Search Results For: buy to rent sector

Tenant demand to increase

Published On: January 7, 2014 at 4:44 pm

A busy 2014 is predicted for letting agents, according to new figures from LSL Property Services.

Positivity

Positive results of a recent poll of 2,195 landlords indicate a prosperous coming year for the private rental sector. Landlords have experienced boosted confidence through growing tenant demand, with rising prices enhancing properties as surefire investment opportunities.

The survey suggests that 41% of landlords questioned reported a rise in tenant demand within the last six months. Just one in 16 experienced a fall. Demand led to a marked increase in rent rises during 2013. 58% expect the demand to increase again during 2014.[1]

18% of landlords plan to extend their portfolio in the next twelve months, with 16% expanding in 2013.[1]

Healthy

David Newnes, the director of LSL Property Services, was pleased with the findings of the survey and said that they emphasized the growing rental sector. Newnes said: “The rise in house prices is evidence of the underlying buoyancy in the property market and the stabilising of rent rises is an indication of the current healthy state of the rental sector.”[1]

He continued by saying that landlords are in “a prime position to benefit from the strong yields on properties” and that “buy-to-let investors can be encouraged by the climbing tenant demand.” Mr Newnes went on to say that the demand not only signifies an “excellent long-term investment opportunity,” but also “demonstrates the continued the continued appetite for rental homes.”[1]

Rising Stock

Rick Flay, director of Belvoir Sheffield, said that tenant demand in his city was increasing at a incredible rate. Flay said :”Here at Belvoir Sheffield we are seeing proof that tenant demand is certainly increasing, to the point where we are seeking out new properties in Sheffield and the surrounding areas.

“We are urgently looking for one and two bedroom flats in Sheffield, along with one and two bed terraced houses in the S1, S2, S3, S7, S8, S10 and S11 postcodes, after a significant increase in tenant enquiries.”[2]

Tenant demand to increase

Mr Newnes also underlined the rising stock in the rental market. He stated: “Demand for rented accommodation is strong, exemplified by the fact that the number of lettings, new viewings and applicants are all rising. There are strong foundations for prosperity in the rental sector, fuelled by increased economic optimism and future job creation. Against the backdrop of growing economic stability, more confidence is driving people forward in search of the attractive deals on offer across the buy-to-let mortgage market, which will allow them to benefit from the attractive returns.”[1]

Future

Looking ahead, Mr Newnes urged action to be taken to help first-time buyers raise adequate finances to secure a mortgage, to save over-reliance on the rental sector. Newnes said that “securing mortgage finance is therefore not just a concern excusive to frst-time buyers but remains a real and serious challenge for many landlords.”[1]

He acknowledges that “lending to first-time buyers and those without large deposits has itself seen a pick up,” but says this “still has a long way to go.” Newnes warns that “it is the rental sector that will be continually needed to pick up the slack.”[1]

[1] http://old.lettingagenttoday.co.uk/news_features/Tenant-demand-set-to-increase–LSL-Property-Services

[2] http://www.propertyreporter.co.uk/landlords/tenant-demand-set-to-soar.html

Landlords use Bridging Loans to Raise Money

Published On: December 14, 2013 at 11:15 am

Author: Em Morley

Categories: Landlord News

Tags: bridging loans

Buying a house is becoming more difficult for everybody, says the International Monetary Fund (IMF) stating that the housing market will get worse before it recovers.

This is down to big banks trying to recover from mounts of debt, the housing bubble, and a decrease in competition in the mortgage industry.

This is not only affecting would-be homeowners, but also the buy-to-let sector, where mortgages are becoming stricter. Normally, rental income must be at least 125% of the mortgage repayments, and a deposit of about 40% is needed.

Increasing rental returns have, however, created more interest in buying to let. There is strong demand from tenants for rental accommodation, as many cannot afford to buy their own homes.

Landlords use Bridging Loans to Raise Money

Landlords are now able to add considerable numbers to their property portfolios with bridging loans, which allow investors to borrow on the equity contained within their assets.

Bridging loans are short-term lends that are secured on investments that you own, for example, a property. In the past, they have been useful for people who are in a property chain, but needed when the chain fails or is going to take a long time. The loan allows you to continue with the transaction and obliges selling the property at a later date, and paying back the money.

Because the bridging finance market is growing, loans are now available on other assets. The money has been used to buy yachts, pay outstanding corporate tax, and business development finance.

They are ideal for the buy-to-let market in terms of expanding landlords’ portfolios, by finding good deals in property auctions or quick sales.

A bridging loan will give investors the advantage of not being part of a buyer chain. A transaction should be able to be finalised very quickly, and a discount may be able to be negotiated.

The promptness of transactions is one of the top benefits, as they are often completed within a week. This is helpful when a property is up at auction or when it is repossessed.

Interest can also rollover to the end of the loan for a greater repayment. This is useful if a property will not be making any money whilst in renovated, for example. Once refurbishment is complete, the loan can be paid back once the property is sold, or once tenants have moved in.

Landlords can sometimes need to redevelop or convert a property for the rental market, but cannot qualify for buy-to-let lending until there is a full rental valuation. Bridging loans allow an investor to fund the renovation stage.

Loan to value (LTV) rates can be increased by combining equity in other assets, and loans can be provided to cover maintenance, in addition to the value of the property.

However, bridging loans aren’t a long-term solution, as they must have an appropriate exit strategy in place. Buy-to-let is still the best option for buying properties intended for the rental market. Although bridging finance does offer solutions for landlords planning to refurbish.

Santander Breaks the Trend

Published On: November 29, 2013 at 3:53 pm

Author: Em Morley

Categories: Finance News

Tags: mortgage rates,Santander

Recent months have seen landlords being unfavourably affected by a sudden rise in interest rates on their mortgages. The Bank of Ireland case, in which they increased the margin differential on their lifetime tracker mortgages, has been particularly exposed.

Many banks have moved away from lending for buy-to-let purposes on account of the risks involved in letting private properties. Recent reports, however, have revealed that Santander have broken the trend and loosened their criteria for landlords. This is to open up to amateur landlords.

Santander Breaks the Trend

Santander’s director of retail assets, Phil Cliff, discussed the new measures, saying: “The buy-to-let market is continuing to see strong growth and the latest improvements to our criteria herald the next step in our journey to becoming the intermediary partner of choice, demonstrating our continued commitment to this market.

“We’re keen to support the non-professional landlords sector and will continue to review our buy-to-let criteria to ensure we’re offering your clients the right mortgage with features to meet their needs now and in the future.”

The lender has reduced their buy-to-let affordability rate from 6% to 5%. The maximum loan size per property will also be increased, from £500,000 to £750,000 from Friday 27^th September.

In addition, the Buy to Let Business Managing Director, Ying Tan, said: “This is fantastic news. Lenders are solely but surely moving more towards larger landlords who have been neglected during the past few years. Santander is one lender that can start to compete with BM and TMW with its balance sheet and proposition. It’ll certainly get business.”1

Under the revised criteria, landlords with a maximum of seven buy-to-let properties will be able to apply for a buy-to-let mortgage with Santander Intermediaries, while those with up to five properties can apply to Santander.

The minimum gross rental income requirement remains at 125% of the mortgage payment. Applicants must already have a residential or buy-to-let mortgage. At least one of the borrowers must be employed and earn over £25,000 per annum. Houses in multiple occupation are not eligible.

Additionally, the lender will also consider applications from those who have a minimum of one and a maximum of ten secured credit commitments at the time of application.

Santander is also launching a range of two-year residential track mortgages available up to 90% loan-to-value, with no early repayment charges.

With a high demand for private rental property, it is unsurprising that Santander aim to take a larger share of the buy-to-let lending market. However there are risks involved. Since the recession, evictions due to rent arrears have increased, meaning that landlords are more likely to miss one of their mortgage repayments without rent guarantee insurance. Any landlord thinking of applying for a mortgage through Santander in the near future should ensure they are financially secure and can realistically afford the repayments.

1 http://www.justlandlords.co.uk/news/Santander-Relaxes-Lending-Criteria-for-Landlords-1780.html

Become a Successful First Time Landlord

Published On: November 19, 2013 at 4:46 pm

Author: Em Morley

Categories: Landlord News

Tags: first time landlord

On BBC Radio 4’s Money Box Live show, National Landlords Association (NLA) Chairman, Carolyn Uphill, says that first time aspiring landlords should not be discouraged by the negative press the buy-to-let market receives, and the potential financial difficulties.¹

Uphill was responding to a prospective landlord looking to break into the buy-to-let sector.

Become a Successful First Time Landlord

“First of all, it’s imperative that prospective landlords don’t underestimate what they’re getting into,” says Uphill. “At the end of the day, it’s a business and landlords should know what they need to do to make that business succeed.”

She continues: “Before starting out, I advise to research thoroughly, understand the market and what sort of tenant you’re aiming the business at, and finally, to make sure you seek out the best advice possible.

“I strongly advise joining a trade association like the NLA before investing a substantial amount of money. With the NLA’s new Effective Letting campaign you’ve got a better chance of getting it right first time.

“If you don’t want to manage your property, there are good agents out there, but you must make sure the agent is a member of a professional body like UKALA [UK Association of Letting Agents] before taking that route. However, it’s important to fully understand your legal obligations as you will still be responsible for certain things even if you use an agent, for example: making the home fit for habitation; ensuring that there are no category one hazards which can cause injury; that gas safety appliances are properly tested and in working order; that the property’s Energy Performance Certificate is up to date before you rent.”

She concludes: “Finally and most importantly, being a successful landlord requires effective communication, which in turn can help to reduce missed payments and voids that can have severe financial implications.

“With all tenancies, it’s important to establish a good, professional relationship from the start. It is also essential that you set out fair terms in your tenancy agreement and that both landlord and tenant understand their obligations throughout the tenancy. If you get this right, then the tenancy is likely to run smoothly.”1

More information can be found at www.landlords.org.uk.

¹http://www.landlords.org.uk/news-campaigns/news/avoid-pitfalls-and-become-successful-first-time-landlord

Mortgage Lenders Clamp Down on Accidental Landlords

Published On: November 6, 2013 at 3:25 pm

Author: Em Morley

Categories: Finance News

Tags: accidental landords,mortgate lenders

Mortgage lenders are clamping down on accidental landlords who do not tell their bank that they are renting out their homes.

Lenders are wary of these investors, who aren’t being honest about letting properties, in an attempt to avoid higher interest rates or a move to a more expensive buy-to-let loan.

In an intensive campaign to find out who is mistreating the system, banks are going through the electoral register, social media, and online letting agencies for any indications that a house is up for rent.Despite strong recovery in the housing sector, many people are still in negative equity, and are therefore unable or unwilling to sell their home. Lots of these become accidental landlords; there could be up to 30% in the landlord market

Lenders have managed to take advantage of this by raising rates or requiring these landlords to change from a residential loan to a higher buy-to-let loan. This drastically increases monthly repayments for the borrower.

A large amount of borrowers have attempted to avoid this, by not telling their mortgage provider that they are renting out the property. Lenders have caught onto this and are now chasing the wrongdoers.

A broker with John Charcol, Ray Boulger, says: “We know there are many borrowers who have let their property but failed to inform their lender. Before the financial crisis lenders didn’t often check whether borrowers were still living in their property, but they are increasingly doing things like checking the electoral register to see who lives at an address, and looking on letting websites such as rightmove.co.uk, to see if a property is listed. These borrowers now run a much greater risk of being caught.”

It is a contractual requirement of borrowers to inform their lender if they would like to let a property. If they decide to do so, they could see a rate increase between 1% and 2%, plus an administration fee.

This rise is because mortgage providers see buy-to-let properties as more risky, because of possible void periods, or tenants falling into arrears.

Mortgage Lenders Clamp Down on Accidental Landlords

Boulger explains: “If a borrower has 20% equity in their home, they have the option to move to a more competitive buy-to-let mortgage with another lender. But for those in negative equity, they are stuck with their existing lender and must accept whatever they offer.”¹

Lenders deal with this in many ways. Nationwide, for example, increase their rates by 1.5% points for all residential borrows who rent out their homes for over six months. An administration fee of £30 is also charged.

The Co-operative Bank raises interests rates by 1% point. They also charge a £55 fee for transferring the mortgage to a letting arrangement.

HSBC does allow their customers to remain on their residential mortgage rates if they are letting their property out for 12 months or less. If the period is longer, customers are expected to remortgage to a buy-to-let deal.

Two options are given by Barclays, who says that customers can swap to a buy-to-let mortgage before renting the property out, or can apply for consent to let. This will allow the home to be let for up to two years, with no change to the rate.

Santander are also considering consent to let requests for short-term arrangements. These borrowers will stay on their existing mortgage, but a fee of £295 is charged. For an extended period of letting, borrowers need to move to a buy-to-let mortgage.

Smaller lenders, such as Chelsea Building Society and Accord Mortgages enforce penalties on those borrowers that don’t let them know they are letting out their property. The rate for borrowers with consent to let is raised by 1% point, however the margin increases to 2% points if they are letting without permission.

Letting out your property without telling your mortgage provider is very risky. It breaches the terms and conditions of the contract, and lenders could potentially demand full and final repayment, which would mean borrowers had to default on the loan.

Mortgage broker Coreco’s Andrew Montlake says that letting a property without permission invalidates home insurance policies as well.

“Mortgage lenders are getting tough on this and I would encourage borrowers to be honest and upfront with their lender,” he advises.1

Another broker, Aaron Strutt of Trinity Financial, adds: “If the lenders want more of their customers to tell them that they are letting their properties out, many of them should not be so quick to raise their rates. Many homeowners don’t want to let out their property, but they do it to ensure the mortgage repayments are kept up to date. At the moment, honesty is costing some homeowners a lot of money.”1

¹http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/10418580/Lenders-crack-down-on-accidental-landlords.html

What is ARLA?

Published On: September 3, 2013 at 5:18 pm

Author: Em Morley

Categories: Property News

Tags: association of residential letting agents,what do arla do,what is arla?

What is ARLA?

The Association of Residential Letting Agents (ARLA) is the largest professional body representing letting agents in the UK. Present-day members range from all varying tiers of letting agency organisations, from office employees to leading business managers.

Formed in 1981, ARLA was known as the first professional and regulatory body for letting agents in Great Britain. The foundation of the organisation came after it was noted that a separate company was required to keep standards up in the important and growing sector of the property market.

ARLA is currently based in Warwick, with additional operational offices in London and Edinburgh. Their primary roles include providing support and guidance to property professionals across all ranges of the market. One of ARLA’s key principles is to make the property market more streamlined and user-efficient for both homebuyers and sellers.

In its role as one of the biggest organisations in the property industry, ARLA is proud to be able to offer benefits to consumers and letting agents alike.