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New Electrical Safety Rules For Buy To Let Property Sector

Buy to let investors renting properties out will soon face new electrical safety rules on all properties they rent out in the private rental sector, following a government announcement.

Minister for housing and homelessness Heather Wheeler MP announced this week that mandatory electrical safety inspections will have to be carried out by ‘competent and qualified’ inspectors, with landlords facing tough financial penalties if they don’t comply with the new electrical safety rules.

Government ministers are due to publish new guidance which sets out the minimum level of competence and qualifications necessary for those carrying out the electrical safety inspections to ensure let private rental properties are safe from any electrical faults.

The minister said that the new guidance will provide clear accountability at each stage of the electrical safety inspection process, making it clear what is required and whose responsibility it is to put it in to place, but without placing excessive cost and time burdens on private sector landlords.

She said: ‘Everyone has the right to feel safe and secure in their own home. While measures are already in place to crack down on the small minority of landlords who rent out unsafe properties, we need to do more to protect tenants.

‘These new measures will reduce the risk of faulty electrical equipment, giving people peace of mind and helping to keep them safe in their homes.

‘It will also provide clear guidance to landlords on who they should be hiring to carry out these important electrical safety checks.’

The new electrical safety rules are part of the government’s continuing efforts to drive up standards in the private rented sector. Gas safety checks have long been in place in the private buy to let sector, and carbon monoxide alarms are required by law wherever there are solid fuel appliances.

Source: Residential Landlord

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What buy-to-let landlords can expect in 2019

As 2019 gets underway, and economic conditions continue to be uncertain, it is important for buy-to-let investors to be on top of the market and its changes.

The past three years have seen the market face a host of new regulations and tax changes, and this year is set to be no different as buy-to-let landlords must brace themselves for further uncertainty. However, it’s not all bad news – some of the changes are set to have a positive impact on the market, and there are still plenty of landlords planning to increase their property portfolios over the coming 12 months.

Tax reforms have been unkind to the buy-to-let market, with landlords only able to claim 25% of their mortgage tax relief, when filing their taxes between April 2019 – 2020. This is down from 50% for the previous tax year. Not only will this increase tax bills, but it could also mean that some landlords who are currently paying basic rate tax find that they are pushed into a higher rate band.

The good news is that the slow market activity means lenders are offering rock-bottom mortgage rates to tempt landlords, following the Bank of England’s base rate decision last year. However, the low rates are unlikely to stay that way for long. Many mortgage lenders will continue to offer incentives, such as free valuations and cashback, to attract business from landlords.

From April, all lettings agents will be required to register with a Client Money Protection scheme (CMPS), which protects both landlord and tenant money. For example, deposits, rent or money for property maintenance – should the letting agent go into administration. Landlords can rest assured that even in an uncertain economic climate, their rental income will be protected.

The likely introduction of the Tenant Fees Bill will also offer greater peace of mind to tenants, although it could come at a detrimental cost to landlords. The bill will mean tenants will only be required to pay their deposit and rent when signing a new tenancy agreement. If letting agents increase charges in other areas to compensate for the loss of fees, and subsequently become too expensive for a landlord to use, they may have to pass the added costs onto tenants in the form of rent increases. Alternatively, more landlords may decide to self-manage their properties rather than go through an agent, however this may result in many landlords struggling to stay on top of ever-changing property rules and legislations.

Of course, depending on the outcome of Brexit, house prices in the UK could take a hit. Deterred by the uncertainty of the property market, an increasing number of individuals could be looking to rent property instead of buying, pushing up the demand for rental housing and the cost of rent. If you’re currently considering investing in buy-to-let property, it’s worth monitoring the property market, as house prices have the potential to drop significantly. However, you will need to be prepared to act quickly if you are hoping to invest in buy-to-let property, so getting your finances in order ahead of 29 March will make you are more attractive buyer. Alternatively, bridging loans and other alternative finance options can give landlords access to fast, flexible finance to secure property acquisitions in a competitive market.

2019 is set to be an uncertain time for landlords and staying on top of the new regulations can feel like a full-time job in itself. The UK Adviser offers support to landlords of all portfolio sizes, ensuring that you remain fully compliant amid the economic and political market changes.

Source: Mortgage Introducer

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Five ways to clean up your buy-to-let portfolio in 2019

While January is a great time to be making financial resolutions, with many over-spending at Christmas, it’s sometimes best to concentrate on making the most of what you already have. For 2.5m people owning £1.4 trillion of buy-to-let, investment property is the best place to start. It comprises an enormous part of personal wealth, it requires time commitments that are akin to a part-time job, and the outlook for individual landlords is increasingly uncertain.

With that in mind, we’ve put together five tips for landlords to consider as they think about how to optimise their buy-to-let holdings in 2019.

1. Manage your mortgage

Mortgage payments may represent a significant part of your costs, and this will increase in a rising interest rate environment.

But there are great deals in the market, including fixed-rate options. Alongside traditional brokers, tech-powered online mortgage offerings like Trussle and Habito are able to help you sort through the huge range of deals on offer.

2. Review your managers

Many landlords make do with “rack rates” from high street agents for the management of their properties.

While you may have got the best offer when you bought the property, it is worth reviewing contracts periodically, with regard to both costs and service. If you have multiple properties, you should be able to secure significant discounts.

Also consider whether they are providing you and your tenants with a good service. Unhappy tenants mean voids, and voids significantly reduce returns, particularly if your properties are mortgaged.

3. Look at your profit and loss.

Do you really know how much you are earning, after mortgage costs, wear and tear, property management, and voids?

Most landlords focus on the rents they receive, not the bottom line. The answer might surprise you – 61 per cent admit that they underestimated costs last year.

4. Beware tax changes.

Once you’ve got to a clear-eyed view of the economics of your properties, you have to consider your personal tax situation. For example, mortgage relief is being phased out, and there have been changes to “wear and tear” allowances that may erode returns.

Some portfolio landlords are using limited companies to optimise their tax position, but this will only make sense for larger portfolios, given the overheads involved.

You need to consider if it justifies the amount of time (and risk) involved with running your portfolio.

5. Plan your strategy.

Property is a long-term asset class, and involves considerable costs, effort, and time, so you should be deliberate with regard to the future.

It might be prudent to reallocate your property exposure to different regions of the country (areas like Manchester and Birmingham have delivered strong returns on price and rental income). It may be that you want to gradually decrease your allocation to property compared to other asset classes.

You’ll also want to take a long-term view of your tax position, potentially with advice. With many young people struggling to get on the property ladder, advice can be particularly important when thinking about how to allocate investments between generations.

Whatever you decide, you need to be paying attention. The government and the market are making it increasingly hard to be an “armchair” landlord.

Without due consideration, you could be sleepwalking into investments that cost you money as well as time, while thoughtful landlords reap the benefits of their care and attention.

Source: City A.M.

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3 reasons why buy-to-let could crash in 2019

The prospects for buy-to-let investors appear to be relatively downbeat at present. In fact, this year could prove to be a challenging period to be a landlord.

Political risk in the UK appears to be causing a reduction in demand among property buyers, and this could hold back the rate of capital growth which is on offer for landlords. Similarly, affordability issues and the increasing appeal of other assets may mean that the outlook for buy-to-let investors deteriorates during 2019.

Political risk
While Brexit negotiations have been ongoing for a number of months, a clear path towards the UK exiting the EU doesn’t seem to be any closer. At the present time, almost any conclusion to the Brexit process is feasible, with a new Prime Minister, a change in government, or even a reversal of the initial referendum result still all possibilities.

In response, it appears as though prospective home buyers are becoming increasingly cautious. Various house-builders have reported a softening of demand in parts of the UK, and this trend could continue over the course of 2019. Even after Brexit has taken place, there may still be caution due to its one-off nature, linked to the fact that it’s never been undertaken before. As a result, demand for homes could slow and capital growth prospects for landlords could decline to some degree.

The affordability of property in the UK continues to be a potential risk facing buy-to-let investors. In 2018, the house-price-to-earnings ratio reached its highest level since records began in 2002, which shows that many people are finding it difficult to get onto the property ladder. The natural response of the market to this issue is likely to be a fall in demand, which could help to ease affordability issues over the medium term.

This situation would be bad news for landlords, since it could mean that the capital growth which has been experienced in previous years is somewhat lacking in 2019. And with yields on property already relatively low in a number of areas, the total return capacity of the industry could be limited.

Relative appeal
While buy-to-let may be unappealing this year, other asset classes could become increasingly attractive. Equities, for example, have experienced a severe pullback in the last six to eight months. This may continue in the short run, but history shows that corrections are always followed by recoveries. There could therefore be an influx of capital away from property and into the stock market as investors seek to capitalise on the undervaluation of the latter and the potential overvaluation of the former.

As such, 2019 could be a tough year for property investors. While in the long term there could be continued growth ahead, there may be better opportunities within the stock market for investors who are seeking to obtain a mix of income and capital growth in the coming months.

Source: Yahoo Finance UK

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Less Buy To Let Investors Registering To Buy Property

There were less buy to let investors registering to buy property in 2018 according to new data released by estate agent Haart.

The number of landlords registering to buy property with the agent fell by 36 per cent year-on-year in November when compared to November 2017.

London recorded the biggest fall in property investors registering, down by 47 per cent on an annual basis.

On a broader scale, the number of landlords registering to buy property across the market in England and Wales dropped by 15.6 per cent on a monthly basis but was actually 22 per cent higher than the corresponding month last year.

From a rental point of view however the opposite is true. Average rents across England and Wales fell by 0.9 per cent on a monthly basis, and by 3.6 per cent year-on-year.

However, demand in London has increased by 7.6 per cent on a monthly basis and by 41.4 per cent annually, a major factor why rents edged up 1.2 per cent monthly month and by 6.9 per cent year-on-year.

CEO of Haart, Paul Smith, commented: ‘It’s very promising to see house prices climb up on the month amidst choppy political and economic waters. November and December are typically quieter months for the property market, but I expect we will see a surge in activity across the country once the Christmas lull is over.

He continued: ‘The monthly drop in the numbers registering to buy in London, which coincides with a huge increase in the number registering to rent, is indicative of buyers waiting for the political in-fighting to blow over. However, if the government were to provide clarity on Brexit, this would act as an ignition to unlocking the market’s huge potential.

‘Throughout 2018, the market has enjoyed a number of underlying strengths. With demand for property remaining significantly higher than supply, and a range of low fixed mortgages readily available, coupled with the fact that employment figures are at their highest in decades, there is plenty of reasons to be confident about the UK’s housing market going into 2019.’

Source: Residential Landlord

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Best Investment Property For Rental Yields

Buy to let investors are always looking for the best rental yields, so what type of properties can provide the best rental yields at the moment?

According to data from online buy to let agency yieldit, three out of the top five highest-yielding properties were houses with three bedrooms or more, producing net rental yields of up to 11 per cent.

Houses with three bedrooms or more are able to attract multiple tenants or larger families, and also tend to be freehold and therefore have no service charges attached that need to be deducted from the net rental yield.

In fact, houses as a whole came top for rental yields at an average of 6.4 per cent, followed by studios at 5.3 per cent and apartments at 4.9 per cent.

When it came to apartments, one-bedroom apartments were found to be a better investment than two-bedroom, with average net rental yields of 5.4 per cent compared to just 4 per cent.

One-bedroom apartments without parking were found to have higher rental yields (5.5 per cent) than those with parking (5.2 per cent), likely down to a lower purchase price.

Head of Sales at yieldit, Ryan Hughes, commented: ‘Deciding on what type of property to invest in is one of the biggest choices a landlord has to make. Houses suitable for families remain a popular choice, and yields can be significantly higher when you remove costs like ground rent, service charge and self-manage – however it’s important to note that this type of property might require more work and unexpected maintenance costs could affect annual returns.’

He continued: ‘For those looking to invest in apartments, the data suggests that there is a growing demand for one-bedroom apartments without parking. As environmental issues become more prevalent, we can expect to see tenants opt for more environmentally friendly ways to travel and an unwanted parking space might push up the price for renters.’

Source: Residential Landlord

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Does Brexit turmoil offer buy-to-let investors the perfect buying opportunity?

Brexit! What is it good for? Leavers and remainers are both struggling to answer that question right now but I’ve finally found something. The current turmoil may offer a chance for buy-to-let investors to pick up a property at reduced price, while share investors could also find bargains in the FTSE 100.

Slowing down
House prices have been relatively resilient since the referendum but now they are beginning to soften, with £1.6bn wiped off values over the past year. Buyers, sellers and investors are all adopting a ‘wait and see’ approach, as Brexit plays out, the global economy shows signs of fatigue, and interest rate rises potentially loom.

London prices are down 5% in a year as foreign investors are driven out by uncertainty and higher property taxes. The RICS says pessimism intensified in November and UK sales and prices will fall over the next three months. The average home now takes four months to dispose of.

Opportunity knocks
This is a blow for FTSE 100 housebuilders, whose share prices have fallen sharply, but their struggles may be good news for investors, because today’s low valuations could offer the opportunity of a lifetime. It may also be good news for those who are still keen on investing in buy-to-let.

That the last two or three years have undoubtedly been a disaster for buy-to-let, as the Treasury’s tax crackdown has driven up costs and slashed post-tax profits in a deliberate push to tilt the balance in favour of first-time buyers.

Second chance
The 3% stamp duty surcharge on second homebuyers and investors, combined with the phasing out of higher rate mortgage interest relief, has destroyed margins. You can’t do much about the second of these, but if you could get, say, a 5% or 10% discount on the purchase price, that will more than offset the extra stamp duty.

So if you are still tempted by buy-to-let, your chance may not have passed after all. As Brexit uncertainty looks set to drag on to the 29 March deadline for leaving the EU and beyond, you might pick up a bargain in the months ahead.

A better option
You should first decide whether buy-to-let is really something you want to do. As my colleague Royston Wild points out, enthusiasts have been hammered over recent years and it may be better to look at stocks and shares instead.

There is certainly a buying opportunity on the FTSE 100 now, with the index plunging from a peak of 7,877 in May to 6,826 today, a drop of 13% in just over six months. This means it now yields a whopping 4.37%, almost as much as you can get on a buy-to-let property, but with less bother. Trading at 15.63 times earnings, it isn’t overpriced either.

If you pop a FTSE 100 tracker inside your annual tax-free ISA allowance, you don’t have to worry about paying income tax or capital gains on your returns either. Plus there is no bother with tenants and all that nonsense. Now may be a buy-to-let buying opportunity, but the FTSE 100 could be a better one.

Source: Yahoo Finance UK

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The big problems facing buy-to-let investors in 2019

There’s no two ways about it, the buy-to-let market has become much more challenging for investors of late for a broad variety of reasons. And landlords need to be braced for conditions becoming even tougher in the months ahead.

One problem I previously touched on is the impact that the Bank of England’s recent interest rate rises have had on driving buy-to-let mortgage costs higher again. And the trend is expected to continue into 2019 and probably beyond.

Andrew Turner, chief executive of dedicated buy-to-let lender Commercial Trust, was bang on the money when he commented this week that the current environment of exceptionally-low mortgage rates “will have to change.”

Turner said that “the bumpy road of Brexit may see the base rate brought down slightly, once things settle, but I think it is unlikely and in any event, there is not too much scope for reduction.” He added that “my view is that the overall picture for the next decade is a gradual upward trend in rates.”

Rates poised to rise That said, recent commentary from the Old Lady of Threadneedle Street released earlier this month suggests that any reduction in borrowing costs in the short term or beyond to support the economy in the event of a catastrophic no-deal Brexit cannot not be considered a given.

As the Bank of England explained in its most recent minutes, “the economic outlook will depend significantly on the nature of EU withdrawal,” and that therefore “the monetary policy response to Brexit, whatever form it takes, will not be automatic and could be in either direction.” Indeed, should sterling dive in response to the UK’s Brexit strategy, the committee may have no choice but to hike rates in an effort to tame a likely surge in inflation.

A property price crash? Another clear risk of a disorderly Brexit in the spring is the possibility that house prices in the UK could fall off a cliff.

The property market crash that many had predicted in the event of a Leave campaign victory in June 2016 may not have transpired. But home price growth has slowed to a crawl, the latest home price inflation gauge today showing expansion of 3.5% in September, more than halving from the 7.7% rise posted exactly two years earlier.

The impact that Brexit is having on homebuyer confidence has proved devastating, and the problem was again highlighted by Foxtons this week, the estate agency advising that it had recently closed another six branches in and around London in reflection of the “challenging market.”

Demand from first-time buyers may still be strong, but the uncertain outlook for the UK economy has seen transaction activity from existing homeowners slow to a crawl. And I would expect buying appetite from both of these demographics to sink, at least in the immediate term, should Britain fall out of the EU with a bang.

The buy-to-let sector is becoming more and more of a minefield for investors and for a variety of economic and political factors. In my opinion it’s a sector that is far too high risk and I think that savers should seek other ways of deploying their cash, like stock market investment, to generate solid returns.

Source: Investing

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When will the next great UK house price crash hit buy-to-let investors?

With governor of the Bank of England Mark Carney stating that a 35% fall in UK house prices could be ahead if a no-deal Brexit becomes a reality, the outlook for buy-to-let investors may be precarious.

Of course, a deal may be signed between the UK and the EU, and this could lead to an improving performance for the UK economy. The reality, though, is that the UK housing market may struggle to generate the kind of growth that has been seen in the last 20 years. Rising interest rates, affordability issues, and political risks could mean that house price growth disappoints to some degree.

Changing economy
Assuming a Brexit deal is signed, interest rates are likely to rise at a brisk pace over the medium term. A Brexit deal could provide consumers and businesses with greater confidence in the UK’s economic outlook, and this may lead to a stronger economic performance. And with the rest of the world economy delivering high growth at the present time, the Bank of England may seek to cool inflationary pressure over the medium term.

As such, the availability and affordability of mortgages may decline. A higher interest rate would also make mortgage repayments less affordable, and this could prompt a slower rate of growth in house prices.

Cyclical events
Of course, no asset has ever risen in perpetuity. After two decades of growth, UK house prices may experience a period of difficulty, with the market having been boosted by favourable government policy in recent years. The Help to Buy scheme has allowed many first-time buyers to own their first property without having large deposits, while the stamp duty relief scheme may also be having a positive impact on house prices.

Given the precarious political outlook for the UK, policy change in housing would not be a major surprise. That’s especially the case since housing affordability is becoming a bigger political issue – particularly among younger voters who are struggling to get onto the property ladder. As such, the price rises which buy-to-let investors have become used to may be less impressive over the coming years.

Investment potential
While there’s a lack of supply of new homes, demand for them could come under pressure, due to rising interest rates and a change in government policy. As such, investing in a broader range of assets rather than property could be a wise move, since the risk/return ratio for buy-to-lets could be less appealing now than it has been for a number of years. And with tax changes coming into force, shares may offer a simpler and more profitable outlook.

Given that the FTSE 100 has a dividend yield of over 4%, and has recently experienced a pullback, it may offer good value for money for the long term. While potentially more volatile than house prices, ultimately it may generate higher returns in the long run.

Source: Yahoo Finance UK

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Has there been a better time to be a buy-to-let investor?

Regular readers of The Motley Fool will know that we writers, broadly speaking, are not exactly cock-a-hoop over the buy-to-let sector.

A litany of issues, from painful tax changes to slowing (or even reversing) home price growth, from rising interest rates to inconvenient and even costly regulatory changes governing tenancies, mean that this type of property investment is now a minefield.

Having said that, some would argue that the financial market volatility of the past month shows how buying bricks and mortar is a much safer and more stable investment destination than stock investing, the sharp sell-off dragging both good and bad stocks through the floor.

And there’s room for plenty more pain to come down the road. The seeds of last month’s market panic, i.e. concerns over interest rate rises in the US choking off global growth allied with fears over the implications of President Trump’s trade wars with China, haven’t gone away. And other problems like the short- and long-term implications of Britain’s Brexit saga; the emergence of Cold War 2.0; and fiscal battles between Italy and EU lawmakers, add extra layers of fragility to the current trading climate.

Mortgage choices are rising… but so are costs
For risk-averse investors, now would appear to be a great time to get into buy-to-let investment, and particularly as the range of mortgage products available to landlords continues to grow, more than doubling over the past year, in fact.

And there’s been a slew of new products brought out in the past few days alone. Among the big movers, Atom Bank entered the rentals arena at the start of the week with the introduction of two- and five-year tracker mortgages, and Paragon Bank expanded its suite of products to include a specialised product for expat landlords and UK holiday lets. These moves followed digital lender Molo Finance entering the buy-to-let sector in late October.

Increased competition in the market should mean good news for consumers, of course. But investors need to be aware that right now mortgage costs are rising. A report from broker Property Master this week showed that the monthly cost of a two-year fixed rate £150,000 buy-to-let mortgage rose between £2 and £5 due to recent Bank of England interest rate rises, and between £4 and £5 for a five-year fixed rate product.

Sure, these additional costs are not exactly astronomical. But as Property Master pointed out, further rate rises from Threadneedle Street may be just around the corner, a scenario that would likely push mortgage costs still higher.

Stick with stocks
All things considered, I’m yet to be convinced that buy-to-let is a smart way to use your cash today. Irrespective of last month’s stock market sell-offs, investing in shares remains a vastly superior way of generating strong shareholder returns over a long time horizon, something that has been proven time and time again.

Sure, buy-to-let was a wise way to make your money work in years gone by as Britain’s homes shortages pushed property prices and rents through the roof. But the raft of increasing costs and ratcheted-up regulations make it quite a problematic investment arena, and one that is likely to get trickier. I for one will continue to shun the temptation of buy-to-let.

Source: Yahoo Finance UK