SOLD Festive Cheapie - £80000, £500, 7.5%

This has flashed up in my inbox today and will be a relative high yielder for whoever buys it. Woodstock isn’t the best block in town, but it’s very well located and rents like clockwork if the property is in good order – expect £500PCM.

A 1 bed apartment, in the heart of the town centre, immediately adjacent to the hospital.

I rather suspect this one will need work, so factor that in – it will be good yielder anyway. Also the service charges and lease length need to be factored in – these aren’t usually an issue in this building but as they aren’t identified on the ad, interested parties should clarify them at the earliest opportunity.

Not a lot else you can buy for £80k, so if that’s your price range I challenge you to find something better! As ever, we’ll help with refurbishment as required.
http://www.rightmove.co.uk/property-for-sale/property-49797154.html Here's the property - contact the agent direct but please let me know if you're doing this as clearly creating a bidding war isn't in any of our interest! richard.baker@belvoir.co.uk 

BUY TO LET IN NORTHAMPTON : where to start?

You’re here because you’re looking for a buy-to-let in Northampton. The chancellor doesn’t want you here, the tax man neither, so well done for ignoring them and getting this far!

You’re not alone. We’re one of the larger LETTINGS agencies in Northampton and every year we help numerous people find investment properties to buy. Some may be for sale through us, but most aren’t – we cover the whole market in trying to find the right thing for you, and will give you realistic figures for purchase, refurbishment if required, and likely rental return.

If you know Northampton well, what different properties rent for, and what type of tenant you’re likely to attract, we may not be of much assistance! But plenty of people don’t know these things and aren’t sure of which area to go for, or where to go to get a better return. We can help with this and are happy to talk to you about your options before you commit to a purchase. We may also be able to suggest other properties you may consider – look through the history section of this website to see what we’ve recommended to others in recent months and years.

So if you know you want to invest, but aren’t sure of what, and where, feel free to get in touch with us. We’ll be happy to email you our buy to let guide for Northampton which talks about different areas, different properties, and different levels of return – and may help you narrow down your search criteria. Email richard.baker@belvoir.co.uk in the first instance BEFORE you overpay for a very well presented, very lettable, but completely overpriced house in Wootton!

Our lettings agency is at https://www.belvoir.co.uk/letting-agents-northampton

SOLD ABINGTON : £165,000 for £800 and 5.8%

A bit of pre-Christmas cheer here – with a 3 bed, downstairs bathroom, Victorian Terrace in the middle of Abington – one of the most popular Victorian areas. It’s a little rough round the edges and would benefit from some general improvement which we could easily deal with. Nothing drastic though.

Most importantly it’s very rentable – we’ll get £800 for this fairly easily which means a return of about 5.8% on a freehold property – pretty good these days for one of the better areas.

This property isn’t on the market yet, but will be soon and will sell quickly at that price – there’s no movement on £165,000 – so an opportunity to get in quick if you’re interested. richard.baker@belvoir.co.uk 

COMING SOON : Town Centre Apartments

I’m expecting to be able have a couple of town centre apartments later this week which, according to form, will fly out of the door like hot cakes! Both are tenanted already. Final details are being confirmed with the owner so it is possible prices may change slightly.

Henry Bird Way, NN4

·        2 bed apartment, already tenanted at £650PCM.

·        £127,500

·        200 metres from the new university campus.

·        Lease of about 110 years and annual charges of about £1000.

The Nurseries, NN1

·        2 bed apartment, already tenanted at £725PCM.

·        £150,000

·        Premium development close to hospitals.

·        Lease of about 110 years and annual charges of about £1100.

St Andrew's Street, NN1 – 6.5% return before charges.

·        2 bed apartment, which will tenant for £625

·        £117,000

.     5 mins walk from Northampton Railway Station

·        Lease of about 110 years and annual charges of under £1100 (we think).

These are on my blog prior to advertising, so if you want to see either you need to be around this week – I expect to be in a position to do viewings by Friday. richard.baker@belvoir.co.uk if any queries.

Tax Update for Landlords : Important for Most

You will be aware from national media about more changes to the way landlords are taxed in 2017, and it will be interesting to see if this months ‘Autumn Statement’ adds or reduces our (landlords) liability.

Anyone thinking of RE-MORTGAGING any time soon should have a sense of urgency about them. From January 2017, and maybe before, it looks like it’s going to get harder to re-mortgage if your yield isn’t that great on your portfolio as lenders have to assess you in more detail. See http://bit.ly/2eqP0Md.

Without a change in policy, the situation will get worse from September 2017 for ANYONE WITH MORE THAN 4 PROPERTIES – at that point if you re-mortgage any one, the lender will want to know the inside leg measurement of ALL your properties in your portfolio. See http://ow.ly/mV5W3065LLm

Many landlords will be affected by the changes to TAX RELIEF in April 2017. This has received extensive coverage in the national media but despite this it has clearly not appeared on some people’s radars. Information from the horse’s mouth is here - http://bit.ly/29Y25ds. As a result of this incoming change there has been a growth in landlords setting up limited companies to purchase property. There has also been a growth in people looking to pay down mortgages over a period of time.

SOLD £110,000 - FREEHOLD - VIlLLAGE LOCATION - £550 RENT.

This is a FREEHOLD property in a village (Little Billing) location for £110k. It’s a fairly rare commodity and will be very attractive to a tenant. I viewed it myself a short while ago as a potential purchase but ended up going for another property.

It’s a decent buy for someone though, but the purchaser needs to be aware of the following:

·       It’s quirky. Laid out over 3 floors with a very steep staircase. Perhaps not that practical, but will definitely appeal to tenants due to it's uniqueness.

·       It probably needs some money spending – I suspected the current owner had let it go a bit and there were a few jobs required, but nothing that couldn’t quickly be resolved by us. I’d have chipped the asking price down and spent the saving on getting the property as I wanted it. Maybe £112k all in.

·       The freehold situation is unorthodox. As well as the freehold of the house there were freeholds for three other patches of land in the vicinity – all pretty worthless. I suspect this was putting people off, but I don’t see why it should – the house itself is worth £110k so either these bits have no value and can sit there, or (more likely) I’d have tried selling them on to neighbours!

·       Most importantly I can rent this for £550 once it’s been tidied a little – maybe more. And no service charges because it’s freehold. Nearly 6% return?

If you’re insistent on freehold, but also on a budget, I challenge you to find better!

SOLD - MODERN APARTMENT, £127,500 AND TENANTED

Still no sign of a post-Brexit wobble as prices continue to creep up and anything less than £150,000 that isn’t massively overpriced continues to sell more or less immediately.

There’s a potential deal here for someone – not a world beater - but in the current market a perfectly decent bit of business. This is a modern flat, eternally rentable, in a good area, already tenanted at £650, well presented, void periods over 6 years almost zero. I think I can get £127,500 accepted on it – 95% sure.

Full details here - http://www.zoopla.co.uk/for-sale/details/41413918. Any questions to richard.baker@belvoir.co.uk as usual. Please don’t be the person who asks in 14 days if it’s still available!

LEGAL UPDATE : Accelerated Possession Timescales Improve

Whilst we need to seek possession of properties through the courts rarely, when we do it can be quite a drawn out process.

Things have improved recently though as the court will now award a landlord possession automatically and without a hearing if a) the papers are served correctly and b) the tenant doesn’t submit a defence, which usually they don’t. It’s a small ‘win’ for landlords, but when there are tenancy arrears one that they will be happy to take – we recently applied to the court on 28 September and have been given a date of 12 November for possession – we’ve probably saved a month or so.

The Council don’t assist of course. Their advice to tenants, which is legally questionable, is still to remain in the property as long as possible (although they word it more carefully) which draws out the amount of time it takes a landlord to recover his property from a non-paying tenant. But none the less, I’ve been doing this for 10 years plus and the amount of time taken to recover a property has only ever increased – so speeding things up by a month is something to be welcomed.

SOLD - CHEAP & CHEERFUL : 1 bed apartment with good returns.

This has appeared in the last 24 hours and although it needs some improvement, it will be snapped up by someone quickly as it’s very cheap and will generate rental income of up to £500 once it’s been improved.

Let’s assume you spend £72k on it in total – that’s over 8% before charges.

It’s in Dell Crescent, Goldings – not the most salubrious part of town – but rentable. If you want 8% before costs and don’t fancy a HMO this is the type of thing you need to consider.

Be quick if interested! Further details here : http://www.rightmove.co.uk/property-for-sale/property-44436708.html

Richard.baker@belvoir.co.uk if you want to chat about it!

INVESTMENT PROPERTY : Picks of the Week

Currently there are 240 properties currently listed for sale on Rightmove in Northampton for under £150,000. If you’re short of time, or not too sure what you’re looking for, that’s a lot to look through. But fear not – we’ve done it for you – and from what’s available at the moment here’s what caught our eye the most. There’s a bit of something for everyone!

http://www.rightmove.co.uk/property-for-sale/property-52929097.html

1 bed apartment, Rothersthorpe Road, £90,000 for £500 rent.
If you’re on a budget, here’s where we would start. This one looks as though it needs some nominal upgrading including a new kitchen which we could deal with quickly. But then it will rent at £500 (the £550 the agent is suggesting is a bit optimistic). It’s an ex-local authority block so service charges should be reasonable.

http://www.rightmove.co.uk/property-for-sale/property-43992546.html

2 bed apartment, Porlock Close, £100,000 for £600 rent.
One rung up the ladder is this 2 bed, again needing a bit of upgrading, and in a marginally better area, but also benefitting from instant rentability and reasonable service charged. These are usually big flats - much more so than their more modern equivalents.

http://www.rightmove.co.uk/property-for-sale/property-59439674.html

1 bed cluster, Manorfield Close, £100,000 for £525 rent.
No internal pictures here which often indicates there’s some money to be spent. But this is sensibly priced, and these cluster houses are tiny so any refurbishment costs shouldn’t be too high. We rent loads of these things throughout town and they are freehold, so no charges.

http://www.rightmove.co.uk/property-for-sale/property-51842636.html

1 bed apartment, South Meadow Road, £115,000 for £600 rent.
This is in one of the best areas of town so will appeal to people who value postcode above return. It’s smart, modern, and you could live there yourself. Will have a good lease length and secured parking too.  Should require little work.

http://www.rightmove.co.uk/property-for-sale/property-55827670.html

2 bed apartment, South Meadow Road, £130,000 for £675 rent.
Same road, slightly less attractive block, but a LOT of flat for the postcode. This has failed to sell at auction and is now listed as available at £130,000 from the auctioneer – if you’re a cash buyer you may be able to knock them further? You can spend £130,000 on a bog standard flat elsewhere in town, so this is cheap for a premium area.

http://www.rightmove.co.uk/property-for-sale/property-54917341.html

2 bed house, Boughton Green Road, £135,000 for £700 rent.
Not much Victorian stock on the market currently and this one looks the best of what’s there. Doesn’t look like it’s huge, and does look like it needs cosmetic improvement but it’s very rentable and a better use of £135,000 than much else that’s offered for the same money.

As ever, I’m happy to talk to any investors thinking of purchasing one of these, or about one you’ve seen yourself. richard.baker@belvoir.co.uk in the first instance.

SOLD : 3 DEALS WEEK : Smart Modern Flat : £135,000 : Tenanted

This a 2 bed apartment with balcony overlooking the river nene – about as good a location as any apartment in town. It’s right next to the new university campus and 5 minutes walk from the high street.

This property is tenanted already at £670 per month – we manage it and the tenancy has had no issues – you would be buying with tenant in situ.

The lease is over 115 years and annual charges are in the region of £1100.00

richard.baker@belvoir.co.uk if you have any queries.

SOLD : 3 DEALS WEEK : The REFURB : £130,000

In a market where prices are holding steady and it’s proving hard to find value, we have three deals that, if they come in, are good bets for investors. These will go on this blog if / when they arrive this week. All are different, and will suit different styles of investor.

DEAL 1 : REFURBISHMENT OPPORTUNITY

This is a 3 bed house with a downstairs bathroom in Far Cotton. If it was well finished we would sell this for £160,000 without any difficulty in the current market. This one isn’t well finished – it hasn’t been upgraded for some years and need EVERYTHING doing – we think a spend of just under £20,000. If you’re in the trade, you’d get this price down. It’s not a question of a quick lick of paint. BUT we’re pretty sure the vendor would take £130,000 for it so there’s some money in it for someone.
In terms of rental potential, if it was well finished we’d get at least £750 for it and maybe up to £800. Equally it’s in the student area so if you wanted to turn it into a HMO (no license required here) there’s the option to create 4 lettable rooms.

Any questions, please don’t hesitate to ask. We have keys on this and are viewing today. richard.baker@belvoir.co.uk.

LOW INTEREST RATES INCREASES ATTRACTIVENESS OF BUY TO LET

Today’s reduction in interest rates is bad news for savers with the most competitive saving accounts already pulled (see https://www.theguardian.com/money/2016/aug/01/savings-accounts-disappear-bank-of-england-prepares-cut-rates). It’s almost at the point where interest isn’t being paid on credit balances by financial institutions, so although the government has tried to make property investment less attractive through taxes and the like, many people are likely to do the maths and decide that buy-to-let will clearly offer a better return.
As an example I saw an Essex based investor earlier in the week who owns a couple of properties in Northampton already. He has some cash from a pension lump sum – about £150k – and was looking at how to generate a return from it. Thought process was as follows:

·        He could leave it in the bank. The market leading rate for 1 year is about 1.5%, so that would be his return.

·        He could buy an investment property for cash spending maybe £130k. Add on some stamp duty, purchase costs, and improvements to the property and he’d be at about £140k, with £10k left in his pocket for a rainy day. I’d let it for him – we assumed a price of £650 which is fairly average in that price range, so that’s £7800 income the first 12 months. Being a cautious chap, he assumed he’d lose £2000 of that to agency fees, insurance, repairs to the property etc leaving him with a return of £5800 on an investment of £140,000. That’s a return of 4.1%. There was also the potential for capital improvement on the property which could make this figure rise significantly.

His summary was simple and offers some perspective. Some investors will look at what’s available and conclude Buy To Let returns aren’t as attractive as a few years ago – they may be correct, but that’s a change in the economy in general. However they are still WAY better than leaving the money in the bank where £150,000 will get you £2250 in interest compared to £5950 in property – and that’s AFTER costs.

SOLD : £100k for a 3 bed freehold - a bit of summertime VALUE

In a market where estate agents are STILL overvaluing to win instructions, there’s some very good value here if you’re investing and looking for a freehold property.

http://www.rightmove.co.uk/property-for-sale/property-60717839.html

This is a 3 bed house for under £100k. Not in the best area of town, but in an area that’s very lettable. It’s going to need some improvement at that price, but this is at least a £125k house once done and it’s habitable already so there’s no way £25k needs to be spent. Unless there’s a structural issue – which there shouldn’t be in a property of that age – this is very keenly priced and will sell immediately.

Rental wise, £650 is a safe figure for this once it’s been brought up to date. So let’s say the final spend is around the £110k mark, that’s a return of 7% - a bargain in the current market.

YIELD? OR RETURN ON INVESTMENT?

POST BREXIT FLURRY : £77,500 for a tenanted apartment

I’m spoiling you now! After a couple of weeks of uncertainly, we now have 2 good deals in the space of a day. The second is a 1 bed apartment, tenanted successfully at £500 per month, right in middle of the town centre – extremely lettable. The vendor is looking for £80,000 but I suspect there may be a little bit of give if the new purchaser is an investor – hence the quoted price of £77,500.

The service charge on it isn’t the cheapest - £150 a month – but it’s still over 5% return after the service charge has been calculated – so someone on a budget will still snap this up as it’s a nice place in a plum location. It’s on Sheep Street – right next to the bus station and less than 5 minutes walk from the main railway station.

A quick search of the internet for mortgages suggest you could get a 5 year fixed rate, borrowing 75% for £100 per month (2 years) or £150 per month (5 years).

Pictures again below. Please get in touch quickly please if interested – richard.baker@belvoir.co.uk

 

SOLD POST BREXIT TREAT : Freehold for £110,000

As half the UK contemplates if things will ever be the same again, a decent FREEHOLD opportunity has popped up for those of you who take the view that supply far outweighs demand so houses remain a safe bet.

This is a 1 bed cluster on FARNDON CLOSE which will be available soon with an asking price of £112,500. The owner, who needs to sell for business reasons, has told me to get £110,000 for it – and with plenty of comparable properties listed for between £115,000 and £120,000 there shouldn’t be much of an issue with that.

It will rent for £500PCM – these things are VERY rentable - offering a headline return of 5.4% - which in this market and in this price bracket isn’t half bad! It’s tenanted currently – but the tenant isn’t the best so it will be sold with vacant possession and ready to let upon completion.

A few pictures below for you. Interested parties, please get in touch with me without delay richard.baker@belvoir.co.uk

BREXIT : how will it effect the rental market in Northampton?

Will we, won’t we? It’s the topic that’s dominated the news for a few weeks now and in 10 days we’ll know the outcome, but what effect will the BREXIT vote have on the local property market? There’s been a lot of commentary on this in the national press, with the consensus being that if we vote to leave the housing market may suffer. I was at a meeting earlier today with a group of investors who said their purchasing activity was ‘on hold’ until after the vote, but when challenged they didn’t really seem to know why. There’s no doubt that the referendum has made people pause for breath, but getting them to explain it is another matter.

I can see why the London property market may suffer if we do vote to leave the EU. In the capital, the market is built on foreign money, particularly at the higher end, so a change in people’s perception about the UK could conceivably have an effect. But in Northampton where 95% of my landlords are UK Nationals, I don’t get the argument that BREXIT would cause much to change. The fact would remain that there’s a massive shortage of property in this country, and as an agency we are, and always have been, desperate for more good quality properties to let. Unless you believe that upon BREXIT people will bail out of Northampton en mass and the place will become a ghost town, I can’t there being much cause to worry.

The more serious threat it seems is the government’s recent intervention in the housing market by raising stamp duty. This has certainly caused a lull in the number of people buying – although I suspect this may be temporary. It’s also caused rents to rise which will please many landlords in the short term but may frustrate them in the long term if their tenants struggle to pay. More challenges are to come in 2017 when mortgage relief is cut back – this will certainly cause some landlords to exit the sector, with rents rising accordingly. These two issues are having a greater impact on the day to day property market in Northampton than BREXIT will.

2 Bed House, Tenanted, Cheap

An interesting one has popped up here – a property we’ve been managing for some time and is currently tenanted at £540PCM – a 2 bed freehold house in Thorplands Brook. It’s in poor order as the current owner has failed to maintain it – needs about £8k spending on it which will include double glazing throughout, a kitchen and a bathroom (all sortable by us - no need to get involved if you don't want). With the work done, and let to a different tenant it would achieve £600PCM.
He’s been keen to sell for a while but has been after an inflated price – this has now changed and he’s happy to take £115k for it (perfectly realistic) which values the whole lot at £123k. Now get on rightmove and tell me where you can get a 2 bed freehold house IN GOOD ORDER for £123k? I’ll answer my own question – in this market you can’t. As such it’s a good bet.

I know this property quite well so am happy to discuss as required. richard.baker@belvoir.co.uk

The property can be seen here http://www.zoopla.co.uk/for-sale/details/39733426#C8q06ZFdgoPSfXdj.97

A RARE GIFT : £60,000 for a 9% return - IMMEDIATELY SOLD

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Advertised this morning, and very probably gone already at that price – it’s a 1 bed ex local authority flat in Lings at £60,000. It would rent for MINIMUM £450 which is a 9% return. Improve it in places – although it isn’t bad as it is – and you’ll get a few pounds more and importantly a better tenant. It’s almost TOO cheap in the current market which makes me wonder if the ad is genuine.

The property is here http://www.rightmove.co.uk/property-for-sale/property-59452550.html and advertised with another agent. The agent won’t want to hear that you’ve learned of the property from me(!) At the price it’s one to buy without viewing – if you don’t, someone else will.

Any queries please email me richard.baker@belvoir.co.uk

PROBLEMS WITH TENANTS? Book an appointment with us to fix them.

We hear from a fair few landlords every year who have managed their own tenancy but something has gone wrong. Usually the tenant isn’t paying rent for one reason or another, or sometimes the tenant is just being generally disagreeable. It’s at this point the landlord realises he doesn’t know much about ending a tenancy and needs some help getting out of the situation he’s in. A court process is costly and advice on the court process from a solicitor is costlier still!
The solution at that point is to talk to someone like ourselves. Whilst we may not be solicitors, our knowledge of the law of Landlord and Tenant is better than most solicitors because we deal with issues like this every day. If you are in a pickle we offer a free introductory chat where we’ll review what’s happened so far and advise what steps you need to take to move this forward. Sometimes things can be rectified – other times it’s simply a question of understanding the legal process you need to go through to get your property back.
We operate landlord ‘surgeries’ like this by appointment throughout the year and have helped quite a few people who had got themselves into a difficult situation with their tenancy. If you’re in need of help with a tenancy matter, or you know someone that is, email me richard.baker@belvoir.co.uk for an initial chat. You'll get straightforward and honest advice and if you're partly to blame by cutting corners to save money you'll be politely told that too!

SOLD! 2 BED FLAT : headline 8% return and only £90k

for updates on this blog follow @belvoirnorthamp on twitter!

I like the look of this 2 bed flat in the Duston area which has recently come onto the market with another agent. It's advertised at £89,995 which probably isn't a bad price, but it looks like it needs a bit of improvement in places so hopefully it could be bought for slightly less and the difference spent on making it shine a bit. Stamp duty would be under £3,000 too.

The rental prospects for this sort of thing are very good. It's likely to achieve about £600 per month which is a return of 8% based on the asking price. There will be costs to deduct but the Local Authority is usually the freeholder of these things which means the charges are reasonable. I own a very similar one and get over 7% return AFTER the service charge has been considered - this flat should be no different.
I increasingly hear investors bemoaning the fact that returns aren't as good as they were a few years back and due to recent house price rises this is partly true. But properties like this one buck the trend - where else can you get around the 7% mark other than chancing your arm at the bookmakers!
Happy to discuss this and any other property with interested parties. richard.baker@belvoir.co.uk if interested.

BLOG CHANGES : I'm going back to basics!

I’ve been blogging about the Northampton property market since 2010 – not quite sure where the time has gone(!) and in that time my figures suggest I’ve helped over 150 landlords buy investment properties in the area.

The blog started as an information source, but rapidly grew into a way of promoting properties I’d seen locally that ‘needed buying’. The first was in April 2011 (still on the blog if you look - http://lettingsblog.blogspot.co.uk/2011/04/potential-investment-with-9-yield.html). One of my landlords paid £40,000 for it, spent £6k on it and rented it straight away. It’s been empty for 2 weeks since, rents now for £450PCM, and is worth £75k without trying. I’d buy 10 of these at £40k if I could now!

Times have changed – property prices have risen and returns have been squeezed. In 2016 a few of my competitors have copied, and also have their own blog – although they use these generally to promote their own properties rather than looking at what may be a good buy from another agent.

My mailing list has grown too – I know how many people read the blog and it’s grown into something quite big. I also know how many of my competitors read it, and I’m pleased to continue educating you(!) – I especially liked the agent who, when asked a legal question about tenancies, told his landlord to go and read Richard’s blog!

But the purpose of me doing this originally was to provide information in an understandable format, and to help people who didn’t know much about being a landlord to make the right decisions – whether that’s purchasing a property or managing it once purchased – and that’s what I need to go back to. I get too many emails these days from people who think they know what they are doing, asking immediate questions about ‘best price’ or ‘discount’ – clearly they are still living in 2009 when repossessions were plentiful. In the current market anything half decent and sensibly priced sells immediately - there's no need for a vendor to sell cheaply - would you do this yourself?

With that considered, going forwards I won’t be emailing out new blog postings en-mass as it’s in danger of becoming ‘another property mailing list’. The blog will still be there, and I remain committed to identifying purchasing opportunities that represent good value, but I’m only sending these out to people who confirm they are ACTIVELY LOOKING TO INVEST. If this is you, you’ll have been in touch with me recently, and I’ll know who you are. You’ll also be aware that, in the current market, anything half decent gets snapped up in roughly 30 seconds – as an example we recently advertised a bang average 3 bed recently that was overpriced in my view (I won’t say which one) and we had 20 viewings on it within 7 days. That’s the Northampton property market in 2016!

TAXATION CHANGES : important for ALL landlords

A few changes here, and ones which most landlords really NEED to understand. However despite extensive media coverage most landlords clearly DON’T understand what’s happening, so I’ll try to explain as simply as possible.

STAMP DUTY

This is payable when you buy ANY investment property. From now on you have to pay extra stamp duty when you buy an investment compared to buying your own first property. As an example, spend £125,000 on something and the stamp duty will be £3,750.

There’s a lot of panic about this, but my argument is that it’s the lesser of the 2 evils – it’s a one off cost that within time will be factored into the purchase price of properties – the market will adjust and is adjusting already.

FINANCE COST RELIEF

For many landlords, this will be the KILLER. It affects landlords that have mortgages on their properties. Currently when you have a mortgage you can deduct the interest element as an expense, and only pay tax on the profit. As an example I have a property I rent for £600 per month (£7200 per year) and I have an interest only mortgage of £400 per month (£4800 per year). My profit is hence £2,400 per annum (maybe a bit less after a few maintenance expenses have been deducted) and I’m a higher rate tax payer so I’ll pay 40% of that. My tax bill for the property is hence £960 per annum.

But that will change as the government are stopping landlords treating mortgages a deductible expense. Between 2017 and 2020 the amount of the mortgage you can deduct is dropping by 25% a year – so by 2021 I won’t be able to deduct ANY of my mortgage payment. At that point I’ll pay 40% tax on the full £7200 which will mean my tax bill is £2880. That’s a BIG jump.

Many in the property industry are up in arms about this change – there’s a legal challenge underway with some landlord groups seeking a judicial review – but as things stand this is happening and it’s starting next year.

Most landlords I speak to haven’t got a clue about this. Some have heard of it but don’t completely understand it. Others haven’t really heard of it and as it’s not happening now the mainstream media isn’t really reporting on it. But they will!

WHAT SHOULD YOU DO?

At a simple level you need to make sure you understand what’s happening and how it will affect you. Everyone will be affected differently, but the indications are that this will affect the smaller investors (with 1 or 2 properties) more than the larger investors. If you’re not sure, speak to your accountant and ask the question now. There may be a number of strategies to deal with this, and so far the following options have been mentioned:

·          Transfer your properties into a limited company – these are currently exempt from the changes. There’s an associated cost and it will work for some but not for others.

·          Create a ‘trust’ for your properties and use that. Sounds a bit iffy to me, but a decent accountant will explain more.

·          If you have a larger portfolio, sell some properties and use the equity to pay off mortgages on other properties.

·          Sell your investment properties. For a few people this may be the only option.

·          Do nothing. Most will do this by default and although it may be absolutely fine for some, it will be completely the wrong thing to do for others.

As I say, the main thing at this stage is to understand the change, and take some advice so you can come up with a plan! What you must NOT do is ignore it until the change comes in then stick the property on the market – a lot of landlords will take this approach as they only react, rather than plan. When that happens a lot of property will get dumped on the market at roughly the same time, which may cause a price dip. A sensible landlord will be mindful of this and aim not to get caught up in it!

Need accountancy advice? I’m not an accountancy expert myself but can put you in touch with local accountants who seem to have done good things for other landlords.

SOLD! WILDCARD! Freehold 2 flats in Abington, DISCOUNTED

OFFERS INVITED AROUND £180,000. The flats themselves are worth £200,000

An interesting one here, and quite a complicated one too. Offered for sale are 2 TENANTED flats, including the freehold. They currently bring in £1050 per month which a 7% return on the asking price. They are in good order too. In theory, these should be worth about £90,000 and £110,000 each, so there's an immediate saving of about £20,000 on the asking price.

 So what's the catch? Well there are a couple of things the purchaser needs to be aware of and take on the chin

• if you look at the diagram above there are actually 2 freeholds for sale here - number 4 and number 25. The latter is a ramshackle commercial building (see below) in the garden of the former, let since the dawn of time at a peppercorn rent. Once you own it you could leave it, or evict the tenant and develop it, or turn it into a garage or garden - your choice. But you're buying it as it is.
• the house has a natural spring in the cellar - always has. There's a pump down there that deals with this, but it's a known issue. 
• the current owner has had the property for many years and paperwork is pretty scarce. You're buying it a discounted rate accepting this. 

It's the type of purchase that will appeal to someone who is happy to take a property on at a genuine discount and accept that there are a few irregularities - the vendor seeks that type of buyer. It really needs to be a cash purchase, as the vendor wants a quick transaction. A solicitor will be required to 'process the transaction' rather than analyse in the n'th detail. It's the type of property that would usually end up in an auction for these reasons, and that's where it will be heading if a sale isn't agreed in the next few weeks. 

SOLD! LITTLE BILLING : cluster house £112,000

Just when I’d nearly given up, along comes a 1 bed FREEHOLD cluster house in Little Billing at £112,000. It’s a nice area this, and we have half a dozen rented out for between £450 and £500. This looks to be a good one so will get towards the top end of the scale. Stamp duty is part of the deal now, so I’d simply advise factoring that into any offer you make. A nice safe rental in a decent area if that’s what you like.

richard.baker@belvoir.co.uk if this takes your fancy.

Time to UP the rent?

As I’ve said on this blog before, rents in Northampton are on the up! I’ve been letting properties here for 10 years and rarely has it been necessary or advisable to raise the rent – the market has been solid but static. However in the last 18 rents we’ve seen rents start to creep up consistently to the point that when we review (which we do for managed customers every 12 months) pretty much every rent is seeing a small increase.

Why is this?

I’m not 100% sure! Well I am – it’s because demand exceeds supply. But what is fueling the demand?

Property prices are high – that’s certainly a factor which means that the average first time buyer is stretched so chooses to rent instead. Immigration is certainly a factor – every other tenant we let to at the moment is Romanian whereas 5 years ago they were Polish. Generally speaking this is the good end of the market too – I hate to think where we would be if we didn’t have Eastern European tenants. And a lack of house building is also an issue. If you read the local newspaper you’ll see that every time a development is proposed, local people object to it – that may suit them but I’m not entirely sure that’s in the interests of future generations!

What should you do?

If you’re a managed landlord of ours, nothing! We’ll raise the rent as appropriate but we won’t squeeze it to the limits, as that’s not in the interests of our landlords or ourselves. Clearly there’s a benefit for a landlord in increasing the rent, but zero benefit if the increased rent causes the tenant to give notice.

If you’re managing yourself you're clearly an experienced landlord so will doubtless have dealt with this already using the appropriate legal forms and taking the appropriate safeguards.

Is this a good thing?

I’m a landlord myself and won’t pretend it doesn’t feel good to see rents creeping up. We do after all live in an age where the costs to landlords increase on an annual basis with more regulation and government intervention in the sector – so it’s nice to reclaim at least a bit of this through increased rents. But I’m also conscious that Northampton isn’t the centre of the economic centre of the universe and whilst employment is high, most people aren’t in massively well paid jobs. You need to remember that whilst the market rent for your property may be £x, that doesn’t mean the current tenant can afford £x – and by increasing the rent you may be creating problems (arrears and evictions) that it ends up costing you to sort out. As an agency we’re seeing more arrears (slightly, not massively) and when tenants move out there’s a definite increase in “moving back with the parents” which is a sure indicator that affordability is being stretched. As such whilst increased rents are a good thing for landlord, they need to be welcomed with a note of caution. 

Is everyone getting an increase?

Certainly not! Rental increases generally apply to properties that weren't over squeezed in the first place, and properties that are in good repair. If your tenant is on the phone every 5 minutes complaining about A, B and C, you're hardly likely to get away with increasing the rent. Deal with any issues outstanding before proposing an increase as ending up having to change tenant will always cost you more than you make back.