Going overseas? Be careful of the taxman!

I took on a landlord from another agent recently who lived overseas, but had not advised HM Revenue and Customs (HMRC) of this. HMRC had taken £2600 from his rental income and weren’t for returning it! However there was no need for this to have happened, had the landlord and his agent registered properly in the first place.

What are the rules for overseas landlords?

When a landlord is not a UK taxpayer, the law says that an agent must deduct tax from rental income received, and pay this to HMRC. If they don’t do this, the agent is acting illegally. However a landlord can apply for a tax exemption certificate from HMRC which gives the agent permission to collect rent without deducting tax. This must be done in advance – it can’t be done retrospectively. It also works – we have about 20 overseas landlords in Northampton and we have an exemption certificate for each of them, so don’t need to deduct any tax.

As such we’ve been able to register the landlord in question for all future payments – we don’t need to deduct tax going forwards. However the tax already deducted has already gone – he wasn’t registered and there’s nothing that can be done about this. It’s hence really important that a non-UK landlord gets registered with HMRC prior to renting out his property, or financially there could be consequences. 

Richard

Accidental Landlords!!

Since the downturn in the sales market, there has been a marked growth in people becoming landlords by necessity rather than by choice. The national press call these 'accidental landlords'. It basically refers to people who rent their property out because they can't sell it, not because they have decided to invest in property.
Accidental landlords need to be careful! Quite often they are renting out the family home, or a property to which they are really attached. If they have spent the last 15 years turning the garden into a horticultural marvel, it can be quite disconcerting when a tenant pays less attention and weeds appear. For this reason we find that accidental landlords often don't last longer than the first tenancy, and end up selling the property at a loss.
This however, is the nature of letting. Where as some agents promise the earth when taking a property on, we go to great lengths to explain to homeowners what letting out a property actually involves, so people can make a balanced and conscious decision as to whether renting is for them. Most claim to have no issue, only to forget this a few months later. This is what they should consider:

• This is not your home any more. It's now a financial investment.
• Any items which hold high value (whether financial, or sentimental) should be removed from the property. This particularly applies to properties that are furnished.
• Landlords should not expect any damage, but must accept that 'wear' in a tenanted property is generally slightly more than a property that's owner occupied. Especially in the garden.
• Whereas you decorate your own property to your own taste, you decorate a rental property to appeal to the widest possible audience - white, magnolia, etc. 
• Whereas you're happy to put up with the fact that the garage door can only be opened from the inside, or that the landing light falls down if you knock it, your tenant will not. You should attend to any niggly DIY issues before your tenant moves in, as that will make for a hassle free tenancy, and less stress for you.

Landlords who are able to adjust to this way of thinking are generally fine with the rental experience. I have one lady who rented her house out 2 years ago, and the experience persuaded her to buy 2 more investment properties! As such being an accidental landlord can work out well. Where it doesn't work, it's as often the failure of the owner to adjust as it is due to any real problem with a tenant. 

Richard.

Introducing Belvoir Mortgages

DO YOU HAVE A BUY TO LET MORTGAGE EXPIRING THIS YEAR?

One of the main challenges for landlords in the next few years will be re-mortgaging their investment property. People who have been on a mortgage product for 2-5 years, but now that product is expiring, will find the mortgage market a whole different place to the last time they visited.

Gone are the days when 100%+ mortgages are available. The maximum you can get as a buy to let investor is now about 85% loan to value, and the rates aren’t that attractive – to get a decent rate, lenders generally want to see you having at least 25% equity in a property. Then there are arrangement fees etc.

For many people, that’s unrealistic. Property values have slipped in recent years, so most people who’ve bought a property since 2006 will find it’s worth less now than what they paid for it. In the long term this isn’t a problem – prices will rebound. But in the short term it can create a problem with remortgaging, meaning that landlords need to either a) put more money in or b) take whatever their existing lender is offering.

As part of our range of services to landlords, we are now in a position to assist with buy to let mortgages. We don’t do this within our local office – Landlords can either deal with our mortgage people on line, or by telephone. However the good news for landlords is:

·               Our mortgage services cover the whole market – there are very few products out there that we’re unable to access, so you can be sure that all your options are being considered.

·               Belvoir has been able to ensure you won’t be charged a broker fee on any mortgage we arrange.

You can access our mortgage section BY CLICKING HERE. I would suggest that if you do have a mortgage expiring, you review it a few months before the expiry date, so you understand what your options are likely to be, and have time to plan accordingly.

Richard.

Digital Switchover : An Update for Landlords

At the end of March 2011, the analogue TV signal in Northamptonshire is being turned off, as the service switches to digital. This could put some tenants in a position where they can't get their weekly dose of 'Strictly'. At that point, it's a fair assumption that they'll make a lot of noise!

We're not expecting this to be too much of an problem. As we understand it, the ability to receive the new digital signal depends mainly on the TV set you're watching - in the majority of cases this will belong to the tenant and as such it their issue. In a minority of cases though, there may be issues with having an old TV aerial in the property which tenants will doubtless argue is the landlord's problem. 

A landlord then has to decide how to react. Legally, you're under no obligation to provide TV reception to a tenant, but generally this is something it's accepted a landlord does. By not doing this you risk annoying the tenant and potentially encouraging them to leave. You're also technically in breach of your terms with Belvoir, as we ask all our landlords to provide free-to-air TV reception in all properties.

You should probably be wary if: 

1. Your property is furnished. You supply a TV, and the TV isn't capable of receiving a digital signal.
2. Your property is older and hasn't had an updated TV Aerial in the last 10 years.
3. Your tenant has SKY / Cable. This could mean there is a problem but you won't realise until this tenant has gone and a new one tries to connect using the terrestrial signal.

This is the advice we have received from local aerial installers. We'll be working with them to upgrade known properties leading up to the switch-over date, but already they are pretty overrun with demand! As such we could be in for a busy few weeks!

Richard.