Li Magazine 55th Edition

LANDLORD INVESTOR

WRITTEN BY INDUSTRY EXPERTS COVERING ALL ASPECTS OF BUY-TO-LET

LANDLORD | PROPERTY | INVESTMENT

55TH EDITION | 2020

LANDLORD SURVIVAL GUIDE III

IN THIS ISSUE...

Locked Down, But Not Quite Closed Down

Let technology take the strain

Covid-19 triggered opportunity

Advice for landlords during the pandemic

What do I do if I'm a student landlord?

Coronavirus & Taxation Landlords Voice

N AT I O N A L L I S AWA R D S 2 0 2 0 T H U R S DAY 1 9 T H N OV E M B E R G rosve n o r H o u se H otel , Pa rk L a n e, Lo n d o n W 1 K 7 TN

RETURNING

C E L E B R AT I N G

FOR THE THIRD

EXCELLENCE

CONSECUTIVE

I N T H E P R I VAT E

YEAR

RENTED SECTOR

Brought to you by the National Landlord Investment Show, the National LIS Awards celebrates excellence & professionalism in the private rented sector for both landlords, property investors and services throughout buy-to-let. To find out more please visit our dedicated LIS Awards website: www.national-lis-awards.co.uk

A warm welcome to the 55 Edition of Landlord Investor Magazine, and the third Landlord Survival Guide.

TH

Again, my first responsibility as editor is to wish you the very best of health at this troubling time. At the time of going to press the Government have announced another 3 weeks of lock-down, which really does put life into perspective, reminding us to cherish all we hold dear. Without health and security we have nothing. If you're a landlord then it's likely the money earned – and anyone who owns a BTL property will assure you it is very much earned – constitutes a major part of your income (possibly all of it). Government directives on rental properties has been a little fuzzy so far, and appears largely to depending upon reasonable behaviour from both Tenant and Landlord.

To fill the vacuum we'll be publishing weekly editions of our LI Magazine Landlord Survival Guide. This being our third to date, we aim to bring you features, articles and opinion from industry experts, offering a wealth of experience and information. We'd also like to hear what Landlords have to say regarding their challenges / concerns during the Covid-19 crisis. If you're a landlord and wish to write a 400 word article detailing your specific concerns, and how you feel about the market, please get in touch. Furthermore, we'd like to know what you may be doing differently, and anything else you have to say about the subject, so we can really understand how it impacts the plight of the private rental landlord. Please email your submissions to landlordguide@ landlordinvestmentshow.co.uk and we may publish your article in the coming weeks. You can find digital copies of all back issues at www. landlordinvestmentshow.co.uk/li-magazine and if you have questions for any of our guest columnists then please do not hesitate to get in touch via our dedicated email: help@landlordinvestentshow.co.uk The response so far has been nothing short of spectacular, with a consensus from our audience that the guide brought a welcomed voice to the private rented sector during this uncertain time, and all the time there is a need we'll be publishing on a weekly basis.

With regards to our shows, obviously our calendar has been disrupted, but we're in the process of taking our seminars online, and have launched an online seminars section of our website. Here you can view industry experts delivering advice in the form of video. The service is completely FREE and we'll be updating them constantly over the coming weeks, visit www.landlordinvestmentshow.co.uk/online-seminars to see more.

We have other great ideas in the pipeline for the coming months. We exist to deliver content and are reviewing the myriad options on offer, to keep you up-to-date, and remain a beacon of information for the BTL community.

As we always say here at LIS: 'it's a tight ship and we all have to row together'. On that note, enjoy reading this issue of our Landlord Survival Guide. Stay Safe. Keep Well. TH

LANDLORD INVESTOR MAGAZINE

Editor Tracey Hanbury

Editorial Contributors David Smith Aviram Shahar Jun Cheong

David Asker Peter Littlewood Sean Hughes David Aston

IN THIS ISSUE...

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Locked Down, But Not Quite Closed Down

6

Let technology take the strain

8

Covid-19 triggered opportunity

10

Advice for landlords during the pandemic

12

What do I do if I'm a student landlord?

14

Coronavirus & Taxation

16

Landlords Voice

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Telephone: 020 8656 5075 landlordinvestmentshow.co.uk Published by LIS Media, 27 Stafford Road, Croydon CR0 4NG

Statements and opinions expressed in articles, reviews and other materials herein are those of the authors; the editors and publishers and do not under any circumstances constitute investment or legal advice. While every care has been taken in the compilation of this information and every attempt made to present up-to-date and accurate information, we cannot guarantee that inaccuracies will not occur. LIS Media, Tenants History Limited and our contributors will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information accessed through the promoted links.

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LANDLORD INVESTOR 55TH EDITION

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LANDLORD SURVIVAL GUIDE III

DAVID SMITH ECONOMICS EDITOR OF THE SUNDAY TIMES AND PROPERTY NOTIFY ECONOMICS COLUMNIST

Locked Down, But Not Quite Closed Down FEATURED COURTESY OF OUR SISTER PUBLICATION:

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LANDLORD SURVIVAL GUIDE III

The question of what is happening in the economy, and the property market, during this period of lockdown is an interesting one. The Centre for Economics and Business Research (CEBR) recently estimated that 31% of normal economic activity is being lost as a result of the lockdown.

The question of what is happening in the economy, and the property market, during this period of lockdown is an interesting one. The Centre for Economics and Business Research (CEBR) recently estimated that 31% of normal economic activity is being lost as a result of the lockdown.

Interestingly, for estate agents, both commercial and residential, the figure was only 20%, implying that working from home, virtual viewings and other adaptations are keeping some things going in the market, even at a time when the official advice is to pause exchanges of contract and completions.

The CEBR also found that construction activity was operating at 50% of normal. This was consistent with the latest purchasing managers’ survey for the industry, which in March showed the steepest fall in activity in the sector since April 2009. April 2009, of course, was in the depths of the financial crisis.

Housebuilding activity held up better than civil engineering or commercial work in the survey, though respondents were braced for a sharp drop. Sure enough, led by Barratt Developments and Taylor Wimpey, most of the big housebuilders called a halt to construction activity on their sites in late March.

What does it all add up to for the housing market? Knight Frank, the estate agent, making the assumption that the lockdown will remain in place for the whole of April and May, with a gradual lifting through June – which we can all hope for – predicts that this will lead to a 38% drop in transactions to 734,000 for 2020. That would take the total below that recorded in the financial crisis of 2008-9, when the number was just below 800,000. For something that we were barely aware of just a few weeks ago, this is an

LANDLORD INVESTOR 55TH EDITION

extraordinary turn of events. You would have to go back very many years for a lower annual transactions’ total.

There will be a recovery, according to Liam Bailey, Knight Frank’s global head of research, with transactions next year set to be 18% above 2019 levels, and the market went into this crisis in pretty good shape, on the back of a post-election recovery. But roughly half of this year’s missing transactions will be “lost”, he suggests. Some people who were going to move will no longer do so. This makes sense. There will be those, probably quite a number, whose income expectations will have changed for the worse as a result of the crisis.

Knight Frank expects only a modest 3% fall in house prices this year. Lettings activity will be 25% below its average of the past five years but rental values in the London and Home Counties markets it covers will be flat rather than falling, with some upward pressure resuming later in the year.

If that is as bad as it gets, for house prices and rental values, many people

will be relieved. There are plenty of gloomier scenarios around, which involve much longer lockdowns and which worry about the absence of a comprehensive exit strategy from a public health crisis which has become an economic crisis.

Even in a lockdown, however, people have to move. Demand for housing does not stop, even when the supply of new-build properties comes to a halt.

Second homes may be out of bounds, as Scotland’s chief medical officer discovered to her cost, but things have not completely ground to a halt.

The lockdown itself may also be generating its own demand.

Some delving by the tradespeople comparison site HaMuch, based on a trawl of lettings websites, found a strong demand for rental properties with gardens, as people try to make isolation more palatable.

The strongest demand for rental properties with gardens was in Bristol, followed by Nottingham, London and Cambridge. It is an ill wind that does not blow somebody some good.

Housebuilding activity held up better than civil engineering or commercial work in the survey, though respondents were braced for a sharp drop.

To read more features by David Smith and the Property Notify team, please visit www.propertynotify.co.uk

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LANDLORD SURVIVAL GUIDE III

AVIRAM SHAHAR CO-FOUNDER AND CEO, LENDLORD

Let technology take the strain

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LANDLORD INVESTOR 55TH EDITION

LANDLORD SURVIVAL GUIDE III

Lendlord is an online platform that helps landlords to manage, track and optimize their portfolio's performance.

The impact of technology has become more apparent in recent weeks with it supporting many businesses of all sizes that have started to utilise a variety of systems and solutions to operate safely, securely and remotely where possible to combat Covid-19 restrictions. In short, technology helps to assist, influence and disrupt any number of overlapping market sectors.

In the buy to let sector, we are seeing a much greater proportion of landlords stating to embrace technology, especially these days.

This is hardly surprising. After all, ‘smart’ technology has become a common feature in almost everything we do. Technology has changed the way in which many people go about their daily lives. When it comes to PropTech (property technologies), this is also changing the way landlords – large and small - gather, analyse and interpret data.

Working with PropTech tools such as Lendlord can help landlords realise exactly how their portfolios - and individual properties within this portfolio - are performing so that realtime decisions can be made according to the data at hand.

In addition to that, Increased levels of automation are critical for landlords in terms of understanding and accessing the available finance options as the BTL market changes so rapidly. You only have to take a look at the news pages of the trade press to see how many launches and criteria changes

LANDLORD INVESTOR 55TH EDITION

occur on a weekly basis across this dynamic sector.

especially during a time when profit margins are being squeezed.

And to track these without any AI or tech support is getting increasingly difficult for landlords. There is also the pressing issue of generating, collating and securely storing the necessary compliance and regulatory requirements in what is a different age from what many are used to.

Technology platforms are not here to tell landlords what they should be doing. We’re simply here to recognise, understand and provide solutions for the new challenges they are facing.

We need to constantly adapt our role, so we stand shoulder to shoulder with landlords to ultimately improve their lives through the provision of access to a cost-effective range of digital tools, platforms and systems.

Managing all portfolio details in a more efficient and secure manner can make a real difference to any landlord’s bottom line. Technology not only allows every small detail to be stored in the same place, but it also offers simpler insights into how portfolios are performing.

After all, it’s essential to know what your property portfolio is doing at all times,

Utilising such tech enhancements will then allow landlords time and energy to do what they do best – follow the market trends, realise the value attached to their investments and diversify their portfolios accordingly.

Working with PropTech tools such as Lendlord can help landlords realise exactly how their portfolios - and individual properties within this portfolio - are performing so that real-time decisions can be made according to the data at hand.

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LANDLORD SURVIVAL GUIDE III

JUN CHEONG PROPERTY PORTFOLIO INVESTOR

Covid-19 triggered opportunity

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LANDLORD INVESTOR 55TH EDITION

LANDLORD SURVIVAL GUIDE III

Many have predicted this economy slump, in fact, I think it was way overdue. The economy has been ‘artificially’ supported by record low interest rates and human factors. However, most did not expect the trigger was by a virus, Covid19.

An economy downturn is a cyclical event due to the availability of credit, which is what most investors are dependent and leverage on. Covid19 did not cause the economy crash, it was the trigger. Like previous economy downturns, it is an opportunity for professional investors. Prices are dropping, but not necessarily the value of the assets, and this differentiation is the opportunity. As I always tell my investment partners, “we invest based on the value and not the price”.

Property transactions have stalled due to restriction on movement and property valuation. Hence many lenders withdrew their mortgage products. However, property prices will only fall if there is permanent finance restriction and a supply/demand ratio increase. Finance is now restricted, however there is no liquidity issue (not like 2008 crash). The lenders have money, and probably wants to do business and lend, but only to the low risk investors.

How about property supply and demand? One would argue that the supply and demand are relatively unchanged once the lockdown is lifted. Property owners who needed to sell, will need to sell, and buyers who needed to buy, will need to buy.

virtual viewing, or working with professionals who already have a good quality stocklist. Quality stock is the key. I am re-negotiating most of the properties I viewed pre-lockdown.

Whatever you do, do not keep cash for long. Governments are throwing money at tackling Covid19 (350bn emergency package, wiping out NHS 13.4bn debt), rightly so. Likely, much more is needed. Now, who is going to foot the bill? The government must either generate more income (raised taxes) or create money (keep printing

more money). Taxation is a must.

To drive up the economy (and inflation) government employ quantitative easing. Most value/prices will increase (property, salary, beverages etc.), except cash savings. Effectively a ‘stealth tax’ on cash. Therefore, keeping liquid cash is one guarantee way of losing out.

Investors know good quality property value only goes up over time, and the investment opportunity has now been triggered by Covid19.

Property prices will only fall if there is permanent finance restriction and a supply/demand ratio increase.

Now is the buying opportunity, not in a few months. The lockdown has effectively eliminated the competitions.

No physical viewings, but there is

LANDLORD INVESTOR 55TH EDITION

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LANDLORD SURVIVAL GUIDE III

DAVID ASKER THE SHERIFFS OFFICE

Advice for landlords during the pandemic

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LANDLORD INVESTOR 55TH EDITION

LANDLORD SURVIVAL GUIDE III

During the past few weeks there have been significant changes for us all. The Government has fast-tracked legislation to protect tenants, including a three month ban for residential evictions, which means that any tenants are secure in their rental property for at least three months from 26th March 2020, but this may be extended.

S21 notice extended from two months to three

County court judgment for rent arrears

Landlords can still serve notice to tenants, however the notice period for a S21 eviction has been extended from two months to three. You would then be able to carry out the eviction once the ban has been lifted.

Further down the line, when the situation has eased somewhat, if your tenant has perhaps moved on and stopped paying any arrears accrued, you do have the option of going to court to obtain a judgment. This can then be transferred to the High Court for enforcement under a writ of control.

Arrangements with tenants With some tenants facing an uncertain future financially, the Government is expecting landlords and tenants to work together to agree “an affordable repayment plan”. Where possible the tenant should pay what they can afford so they don’t build up significant arrears.

However, if they are still struggling financially, then they would be unable to pay anyway and there may be insufficient goods to take control of to clear the debt.

New tenancies

Whilst you may prefer to recover all rent owing, communicating with your tenant and making an arrangement to offer rental holidays and/or allow tenants to spread payments over several months may be the best way forward, especially for tenants that you want to keep.

If you are taking on new tenants, then consider asking the tenant for a guarantor, who would be legally obliged to pay the rent if the tenant is unable to.

Mortgage holiday and insurance

If you already have a possession order or you think that you will need to evict tenants once the ban is lifted, get in touch with The Sheriffs Office at client@thesheriffsoffice.com for further information on the process and what you can prepare in advance.

Under these circumstances, you may want to consider asking your mortgage provider for a payment holiday to be able to afford arrangements with tenants.

You can also check what rent arrears and eviction cover your insurance provides.

LANDLORD INVESTOR 55TH EDITION

With some tenants facing an uncertain future financially, the Government is expecting landlords and tenants to work together to agree “an affordable repayment plan”.

If you need to evict tenants

David Asker Authorised High Court Enforcement Officer and Director of The Sheriffs Office

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LANDLORD SURVIVAL GUIDE III

PETER LITTLEWOOD IHOWZ

What do I do if i'm a student landlord?

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LANDLORD SURVIVAL GUIDE III

Student landlords are in a really peculiar position. Assuming they had managed to let all their rooms at the beginning of the academic year they are sitting on a gold mine – but might be a temporary gold mine, possible about to change to a lead mine!

It’s currently a gold mine because they know that (generally) students have signed a long term contract, and the students’ income (their grants) will be paid in full for the rest of the academic year. So many landlords affected by Coronavirus will be casting coveting eyes at them.

Is it justified; should landlords be still charging students?

If the students have decided to remain in occupation, because they are continuing to study, albeit remotely; or they have vacated but have left goods in the property (expecting to return quickly) the landlord is quite justified to continue charging rents.

therefore be seeking affordable accommodation?

The ones who will be feeling the pinch is the plethora of specialised blocks going up to only accommodate students. Whilst they have many befits small landlords can’t offer (in-house cafés; recreation areas; etc) they have large overheads; promised dividends; and are (generally) only able to be used for one purpose – students.

Consequently they (tend) to charge high rents. Small student landlords should have the ability to undercut them, offering a friendlier service and more flexibility.

If you are a small landlord get in there, be proactive; market yourself as ‘smaller; friendlier’ and most importantly ‘far more cost effective’ than the big soulless blocks.

But above all remember two important things for student landlords:always have a Plan B if you can’t find any students (it is likely there will be a downturn in students next year); ensure all the students in your property will get on together. Meet them; interview them. So often the thought that a drinking buddy will also be a good fellow tenant turns to ashes, and the landlord has to sweep up the residue!

In the cases where the property has been completely vacated it is a more difficult question.

The contractual answer is Yes, they can continue charging. The moralistic answer is Maybe. Perhaps they should be negotiating with the students, after all the Government is keen to keep as many people in employment as possible, including the self-employed.

Does this keenness extend to landlords?

All landlords, including student landlords must take each case on its own merits. Is the student suffering extra financial strain because of Coronavirus; are they able to continue studying; are they intending to come back to study next year, and

LANDLORD INVESTOR 55TH EDITION

If the students have decided to remain in occupation, because they are continuing to study, albeit remotely; or they have vacated but have left goods in the property (expecting to return quickly) the landlord is quite justified to continue charging rents.

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LANDLORD SURVIVAL GUIDE III

SEAN HUGHES COMPREHENSIVE TAX PLANNING

Coronavirus & Taxation

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LANDLORD SURVIVAL GUIDE III

What does Coronavirus mean for landlord taxation?

Section 24 Section 24 was fully implemented on 6 April 2020.

I know some people did lobby to get this delayed in light of the current situation, but in a time where the government will likely need to increase taxes to recoup the financial aide offered to business and employees, reducing tax charges for landlords seemed like mission impossible!

However, the common view is that profits will be down in the 2020/21 tax year.

This coupled with mortgage holidays will likely result in the full effect of section 24 being deferred until the 2021/22 tax year.

Tax payments The 31 July tax payments can be deferred. This is very different to being waived. The tax will still become due in January 2021, although “Time To Pay” arrangements will likely be available for people in real need.

What can landlords do?

Inheritance Tax I like to have an optimistic outlook on life.

House prices will fall due to Coronavirus. “CEBR” are predicting a 13% drop in 2020 but it is expected that house prices will rise again in 2021.

Landlords with a current Inheritance Tax (IHT) concern can use the fall in property values to their advantage.

IHT planning works by using an investors IHT allowances to move assets to the next generation(s), either directly or using trusts. Every investor has certain IHT allowances.

Lower house prices mean that more assets will fall within an investors IHT allowances, resulting in larger IHT savings for the investor once house prices rise in 2021.

Section 24 The full implementation of tax planning to reduce the effects of section 24 can take around 12 months. Therefore, now may be a perfect time to consider how the mitigate the full effects of section 24 in the 2021/22 tax year.

Landlord taxation: PostCoronavirus

Given the amount of aide the government has issued to businesses and employees, once this situation is fully resolved I imagine there will be tax increases.

Will this be a return to the 50% additional income tax rate? Will the basic rate of income tax increase from 20% to say 22%? Nobody knows.

What we do know is that Section 24 almost certainly will not be reversed.

Increased tax rates will only increase the effect of this severe tax. So now, more than ever, landlords need to plan to mitigate the effects of Section 24.

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LANDLORD SURVIVAL GUIDE III

DAVID ASTON LEDAJON PROPERTIES LTD

Landlords Voice

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LANDLORD SURVIVAL GUIDE III

Following our call to action for UK Landlords to voice their concerns re the Covid-19 crisis, we were inundated with responses. We'd like to say a huge thank you to everyone who responded, choosing a single feature was really hard. After careful consideration we decided to feature this excellent article from experienced landlord David Aston.

I think that 99% of most Private Landlords would agree that having a good, reliable and honest tenant is the most important thing when letting out your premises. A tenant who respects the property, pays rent on time and causes little fuss is something that money just can't buy. It's often a matter of luck and of course how you as a Landlord respect them too.

There are times, which don't happen often, when circumstances occur that as Landlords we are not in control of. We have that situation now. But primarily we must remember that these tenants, as I have described above, consider our properties to be their "home" This gives us a golden opportunity to prove to others that overall, we are not the greedy, uncaring and unscrupulous individuals that parts of the national press would like to portray us to be.

For those of you who DO fit this description (and I don't think for one minute you don't exist), don't bother reading the rest of this article. We are already paying for your poor performances. e.g. Selective Licensing.

I am fortunate enough to have a number of tenants described above, many whom have been renting from my company for over 20 years. It is times like we find ourselves in at the moment when we as Landlords can help our tenants get through these difficult months and I'm afraid to say it all boils down to money.

It is not my policy to offer payment "holidays". These are not helpful, they cause arrears and added stress. As after this is all over, monthly payments

LANDLORD INVESTOR 55TH EDITION

would have to increase to gradually pay back what is owed. This is the last thing someone wants to do when they are attempting to return to normality, especially families with young children, whose demands will not have diminished just because of a pandemic.

Banks & Building Societies tend to think differently!

If a tenant comes to me claiming difficulties in paying rent during this lock down, I need them to be totally transparent and I ask for a breakdown of their monthly income and expenditure. I can then make a decision as to how much I will be able to adjust their rent for the next three months but on the condition that afterwards, once normality is returned, they owe me nothing.

I give an example of one family of four, who has rented for almost 20 years

and the father is the only breadwinner in the house. I know he works in the restaurant business as a waiter. His job is on a casual basis and he has no guarantee that he will be paid anything.

He kindly provided me with his monthly account. It didn't look good. So I waived his April rent and reduced May & June. His response by email was "I will never forget what you've done.

All of my family can never thank you enough" I am happy to take a loss of a few hundred pounds per month to make their lives more bearable.

As I have often said to my tenants in they past "we value your tenancy" now, during this pandemic, I find that there is an opportunity to prove it.

David Aston Ledajon Properties Ltd

As I have often said to my tenants in they past "we value your tenancy" now, during this pandemic, I find that there is an opportunity to prove it.

If you'd like the chance to voice your concerns here, please email 400 words on the subject of your concerns to help@landlordinvestmentshow.co.uk

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