Category Archives: Property Finance

Buy To Let Market: A Time Bomb!

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Reports out this week indicate something most of us have known for a long time: the buy to let industry is in a crisis that is set to only get worse if banks continue to take the line they have recently adopted.
The crux of the matter is that enquiries regarding BTL properties have increased by fifty percent over the past year, while the number of deals available from banks has dropped by seventy percent. This is clearly causing major problems with supply and demand. Hannah-Mercedes Skenfield, Moneysupermarket mortgage channel manager has this to say on the situation

“Our figures show nearly ten per cent of those looking for a mortgage are looking for a buy-to-let mortgage, but the number of products has fallen by over two-thirds compared to this time last year,” she says.

“With significantly less products left on the market and high interest rates attached to those available, we could potentially have a ticking buy-to-let time bomb on our hands. The need for rental housing is increasing, but there may not be enough landlords available to cater for this demand.”

This really does seem to be a recipe for housing disaster and we can only hope that something gives soon in the banks attitude to help us avoid this crisis.

A Third of Landlords Worried About Future

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It seems that despite the fact the economy is now in recovery, according to most experts, landlords are still very worried about where they will be in a couple of years time. This is probably not surprising considering the attitude of the banks which has been well documented on this blog over the last month or so.

I suppose that if you are in a position where you need to negotiate some or all of your mortgages in the near future, you have a real reason to be concerned. Considering the fact that so many landlords have struggled through the previous eighteen months, it is understandable that the way banks are acting is making them extremely edgy.
 
They are also concerned about the plight of tenants, many of whom are still finding it hard to make ends meet. Clearly this is an issue for landlords as it will inevitably be linked to some rent arrears, which in turn will make it difficult for landlords to meet their commitments.

While I think caution is called for at this stage of the recovery process, landlords should be careful not to worry themselves into a difficult position. For example, as I have said before, keeping up with insurance payments is vital.

Buy To Let Loans Harder And Harder To Get

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The news that landlords are finding it extremely hard to finance their ventures these days seems to still be the biggest news in the property sector at the moment. If you are a landlord with a sizable portfolio, the news is even worse as banks continue to show reluctance to lend to you.

Whatever the reason that you may be in talks with the bank, most of you are commenting that it is harder than it has ever been to get hold of the money you require. A full ninety percent of landlords have indicated to survey-takers that you found negotiations significantly more difficult this time than at any other.

When you take into account that products available to buy to let landlords fell by a truly mind boggling 95% over the last two years, this fact is hardly surprising but it is distinctly worrying. In an economy that is starting to show signs of recovery, it appears that buy to let landlords are getting a even more raw deal than anyone else, with residential loans being on completely the opposite track.

As people involved in the property rental sector, we can only hope that the banks wake up to themselves soon and give us a fair deal. Either that or that the Government intervenes to guide the banks in the right direction.

Banks Preventing Landlords Snapping Up Bargains

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The Times Online had a really interesting article on how banks are reducing even further the amount they are willing to lend to landlords. If you are in the market you should probably head over to their website and read the whole thing, but for those of you who are pushed for time or have only an academic interest I will give you a quick rundown.

The depressing news that Lloyds bank has halved the amount it is willing to lend from £6m on up to 18 properties, to £3m on a maximum of nine properties, is probably not a huge shock to anyone but it is certainly a worrying sign of the times, especially when you take into account that two years ago the same bank would have been willing to lend in the vicinity of £14m.

This has come at a very bad time for those property managers with an eye for a bargain. As David Hollingworth, at L&C, puts it: “This is the last thing the market needs. Lloyds’ decision leaves slimmer pickings for landlords hoping to make the most of low [interest] rates and property values.”

Landlords are chafing at the bit to get stuck into these opportunities and yet the banks are holding them back. I cannot help but think that this is counterproductive in an economy that is struggling to recover from a horrible financial downturn, especially when we hear so much about economic stimulation from our politicians.

Landlord Software Saves You Time and Money

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There are very few landlords with any sort of sizeable portfolio that try to struggle through their day to day business without some form of property management software. The large majority of modern landlords are now fully aware of the kind of benefits that property software can bring to their business and have jumped on board.

For those stubborn few still holding out or those that are relatively new to the game and looking for some advice, let’s take a quick look at the advantages of decent landlord software for the smooth running of your business:

It will Record and Update Your Tenant Reports
We are all aware that having spotless and up to date records of everything pertaining to your tenants is one of the biggest tasks of residential property management. This time consuming task is also one of the most vital and, as a result, takes up loads of time in the average landlord’s week.

Any slacking in this area makes the landlord vulnerable in the event of a dispute with the tenant regarding payment, lease terms or any other conditions of a tenancy. Landlord software will make sure that your records are beyond dispute.

Property management software will also allow you to make up a report when it is time to send a late payment notification, renew a lease, or prepare an eviction notice. Most landlord software contains templates that let you adjust them to your individual needs and save loads of time and effort in the process.

It Can Help With Accounting and Filing Your Annual Tax Returns
Most of us dread tax return time even though we know everything we have done is above board. It is the fear that we have forgotten something that usually causes this anxiety. It is also because, no matter how thorough we have been in keeping our records, the job of putting it all together to fill in the tax return is always a daunting prospect. Property management software will take all the worry out of this time of year for you.

It will allow you to track all your rental income and expenses in real time so when it comes to completing your tax return you are sure to have all the data you need. Excellent record keeping will also ensure that you won’t miss out on any possible tax deduction, which is a hugely important (and beneficial) reason for getting hold of landlord software in the first place. No one likes the idea of giving the taxman more than they are due!

Landlord Software Keeps Track of Your Rental Property Inventory
Keeping an inventory allows you to track your rental properties with ease, and property software can save you so much time in this depatment. You can include information on important property details such as location, square footage, rental information or any type of maintenance issue with your rental properties.

If you own a large number of rental properties, you can also compare the returns of your properties by any number of elements such as monthly rental rate, property values, location and so on.

All landlords that use property software agree that it has made their lives easier and their business more profitable.

Buy to Let Landlords Still Worried

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Despite the fact that we seem to be hearing a lot of good news about the state of the economy, and in fact the state of the property sector specifically, some landlords are still very concerned.

A recent poll conducted by an organization called Direct Line for Business found that nearly a third of landlords are still losing sleep over the current economic situation and many are very worried about their future in the property sector.

Personally, I don’t find this news at all surprising. For a lot of landlords the recent huge upheaval was the first time they experienced how quickly things can crash in the property game. The shock of going from boom to near bust will have had an effect on the confidence of a lot of landlords and rightly so. Hopefully it is this kind of experience that prevents us from repeating the same errors perpetually.

There is a worrying aspect to all this, though, and it is the news that some landlords are cutting corners by cancelling insurance policies. That is a very dangerous practice and, in my mind, is akin to gambling; the odds may be slightly more in your favour than in a casino or bookies but the stakes are very, very high.

One of my rules in this game is to make sure I am fully covered. It is imperative that you keep your insurance up to date. If the worst happens and you are uninsured you stand to lose everything. As harsh as it sounds, my advice is to leave your insurance policies alone and find somewhere else to cut corners.

False Dawn a Frightening Thought for UK Housing Market

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The BBC website has recently published an article on their website that is sure to cause some concern among those of us involved in the UK property sector.
 
After weeks, if not months,  of generally good news about the state of the housing market in the UK, economic forecasting group, The Ernst & Young Item Club, have decided to ruin the party with their prediction that the property market is at least five years from regaining its 2007 peak.

At first glance this does seem like fairly bad news but on further reflection UK landlords, or at least those that have weathered the storm in reasonable shape,  may not be terribly dismayed at this news. Those landlords who are still holding a decent portfolio tend to be of the variety that see property as part of a long term plan, the benefits of which are likely to be reaped sometime in the future, as such a slow return to peak prices is unlikely to affect them too much.

In fact,  the opportunity for picking up additions to their portfolios at a reduced price, for some time to come, may be welcome news for a lot of landlords who are still in a position to invest.

Despite the general feeling of optimism abounding concerning the economy at the moment, my thought is that most of us are just pleased the whole thing did not prove to be as dire as some predicted. I am not sure we are that shocked that we are in for a bit of a wait before we return to peak housing prices.

Things Not looking Good for Bradford and Bingley

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Despite the fact that buy to let landlords are catching up on their repayments according to the Council Of Mortgage Lenders, Bradford and Bingley are still looking in very poor shape.

According to a recent article in The Telegraph, the state owned mortgage lender posted a horrific loss of one hundred and sixty million pounds in just the first six months of this year.

This is the first time that the true extent of the trouble faced by Bradford and Bingley has been known as despite the fact they were obviously floundering they posted a one hundred and thirty million pound profit last year.
This was due to the sale of 197 branches to the Abbey and also the selling off of its 20 bn deposit book. Now it is easy to see why these measures were necessary.

The losses faced by this group are largely no threat to the tax payer because of the fact they will largely be borne by the financial services compensation scheme under terms agreed at its nationalizsation last September.

The fact that the organization has posted bad debt figures of 328 million in the last six months is cause for comment though as you have to ask how such a terrible and one would think irreversible  situation was allowed to occur in a lender that had years of trading experience.

Second Quarter of 2009 Good for Landlords

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The Council of Mortgage Lenders, CML, have released their latest report on the state of play in the property business and it has to be said that things are looking much rosier than many would have predicted.

The report finds, among other things, that the number of landlords behind in their repayments has significantly improved.

Loans in arrears of three months or more fell to 29,400 or 2.49% of all buy-to-let mortgages, down from 35,600 or 3.06% in the previous quarter. As well as that, 21,600 new loans were given out during Q2, up 5% on the previous three months.

Rob  Thomas,  a senior figure at CML had this to say “So long as properties have paying tenants, landlords now have much greater ability to service mortgage payments and we expect arrears to continue to fall as landlords are helped by lower interest rates.”

It is interesting to note that far fewer remortgages were taken out as landlords opted to stick with the lenders variable rate rather than locking themselves in at this stage.

Let’s hope that these exciting figures continue as it appears that landlords who have really felt the tough times with everyone else seem to be making a strong and welcome recovery. As well as being good for the buy to let market it can only be a positive sign for the economy as a whole.

Brokers Want Buy To Let Regulation

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Exact Mortgage Experts claim that it was revealed this week that fifty four percent of brokers believe the FSA should step in to regulate the buy to let market.

It is also being said that figures show a large number of mortgage brokers say that two thirds of their clients, who are buy to let landlords, are amateurs in the property market. It seems many are equating this amateur status with a need for more serious regulation in this sector. It is sensible to assume that those with less experience may require a more hands-on approach and extra guidance.

Alan Cleary, managing director of Exact, has this to say on the issue:

“The ready availability of mortgage finance and credit up until two years ago opened the door for a lot of amateur investors…The lack of regulation meant it was too easy for amateurs without a commercial head on their shoulders to jump on the bandwagon…It was a mistake to assume that because buy to let was viewed as a commercial endeavour, it could be left unregulated. The number of amateurs landlords in the private rented sector with sizeable portfolios now well under water is proof of the fact.”

It seems to me that FSA regulation, so long as it is not too intrusive, may be a good idea for this sector of the market. It should provide guidance and protection for everyone concerned including the landlords themselves.