News & views from Urban.co.uk

Over 300,000 landlords in line for surprise 'tax' of up to £5,000!

Posted by: Adam Male on 7 August 2016
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A report produced by the Telegraph has suggested over 300,000 landlords could be hit by an additional surprise ‘tax’ of up to £5,000.

The tax is designed be levied on landlords in order to encourage them to make their properties more energy efficient, and will see them facing costs to install featured such as cavity wall insulation and new boilers from 2018.

Before it was scrapped, landlords could have taken advantage of the Green Deal scheme to make such improvements, which would have seen such payments being repaid by tenants who would in turn have benefitted from lower costs. However, it is now up to landlords to shoulder this additional cost, which is being estimated at around £5,000.

The worst affected are likely to be landlords who snapped up period properties. Whilst these properties are often very appealing to renters who lust after period features and spacious rooms, they are often far less energy efficient than their modern counterparts, and in turn may require more substantial work in order to modernise them in line with suggested guidelines.

Experts in the sector are already voicing concern that these changes could see the price of rents pushed even higher, as landlords forced to pay out for ‘green amendments’ pass the price on to their tenants. Richard Jones, policy advisor at the Residential Landlords Association, believes that ‘unless they make funding available, landlords will be forced to pass these costs on to tenants. It could also make being a buy-to-let landlord prohibitive. They could struggle to find such a large amount of money upfront.’ 

Home ownership at all-time low!

Posted by: Adam Male on 4 August 2016
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With a new report from the Resolution Foundation highlighting that home ownership levels in the UK has fallen to the lowest levels since 1986, it should be a boom time for landlords.

The study showed that only 64% of the UK own their own homes, compared to the peak of 71% in 2003.

With so many of UK residents reliant on the private lettings market, it is vital that private landlords are able to keep the level of rental properties buoyant, in order to maintain the housing required to satisfy the nation’s need. However, it would seem that despite the nation’s landlords doing all they can, their tenants are not as loyal as you might hope…

Following a survey of 941 tenants, The National Landlords Association has discovered that more than 50% of tenants would consider moving to a different town or city if it gave them the option of getting out of the rental cycle and onto the property ladder.  

 

London tenants are the most open to the ideal of relocating, with 87% happy to consider moving on if it gave them the opportunity to buy. Tenants in the East Midlands were least likely to look to move from their rental pad though, with just 14% willing to move on. 

Urban.co.uk Q&A: I'm not sure whether to let my property furnished or unfurnished - what are the pros and cons?

Posted by: Adam Male on 4 August 2016
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Q.

I’m not sure whether to let my property furnished, unfurnished or part-furnished: What’s the pros and cons of the different options?

 

A.

There are many options open to you with regards to how you choose to let your property, and it’s not necessarily as simple as leaving your furniture in, or taking it out!

There are income tax breaks available to landlords who choose to go down the furnished route, and council tax breaks for those who choose unfurnished… so it’s really worth thinking hard about before you make the decision!

Furnished

A furnished property allows your tenants to move straight in, without having to provide any of their own furniture. If you choose to go down this route, you are able to claim the 10% ‘wear and tear’ allowance on part of your tax bill – at least until 2021.

Previously, you would have been able to claim the discount on your full income, however following the shake-up of letting legislation in the 2015 budget, in 2017-18 landlords will only be able to apply the existing relief rules to 75% of their finance costs with the remaining 25% using the basic rate reduction. Until 2012, the proportion will change to 50:50, before the basic rate applies in full from 2020-21.

In the meantime, the deduction is provided to cover the costs associated with repairing:

  • Large movable furniture or furnishings, such as beds or sofas
  • Televisions
  • Fridges and freezers
  • Carpets and floor-coverings
  • Curtains
  • Bed linen
  •  Kitchenware (saucepans, crockery and cutlery)
  •  White goods (washing machines, ovens)

 

 

However, do be aware that even if you advertise your property as fully furnished, you should be open to negotiation if your tenant requests it. They may not require all of your furniture, so if you find a tenant that ticks all of your boxes, do try to be as flexible as you can with regards to what you are prepared to remove from the property. 

 

Unfunished

As the term suggests, this option means you are providing simply they empty property, with no furniture at all. Many tenants prefer this option, as they will have their own furniture, and will want to make the property their own.

It is expected that floor coverings, basic white goods (fridge, freezers, cookers, washing machines) and in some cases window coverings are supplied, so you should consider finding room for these basics in your budget.

There is also a hidden potential benefit to letting your property unfurnished. In void periods, some councils will give landlords relief from council tax if the property is unfurnished – not the case if it is furnished. This is not that case with all areas, so do check with your local council, but it is something to consider before making your decision. 

 

Part-furnished

This is possibly the most confusing term – it is very open to interpretation!

Generally, you would expect to have to provide all of the basic elements - floor coverings and basic white goods (fridge, freezers, cooker, washing machine) – but also the ‘significant’ items of furniture, such as wardrobes, table and chairs– come with the property, but your tenant will supply their own ‘soft furnished’ items, such as sofas and beds, and electrical items.

This can be a good option if you have large items of furniture that fit well in a property, but do not want the responsibility of having to maintain easily damaged items, such as fabric sofas.

 

You should also consider that if you have expensive furniture, you might not want to leave it in a tenanted property, but cheap furniture may not last very long – and if the property has been let with the furniture, you would be obligated to replace it for your tenant. 

New rental properties could prop up the UK economy, claim experts

Posted by: Adam Male on 28 July 2016
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Property peers have been urging the new housing minister Gavin Barwell to consider pledging his support in the direction of funding the building of more rental properties.

The appeal was launched in response to a report produced by the Centre for Economic and Business Research, which has reported the that UK economy could decrease by £145 million over the next ten years, should the rate of new housing drop at the levels that we experienced in 2008.

The report, commissioned by the National Housing Federation, suggests that more homes for rent would keep the building industry, and the economy out of the grasp of a recession. According to the NFH, by relaxing the restrictions on how funding can be spent, housing associations could maintain strong housebuilding ambitions and build homes quickly to deliver a boost to the whole economy.

The National Housing Federation has made a prediction that 300,000 units could be built by housing associations by the year 2020, if funding is made available – nearly a third of the Government’s target of one million new homes.

These calls from sector bodies is likely to be welcomed by would-be tenants, but could be bad news for private landlords, who are currently propping up the rental industry as housing associations struggle to cope with demand. 

Urban.co.uk Q&A: I have the opportunity to invest in an HMO - is there still a market for this type of rental property?

Posted by: Adam Male on 28 July 2016
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Q

Despite all of the ups and downs in the property market at the moment, I have a great opportunity to purchase a property that I could convert into an HMO. Is there still a good market for this type of property?

 

A

Definitely, although the demand varies depending on where you are in the country. If you are looking to buy a property anywhere near a university you might have even more luck – as student lets are one of the biggest growth sectors.

A new report has just been announcing, showing that you are not alone in your interest in the HMO sector, and a growing number of landlords are looking at this area of the market as a safe place to invest

High demand: with property prices showing no signs of slowing, despite the concerns around Brexit, more and more people are turning to the private rental market as an option. For many, an HMO is a more viable financial option, especially in the larger towns or cities.  

Less void periods: If you have multiple tenants in situ all paying rent, you are less at risk of falling into mortgage arrears when one tenant moves out.

Increased rental income: More tenants, means more rent. Of course you can’t charge a full rent for just a room, but overall you can expect a higher average for the property.

Fewer arrears: It is unlikely that all of your tenants will fall into arrears, so you shouldn’t be left short even if one tenant finds themselves struggling to find the rent.

Of course, it’s not a foolproof option. Don’t forget that you will have to factor in to your purchase the additional 3% stamp duty, and you may have to pay for an HMO licence and the maintenance requirements that this type of property demands. However, if you are able to convert a property into an attractive flat, which you can demand premium rental rates from, you are likely to be looking at a very good investment in today’s market.