Archive for March, 2010

Chancellor Alistair Darling has delivered his last budget before the General Election, but after much anticipated waiting to see what it would hold, sadly the needs of landlords have been largely overlooked.

The big property news was that the threshold for Stamp Duty Land Tax would be increased from £125,000 to £250,000, for two, but that it would only be applicable for first-time buyers. Although it’s definitely good to give first-time buyers a helping hand onto the property ladder, many other buyers are feeling left out of the loop.

In fact, the outlook for some landlords may not be looking too good. A new 5% rate of Stamp Duty Land Tax will be introduced in 2011-2012 for property transactions costing over £1m. Although at first glance, most landlords may look to be unaffected by this, it looks like it will apply to both individual property purchases (e.g. expensive homes) and the purchase of property portfolios.

For any landlords or property investors thinking of buying property in bulk to form a new portfolio could find their purchases attracting much higher Stamp Duty tax bills in the future.

The budget also discussed changes being made to the way in which Local Housing Allowance (LHA) rates are calculated. The market areas used to work out the rates of LHA are going to be adjusted, which will remove the properties with the highest rents.

What do you think of this year’s budget? Are you disappointed that there’s nothing more positive for landlords?

In the property investing world, buy-to-let is a buzzword and concept that you can’t fail to miss. In fact, it’s the crux of the business for the majority of property investors.

The idea of buy-to-let is pretty self-explanatory – you buy a property at a good price and let it out to tenants, giving you a regular income on the property. Not only that, but the hope is that when you come to sell, the property will have risen in value, giving you a tidy profit. It might sound easy – and this has surely tempted many people to have a go at buying-to-let – but it’s not always as simple as that.

For example, there’s the small matter of finding the right property to buy and getting it at an affordable price. Any old property won’t do – you have to select the right type of property, in the right area and market it towards the right type of people in order to stand a chance of being successful. If you get any of these factors wrong, you may find yourself stuck with a property that you can’t rent out, which will be costing you money. This is the point at which many hopeful, or amateur landlords, get disheartened and give up on the idea.

Serious investors, however, are usually more aware of the importance of market factors and, in theory, should have done more research before purchasing a buy-to-let property. They’re not immune from the odd buy-to-let purchase mistake, but are usually more prepared to learn from their mistakes and move on to the next investment.

As well as describing a type of property purchase, the term buy-to-let is often used for a type of mortgage option. In the height of the property surge, buy-to-let mortgages were very widely available, with many great deals available to tempt people. Although still an option, the choices have somewhat narrowed, but this has helped weed out the ‘having a go’ investors, and given more room to the serious buy-to-let property investors.

Related Posts

A to Z of Property Investing: A is for Appreciation

Finding and buying the right investment property for your needs may seem like hard work, but it doesn’t stop there. Before you’re able to start renting it out, there are various rules and regulations you need to adhere to and steps you need to take to get it fit for renting. One of these is obtaining an Energy Performance Certificate (EPC).

Energy Performance Certificates became a legal requirement for residential landlords in October 2008. They have to be obtained before you begin marketing your property for rent and, if you fail to do so, then you could end up being fined £200 by Trading Standards.

The Energy Performance Certificate provides a rating about how energy efficient your property is. It uses a rating system from A to G, with A being the most energy efficient, and G the least efficient; the average level is about D. You’ll need to have your property looked at by an energy assessor and, as well as providing your rating and certificate, they will provide ideas for how you can make your property more energy efficient (you don’t have to take these ideas up, but it can be useful if energy efficiency is a concern).

In fact, research suggests that tenants are becoming more concerned about environmental issues, the cost of household bills and the impact a building has on the environment, so the extra advice may help you make practical steps to improve the overall efficiency of your property and make it more desirable to tenants.

Find more about how to go about getting an EPC. Once you’ve obtained your EPC, it’s valid for 10 years and you can take the next step towards advertising your property for let.

There are all sorts of issues involved in successful property investing and in this A to Z guide, we’re going to be exploring some of them. To kick things off, A is for appreciation.

In the property investing world, appreciation refers to the positive effect that occurs when you invest in a property that goes up in value over time. It should be the goal of all serious investors to try and achieve good appreciation on their properties, not least as it increases the chance of making a profit when the time comes to sell.

The appreciation factor isn’t something that can be controlled easily – if only it were – but you can increase your chance of getting a property that will appreciate by putting careful thought into your property purchases. Some of the market factors that influence appreciation include supply and demand. As our property hotpot series has been exploring, buying in certain areas can help harness the demand for your property, if it’s in an area that is particularly popular and where there’s currently an undersupply for rental homes.

Inflation can also help property prices appreciate over time and so too can making improvements to your property. These need to be weighed up carefully, to ensure that the improvement will add long-lasting value and they’re particularly beneficial if you can also add extra value for rental purposes too. Improved bathrooms, kitchens and extensions are all common improvements that can make a significant difference.

Overall, if you’re a serious property investor, then the issue of appreciation should be firmly on your radar and you should keep aware of market factors when making business decisions.

There are pros and cons involved in buying any type of property and it’s always important to weigh up all the issues before you part with your hard earned cash. Old build property, new build and off plan properties are three types of popular property choices and, in part three of our mini series, we’re turning our thoughts to the issue of maintenance and upkeep and how this relates to these three types of properties.

If the amount of maintenance and upkeep needed for properties are key concerns for you, then it’s definitely worth carefully thinking about what type of property you want to purchase. Newly built property and off plan properties may win over with their short term benefits of being low on maintenance and upkeep. If the properties have been built and finished well, then in theory they shouldn’t need too much maintenance to be done for a while.

Depending on their age and the overall state of the property, then there may be a tendency for older properties to be more likely to require regular maintenance and upkeep.

However, this isn’t to say that old build properties can’t be low maintenance too. If they’ve been well kept and cared for, in the long-term they may offer benefits for being sturdier than some new builds, with more substantial and thicker walls. 

If you’re not that keen on having to sort maintenance and upkeep problems on rental property out yourself, then it’s a good idea to use a letting or rental management agent. They’ll handle the full lettings process for you, including any problems that arise, and will have a list of reliable handymen to call on in times of need, which takes the hassle away from you and gives you more time to focus on the business side of property investing.

Old build versus new build and off plan property, part 1 – Cost

Old build versus new build and off plan property, part 2 – Renting

As we’ve been exploring in this property hotspot mini series, there are a variety of ways you can employ to try and predict potential new hotspots. Having already looked at the benefits of improved transport links, regeneration schemes, universities and schools, now it’s the turn to explore the influence of major sporting events.

Like some of the other methods of locating and identifying property hotspots, the positive influence that major sporting events can have on a location are well documented. The South African property market has spent the last few years building up to 2010, and hosting the World Cup, as did Vancouver, in Canada, which has just held the Winter Olympics.

If a major international or national event, such as World Cup events, the Winter Olympics or Olympic Games are scheduled to take place at a particular location, one of the first things people begin to think about is accommodation.

Not only does an area need to have enough accommodation to comfortably house all the sportspeople, but also their entourage of coaches. Then there’s the small matter of having suitable accommodation for all the spectators that will want to come and see the event, and all the media that will be reporting on it. During any building work, for example construction of a stadium, then accommodation nearby may also be required for people involved in the building work.

Even though the London 2012 Olympics are still two years off, reports are suggesting that tourists are already booking up accommodation in the city and property owners are beginning to think about the prospect of letting their properties for the event.

Having property in the right area and being able to cater for the rental property needs for major sporting events can be lucrative in the short term, but isn’t necessarily simply a short-lived bonus. Often areas hosting major sporting events undergo regeneration and considerable improvements to infrastructure in the lead up to the event, which leaves the area in a good position after the event is over.

Keeping an eye out for details of major sporting events, especially the locations where accommodation will be needed or players will be housed, and seeing if a property purchase in the area may work for you can lead to a good deal. If you’ve already got a rental property in the right location, then don’t forget to take action and see if you can make your bricks and mortar work in your favour!

The energy performance and energy efficiency of properties has become a key concern, but if new government proposals go ahead, landlords could be stopped from letting badly insulated properties. 

According to the latest strategy plan from the Department of Energy and Climate Change, any landlords letting properties will have to upgrade the energy efficiency of the property to a minimum standard before they are allowed to let it out. For example, loft and cavity wall insulation would have to be put into older properties as a condition for being allowed to rent them out.

This isn’t the only new proposal though, as there’s also the suggestion that homes with low energy efficiency will lose their value – so if you don’t do anything to help improve energy efficiency, when you come to sell the property, estate agents will be advised to provide a lower than average property price.

The theory behind these new proposals is that landlords and homeowners will be more likely to pay for energy efficient home improvements, such as improved insulation and solar panels, if it will improve the value of their property. There will be further rewards for those who embark on improvements, in the form of council tax rebates of over £1000 a year for property owners improving insulation.

All these plans are part of the government’s “Warmer homes, greener homes” initiative, which aims to help cut carbon emissions by a third by the year 2020. Currently, nearly a quarter of British carbon emissions stem from the energy used in homes.

What do you think – do the plans sound viable to you? If you have an older rental property, have you done anything to improve its efficiency?

If you’ve been letting property for a while, then the chances are that you may have come across a situation where a tenant wants to paint or decorate a room. But would you let them loose with a paintbrush in your property? We explore the pros and cons of letting tenants decorate.

The pros of letting tenants decorate

If you’ve been letting the property for a while, and it’s a long time since it was decorated, then it may be worth considering it if you’ve got a tenant who wants to give it a go. Even better if they have decorating experience, or simply want to put a new coat of paint in one room.

However, be sure to make it clear what they’re allowed to do and not do, preferably in writing. This includes which rooms they can touch and what they’re allowed to do, in terms of painting or wallpapering. You may even want to vet the colours or ideas, just in case they’ve very outlandish.

The cons of letting tenants decorate

Mention the decorating issue to landlords and some will always have horror stories to share. Although it may seem like a tempting offer to have someone else do the hard work for you, do you really want to put your property in their hands?

Horror stories of decorating gone wrong involve garish colours, badly hung wallpaper, bad painting, paint in areas that shouldn’t have been painted and half done jobs that were abandoned.

Realistically, you can never be 100% certain that tenants will do a decorating job properly, so if you’ve got any doubts about their ability or commitment, it’s best to do it yourself, or pay an expert to come in and do it. It’s the only way to avoid unwanted decorating nightmares.

It helps to have this covered in your paperwork and contract, so they know they can’t just whip out a tin of paint and start decorating when they feel like it.

If there’s no major need to decorate just yet, then a good time is always between rentals – as one tenant moves out, and before another arrives.

Every investor dreams of finding the next property hotspot, where rental prices rice above expectations and demand for the property is high. But finding those elusive property hotspots isn’t always quite so easy. In our property hotspot mini series, we’ve already looked at the potential benefits of looking to buy in areas where there are improved, or soon to be improved transport links, regeneration schemes and popular universities, but another area that can be an influencing factor are schools.

The impact of school catchment areas on demand for property, both rental and privately owned, has been well documented over the last few years. Even the downturn in the housing market didn’t have such an effect on places with popular school catchment areas.

Buying investment property in very sought after areas within school catchment areas will probably come at a price, as they are already established property hotspots. However, if you apply a wider view to it and look for properties in close proximity to good primary and secondary schools, or look for schools that are likely to be improved soon, then it’s still possible to find properties that could prove to be a good financial investment.

For example, schools that have failed Ofsted reports are often equipped soon after with a new head teacher, who is appointed the task of turning the school around and making huge improvements. Compared to properties in popular catchment areas, those in close proximity to rundown schools may be lower in price and could hold the key to a potential property hotspot.

Realistically, rundown schools can take a few years to be turned around, and for the league tables to improve, but you could be lucky and find yourself a property hotspot and do well with family renters wanting to live close to their school of choice

Of course, it’s important to choose the right type of property that will attract family renters too. Small flats are unlikely to be all that popular, but two and three bed family homes are. Many areas around good schools are also well equipped with local shops and leisure facilities, so when you’re investigating the area, do carefully check out the location as a whole.

Finding Property Hotspots Part 1 – Improved transport links

Finding Property Hotspots Part 2 – Regeneration schemes

Finding Property Hotspots Part 3 – Universities