New money for councils to tackle rogue landlords

Councils across the country will receive £4 million to tackle rogue landlords in their areas. Housing Minister Kris Hopkins said 23 councils will share the funding to help them take on landlords that provide their tenants with squalid and dangerous properties. Among the councils included are Barnsley (£230,000), Blackpool (£293,000), Derby (£238,000) and Sheffield (£145,000).

rogue landlords

“The majority of tenants are happy with their home,” said Kris Hopkins, “but the private rental market is still afflicted by too many unscrupulous Scrooges, miserly landlords who rent dangerous, dirty and overcrowded properties without a thought for the welfare of their tenants.”

Housing is a key issue for Londoners

A poll by Ipsos MORI among Londoners carried out on behalf of London Councils shows that, without prompting, a quarter mentioned the affordability of housing as a more important issue facing London than transport/public transport (23%), crime (14%) and immigration (10%). Four in five agreed that there is a “housing crisis in London” (64% strongly). Asked to give the main reasons for the crisis (again without prompting), 47% said affordability/house prices, 39% over-population/immigration, 37% the lack of building or supply or investment.

House prices up by nearly £12,000 in 2013

Average prices rose by nearly £11,920 according to LSL Property services with the highest December yearly rise since 2007 (£1,489) making the average price £240,134, a new record for England & Wales. West Midlands experienced the second highest regional price growth after London.

David Newnes, director of LSL Property Services said: “Without doubt, the market is moving full steam ahead. However, we’re certainly not in the bubble zone here, with price growth and sales both still some way off the pre-crisis peak. Momentum is sweeping across the board with new record high house prices in areas beyond the capital, ranging from the West Midlands to East Anglia. Attention is moving away from the north south divide and other regions are stepping out of the shadow of London’s more buoyant property market.”

House purchase loans at six year high

December was the best month for home lending in six years, according to the latest report from chartered surveyor e.surv. There were 77,918 loans made to homebuyers in December, the highest number since November 2007 and a 40% increase in home loans over the past year. High LTV lending has increased at an even faster rate.

Richard Sexton, director of e.surv chartered surveyors, said: “There is still a long road to travel before the mortgage market is fully recovered from the hangover of the financial crisis. But the recovery is quickening, and the end is beginning to appear on the horizon. High LTV lending has exploded in the past 12 months, and it is now far easier to take out a mortgage with a smaller deposit saved. There has been something of a festive dip in high LTV lending in the last month, likely to be the result of lower equity borrowers paying for Christmas and delaying their move until the New Year. High LTV lending should continue its recovery in the coming months, but it’s important that Help to Buy remains in place to help support borrowers in building a deposit, enabling them to access better rates, and cheaper deals.”

Buy to Let: Ltd Company v Personal Investment

One of the most frequent questions asked by landlords is whether to buy investment property in their own name or through a ltd company.

Buy to Let: Ltd Company v Personal Investment

It’s a great question and there is no simple answer.

It will depend on a number of factors surrounding the particular circumstance of the buyer such as how long the properties will be owned for, when to extract the cash, how much income the investor wants to extract and what other income sources they may have.

Whilst Im not an accountant, have no formal qualifications in this area and therefore can’t offer Property Investment Tax Advice I can talk about my experiences and how this has affected me as a property developer/investor.

Lots of our Progressive delegates have found these Property Investment Tax Tips useful.

Before we go into any details about should it be a Property Investment company or individual lets set the scene. The majority of investors buy property in their personal names because there are less hurdles to jump over.

The vast majority of buy to let lenders will only lend to people who buy properties in their own name and therefore for those starting out this will be the determining factor that will make the decision easy.

Buy to Let mortgages are designed for people who are earlier in their investing journey and can be simpler to obtain. Commercial Lenders/mortgages are more flexible in this regard, usually being available for property investment through ltd company, LLPs, Personal names or even trusts.

You see when you buy property through ltd company, this is seen to have a separate legal status to individuals.

So when you search on Land Registry, the company’s name will appear as the owner rather that the individual’s.

This can be useful if you want to keep your details private and might be useful in protecting your personal credit status against utility providers who register late payments for bills you haven’t received and other civil claims.

But owning in a Ltd company/LLP will mean you have to publish publicly available financial accounts on your portfolio, which whilst not detailed when small will become quite clear as the size of your company/portfolio grows and the reporting requirements increase.

Personal Guarantee…
Mortgage lenders will often ask for a personal guarantee (some probably wont such as Lloyds) if you own the property investment through ltd company meaning that whilst you protect yourself personally from other creditors you are personally liable for all debts to the mortgage lender anyway so this does not change by having a Ltd company.

If you want the benefits of limited liability but want to use the personal tax regime try using LLPs, this is what i do as I feel it gives the best of everything.

You only need one shareholder to purchase through a ltd company so you can hold the only share and still be the sole owner. And if you’re a shareholder you are of course entitled to the share of the profit and this will be paid out in dividends.

You don’t need to own a vast property portfolio to benefit from a corporate structure, one property is enough.

When you have the property investment through ltd company you pay corporation tax which is likely to be around 20% of the profit generated (but not drawn out) of the business.

Should you leave all of the profits within the company this the only tax you will be liable to pay on profits. For those who don’t want to draw any (or much) of the funds personally to create a personal income this can be very useful and offers a definite advantage over owning property personally.

If you are like me and like to reinvest profits to create bigger profits the compounding effect of only paying 20% tax over time is huge. With some paying 40% tax on their rental income profits you could potentially generate a yearly tax saving of 20% which would snowball into big numbers if consistently reinvested over many years.

When owned personally, any property income would be taxed in its entirety every tax year giving no ability to defer.

Personal Use…

But the story changes if you want to draw these profits out as an income for personal use. If all the profits were drawn out in the form of dividends on a yearly basis you would end up paying around the same level of tax as if you owned the properties personally because whilst Limited Companies will pay Corporation Tax at 20%, and basic rate (20%) income tax payers wont pay tax on the dividends they receive, higher rate (40%) income tax payers then pay tax on dividends meaning there is little difference between owning personally or doing the property investment through ltd company if you draw all the profits in dividends.

“Compound interest really is the 7th wonder of the world, and I love it!”
For those who only want to draw a portion (rather than all) of their profits out of their Ltd company the snowball effect of the tax saved and reinvested could be huge in years to come.

Disposing the Asset…

When you come to sell a property rather than paying 18% (basic rate tax payer) or 28% (higher rate taxpayer) capital gains tax for properties held in your own name the ltd company would pay 20% corporation tax and you would then be subject to the same tax on dividends outlined above for higher rate taxpayers.

This coupled with the fact that you get no personal capital gains tax allowance (The first £11,100 each so £22,200 if you own it with your wife/husband/someone else of gains where you pay no capital gains tax) often means Capital gains is tax lower for properties owned in your own name rather than the tax regime afforded to Ltd Companies.

So if you are likely to sell a property every few years you are better to own it personally to reduce your capital gains tax bill.

Should this become too frequent however (say more than 1 a year) HMRC will claim you are property trading and charge you income tax anyway. An important consideration when deciding whether to have a Property Investment company or individual.

Remortgaging your buy to let investment

Another major benefit of owing properties personally and not doing the property investment through ltd company is as follows: Remortgage money is tax free.

Should you remortgage a property in your own name the cash would come to you and could be used for any purpose, no tax would be due until you sold the propert(ies).

Lets say you purchased 10 houses for £100k each or £1m. In 30 years they are worth £4M in total, you remortgage them over the years and take out £3M in remortgage cash – as this is borrowed money there is no tax due and these funds can be spent on whatever you want.

When you die it is only the remaining equity which is taxed (£1M in this example as long as the other funds have been gifted to others such as children or spent) meaning you have avoided paying tax on the £3M you released over the years, an amazing strategy – obviously this is an extreme example and you might want to only follow it on some properties as you will have a big tax bill should you have to sell your properties in your lifetime!

Should you own these properties in a Ltd company you would have to extract the remortgage money through Salary (if your company didn’t have enough profits to support dividends at this level, as is likely) which would mean huge income tax and national insurance, so it wouldn’t work. So a definite score to owning personally.

Capital Allowances…

Rob and I also like to claim capital allowances which are allowances on plant and machinery items on purchases of commercial buildings. Typically you get about 20% of the purchase price of such properties offset against your personal income (from any source) up to £50k.

So if you purchased a property for £300k you might be able to claim £60k in allowances, for someone that earns £100k a year as a salary you could use sideways loss relief up to £50k this would reduce their personal income by around £50k meaning that they pay their income tax on £50k rather than £100k which would usually be paid at 40%.

Should put the property investment through ltd company you will only be offsetting 20% corporation tax (and couldn’t offset it against tax on dividends) which is a definite disadvantage,

What’s the way to go?

So to conclude, which is better, a Property Investment company or individual? I think you can see that it depends who you are and what you want to do.

You may like us have a mixture of owning properties personally, within Ltd companies and LLPs and your decision will affect the amount of Property investment Tax you may massively so its worth spending time on this. What I do know is that It is rarely worth transferring properties out of your name into Ltd companies/LLP or visa versa as you will be liable for stamp duty and capital gains tax based on the gain you have enjoyed at the time of the transfer.

If you want to change your strategy just do it for future purchases.

Its important that you consult an accountant for Property investment Tax Advice before you make the final decision as your individual circumstances such as your portfolio, other income, age etc will affect your decision.

Cost of renting hits new high

The cost of renting a home hit a new high in September as landlords made record returns on their investments, figures showed today.

Cost of renting hits new high

The average rent charged on a property in England and Wales rose to £768 during the month, according to LSL Property Services.

Higher rents combined with strong house price growth helped push total annual returns on an investment property up to 13.4 per cent, nearly double the rate of 7.9 per cent seen in September last year.

As a result, the average landlord made a return of £22,706 on their investment during the 12 months, before deductions for mortgage repayments and maintenance.

The total was made up of £8,379 from rental income and £14,327 through property price growth.

Looking ahead, if house prices continue to rise at the rate seen during the past quarter, total annual returns could hit 22.1 per cent over the next year, or £40,489 per property, LSL said.

But there was some good news for tenants as the annual rate at which rents are rising slowed to just 1.5 per cent in September, down from 2.4 per cent in August.

Landlords expect rent rises to remain muted in the year ahead, predicting they will increase by an average of just 1.8 per cent during the next 12 months.

The group said there had been a resurgence in demand for rental properties outside of London and the South East, with the East posting the biggest annual hike in rental costs at 3.1 per cent, followed by the South West at 2.3 per cent.

But in other regions of the country, the cost of being a tenant has fallen.

Average rents in the West Midlands have dropped by 2.4 per cent in the past year, while in the North East they are 2.3 per cent lower and in Wales they have edged down by 1.1 per cent.

David Newnes, director of estate agents Reeds Rains and Your Move, said: “Historically rent rises have broadly tracked inflation. And as the wider cost of living grows ever more slowly, so too has the cost of renting a home.

“That said, autumn is always a busy period for the lettings industry, and this has been no exception.

“Looking ahead, it is likely that rents in most parts of the UK will have now reached their seasonal peak – so as the market cools along with the autumn weather there may be opportunities for some tenants to pick up a favourable deal.”

Tenants finances improved during the month with only 7.2 per cent of rent in arrears, down from 8.5 per cent in September last year.

But despite the drop, there was still £256m of late rent during the month.

Property professionals change with the times

The definition of what makes a good property professional has evolved in response to economic, social and technological change. The 2008 downturn and the introduction of more regulation in the financial services sector has led to a drive towards higher standards of professionalism and accountability across the business world, including in property.

Property professionals change with the times

Nowadays, professional qualification requires not only a detailed understanding of, and adherence to, regulation, but also the expectation that individuals will continually develop these values.

But upholding and cultivating high standards of professionalism is just one quality we are on the lookout for. As the world has changed, our staff need to be representative of the increasingly diverse clients we serve, while the recognition of property as a stable and profitable asset class has driven a need for more data analytics and research skills. Traditional undergraduates are still very much required, but we need to supplement this with a pool of individuals with different skills, perhaps gained from financial or analytical backgrounds.

So, sometimes we’re looking for a different set of skills, but it would be wrong to assume that technical expertise alone guarantees success. Expectations of what ‘makes a manager’ have changed. Individuals joining the workforce today expect feedback and development from their seniors; to be told how their work contributes to the bigger picture and for their remuneration package to reflect not only their achievement but their potential. In turn, HR support to develop these skills is more informal: mentoring is commonplace and coaching is considered an aspiration, rather than a remedial measure.

As with many other careers, today’s technology means that work is seldom left at the office and that work/life balance now needs to be articulated and planned for, but the sociable nature of property brings with it unique challenges. More than most industries, working life often moves from the office to social venues after hours and participation in work-based sports teams is commonplace. Increasingly, flexible working provides an antidote for those with other commitments, and the prevailing view is that employees in few industries are lucky enough to call their clients and colleagues friends as extensively as in property.

First-time buyer prices surge nearly 10% in a year


  • Highest ever national average price of property coming to market, up by 0.6% (+£1,715) this month to £296,549 – and 5.6% more expensive than a year ago
  • New record fuelled by high demand for first-time-buyer properties, with prices up 4.9% on last month and  9.6% (+£16,105) over the past 12 months
  • Vicious circle as high tenant demand leads buy-to-let investors to go head-to-head with first-time buyers:
  • – Many letting agents report ‘same-day’ rentals and little or no property to rent
    – Number of first-time-buyer properties (two bedrooms or fewer) coming to market down by 8% on same period a year ago, exacerbated by first-time sellers struggling with second-step price gap
  • Rightmove advises first-time buyers how to get on a level playing field versus landlords by winning over the hearts, minds and pockets of sellers

While this month sees a new all-time high of £296,549 for the price of property coming to market, it is a relatively modest monthly increase for the time of year, at 0.6% (+£1,715). This is the lowest October increase since 2010 (+0.2%) and should be compared with an average October rise of 1.8% over the previous five years.

However, while new seller asking prices in the middle (+0.4%) and upper (-0.1%) market sectors have under-performed against the national average this month, high demand combined with a supply shortage at the lower end of the market have pushed up prices for typical first-time-buyer properties by 4.9%. These two bedrooms or fewer properties are now at their highest price ever, an average of 9.6% (+£16,105) more expensive than a year ago, far outstripping the overall annual rise of 5.6% for all property types.

Miles Shipside, Rightmove director and housing market analyst comments:

“There are signs of a slowing pace of price rises in some sectors of the market, with the overall October rise the lowest we’ve recorded at this time of year for five years. We still have another national average record however, as prices continue their upward trend. This is mainly being fuelled by the heady price rises of typical first-time-buyer homes. A near 10% price surge in this category in the last year proves that despite tighter lending criteria in last year’s Mortgage Market Review, some first-time buyers can still afford the higher prices being asked for by sellers in this sector. It’s also symptomatic of a shortage of properties coming to market with two bedrooms or fewer, combined with demand from both first-time buyers and landlords investing in reaction to the huge rental demand for smaller properties.”

Letting agents report extraordinary demand from tenants in many parts of the country, with new or existing households looking to the rental sector to fulfil their need for quick and flexible housing arrangements. A growing number of people like the transience of renting, without the complications, commitments and costs of buying and then selling. With inadequate supply from housing associations and the public sector, private landlords are one of the few active providers of smaller homes for rent. However, when this need is combined with first-time buyer demand, boosted by the return of low-deposit mortgages and lenders competing to reduce their rates, it creates a vicious circle due to the limited supply of suitable properties for sale in this most active sector. The number of first-time-buyer properties (two bedrooms or fewer) coming to market is down by over 8% on the same period a year ago.

Shipside observes:

“With local authorities, housing associations and developers no longer satisfying the country’s housing needs, those in particular looking to rent or buy smaller homes must hope for the cavalry to come to their rescue, in the form of government action or large-scale institutional investment. Initiatives such as continued relaxation of planning rules to boost building, 200,000 new affordable homes available to buy over the next five years, or American-style institutional investment in the rented sector will take time to come over the hill, as the sound of bugles is still in the distance. In the meantime, it seems the army of privateer buy-to-let investors remains the only short to medium term way to scale up our rental capacity.

“Tenant demand is such that many letting agents are reporting viewings and tenancy applications on the same day as marketing properties. In some cases they’ve nothing left to rent until tenants move out or a new influx of investor landlords gives some short-lived respite to tenants-in-waiting. Both investor landlords and first-time buyers looking to buy smaller homes are finding them in short supply. As they’re typically owned by potential first-time sellers, the price gap and costs of moving to the second step on the housing ladder deter them from coming to market. Competition is most fierce in this sector, with first-time buyers and buy-to-let investors going head-to-head for the same properties.”

So what can first-time-buyers do to get on a level playing field versus buy-to-let investors?

This is a tough battle, as there are lots of logical reasons why a seller would prefer to sell their property to a landlord investor. Their funding is often a safer bet as they typically have larger deposits or cash, and it could be said that they are less likely than less experienced first-time-buyers to pull out before exchange as their business mind-set lessens the risk of an emotionally inspired U-turn that sometimes scuppers a sale.

Rightmove’s Miles Shipside, who practised in estate agency for over 20 years, shares some tactics and suggestions:

“Win over the heart, mind and pocket of the seller. Buy-to-let investors will give sellers logical reasons for accepting their offer over a first-time-buyer, so do whatever you can to be not only among the first to view, but also to meet or communicate with the owner and make sure they know how much you would love to own, occupy and cherish their property. Most owners have sweated hard to create a home and become very attached to it, so emotionally would prefer to pass on their property legacy to your caring hands rather than those of an absentee landlord.
“While the agent will advise on the best and least risky offer to accept, the ultimate decision is the seller’s. You can mitigate the seller’s concerns by getting your financial affairs in good order and ensuring you have an agreement in principle for a mortgage, giving sellers and agents peace of mind in this area. Finally, landlord investors are in business to make a return, so may habitually try lower offers as they’re less emotionally attached to the properties on which they are bidding as it’s not their future home. If you can find out what fair price the seller is ideally looking for, and you can afford it, then your bid for their home may well be better for their pocket than a landlord’s and also give them a feel-good glow for helping you onto the property ladder.”

Be a Wise Landlord

imagesWhen you manage a residential lettings property, it means bases are covered by you. You need common sense, good organization. All landlords needs to learn about how to better manage their property. Renting out a property initially aims to generate an income, but, renting out can also give you risk of losing an investment that results from mismanagement.

One of the best thing to do in order for you to be a successful landlord is obviously by using a letting agent who will sign up to the standards of professional body such as ARLA.

If you are new to this business, or if you have been doing this but always failed, here are some of the basics you need to know.

You should notify your mortgage and insurance providers.

imgresIt is very important that you speak to your lenders and insurance providers. It is a crucial requirement that you should have a property insurance to protect yourself against the risk of damage to your property, so that in the event of say a storm, flood, earthquakes or any other disastrous incidents, you won’t be financially drained renovating your property. In the case of property rented out to tenants, find your desired property insurance that may protect you from fire and vandalism. Some insurance gives you an actual cash value of the property damaged while others give you the actual costs of replacing the property.

Renting out your property is not pure and a sure ball to income stream, it will cause you a lot of time managing them and risks of liability to tenants. So one type of insurance to consider when letting your property is what they call liability coverage.  It will protect you from liabilities to tenants in cases of damage to them caused by an indoor fall, animal bite, accident due to slippery aisles or anything that causes undesirable effect to your tenants. Some insurance companies will let you add only an amount for the current insurance you signed with them.

One last thing. Always make sure your tenants has signed for a renters insurance to cover their own personal property.