Li magazine relaunch issue

LANDLORD | PROPERTY | INVESTMENT

#LIMAGAZINE

IN THIS ISSUE

LANDLORD INVESTOR MAGAZINE RELAUNCH ISSUE 2017 | 25TH EDITION

Buy-to-let challenges for landlords & property investors

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

KEY ISSUES AFFECTING BUY-TO-LET INVESTORS IN 2017 / IS 2017 THE YEAR TO GET OUT OF PROPERTY? / TOP TIPS FOR GETTING DEPOSIT PROTECTION RIGHT / BREXIT UPDATE / ANOTHER YEAR, ANOTHER HOUSING ACT? / CYBER-CRIME / NOT SO DAPPY LANDLORD

UK’s leading property investment event National Landlord Investor Show 2017 WEDNESDAY 1 MARCH NORTH LONDON Emirates Stadium - Arsenal Football Club WEDNESDAY 19 APRIL MIDLANDS

WEDNESDAY 13 SEPTEMBER SUSSEX

Villa Park - Aston Villa Football Club

Brighton Racecourse

WEDNESDAY 3 MAY SURREY

TUESDAY 26 SEPTEMBER KENT

Croydon Park Hotel

Kent Showground

WEDNESDAY 24 MAY BERKSHIRE

THURSDAY 12 OCTOBER MANCHESTER

Reading Crowne Plaza Hotel

Old Trafford - Manchester United Football Club

THURSDAY 15 JUNE LONDON

WEDNESDAY 25 OCTOBER CARDIFF

London Olympia

Cardiff City Stadium

WEDNESDAY 6 SEPTEMBER EAST LONDON

TUESDAY 7 NOVEMBER LONDON

Crowne Plaza Hotel - Docklands

Olympia Conference Centre

For further information regarding our 2017 shows please call 0208 656 5075 or visit our website: www.landlordinvestmentshow.co.uk Follow us :

@LandlordInShow

@LandlordInvestmentShow

Welcome

to the relaunch Issue of LI Magazine

Welcome to the 25th edition Landlord Investor!

LANDLORD INVESTOR MAGAZINE Relaunch Issue 2017

Editor Tracey Hanbury editor@landlordinvestmentshow.co.uk Editorial Contributors Tom Entwistle - LandlordZone Karen Bennett - Shawbrook Simon Zutshi - Pin Ben Beadle - Tenancy Deposit Scheme Allison Thompson - Leaders Peter Littlewood - Southern Landlord Association Steve Barnes - Hamilton Fraser Paul Shamplina - My Deposits Design Marc Riley

You will notice that the style in which we present LI Magazine has changed!

We decided it was time for a little revamp of our monthly title and we hope you like it!

We are delighted that over 44,000 Landlords & Investors receive our periodical publication and hope the title will continue to go from strength to strength.

In this special re-brand edition we cover a wide range of topics which we hope will keep you up to speed on the private rented sector including: Tom Entwistle - Buy-to-let challenges for Landlords in 2017 Karen Bennett - Key Issues affecting buy-to-let Investors in 2017 Simon Zutchi - Should we sell or should we buy?

Ben Beadle - Top tips getting deposits protection right.

Peter Littlewood - Another Year, another Housing act?

Steve Barnes - Cyber Fraud and how it could effect Landlords + much more Dates for your diary Our 45th National Landlord Investment Show will be on the 1st March at the Emirates stadium. This one day event is free to attend, come along and meet over 40 leading service providers from the private rented sector and attend up to ten seminars on Tax advice, Finance advice, Eviction advice, Tenancy deposit advice. To book your free show tickets, download the seminar programme and plan your day visit: www.landlordinvestmentshow.co.uk

Advertising Beverley Meliniotis Marketing Anna Jackson Contact Telephone: 0208 656 5075 Website: landlordinvestmentshow.co.uk Facebook: /LandlordInvestmentShow Twitter: @LandlordINShow

Tenants History Ltd 27 Sta ord Road Croydon CR0 4HA

For further information regarding both Landlord Investor Magazine and National Landlord Investment Shows please call our office on 0208 656 5075 Recruiting We are currently recruiting for Property professional journalists to join our expanding team, if you would like to find out more about the positions available then send me an email: Tracey@landlordinvestmentshow.co.uk Happy reading and we hope to see you at our events!

Tracey Hanbury | Editor, LI Magazine

Contents

4 12 16 21 24 26 32 34 Expert Advice

Finance

Investment

Sales and Lettings

TDS

Industry Update

Industry Spotlight

Industry Spotlight

Buy-to-Let Challenges for Landlords in 2017

Key issues aecting buyto-let investors in 2017

Is 2017 the year to get out of property?

Brexit Update

Top tips for getting deposit protection right

Another Year, another Housing Act?

Cyber-crime & landlords

Not so dappy landlord

Statements and opinions expressed in articles, reviews and other materials herein are those of the authors; the editors and publishers. 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. 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.

LANDLORD INVESTOR RELAUNCH 2017

1

Meet the team TRACEY HANBURY

RYAN DENNINGTON

T: 0208 656 5075 M: 07931 308 875 tracey@landlordinvestmentshow.co.uk

T: 0208 656 5075 M: 07931 308 856 ryan@landlordinvestmentshow.co.uk

STEVE HANBURY

BEVERLEY MELINIOTIS

T: 0208 656 5075 M: 07429 683 046 steve@landlordinvestmentshow.co.uk

T: 0208 656 5075 beverley@landlordinvestmentshow.co.uk

EDITOR & SALES DIRECTOR

SALES & EVENTS MANAGER

DIRECTOR

ADVERTISING SALES MANAGER

ANNA JACKSON

MARKETING MANAGER

LES HANBURY DIRECTOR

T: 0208 656 5075 anna@landlordinvestmentshow.co.uk

FRAN ROBINS

MARC RILEY

SALES & EVENTS MANAGER

DESIGN MANAGER

T: 0208 656 5075 M: 07950 284 615 fran@landlordinvestmentshow.co.uk

T: 0208 656 5075 marc@landlordinvestmentshow.co.uk

Alicia Cela

Charlotte Dye

ACCOUNTS

SALES SUPPORT

T: 0208 656 5075 accounts@landlordinvestmentshow.co.uk

T: 0208 656 5075 info@landlordinvestmentshow.co.uk

SPECIALIST LANDLORD INSURANCE YOU CAN TRUST As one of the UK’s leading specialist landlord insurance brokers, our wide range of solutions covers all types of residential property, commercial property and tenant status. Whether a single property or a portfolio, we’re sure to have it covered.

To find out more, call 01625 348116 or visit www.bollington.com/landlord-investor

Insurance Times

Awards

WINNER

BOLL255 01/17

2

RELAUNCH 2017 LANDLORD INVESTOR

Need a mortgage?

We can help.

Home-buyer | Buy to Let | Commercial Auction & Bridging Loans | Property Development Finance

Call us: 0345 345 6788

Visit us: mortgagesforbusiness.co.uk Email: enquiry@mortgagesforbusiness.co.uk ANY PROPERTY USED AS SECURITY, WHICH MAY INCLUDE YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE. Mortgages for Business Limited is authorised and regulated by the Financial Conduct Authority (no. 313537) to transact regulated mortgages.

Registered in England No. 2502713. The FCA does not regulate some investment mortgage contracts.

EXPERT ADVICE

TOM ENTWISTLE LANDLORDZONE

Buy-to-Let Challenges for Landlords in 2017 Two things have happened in the private rented sector (PRS) affecting small-scale landlords since the Brexit vote last June: there’s been a rapid slow-down in new investment as confidence took a knock, and buy-tolet lending criteria is tightened. Secondly, there has been no slow-down in the legislation steam roller hitting landlords and letting agents.

There is no doubt, private landlords operating in the residential letting sector have taken a real beating over the last 18 months or so.

Negative media coverage and what appears to be a regulatory tirade and tax grab by the government has the average landlord (and 90% of those in the UK own under 3 rental properties) feeling like 21st Century pariahs.

Private landlords have never been much revered or respected for the work they do by society, and have often been put on a par with, or even below, used car sales persons, journalists and politicians?

But the resurgence of renting in the UK following the abolition of protected

4

rents, in the 1990s and 2000s, changed the landlord demographic completely.

Out went the rich landed-gentry absentee landlord and in came the middle class investor; the buy-to-let saver, the movers and shakers, the striver and the pensioner saving for his or her retirement. This was to be achieved by owning one, two or several rentals, when the alternatives; the banks and building societies, which were paying paltry interest, stocks and shares, which are volatile and risky, and pension schemes, which saw one financial crisis after another.

The result was a boom in rental property ownership at a time when demand for renting sored. On the one had

quantitative easing and low interest rates put property asset prices beyond the reach of many young people, and job mobility meant that they preferred to rent anyway. At the same time, local authorities stopped building council housing, even as many were being sold off, transferring the responsibility of housing thousands of erstwhile social tenants and families to the private sector.

Housing charities often highlight the amount of money government spends on housing social tenants in the private sector, but they fail to point out that this is money that would otherwise have been spent by councils, and perhaps to an even greater degree.

RELAUNCH 2017 LANDLORD INVESTOR

LANDLORD INVESTOR RELAUNCH 2017

5

EXPERT ADVICE

There have been several consequences to this sequence:

1 The buy-to-let boom had been such that the government and the Bank of England became concerned about the amount of money out on buy-to-let loans, and the effect of this should there be another 2008 style slowdown (crash). This led to a plethora of legislation to tackle rouge landlords, legislation that affects all landlords, a crackdown on buy-to-let mortgage availability and a more punitive tax regime for landlords.

2 The government came under increasing pressure to do something about the “housing crisis”; the way a minority of rouge landlords were treating mainly social tenants, and the inability of the young to get onto the housing ladder.

3 The government, financial institutions and large property developers became aware of the huge potential of the growth of residential renting in the UK and started to invest in large developments of rental housing, all to be professionally managed US style, following substantial government incentives.

Almost half of UK landlords, when questioned, said they would move to self-management if their profits were being squeezed.

The result is that confusion reigns for many landlords and agents in the UK residential priva–te rented sector (PRS), with pressure groups from all sides impacting on them, and a rental property market that has seen seismic change over the last 20 years.

Despite all of this, the UK rental market (PRS) is still growing (albeit unequally) despite the changes.

Many would have expected a large decrease in the number of rental properties on the market after the tax changes, namely the reduced mortgage interest rate relief and increase stamp duty on second homes.

But recent research shows that new rental listings in November 2016 rose by around 7 per cent, a similar figure to October. Although significant regional variations are evident, London saw a roughly 1 per cent decline, four other major UK cities are said to have experienced triple-digit increases, while others recorded falls.

However, despite all the above hurdles for buy-to-let landlords to contend with in 2017, there are still more challenges to come. One of these is the controversial announcement in the Chancellor’s Autumn Statement

6

about a ban on letting agents’ fees for tenants, planned for introduction in 2017, but with so much going on in Parliament and the need for a full consultation (set for March) this may not happen too soon.

The details are still to be decided, but ostensibly letting agents will not be allowed to charge fees to tenants covering administration charges, which may include referencing or credit and immigration checks etc., the costs of which are likely to be transferred to landlords.

Apart from the impact of this on letting agents, where more landlords may try to defer these extra costs by doing more of their tenancy management themselves, there is likely to be an attempt to recoup at least some of the extra the cost by increasing the rents.

The Association of Residential Letting Agents (ARLA) says that almost half of UK landlords, when questioned, said they would move to self-management “if their profits were being squeezed”, despite claims from some quarters that letting agents not only save landlords almost £2000 per year, they make their lives much less stressful.

The profits squeeze is already on the cards for those landlords with large mortgages, and especially for high and higher rate taxpayers, after April this year, when the new (mortgage interest) tax regime comes into force. It has been estimated that some 400,000 landlords could be pushed up into a higher tax bracket.

Another considerable threat on the horizon for many buy-to-let landlords, particularly as a large proportion operate with older low energy efficient properties, is new legislation due to come into effect in April 2018, which will make it unlawful to let rented property with a poor energy efficiency rating.

Rental properties, from April 2018, will all need to have an Energy Performance Certificate (EPC) with an E rating or better. Figures published by the Residential Landlords Association (RLA) indicate that there are less than 0.1 per cent of UK rental properties with an A rating, 35.5 per cent in the D category and nearly 8 per cent of the total (about 432,000) in bands F and G. The cost to landlords of bringing these latter categories up to standard is likely to be considerable.

RELAUNCH 2017 LANDLORD INVESTOR

Despite all the hurdles for buyto-let landlords to contend with in 2017, there are still more challenges to come.

LANDLORD INVESTOR RELAUNCH 2017

7

EXPERT ADVICE

Future Growth Research carried out by The Royal Institution of Chartered Surveyors (RICS) indicates that the number of UK households in the PRS rose from 2.3m in 2001 to 5.4m in 2014. RICS is predicting that by 2025 this figure could increase by around 1.8m.

On the rent front, Savills has predicted that by 2021 rents will have risen by just short of one fifth – almost 20%. That is 6 per cent age points faster than their prediction on house price rises, at 13 percent, over this same period.

Changes mean higher rents, lower initial tax take Landlord bashing has been a particularly harsh over the past couple of years, but given the need for rental housing in the UK there is a certain irony in that the stamp duty land tax take (receipts) has been downgraded by the Office of Budget Responsibility due to fewer residential transactions taking place. The Laffer effect, the

inverted U curve which shows that beyond a certain point, tax increases actually reduce total take revenue, appears to be at work here.

As we go into 2017, landlords are likely to be more concerned about costs and the additional services they are paying for. It could certainly lead to a downturn in the demand for agents’ services and more competition between agents.

Internet-based agencies that provide a basic service at a lower cost may gain market share?

With the tightening of landlords’ profit margins will come pressure on landlords to raise rents. Belvoir Lettings (BLV), which operates a network of 300 franchised offices across the UK, has forecasted that rents will rise by 15 per cent in the next three years.

Estate agents Savills is making similar predictions, that rents will rise 19 per cent on average by 2021; this they argue will be faster than house price rises over the same period, which it forecasts will rise by 13 per cent. In London Savills thinks rents will rise by nearly 25 per cent over that period.

Will Government (the Chancellor) change its mind on its dealings with smallscale landlords?

A housing white paper is due for publication in late January, and there has been some petty high profile calls for some of the new taxes on landlords to be rolled back. These have come from parties and MPs within the government itself. Four Conservative peers registered their disappointment that the new chancellor, Philip Hammond, did not address the stamp duty issue in the Autumn Statement, and others have called for a re-thing on the mortgage tax relief issue.

However, with stamp duty land tax and other landlord tax receipts forecasts by the OBR to increase considerably during the course of this Government, it may be hard to convince the Treasury?

Tom Entwistle

RICS is predicting that by 2025 UK households in the PRS could increase by around 1.8m.

8

RELAUNCH 2017 LANDLORD INVESTOR

®

TenantVERIFY for Landlords & Letting Agents Credit Checks & Referencing ®

We verify thousands of Tenants and Guarantors for busy Landlords & Agents every year.

We pride ourselves on our First Class, Fast & Efficient Credit Checks & Referencing Residential & Commercial Tenants, Guarantors & Limited Companies.

Basic Credit Checks within 2 hours, full Referencing Checks normally within 2 days, & International Checks within 5 days.

Professionals Rely on TenantVERIFY

®

Established - 1999 - 0845 260 4421 - TenantVERIFY.co.uk

ADVERTORIAL FEATURE

KEVIN WRIGHT NINJA INVESTOR PROGRAMME

If you’re buying a property and the surveyor identifies that either the property you want or an adjacent piece of land has Japanese Knotweed growing on it – the lender WILL say ‘No’.

A growing problem Japanese Knotweed is the most prolific-growing weed in the UK and during its growing season it can grow up to 20 cms every day! It can even grow through concrete and tarmac and its roots can be up to three metres deep. It spreads rapidly because it can grow from miniscule fragments of its underground roots.

This is not just a nuisance, it can undermine the whole structure of any building and Japanese Knotweed on or near a property can easily halve the value of the property.

This blight was introduced to the UK in pre-war times. At that time it was seen as an excellent means of stabilising loose soil. The National Coal Board used it in Welsh coal mining valleys and British Rail used it extensively to shore up railway embankments.

While it grows a mile a minute during the summer, it dies back during winter completely, leaving just brown stems.

This means that if a surveyor carries out a valuation during the winter months, they may not spot it. That doesn’t mean that you can ignore it if you’ve already bought a property with this blight.

Japanese Knotweed is classified as controlled waste under the Environmental Protection Act 1990.

Therefore, it can only be disposed of at licensed landfill sites.

10

The owner of any property with Japanese Knotweed has a duty to treat it and the Environmental Agency can choose issue enforcement notices – and that means any adjacent properties with this infestation also need to take action.

Bridging finance lenders will lend on properties with Japanese Knotweed as long as you give them your solution for getting rid of it.

How do you get rid of it?

There are two recognised options dig it out or kill it with chemicals.

You would need to dig it out to a depth of three metres – that’s an awful lot of soil!

A chemically based treatment, containing glyphosate, will eventually kill off the weed and need to be carried out by a firm specifically licensed to do so.

It’s a five-year treatment programme; the weed treated during the growth

cycle for at least the first three years and then observation for a further two years, before you can finally say you’ve got rid of it.

The cost quoted for the last case I was involved in was £3,000 per 30 square metres. Once you are in a five-year treatment programme the company can issue a certificate as evidence.

As an investor needing to recycle your cash, does this present you with an opportunity?

The answer is ‘Yes’.

Bridging finance lenders will lend on properties with Japanese Knotweed as long as you give them your solution for getting rid of it.

Once a treatment programme is in place, with the certificate as evidence that you are taking action, some, if not all, mortgage lenders will be willing to lend.

So you buy a property at a reduced rate – because of the Japanese Knotweed – solve the problem and the value of the property goes right back up.

That makes you a Ninja Investor!

Kevin Wright is always happy to discuss how best to finance your property deal. Call him on 07889 526979. Kevin runs the Ninja Investor programme teaching these strategies www. ninjainvestorprogramme.co.uk

RELAUNCH 2017 LANDLORD INVESTOR

FINANCE

KAREN BENNETT SHAWBROOK

Key issues affecting buy-to-let investors in 2017 Can you give an outline on the recently updated Prudential Regulation Authority (PRA) requirements around underwriting standards?

Essentially, the new guidelines already in effect require lenders to adopt minimum interest rate stresses, and interest cover ratio levels when assessing affordability. This moves the BTL market more towards the residential mortgage market where similar stress rate and affordability limits exist. Lenders have therefore made changes to their approach and ultimately it is likely that investors will see lower levels of funding available to them and the need for higher deposits on purchases. One of the key differences now is that coverage ratios are higher for individuals than limited company borrowers, reflecting the additional costs an individual will be incurring as mortgage interest tax relief becomes limited. In addition longer

12

term fixed rate products will not carry the same stress rates and therefore these products may provide different levels of funding when compared to variable rate products.

From September this year a further distinction between investors and portfolio landlords is drawn, with the cut-off point struck at ownership of 4 properties. Those in the latter group will require a specialist underwrite with greater attention paid to experience and financials of the overall portfolio and underlying business. This is likely to limit larger landlords’ access to some of the keener priced retail BTL products.

These regulations were implemented to tighten underwriting standards and ensure investors were not too highly geared. The regulator is concerned about the impact landlords and BTL can have on overall property price volatility.

There was some evidence of more

Karen Bennett, Managing Director of Commercial Mortgages at Shawbrook, provides clarity around some key challenges for investors and landlords in the buyto-let (BTL) market.

aggressive lending returning to the BTL space, and it has grown rapidly during 2015 and 2016 in contrast to the wider residential housing market.

What have been the implications of these enhanced underwriting criteria?

Lenders are always required to adopt responsible lending practices and need to consider the affordability of their loans to their borrowers. The changes to mortgage interest tax relief reduce the net cash flow of a mortgaged investment property, and therefore need to be reflected in the underwriting approach. However this is a complex area as tax information can be historic and is highly likely to change in the future, prompting lenders to look at ways to manage this risk and ensure good outcomes for their customers.

Most are adopting higher interest coverage ratios to account for this tax change.

RELAUNCH 2017 LANDLORD INVESTOR

Many have looked towards limited company structures – is this a valid strategy?

In truth a limited company structure offers advantages and disadvantages to landlords. Whilst interest is fully allowable, investors need to consider the impact of property disposals in a company (effective tax higher once profits are distributed). For many investors long term estate planning is most important and for them a company structure offers more options for effective planning. The point is there are many considerations and operating through a limited company will involve more costs (finance costs and associated fees generally higher), together with higher levels of administration. Ultimately it is vital landlords take specialist advice considering all the implications, rather than defaulting to thinking a limited company is an easy or appropriate solution. There is evidence that many landlords are increasingly looking to mitigate the additional costs through rental increases rather than choosing corporate structures.

What about refinancing on a like-forlike basis?

Remortgages without additional capital being raised (excluding fees) are excluded from the underwriting standards. However, the changes to interest tax relief affect many unincorporated landlords and will have historical debt levels that would make the investment ‘loss-making’.

Lenders will be unwilling to take on

LANDLORD INVESTOR RELAUNCH 2017

such customers and question the responsibility of doing so if that level of debt is not sustainable for the borrower. These customers are also likely to then fall onto higher reversion rates which will amplify the impact on their cash flow. It is hugely important that landlords spend time working out the impact this has, as well as using this time to take action. Many have options which include a review of rental levels, selling property to reduce debt, reducing other costs (self-managing), or setting aside other income they have to cover any shortfall.

From September this year a further distinction between investors and portfolio landlords is drawn, with the cut-off point struck at ownership of 4 properties.

Could you share some views on the Greater London and South East property market?

London and the South-East will always hold strong investment appeal.

Yields are somewhat lower and the stamp duty changes announced in April 2016 will have made some properties seem unaffordable, but with an influx of foreign investment, capital growth is likely to remain.

This may not be at the same level as historically, but the stability in the market may attract people looking for growth opportunities. If investors are looking for cash flow over longer term capital gains, then the higher yielding properties in more regional areas - particularly further North - may be more of a focus. Southern hotspots remain and regions such as Southendon-Sea are attracting more investment with strong yields at circa 7%, good capital growth and an improving infrastructure, all within 40 minutes of London.

13

FINANCE

Most importantly understand the impact of the tax changes to your net cash flow.

Does this affect how well-capitalised investors will need to be in the future?

Highly leveraged investors are most exposed and will feel the impact of the tax relief changes acutely. Those that have grown in a sustainable way, sacrificing pace of growth for less debt, will undoubtedly be better positioned to take advantage of the changing market conditions. We are entering into a phase of lower gearing for investors, however the fundamentals of BTL remain compelling. Yields relative to other assets are attractive, it offers long term capital gain potential, and the supply / demand imbalance of the UK housing market and its population growth all support tenant demand. Landlords just need to adjust and accept higher deposits and potentially slower growth.

Unfortunately human nature will always see some driven by greed, risking their whole portfolio by gearing to the max.

Do you have any considerations for those landlords who are highly leveraged on their properties moving into 2017?

14

Most importantly understand the impact of the tax changes to your net cash flow. It is important to have a good team around you providing the right advice to ensure you reach a positive outcome.

Tax advice and a professional mortgage broker would be the first numbers to call in order to build this. Take action – whether that’s through deciding to deleverage through some sales or consider rental levels and review your other costs to see if there are savings to be had. Reviewing your existing financing costs can often be a good idea as pricing in the market has improved materially during the last few years.

What should professional investors and landlords consider during the application process?

a strong risk framework that protects both lender and borrower. Shawbrook has always encouraged a long term, sustainable and sensible approach to lending, and one of the reasons we have managed to achieve this is through our tightly managed panel of professional mortgage brokers whose value cannot be understated. Other helpful tips include the quality of your properties (remember the valuer will inspect and the lender will make assumptions based upon the quality of the property), as well ensuring you adhere to any and all licensing requirements. Avoiding minor credit oversights is also important as is your digital footprint, which is something most lenders will review.

Karen Bennett

There are some pitfalls but much of any BTL underwrite - particularly on the specialist side - just needs to be viewed with common sense. Simply put, one of the main questions a lender will ask is; ‘can the customer afford the loan, and can they prove it?’ Everything else should play a supporting role within

RELAUNCH 2017 LANDLORD INVESTOR

SPECIALISTS IN

GOOD SENSE

Our business is built on relationships, and our commitment to sustainability and transparency has delivered over £2.2bn in property finance to the professional investor, landlord & SME community.

Helping to build your business: •

Personal, case-by-case approach to suit your circumstances

•

Standard residential, HMOs, multi-units & commercial property

•

Lending to individuals, limited companies, and LLPs

•

Multiple awards for service and product innovation

C O N TA C T S H AW B R O O K T O D AY

T 03301 234 522 cm.client@shawbrook.co.uk W W W. S H AW B R O O K . C O. U K

BUY TO LET AND MOST INNOVATIVE LENDER 2015 & 2016

SPECIALIST B U Y-T O - L E T

BEST COMMERCIAL MORTGAGE PROVIDER 2015 & 2016

COMMERCIAL LENDER OF THE YEAR 2015

S H O RT T E R M LOA N S & REFURBISHMENTS

BEST BRIDGING LENDER OF THE YEAR 2016

COMMERCIAL INVESTMENTS

TRADING BUSINESS

ANY PROPERTY USED AS SECURITY, INCLUDING YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT. EARLY REPAYMENT CHARGES APPLY TO TERM PRODUCTS ONLY. A BROKER FEE MAY APPLY.

INVESTMENT

SIMON ZUTSHI

With a huge amount of uncertainty in the property market right now, many investors are not sure what they should be doing this year, and so we thought we would ask experienced property investor, mentor, and author of Property Magic, Simon Zutshi, what advice is he giving his students.

Is 2017 the year to get out of property?

We have interesting times ahead.

A significant change in the way landlords are taxed from April (and phased in over the next few years), may cause many long term landlords to decide to retire earlier than planned.

Many amateur investors, who are also higher rate tax payers, may find that their one or two Buy to Let properties, start to become negatively geared over the next few years, as the amount of tax they have to pay increases. For these reasons, I believe that many landlords may decide to sell their investment properties over the next 18 months, causing an over supply of property on the market for sale, which

16

could result in an overall fall in property prices for the first time since the last property price crash. Personally, I can’t see prices falling as much as they did back in 2008 and 2009 but who knows what could happen.

Logic would suggest that if many of these landlords decide to sell their rental properties, then there will probably be a shortage of property available to rent in the market and so rental rates will actually go up, which is good for those of us who are in for the long term. This could help compensate slightly for the increased tax we are going to have to pay.

RELAUNCH 2017 LANDLORD INVESTOR

Logic would suggest that if landlords decide to sell their rental properties, then there will probably be a shortage of property available to rent.

LANDLORD INVESTOR RELAUNCH 2017

17

INVESTMENT

We should be buying not selling With many landlords potentially selling up, there is a massive opportunity for us to pick up some great deals. However, if we believe that the property market is going to dip then should we not buy now, but instead wait until the property market hits the bottom before we buy?

That would be a great idea, if anyone was actually able to predict when that might be. This is what many investors thought during 2008 and 2009 in the aftermath of the Global Credit Crunch.

They waited until they were certain that property prices were going up before they decided to buy. What this actually meant was that they missed one of the best buying opportunities in the last decade when it was possible to pick up some fantastic bargains, as the market was going down.

There are always motivated sellers even when the market is booming, but there are far more of them when there is uncertainty in the market like there is right now. That’s why there is a such opportunity to build your portfolio this year.

In a few years time from now, when you look back at 2017, you will probably be in one of two groups of investors. There will be some people who are really happy that they took action, made most of the market conditions and acquired some fantastic properties for their portfolio.

But there will be the other group of investors who will regret not taking action and making the most of the best buying opportunity in the last decade.

Which group are you going to be in?

As professional investors who have invested for cash flow now, over and above capital growth, we don’t really mind if property prices fall in the short term, as long as you can afford to hold the property and you are not forced to sell. There are always risks associated with investing in property, but if you follow my 5 Golden Rules as described in Property Magic, you will massively reduce your risks and maximise your return. Just to remind you, Rule No 2: is that we only buy in an area with strong rental demand.

Rule No. 3: is that we only buy if a property gives us positive cash flow, i.e. it makes money every month after all of the costs. Rule No 4: is that we invest for the long term.

There are always risks associated with investing in property, but if you follow my 5 Golden Rules as described in Property Magic, you will massively reduce your risks and maximise your return.

What about negative cash flow properties?

Due to the change in the way investors will be taxed, some of your properties may become negative cash flowing, which means that you will have to put money into your property investments each year instead of making money.

So what can you do about these if you don’t want to sell? You may want to consider if you can repurpose the property by renting it out in a different way to how you currently rent it. In the right location, one and two bedroom apartments could be used as Serviced Accommodation, and larger properties could be converted into Multi let properties, subject to local planning and HMO licensing requirements. Both of these strategies create far more cash flow and will ensure that the properties are still cash flow positive. This means you may not need to sell, indeed selling when the market looks like it is going down is not a good position to be in.

18

If you do decide to sell some of your properties and have owned them for a long time, then you may well have some Capital Gains Tax (CGT) to pay, which is the profit on sale of properties other than your main residence. This capital gain is the difference between sale price and purchase price less any capital improvements you have made. This is what I have done You may want to consider diversifying your investments by also investing into some businesses taking advantage of the Enterprise Investment Scheme (EIS). EIS is a government initiative to help new businesses raise funds for growth.

As an EIS investment you can defer your Capital Gains Tax and even get a rebate on income tax of 30% of the investment made into the EIS business. The idea is that you buy shares in a company with a great

product and a strong team who can grow the business to increase the value of your shares. As long as you hold the shares for at least 3 years, when you sell them any profit is tax free and you would at that point pay the CGT. By the very nature of investing in new businesses, there is always a risk and you should never make an investment just to save taxes. However, there are some great opportunities that you might want to consider as part of a diversified portfolio. You may like to know that, I have written a special tax saving report all about this and other ways to minimise your tax, which we are giving as a gift to everybody who comes to any one of the property investors network meetings this month (March 2017). Details of all the dates and locations of you local pin meetings are here www.pinmeeting.co.uk

RELAUNCH 2017 LANDLORD INVESTOR

When you look back at 2017, you will probably be in one of two groups of investors.

Which group are you going to be in?

LANDLORD INVESTOR RELAUNCH 2017

19

INVESTMENT

When there is uncertainty like this, people come up with all sorts of reasons (excuses) why they can’t invest.

What do we need to do?

My theme for this year is: 2017 the year of no excuses! I believe this is going to be a fantastic time to invest in property. As long as you know what you are doing, take action and get some support around you, then there are going to be some great opportunities. However, when there is uncertainty like this, people come up with all sorts of reasons (excuses) why they can’t invest. One of the most common excuses I hear is that people don’t have the funds required to invest. You can either use strategies where you don’t need a lot of money such as Rent 2 Rent or Purchase Lease Options, or you can find other people

Banner Advert for landlord zone W190mm x H130mm D2.ai

2

12/11/2015

to fund your deals. If you get good at finding great deals then there are plenty of people who have money but don’t have time, knowledge or expertise to find great deals themselves. If you don’t have time, then work with people who do have time to find great deals. It all comes down to two things: 1) Educating yourself so you know what makes a great deal and 2) Networking to find other people who you can work with.

I wish you all the best with your property investing in 2017.

Simon Zutshi

16:57

Guaranteed income for Landords

C

M

Y

CM

MY

No fees or commission Fully managed or non managed options available Incentives paid

CY

CMY

K

Over

800 properties are already on our books. Are you missing out? *Guaranteed income available through our fully managed service only

To find out more call 020 8547 5491 or email lettings@kingston.gov.uk

20

RELAUNCH 2017 LANDLORD INVESTOR

SALES AND LETTINGS

Tracey Hanbury, Editor of LI and Director of the National Landord Investment Show catches up with Allison Thompson from Leaders to ask about the affect Brexit will have on the Property market.

Brexit Update Q

Will the uncertainty of Brexit affect the rental market for landlords?

A

There has been a lot of noise in the media about the affect Brexit will have on the property market, mostly focused on property values. So many landlords are understandably keen to know how it will affect them.

Firstly at any time when the property market is under question (whether legitimately or not) the rental market tends to benefit. Essentially it would be first time buyers that hold off and stay in rented where they feel less exposed.

Additionally some people try to play the market selling and moving into rented in the hope they can jump back on the property ladder at a cheaper price later down the line.

Both of these factors mean more demand and therefore fewer void periods and often slight increases in rental income.

The private rented sector has been steadily growing over the last 14 years as homeownership in the UK has

LANDLORD INVESTOR RELAUNCH 2017

dropped from the all-time high of 71% in 2003, to an all-time low of 64% in 2016 as more and more people choose to rent rather than buy. This is in part driven by millennials (youngsters to you and me) choosing to stay unburdened by a mortgage to give them more flexibility and choice, or, because for those that want to buy there is a need to raise a hefty deposit. Finally, because renting is becoming an accepted way of life in Britain with the drive to ‘buy, buy, buy’ being less prevalent than in previous decades, the average tenancy length for Leaders is now 37 months – which is great news for landlords who want a steady income.

In short, whether we are part of Europe or not, the UK is an excellent place to be a landlord as long as you get the right advice from a lettings specialist and make sure you look after the property and your tenants.

For property advice contact your local Leaders branch at leaders.co.uk

21

One Oneof ofthe theUK’s UK’sleading leadingonline onlineestate estateagents agents

Award-winning Award-winningteam team

Legal cover as standard Legal cover as standard

Advert live on Rightmove, Zoopla Advert on Rightmove, andlive Primelocation in 24Zoopla hours and Primelocation in 24 hours

Tenant Finder package just £95 Tenant Finder package just £95

ARLA-qualified staff ARLA-qualified staff

Thousands of of properties sold and letlet Thousands properties sold and saving our customers millions of pounds in fees saving our customers millions of pounds in fees

Open 7 days a week, Open 7 days a week, 362 days a year 362 days a year

Five star service (Trustpilot) Five star service (Trustpilot)

We’ll fully reference We’ll fully reference your tenants your tenants

Theperfect perfectblend. blend.

The

£10 OFF for LANDLORD INVESTOR readers . Please quote CODE : LIS 5 £10 OFF for LANDLORD INVESTOR readers . Please quote CODE : LIS 5

TENANCY DEPOSIT SCHEME

BEN BEADLE TENANCY DEPOSIT SCHEME

Top tips for getting deposit protection right As the longest standing tenancy deposit protection scheme, the Tenancy Deposit Scheme (TDS) knows a thing or two about deposit protection and successful tenancies. Whether you are new to being a landlord, or you have an established portfolio, we’re sure that our tips can help you to get deposit protection right.

Before the tenancy starts Deposit protection isn’t just about safeguarding the tenant’s deposit, it’s also about protecting the landlord’s asset. The starting point is to get the tenancy agreement right. If you don’t properly list what you expect to be able to use the deposit for, then you may face obstacles at the end of the tenancy.

Make sure that the tenancy agreement has a clear and comprehensive deposit clause which sets out the circumstances in which the deposit may be retained at the end of the tenancy. This should cover cleaning, damage, redecoration, rent arrears, missing items, or removal of items left by the tenants at the end of the tenancy. It is also advisable to include an over-arching clause stating that the deposit can be used to

24

compensate the landlord for any loss caused by the tenant’s breach of any other obligations under the tenancy agreement.

You should also compile a comprehensive inventory, or checkout report and give it to the tenant at the start of the tenancy. This is still the case where the property is unfurnished. The inventory should include a detailed description of each item, its cleanliness and condition.

Include wall and floor coverings, light fittings, appliances and furniture. Be as descriptive as possible – for example ‘cleaned to a professional standard’ is different from ‘cleaned to a domestic standard’. The written word is key, and while photographs can be good supporting evidence, they are rarely sufficient to replace written, dated check-in and check-out reports.

Make sure that the tenancy agreement has a clear and comprehensive deposit clause.

RELAUNCH 2017 LANDLORD INVESTOR

If you want to make any deductions from the tenant’s deposit, clearly list the reasons.

At the start of the tenancy Once you have received the deposit you must protect it with a governmentapproved deposit scheme. You have two choices about the type of deposit protection to use: TDS Custodial – a free to use scheme where TDS holds the deposit on your behalf TDS Insured – a scheme where you hold the deposit in an account of your choosing and pay a small fee Whichever scheme suits you best, you must ensure that the deposit is protected within 30 days of receiving it from the tenant(s). You will also need to send the tenant(s) (and anyone who paid the deposit on the tenant’s behalf) prescribed information – key information about the deposit, and the scheme it is protected with.

During the tenancy Ensure that your tenants have your contact details, as well as any important phone numbers such as your preferred plumber, locksmiths, electrician, etc for emergencies.

Keeping communications open can really help you ensure that the tenant is aware of your expectations.

Additionally, if you deal with problems throughout the tenancy as they arise, you can prevent them from developing into bigger issues at a later date. For example, fixing a leaky tap is easier, and less expensive than treating a water stain in the ceiling or replacing floorboards

At the end of the tenancy Do a similar exercise to the checkin report and create a check-out at the end of the tenancy. Again, be as descriptive as possible. You can then

LANDLORD INVESTOR RELAUNCH 2017

compare your findings with how the property was presented at the start of the tenancy. Both reports will be good evidence to substantiate any deductions you wish to make against the deposit.

Remember that fair wear and tear does not apply to cleaning, so you can expect the property to be cleaned to the same standard as it was at the start of the tenancy.

After the tenancy Prepare your deductions report promptly. If there are no deductions to be made from the tenant’s deposit, and the deposit is protected with TDS Insured (so you hold the money) then you should return the money in full within 10 days from the date the tenant requests its repayment. The tenant cannot request repayment before the tenancy has ended, even if they move out early.

If you want to make any deductions from the tenant’s deposit, clearly list the reasons for any deductions, and the amount for each claim. It is good practice to draw the tenant’s attention to the check-in and check out reports, and send your findings to the tenant for their agreement.

They may wish to negotiate with you, or argue about fault or cost - this is where your inventory reports will help you to establish what happened and substantiate the claim.

Speak openly with the tenants and try to come to a reasonable solution between both parties. If you are unable to reach a resolution that is satisfactory to both parties TDS can be asked to resolve the dispute. In this case, all your preparations will stand you in good stead to be able to evidence your claim to an adjudicator. For more guides and further information visit www.tenancydepositscheme.com.

Custodial and Insured Deposit Protection Explained Insured deposit protection allows the landlord to hold the tenancy deposit in an account of their own choosing. On the other hand Custodial is a completely free deposit protection service that holds the money on your behalf.

The Tenancy Deposit Scheme (TDS) is able to offer both of these services without a joining fee. Our customer service is award winning, and we have a dedicated team to helping you switch deposits from another deposit protection scheme to us, so the process is completely hassle free.

Custodial Deposit Protection • Fast, free, secure • We hold the deposit • Quick repayment process at the end of the tenancy Insured Deposit Protection • Market leading rates and free to join • You hold the deposit • You repay directly at the end of the tenancy

Insure fee per tenancy

DepositGuard TDS for RLA members)

TDS

DPS

MY Deposits

Joining fee

No fee

No fee

No fee

£20.00

Deposits £13.20 up to £5000

£14.70

£15.00

£20.00

Deposits £17.95 over £500

£21.95

£22.00 £26.00

25

INDUSTRY UPDATE

PETER LITTLEWOOD SOUTHERN LANDLORDS ASSOCIATION

Another Year, another Housing Act?

At the end of last year I gave a talk at an awards ceremony with the theme of changes to the law in the PRS since 2015, and I was absolutely astonished at the amount of ‘stuff’ that has come our way in that time.

All sorts of rules and regulations have been introduced, and the main reason?

Lots of different politicians. In May 2015 we went from a coalition to a straight Conservative administration; then as a consequence of the Brexit vote another new Conservative administration, leading to 2 different Prime Ministers; 3 different Secretaries of State; and 3 different Housing Ministers – all wanting to stamp their own signature on the political landscape with different Bills.

The latest set of a new Prime Minister; Sec of State and Housing Minister have been in office for just over 6 months, and in spite of giving time to the outcome of the Brexit vote have had time to look at the Private Rented Sector (PRS), so clearly it is time for another Housing Act. To that end a Housing White Paper was announced at the end of last year.

A White Paper is a declaration of intent from a Government on a potential Bill they intend to bring in, and as such is a perfect time for comments. Rest assured that the SLA will be taking this opportunity to make comments, and we would urge members to make individual comments.

It is intended to be published by the end of January, and as soon as it is published we will put details on the web site with details of how to comment. It is important that individual people comment on these matters, as sometimes their comments are taken more seriously than if they were included in a report from us.

I was tempted at this stage to write about what might be in the White Paper, but it would be pure speculation, so better to wait for it to come out.

It is important that individual people comment on these matters.

26

RELAUNCH 2017 LANDLORD INVESTOR

The knowledge Useful web sites for London If you rent in London you might be interested in the following sites: www.londonpropertylicensing.co.uk – looks at licensing in all the London boroughs, and the latest requirements.

Members often say licensing doesn’t affect them because they don’t have an HMO. Well it might, firstly they might actually have an HMO and just not realise it; secondly Selective Licensing is for non HMO’s and is becoming more prevalent. www.rentersrightslondon.org – actually a web site for tenants to attack bad landlords, and the significant word us bad. None of us want bad landlords in the industry; it just gives all a bad name.

It gives examples of typical tenant questions, which I have to say, are horribly close to landlord questions.

Another matter that affects only London is letting for less than 90 consecutive nights is a change of use which requires planning permission.

In fact Airbnb has had to react to this by banning the renting of an entire home for more than 90 days via their web site in London. They have also extended this to properties in Bristol, Liverpool, Manchester and Newcastle.

The SLA talks to the Government Recently, a small delegation from the SLA had separate talks with civil servants from the DCLG, and a separate meeting with the Housing Minister, Gavin Barwell. We will continue these face to face meetings in order to put members’ views across.

LANDLORD INVESTOR RELAUNCH 2017

Right to Rent More and more we are finding legislation is poorly drafted, leading to confusion.

The best example was the section in the 2004 Housing Act dealing with Tenancy Deposit regulation. The first time it went to court the Judge threw out the case as he wasn’t certain what the legislation intended.

The latest one is about the Right to Rent checks. If you are an agent; act as an agent; or a landlord using an agent you need to be aware of this.

If an agent is contracted to conduct the referencing/credit check ARLA believe that they have to also take on the Right to rent checks, and cannot pass that back to the landlord by their T&C’s.

However, we have written to the Home Office to get clarification and their response was: A letting agent will only become the liable party under the RTR scheme where they have an agreement in writing with the instructing landlord.

Indeed the 2014 Act provides that an agent may only be penalised where-

For the purposes of this Chapter, an agent is responsible for a landlord’s contravention of section 22 if (and only if) – a) the agent acts in the course of a business, and b) under arrangements made with the landlord in writing, the agent was under an obligation for the purposes of this Chapter to comply with the prescribed requirements on behalf of the landlord.

I do not think that the term ‘referencing’ really cuts the mustard, the agreement needs to be clear as to who is responsible for conducting the RTR checks. Basically, no agent will be the responsible and liable party unless they have agreed this in writing.

Possible amendments to HMO Licensing The Government have consulted on making amendments to HMO Licensing. They are proposing to extend mandatory Licensing to all HMO’s with 5 or more occupiers, regardless of the number of storeys; currently mandatory licensing only happens for an HMO with 5 or more occupiers and 3 or more storeys.

In the same consultation they proposed bringing in minimum room sizes for licensed properties: • 6.52 sq. m for one person • 10.23 sq. m for two persons.

We await the outcome of this consultation.

Homeless Reduction Bill There is a new bill making its way through Parliament which will place duties on councils to prevent homelessness. Minister for local government Marcus Jones, who has responsibility for homelessness, announced the government will provide additional funding to cover the costs councils will face in taking on new responsibilities to prevent homelessness.

A spokesman for the Department for Communities and Local Government said it had not been decided how much funding would be made available but it would be enough to cover “reasonable” costs councils will incur.

It is almost certain to go through, and will mean that councils will be seeking even more accommodation.

27

INDUSTRY UPDATE

The things that have been thrown at us since 2015 Just to remind you of all the recent changes that have come our way: Minimum Energy Efficiency Standards (MEES) For properties with an F or G EPC rating: • from April 1st 2018 it will not be possible to start a new rental; • from April 1st 2020 no existing rentals will be allowed.

It will be possible to get an exemption from this, but it will have to be applied for, and to be renewed on a regular basis (frequency not currently known). The exemptions in summary are: • that if the works carried out would take more than 7 years to pay back.

New double glazing would fall under this; • if the works would result in the property being devalued by more than 5%; • where third party consent cannot be obtained – refusal from the tenant or superior landlord; inability to get appropriate planning permission; • no EPC is required, e.g. listed building (but see below); • or the EPC is more than 10 years old (won’t be the case until after Oct 2017).

The two main things it introduced for landlords are:

New Section 21: • it is a prescribed form, confusingly called Form 6A; • if your AST was raised after Oct 1st 2015, the new S21 must be used, but cannot be issued in the first 4 months of AST; • Note that the new S21 can be used on an AST issued before Oct 1st 2015.

Some courts are insisting that the new S21 has to be used for AST’s – this is not the case. However, the new one is much easier to use than the old one.

• Must be used within 6 months of issue, i.e. within 4 months of it expiring; • Tenants have statutory right to claim back any overpayment of rent; • When you go to court must have valid (where required):> EPC; > gas safety inspection report, and;

Retaliatory evictions This is the second main matter to be introduced in this Act, whereby: • if a tenant makes a complaint about the property in writing, the landlord must respond in writing within 14 days stating what they intend to do about the problem, and a timeline for doing the work. It is important to respond in time. If the landlord considers there is no problem, then that is the response, but they must be certain, because; • the tenant can complain to the local authority, who have to inspect the property.

• If the local authority then serves an improvement notice or carries out emergency remedial action, any section 21 notice already served will be rendered ineffective and no further notice can then be served for six months.

The moral is, don’t ignore any complaint; and be able to prove everything you say – that is always good advice.

> the ‘How To Rent’ booklet issued by the Government – see below.

• Cannot be used:> If deposit not properly protected;

Briefly, the matter of a listed building is complicated. A listed building does not require an EPC if that EPC contains recommendations that are impossible because of its listed status – i.e. you would need an EPC to determine that you don’t actually need one!!

The De-Regulation Act 2015.

This act should be prosecuted under the Trade Descriptions Act as it brought in even more regulations!

28

> Property not licensed where one was required.

‘How To Rent’ booklet is best obtained online at www.gov.uk – type How To Rent in the search line. There is an anomaly in the version you have to issue. It has to be the version relevant at the time the agreement started.

The very best time to issue it is at the commencement of the tenancy, but be careful if you issue it late.

As I said, this is an anomaly and the Government might eventually sort it out.

RELAUNCH 2017 LANDLORD INVESTOR

The Housing and Planning Act 2016 This has been reported on in this newsletter before, but the important sections are: • Part 2 – a database of ‘Rogue Landlords’ and the ability for more legislation against them. This is still being consulted on, so full details are not yet known; • Part 3 – recovering abandoned premises. Again not fully in place, but will allow for a landlord to recover premises they know to be abandoned – note that this promises to be a complicated procedure.

Note that currently a Section 21 and/or a Section have to be used. This route will continue.

• Part 5 – a mixture of matters all shoved together: > the (probable) introduction of mandatory electrical certificates for all rental property. Being consulted on; > the ability for Local Authorities to obtain information from the

supposedly sacrosanct information held by the tenancy deposit schemes. Although not mentioned, surely the tax man won’t be far behind!; > A landlord could be ordered to make certain information available to certain tenants groups. Ouch, but we don’t know all the details yet. > Anyone being declared bankrupt, and/or have their Right to Remain (visa has expired) will not be allowed to hold an HMO license; > Gives the Government the ability to introduce a Money Protection Scheme for all agents. This is long overdue.

• Schedule – at the end of the Act. This would allow local authorities to decide whether to prosecute an errant landlord, as now. This would mean the fine going to the Government. Or the local authority would be able to issue a Fixed Penalty Notice imposing a fine of up to £30,000 that can be kept by that local authority.

Immigration Act 2016 Following on from the 2014 Act, and giving it more teeth.

Briefly the landlord must ensure that anyone occupying their property has the Right to Rent – note occupying. This means all adults over 18 living there, not just anyone on the agreement. If it transpires that someone should not be there the landlord has to show they have taken all steps to minimise this problem, to get what the law calls a ‘Statutory Excuse’.

There is a fact sheet on the SLA website about this, or go onto www.gov.uk and put Right to Rent in the search line. This will lead you to an unusual Government website – it works and is useful.

Guess which one they are keen on.

Landlords do you have a property to let in the london area?

Camden Lettings offers great benefits to landlords and is tailored to protect Camden Lettings you and your investment during a time Fully vetted prospective tenants. Checks includes immigration status, housing & of immense change in the sector. credit history With Camden Lettings you can All tenants attend tenancy training & receive 3 months support at the start of the tenancy choose between our free rent Rent paid directly to you the landlord guarantee service, or generous Choice of tenants so that you can decide cash incentives up to £5000. who is most suited for your property The comparison chart highlights some Tenancy Support Service, offering FREE support and expert advice for of the key features of Camden Lettings:- specialist landlords and tenants* Generous Cash Incentive Payments To get a quote, please contact the Guaranteed Rent up to 6 Months in advance PRS Initiatives team on: Free London Landlord Accreditation camdenlettings@camden.gov.uk Scheme (LLAS) voucher worth £100 020 7974 4158 Fees payable camden.gov.uk/camdenlettings

Cash Incentive

Rent Guarantee Service

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

No

No

Yes

Yes

Yes

No

No

*T’s & C’s apply

LANDLORD INVESTOR RELAUNCH 2017

29

ADVERTORIAL FEATURE

Due to recent tax changes that have been perceived by many as an attack on landlords and additional hype generated by the media, you would be forgiven for believing that buy to let is no longer a viable investment. Combined with Brexit, stricter lending criteria and an already unaffordable property market with low yields in London; how could buying property now be a good investment?

We spoke with Paul Mahoney, Managing Director at Nova Financial for further clarification. Nova Financial is a property investment and finance advisory company.

Is buy to let Paul, we’ll start with the big question, is buy to let dead?

Paul: Great question, and certainly a topic of hot debate at present. When considering the tax changes and higher rental coverage rates for lending, there are certainly some areas where buy to let property investment is becoming a lot less viable. London and the South East are the main areas that stand out, given lower rental yields that average circa 3.5% that restrict the maximum borrowings in most cases to less than 60% so a lot more cash needs to be applied. And given the average property price in London is now well over £500,000 the average cash investment is well over £200,000 including costs. Due to the low yields available in these areas, properties that are leveraged at 60%, loan to value are barely breaking even and therefore landlords are exposed to interest rate rises and potential negative cash flow situations. Add to this the tax changes which will reduce the tax efficiency of an investment for anyone earning more than £50,000 if the investment is in their personal name and you have quite a few reasons to not be investing now.

30

Well that all sounds quiet negative with regards to London, are there other areas worth looking at?

Paul: I’m glad you asked, many of our clients have been investing in other major UK cities such as Birmingham, Manchester and Liverpool. The most interesting trend affecting the property market currently is ‘North Shoring’ which is the movement of employment from London to the North West. Net migration is strongly positive from London to the Midlands and the North West which is being driven by strong job growth. Manchester alone has benefited from over 60,000 new jobs since 2011 and major companies such as Ernst& Young, Price Waterhouse Cooper & Deutsch Bank, to name a few, are contributing. This is driving strong population growth to cities such as Birmingham, Manchester & Liverpool and changing the dynamics in a very positive way.

Manchester alone has benefited from over 60,000 new jobs since 2011

RELAUNCH 2017 LANDLORD INVESTOR

Nova Financial is a privately owned and independent financial and property advisory Company. Nova assists a broad range of clients from first time investors through to high net worth individuals.

Paul at Nova is kindly offering a free personal consultation in his Central London office to discuss the tax and finance changes as well how they might affect different areas and your portfolio and future investment plans.

To schedule a consultation call 0203 8000 600 or email info@nova.financial.

For more information about Nova Financial, visit www.nova.financial

dead?

That’s very interesting, I suppose the general consensus has been that London is more stable and will provide more growth, what are your thoughts on that?

Paul: Well if we look at the changes that have occurred in Liverpool over the past 12 months. Job growth year on year to June 2016 was 38.1% and the economy grew by 15% which is incredible. There is also over £10 Billion of infrastructure spending currently underway in central Liverpool which is expected to create over 100,000 new jobs over the next decade.

That will affect the property market in a positive way. Each of the cities on average have outperformed London over the past 12 months for capital growth and are providing circa double the yields so there seems to be a swing coming about in the UK property market.

LANDLORD INVESTOR RELAUNCH 2017

How do the tax and lending changes affect cities like Birmingham, Manchester and Liverpool?

Paul: Given that yields generally range from 6-8%+ there is no problem with rental coverage at all and although the tax changes may slightly impact upon some investors cash flow, there is a stronger buffer given the difference between interest rates and the yield is greater. These changes are therefore far less likely to impact the above-mentioned cities and in fact have already started to impact them positively as the shine comes off London and investor interest is shifting to each of these cities from both domestic and international investors.

So where have most of your clients been investing and what returns are they getting?

Paul: The vast majority of our clients have been investing in the Liverpool and Manchester city centres renting to young professionals. With the ability to borrow up to 75% loan to value at interest rates of circa 2.5% and generate yields of 7%+, the net return on investment is mostly 10%+ excluding growth. A fairly average growth rate of 5% per annum offers a 20% return on your deposit as you’ve leveraged four times so when you add that to cash flow that is 30%+ per annum. This may seem very high, even too high to be true but it is due to the borrowings which accelerate returns on your cash deposit four times.

Is there any way that people can avoid the tax changes?

Paul: Yes many of our clients have been investing through limited company structures or in a spouses name but you should seek advice before doing either.

31

INDUSTRY SPOTLIGHT

STEVE BARNES HAMILTON FRASER

Cyber-crime & landlords:

Is your business as secure as your property?

Though a mention of ‘security’ usually calls locks and alarms to landlords’ minds, it is computers which demand their attention as a wave of online cyber-criminals target property owners.

18 32

Most private landlords are self-employed, run their own small company, or rent as a supplementary income. We know the importance of operating online in this modern world, but according to research carried out in March 2016 only 7% of SME bosses had cyber insurance in place, despite 31% seeing expanding their online presence as a key business opportunity a gap of 24%.

It is easy to assume you don’t run an online business, but as a landlord, your tenant’s information is likely to be stored digitally, either on a PC or in the cloud, whilst the internet is often where payments are made, and even where contracts are electronically signed.

Some of the main risks landlords could face:

Financial fraud Landlords and tenants often transfer money online, potentially putting themselves at risk of one of the most common online crimes - phishing scams. This is where fake emails claiming to be from legitimate websites encourage users to click a link and log in, in order to steal access to their account. Recently both Rightmove and Zoopla have fallen victim to this technique, warning their customers that the emails are bogus. Another common scam is for hackers to pose as landlords and ask tenants to pay rent to another account number.

RELAUNCH 2017 LANDLORD INVESTOR

Landlords and tenants often transfer money online, potentially putting themselves at risk of one of the most common online crimes phishing scams.

Identity theft From a tenant’s personal details to reference checks, plenty of personal data is held online which could be stolen in order to carry out identity theft. In 2015, the UK’s Fraud Prevention Service named identity theft as the most ‘dominant fraud theft’.

Having used personal information to forge documents such as a passport or driving licence, criminals could take out a credit card, loan or even mortgage, landing the victim in financial hot water – and potentially landing you with legal action.

What you can do to protect yourself: • Encrypt all of your devices including laptops, tablets and mobile phones so that only authorised parties can access them

LANDLORD INVESTOR RELAUNCH 2017

• Password-protect your files, and avoid storing tenant’s information on a laptop or device which is often taken outside the home and could get lost • Ensure that you understand the level of security offered by your cloud storage provider • Never release personal information over the phone, through the post or electronically until you have verified the receiver as somebody authorised by the tenant • Only employees who need to use sensitive information should have access to it • Ensure you have the latest anti-virus software installed on your computer, and that all plug-ins are up to date • Don’t open suspicious-looking emails or links. Go to websites manually rather than clicking links in emails

• Before transferring money online, check bank account details in person or over the phone rather than relying on emails • Online or on paper, make sure you securely dispose of previous tenant records or data which is no longer required • Take out a dedicated Cyber Liability insurance policy, specifically designed to help reimburse you for costs incurred by this type of crime Steve Barnes

Steve Barnes is the Associate Director of Hamilton Fraser. He joined Hamilton Fraser in 1998 as a member of the household team. Steve currently oversees the insurance division of Hamilton Fraser which includes specialist schemes for residential and commercial property owners and professional indemnity for letting agents.

33

INDUSTRY SPOTLIGHT

PAUL SHAMPLINA MYDEPOSITS

We’ve seen and heard it all before, a beautiful property trashed by an unscrupulous tenant who then vanishes or denies any wrongdoing.

It’s perhaps less common to hear this kind of behaviour coming from someone in the public eye. Nevertheless, a particularly shocking story hit the tabloid headlines over Christmas concerning former N-Dubz star, Dappy (real name Costadino Contostavlos).

Not so dappy landlord The rapper had been renting a £1.7 million Grade II listed property in Hertfordshire with his partner and three children. However, after the tenancy ended and he vacated the property, the landlord claimed the family had left the property in such a state that it was “unfit for humans” with an estimated £70,000 worth of damage.

Dappy denied the accusations insisting the damage was done after he left. He said “I’m disgusted and would like to make it clear when we left that house all rubbish was bagged up. I categorically didn’t destroy or smash up the house.”

34

What can we learn from this?

How much deposit was taken?

This situation and level of damage is very rare, and of course, we don’t know the full details behind the incident. However, it certainly throws up a number of questions and lessons for other landlords who might find themselves in a similar situation.

Firstly, we don’t know if the property was looked after by a managing agent, or whether the landlord self-managed the property. Either way, what steps were taken before, during and after the tenancy to safeguard the property?

For example, was a full inventory, along with photos to prove the condition of the property and its contents, carried out at the start of the tenancy? What about regular property inspections?

Assuming a deposit was taken and protected with one of the government approved schemes, the landlord could either wait for an adjudication or if he/she needs to re-let the property asap, go straight to court to make a claim. Waiting for an adjudication can take between 2.5 and 3 months because adjudicators have to review all evidence regarding the damage in order to reach a decision.

RELAUNCH 2017 LANDLORD INVESTOR

However, the average deposit is approximately £1,200, or six week’s rent. So, in a situation with extensive damage such as this, where the deposit will not cover the damage, a landlord then has three options: 1. Put it down to experience.

If there is no evidence (such as photos) to prove the condition of the property at the start of the tenancy, a landlord may be forced to put it down to experience, repair the damage and move on. However, with extensive damage, as in the Dappy case, not many landlords would be able to swallow such costs and would need to recoup some of the money.

2. Claim off landlord insurance.

Landlords who have comprehensive landlord insurance may well be covered under malicious damage (Total Landlord Insurance covers up to £25,000 for malicious damage). If not, then the next step is legal action.

3. Take legal action against the tenants for compensation.

What does a landlord need to do to take legal action against a tenant?

• Have up to date referencing as this may determine where the tenant is working and what assets he/she does or does not have • Before issuing proceedings, a tenant must be served a 7-day letter before action which lists down and quantifies the damage done and the money spent to repair it. It is advised to hand deliver this to the tenants forwarding address where possible.

• If the tenant does not reply, the landlord has to look at issuing debt recovery proceedings. This should be done through a solicitor to ensure it is carried out correctly.

If a landlord is unable to get a forwarding address, we advise waiting 3-6 months after they have vacated

the property and then enlist the help of a tracing agent or private investigator. The cost of this can be added to the claim.

Tenants will have a certain amount of time to file a defence at court if they disagree. Alternatively, they may not respond in which case the landlord would obtain a judgement by default.

Once a landlord has obtained a judgement, the next step is to find out about the tenant’s financial situation which will help determine the best avenue to recover the debt. This may involve using a bailiff to seize high-value goods such as cars, an attachment of earnings against wages, obtaining a 3rd party order (taking money directly from the tenant’s bank account) or possibly the most severe form of debt recovery – bankruptcy.

Make sure you read the mydeposits guide on how to claim for deposit deductions to find out more.

Paul Shamplina

The tenancy ended and he vacated the property, the landlord claimed the family had left the property in such a state that it was “unfit for humans”

LANDLORD INVESTOR RELAUNCH 2017

35

let2barnet Call 020 8359 4761 for: Guaranteed rent Cash incentives Full managed services 0% fees

Follow us on Twitter @let2barnet

Call: 020 8359 4761 Email: info@let2barnet.co.uk Web: let2barnet.co.uk

One

scheme

two

Switching to TDS is easy switch@tenancydepositscheme.com 0300 037 1000 tenancydepositscheme.com

Your next property is our priority Visit our stand to speak to one of our Personal Mortgage Advisers today

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE. Royal Bank mortgages are available for over 18s only.

Visit your local branch

personal.rbs.co.uk

Give us a call on 0345 900 0400