Wednesday, October 15, 2008
OFT weeds out rogues in Sale and Rent Back Market - by Letting Focus
I’ve just been up to Soho to do a podcast for the Motley Fool website at http://www.fool.co.uk/ where I was interviewed by David Kuo who in real life is as entertaining as he appears in the wee early hours on BBC Breakfast.
Ahead of these podcasts, the guys at Fool invite readers of their site to put questions to the “podcastee.” For example, “Isn’t buy-to-let dead? Why are you still flogging a dead horse? Aren’t landlords horrible people who should be shot at dawn?"
These were just some of the questions that we dealt with on the podcast. (Actually, I made up the one about landlords being shot at dawn). Look out for the podcast here soon.
BUY TO LET IS ALIVE AND KICKING
Well, buy to let is very much alive and kicking as you will see if you read the other posts at this blog.
However, it has undoubtedly got a lot harder for the new entrant landlord today.
Typically, right now you will need at least 25% deposit to put down in order to get a buy to let mortgage. And you can expect to pay anywhere from a 1.5 to 3% fee to the mortgage lender as a fee too.
And we will be stuck with these high entry costs for as long as the credit crunch is with us.
Sure, there are some clever financing techniques you can use to cut the amount of your own cash you need to put in – sometimes to nil - but many of these schemes have proved to be made of sand.
For example, there will be many landlords now ruing the day they bought a shiny new build flat off plan in one of the city centres only to find that despite the clever financing techniques that allowed them to acquire the place with none (or very little) of their own money down, they had actually massively overpaid for a property that is now proving very hard to let out because few tenants want to live in that kind of property.
For a long time it has been my view that the activities of the property companies that marketed these schemes to novice investors need to be regulated.
This should be looked at urgently as it is clear that some people have lost large sums of money. Sure, some of these investors were greedy and yes, many were naïve too. And if you were very uncharitable you may think, “Well, they got what they deserved.”
But even if you are a non landlord you ought to be concerned that the activities of the companies that marketed many of these worthless flats led to many of our inner cities being clogged up with the kind of property that as a country we don’t actually want.
And as the effects of the lack of housebuilding today translates into an even worse shortage in two years time that ought to be something that bothers all of us.
SALE AND RENT BACK
Talking of regulation, the Office of Fair Trading (OFT) has just called for tighter controls of Sale and Rent back
So far, there has been no regulation of these schemes where firms buy homes from cash strapped owners at a big discount and then allow them to continue living in the property as tenants.
The OFT has found that customers of these schemes, many of them highly stressed and facing imminent repossession, were sometimes misled over the value of their homes and in some cases were told that they could stay in their home for years whereas in reality the tenancy was only guaranteed for 6 or 12 months.
The OFT has recommended that there should be more clarity about the initial valuation, sale price, terms of tenancy and amount of rent to be paid. They also say that Sale and Rent Back firms should tell people about free independent advice available to them before they decide to sell.
I completely agree with these recommendations and any decent operator in the Sale and Rent Back market should too.
SMALL PRIVATE RENTED SECTOR
The UK still has a small private rented sector – only about 10% of all homes are privately rented today. This is very small by current European standards and is low compared to the UK’s 50% post war level.
Independent surveys continue to show that increasing numbers of people prefer to rent property even if they could afford to buy - and for these reasons alone we DO need a really well regulated private rented sector.
I would say that most new regulations that landlords have had to face over the last few years have been for the greater good of society (though The Licensing of Houses in Multi Occupancy or HMOs
could be improved) and the tenancy deposit schemes are still too clunky.
The new recommendations for Sale and Rent Back are a welcome addition, will make for good regulation and will make fewer people say that landlords should be shot at dawn.
ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
I’m David Lawrenson of LettingFocus.com - landlord experts.
I’m the author of “Successful Property Letting” which for the last 3 years has been the UK’s top selling property title - Buy Successful Property Letting - How to Make Money in Buy to Let.
The new edition is fully up to date with all the recent changes to tenancy deposit schemes, HMOs, licensing, capital gains taxes and it has new sections on sale and rent back.
I’m an expert freelance property journalist, property speaker and a well known buy to let blogger
I contribute to newspapers and a host of property websites, write a number of columns in the press and I provide general property education, training & advice for anyone looking to buy property for themselves or to let out.
In my work as a consultant I help private individuals with any aspect of buying property or buy to let. What’s unique about lettingfocus.com is that we are independent property mentors because unlike most people in the buy to let and property “advice” business we are not linked to a property company, developer, agent or bridging loan financier and do not receive commissions from any of these sources.
We simply give one to one unbiased advice and are often asked to evaluate other property investments.
In my corporate consulting role, I also advise banks, building societies, housing associations and web portals with their buy to let and property products and services.
You can read more of my blog & find details of my networking, advice and property training programme at my website.Copyright: David Lawrenson 2008. This blog is updated once a week. WANT TO BE KEPT UPDATED WITH OUR LATEST BLOGS?
It’s easy.
Go to the bottom of this post, and click on “Link to this post”
Our home blog page should then open & you should then see my smiling profile. Then page all the way down and on the bottom right it will say “Site feed” - click there and away you go.
You then just copy the link that comes up into your News Reader or News Aggregator. Even a non techie like me managed to do all this.
Please note if you have a website & are thinking of reproducing material here - that’s fine but we DO require the full links shown in each blog to be included including also the links in the section “ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON”
Please Contact Us button at our main site http://www.lettingfocus.com/ if you have any queries about this.
Ahead of these podcasts, the guys at Fool invite readers of their site to put questions to the “podcastee.” For example, “Isn’t buy-to-let dead? Why are you still flogging a dead horse? Aren’t landlords horrible people who should be shot at dawn?"
These were just some of the questions that we dealt with on the podcast. (Actually, I made up the one about landlords being shot at dawn). Look out for the podcast here soon.
BUY TO LET IS ALIVE AND KICKING
Well, buy to let is very much alive and kicking as you will see if you read the other posts at this blog.
However, it has undoubtedly got a lot harder for the new entrant landlord today.
Typically, right now you will need at least 25% deposit to put down in order to get a buy to let mortgage. And you can expect to pay anywhere from a 1.5 to 3% fee to the mortgage lender as a fee too.
And we will be stuck with these high entry costs for as long as the credit crunch is with us.
Sure, there are some clever financing techniques you can use to cut the amount of your own cash you need to put in – sometimes to nil - but many of these schemes have proved to be made of sand.
For example, there will be many landlords now ruing the day they bought a shiny new build flat off plan in one of the city centres only to find that despite the clever financing techniques that allowed them to acquire the place with none (or very little) of their own money down, they had actually massively overpaid for a property that is now proving very hard to let out because few tenants want to live in that kind of property.
For a long time it has been my view that the activities of the property companies that marketed these schemes to novice investors need to be regulated.
This should be looked at urgently as it is clear that some people have lost large sums of money. Sure, some of these investors were greedy and yes, many were naïve too. And if you were very uncharitable you may think, “Well, they got what they deserved.”
But even if you are a non landlord you ought to be concerned that the activities of the companies that marketed many of these worthless flats led to many of our inner cities being clogged up with the kind of property that as a country we don’t actually want.
And as the effects of the lack of housebuilding today translates into an even worse shortage in two years time that ought to be something that bothers all of us.
SALE AND RENT BACK
Talking of regulation, the Office of Fair Trading (OFT) has just called for tighter controls of Sale and Rent back
So far, there has been no regulation of these schemes where firms buy homes from cash strapped owners at a big discount and then allow them to continue living in the property as tenants.
The OFT has found that customers of these schemes, many of them highly stressed and facing imminent repossession, were sometimes misled over the value of their homes and in some cases were told that they could stay in their home for years whereas in reality the tenancy was only guaranteed for 6 or 12 months.
The OFT has recommended that there should be more clarity about the initial valuation, sale price, terms of tenancy and amount of rent to be paid. They also say that Sale and Rent Back firms should tell people about free independent advice available to them before they decide to sell.
I completely agree with these recommendations and any decent operator in the Sale and Rent Back market should too.
SMALL PRIVATE RENTED SECTOR
The UK still has a small private rented sector – only about 10% of all homes are privately rented today. This is very small by current European standards and is low compared to the UK’s 50% post war level.
Independent surveys continue to show that increasing numbers of people prefer to rent property even if they could afford to buy - and for these reasons alone we DO need a really well regulated private rented sector.
I would say that most new regulations that landlords have had to face over the last few years have been for the greater good of society (though The Licensing of Houses in Multi Occupancy or HMOs
could be improved) and the tenancy deposit schemes are still too clunky.
The new recommendations for Sale and Rent Back are a welcome addition, will make for good regulation and will make fewer people say that landlords should be shot at dawn.
ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
I’m David Lawrenson of LettingFocus.com - landlord experts.
I’m the author of “Successful Property Letting” which for the last 3 years has been the UK’s top selling property title - Buy Successful Property Letting - How to Make Money in Buy to Let.
The new edition is fully up to date with all the recent changes to tenancy deposit schemes, HMOs, licensing, capital gains taxes and it has new sections on sale and rent back.
I’m an expert freelance property journalist, property speaker and a well known buy to let blogger
I contribute to newspapers and a host of property websites, write a number of columns in the press and I provide general property education, training & advice for anyone looking to buy property for themselves or to let out.
In my work as a consultant I help private individuals with any aspect of buying property or buy to let. What’s unique about lettingfocus.com is that we are independent property mentors because unlike most people in the buy to let and property “advice” business we are not linked to a property company, developer, agent or bridging loan financier and do not receive commissions from any of these sources.
We simply give one to one unbiased advice and are often asked to evaluate other property investments.
In my corporate consulting role, I also advise banks, building societies, housing associations and web portals with their buy to let and property products and services.
You can read more of my blog & find details of my networking, advice and property training programme at my website.Copyright: David Lawrenson 2008. This blog is updated once a week. WANT TO BE KEPT UPDATED WITH OUR LATEST BLOGS?
It’s easy.
Go to the bottom of this post, and click on “Link to this post”
Our home blog page should then open & you should then see my smiling profile. Then page all the way down and on the bottom right it will say “Site feed” - click there and away you go.
You then just copy the link that comes up into your News Reader or News Aggregator. Even a non techie like me managed to do all this.
Please note if you have a website & are thinking of reproducing material here - that’s fine but we DO require the full links shown in each blog to be included including also the links in the section “ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON”
Please Contact Us button at our main site http://www.lettingfocus.com/ if you have any queries about this.
Labels: buy to let mortgages, mortgage fees, mortgage finance, sale and rent back
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