With the continued drop in property prices and ever tightening of mortgage lending, more properties ‘available for rent’ are coming on to the market.

An increasing number of property owners faced with plummeting prices are no longer prepared to accept ‘silly offers’ for their properties. Instead of yielding to modest offers they are now welcoming tenants as a new breed of landlords.

This means that instead of selling in the current market, would be sellers are taking advantage of the market slump by letting the property out and then biding their time for property prices to increase again before selling.

Although this may sound like a sensible strategy, these new landlords need to fully understand their roles and responsibilities.

For example they need to make sure that:

– Their mortgage lender will allow them to let the property
– The insurance policies are changed from residential to buy-to-let related policies
– They have the correct safety certificates and energy performance certificates in place
– They understand that they need to protect tenant’s deposits
– etc… Continue reading →

It will come as no surprise that mortgage lenders are refusing to re-refinance credit worthy landlords (and general homeowners) because they no longer have enough equity in their property.

There are three main reasons why those who have a good credit rating are not being allowed to remortgage:

a) The falling property prices over the last year has caused a number of people to go into negative equity
b) Surveyors are under-valuing properties even further as they are scared that if things go wrong they could get sued by vendors. This means that landlords and homeowners are being told they are in negative equity or do not have enough equity in their property to remortgage.
c) The amount of equity required to refinance has now shot up to as much as 40% and this has meant that again they no longer have enough equity in the properties to remortgage. Continue reading →

There was a very interesting article that I came across in the telegraph recently. It was particularly of interest to me as I am one of the fortunate investors who have mortgage deals that are currently 0.79% below the base rate!

Yes! You read correctly – 0.79% below base rate!

The article said that if interest rates continue to fall (and it seems very likely that they will do so) without any changes to the terms of the loans/mortgages, then a bizarre situation could arise where the banks could end up paying the loan.
 
It will affect those who have tracker mortgages that are below the base rate. Whenever the base rate changes, so do the repayments on the tracker mortgages as well. This is because they are linked directly to the base rate.

Most of those with this type of mortgage pay the bank’s base rate and also a percentage on top. But in some cases (such as mine) the borrower pays the bank base rate minus a certain percentage.
  Continue reading →

An appeal has been made by the National Landlords’ Association to allow buy-to-let investors to also benefit from the two year moratorium on mortgage payments.

It does seem a little unfair that this two year mortgage break is only being allowed for homeowners who are struggling with their main residence mortgage repayments.

The NLA are putting forward the argument that the purpose of the temporary relief is to allow more people to stay in properties. Landlords are providing houses for tenants who can’t afford, or don’t want, to buy in the current economic crisis, and therefore they should not be excluded from this scheme.

The NLA argued that by allowing buy-to-let landlords time to improve their property cashflow the benefit would automatically be extended to their tenants. There is an increasing number of defaulting tenants so maybe the landlords would be able to pass on some kind of help to the tenants to help them stay in the property.

If those landlords can be helped to stay afloat then, of course, it will mean less repossessions. In a recent survey an increasing number of landlords stressed that they would experience cashflow difficulties in 2009. Continue reading →

It will come as no surprise that those who previously had plans to buy their first home have been doing a lot of rethinking over the past few months. Faced with the continuing impact of the credit crunch and the falling house prices, more and more tenants are deciding to extend their existing tenancy agreements.

Seems quite a sensible choice given that even more people are now having difficulty in finding funds to make down-payments that many mortgage lenders are now asking for.

This is not only happening in the UK, but is the trend in the rest of Europe and America as well. Tenants are calculating that by extending their existing agreements they will be able to save money while waiting for the health of the economy to improve, and more affordable mortgage products come on the market.

It is the first-time buyers who are choosing to opt-out of buying properties and going for tenancy extensions. Many are still struggling with student loans and cannot raise the down payments that are now demanded by the mortgage lenders. Continue reading →

As of April this year, the Local Housing Allowance (LHA) is being paid directly to tenants. Previously it was paid to landlords. Unfortunately this change is causing landlords to lose out on rent collection, especially with the worsening economic climate.

As a result more and more landlords are now reluctant to rent properties to tenants who receive housing benefits.

My good friend, Paul Shamplina, from Landlord Action feels that the change in the way the housing allowance is paid has been a mistake and he is therefore asking for an immediate review.

The housing benefit is being given directly to the tenants to enable them to be financially independent and become capable of handling their own funds. But the reality is that when times get tough (i.e. like the current economic climate) the tenant no longer feels that paying the rent is the top priority on the agenda.

As the economic climate has worsened there has been a sharp increase in the number of landlords seeking help due to unpaid rents. The rules state that a landlord can appeal to the local authorities to have the rent paid, but in reality this takes time. Whilst the outstanding rents are being chased the landlord’s pockets are empty as the arrears pile up. Continue reading →

The question about whether you can offset costs that you have made before you purchased a property is an interesting one. Unfortunately it is also a bit of a grey area as far as taxation goes.

The rules for pre-trading expenditure are quite complex, but in theory you can claim expenses incurred in the seven years before commencement of the rental ‘business’.

The expenses are treated as incurred on the first day the rental ‘business’ starts.

Having said that, HMRC will want to examine these property expenses closely with a view to establishing whether they were incurred ‘wholly and exclusively’ for the purposes of the ‘trade’ i.e. your property business.

Again in theory HMRC can disallow any expense which has a duality of purpose, but in practice they will usually allow a split to be made.

They will also examine the expenses to see whether they are capital or
revenue in nature. Continue reading →

The decision by the Bank of England to reduce the base rate to 2% last Thursday will prop up the treasury coffers with an additional £400million. This was the findings of the Young Group, a company providing a service to landlords.

The firm estimates that each reduction of 0.5% in the base rate will enrich the Chancellors coffers by an extra £80 million coming from taxes paid by landlords.

Landlords profit on rental income in most cases is taxed at the rate of 40%. This means that the drop from 5.5% to the current 2% rate will generate an additional £1billion of income for landlords. And this could ultimately result in an additional £400 million in taxes for the government.
 
Young Group has calculated that about £136 billion of the outstanding buy-to-let mortgages, 30% being tracker products have seen interest rates drop automatically with the lowering of Bank of England’s base rate.  Continue reading →

One of the checks that landlords sometimes make when vetting tenants is to ask the tenant to get their bank to provide a bank reference.

These typically cost around £10.

However as my good friend Paul Shamplina (from Landlord Action) says ‘they are not worth the paper they are written on’.

Why?

Well this is because they give very little information. In fact it is true to say they hardly give any information at all.

What is much better than asking for a bank reference is to ask the tenant to provide the last three months of bank statements.

Now, these statements will tell you everything that you want to know as a landlord !

This is not an unreasonable request and if a tenant declines to provide these then I would simply say that they cannot be considered for renting the property until these are provided. Continue reading →