Buy-To-Let Landlord – Pros And Cons

Firstly

  • You’ll need to arrange a buy-to-let mortgage on your property. This can be from your existing residential mortgage provider or another lender.
  • You can either manage the property yourself or have a letting agent handle things like finding new tenants and coordinating repairs/maintenance, etc.
  • You’ll still be expected to meet mortgage repayments even if your property is empty.

Pros

  • Property is still seen as a relatively safe long-term investment.
  • By renting, you can generate an income from your property to pay the mortgage and any additional costs.
  • You can offset some of your expenses and costs against tax (make sure you consult a tax professional).

Cons

  • You’ll have to be able to pay the mortgage even if your property is empty.
  • Stamp duty is higher on buy-to-let properties than those for simple residential use.
  • You will be responsible for maintaining the property in good condition, as well as ensuring that it meets all the legal requirements for landlords (Gas Safe inspections, electrical PAT testing, etc.

You don’t have to stay with your existing residential mortgage provider when becoming a landlord – don’t be afraid to shop around for the best buy-to-let mortgage deals for your needs.

Why Landlords Insurance Is Important

Typically, contents insurance for landlords is only necessary where a property is furnished or part-furnished. Landlord insurance can also provide for other eventualities, such as rent protection cover if tenants fail to pay. But generally, insurance does not cover the permanent fixtures within the home.

Now Direct Line for Business has revealed a new “Fixtures and Fittings” insurance that plugs this gap. It is specifically for leasehold landlords and includes internal permanent fixtures that are not covered through the existing buildings insurance

What does the insurance cover?

Bathrooms, fitted kitchens, built-in units, skirting boards and doors all come under the Fixtures and Fittings insurance. It also includes number of floor coverings, such as carpets, tiles and vinyl floors. However, the insurance excludes walls, ceilings, concrete flooring and floorboards, external doors and windows, pipes, cables and services. The freeholder’s buildings insurance should cover this.

The landlord insurance should pay out in the event of fire, theft, flood or escape of water. According to householdquotes.co.uk, the average bathroom suite costs around £1,000, so it’s an expensive item to replace if it gets severely damaged during a tenancy.

Jamie Chaplin, landlord business manager at Direct Line for Business, said: “We are continually evolving our landlord insurance product to meet the needs of customers.

For most people, their property (or properties) are their biggest and most expensive asset. For landlords it is an investment that provides some if not all of their income.

Renting out a property comes with its own set of risks, whether related to the tenant or external events. Normal homeowner insurance doesn’t provide full cover for this. What’s more, many insurers simply won’t cover properties that are rented out with a standard, non-landlord policy. This leaves the owner fully exposed to risk.

Some may baulk at the added expense of comprehensive cover. However, when calculating how much could be lost if the tenant stops paying rent, for example, most will find that it is actually worth the cost.

Landlords – Can I Take A Mortgage Break

Like homeowners, landlords must contact their lender if they wish to arrange a payment break. Alongside the government-backed mortgage payment holiday scheme, lenders can offer a range of options depending on the individual’s situation.

Prior to the current scheme, anyone could apply to their lender for a payment break, but they normally had to provide supporting evidence. For most borrowers now, it is just a case of self-certifying that their income has been affected by coronavirus.

However, according to Which?, landlords must self-certify that their tenant’s income has been affected by the pandemic. Some buy-to-let landlords may also be in a situation where a house sale has fallen through as a result of the outbreak, and this has led to cashflow issues. Similarly, they should be able to inform their lender of this and still qualify for a payment break

A mortgage payment holiday may be the best solution for some borrowers. However, there are other options available which may be more suitable.

While major credit reference agencies have made assurances that no one’s credit score will suffer, there are downsides to pausing your mortgage payments. The main one is that you will owe more money in the long run. Missed payments are added onto your total mortgage, so it will take longer and cost more to clear this.

There is also a risk that it could affect future credit applications. It is possible that lenders could look at mortgage payment history when assessing any further borrowing requests in the future.

Renting A Home

For many people, a letting agent will be the first port of call when looking for somewhere to rent, but be aware that they can come with extra fees including charges for credit checks and setting up the inventory.

Letting agents will advertise rental properties, arrange viewings and help negotiate the tenancy agreement. In some cases they even manage the property on behalf of the landlord, so it’s worthwhile investigating just how involved your letting agent will be.

A perk of dealing with letting agents is that they must be part of an approved redress scheme that can mediate in disputes between landlords and tenants. The letting agent must clearly state which scheme they are members of.

The three government-backed schemes are: The Property Ombudsman (TPO) Ombudsman Services Property Property Redress Scheme. Most tenancy agreements last for a year and normally no longer than three years – this offers the landlord a financial guarantee for a significant period of time and also gives the tenant enough freedom to leave the agreement if needed.

If you’re a student or you’re planning to move job or area in the not-too-distant future, then it’s probably best to make sure you stick to a six-month or one-year agreement, a break clause is also quite standard now, too. This allows the tenant and the landlord to end a fixed-term tenancy early.

Renting is not a cheap process and it’s wise to make sure you’re financially setup before starting your search. Here are the costs you could face before securing your rental.

The average cost for rent in England is £675 a month, but for London that figure jumps to £1,400. Property costs will be advertised as ‘pw’ (per week) or ‘pcm’ (per calendar month) and you will normally have to pay your first month’s rent in advance.  Be careful not to calculate the monthly rent by multiplying the weekly charge by four, though.

A typical month lasts longer than 28 days, so the extra days’ rent you don’t include will add up and could leave you budgeting less money than you need. Some agreements also include bills within the rent which can work out cheaper and is a great option for tenants in shared houses.

Try to be flexible with your property search, a garden can add a lot on to the rent so if it isn’t a necessity take it off your checklist. Or, try looking a little further away from central locations or main transport stations – the convenience will cost more. Be sure to budget for your outgoings as much as you can. Set up direct debits and check you’re on the best energy tariff for your household.

Mortgage Payment Holidays – Who Can Apply?

Right now, mortgage payment holidays are an excellent option for some borrowers. The coronavirus lockdown has led to some people losing their jobs, for example. For those who are unable to make ends meet and keep up with monthly payments, a pause in mortgage outgoings is likely to help in the short term.Buy-To-Let landlords are not immune to the situation, either. Some tenants may be asking their landlords for a rent payment holiday due to the current climate. For others, a failed property sale that might have added to a landlord’s cashflow, for example, could leave them struggling to pay their mortgage.

Mortgage payment holidays for landlords work in the same way as for owner-occupiers. Landlords must apply to their lender, who will be able to accept or reject the application

Whether you should try and get a mortgage payment holiday obviously depends on your individual circumstances. For those who will genuinely be unable to cover their outgoings, or will have to choose between a mortgage payment and other essential items, it could be a good option.

However, some brokers are advising landlords against this if they can possibly help it. According to Mortgages for Business, a lot of landlords enquiring about mortgage breaks are not actually unable to cover their payments.

When the government introduced the measure, it reassured people that their credit scores wouldn’t suffer. Though this is the case, it could still affect how lenders view borrowers.

Steve Olejnik, managing director of Mortgages for Business, says: “We’re having a lot of discussions with landlords around payment holiday requests. Only a handful are raising legitimate concerns about how to pay their mortgage in the face of the COVID-19 pandemic.”

Olejnik adds: “Landlords must be aware that any requests could potentially damage any approaches to that lender. Lenders expect landlords to be able to cover void periods under normal circumstances – where a property is empty, and a landlord isn’t getting any rent – so they won’t take kindly to landlords trying to take advantage of them just to build up some cash reserves.

“One borrower with three live cases with their lender approached them for repayment holidays on another, existing loan. The lender immediately cancelled all three. Smart landlords, who want to capitalise on short-term house price falls and expand their portfolios when the lockdown is lifted, should think long and hard before approaching their lender.”

Wonderful news in challenging times – your home is ready!

Park Central completed its work this week and that is good news for all.

We are proud to be able to deliver our second phase of our development on Central Docks and Park Central looks fantastic next to Quay Central.

Park Central offers a communal room with workspace for residents and a beautiful landscaped platform on the 1st floor for residents to enjoy looking across the city and out on to the Mersey river.

Each apartment has its own defined entrance lobby and floor to ceiling windows which provide a bright and natural environment as well as fantastic long views of Liverpool’s famous water space. The apartment finishes are lovely and slightly different from phase one Quay Central. A deep and rich tonal palette provides a contemporary feeling complemented by carefully chosen ironmongery. The colour theme within apartments is modern in feel, as well as homely.

The team at Romal is based on site together with our recommended lettings and property management agent and we all look forward to welcoming you to Liverpool Waters and your new home.

The Benefits Of Investing In A New-Build

  • No chain – When buying an existing property, there is often a chain above you, which can add stress as well as slow things down if people higher up the chain pull out, whereas this isn’t the case with new-builds. Buying a new property also removes the risk of being gazumped.
  • Discounts – Developers will sometimes offer money-off incentives enabling larger savings than when buying privately, particularly when a building project is in its early stages.
  • Peace of mind – New-build homes come with an NHBC (or equivalent) 10-year warranty, which includes a two-year builder warranty followed by an eight-year insurance agreement against damage to your home caused by building errors that affect the main structure.
  • Everything brand new – It goes without saying that when buying a new-build, all the fixtures, fittings and decor will be brand new, modern and unused, with most new appliances coming with their own warranties. Developers often install the latest smart technology as a selling point, too, with the most up-to-date energy efficiency and ventilation technologies.
  • Cheaper and greener – New-builds are substantially cheaper to run than the majority of existing properties, which offsets some of the premium paid at the outset over time. They are built to the latest environmental standards, with better insulation, more efficient heating systems and, as mentioned above, better appliances. According to the Home Builders Federation, more than 80% of new-builds have an A or B energy performance rating, while only 2.2% of older homes have the same.
  • Customise – If you invest before or during the building phase (Off-plan), you will probably have the opportunity to choose things like the decor and even the appliances and layouts yourself.
  • Help to Buy – The government’s Help to Buy scheme is only available on new-builds, and has helped thousands of first-time buyers onto the housing ladder.
  • Great for tenants – Compared to older, tired rental properties, new-builds are much more appealing to tenants because they won’t have to worry about issues like damp, condensation or unreliable old boilers and heating systems that sometimes plague older rental properties. The fact that bills are much lower is an added bonus for tenants.
  • Less hassle for landlords – Property investors often have to deal with repairs and maintenance on their rental properties, but much of this is taken away with a new-build as the chance of appliances wearing out is significantly lower.
  • Compromise – If a brand new building isn’t for you, investing in a newly redeveloped existing building or conversion can be a good compromise. Everything internally is still brand new, often with optimised insulation and other mod cons to improve energy efficiency, but this option can offer more character than a new-build.

Can I Afford An Investment Property?

Purchase and stamp duty

This probably goes without saying, but having a clear idea of the price of the purchase with the added stamp duty is essential, as this will affect everything. You will need to put forward a deposit, and for a buy-to-let property this tends to be a minimum of 25% for most lenders, if you’re buying with a mortgage. If you’re buying with cash, it will be down to the seller what deposit needs to be paid and at what stage.

Legal and conveyancing fees

Certain legal fees apply to any property purchase by both owner-occupiers and investors. Conveyancing is usually carried out by a solicitor or conveyancer, and involves legally transferring home ownership from the vendor to the buyer. The process begins when an offer is first accepted on a property – this is the stage at which the buyer instructs a conveyancer or solicitor to act on their behalf – and continues right through to completion when you are handed the keys to the property. The rate you pay for this service will depend on the individual solicitor. Most agents will recommend a local solicitor to use, but buyers can also shop around.

Mortgage and valuation costs

Most lenders will charge an arrangement fee, and many buyers will also choose to use a broker who can find and arrange the best deal, which may involve an additional cost. Further to this, lenders require a bank valuation of the property to be carried out to ensure there’s no discrepancy between what is being paid and how much the bank deems the property to be worth. This can cost anywhere in the region of £250 to £1,000 plus VAT, depending on the property value. Buy-to-let mortgage rates are currently very competitive, although still tend to be higher than traditional residential mortgage rates.

Furniture packs

When buying an investment property, many landlords and investors want to offer a fully furnished apartment. One way to do this is to buy a “furniture pack”, where the whole home is furnished to suit your budget and property. It can make it easier to budget rather than trying to source items individually. It also saves time for busier landlords and investors, and the brand new furniture can be a selling point for potential renters. Costs will vary depending on the size of the property and the quality of the furniture.

3 Primary Factors To Consider When Investing In Property

Timing

The old cliche that timing is everything couldn’t be more true with property investment. Housing markets tend to work in cycles, so while investing at the peak of a boom might not get you the best returns in the short term, over time you are still likely to see your investment rise. Getting in when prices are at a lower point, or just as things are beginning to rise, is often the preferred strategy. Keeping an eye on house prices in an area can be helpful, with some locations performing more strongly than others at different times. The length of your investment matters – property is normally a long-term commitment, rather than a way to make fast money, so investors should be prepared to see their gains grow over time.

Location

Choosing the right place to invest is vital, but is also a decision that will vary from investor to investor. Emerging markets are a good place to start, which could include areas that are about to receive or have recently benefited from local investment, or parts of the country that have been relatively undiscovered until recently. While London was once the go-to property investment location, this has been overtaken by parts of the north-west including Liverpool and Midlands where rental yields as well as capital appreciation are much stronger. Investing close to where you live, in an area you are familiar with, might seem appealing, but researching and considering other areas can prove more beneficial in the long run.

People

Who you work with can have a big effect on the outcome of your investment, so doing your own thorough due diligence is vital before making a big commitment. For example, working with property developers and contractors who have a good track record should mean that you can be confident your investment will pay off. You should also look into how each company works, to make sure that it fits in with your own investment strategy. For example, will you be buying a tenanted property with assured rental yields, or would you prefer a more hands-on approach where you manage the property yourself?

Spending Priorities Of Todays Renters

What are Generation Rent splashing their cash on?

Going on holiday

As a society, we are moving towards valuing experiences above assets, with holidays being near the top of the list of go-tos in the “experience economy”. Perhaps then its no surprise that holidays came out on top for renters’ spending goals. A third proclaimed they were saving to go on holiday, be that a lavish summer holiday in the Caribbean or a staycation in Brighton – for renters, a trip away tops the list.

Emergency funds

Second on the list, 31% of savvy savers are stashing cash away for a rainy day. This flexible-living cohort might lease their cars and stream their films, but they still know that an unexpected expense can arise out of the blue and prove problematic for your wallet. Financial gurus recommend that everyone has an easy-access account with money that will see them through three to six months’ worth of essential outgoings, and renters are abiding by this rule by saving for an ‘emergency fund’.

Buying a house

Less than a quarter of renters (23%) are saving for a house deposit, with women leading the charge at 26% to men’s 17%. Perhaps unsurprisingly, younger renters are most likely to be pocketing the pennies with an eye to getting on the property ladder – 38% of 18-34 year-olds are saving to buy, compared to 25% of 35-54 year-olds.

Other top savings goals for UK renters include saving for retirement (14%), spending money on their children (10%), buying a car (10%), and leisure activities such as going to the cinema or family days out (9%).

Disposable income is used to fund the lifestyle people want to live, and it’s clear that owning a house is no longer the main financial goal for renters. Landlords must make a concerted effort to understand they’re tenants. Those who really comprehend the wants and needs of renters in the UK will be most equipped to provide the best accommodation, the best service, and ultimately generate the best yield from buy-to-let properties.