The number of buy-to-let mortgages products available on the market in June 2019 was the highest in over ten years at 2,396, according to a new report from Moneyfacts. That represents a 21% increase in the number of available BTL mortgage products in the year to June, compared with the same period in 2018.
Although buy-to-let property is still one of the best ways to invest your savings, it has become more challenging in recent years. Alterations to tax relief rules, more stringent lending criteria and a general slow-down of the market are making buy-to-let more and more difficult to make a profit from. Here are a few of the top challenges that BTL investors have to face.
While Brexit is likely to cause ripples - at the very least - in the UK's housing market, the rental market is expected to remain pretty steady. The slow pace at which any change to the UK’s status will occur is, of course a factor in this assessment while little expected change in demand is another.
According to a recent report, buy-to-let mortgage interest rates are rising. That’s something that could mean even more landlords consider selling up, when the time comes to re-mortgage their investment. However, although research has noted a small increase in BTL mortgage interest rates, a still strong offering of deals for the sector should help ensure any future rises remain on the small side.
Whilst the buy-to-let market has been beset by worries on all sides – Brexit, new tax schemes and the weak pound – a majority of buy-to-let investors now say they are confident in their portfolios. Let’s look at the reasons why:
As well as the new Stamp Duty Tax rules that came into force this month affecting Buy-to-Let (BTL) investors, property landlords are now facing further scrutiny from the Bank of England (BOE).
Far for being famed solely as the land that produced Alan Partridge and Delia Smith, Norwich has a lot going for it. Just a half hour commute from London, the capital of East Anglia Norwich is a stunning little city. It’s also been voted as one of Britain’s top 100 best so it’s well worth a little further investigation.
New Government rules on Homes of Multiple Occupation, or HMOs, came into force on October 1st. They update the existing HMO licensing rules and mean that around an additional 160,000 rental properties could now require an HMO license.
The Government is once again considering a further change to the way Buy-to-Let landlords and property investors are taxed. But, before you start worrying that this is yet another tax grab on your income, while providing housing for the still growing number of private sector renters, you’ll find you’re in for a surprise.
Taking on a property renovation project is a big decision, particularly when it’s your first one! We’ve pulled together a few tips and details to help you remember the difficulties you’ll face along the away, as well as the end result you’re aiming for. There will be problems but you’ll also learn a lot about the property renovation world – and yourself too! But, provided you make the decision with your eyes – and wallet – open, you’ll eventually be the owner of unique home, that suits all your needs, both once its finished and in the future too.
“Osborne drops tax bombshell that will wipe out bulk of buy-to-let profits”, The Guardian, 11th July 2015
The Guardian, like the Financial Times and many other media outlets baulked at George Osborne’s somewhat hidden tax relief changes as announced in the emergency Summer Budget last July. The talk has been of a ‘rental Armageddon’ and the decline of rental properties in the UK.
Merthyr Tydfil is the name given to both the town, which is an extensive urban area, as well as the county, although both are often just referred to as Merthyr. The area was known for its production of iron particularly throughout the period of the Industrial Revolution. Looking back historically towards the 1891 census, 68.4% of the population were records as speaking the Welsh language.
As Buy-to-Let (BTL) investors contend with the new tax rules regarding their property purchases there has been some more welcome news in the form of relevant mortgage products – there are more of them on the market.
The proportion of rental property owned through a company structure hit the joint-highest level on record in the first half of 2019, according to research by international property management firm, Hamptons International. According to the housing market experts, some 12% of all property in the PRS is owned under via a company. That’s up from 9% in 2015 and 11% in 2018.
The UK’s rental market is an interesting topic to discuss and asset to invest in. Right now, it seems that the Purpose-Built Student Accommodation (PBSA) rental market is all but immune to Brexit worries and is also outstripping its mainland European neighbours, by far.
While selecting the right property in the right area to attract the type of tenants you’re comfortable renting to are extremely important aspects of your new life as a BTL Landlord, there’s a lot more to consider, plan and execute!
These additional details include – but are not limited to – your legal obligations, the services you must provide for your tenant/s and the importance of inventories.
In order for you to be a law-abiding landlord and supply tenants with those things they are legally entitled to by UK Government law, there are a number of things you will need to prepare and keep certification for.
Before you even think about property checks, you need to ensure your prospective tenant or tenants have the ‘right to rent’ in the UK. This is a relatively new rule which came into force on February 2016.
It is the landlord’s responsibility to:
This is, of course, a rule which has been created in order to help limit illegal immigrants from renting a property and also to stop unscrupulous landlords from taking advantage of illegal immigrants.
The types of documents which are suitable for this include: A Passport or National Identity card showing the holder is citizen of the UK, a UK colony or a European Union National. Home Office stamped certificates showing the holder has leave to live in the UK are also acceptable as are certificates to show the holder is a naturalised British citizen. The full list of acceptable documents is available here.
A Gas Safe certificate is a requirement of letting out a residential property. The landlord must have the gas supply tested by a Gas Safe registered engineer who, if the supply is safe, will issue a certificate stating that. A copy of the certificate must be given to the tenant and also held by the landlord. Annual gas safety checks must also be conducted every 12 months to ensure the gas supply is safe and in good working order.
An electrical safety check must also be conducted prior to a new tenant moving into a rented property. This means the electricity supply and any appliances in the property must be tested to ensure they are working and safe to use. Complete instruction manuals must be available for all appliances and the supply and appliances must be maintained so they remain safe for use throughout the tenancy.
Energy Performance Certificates (EPCs) are another mandatory requirement for a landlord to provide. These certificates, however, are valid for ten years at a time although you can have them updated earlier if you renovate the property and make some energy efficiency improvements.
Fire safety is also paramount and it is the landlord’s responsibility to ensure working smoke and carbon monoxide alarms are present in the property – at least one smoke alarm per floor of the property. You must show the tenant the alarms are installed and working on the day they move in. It’s worth asking the tenant to sign a form to confirm they were installed and working when they moved in – provide a copy for the tenant for their records too.
Deposits are another important area. Typically, landlords require one full month’s rent as a deposit and a full month’s payment before handing the keys to the tenant.
While the rent goes into your bank account, the deposit must be safeguarded – this is a legal requirement – and there are two options.
One option is to transfer the deposit into an official tenancy deposit scheme, while the other is to keep the deposit in your own account but with deposit protection insurance. These updated options are there to protect the tenant’s deposit and ensure it is available to be returned – minus any agreed costs – once the tenancy agreement comes to an end.
Aside from initial safety checks when your new tenant moves in, you are ultimately responsible for the maintenance of the property, appliances and any white goods that you have supplied. If there’s a problem with the water supply, for instance, then you will need to rectify that problem, in a ‘reasonable period of time’.
One option is to sign a management agreement with a lettings agent. In return for a percentage of the rent they will be the first port of call for the tenants if there is a problem. The letting agent will then assess the problem and arrange for a relevant engineer or appliance replacement to be sent or delivered. They will then inform you of this and bill you the required amount, which they will also receive a percentage of.
As you can see, this can turn into an expensive option if/when things go wrong. However, if you live far from the property or aren’t confident or able to either fix or arrange these details then it will be money well spent, provided your letting agent does their job well.
If you opt to manage the property yourself, there are a few ways in which to minimise the stress when things do go wrong, for you and the tenant:
If you do take on additional contracts, just as with any other agreement, make sure you read through all the details carefully and understand what you’re signing up to and paying for. If you think you’re paying for 24-hour response seven days a week but it turns out to be 48-hour response over the weekend because you didn’t read the small print and missed it, your tenant could get very upset when you can’t deliver on your promises.
Conducting or arranging an inventory may seem like a waste of time, but it’s actually an important part of the rental process. While landlords should allow for realistic wear and tear during a tenancy period, having access to a correctly taken and agreed inventory will make it a lot easier to make necessary deductions from a deposit if the tenants haven’t looked after your property well.
It also serves as a useful document if disputes over what was provided by the landlord ever arise – provided you and the tenant both agreed and signed the form when they moved in. And, once you create and conduct the initial inventory process, it will become less laborious and just another small part of the whole rental process.
Alternatively, there are companies that will handle the whole inventory process for you for a reasonable cost.
Knowledge and professionalism are also two important traits when you want to become a BTL landlord – but so are good people skills, patience and the ability to listen and understand others.
You can always research and learn about lots of different, important things but people skills and patience are harder to learn and are more of a personality element that you either have, or not. If you have patience and are willing to put in a lot of work, to listen and to learn then chances are you might make a decent landlord
Information contained in this article may have changed since it was first published. Ezylet strongly advises you to seek legal advice from a qualified professional.
When it comes to being a Buy-To-Let landlord, it’s always important to focus on your annual yield and how profitable each property is on a rental basis. And, although it shouldn’t be relied upon, a capital gain is also very nice to have! However, even though property prices growth has been easing for the past couple of years, figures from Hamptons International shows there’s still capital gains to be made, as BTL landlords who sold their properties last year made an average profit of just under £80,000.
While lots of commentators are saying the Brexit vote will mean a spell of falling house prices, others disagree. There are a number of views and predictions of an immediate increase, in the London market at least, as overseas investors look to get more for their money while the pound is in free fall.
A Bank of England (BOE) member has told the UK Parliament’s Treasury Select Committee (TSC) that he expects banks’ buy-to-let (BTL) lending activity to slow in the wake of the UK’s vote for Brexit as lenders survey the new, post-Brexit landscape.