What the new shorthold tenancy classifications for UK private property landlords means

  • Deposit guarantee scheme for all properties earning upto £100k rental per annum
  • Failure to do so in 14days means no Section 21 (eviction order) can be served
  • Fines up to three times the original deposit
  • Student accommodation and multiple occupancy also affected
  • Advice: Use a reputable and experience lettings agent, email info@propvestment.com for our quote and special offers.
  • New legislation mainly affects high rental properties in particularly in London
  • Extra Red Tape that makes it difficult for honest, reputable Landlords

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House Prices increase £91 a day

The surge in property prices will reassure landlords and investors worried by reports suggesting the housing market faces a dramatic collapse.

Figures released by the Halifax yesterday also show how prices have rocketed over the past decade, giving property owners potential returns unmatched by any other form of investment.

Semi-dethatched properties have risen 111 per cent in ten years.

Halifax says the big winners over the past year have been detached houses which soared by 13 per cent – the equivalent of £91 a day – between June 2009 and June 2010 to stand at an average of £299,295.

But bungalows, flats, semis and terraced houses all spiralled upwards too, with price gains of between eight and nine per cent. The average cost of a detached home was 63 per cent more than the average house price during the second quarter of this year.

However semi-detached properties saw the biggest gains during the past decade with values soaring from an average £81,706 to £172,196 – and by £35 a day over past 12 months alone.

The average value of a terraced property jumped by 110 per cent during the decade while the price of bungalows rose by 109 per cent. In the past 12 months the average terrace house rose by £29 a day while bungalows went up £49 a day.

The value of detached homes rose by 102 per cent during the decade. Flats were the only property type not to double in value, though prices went up by an average of 81 per cent over the ten years and rose £35 a day in the year to June 2010.

Yesterday it was reported that house prices are set to rocket by 20 per cent in five years, fuelled by a shortage of homes. This would add £30,000 to the value of the average three-bed semi.

And last week July data from the Land Registry’s official House Price Index, based on actual sale prices, showed an annual increase of 6.7 per cent, taking the average property value in England and Wales to £166,798. The monthly change from June to July was an increase of 0.4 per cent.

Article adapted from the Daily Express, information from Halifax.

What does this mean in real terms for investors, firstly the long term capital gains from property are still strong, for the active investor the appreciation means that if they were to re-mortgage every year to pull out equity in order to reinvest (£91×365 daysx75%BTLmortgage=£24911) they can raise just under £25,000 per detached property or just under £10,000 per flat.

Using this appreciation, reinvested properly in finely selected properties that result in a cash flow surplus can support a great income stream as well as sustainable organic growth or your property portfolio.

If you want any advice or discussion of your options please email me Nirav@PropVestment.com

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An Alternative Investment: Thinking outside the Property Box

This week there is a small deal which will appeal to most of our readers. It is a studio flat on Edgware Rd W2 minutes from Edgware Rd Station and Hilton Metropole. It is a self contained studio with a separate kitchen. The property is in a popular purpose built block called Cambridge Court. The property is off market and available exclusively through us.

This deal has been packaged as an investment only. The property comes with the benefit of a tenant paying £300pw. The block has a lift and is well maintained.

This may seem a lot of money to rent a studio property for those not familiar with the area. We assure you this is not an enhanced rental designed to encourage a sale. It is the market rental for this area. In fact in the summer the property can be rented for well over £500pw as a short let. A short let is a period less than 6 months, typically 1 or 2 months. Many use this as a cheaper alternative to hotels in the area.

There are two ways to purchase this property.

One the normal, boring, old school way: you buy the property, it is transferred over to you and you take a fresh mortgage.

The other is an ingenious alternative way, fresh thinking outside of the box by us:

The current owner has a mortgage of £167,000 on the property with the Bank of Scotland. He is paying 1.94% on this amount. This comes to £270pm. In order not to lose this we have created a strategy whereby you can benefit from the same terms. The mortgage terms would be passed on to the buyer via a document mirroring those same terms. This agreement will come with an option to purchase within a fixed period of time.

Though this way is a little out of the ordinary, it will be completely water tight and will come with full legal guarantee. Looking at the property this way you would need to put £70,000 into the property and will be postponing the actual purchase of the property.

We however appreciate many will not want to go down this route especially with it being a relatively low cost property and may prefer to do things in the conventional fashion.

Under this way you will need to put in 25% of the property value which comes to £60,000. And the rest will be borrowed. The table above illustrates both methods more clearly.

A note worthy point is even the more modest return of 5.9% will easily beat the best return offered currently by banks. According to the recent survey by the Money Supermarket the return offered for a 5 year bond is 4.9%. The yearly yield from our property beats this marginally.

This is not where you make your money in a property however. The bulk of the return is made on capital growth. If we assume a modest rise of 5% per annum the property at the end of the year will be £306,000. This means the property has increased buy £66,000, a 100% increase over the 5 year period. A 5% increase for this location is a very cautious estimate; this location was pretty much immune to the effects of the recent credit crunch, especially properties less than £500,000.

To confirm this property you will need to call our offices and place a deposit of £5000 down on this property.

This article is an extract written by one of my mentors Suresh Vagjiani, MD of Sow & Reap

www.sowandreap.co.uk

Old School Way New Way
Purchase Price £240000 £240000
Deposit £60000 £70000
Loan Amount £180000 £170000
Annual Mortgage Payment £9000 £3298
Service Charge £1500 £1500
Management Fee £1560 £1560
Annual Rent Income £15600 £15600
Net Income £3540 £9242
Net Return on Deposit 5.9% 13.2%

Demand > Supply = Residential property rents in the UK expected to keep rising

Residential property rents in the UK are increasing as tenant demand and a shortage of properties dominate a buoyant lettings market,

  • 26% more chartered surveyors reported a rise in demand for property rather than a fall
  • Strongest demand increase in London and the East of England.
  • Large deposits and difficulty securing mortgages leading to higher numbers seeking to rent rather than buy.
  • Low Supply, only 4.1% of Landlords intend to sell at the end of current AST. Supply fallen for fourth consecutive quarter.
  • Rents for houses are expected to marginally outperform flats.
  • However as property prices are still low, many owners may let for some time before selling, thus modestly increasing supply.
  • One in five landlords are experiencing rent arrears and many are concerned about the increase in Capital Gains Tax. Added to the forthcoming cuts to Local Housing Allowance and the possibility of increased interest rates, it is clear any increase in rents will be quickly offset by these additional factors that have to be taken into account.

Article is a summary of information from www.propertywire.com

Demand > Supply = Residential property rents in the UK expected to keep rising

Residential property rents in the UK are increasing as tenant demand and a shortage of properties dominate a buoyant lettings market,

  • 26% more chartered surveyors reported a rise in demand for property rather than a fall
  • Strongest demand increase in London and the East of England.
  • Large deposits and difficulty securing mortgages leading to higher numbers seeking to rent rather than buy.
  • Low Supply, only 4.1% of Landlords intend to sell at the end of current AST. Supply fallen for fourth consecutive quarter.
  • Rents for houses are expected to marginally outperform flats.
  • However as property prices are still low, many owners may let for some time before selling, thus modestly increasing supply.
  • One in five landlords are experiencing rent arrears and many are concerned about the increase in Capital Gains Tax. Added to the forthcoming cuts to Local Housing Allowance and the possibility of increased interest rates, it is clear any increase in rents will be quickly offset by these additional factors that have to be taken into account.

Article is a summary of information from www.propertywire.com

Landlords: Ways to be Green and Save Money

For all Landlords, in particular when lets are to students, all inclusive ASTs, or Flat Shares it is very important to try keep the costs down for pure profiteering reasons as well as doing our bit to be green. Being environmentally friendly in the long run really pays off financially and you can use being green as a marketing tool also. Being green can be expensive but there are a few cheap alternatives that can really have a big impact.

Here are our Top Tips… Read more