Search Results For: buy to rent sector

Average Landlord Portfolio is Small

Published On: March 12, 2014 at 9:38 am

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The average size of a landlords portfolio is likely to be small, with only 6% owning more than one rental property, reveal new figures from Countrywide.

The upsurge of the accidental landlord has been highlighted by new research that states that the majority of landlords live within 10 miles of their rental property.

The Countrywide Residential Lettings Index has discovered that it is landlords of London that have the smallest average portfolio size, with just 4% of them possessing more than one rental property.

Average Landlord Portfolio is Small

Average Landlord Portfolio is Small

It is believed that the cost of purchase and size of deposits is a major obstacle in expanding their portfolio size. The largest proportion of landlords living over 100 miles away, with more than 20% of landlords doing so, is also in London, and is almost double the UK average.

Over half (56%) of buy-to-let landlords live within 10 miles of their rental property, with the North East having the highest amount of landlords living within 25 miles of their property (83%). Following this, 81% live near their property in the North West, and 71% in the East Midlands. The number in London was 60%.

In more rural spaces, such as Wales and the East of England, a sparse population has caused a low quantity of landlords to be living within 10 miles of their rental properties. In place of buying in the same town, landlords have chosen to live further away, remaining close enough to check up on their possessions. The number of landlords who live between 10-25 miles of their property in Wales and the East of England is the highest in the country.

The study also indicates that most landlords are positive about growing rents this year, as the average rent standing at £861 per month.

The largest increase yearly has been seen in Scotland, where rents rose by 9.6%, to an average of £626 a month. The next highest rent increase was seen by tenants in central London, who pay £2,630 a month, a rise of 8.5% from last year.

Just two areas, the West Midlands, and Yorkshire and Humberside, saw a drop in rents, with prices falling by 6.2% and 0.7% respectively.

With the UK’s economy improving, landlords over the majority of the country are claiming that arrears are declining, except in Scotland and the East of England, where arrears grew by 2.7% and 0.1% correspondingly.

Nick Dunning, Commercial Director of Countrywide, says that the secret to the success of a rental property is its location, and that landlords are keener to buy in areas that they know for monthly rents and property prices. They also understand local amenities, which attracts tenants.

Dunning explains: “With 94% of landlords in the UK owning only one rental property, many of them opt to take a hands-on approach to its management and favour being close to it.

“The private rental sector will continue to grow because there’s a growing need for good quality accommodation to rent and the property market and economic conditions are encouraging for investors.”1

1 http://www.accommodationforstudents.com/view_landlord_guides.asp?id=2489

Landlords Hit with Hidden Fees and Commissions

Published On: February 26, 2014 at 3:03 pm

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Letting agents are taking large amounts for organising work through contractors, and not revealing it to landlords.

Landlords are suffering hidden charges and inflated prices by letting agents that arrange maintenance work and servicing through contractors.

Buy-to-let investors that use a letting agent to manage their property portfolios general pay a monthly cost of about 15% of their rental earnings. This will provide a service of finding tenants, preparing tenancy agreements, and maintaining the property.

Despite this, letting agents are adding charges to this price, of up to 20% of contractors’ bills and requiring a take of up to 60% from contractors for the work they carry out.1 These costs are not properly disclosed to landlords, who will eventually take the bill.

The Happy Tenant Company says that agents regularly add extra to contractors’ bills before invoicing landlords. A mystery shopper exercise recently found that agents are charging landlords six times the price of basic services, for example, gas safety checks, tenant referencing, and deposit protection.1

Lawyer and Chief Executive of The Happy Tenant Company, Jonathan Monjack says that the more serious issue is that agents also take “secret commission” from the contractor.1

Monjack also says that some agents are fixated on finding contractors who agree to high commissions, sometimes up to 60%, in exchange for high volumes of work.1

He states: “We have seen cases where a contractor provided a service for £100 and the agent billed the landlord for £120 and took a 60% cut from the contractor. Essentially the agent received £80 for arranging a job that cost £100. This type of practice drives up contractors’ prices, and landlords are forced to foot the bill.”1

Will Davies runs property maintenance and renovation company aspect.co.uk. He says that this practise is ordinary in the industry, but thinks that some agents are particularly forceful when requesting commissions on maintenance work that they booked for landlords.

Davies says: “We stopped working with one very well known letting agency when the wanted to increase their commission from 15% to 20%.

“Landlords pay their monthly fee and they expect their agent to find contractors with their best interests in mind. In reality, agents are not concerned about quality; they will sign up the contractor who will pay the best commission.”1

Monjack believes that the way agents do not inform landlords of their commissions is “questionably fraudulent.”1 He thinks that agents should work to the best interest of their landlords.

Estate agency in southwest London, Featherstone Leigh, has addressed hidden commissions.

Landlords Hit with Hidden Fees and Commissions

Landlords Hit with Hidden Fees and Commissions

A director at the company, Joanna Hamilton, says that it is prime time for the costs to be wiped out.1

The Trading Standards Institute stated that they are aware of the accusations, however, they have not seen any “hard, written evidence”1 that agents are taking commission from contractors. A spokesperson for the Institute said that they do not know of any convictions or prosecutions within trading standards.

However, landlords who suspect their letting agent of taking commissions should complain to the Property Ombudsman.

It is important to only use an agency registered with a professional organisation, such as the UK Association of Letting Agents or the Association of Residential Letting Agents (ARLA).

These associations provide a code of conduct for their members to follow, however, this does not guarantee that they will not charge additional costs.

Before handing over a property for management to an agency, request a full list of fees and a detailed explanation of these. Also ask if the agent takes any fees or commissions from contractors.

Demand to see original invoices from contractors when work is completed. The typical cost of standard maintenance work, for example gas safety checks, is available online.

You can also insist that the agent uses a tradesperson of your choice if you have a preferred company.

If you believe that you have been overcharged, then you can complain to the agency and request an explanation of all charges. If it is not resolved at this stage, you can go on to complain to the Property Ombudsman.

Christopher Hamer, the Property Ombudsman, says: “While there’s nothing illegal about a letting agent receiving a commission or referral fee for arranging contractor work at a property, you have to ask if it is fair for an agent to charge the landlord a premium on top of the actual cost for contractor work when the landlord is already paying a management fee to the agent.

“The Property Ombudsman’s Lettings Code of Practice clearly states that there must be complete transparency when it comes to fees so we would advise landlords to always ask agents to provide a full breakdown of contractor costs, including any commission arrangement.

“If an agent wants to charge a commission or referral fee to the contractor for introducing the work, this kind of practice is not illegal and quite common in other sectors but the financial arrangement must be disclosed to the landlord so they are fully informed about any financial gain the agent will make.”1

Landlords face various charges when using a letting agent. These depend on the type of property they are letting, and the type of tenant who lives there.

The National Landlords Association (NLA) put together a typical list of costs landlords will pay to an agent. They are based on a £175,000 house, with a monthly rental income of £750.

The NLA state that landlords will pay around 10% of their rental earnings on maintenance, so should budget this into the extra costs.1

There are two types of letting agent fees. The let only service costs around 10% of rental income, and includes the agent finding and vetting the tenant. Full management costs around 15% of annual rent, and this involves the agent taking complete control of communication and organisation with the tenant.

Further costs include: credit checking, £20; referencing, up to £150; deposit protection, £24; Gas Safety Certificate, £50; and landlord insurance, £200 per year.1

It is also worth pointing out that some agents charge a renewal fee when an existing tenant renews their contract.

1 http://www.landlordexpert.co.uk/2014/02/24/landlords-hit-with-hidden-fees-and-commissions/

 

Landlord Insurance Key Trends to 2017

Published On: February 20, 2014 at 3:02 pm

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UK landlord insurance is estimated to have made £2.51 billion in gross written premiums in 2012, and produced 7.3% of the country’s non-life insurance category.1

Landlord Insurance Key Trends to 2017

Landlord Insurance Key Trends to 2017

Landlord insurance policies cover the possibilities of risks in renting a residential or commercial property, including damage to buildings and contents, loss of rent, and public liability.

Strength in the sector continued throughout the recession and financial difficulties of 2008-11, when the stagnant housing market caused a rise in rental accommodation.

This marked the turnaround from post-war homeownership, with almost 35% of properties rented through private or social housing landlords in 2012. This was a 5% rise from 2000.

Furthermore, the move to rental properties is also likely to have caused a growing demand for landlord insurance, as a consequence of greater risk aversion, a high number of homeowners decided to rent out their old homes, unemployment causing an increase in the amount of tenants in rent arrears, doubtful businesses dropping their commitment to long leases, and a rise in weather-related incidents.

There are chances that the sector will progress further also. Insurer-led studies have revealed that consumers are not property aware of the insurance cover required for landlords, as a quarter of residential landlords only take standard home insurance. By moving to suitable landlord insurance, there will be large growth potential for premiums in this group. Looser credit conditions and a rise in buy-to-let lending imply further favourable possibilities.

However, the future of available flood insurance is not certain. It has been confirmed since the move from the Statement of Principles to the Government Flood Re plan, that affordable flooding insurance will only be provided for resident homeowners.

Therefore, insurance premiums for landlords are predicted to face additional difficulties in the coming months. Industry experts expect that the number of properties that could be affected is one million.

1 http://www.landlordexpert.co.uk/2014/02/19/landlord-insurance-in-the-uk-key-trends-and-opportunities-to-2017/

 

 

Are there Enough Homes for Britain?

Published On: February 10, 2014 at 10:51 am

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Britain’s nightmare with housing stems from the extremely high prices of buying your own home.

The average property costs five times the average person’s annual earnings; almost a record high. Prices are not slowing down either. December saw property prices sitting at around 10% higher than they were the previous year.

Rents are also increasing sharply, with housing costing about 20% of a typical family’s weekly expenses, up from 16% in 2000.1

The Government is also struggling with the expenses of housing the population, as many simply cannot afford the rising rents, and 1.7 million people are waiting for state-funded housing.1

Young people are suffering the most, as they are unable to get onto the property ladder. Many are still living with their parents, as they attempt to save for the huge deposits expected by the banks.

The proportion of Britons who own their own home has dropped from 70% to 65% since 2000.1 However, many stress that they are still eager to buy.

There are many people, and situations blamed for the housing crisis. Although it seems that several factors are contributing to the problems, and the lack of solutions.

The existing population have to compete with foreigners buying into the market. The surge in immigration has lead to a densely populated country, and simply too much demand for new homes.

Are there Enough Homes for Britain?

Are there Enough Homes for Britain?

However, this problem seems centred within London, where wealthy foreigners are driving up house prices in the capital. There is not much proof that the same is happening around the country.

The higher house prices of the last few decades have prompted some to invest in the sector. Buy-to-let landlords are now purchasing property after property, and due to their approval from the banks, they are forcing many young people out of the market.

Nonetheless, buy-to-let landlords could be seen to increase the supply of houses, as often they will buy bigger homes to divide into smaller apartments.

Rural lobby groups, such as the Campaign to Protect Rural England (CPRE), and the National Trust are preventing any building on the green belt. Just 13% of the UK’s land is built on1, meaning that the overcrowded urban areas are simply having to increase prices.

Unfortunately, these groups are effectual, and manage to stop politicians building in rural parts.

Construction firms do not build enough property, and this raises their profits due to the new homes that they sell being increasingly expensive. In an ideal world, new companies would be competing with them to stabilise these profits. However, this does not seem to be happening, leading to unaffordable property.

During the 2008 recession, banks abruptly stopped providing mortgages to young people, and are only just picking up. They began requiring huge deposits and introduced high interest rates to new borrowers. This generation have therefore suffered rejection from the market.

The sudden halt in lending pushed young people off the property ladder. Although, banks were right to be conscious of providing mortgages to those who overspend and could struggle to repay their loan if interest rates rose further.

The Government’s Help to Buy scheme provided a short-term solution to a larger problem. The system has pushed keen young buyers into the market, although it has also stopped the levelling out of property prices that the sector needs.

Tenants in Britain are also suffering from insufficient rights, compared to those renting in the rest of Europe. Contracts in the UK are predominantly short-term, allowing landlords to control the sector. Excessive fees for letting agents can also halt renters from saving.

In Europe, long-term renting is much more commonplace, and this is potentially due to tenants having greater rights. British renters could benefit from having more equal rights to landlords and thus wanting to stay in the sector.

Landlords are overcharging those that simply have to rent. A rent cap by the Government could stop investors taking advantage of the generation that cannot get onto the property ladder. However, limits can prevent landlords from developing more properties, providing less supply

By protecting tenants, Britain would move into a renting-friendly society. This could help mortgage providers stabilise their lending.

The Government’s mortgage plans would indeed increase the demand for property, but would not boost supply. In the future, first time buyers will face even greater mortgages, of which their wages will not match.

The rate of new build construction is about 150,000 per year, the lowest number since the 1920s. However, annual demand for these properties is around 250,000.1

There are many options for building more homes, for example, bigger development budgets, or land value tax, which would raise supply and reduce prices in the market.

1 http://www.independent.co.uk/property/house-and-home/property/britain-is-suffering-from-a-housing-crisis–who-is-to-blame-and-how-can-we-fix-it-9113329.html

 

 

Landlords to Protect Themselves from Interest Rate Increases

Published On: February 7, 2014 at 9:19 am

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Recent changes in the UK property market have driven mortgage lenders and property investment specialists to offer advice to investors on how they can protect themselves.

Mark Carney, Governor of the Bank of England (BoE) has states that the BoE’s base interest rate will not be increased in the near future; at present it is at the record low of 0.5%. This situation could however change in the next year.

The fragile nature of the UK property market, alongside affordable residential properties being purchased at high speeds, are causing a stronger economy, but also a rise in property prices over the next few months. Property investors are attempting to beat the swarm and save money in the sector.

Landlords to Protect Themselves from Interest Rate Increases

Landlords to Protect Themselves from Interest Rate Increases

This burst of property investors could lead to another housing bubble, warn estate agents. The amount of people seeking to invest in property is higher than the amount of properties available to buy.

This predicament will cause property prices to surpass the amount that most owner-occupiers can pay, which would force the UK property market to deteriorate again.

Homeowners around the UK are already concerned that their mortgage interest rates will increase, potentially as soon as next year. Despite the economy improving, the cost of living is still also very high.

The Government has said that living standards are improving, however, many property owners still struggle to cope with their finances.

If interest rates do increase, a large amount of homeowners will struggle further with their mortgage repayments. This would raise the risk of property repossessions.

This would have a damaging effect on the sector, as less people will be able to afford mortgage repayments, and potential buyers will have to wait longer to purchase a house.

The general election, on 7th May 2015, will also affect the property market. All political parties will begin promoting their policies on this sector.

The behaviour of banks and mortgage lenders will change due to political action. Those thinking of buying or selling properties will also attempt to protect their investment.

Some may delay buying or selling a property until the political party in power is announced.

The last few years has seen private rental sector landlords thriving, due to extraordinary demand. This demand is starting to decline, however, as the Help to Buy scheme is aiding first time and next step buyers into the market, and the amount of people living in private rental sector properties could decrease even further.

A number of mortgage providers are currently offering buy-to-let mortgages at record low interest rates. However, it is expected that BoE interest rates will rise eventually, and the demand for private rental sector homes will decline. Mortgage lenders may then introduce stricter criteria, for property investors.

Property investors could maybe look at investing in a five year fixed term rate to beat the worst rate rises.

Property investors must be more thorough when looking to invest in the next few months, and a drop in income should be expected, plus a reduction in the demand for property.

 

 

Landlords Should Focus on Reliable Tenants

Published On: January 15, 2014 at 4:28 pm

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Landlords Should Focus on Reliable Tenants

Landlords Should Focus on Reliable Tenants

The current thriving sales market indicates that landlords should move their focus away from high-paying renters, to reliable long-term tenants, despite the possibility of them paying less.

Rental consultancy Landlord Assist, who operate tenant eviction and rent recovery services, says to expect a turnaround in rental sector trends.

The consultancy says that when sales of flats and houses were stagnant, landlords were able to set rents at record highs due to the demand for rented accommodation surpassing supply.

However, with more tenants are now looking to purchase their own homes, aided by Government schemes such as Help to Buy, landlords need to shift their focus.

Graham Kinnear, Landlord Assist’s Managing Director, says: “This could lead to a greater choice of properties to rent in parts of the country and more competition between landlords for the best tenants. It’s tempting for landlords to set rent levels high but instead it’s better to focus on attracting the right type of tenant at the right price.”1

The consultancy claims that the alternative for over-optimistic landlords is a year of void periods, and a risk of arrears because rents are too high for tenants.

1 http://old.lettingagenttoday.co.uk/news_features/Landlords-Should-Favour-Reliable-Tenants-Over-High-Rents