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LettingFocus

Unbiased buy to let, property investment and letting coaching, mentoring, advice and seminars for landlords from top selling property author and media commentator.

PRS Access Schemes, Build to Let and the Rugg Review. LettingFocus Surveys the Wreckage

Reading the housing section of the Labour party manifesto, one can see that the PR campaign that the British Property Federation (BPF) and their members waged on Labour Grandees has paid off in terms of Labour support for “Build to Let,” which for the uninitiated, is where the Government tries to open up the private rented sector (PRS) to big property firms and institutions.


Curious Move – And What Would Julie Rugg Say?


As I have said before, this is all very curious because Labour has decided to ignore Julie Rugg and the finding of the report they themselves commissioned.

Just to remind you, the Rugg Report said that those small pesky private landlords do a better job of being a landlord than the big boys. To quote her: “Bigger doesn’t necessarily mean better – as can be seen when you look at banks and utility companies. Small landlords are more flexible: they don’t necessarily feel that they have to put up rents year after year. I also think larger investors aren’t impressed by the private rented sector because they simply don’t understand it. Indeed, there is a complete dearth of management skills in the corporate sector” (Julie Rugg quoted in “Residential Property Investor” the RLA magazine March/April 09 edition.)


Fast Growing PRS


And with the private rented sector growing from 8% of all housing stock to 14% plus over the last 20 odd years, you could add that the individuals who make up the bulk of the UK’s army of private landlords is doing quite well on their own and is also coping rather well with the current level of reduced mortgage availability. Read this piece for more on how well they are doing right now: http://bit.ly/dkoFz0

So, like me, you may be wondering, why does the Government need the big property firms to come in and join the private rented sector party? (And, no the answer is not to do with payback for donations to political parties.)


More Stock Needed in the PRS


Well, I guess one answer is that we need even more stock in the private rented sector. (Everyone now accepts that the Thatcher claim that most of us could be homeowners was always utter nonsense.)

The Government will certainly understand this need for more stock as it faces an ever mounting bill for Local Housing Allowance as more tenants - who would in times long gone, be housed in council houses - must now be housed by landlords. And so the Government clearly thinks: More stock in the PRS equals lower rents equals a lower local housing allowance (housing benefit) bill for us to have to foot.

And that’s all true. We do need more houses in the private rented sector. But what I’m not sure about is whether the big property companies and the institutions are the best people to provide it.


Tax, the PRS and Build to Let


It seems that the institutions and big property firms worry greatly about trying to get the Government to give them suitable tax breaks so they can make investing in the private residential sector or "build to let" work for them.

Now, we know the money is there to be made in the private rented sector. (At www.LettingFocus.com we show both corporates and private individuals how to do this.)

But the institutions that wish to join the party and invest, first need to understand how to maximise the "tenant asset" - and that is all about getting the right tenant in the first place and then providing a high level of service focused on their needs. If they can understand that part of the work and learn to get it right (doable but not easy), they can make money in the PRS without recourse to special tax breaks or other unique treatments doled out by Government. (Indeed we argue that these tax breaks are unfair on the UK’s small scale landlords.)


Who Will Help the Big Property Firms Get It Right?


Who can help these big institutions and property firms, who are much more used to commercial property, get the knowledge to allow them to be good in the private rented sector?

Well, managers of public housing assets (such as housing associations) could be candidates for this role, but I would suggest that managing tenants in the private rented sector is a tad different and calls for a slightly different approach and treatment.


At LettingFocus we work as consultant in the area around Private Rented Sector Access Schemes for the local authorities and housing associations. We know these bodies do a lot of good work in this area but we have found that they lack a really close understanding of the needs of landlords and are often inefficient in recruiting them. Indeed, the way many private rented access schemes are currently set up are a long way from being the optimum method of recruiting landlords and in some cases are incredibly wasteful of taxpayers’ cash.


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 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 broadcast 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 either a one-to-one mentoring / coaching basis or through our occasional group seminars. With no links to property firms, developers or bridging loan providers we can advise on where and what type of property to buy for investment and when to buy it. We also show you how to manage tenants properly.

AT OUR WEBSITE LETTINGFOCUS.COM:

THE HOME PAGE OF THIS BLOG click here: Blog

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


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Copyright of Blog:
David Lawrenson 2009. This blog is updated roughly once a week usually on a Monday or Tuesday.

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Local Letting Agency and PRivate Rented Sector Access Schemes. Local Authorities Engage With Landlords by Letting Focus

One of the findings of the Rugg Review into the private rented sector was that local authorities should be actively encouraged to explore ways in which to “improve their engagement with private landlords” in their area.
Hooray, say many landlords.
The fact is that local authorities need landlords to house people on Local Housing Allowance (Housing Benefit) and whilst some councils have a negative view of landlords, some other local authorities actually do a very good job of trying to think of innovative ways to get landlords on board in such a way that the landlords worries about tenant default are reduced.
But even in the better local authorities, all too often, the ways and means that the councils have devised are not really what landlords want.

Understanding the Needs of Landlords
At LettingFocus we think we understand the needs of landlords.
As a landlord for over 20 years and the author of the UK’s best selling book on property – which happens to be all about the subject of letting from a landlord point of view - I do claim to have an understanding of what landlords actually need.
And since the Rugg Review was published a growing number of local authorities have found me via the internet and asked to consult with them and benefit from my advice on how to set up Local Letting Agency Models and Choice Based Lettings schemes so they can better engage with landlords and meet their needs.
I do find public sector employment / consulting contracts and the rather long winded process of being hired as a consultant by a local authority rather daunting - but it is fun and it is nice to do something which is for landlords and the social housing sector and which will, I hope, be to the benefit of all.

Local Housing Allowance Payments and Default
Of course one of the problems for local authorities is that the present government decided that Housing Benefit would in future (unless the tenant was classed as vulnerable or other special circumstances were in place) be paid to the tenants rather than direct to the landlord.
(This was to encourage tenants’ financial responsibility, since you ask.)
Paul Shamplina of Landlord Action at our seminar last night said that this move has led to a huge increase in his workload of evicting non paying tenants because all too often tenants spent the money on other things rather than hold it and pay the rent due to the landlord.
As a result, a large number of landlords have completely stopped letting to people on Housing Benefits.
The Conservatives have said they will, if elected; once more offer the option of having Housing Benefit paid direct to the landlord.

Housing Benefit Bill Growing
All the while, the bill for Housing Benefit is growing and lots of landlords are still be prepared to let to people on benefits, despite the higher default risk.
(They know that good Housing Benefit tenants tend to stay a long time and often make model tenants. The hard bit is finding such good tenants.)
With the continued growth of people on Housing Benefits, it is imperative that local authorities do all they can to make letting to people on benefits attractive to landlords.
Through my consultancy with RSLs and local authorities I can help them with this objective.

ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
We are LettingFocus.com - the landlords’ expert and I’m David Lawrenson, the author of “Successful Property Letting” - the UK’s top selling property and buy to let book for the last 3 years.
I have been a landlord and property investor myself for over 25 years.
At LettingFocus we offer independent unbiased seminars for buy to let investors and landlords as well as one to one advice covering all aspects of being a landlord and investing in property.
I am able to give unbiased independent advice on where to buy (which areas), what type of property to buy, when to buy and how to buy property at a low price. I can also explain how to reduce the risk of getting a bad tenant.
I also do a lot of corporate consulting work in the private rented sector with banks, property websites and local authorities and RSLs - helping with their buy to let and landlord facing products and services.

CHECK OUT THESE PAGES AT OUR SITE LETTINGFOCUS.COM:
Our Events only take place twice a year.
For our NEXT SEMINAR AND NETWORKING EVENT for Landlords and Property Investors click here:
Next Property Investing Seminar and Networking Event
We have GREAT OFFERS for landlords too, Click here: Services and Products for Landlords to see our Landlords Resources (Useful Links) page. (Selling services to landlords and property investors and have a national coverage? You could be a partner, please get in touch!)
For general info on our SEMINARS AND CONSULTING click here: Property Seminars, Networking Evenings and Consulting
ONE TO ONE CONSULTING click here: Property Consulting
CLIENT TESTIMONIALS from past customers click here: Testimonials
BUY THE BOOK click here: Buy the Book at Amazon
THE HOME PAGE OF THIS BLOG click here: Blog
THE HOME PAGE OF OUR MAIN SITE click here: LettingFocus Home Page
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IF YOU HAVE A SITE WHY NOT LINK TO THIS BLOG OR OUR WEBSITE?
Copyright of Blog: David Lawrenson 2009. This blog is updated roughly once a week usually on a Monday or Tuesday.

Related Article:
http://www.lettingfocus.com/pages/myarticles_Local_Housing_Allowance.html

Also, have you seen this article on Choosing a Letting Agency?
http://www.lettingfocus.com/pages/myarticles_ChoosingaLettingAgency.html

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FSA Regulation of Mortgages. Landlords News by Letting Focus

I see the FSA is proposing changes to the regulation of mortgages that will probably ban self certificated (or so called, “self cert”) mortgages.
These are mortgages where the borrower is granted a mortgage without having to prove their income.
These types of mortgages always came with a higher interest rate and a higher loan to value requirement than would be the case on a standard residential mortgage.
Self cert mortgages have always been very useful for the self employed, who whilst their earnings might be OK, had not yet filed three years of accounts to make a would-be mortgage company happy enough to give them a mortgage.

Poor Mortgage Lending In the Past
As you will know from reading this column I think that the control of mortgage loans, especially on buy to let has been very poor over the last 10 to 15 years.
You will know that I am especially critical of the poor lending decisions made by lots of banks and building societies where they lent money to new and inexperienced landlords to buy duff new build identikit flats - many of which were hard sold by property clubs.
My contention was that it should have always been pretty obvious that the value of many of these flats would plummet as a result of oversupply.
And sure enough, plummet many of them did!

Blanket Ban on Self Certificated Mortgages is Wrong
The blanket banning on self certified mortgages will be, in my opinion, the wrong move.
There are lots of self employed people who earn well but cannot yet prove 3 years of income. (Yes, yes, I know, some of these are people who let’s say are less than straight about their earnings but that's a minority.)
A more sensible way forward would have been to have said that a self cert mortgage can only be granted where a borrower puts in at least 30% of the equity – i.e. the maximum loan to value is set to 70%. (Actually, in these post credit crunch times, that is pretty well what it is right now.)
That would at least have ensured that self cert mortgages were only being issued to people who are not “men and women of straw.”

Bad and Good for Landlords

One other proposal from the FSA is that buy to let mortgages could be regulated in the future in the same way as standard residential mortgages already are.
We don’t have all the detail yet so we will just have to see how this will work out.
But I do fear the FSA may be thinking that a minimum personal income requirement could be required for all buy to let loans in the future.
This would be bad for landlords of more limited means who may find themselves shut out of entering buy to let. That would be shame.
However, if the banning of self certificated mortgages means more self employed people are frozen out of getting a mortgage that could increase the demand for rented accommodation from that particualr group of people.

No one at Home at the FSA?

Last December I had dinner in Pizza Express in Canary Wharf and from their restaurant you can see right into the FSA’s offices.
It was 6pm and naturally all the lights were blazing away (which seems the norm in public sector buildings) but even at 6pm there was no one at home. Everyone had already left for the evening. Was there anyone at home when these proposals were put together?
Rather than increased regulation of buy to let mortgages the authorities would have achieved more by banning some of the more reckless property syndicates who hard sold lots of duff new build flats to inexperienced would be landlords.

Make Property Letting Sippable
As you know from other posts I don’t think much of the government’s idea to crack on with their “build to let” ideas.
“Build to Let “is the daft idea that the government has where they dole out juicy new tax breaks to city institutions and big property firms to encourage them to build and manage rabbit hutch blocks for tenants – think Identikit Flats Mark 2.
(The Rugg Review was pretty much against this not least because small landlords are doing very well, growing the sector fast and have largely happy tenants - but the government, it seems, can’t wait to get their big property pals in on the buy to let act so has ignored Rugg on this.)
Over a pie and a pint, a follower of mine, a Mr. Peter D, said the government should instead dust down their plans to allow people to invest in certain types of property via a tax efficient SIPP.
A very good idea Peter and if only us small landlords and our representatives could afford the canapes that the city institutions can provide, maybe the government would listen to us.

ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
We are LettingFocus.com - the landlords’ expert and I’m David Lawrenson, the author of “Successful Property Letting” - the UK’s top selling property and buy to let book for the last 3 years.
I have been a landlord and property investor myself for over 25 years.
At LettingFocus we offer independent unbiased seminars for buy to let investors and landlords as well as one to one advice covering all aspects of being a landlord and investing in property.
Unlike many in the still largely unregulated buy to let and property “advice” business I am not linked to a property company, developer, estate agency or bridging loan provider.
As such I am able to give unbiased independent advice on where to buy (which areas), what type of property to buy, when to buy and how to buy property at a low price. I can also explain how to reduce the risk of getting a bad tenant.

OUR SITE LETTINGFOCUS.COM:
Our Events only take place twice a year.
For our NEXT SEMINAR AND NETWORKING EVENT for Landlords and Property Investors click here:
Next Property Investing Seminar and Networking Event
We have GREAT OFFERS for landlords too, Click here: Services and Products for Landlords to see our Landlords Resources (Useful Links) page. (Selling services to landlords and property investors and have a national coverage? You could be a partner, please get in touch!)
For general info on our SEMINARS AND CONSULTING click here: Property Seminars, Networking Evenings and Consulting
ONE TO ONE CONSULTING click here: Property Consulting
CLIENT TESTIMONIALS from past customers click here: Testimonials
BUY THE BOOK click here: Buy the Book at Amazon
THE HOME PAGE OF THIS BLOG click here: Blog
THE HOME PAGE OF OUR MAIN SITE click here: LettingFocus Home Page
To JOIN our Free QUARTERLY NEWSLETTER simply send an email to [email protected] - Please note we WILL NOT send spam or sell our mailing list to advertisers!

Featured Article: We have recently updated this article on Local Housing Allowance and Housing Benefit: http://www.lettingfocus.com/pages/myarticles_Local_Housing_Allowance.html

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Copyright of Blog: David Lawrenson 2009. This blog is updated roughly once a week usually on a Monday or Tuesday.
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Rugg Review Government Response by Lawrenson of Lettting Focus

In this bog I will look at the Government Resposne to the Rugg Review
But first, did you know that 90% of UK households are potentially eligible to access state aid to cover their housing costs?
I have to say that surprised me too when I read it in a piece of research from Knight Frank.
So, no longer do you need to be a key worker to get help. Knight Frank say that £60,000 of household income is now the accepted limit for eligibility for access to most shared ownership schemes and they add that there is talk of this limit being raised to £74,000 in London where Mayor Boris Johnson has “equated eligibility to cover everyone paying basic rate income tax.”

Front of Queue
Of course, just having a household income of £60K won’t cut you to the front of the queue for one of the many schemes.
A friend of mine who tried to find out more was told that most of the schemes were already fully “sold” out of cash within a very short time of getting the money in from the state.
Mmm, what a strange state of affairs it is when money for housing is rationed to those fastest off the mark for one or other of the subsidised or shared ownership housing schemes?
It all show that we really need a fresh debate and new thinking on housing.

Government Response to Rugg Review and Consultation
Talking of fresh thinking, if you ever have a few hours to spare you really ought to read the generally excellent and well observed Rugg Review into the Private Rented Sector.
For the most part it is full of good ideas and reasoned arguments.
Also, worth a read is the Government’s Response to the Rugg Report and Invitation to Consultation. Put "Government Response to Rugg Review" in your Search Engine.
Whilst I liked the Rugg Review, I did have a few issues with the Government’s Response to it.
In particular, the Government does not think that landlords have to “wait too long to get a possession hearing.”
Well that is a matter of debate.
What they don’t seem to understand is that once a landlord has an order in his favour, it does not end there.
If the tenant does not go by the end of the period in the possession order notice, then the landlord has to appoint a bailiff – and this all takes a long time.
In the experience of one of my clients (who by the way got his tenant from hell from one of the many fly by night letting agents), at least another 6 weeks can be added to the process.

Section 21 and Section 8
Also, they don’t understand that you can only use Section 21 (the so called accelerated possession procedure) when the fixed term in a tenancy agreement has ended.
If it hasn’t ended and is not is nearing the end soon, then you must use the Section 8 notice and normally you cannot even start proceedings until at least 2 months is overdue in rent.
This actually means that from the last time you received rent to having a bad tenant forcibly evicted by bailiffs can easily take 5 to 6 months. I’m sure most people - even the Government - would accept that this is an unreasonable period of time.

Government Fixation with "Build to Let" Won’t Die
Also, unless I have got this wrong, I recall that Dr Rugg recommended against the involvement of big institutions in “build to let” given that she found that small landlords did a pretty good job as it is on the whole. (All we need to do is weed out the rogue landlords – a thing we are all agreed on!)
So, given the good growth of private rented sector (from 8% of all housing stock in the late 80s to about 12% now) and the generally happy view that most tenants have of their experiences in it, why does the Government seem to be so determined to get the big institutions involved in the sector?
Is there something we should know? Is it just me, but I always smell a rat when a Government wants to give something to big business even when its own advisors have indicated it may not be such a bright idea.
There goes the gong for my dinner. Must go!

ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
We are LettingFocus.com - the property experts and I’m David Lawrenson, the author of “Successful Property Letting” - the UK’s top selling property book for the last 3 years.
What’s unique about LettingFocus is that I offer independent unbiased
property seminars covering property investment and letting because unlike most people in the buy to let and property “advice” business I am not linked to a property company, developer, agent or bridging loan financier.
I can tell you where to buy (which areas), what type of property to buy, when to buy, how to buy property at a low price, how to make sure you get tenants who are going to pay the rent and how to manage a rental property to make money.
I can also comment on how to avoid getting a bad tenant.
I can answer most questions on letting property because I have been a landlord and property investor myself for over 25 years.

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