Buy-to-let investors – is Landlord Ltd. the answer?

As far as buy-to-let landlords are concerned, April 2017 is not so much a red-letter date as a red ink one. That’s the date when a series of tax changes start to come into force which are going to decrease their profits and increase their tax liability.

Until now, landlords have been able to subtract mortgage interest from rental income, before calculating how much tax they owe. Not after April. Changes will be phased in from April onwards which by 2020, will result in landlords paying tax on the entire rental income their property earns. If the fat-cat landlord ever really existed, they are certainly a thing of the past.

Needless to say, given the world-beating complexity of the UK tax regime, the changes aren’t that simple. The landlord will be due a tax credit of 20% of the total interest they pay, but the entire rent will be taxable. Higher rate tax payers will be much harder hit because the rent will be taxable at the higher rate. And of course, a landlord who is paying 45% tax, will be worse off still.

The people at MoneySupermarket.com have been busy crunching the numbers and they reckon that if you are a higher-rate taxpayer and the mortgage interest is 75% or more of your income from the property, the tax changes will eliminate your return on the investment. For someone paying the additional rate of tax, this will happen when the interest is at 68% of the rent.

If you are a small landlord with just one property, you may be breathing a sigh of relief, if you are on the basic rate of tax. But wait a moment. Since your taxable income will go up as a result of the changes, you may well become a higher rate tax payer.

Is there any way to protect yourself from the changes?

Companies which own property and let it out are not affected by the rental tax changes. They can carry on paying corporation tax on the profits and paying dividends and salaries to the company directors. But before landlords rush to become limited companies, they need to be aware of the many tax complications and possible pitfalls in taking this step. They certainly need to take professional advice.

The company needs to be set up properly to buy the property, and this has to be achieved with the correct paperwork. So don’t necessarily assume the cheapest set-up that you find is the best choice. It is better to get an accountant to do this for you.
And although companies aren’t affected by the tax changes on rents and interest, they are affected by the stamp duty changes which mean that there’s 3% extra stamp duty payable by any person or company buying a second property when they already own one.

As for transferring properties you already own into a company, there are a host of tax complications.

Buy to let investments still competitive

The fact is that many people, not just those on very low incomes or on benefits, need to rent property and in Manchester lettings agents are as busy as ever. Tenants need landlords to provide a stable and active property rental market.

Professional landlords, holding large portfolios of property can probably look after themselves but the small landlord with one or two properties is going to be more adversely affected. One of the effects may be that the average age of landlords rises, as people in work are not going to want to be pushed into higher tax bands by the income from a rental property. They may wait until they retire to move into buy-to-let.

For retired people looking for additional income, even though the tax benefits of buy-to-let have been greatly reduced, given the woeful returns on savings, the income from owning rental properties looks very attractive and there is always the possibility of increases in property values.

Furthermore, mortgages for buy-to-let are becoming increasingly available for older people. For many retired people with lower outgoings and perhaps no mortgage left on their own home, the affordability criteria for these mortgages are not stumbling blocks to anything like the same degree as they are for younger borrowers.

The Chancellor has done his worst, but buy-to-let is still with us and while interest rates on savings are below 1%, landlords are unlikely to give up on their investments.

Britain’s biggest buy-to-let investors have sold nearly half their £250m property portfolio – Should You?

The Wilsons are an extraordinary couple. Fergus and Judith were both previously maths teachers. But starting in the mid-1990s they built up a buy-to-let property empire that eventually led to them owning 900 houses in Kent.

They put their success down to the appearance of buy-to-let mortgages with favourable terms which enabled them to expand their portfolio quickly. In those days, it was easy to get loans with a high loan-to-value ratio that were also interest-only. In fact Fergus Wilson has claimed in an FT interview that in those days, the only requirement was that you could spell your name and that checks were almost non-existent.

However, recently the couple have sold off about 400 of their properties in Kent, mostly to overseas buyers. Mr Wilson thinks that the era of the amateur landlord is over and that life is much tougher these days for people trying to acquire a buy-to-let property. In the article, he quotes 60% loan to value mortgages as a particular problem.

The FT quotes OneSavings Bank which has decided, since Brexit, to focus on professional buy-to-let investors since it considers that they will be better able to ride out any market volatility. It has also tightened lending criteria for smaller landlords.

Meanwhile Mr Wilson, who one suspects never listened to this kind of advice but ploughed on regardless, is waiting to complete the sales of property within his portfolio, pay off his mortgages and hopefully walk away with £200 million profit.

Although he doesn’t own property in London, he describes a type of overseas buyer who is desperate to obtain a property in the UK. He believes that Brexit will in the short term assist these buyers, as the fall in sterling will help them to afford a property in the UK.

He believes that in the longer term, UK property prices will be underpinned by the shortage of housing and that the developers cannot possibly deliver the numbers of houses that are needed in the next 15 years.

It’s likely that one of the Wilsons’ motivations may be retirement as both are at the age where the challenges of running a large property portfolio may be just a little too much. It’s certain that a new generation of keen private landlords are seeking to replicate their success, no matter what the challenges.

One of the challenges for landlords who are in the business long term is to keep up with the constant changes in legislation that affect the property rental business. This is a key reason to employ an agent who can keep up with them on your behalf and let you know about the issues that are relevant to you.

The Association of Residential Letting Agents (ARLA) has apparently said that there are currently 160 regulations that apply to property rental. Add to this the assured landlord schemes and guidance that landlords are supposed to take on board, and you can see how someone who has say, two or three Failsworth lettings, might feel overwhelmed by the level of regulation with which they must comply. What’s more, with the law constantly being challenged by court cases, the interpretation of it can change rapidly.

This is why landlords who don’t want to find themselves on the wrong side of the law employ a professional lettings agent to advise them. Only an agent who has looked at your particular property can advise as to what specific legislation you may need to take into account.

Of course, some new laws can be helpful to landlords. For example, landlords are now able to carry out checks known as “Right To Rent”. This will allow them to check that the person they are thinking of signing up as a tenant has the right to be in the UK. This will help them to avoid the potential £3000 fine for each tenant who is here illegally.

Some commercial finance websites are also reporting that around a half of landlords are intending to raise their rents next year. If returns are falling, many landlords will feel under pressure to increase rents in order to restore some profitability to their portfolio.
The Wilsons may feel that it’s all become too much effort and that now is the time to cash in their portfolio.

Possibly so, but one thing is certain – there will still be plenty of willing buyers out there.

£13.8bn – The Value of The North Manchester Property Market

“How Much Would it Cost To Buy All The Houses and Flats in North Manchester?”

This fascinating question was posed by the 11-year-old son of one of my landlords when they both popped into my offices. At the time I didn’t have an answer for him, instead throwing my hands in the air I smiled and vaguely answered “hundreds of millions”. I hadn’t ever thought about the total value of the market, so I thought to myself that it would be interesting to sit down and calculate what the total value of all the properties in North Manchester are worth.

Now this isn’t something that you can just google lightly and ping receive an answer, you can readily find information on house prices and trends, you can find population data on a city wide basis and lots of vague demographics dotted around, but nothing readily prepackaged to tell you 1) how many houses are in an area and 2) what the values of those houses are. It took me considerably more work than I first anticipated and became a bit of a mission for me to solve this problem.

I started with the city council, then went to the office for national statistics, then pulled census data and land registry files. I quickly found myself with reams upon reams of data which all gave lots of clues, but no definitive answer.

When I delved into the numbers, the first thing I found was that the average price currently being paid for a North Manchester property stands at £99,229.  Which seemed a little low, so I split the property market down into individual property types in North Manchester; the average numbers come out like this.

 

Curious as to how the figure settled at £99,229 I then looked at the distribution of the types of homes in North Manchester, and found this:

 

Working out of Moston, and area heavily packed with street upon street of terraced houses, I wasn’t too surprised to see terraced houses dominating the statistics for North Manchester. However, what was initially surprising was the figure for the number of flats.

I initially wrote this figure off as being inflated by bedsits, converted homes, flats above shops and some of the larger mixed use commercial buildings. However, I chose to dig a little deeper into the distribution of the types of flats in North Manchester and this is what I found:

 

Although, from working in the North Manchester property market for the best part of my life, I did appreciate there were a fair number of flats, I hadn’t until now got my head around the fact that there were just shy of 28,000 flat in the area, of which over 24,500 were within custom built blocks or tenements.

 

A cool £2.1bn could bag you ALL of the flats in North Manchester. Sitting at the lowest price point the local flats are offering astounding returns on investment as rental properties and are in very high demand with the young professional market.

If you happen to be a multi billionaire, check down the back of your sofa, in that pair of jeans that you don’t wear but are hanging onto incase they fit again or in an old coat pocket- if you happen to find a spare £2.1bn give us a call and we’ll talk about investments.

If you’re not a multi billionaire, and like me you’re just a regular person trying to save for the future and provide security for your family this information may seem pie in the sky, but I promise there is a point to it all.

What does this all mean for North Manchester Investors?  

Well as we enter the unchartered waters of 2017 and beyond, even though property values are already declining in certain parts of the London property market, the outlook in North Manchester remains relatively good as over the last five years, the local property market was a lot more sensible than central London’s.

North Manchester house values will remain resilient for several reasons.  Firstly, demand for rental property remains strong with continued immigration and population growth.  Secondly, with 0.25 per cent interest rates, borrowing has never been so cheap and finally the simple lack of new house building in North Manchester not keeping up with current demand, let alone eating into years and years of under investment – means only one thing – yes it might be a bit of a bumpy ride over the next 12 to 24 months but, in the medium term, property ownership and property investment in North Manchester has always, and will always, ride out the storm.

 

North Manchester Lettings: Advice for First-time Landlords

The decision to enter the property market as a landlord is not one to be taken lightly, but if you’ve been thinking about it for a while, there’s no time like the present to set the ball rolling on your new venture. Manchester is a great spot for property investors – one of the UK’s major cities, it is well connected to the rest of the country by road, rail and air, and has a large student population. Both these factors mean there is always a steady stream of renters looking for the perfect property. If you choose wisely and research your target rental market, you should have no trouble generating interest in you property (or properties).

This article aims to provide practical North Manchester landlord advice for those who are new to the area, or new to the property market.

Decide What Type of Tenant You Want

You might not have any firm ideas of what type of tenant you would like to rent out your property to, but it’s very helpful to know who your market is. North Manchester is popular with a wide variety of renters – including students, young professionals, families and older couples – but not all groups will want to rent the same types of property. Students have become increasingly demanding in the last couple of decades, and the traditional cramped, damp, run-down red brick terraced student properties of the past will no longer cut it. Many students prefer to live in designated student apartments with all mod cons, excellent facilities and good transport links. It’s still possible to rent private properties to groups of students, but students tend to congregate in certain areas, particularly to the south of Manchester, so are unlikely to want to live in a district that is predominantly home to families.

If you want to target families, you will need to think about the proximity of schools. North Manchester has a large number of primary and secondary schools, some more popular with parents than others. Proximity to a good school can have an impact on house prices, but you might also be able to command a higher rental fee if you are in a catchment area of a top school, so you should bear this in mind if your target renters have children.

Young professionals are likely to want a property that’s close to nightlife and shops, or at least has excellent transport links to the nearest decent nightlife. In the case of North Manchester, this is likely to mean excellent links to the city centre – so look for good train, bus or tram links, or at least somewhere that is a short and affordable taxi ride away. North Manchester’s Metrolink tram system is very popular with commuters, so properties near a tramline are always a good bet.

Don’t Over-estimate the Market

As an investor, you have the advantage that you are not part of a chain and you do not need to wait for your own property to sell before you complete. This can be a big attraction to vendors, and may allow you to drive down the price on your chosen property. Emphasise your ability to commit and proceed with the sale immediately when you make an offer, but don’t get carried away and be tempted to pay more than you can realistically afford, or more than makes sense given your likely return on investment. While North Manchester has some highly desirable areas, many districts – such as Harpurhey and Moston – are known for their affordable housing and tend to have something of a rough reputation. No matter how desirable or modern any property you purchase in areas like these, you will struggle to attract renters prepared to pay premium level rents.

Seek Professional Advice

If you have never let out a property before, you will need to ensure you fulfill all your legal obligations. There have been moves to clamp down on unscrupulous and negligent landlords in recent years, and tenants have a number of rights you will need to be aware of. If you are not entirely sure of all your responsibilities as a landlord, seek advice from a professional who can ensure you don’t fall foul of the law. There are numerous agencies with specialist knowledge of the North Manchester rental market and these can help you target the right renters for your property, and help ensure a mutually beneficial relationship for both you and your tenants.

Build-to-let – the next big thing?

The Financial Times reported recently that owner occupation in the UK has fallen from 71% in 2003 to 63% currently. With mortgages difficult to get and house prices constantly rising, “generation rent” doesn’t look as though it will be comprised of homeowners any time soon.

And in response, a new type of landlord is entering the market. Private investors are financing the construction of affordable new homes without any intention of selling them on. Instead they want to keep them as long-term investments. Some of these schemes involve entire housing estates and much of the construction is in the North of England.

The developers include companies such as Sigma Capital, a housing developer backed by various finance groups including the Islamic bank, Gatehouse.

This trend may change the structure of the rental market in the UK. In the recent past, only social landlords such as housing associations and local councils, have been building affordable homes for rent. Strict criteria for getting these homes have meant that many people have been left outside the subsidised rental sector and have instead rented privately from landlords.

These landlords often hold just a few properties, perhaps as part of a retirement plan. Typically, they rent the property out and leave the tenants to pay the gas, electricity and any other utility charges.

The model being used by developers such as Sigma is different. In their properties, the monthly rent includes a charge for all utility bills and there is also a contribution towards some maintenance items, such as having the grass cut periodically in those properties that have gardens.

Sigma has a partnership with the house builder Countryside Properties which has built over 600 homes purely for rental and is expecting to deliver another 550 during 2017. Countryside Properties has focused on northern cities where local councils are receptive to the idea of private companies building housing on the large land banks held by the councils.

The properties being built by these investors and developers are not, as you might imagine, blocks of flats aimed at students and single people. Many of them are family houses and a significant percentage of Countryside’s properties are situated next to housing of exactly the same design that has been built for sale to homeowners.

Currently, a house on one of these schemes, with three bedrooms, will achieve a rent of £700-£800 monthly. Four-bedroom homes go for about £1100 a month, but that includes house insurance and all utility bills. The houses would cost roughly £210,000-£225,000 if they were bought on the property market.

Nor are the people renting these homes necessarily short of money. Because it is cheaper for people to rent than to buy, the tenants tend to have more disposable income. Graham Barnet, chief executive of Sigma, points to the cars sitting on tenants’ driveways as a sign of their prosperity.

It is possible that the availability of new rental stock on well-maintained estates, may raise standards across the board, as small landlords have to compete with these larger schemes and tenants. Certainly the model of the all-inclusive rent is being adopted by some landlords because it means that they don’t have to constantly deal with changes of account and possible defaults on utility bills.

And the trend for building rental properties shows no sign of abating. British Property Federation statistics are showing that the number of rental properties in progress or newly completed, has risen to 57,000 from 21,400 with significant developments in the North of England.

Stonegate Developments has a scheme for 162 new rental apartments in Newcastle and there are a minimum of 28 build-to-rent schemes planned for Manchester alone, according to the figures released by the BPF. Any letting agency in North Manchester will confirm that the demand for rental properties is there.

Across the country, Sigma is intending to build another 10,000 homes to rent in the next five years, concentrating on development sites that have good transport links so that commuters will find the properties attractive.

Certainly, if tenants get used to the idea of an on-site maintenance service which some residents of the new purpose-built developments are now enjoying, they may become rather more demanding tenants than those which private landlords are used to.

It will be interesting to see what effect this new development has on the Manchester lettings market.

Maximise Your Investment Property Returns

13762_y39541215_IMG_00_0000_max_656x437 (1)Maximise Your Investment Property Returns

Presentation Presentation Presentation!

Make your property look nice, and you will get more for it. Sounds simple right? Why are so many Landlords and Vendors failing at this super simple task?

We asked around and the most common reasons seem to be time, knowledge and uncertainty. Which can be summed up nicely as:

“I don’t have the time to do that”

“I wouldn’t know where to begin doing that”

“I don’t even know if it would be worth doing that”

Our very simple solution: USE US TO DO IT FOR YOU!

 

13762_y39541215_IMG_11_0000_max_656x437The Property in these pictures was refurbished inside and out by our in-house team. You can view the full gallery here on RightMove.

We put the 2 Bed Droylsden Property on the market on 23rd December 2015 at just shy of £130k.

Our first viewer immediately fell in love with the property, put in an offer for full asking price and completed their sale yesterday (20th January 2016).

With a little love and attention you too can turn your property around, whether its for sale or whether you want to increase your rental income. Talk to us and we can and will do this kind of refurbishment for you.

This Property was a 2 bed semi in Droylsden. We cover all areas in North & East Manchester and are happy to help you maximise your investment.

Kenyon Lane, Moston, M40

£ 675 per Month

Clough Road, Moston, M9

£ 200 per Week

Moston Lane, Moston, M40

£ 825 per Month

Cross Lane, Gorton, M18

£ 580 per Month

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