An interesting article I read today… a must read for buy to let investors … from Property Wire
Despite choice of 900 buy to let mortgages available on the market, lack of finance is hindering almost a quarter of UK landlords, new research has found.The situation is preventing them from expanding their property portfolios, according to the study conducted by online letting agent Property Let By Us.
Overall one in 10 landlords has had difficulty securing a mortgage over the last 12 months but 82% of landlords have managed to successfully secure a mortgage at a when the buy to let market has been challenging for landlords.
Indeed almost 80% of landlords are reporting rent arrears, nearly a quarter of landlords have served an eviction notice and 7% have had to resort to the courts to evict tenants. The good news is that void periods are down as demand continues to outstrip demand.
‘Securing finance also looks like it is going to get tougher for landlords. A new high street crackdown now means landlords will need a bigger deposit and face tighter checks for a buy to let loan. High Street lenders are introducing strict criteria in a crackdown on the buy to let boom, which is feared to be pushing up house prices across the UK,’ she explained.
‘The amount landlords will be able to borrow is expected to fall by thousands and they are likely to face new tough lending criteria to secure a buy to let loan. Landlords must also prove that they are not wholly reliant on their rental income and that they will also be able to cope with void periods and any repairs to the property,’ she added.
Morris also pointed out that some lenders are introducing new affordability checks, which require landlords to answer such questions as how much they spend on household bills and childcare before they can get a loan.
Lenders may also refuse loans to anyone dependent solely on a rental income and some providers expect applicants to have income of at least £25,000 a year from other sources.
‘Landlords need to thoroughly research lenders and ensure they meet the lending criteria before applying for a mortgage,’ Morris concluded.
The Communities and Local Government Secretary has warned that it has become “normal” for young people to be “exiled” from the areas in which they grew up due to the chronic lack of affordable housing.
Having read a few articles, it is evident that there is not a guaranteed route to success. If you wish to buy a property to let out, a good few hours of research is very important and when you have it, to keep it in very good condition.
There are many different types of tenants, so a good place to begin is by asking yourself what sort of people you would like and what sort of home THEY would want. Do you want families, young professionals or students, for instance?
Families go for three or more bedrooms, want gardens for the kids, are likely to need parking and want to be near schools. They usually also have their own furniture.
For young professionals, it’s all about being very close to transport links, restaurants, shops and the gym.
Students need to be close to campus, their friends and local bars. They also look for somewhere that is easy to clean, and comfortable. Part-furnished can be a distinct advantage but make sure your things are either insured or not expensive to replace.
Put yourself into the mindset of the tenant you want, and invest accordingly.
Tunbridge Wells faces a brain drain as young people are priced out of the town by high rents which leave them unable to save for a mortgage
With the average starting price for a house in Tunbridge Wells at £550,407 and 11 streets in the town with average property price of more than £1million, owning a home is out of the question for most youngsters.
Some are choosing to stay at home with their parents rather than spend 40 per cent of their wages renting.
Others are considering abandoning the town either for London – where rents are equally expensivebut with more life opportunities – or for cheaper places.
The Courierthis week examined the figures for typical youngsters, new school-leavers or university graduates, who work in this town in their first jobs.
According to National Housing Federation data, the average salary in Tunbridge Wells for lowest earners is £14,581.60. The average house price in this bracket – the lowest 25 per cent of earners in the town – is £190,000, a massive 13 times the salary.
With buyers needing a ten per cent deposit and securing a mortgage of up to three times their salary, home ownership is out of reach.
Read more: http://www.courier.co.uk/Rental-prices-creating-brain-drain-town/story-26722635-detail/story.html#ixzz3dmSezclH
Residential rental prices increased in every region of the UK in the three months to May taking the average rent to £935 a month or £738 excluding London.
The latest HomeLet rental index shows that the pace of growth in London has picked up again after a period of slower growth, with average rents agreed on new tenancies in May 2015 exceeding £1,500 per month for the first time.
With rents now 10.7% higher than the same time last year, it is only the third time that rents have risen across the country since the index began, once in October 2014 and once in December 2010.
The South East of England grew by 9.4% and Greater London 9.2%.
In Greater London, the average rent now stands at £1,472 for the three months to May 2015, however, when looking solely at new tenancies agreed in the month of May, the average rent has exceeded £1,500 for the first time in the history of the Index. The average rent on new tenancies signed during May 2015 was £1,506 per month.
‘Rental values are now increasing year on year across the country, with no exception. After a short period of London rents rising more slowly, when it seemed the rest of the UK may catch up or even exceed the capital in the speed at which rent prices were increasing, we now see the rate of price rises in London returning towards double digit growth, while the rest of the UK continues to rise steadily,’ said Martin Totty, chief executive officer of Barbon Insurance Group, the parent company of HomeLet.
‘With the whole of the UK experiencing increases in rent prices agreed on new tenancies, it is possible this is an early indicator of a post-election private rental market where both landlords and tenants might expect rent prices to keep rising as demand continues to grow,’ he added.
Experienced landlord Phil Spencer and the Telegraph’s Christopher Middleton offer their top tips for investing in the buy-to-let market
“There is only one way house prices can travel in the decades ahead,” he says. “Which is why I believe it is good news to invest in property. And if capital values are set to rise over the long term, what about rents?
PHIL’S TOP TIPS
Losing tenants because you did not look after them can turn a good yearly return to nothing. Tenants like to feel they can pick up the phone and talk to someone who has direct contact with the landlord.
You need to be confident that a letting or managing agent is adding value. Some will certainly be cheaper – but will they deliver what they promise?
SOAK UP THE LOCAL KNOWLEDGE
I’ve always chosen a specialist lettings agency who is local to the area to manage my properties and I feel that has given the best result.
LESSONS FROM NATURE
A lot of properties need some paintwork done over time, or need regular window-cleaning. Keep the property in good nick – otherwise the maintenance jobs become far bigger.
INVEST IN THE FAMILY
If you are targeting the families-moving-out-of-the- city market, you may pay a premium for a home in a good school catchment area, but rent will be at a premium and there’s more chance of capital growth. Relocating families, perhaps renting with a view to buying, make good tenants. They have money in the bank and look after a place.
FROM PROFIT TO LOSS
Voids are the real killer of the financial model behind buy-to-let. Do anything you can to avoid them. A long one, or even three short ones in successive years, can turn what would have been a profitable investment into a loss-making one.
Resist the temptation to over-furnish or overstock the property. Ask yourself how much these additions will add to the rent – and the answer is probably none. Tenants won’t choose a property because it has every last gadget in the kitchen. They’ll base their decision on factors such as location and proximity to transport. If your property offers those, you should already be able to get the going rent for it.
Are long-term tenants more demanding than short-term tenants? Not really. Tenants, on the whole, are pretty demanding — and why not? For the landlord, a long-term commitment to rent is good news and it does not mean your tenant pays less rent. If it does mean spending a bit on improving the property, it’s a small price to pay.
SAFE AS HOUSES
If you are an landlord and concerned about whether you can leave your property to tick over in your absence, I would say you shouldn’t have to worry about it if you put it in the hands of a reputable lettings agent.
DRESS TO THRILL
If you have a buy-to-let property that won’t let out, try dressing it. If it looks tired, paint it. If there’s condensation on the windows or a mouldy shower, get rid of it. The property must be clean and it must feel like a home rather than an investment property that you don’t care about.
Set aside three months’ rent in case things go wrong or tenants leave. There will always be maintenance costs too, particularly in older buildings, so there needs to be an allowance for that.
PEACE OF MIND
Lettings agents’ fees can seem chunky but look into them. If you manage it yourself but can’t get to the property easily, and you don’t have a contact for a good plumber who can get there quickly, then it’s a price worth paying.
LOOK AFTER YOUR TENANTS
Fix things as quickly as you can and respond pleasantly if they tell you there’s a problem – otherwise, next time, they may not bother, and the problem will escalate from being a tiny one into a big, costly one.
Have a play around with this, Landlords and Buy to Let investors… better than any interest or return offered elsewhere?
A business idea is usually born from a need to create something
new or make something better. Property owner Vanessa Strauss
worked in the City of London and retained some property in the
region of Tunbridge Wells. Having employed a number of letting
agencies to rent out her and other Investment Landlords property,
and living in rented homes, she saw the picture from both a landlord and tenant’s perspective. She experienced significant problems in the letting and property management process. Upon reflection and speaking to other property owners and tenants, it became all too clear that the system was not working in an efficient and optimistic way.
- The charges and fees were barriers to moving and unfairly high.
- The service and products promised in Agency Agreements were not always provided and often contained hidden charges.
- Communication was poor and there were many occasions in which the letting agent failed to develop a good relationship with either the tenant or the landlord, or both.
- The properties were not being looked after well and inspections were not being done, leading to depreciation in the value and potential yield.
- Rent was not always paid on time.With a desire for real change, Vanessa worked with a range of Landlords and undertook research with tenants to develop a model of best practice. By analysing competitors, reviewing fee structures, rental yields, marketing processes and response times, Vanessa and her team have built a new eco-system that works responsibly and profitably for all stakeholders to maximise opportunity and value in the lettings market. And so Bright Fox was born. The fundamentals of this business are ethics, honesty, financial reward and good relationships built on real trust.