News

June 30 2010

Golden rules for buy-to-let

Avoid – city centres oversupplied with flats, new schemes where scores of homes are to let at the same time, and areas swamped with public sector workers set to suffer in imminent spending cuts.

Seek – places where demand exceeds supply, such as colleges with little campus accommodation, areas where private sector work is expanding, or where starter home prices have risen sharply recently.

Find a competitive mortgage – interest-only mortgages remain the most cost-effective and tax-efficient option. A broker will advise.

No false economies – the trend is towards unfurnished letting, but good-quality fixtures and fittings are a must (and, in the main, tax deductible).

Use an agent – tax, health and safety regulations, and tenancy rules change and renters can be demanding, so use an agent in the ALRA trade association. The charge can be offset against tax.

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June 28 2010
Landlords boosted by short summer lets

Enquiries from wannabe tenants are on the increase, particularly for short stays ranging from two weeks to six months.

Kate Marshall from Marsh & Parsons in Barnes says some people are coming to London for the summer, either on secondment or holiday, while others need somewhere to stay while carrying out works on their current home.

“Landlords can maximise their investment due to the shortage of property available for short lets, demanding a far higher price than normal. In some cases, the increase has been 40 per cent above the price usually achieved with a longer let of six months or more,” suggests Marshall.

The long let market also remains buoyant, with good property coming onto the market and demand still at very high levels, which should continue over the summer, adds Marshall.

The market remains busy in Battersea and Clapham, points out Nick Goble of Winkworth, with the usual imbalance of tenants to properties available.

“This has been compounded by an influx of newly elected and re-elected MPs looking for property through the newly formed Winkworth MP Service – WMPS. It was initially thought that only new MPs would be looking for rental homes, but it is evident that due to changes in the mortgage allowance and new procedures imposed by the Independent Parliamentary Standards Authority, many re-elected MPs are opting to sell their existing homes and rent. This has lead to them looking further afield to places like Battersea and Clapham,” Goble explains.

Ironically, we have moved from a market dominated by ‘accidental’ landlords – people who couldn’t sell their homes who ended up reluctantly letting them – to ‘accidental’ tenants, says Ivor Dickinson from Douglas & Gordon.

“Rents on contracts that are coming up for renewal are up by 15 to 20 per cent,” he adds.

Article by Cheryl Markosky

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June 20 2010

Buy To Let Recovery

While landlords have been worried about the threat of a rise in capital gains tax from the new government, they can at least console themselves with the twin facts that rents are rising and, for the time being at least, mortgage rates are remaining low.

The average rent in the UK rose by 0.5per cent to £667 per month in May, according to the latest Buy-to-Let Index from LSL Property Services, which owns estate agents Your Move and Reeds Rains. In London, the increase was double that at one per cent, making the average monthly rent in the capital £924.

Yields on buy-to-let properties have remained at their highest level since
December at 4.8 per cent, as rents accelerated faster than house prices. The house price for the average rental property rose by just 0.1 per cent compared with April, and registered an annual increase of 8.6 per cent.

David Brown, commercial director of LSL said: “House price increases have steadied, and rental income is now accounting for an increasing portion of a landlord’s total return. Rents have continued their upwards climb and are just £21 short of their all-time high.”

These figures coincide with another report that suggests mortgage borrowers are not taking full advantage of low interest rates to overpay their mortgage. This is one of the most tax-efficient ways of saving, particularly at a time when deposit accounts are paying so little.

London landlords may well be cushioned from the worst of the austerity measures that Cameron & Co are bound to extend, as more people are expected to migrate to the capital in search of lucrative work. However, to protect themselves even further from pain, overpaying the mortgage is a very sound investment not only as a savings vehicle but also to build up the equity in your properties.

If times get hard, landlords with the smallest mortgages will be far better placed to cut the rent – if need be – to attract tenants.

Better still, landlords with the smallest mortgages and the largest amount of equity are able to take advantage of market opportunities. As David Brown says: “The fundamentals of sound property investment – tenant demand, yield and rental income – are in place for the buy-to-let recovery to continue.”

But there is one caveat: make sure you have enough of a contingency fund to cover urgent repairs or long void periods.

By Duncan Farmer
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