After years when everything in the property investor’s garden seemed rosy, issues like tax changes, and more rules and regulations – and now Covid-19 – are prompting some investors to consider selling their buy to let property.

But if that’s you …. Wait …. Stop! Here are 8 very important things you must check before putting your buy to let up for sale:

* What’s your motivation for selling?

Is your buy to let actually causing you practical difficulties? Is it actually losing you money? Or is it just a general feeling of despondency at being a landlord that is prompting you to sell?

Whatever it is, know your reason for considering selling up.

* What yield are you getting on your buy to let?

Knowing what your yield is can help put things in context …. you may well find it makes your buy to let more attractive than you thought. Yield percentage can be calculated by dividing the annual rent by the property cost x 100.

The fact is, even pretty low yields are multiple times better than the return even on the best paying savings accounts right now.

* What can you do to improve the situation, or turn things around?

Selling may not be the best answer, and in fact could be the worst. Could you raise the rent to help make things pay better? Could a new tenant be the answer? Could you rent out the property in a different way, eg. as a house share. Are there any ways you could cut costs? Could some professional advice on tax or ownership improve the outlook for your investment?

* Are you guilty of thinking too short term?

Remember, property is a medium-long term investment. By selling now you can miss out on a future, potentially attractive, capital gain.

Governments never last as long as the ideal lifetime of a property investment (15-25 years) so there’s every chance landlord/investor policy could become more favourable again in future.

* Will you be able to sell your buy to let easily, quickly, and an attractive/viable price?

Prices and buyer interest are holding up right now, but there’s no telling how long that might last.

It’s never a good idea to guess or saleability – take advice from a surveyor or estate agent.

* What will you do with the money?

Assuming there’ll be money left over from the sale of course. Is there any other way it could earn you a better return?

You might find this Property Insider report useful: Property over and out? So how else can you make a good return on your money?

* What other plan do you have for securing your financial future?

That’s assuming, of course, that you invested in buy to let – as many investors have – as a pension pot.

Again, explore all the options.

* What will your tax situation be? Is there a risk that an increased tax liability could make you worse off by selling your buy to let, not better? Always find out before you sell … not after!

Whatever you do it’s important not to make a knee jerk decision. Think everything through, do the numbers, and take professional advice if you need it. Think how your decision will play out in both the long and the short term.

Mark Hempshell is Editor-in-Chief of Property Insider.

The post 8 Questions To Ask Before Selling Your Buy To Let first appeared on Property Insider.

One way, in fact the very best way, to do this is to look at how you can increase your letting yields. Or in other words, how to make more money from the same property.

Fortunately there is not just one way to increase your buy to let letting yields, but a whole raft of measures that you can deploy. In this report we will look at some property investment strategies that will help improve your letting yields.

1. Simple but often overlooked – just raise the rent. Rent rises in the private sector have been low or static in many cases in recent years but now they are on the rise in most places. While no tenant welcomes a rent rise most accept that alongside everything else rents will rise. Landlords exiting the market means that some areas now have a shortage of rental property which is pushing rents up.

Check local rental levels and demand to see if this is practical. If you are looking to let a new or vacant property it could be worth a lot more than you think.

2. Buy property in cheaper areas. As a very general rule, where prices are lower rents are usually also lower but not proportionately so. So simple maths says that yields will be higher.

3. Buy in places where demand for property is high and supply is low. Chances are you’ll be able to let your property at a premium, raising yields.

Local agents are well placed to advise you where these areas are, and what types of property are sought after.

4. Invest in shared properties – houses of multiple occupation or HMOs. It pretty much goes without saying that the yield will be higher, usually substantially higher, than single occupancy properties.

5. Invest in property that can be let to students. Student property almost always returns a higher yield …. in normal times. Property let to overseas students may be capable of returning an even higher yield.

Here’s an Insider report on investing in student property.

6. If investing in apartments choose properties that are suitable for letting to two sharers, ie. two friends/colleagues (not a couple) because they have two adequately sized bedrooms.

When there are two people to pay the rent you can usually charge a premium.

This Insider report offers some more advice on increasing returns and lettability from apartments: Insider Tips, Strategies When Buying Buy To Let Apartments

7. Consider entering the Housing Benefit market. Apart from the fact suitable properties are usually in cheaper areas/lower priced yields are generally higher.

Also, consider letting to a local authority/housing association via a private sector leasing scheme. Although the rent may actually be discounted from market rent the reduction in management time and elimination of voids for the period of the contract may effectively serve to improve your return.

8. Consider accepting unusual or ‘difficult’ tenants, eg. those with inadequate/no/bad references – or even just those who have pets. As most landlords won’t accept these tenants and so these tenants have limited choices those landlords who do can often charge a premium.

9. Invest in property of non standard construction. Purchase prices are lower, often much lower, but the rents are the same – tenants aren’t really bothered what the property is actually built of.

This Insider report looks at this type of niche investment opportunity: Investing in property of non standard construction

10. Look at investing in property suitable for corporate lettings, ie. property let to companies to accommodate employees or visitors. Companies will often pay a premium for suitable accommodation. (Take advice from agents on suitable locations, suitable properties and levels of demand in that area.)

11. Consider property that can be let as a holiday rental for all or part of the year. Well managed holiday property should return a substantially higher yield.

12. Rent your property out on short term rentals, eg. daily, weekly or monthly. Consider doing this using a holiday/short term rentals site such as Booking or AirBNB.

In general terms, the shorter each individual let the higher the yield. For example, an apartment let long term at £800 a month could let at £800 a week on a short term basis.

In property, investments that afford a higher yield than a simple, single family, long term buy to let are not actually that hard to find. In fact, those kinds of lets often offer the lowest yields.

However, there’s usually a price to pay for enjoying higher yields – such as more work or a greater risk. Be sure you understand all the pros and cons before investing in higher yielding property.

Mark Hempshell is Editor in Chief at Property Insider

The post 12 Ways To Improve Your Letting Yields first appeared on Property Insider.

First of all let us look at a few fundamentals which underpin the buy to let market:

* Interest rates. Have always been a key driver in the property market. But it looks as though investors will be able to enjoy a low interest rate environment, though not necessarily quite so low as today, for at least the next decade.

So cheap investment money is here to stay – for those who can access it.

* Landlord legislation …. and taxation. After a regime of limited regulation and favourable taxation over the last couple of decades landlords now seem to be faced with a much less favourable climate.

Investors will need to watch what the politicians are doing very carefully. How far can policies that are unfavourable to investment go on before the supply of rental accommodation starts to be seriously affected?

*Demand for rental property. Will keep on growing as the population rises. London and the south east will bear the brunt. London’s current 8.3m population is expected to grow to 9.4m by 2022, and will still keep on rising fast.

Ongoing levels of migration are going to be key here, with the UK’s future outside the EU the key issue here.

* Supply of property. Bound to become even tighter. Governments might promise more housebuilding but new homes need new building land, developers willing to pursue and finance schemes …. and sell them at a price people can afford to pay. That won’t be easy, especially in locations where demand is highest.

The build to rent (BTR) sector needs to be considered here. Some cities are seeing significant BTR development.

* Property prices. Pretty much every forecast out there says that house prices will continue to rise. A rough forecast-of-forecast seems to suggest prices will be on average 20% higher in high-demand areas including the south east, and 10% elsewhere, by 2025. In the process the supply-demand balance will worsen.

So what does Property Insider guess, and it is only a guess, the UK buy to let market will be like in ten years time?

* There will still be even stronger demand for property to rent than now. Much is said about ‘generation rent’ – people who only rent because they can’t afford to buy. But even if you take those people out of the equation demand is still huge from low income workers, migration, transient workers and of course students.

Landlords who are still in the market in 2025 won’t have any difficulty finding tenants.

* Rent increases will be a tricky one to forecast. Rent levels in 2025 will be strongly linked to what the economy is doing by then. Wage rises, especially in the public sector, are likely to be limited …. together with social security benefit rises. But what impact will the new ‘more generous’ national minimum wage have on how much rent tenants are willing to pay?

* Property prices will rise as supply becomes tighter, even if house building accelerates and as a result it won’t be possible to return a good yield on just any property. Landlords will need to invest more selectively to ensure a good yield.

* The regulatory and taxation burdens of running a rental property will be significantly higher than today. Extra costs will be partly covered by increased rents, but probably not entirely. Landlords will need to monitor their profit margins carefully.

* There will probably be fewer landlords overall. Accidental and casual landlords will exit the market (maybe even leaving their properties empty and reducing the supply of rental property). The landlords who remain will have the opportunity to own more properties and benefit from economies of scale.

By 2025 Insider thinks that the buy to let market will be very much alive and kicking. But landlords who are in the buy to let market in 2025 will need to be better informed, better advised, more creative and more professional than today. They will need to look at different ways of making money from their property – and adding value – other than just the standard family or professional let, and be more efficient. Those who rise to the challenge and see letting as a business and not a sideline or just a way of saving for a pension will be best placed to succeed.

The post Where Will Buy To Let Be In Ten Years Time ? first appeared on Property Insider.

But then the property business has always been challenging. Over the last few years, property has perhaps been a bit too easy …. something of an artificial situation …. where making money in property has been almost as easy as falling off the proverbial log. Let’s be honest that’s not how things work in the real world. Property is a business, and any worthwhile business calls for time and effort if it is to succeed.

For some investors, the future could even offer more opportunities in buy to let, not fewer.

In the future ….

Being frank now, property still has a lot going for it as an investment. The savings interest rate isn’t going to rise much, if at all, for years. Unless someone else is footing the bill, pensions aren’t all that attractive as an alternative way to save for the future.

Take a look at this report in which we review the alternatives to property investment.

Here are some other tips that might help you survive and thrive in property in 2019 and beyond:

Brexit. In reality Brexit is only likely to affect the market in the short term. In any case, the impact won’t necessarily be negative for investors. Look out for any economic stimulus measures intended to support or boost the economy, which may have a positive impact for investors.

Cash buyers will increasingly have the upper hand. Something of an odd situation in a climate where borrowed money is so cheap. They won’t be affected by the restrictions on mortgage interest relief.

Highly geared investors are likely to come under pressure – and perhaps should look at how (and even if) they might restructure their portfolios.

It’s important to be really selective about what you invest in. Unlike the ‘golden days’ of buy to let when pretty much any property was profitable in 2019 and beyond only well chosen, well located buy to let properties will be profitable.

Yield is still important. But it’s only part of the story. Low yielding properties can still be lucrative if there are good prospects for capital appreciation …. and if they’re well managed. In the past, investors nearly always invested for capital appreciation and as a ‘safe haven’ for their money.

Be on the look out for risk factors, which could make a buy to let marginal …. or even unviable. These include: Properties in high priced areas. Types of property and areas with slow demand. Areas with too much supply of rental property – watch for competition from large scale new developments including build to let.

Buy at under market value …. or even less. As long standing investors know most of your profit is (or should be) made when you buy not when you sell.

Auctions will become more and more useful to investors looking to pick up keenly priced property. And ex-local authority or property of non-standard construction are most easily available at below market value

Look for opportunities to add value. Renovating a property, or extending it, to provide more lettable accommodation, or accommodation that will produce a higher rent (as well as add capital value), is well worth considering.

Remember, this is exactly what investors used to do to make money, before buy to let became the ‘easy’ option.

Look for opportunities to maximise yield. This is most easily done by looking for buy to let opportunities other than a single family or professional buy to let. Letting shared accommodation is one way of doing this. Student property is another type of property that offers higher yields.

Other action to take …. to ensure buy to let success in 2019 and beyond:

* Prepare and plan. Know what challenges buy to let faces, and how you will deal with them. Have a plan of action.

* Arrange your financial and tax affairs efficiently. Take professional advice where needed.

* Look at whether you should raise your rents. The ban on agency fees could see rents rising across the board, making this a very straightforward option. Tenants aren’t keen on rent rises but, as the price of everything else rises, expect to have to pay more.

* Control your costs, including maintenance and management.

Consider if self management might be right for you, to save money on agency and management fees.

* Should you actually expand your investments? Owning more properties, not fewer, could allow you to benefit from economies of scale …. including potentially more tax efficient structures such as owning through a limited company.

Oddly enough, landlords with larger portfolios are likely to be in a much better position to succeed than single property ‘pension pot’ or accidental landlords.

Above all, be positive! Doom and gloom type thinking tends to become a self-fulfilling prophecy. The property and the investment markets are changing. And, as with anything else, those who see the opportunity in change usually do best.

In property it is very much a case of as one (buy to let) door closes another door opens!

Mark Hempshell is Editor in Chief of Property Insider.

The post Making Money In Property In 2019 …. How You Can Survive & Thrive As A Landlord first appeared on Property Insider.

(Insider wonders in what other area you’d be charged more simply because you’re a property investor. ‘New Range Rover Sir? Certainly, but that’ll be an extra £2,560 because, err, you’re trying to invest sensibly and provide for your future.’)

So what’s the solution for intrepid property investors? Give up and sell up …. or a more positive approach?

At Property Insider we firmly believe now is definitely not the time to roll over. In fact, with demand for accommodation soaring while supply will most likely remain constrained the future still looks very positive for property investors who keep going.

What you do need to do however is address the new property investment climate, and look at what you can do differently or better in future. So in this report we will look at a few ideas for ways landlords can survive and even thrive in these seemingly landlord-unfriendly times:

* Cut out the deadwood. Review your portfolio. If any properties don’t fit in with your longer term plans –or if they are producing a poor return – consider whether you should sell them sooner rather than later.

* Consider whether you need to, or could, refinance your portfolio. Refinancing can be a relatively quick and easy way to make more money from your investments that doesn’t involve any physical changes to your portfolio.

Take independent expert advice on the best way to do this.

* Consider if, and whether, you should raise your rents. Many landlords have been content to leave their rents unchanged over the last few years. But at the end of the day rent appreciation should be a part of every property investment.

As a first step, check asking rents for similar properties in the local area to get a handle on whether you may be underpricing your property.

Remember, in every business, increased costs and taxes are always ultimately borne by the end consumer. Property is no different in this regard.

* Look at whether you should get involved with higher yielding residential property investments. For example, HMOs, student property or holiday property typically returns higher yields (although in return requires more work) than standard buy to let property.

If you are interested in this route look at if your existing property could be converted or, alternatively, at making a new purchase.

Here’s a report on how to achieve higher rental yields.

* If you are looking to buy more property, be more discerning about what you buy. Over the last few years you could pretty much buy any property and produce a good yield by renting it out – as well as offering good prospects for capital appreciation. Being frank though, these it’s probably unreasonable to expect that to be the case.

In the current climate achieving a good yield is more important than ever, and potentially more important than prospects for capital appreciation. When buying, only buy properties where the yield figures really stack up.

Generally, cheaper properties in cheaper areas offer investors higher rental yields.

For new purchases bear in mind that although the 3% stamp duty ‘premium’ seems high property price rises in most areas of the UK over the next year alone should comfortably match that.

* Look at how you could cut the costs of managing and running your rental properties, in order to mitigate the additional statutory costs and taxes. Could you do it yourself more cheaply than an agent? Could an agent do it more cheaply than you can do it yourself? How could you use new technology to become a more efficient landlord and investor?

* Look at how you own your properties, and whether you should change this approach for existing or new property investments. For example, how you could involve family members or a company to become more tax efficient. For the best results, take the best professional advice.

* Investigate other ways to make money in property. Buy to let has been the number one choice for a decade or more but, 30 years or so ago, it hardly existed at all – shrewd investors still managed to make money in property but used other approaches instead.

Alternative opportunities to consider include adding value to a property, including property development and property renovation.

* Keep tabs on alternative ways to invest in property. Although fairly rare at the moment these are likely to enjoy a higher profile in future.

For example, ownership vehicles like syndicates could become more attractive. Investing in property via crowdfunding may become more popular. Watch this space!

The post Now that the Government officially hates landlords, what are the ways to survive and thrive as a property investor? first appeared on Property Insider.

“For some years now many of our franchisees have worked with the Dogs Trust, which has produced some strict guidelines for landlords and tenants on the Lets with Pets section of their website,” says Dorian Gonsalves, CEO of Belvoir. “By applying this advice, together with some common sense, many of our landlords are very happy to accept tenants with pets. From a business point of view, with over 12 million pet owners in the UK, a landlord would be missing a trick to exclude this huge section of the market as potential tenants.”

Belvoir’s top tips…

1.Check out the Lets with Pets section of the Dogs Trust website (http://www.letswithpets.org.uk/) to find everything you need to know about privately renting with pets.

2.Be aware that some landlords are unable to accept pets because of leasehold or mortgage restrictions, so be as flexible as you can about location and the type of property. Be realistic, and do not expect a landlord to accept a large dog such as a husky into a small apartment where the dog will not have enough space and could develop behaviour problems.

3.Try to find a professional letting agent that supports the Lets with Pets scheme and can help you to find the perfect property for you and your pet. To avoid disputes at the end of a tenancy ensure that a full inventory of the property is undertaken before you move in.

4.Write a CV for your pet. Include details of his age, breed, background, whether he is neutered, any training he has had, whether he is microchipped and regularly treated for fleas and vaccinated against disease. Make it clear how long your pet is likely to be left alone each day, and if necessary arrange for a dog walker to exercise him whilst you are working.

5.If your pet has already happily lived with you in a rental property, ask your previous landlord to write a reference that you can show to a new landlord. If possible, invite your new landlord to meet your pet. This is a perfect opportunity to prove that you are a responsible owner.

6.Be prepared to pay a higher deposit to cover the cost of any damage to a property or furnishings. You may also be asked to take out some type of insurance to cover the possibility of damage.

7.Offer to pay for the property to be professionally deep cleaned at the end of your tenancy, so that it is restored back to its original pre-tenancy condition.

To find your nearest Belvoir office please visit www.belvoir.co.uk

The post Six Tips From Belvoir To Help Pet Lovers first appeared on Property Insider.

Buy to let in the UK will see investors look to smaller regional areas for new build developments. These locations offer lower prices and good prospects thanks to vast multi-million-pound regeneration being pumped into the UK’s top cities. This regeneration is set to alleviate the north-south divide. So where are the best places to buy to let 2018?

The Best Places to Buy to Let 

It’s time to set your sights on buy to let property for sale in the Northern Powerhouse. The continued focus on northern towns is largely thanks to the Government’s Northern Powerhouse investment. Chancellor of the Exchequer, Philip Hammond, has declared: ‘If the Northern Powerhouse were a country, it would be among the biggest economies in Europe.’

Recent reports have shown the UK residential market is localised with stronger growth in the Midlands, East of England and the North West, a continuation of the trend that has emerged this year with northern postcodes dominating the buy to let yield tables.

Liverpool postcodes dominate the top 25 areas of the buy to let yield list. In addition, Manchester makes appearances in the top 25. Research has consistently shown that northern cities offer the best rental yields in the UK. Yields can often reach as high as 7% in these areas, which is greater than that found in parts of London.

According to recent figures, more people than ever before are leaving London than are moving there. Many are now looking to the more affordable and up-and-coming cities of the north. Accordingly, investors are following in search of new builds for sale. Now, north-west and north-east homes are set to rise at twice the London rate in the next five years.

Stephanie McMahon, Head of Research at Strutt & Parker, postulates Central London’s price-drop may continue until 2020. She states, ‘Regional hotspots are likely to be the drivers of UK house price growth in the meantime, with 18% growth forecast for the UK over five years to 2022’.

Why Buy to Let UK? 

Asking yourself, is buy to let worth it? Property is one of the only asset classes to offer two different returns on investment – enhancing its stability and reliability. Investors receive consistent rental returns provided every month during the time a tenant is residing in the property. In the long term, investors additionally receive capital appreciation.

RWinvest are one of the leading property investment companies in the UK. Their expert team have a wealth of knowledge about the latest buy to let property for sale with the best buy to let rates. Their portfolio includes copious new builds for sale across the Northern Powerhouse.

New Builds for Sale

The new builds for sale in RWinvest’s portfolio offer some of the best buy to let rates in the UK. Rental returns are often between 7-8%. Capital appreciation can also elevate these rental returns over the long term, which is a likely scenario with the significant growth currently taking hold in the northern cities.

For more information on buy to let investment opportunities in Liverpool and Manchester, contact RWinvest on Tel: +44 (0)151 808 1250, Email: info@rw-invest.com or visit the website at: www.rw-invest.com

Guest post by RWinvest

The post Where Are The Buy To Let UK Hotspots In 2018? first appeared on Property Insider.

One of the first experts to speak was Carla Sateriale, Senior Policy Advisor for UK Finance. Carla and her team represent the first charge mortgage market, and as part of that, they’ve maintained a good dialogue with the Bank of England.

Consequently, Carla was able to share some extremely interesting insight into the latest lending changes for landlords, including:

• Why the PRA (Prudential Regulation Authority) is targeting buy-to-let lending
• Why the PRA is targeting mortgaged portfolio landlords in particular
• How the typical landlord will be affected by these changes

Here’s what she had to say:

Why Is The PRA Targeting Buy-to-let Landlords?

We’ve already seen that the Treasury isn’t shy about introducing tax changes that specifically target landlords. But why did the PRA in further rules? Isn’t the central bank supposed to be apolitical? As an arm of the Bank, shouldn’t the PRA also be independent?

Carla took us back to 2015, when the PRA started to conduct an internal review of the buy-to-let mortgage sector. What they did was examine the growth plans of 31 lenders, which made up 90% of the market. They looked at the medium-term plans of these lenders for expanding their net lending, and the underwriting criteria that was needed to do that.

At the time, it was common underwriting practice for a loan to have a 125% interest cover ratio, under a 5% interest rate.

Carla explained that by extrapolating the growth plans of the market as a whole, the PRA concluded that there was a significant risk that lenders would have to relax their underwriting standards in order to hit their growth plans.

This prompted the micro-prudential intervention that we saw introduced in last year. Before we needed to ask, Carla explained that a “micro-prudential intervention” means that the rules are about ensuring mortgage lenders can withstand economic shocks.

She said: “It has nothing to do with protecting borrowers, or fairness in the housing market—it’s about ensuring that the debt banks are issuing is robust.

Now, the obvious follow on question is—was there data to justify this intervention? Here I’m going to give you some background on the market context.”

Buy-To-Let Vs Residential Loans

If you’ve been in the market for buy-to-let mortgages in the past several years, no doubt you’ve noticed that there is substantially more choice in both products and lenders now than there was a few years ago.

The graph below shows the breakdown between buy-to-let loans and residential lending loans, using data from the company, Moneyfacts. The pink line in the chart above shows the number of buy-to-let products, plotted on the right-axis. Although the data only starts in 2013, you can see pretty clearly that the number of products available has grown massively recently—and Carla explained that this growth reflects the importance of the property investor in helping to drive net mortgage lending.

What you might not be aware of however, is that, for mortgage lenders, buy-to-let played an ever more important role over the past few years. The height of the bars in the chart shows net lending each quarter over the past decade. The bright blue portion shows how much was due to buy-to-let lending, while the indigo portion shows how much was due to residential lending.

Now, you can see in the quarters before the financial crisis, net new lending was driven mostly by residential lending. But since then, residential mortgage lending has only made a tiny contribution to net lending—and in many quarters, making a negative contribution.

So from a mortgage lenders’ point of view, buy-to-let has been absolutely crucial for growth. However, this also illustrates the PRA’s concern.

So, this, in a nutshell, is what’s concerning the PRA.

Why Are Portfolio Landlords Being Singled Out?

The bigger question for most of you is, why are portfolio landlords, with four or more mortgaged properties, being singled out in these new rules? And why was four chosen as the threshold and not, say, ten properties?

Carla explained that essentially, “the reasoning behind the portfolio landlord rule is the perception that the more heavily encumbered a portfolio is, the more financially precarious it becomes, and therefore, more likely to fall into arrears.”

This intuitively seems sensible, but we haven’t actually seen data that landlords with larger portfolios are more affected by arrears problems than landlords with fewer properties.

However, there might be reason for the PRA to be concerned with the pace at which investors have grown their portfolios, and how that may square with- lenders’ risk appetite.

Looking at survey research, Carla pointed out that between 2010 and 2016, the proportion of single property landlords has fallen from about 80% to about 60%. Meanwhile, the proportion of landlords with two-to-four properties had gone up by the same amount. So we can take a guess and say that there are a number of landlords who owned a single investment property just a few years ago, and have collected a few more fairly quickly.

She went on to explain that the PRA may be concerned about this because it’s unlikely that you would get all of your mortgage financing from a single lender. The market for buy-to-let financing has quickly become very competitive; and while you may have fit a particular lender’s risk appetite when you originally take out a loan, if you’ve expanded and re-leveraged your portfolio in the interim period, your original lender might view your current risk profile a bit differently. And that’s particularly true if you only have a short history of letting property, or if you find yourself in a higher tax bracket as a result of the recent landlord tax changes.

So, while the new rules will undoubtedly complicate the application and underwriting process for many lenders, it will also provide some assurance to the PRA that they will all be making underwriting decisions with the same information.

How Will The New PRA Rules Affect Buy-To-Let Investors?

Examining a YouGov survey conducted around this time last year, Carla pointed out that about 1 out of 4 buy-to-let landlords would be classed as “portfolio landlords”—which means you’ll have to go through a longer underwriting process that takes a look at your entire property business as a whole.

Carla explained that you can therefore expect to experience a longer application process to pay slightly higher interest rates if you’re a portfolio landlord, and you may have a narrower range of potential lenders.

She went on to say, “A lot of borrowers have reported that the refinancing process has become more difficult recently, and some are worried about being BTL mortgage prisoners. In theory, there shouldn’t be a problem of mortgage prisoners. The PRA guidance has an explicit carve out to exempt pound for pound remortgaging from the stricter rules. Nonetheless, if you’ve expanded your portfolio since the last time you re-financed, lenders may still be interested in applying the wider assessment, even if it’s not a requirement.”

Carla ended her speech by stating that about one in five landlords are thinking about selling all or part of their portfolio—which is a relatively new market development, potentially fuelled by market conditions and the latest PRA changes.

While it’s certainly true that the buy-to-let market is changing, property is still a great, long-term investment, especially compared with other asset classes. Currently we may be in a dip, but, it’s completely natural for the market to have its ups and downs, and we do expect the market to smooth out. After all, the population is rapidly growing, demand for housing in London is stronger than ever, and yet we’re suffering from an acute housing shortage. Until the lack of housing is addressed, rental prices and property prices will remain high.

Guest post by Portico

Click here for an up-to-date sales or rental valuation, or to discuss your property needs, give Portico a call on 0207 099 4000.

The post Analysis: Lending Changes For Landlords first appeared on Property Insider.

First it’s important to realise that any rise in interest rates will probably be a very gradual process. Most experts are still suggesting that any future rises will still leave the interest rate at historic lows.

Also bear in mind that, following any rise, there is likely to be something of a delayed reaction. Some homeowners and landlords are on fixed rate mortgage deals. Many more are on standard variable rates which, more than likely, have the prospects of a rise already built into them. Some landlords don’t have any borrowing at all.

Of course, a rise in interest rates is something that all investors need to keep an eye on, so let’s look at what might happen if and when interest rates rise:

Will buy to let mortgages become that much more expensive? Undoubtedly they will cost more, but maybe by not that much. For example, a 0.25% rise on a £150,000 repayment mortgage (still enough to buy an ‘average’ priced property in the UK) means a rise in monthly repayments of just under £20.

Will margins be squeezed? Yes, but again probably only marginally for the foreseeable future. Other sources of stress on margins, such as changes to tax relief and so on are likely to have much more impact.

Will it be better to keep your money in the bank? Many landlords, of course, have put their money into property as an alternative to lower-than-low savings rates. However, even when interest rate rise it’s unlikely savings rates will become that much more attractive. Savings rates of over 5% – probably the absolute minimum needed to make keeping money in the bank more attractive than even the poorest buy to let – seem a very long time away.

What will happen to property prices? Will your investment fall in value? This is a very difficult one to call. If the cost of borrowing rises you would expect property prices to be impacted, but this is far from certain. Most analysts are still predicting property price rises of around 3-4% annually for the next few years, and have already factored interest rates into their forecasts.

It’s also worth bearing in mind that a shortage of property supply compared to demand in most areas is a big factor in pushing up property prices up. Both employment levels and wages are rising marginally, so these will also tend to support property price rises even in a more expensive interest rate regime too.

And that’s even before the thorny issue of Brexit.

Chances are it will depend, as so often in property, on location. Most areas will see probably see the value of property continue to rise in the face of rising interest rates. A few areas that benefit little or at all from any economic recovery, or which are heavily impacted by public spending and benefits cuts, might see falls.

What will happen to demand for rental accommodation? This is an interesting one. All the experts tell us that demand for rental property over the last few years has been underpinned by lack of mortgage affordability, meaning people have to rent rather than buy. When interest rates rise then, if mortgages become less affordable, there could be more demand for rental property, not less.

Past figures from PwC have suggested that home ownership levels will fall by 10% and most 20-39 year olds will be living in rented accommodation by 2025.

What will happen to rents? It’s important to remember there’s not really any connection between interest rates and rents. If your property is located in an area with strong demand it will probably be possible/necessary to raise your rents to cover rising interest costs. If it isn’t, it won’t be.

Will buy to let become unprofitable? A few commentators have already touted the ‘death of buy to let’, so is there any foundation to these claims?

It’s very likely that more amateur landlords will be dissuaded from entering the market at all or, faced with diminishing returns, might decide to exit it. However, professional landlords will find ways of making buy to let work even with higher borrowing costs and may find that there are more opportunities open to them, not fewer.

In the 80s and 90s landlords worked with an interest rate circa 10%!

With an interest rate rise on the horizon, what should landlords be doing?

As interest rates can only move in one direction, whenever that might happen, all landlords should be planning for a higher interest rate regime over the next decade. This might include: Checking their finances, and maybe taking full advantage of low fixed rates if remortgaging. Consider disposing of any poorly performing buy to lets that might become unviable. Looking at moving into property investments that offer enhanced yields. Here is an Insider article that might provide food for thought: 12 Ways To Improve Your Letting Yields

Lastly, it’s also important to remember that interest rate rises are contingent on improvements in the economy and rises in inflation, both very difficult to forecast in the current economic and political climate.

The post What Will Happen To Buy To Let When Interest Rates Rise? first appeared on Property Insider.

Portico have revealed 5 things that landlords or potential investors need to know as we head into 2018 – from house price and rental yield statistics, and new PRA and MEES rules, to how to maximise profit and minimise voids.

1. Mortgage Interest Tax Relief Changes

Before April this year, landlords could deduct their full mortgage interest costs from their income when calculating their tax bill. Now, landlords are only able to offset 75% of their mortgage interest.

In the 2018 to 2019 tax year, this figure will drop to 50% and in 2019 to 2020 the figure drops again to 25%, until in 2020 to 2021 all financing costs incurred by a landlord will be given as a basic rate tax reduction.

What should landlords do?  While the changes are inevitable, landlords can mitigate the hit by cutting their interest costs by re-mortgaging. Buy-to-let mortgage interest rates have fallen significantly in recent years, so deals currently on the market may well be substantially better than on products arranged a few years ago. That being said, if you’re a portfolio landlord, you will have to consider the new PRA rules which we’ve explained below.

With large increases in property prices in London over the last few years, another good idea is to get your rental property re-valued. This will make your lender recalculate your loan-to-value (LTV), and a lower LTV means a better interest rate and a larger choice of lenders.

Whatever you decide to do to reduce your tax bill, it’s imperative you stay on top of your finances.

2. Utilising Airbnb To Avoid Void Periods

Cuts to mortgage interest tax relief are certainly going to cut into landlords’ profits – but add long void periods into the mix and landlords could wipe out returns altogether.

Thankfully there are smart ways to avoid voids and actually increase profits – and seasoned landlords are beginning to cotton on.

Currently there are 62,141 active rentals on Airbnb and a staggering 64% of those are owned by multi-listing Hosts, or landlords.

Airbnb is an increasing popular short-term solution for landlords (there’s an annual limit of 90 days for London Hosts), who are utilising the site to a) synchronise their tenancy to begin in a busy season where they can command a higher rent and b) avoid void periods by putting their property on Airbnb until they find a long-term tenant.

Portico offer a cost-effective Airbnb management service, Portico Host, to give landlords the flexibility of short-term letting without the hassle. A month or so before your tenancy is coming to an end, let us know and we can plan to get your property ready to go live on Airbnb. Our team can time it so that by the time you’ve utilised your 90 days on Airbnb – and earned, on average, £11,520* – we will have a tenant ready and waiting to move in.

3. New PRA Rules For Portfolio Landlords

New buy-to-let mortgage rules are hitting portfolio landlords from the end of September 2017. A ‘portfolio landlord’ is defined as a borrower who owns four or more distinctly buy-to-let mortgaged properties.

What are the new rules? Under the new rules, if you want to make an application for a buy-to-let-mortgage on a new rental property, the lender will have to look at your entire property portfolio before deciding what mortgage deal they can offer. For example, if you have four properties generating enough rent to cover mortgage payments, but one property that isn’t, your new mortgage application may not be approved by some lenders.

What should landlords do? If you’re planning on investing in a buy-to-let property, it would be sensible to try and get a mortgage agreed before October.  If that’s not possible, make sure you get your paperwork in order and keep your property portfolio spreadsheet up-to-date. If you are considering investing further but one of your current rental properties is underperforming, you may want to consider selling up.

4. New Minimum Energy Efficiency Standards (MEES)

Landlords have just over six months to ensure their rental properties meet the new Minimum Energy Efficiency Standards.

What are the new rules? As of April 2018, all buildings within the scope of MEES must have a minimum Energy Performance Certificate rating of E, or they will be illegal to rent out. A civil penalty of up to £4,000 will be imposed for breaches, so it’s imperative you make sure your rental property meets energy efficiency standards.

What should landlords do? Get an up-to-date EPC assessment on your rental property! If your EPC Rating is below E, our Property Management team can make a plan to improve the energy efficiency of the property, with help from our Portico Handyman team.

5. London House Prices & Rental Yields

According to the latest House Price Index from Rightmove, the capital saw a 3.2% annual price drop, taking asking prices to an average of £611,000.

Though this may be disheartening to investors, the price drop was primarily driven by the softening market in London’s most expensive, central boroughs, while property prices in the city’s most ‘affordable’ boroughs continued to rise.

Hackney and Southwark, two of the ‘cheapest’ boroughs in central London, both experienced a high annual price growth of 9.5% to £660,000 and 7.2% to and £630,000 respectively — the highest in the capital. Similarly, Barking and Dagenham, London’s most affordable borough, saw the average asking price rise by 5.2%, taking the average property price to £312,443.

It’s in these ‘affordable’ boroughs where rental yields are highest too; landlords can find a high 6% yield in Barking, and a 6.1% yield in Ilford and a 6.2% yield in Chadwell Health, (both in the Redbridge borough, where property prices grew 4.7% annually).

As our Regional Director, Mark Lawrinson, says, “If you want to invest successfully in London property, you need to think about both rental yield and capital appreciation. Location is the most important factor to consider; buy in areas that are experiencing infrastructure investment or regeneration, that offer healthy yields so mortgage repayments aren’t a problem. As London has proven in the past when it bounced back from the recession, it’s an extremely resilient city, so if you are buying with a medium to long-term view then your investment as a business or home is safe.”

Here’s where to buy in Zones 3 and 4 as suggested by property expert Mark Lawrinson.

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Guest Post provided by Portico.

The post 5 Things Buy To Let Landlords Need To Know Going Into 2018 first appeared on Property Insider.