the end of the discounted rate period is very high.

What’s the Follow On Rate?

The trouble is most pieces in the press fail to mention the follow on rate at all.

Now I appreciate that all journalists are confined by a word limit imposed by the editor, but I think all articles on mortgage rates should at least mention that landlords (or indeed any house buyer) should check what the follow on reversionary rate is or, if the follow on rate is the SVR, to enquire if the Standard Variable Rate (SVR) is actually linked to anything specific.

Is the SVR fixed amount at some set amount above BOE base rate, is it linked to LIBOR or is it the worst of all scenarios (for the borrower) whatever the lender feels like charging at any point in time?

Naturally, where the follow on rate is very high, this fact tends to get left out of the press releases the mortgage companies put out to promote their mortgage rates.

Great Mortgages

Professional landlords like me look always look at the follow on rate.

As an example, I have two lifetime tracker mortgages (one pegged at 0.69% and the other at 0.89% over Bank of England Base Rate.) I took out both in the good old days, before the credit crunch hit in 2008.

With these mortgage loans, I had the foresight, at the time to look beyond what was a mediocre introductory rate to see that the long term follow on rate was actually a winner.

The lender is a high street bank – their loss, my gain!

MORE ABOUT LETTINGFOCUS AND WHAT WE DO

LettingFocus.com is the home of Private Rented Sector Advice and consultancy.

Services to Businesses and the Public Sector

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 events and we are regularly quoted by the media.

Services for Private Landlords

We also help landlords and property investors by showing how to make money in the private rented sector using ways which are 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

Click here:  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: 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

BUY “SUCCESSFUL PROPERTY LETTING”

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

TO JOIN OUR FREE NEWSLETTER which goes to 3,000 people just  send an email to david@LettingFocus.com – We do not spam or sell our mailing list to advertisers. Please put us on your “white list” to ensure you receive our emails.

PRODUCTS FOR LANDLORDS: Landlords Resources

GET THE RSS FEED FOR THIS BLOG  Click Here

Copyright of Blog: David Lawrenson 2011. Please link to us here or quote us. We actively pursue copyright infringements. The blog is updated once a week, usually on a Monday or Tuesday (or more frequently when “hot” news items come up.)

TWITTER PAGE For my thoughts on property, personal finance, plus as well as other random things from sport, to 80s and 90s Indy Music, to tsunamis andpolitics please see our  Twitter page.

LINK TO THIS BLOG OR TO OUR WEBSITE

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Posted in Buy to Let Mortgage Terms and Conditions, Buy to Let Mortgages, Media and the Private Rented Sector, Mortgage Arrangement Fee, Mortgage Reversionary Rate, What Is the Standard Variable Rate | Comments Off

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

BUY “SUCCESSFUL PROPERTY LETTING”

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.

To JOIN our Free NEWSLETTER containing regular news for landlords and details of our Events 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.

Discounted Products for Landlords: Landlords Resources

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

For my random thoughts on property and personal finance, plus other random things that interest me from sports, to 80s and 90s Indy music, to tsunamis, to politics please see our TWITTER PAGE: Twitter

Copyright of Blog: David Lawrenson 2011. We pursue any copyright infringements.

LINK TO THIS BLOG OR TO OUR WEBSITE

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

Generation Rent, the Nation of Renters and Landlords Taxes

Monday, June 13th, 2011

A recent survey and press release from the Halifax (the ones with those annoying but oddly impactful adverts of the two girls making a jingle and spilling their coffee) got a lot of column inches. “Suddenly we are becoming nation of private renters” says the Halifax.

Those of you who have followed my work for a while will know that 5 years ago, I made a prediction that half of all residential properties could be let by the year 2026.

Back then, journalists’ favourite Ray Boulger thought it was crazy to make predictions like this, pointing out that government policy could change and easily make the prediction invalid.

Mr. Boulger had a point. We really don’t know what will happen in the future and government policy changes could radically effect what will happen to the private rented sector – its size, scope and ownership profile. Changes to tax policies on housing in particular can also make huge changes to the attractiveness of different parts of the housing sector.

One big potential change, which I have written about here before, will be if big city investors get into the lettings market and start financing the building of large blocks exclusively for the private rented sector (PRS). This looked suddenly more attractive following the last budget’s changes to stamp duty on multiple property units purchased as a block. (Look at the category, “Private Rented Sector Initiative” and “Build to Let” over to the right in our Categories section for more on this.)

The Private Rented Sector Initiative (or PSRI) – which is all about institutional investment in the PRS – is an area of the business that I am watching and already advising on.

Underwriters Staying Underwriters

Speaking of government policy and tax changes and their impact, last week I did a talk to a group of underwriters from a major lender involved in buy to let mortgage lending. This lender is one of an increasing number who have sufficient initiative to see that it might help their staff to find out what landlords do from an actual expert and practioner in the field.

The talk was part of my consultancy for this lender and one bit of the talk covered what successful landlords do (and don’t do.)

Interestingly, only one member of the audience was actually a landlord, (and that was by default, as she had relocated for work.)

At the end of the session, I asked them all, if, as a result of my talk, they any more inclined to become landlords, and was a tad disappointed to find that they were still unprepared to make the leap.

Usually, when I speak, people get a bit inspired to look into landlordism more, though their reticence could be due to them being based in a part of the UK where house prices have been decimated in the past year due to problems in the local economy.

Landlords and Tax

A key thing I highlighted in my speech to them was how I thought the tax system was relatively kind to private landlords. (Yes, I know the landlords reading this won’t all agree.)

In particular, the fact you can offset interest on loans against rent before declaring profits is very attractive (and contentious for some).

Of course, all businesses can do this, but some pressure groups think landlords should not be able to. “It’s not a proper business and it sets landlords at an unfair advantage over first time buyers when it comes to buying property” they say.

I won’t go into that debate, here, except to note that a few years ago on Radio 4’s MoneyBox programme, where I was on with someone from Pricedout.org.uk, an organisation which has this view; I suggested that the lack of social housing was a far more significant factor in the growth of the PRS than landlords’ tax breaks.

Of course, there are other tax breaks too – especially the little understood, “Private Letting Relief” which, whenever I explain it, always has landlords saying, “Are you sure HMRC really gives us all that!”

Yes it does, and it is just one of the things that explain why buy to let remains attractive.

But the tax system could all change and the changes may not all be to landlords liking. It’s a risk to our business but it’s just a risk of doing our business.

And those who don’t like risk are condemned to not become wealthy and to moan about those who have.

Link to the article from 2006:

http://www.mortgagestrategy.co.uk/brokers-ridicule-buy-to-let-predictions/128457.article

MORE ABOUT LETTINGFOCUS AND WHAT WE DO

LettingFocus.com is the home of Private Rented Sector Expertise 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 landlord, private rented sector and buy to let product strategies, marketing and services.

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:

TO GO TO THE 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 specific topic.

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

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 Advice

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

BUY “SUCCESSFUL PROPERTY LETTING”

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Posted in Build to Let, Buy to Let Mortgages, Capital Gains Tax, Generation Rent, Institutional Investment in the Private Rented Sector, PRSI, Private Letting Relief, Private Rented Sector Initiative, Tax on Let Property | Comments Off

Buy to Let Mortgages and the Future for Smart Lenders

Monday, May 16th, 2011

For a long time, in our corporate consulting work with mortgage companies and brokers, I have advised lenders and brokers that the “one size fits all” mortgage lending approach in buy to let may be nearing the end of its shelf life.

Our work may soon start to bear fruit. Eventually, other mortgage lenders will follow and design mortgage products that meet the real needs of the modern private landlord. If they don’t they will find themselves losing profits and market share.

So, these are our predictions for the future of buy to let mortgage lending.  

1. In the future, lenders will need to flex interest rates and loan to values to fully take account of the different risks and costs to the landlord of different types of property – whether it is leasehold or freehold or the size and type of property.  Lenders will need to figure out the costs and risks of different property types and load that back into their mortgage offers.

2. I would expect lenders to look at the type of landlord customer seeking a buy to let loan– what’s their experience in terms of years of being a landlord, the number of properties they have, their exposure to buy to let, their total assets and liabilities, whether they self manage or use letting agents and if they use letting agents, how extensively they use them and for what services.

In other words, lenders should figure how smart their individual landlord customer is at being a landlord and then reflect that in loan offers. This requires the collection of more information as part of the application process (and possible loss of potential customers) but the extra long run profitability for the lenders could outweigh the risk of some loss of customers.

3. I would expect lenders to assess more deeply the outlook for different locations – this is influenced by population movements, demand from tenants, the risk of oversupply of particular property types, the extent of regeneration or degeneration. Lenders will have to take these things into consideration when they offer a loan. Certain locales could be “red lined.”

4. I would expect lenders to assess risks of lending in terms of the type of tenant group the landlord intends to let to – are they proposing to let to students, licensed HMOs or unlicensed HMOs, single let or multiple AST lets, LHA/Housing benefit, private sector lease schemes, corporate lets etc.

Different tenant groups have different risk, time involvement and cost profiles for landlords – profiles that experts who understand the landlord market can map out and translate into risk for the lender.

Products that offer “light refurb” as part of the offer are also required by experienced landlords.

5. I would expect lenders to look at the risk from the Private Rented Sector Initiative (PRSI), if that starts to take off. The PRSI (in which institutions invest in new build property to let) is a great idea but the building of huge new chunks of me-too identikit flats did little for apartment yields and rents in the noughties and it won’t be different this time either, if PRSI takes off.

6. There will always be a role for mortgage brokers who often have a deeper relationship with clients than that of just offering mortgages. However, I would expect the real mainstream “vanilla product” or “take it or leave it product” lenders selling to sophisticated clients, to increasingly question if they need brokers at all, to ask what the broker role in new business in the future will be (possibly more complex situations only) and to even consider if they could operate fully direct. And brokers may need to prepare for this change. 

7. I would expect to see more lenders at the “rougher edge” property shows – finding out the latest scams some “advisors” are up to before they come to light years later as a hit on the lenders profits.

8. I would expect lenders to look again at whether they could more often act as receivers of rent in cases where it’s clear the tenant is paying rent regularly. Why seek repossession and evict paying tenants, when the option could be to sell a property with rent paying tenants to other landlords as a going concern?

9. I would expect lenders to improve times taken to “turn round” buy to let mortgage applications. When the economy settles, faster turn round times could open up the auction market to people seeking mortgage finance, which at present is mainly the province of cash buyers and bridging loan providers.

10. I would expect all lenders to ensure landlords mortgage statement are “written up to” end of the tax year, not to other dates, because end-of-tax-year-statementing is what private landlords want. Doing otherwise is simply very poor customer service, apart from being plain annoying for private landlords.

11. I would expect mortgage lenders to become real one stop shops from where landlords can buy rent guarantee insurance, landlord building insurance and possibly also EPCs, tenancy deposit insurance, arrange independent inventories, gas inspections, electrical inspections, tenant referencing services and up to date tenancy agreements.

12. I would expect mortgage lenders to provide information to their landlord customers about how to be successful landlords, including simple easy to use guides and not leave them in the hands of letting agents, who are often very good but who can sometimes be shockingly bad. I would expect lenders to develop their site as a trusted place for news on the landlord market.

Some of these ideas require thinking through in terms of how they could be processed on a practical basis at each lender. Others are easier to implement.

But what’s clear is that the market is changing. The opportunities are there for smart buy to let mortgage lenders to be smarter still and win the profitable business of the smart landlords.

MORE ABOUT LETTINGFOCUS AND WHAT WE DO

LettingFocus.com is the home of Private Rented Sector Expertise and expertise and I’m David Lawrenson, a landlord and property investor myself for over 25 years and best known as the author of “Successful Property Letting” – the UK’s top selling commercially published property book for the last 3 years. 26,000 copies sold (up to Feb 2011).

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 landlord, private rented sector and buy to let product strategies, marketing and services.

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:

TO GO TO THE 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 specific topic.

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

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 Advice

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

BUY “SUCCESSFUL PROPERTY LETTING” 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.

To JOIN our Free NEWSLETTER containing regular news for landlords and details of our Events 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.

Discounted Products for Landlords: Landlords Resources

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

For my random thoughts on property and personal finance, plus a host of other random things that interest me from football, to 80s and 90s Indy music, to tsunamis, please see our TWITTER PAGE: Twitter

Copyright of Blog: David Lawrenson 2011.

LINK TO THIS BLOG OR TO OUR WEBSITE

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Posted in Buy to Let Mortgage Strategy, Buy to Let Mortgage Terms and Conditions, Buy to Let Mortgages, Marketing to the Private Rented Sector, Worst Mortgage Lenders | Comments Off

Local Housing Allowance and Housing Benefit not of interest for Majority of Private Landlords

Wednesday, April 13th, 2011

Many local authorities, housing associations and charities designing strategies to try to get private landlords to let to tenants on Local Housing Allowance are very fond of doing surveys of landlords.

(Readers of this blog will know how critical I was of one particular survey of landlords that, last year, was used to make some astonishing claims for the impact on homelessness in London of the current changes to Housing Benefit / Local Housing Allowance .)

Doing surveys is better than doing no surveys at all (usually!) but these surveys can be limited in value.

Typically the surveys I have seen solicit the views of landlords who the authority already has a relationship with, those few landlords who are accredited with the council (which is usually not many) and perhaps those members of landlords associations who live in the local area.

From the base of responses from these groups, strategies and initiatives are sometimes devised.

Again, all well and good, but the trouble with this approach is that it misses out the views of the majority of landlords who, right now, want nothing to do with tenants on benefits or the town halls.

For most landords, “tenants on benefits” and the various incentives the council provides for landlords are simply “off their radars.”

To illustrate this, a landlord “tenant find” website I know has 100 live properties listed in the London area – all uploaded by landlords.

When uploading properties to the site, the landlords are presented with a box to tick if they accept tenant of benefits. Not one landlord ticked the box. In Greater Manchester there were 20 live properties. Again, it is the same story – no one has ticked the box to say they accepted tenants on benefits.

Well Meaning but Wrong Strategies

Until local authorities understand how to reach landlords like these and find out what they are thinking and why they are so suspicious of the whole Housing Benefit / Local Housing Allowance system, they will be missing out on the big picture.

And if they believe the survey results unquestioningly and even worse – use them as a base to construct strategies for their local private rented sector, “local letting agency models”, social letting agencies and PRS Access Schemes etc – they will undoubtedly devise bad strategies.

Bad strategies for the private rented sector are not a small matter. It is wasteful and bad for society, not least because the PRS is now so big – indeed, as I explain below, it is probably already bigger than the social housing sector.

Given the size of the PRS, it is time strategies for the private rented sector stopped being a footnote on local authority planning documents.

Private Rented Sector Bigger than Social Housing Sector Now

The English Housing Survey, which is published by the Department for Communities and Local Government, indicates that for the first time since the mid 1960s the private rented sector (PRS) is now larger than the local authority / housing association sector.

The latest survey is for 2009/10. At that time there were 3.7 million households in social housing, compared to 3.4 million in the private rented sector – a difference of just 300,000.

A year earlier, the same source found the respective figures were 3.8 million (social housing) and 3.1 million in the PRS – a difference of 700,000.

So, it’s a fair bet to say that if the trend of those years continued into 2010/11 – and there is no reason to think that it hasn’t – we must have already reached the point where the PRS is the larger.

Private companies selling to the private landlord should also afford the private rented sector more space for the development of robust strategies that meet customer needs. In particular, we think this is true of mortgage lending banks and building societies where provision of buy to let mortgages is still so heavily concentrated among a few players.

Next week we will look at the reasons why the PRS has grown so big and why social housing (and owner occupation) continues to decline.

MORE ABOUT LETTINGFOCUS AND WHAT WE DO

LettingFocus.com is the home of Private Rented Sector Consultancy and expertise and I’m David Lawrenson, a landlord and property investor myself for over 25 years and best known as the author of “Successful Property Letting” – the UK’s top selling commercially published property book for the last 3 years. 26,000 copies sold (up to Feb 2011).

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 landlord facing or buy to let product strategies, marketing and services.

We also write for property websites 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. We pride ourselves on giving independent unbiased advice on a one to one basis.

AT OUR WEBSITE LETTINGFOCUS.COM:

TO GO TO THE 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 specific topic.

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

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 Advice

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

BUY “SUCCESSFUL PROPERTY LETTING” 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.

To JOIN our Free NEWSLETTER containing regular news for landlords and details of our Events 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.

Discounted Products for Landlords: Landlords Resources

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

For my random thoughts on property plus a host of other random things,  please see our TWITTER PAGE: Twitter

Copyright of Blog: David Lawrenson 2011.

LINK TO THIS BLOG OR TO OUR WEBSITE

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Posted in Buy to Let Mortgages, Housing Benefit, Local Housing Allowance, Marketing to the Private Rented Sector, Private Rented Sector Access Schemes, Private Rented Sector Recent History, Social Letting Agency | Comments Off

Mortgage Lender Inefficiency and Housing Market Failure

Tuesday, March 22nd, 2011

One of the curious aspects of landlord behaviour is a failure to look beyond the initial mortgage rate deal terms. And comparison sites don’t help as they rarely say what the follow on rate is once the initial attractive deal period ends.

I have seen many mortgage deals recently where you will see some great headline rate – but it’s only valid for a year or two.

But take time to contact the lender and look behind the headline and you may see the “follow on rate” after the first year or two is 5% or 6% above Bank of England (BOE) base rate or, potentially even worse, “our standard variable rate” (which is, of course, whatever the lender feels like it should be and is usually not linked to BOE base rates.)

So I always advise landlords who buy and let property for the long term to look at the “follow on rate” on any mortgage they are taking out.

By doing this, they will often find they are actually better off paying a higher initial rate if the follow on rate for the rest of the mortgage’s life is much cheaper as they will have the benefit of that for the long term as soon as the initial special term of the deal has ended.

This is particularly the case in these days of high application fees and exit fees – which makes switching a mortgage an expensive business.

Is Your Mortgage Company Efficient?

But there is another issue to consider – the efficiency of the mortgage company. And this is still hard to get a feel for.

I have recently taken out a great buy to let mortgage tracker deal in which the follow on lifetime rate is very competitive, but the turnaround time of this lender has been absolutely appalling. It is far and away the worst I have ever experienced.

Alas, too many mortgage lenders are far too slow at turning around mortgage applications. This was a point I made in the first edition of my book very forcefully. And it is still true today and is made as forcefully as ever in the new edition of the book.

In the book I say, “It never matters how quiet the mortgage market is, many lenders just don’t have enough people to service mortgage applications or other aspects of service.”

With this lender, I have now been waiting 43 days since a survey and valuation was done on the property I wish to buy with their mortgage funds. The lender has had all my documentation now for a whopping 50 days.

Naturally, the vendor is getting very cross and is threatening to put the property back on the market. I don’t blame them.

The lender says the reason for the delay is because they are inundated with applications because their mortgage rate is so attractive.

Well, if that is the case, they should have stopped marketing the mortgage (they haven’t) and dealt with the backlog of applications.

Sometimes mortgage brokers will know which lenders are relatively fast, which are slow and which are turkeys.

So, this can be an argument to go through a big broker – and they may possibly have clout to speed things up too. (With this particular lender readers will be interested to know that it seems to matter not that I am a well known buy to let blogger and columnist in terms of how I am treated. I am waiting in the queue with everyone else.)

There are many awards for best mortgage lender. There ought to be awards for the turkeys too – those with appalling service.

The award could be awarded by say 20 brokers who all vote secretly a la Fifa. That way the lender would never know who voted for which lender and would be unable to punish any broker with retaliatory loss of business.

Housing Market Failure – the Costs

What is the total cost of housing market failure?

What do I mean by failure? Is it the number of people sleeping homeless on the streets? No, I suggest it is much more than that.

The total cost would include anything that is done by anyone to help people get a house to live in.

So, for example, if there were more than enough of the right type of houses in the right locations for everyone on any budget – including yes, social housing and private accommodation – then there would be no need for the myriad of conferences on housing that exist. Also, there would be no need for lots of salaried executives and staff working in housing in local authorities, housing associations, charities and bodies like the CIH.

So, do I know the cost of housing failure?

Well, I don’t know the figure, and I’m not sure anyone else has done the maths either, but add it all up and it does not come cheap – and of course, it has kind of just “crept up on us” as the governments of different hues attempt to deal with what is a market failure in housing.

Suppose you went back in time to the end of the era of council house building. And you said to the government then, that we would, in the future, stop building new council housing. And the total cost of the sticking plasters to fix the problems that resulted from this decision would be £X million or billions per annum.

What would the decision makers of the past have thought? I think they would change track and maybe have done things differently.

MORE ABOUT LETTINGFOCUS AND WHAT WE DO

LettingFocus.com is the home of Private Rented Sector Consultancy and expertise and I’m David Lawrenson, a landlord and property investor myself for over 25 years and best known as the author of “Successful Property Letting” – the UK’s top selling commercially published property book for the last 3 years. 26,000 copies sold (up to Feb 2011).

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 landlord facing or buy to let product strategies, marketing and services.

We also write for property websites 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. We pride ourselves on giving independent unbiased Buy to Let Advice on a one to one basis.

AT OUR WEBSITE LETTINGFOCUS.COM:

TO GO TO THE 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 specific topic.

If you want to reply:

If you are on the URL for this specific post, at the bottom of the post, you should see a space to “Leave a Reply.” (If you are on the Blog Home Page, click on the title of this blog first to get to the URL.) All spam is deleted.

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

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 Advice

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

BUY “SUCCESSFUL PROPERTY LETTING” 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.

To JOIN our Free NEWSLETTER containing regular news for landlords and details of our Events 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.

Discounted Products for Landlords: Landlords Resources

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

For my random thoughts on property plus a host of other random streams of consciousness, please see our TWITTER PAGE: Twitter

Copyright of Blog: David Lawrenson 2011.

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

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Posted in Buy to Let Mortgage Strategy, Buy to Let Mortgages, Cost of Housing Market Failure, Worst Mortgage Lenders | Comments Off

Government Policy on the Private Rented Sector is Not Joined Up

Tuesday, March 1st, 2011

Sometimes government policy doesn’t seem to join up too well – with different policies apparently conflicting with each other.

Two good examples are (1) the lending activities of state owned banks which appear to hamper what local councils are trying to do with their private rented sector access schemes, especially lease schemes and (2) policies on HMOs which appear to be working against the recent change to the rate of LHA for single people under 35.

Let’s look at the first example first.

State Owned Banks Not Exactly Helping Those in Housing Need

Someone working in temporary housing in Exeter emailed me to complain that a state owned bank, Northern Rock, would not allow her private landlord client (whose buy to let mortgage is with Northern Rock) to let his property under a 3 year lease scheme to the council. And could I help?

First, for non-housing people reading this blog, we will briefly explain what a private lease scheme is.

Under long lease schemes a private landlord can get a guaranteed rent (albeit a little below market rents) from letting to the council or housing association. The council in turn lets the property to people in housing need. The landlord gets no voids for 3 years and the property back at the end or however long the lease term is and everyone should be happy.

But this mortgage lender apparently insists that lettings are only on a standard assured shorthold tenancy or lease of less than a year. Never mind that landlords who have entered into long leases are getting a guaranteed rent (courtesy of the taxpayer ultimately), suffering no voids and won’t have to pay letting fees and are therefore presumably less likely to default on their buy to let mortgages as a result.

As Northern Rock mortgages are now owned by the state, readers of this blog might like to consider the irony that a state owned bank won’t consider these schemes which, of course, are meant to house those in housing need.

According to James Ball at www.LannerCapital.co.uk other part state owned banks who also “Like to say No” to lease schemes of this type and length are Lloyds Banking Group (BM Solutions and HBOS) and Nat West (part of RBS.)

BM Solutions and Northern Rock go further and are among the state owned banks who will also not lend to landlords who wish to let to people on Local Housing Allowance.

Not Joined Up

At the same time, local councils that we advise and many others across the land are very busy trying to attract landlords to their private rented sector schemes (including lease schemes) as a home in the private rented sector is often the only housing option they can offer.

Much money and effort is spent on local councils’ endeavours on this kind of work only to be thwarted by state owned banks that won’t let their landlord customers let to these same people that the councils are trying to help.

Perhaps someone senior in Housing at the government or in local authorities ought to have a word with whomever controls lending at these state owned banks.

HMO Article 4 Directions Seem at Odds with Policy on Local Housing Allowance

Now let’s look at HMOs.

For the uninitiated an HMO is a House in Multiple Occupation – basically a house shared by people who form more than two “households.”

First some background. (Journalists with short attention spans should skip the next two paragraphs.)

The Coalition Government allowed the creation of HMOs without the need for planning permission. But at the same time, they made it easier for local authorities to use planning laws to restrict HMOs locally – through a mechanism called an “Article 4 Direction.”

These Article 4 Directions, where implemented, remove “permitted development rights” in a specific geographical area and require planning permission for the creation of all new HMOs. The Directions are commonly likely only to be applied for and implemented in towns and cities that have a high proportion of shared housing, such as university towns or areas with a large number of low income households.

For those with short attention spans it simply boils down to local councils being able to apply to restrict HMOs in their area.

NLA Objections

Landlords’ groups like the National Landlords Association (the NLA) have expressed concern that the Article 4 Directions are likely to displace students from the streets around universities and push them to other areas where HMOs are currently occupied by tenants dependent on Local Housing Allowance (LHA) to pay their rent and other low income households.

The result, they say could be fewer properties available for those on low incomes – potentially increasing housing waiting lists and costing local authorities significant amounts of money for temporary B&B accommodation.

We think this is possible too.

Worse Still

But at LettingFocus, we think the situation could be made worse still from April 2012 when the shared room rate (room in a shared house) is extended from age 25 up to age 35 – meaning that single people under 35 who are on Local Housing Allowance will be paid a shared room rate rather than a rate for a flat.

This move can only further increase the demand for just this type of HMO at the same time as local Article 4 Directions reduces its supply. Again, this does not seem like joined up policy to us.

MORE ABOUT LETTINGFOCUS AND WHAT WE DO

LettingFocus.com is the home of Private Rented Sector Information and expertise and I’m David Lawrenson, a landlord and property investor myself for over 25 years and best known as the author of “Successful Property Letting” – the UK’s top selling commercially published property book for the last 3 years. 26,000 copies sold (to Feb 2011).

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 landlord facing or buy to let product strategies, marketing and services.

We also write for property websites 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. We pride ourselves on giving independent unbiased Buy to Let Advice on a one to one basis.

AT OUR WEBSITE LETTINGFOCUS.COM:

TO GO TO THE 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, you can click on “Select Categories” and use the pull down menu to read all the posts on any specific topic.

If you want to reply:

If you are on the URL for this specific post, at the bottom of the post, you should see a space to “Leave a Reply.” (If you are on the Blog Home Page, click on the title of this blog first to get to the URL.)

Please note, we delete all spam.

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

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 Advice

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

BUY “SUCCESSFUL PROPERTY LETTING”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.

To JOIN our Free NEWSLETTER containing regular news for landlords and details of our Events 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.

Discounted Products for Landlords: Landlords Resources

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

For my random thoughts on property plus a host of other random streams of consciousness, please see our TWITTER PAGE: Twitter

Copyright of Blog: David Lawrenson 2011.

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

Tags: , , , , , , , , , , , , , , , ,
Posted in Article 4 Directions, Buy to Let Mortgage Strategy, Buy to Let Mortgage Terms and Conditions, Buy to Let Mortgages, Government Private Rented Policy Not Joined Up, HMO, House In Multiple Occupation, Housing Benefit, Local Housing Allowance, Private Rented Sector Access Schemes, Private Rented Sector Management, Private Renting Schemes, Private Sector Leasing Schemes, Social Letting Agency, Uncategorized | Comments Off

How Not to Market to Private Landlords and the Private Rented Sector

Tuesday, February 15th, 2011

Landlord readers of this column will know that LettingFocus’s stance these days is now very much built around consulting with organisations who sell products and services to the private rented sector. Basically we tell them how to do it better!

Our two biggest client groups are banks / financial institutions who sell mortgage loans to landlords (commonly known as “buy to let mortgages”) and local authorities / housing associations who face a huge task trying to get private landlords to make their properties available to people on low incomes who turn up at councils offices in droves needing a roof over their heads. (The local authorities often cannot help them so the private rented sector is now the default option.)

As well as doing consulting work for organisations, I still do some one to one consulting work with private landlords and keep “in the mix” with mortgage brokers too. I really like to do this because it is by talking to landlords and brokers that I get to see first hand why the products and services that the banks, local authorities and other clients groups are trying to sell to landlords miss the target so often.

As an example, on Friday, I had lunch up in the city with a mortgage broker called James Ball. A good guy, he tears his hair out at the banks’ complete lack of understanding about what private landlords need.  “In their mortgage criteria they even still talk about DSS Tenants”, he laments. (DSS Tenants is a term that has long since been replaced in landlords’ vocabulary with Housing Benefit or Local Housing Allowance.)

Fast Forward

Fast forward to later on Friday and I’m perusing a local authority website in the Midlands area that is supposed to attract private landlords to get them to let their properties to people on DSS, sorry, Local Housing Allowance.

This site has been lauded a bit and spoken of in glowing terms in some quarters.

As I’m also working in this area, but for a different group of local authorities to set up something better, I call up the number on the site posing as a tenant. After a 60 second wait to be answered (well it’s better than most utilities cos, I guess) and being handed off to other people three times (including one who couldn’t understand how I got through to him at all), it turns out there are actually no properties on their site at all.

“Oh, I was hoping you were a landlord with some properties to put on our site,” says the man at the other end of the line with more than a hint of disappointment in his voice.

Competition and Solutions

Mmm, I am not surprised. Competing in this on line space against the likes of the free spending big portals like Rightmove and the internet savvy landlord facing sites like Upad, Gumtree and Discount Letting, and hoping somehow to be found by landlord punters was never going to work in the first place.

There are solutions and ways that would allow this local authority to attract landlords, but doing it this way isn’t one of them. The right strategy has to be designed by someone close enough to the private rented sector to understand how it really works for the end customer, the landlord. Often this expertise won’t be found internally within the local authority.

Thinking about my mortgage broker friend again, we talked about how my properties in Kent were probably going to be clobbered, both price and rent wise, by the closure of the only big employer in the area, Pfizer.  Donny Rumsfeldt would call the closure an “unknown unknown” – one I could not have predicted 6 years ago when I bought there, but heh, that’s life!

We chatted some more, James and I.

Then I said, “If I was a smart lender, I would anticipate the negative impact on house prices and rents, so I would cut the loan to value ratio for new applications for mortgage loans in areas where such a thing had happened. And I would raise the loan to value where positive regeneration was happening.”

We thought for a few seconds then laughed. But that would require a clever underwriting approach, which would be unlikely from the kind of bank that still calls Housing Benefit, “the DSS.”

MORE ABOUT LETTINGFOCUS AND WHAT WE DO

LettingFocus.com is the home of Private Rented Sector Information and expertise and 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 (to Jan 2011).

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 landlord facing or buy to let product strategies, marketing and services.

We also write for property websites 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. We pride ourselves on giving independent unbiased Buy to Let Advice on a one to one basis.

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Posted in Accommodation in private rented sector, Buy to Let Mortgage Strategy, Buy to Let Mortgages, Housing Associations, Housing Benefit, Local Housing Allowance, Marketing to the Private Rented Sector, Private Rented Sector Access Schemes, Private Rented Sector Management, Private Sector Leasing Schemes, Social Letting Agency | Comments Off

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