Tag Archives: finance
Houses with multiple tenants are a better option for buy to let investment, it is claimed
Houses in Multiple Occupation (HMOs) are the most stable and profitable form of buy to let investment in the UK, protecting landlords against higher costs caused by an interest rate rise, a new analysis report suggests. HMOs, generally rented to young professionals and key workers, are intrinsically geared towards maximising rental income by letting each room on an individual basis, according to the report from Platinum Property Partners (PPP). Research for PPP has shown that compared to capital gains, rental income for all types of BTL is by far the most dependable and stable source of return on investment. The firm says that HMOs landlords are therefore best positioned to absorb the higher mortgage costs caused by an interest rate rise, an event which the Bank of England has indicated will take place in early 2016. It explains that the profits of a standard buy to let investment can be wiped out by a 3% rise in interest rates, assuming mortgage rates increase by the same amount, as gross rental income is not sufficient to cope with higher mortgage interest repayments. Even although HMO landlords pay for all household bills, the fact that the property generates a much higher gross rental income means that these costs are easily absorbed. The analysis suggests that the maximisation of income from a given size of property by creating extra rooms and renting them to multiple tenants means HMOs can generate rental income that is up to four times higher than the rents achieved in a standard buy to property. Previous analysis carried out by PPP has shown that rental income is a far more stable and dependable source of return than capital gains, dispelling the myth that the success of any buy to let investment is mostly about rising house prices. From 2010 to 2012, investors operating in both the standard BTL and professional HMO market were sustaining capital losses. It was only in 2013 and 2014 that capital gains began to recover but in contrast, rental income consistently increased throughout the same period for both asset classes, albeit at a much higher rate for HMOs, the report says. It also points out that the best way that landlords can ensure their investment can cope with an interest rate rise, and any other unexpected costs, is by planning ahead and having a good understanding of the financial performance of their portfolio. Research carried out by PPP in 2014 showed that a severe lack of research and poor planning is preventing many buy to let investors from maximising their income. A quarter of buy to let investors sought no advice and carried out no research before making their property purchases and a staggering 93% had no five year plan for their investment. Separate research by PPP shows that landlords are also prone to miscalculating their returns. Some… Continue reading
Largest monthly rise for England and Wales house prices for a year
Property prices in England and Wales increased by 4.6% in July year on year, taking the average property value to £183,861, according to the latest data from the Land Registry. Month on month they increased by 1.7% with the East of England seeing the largest monthly rise of 2.8% and the biggest annual price increase with a rise of 8.9%, the data also shows. The North East saw the lowest annual price increase of 0.4% and Wales saw the only monthly price decrease with a fall of 0.3%. But transactions are down. The number of completed house sales in England and Wales decreased by 15% to 65,619 compared with 77,488 in May 2014. From February 2014 to May 2014 there was an average of 70,029 sales per month. In the same months a year later, the figure was 61,283. The Land Registry figures also shows that the number of properties sold in England and Wales for over £1 million decreased by 21% to 878 from 1,113 a year earlier. John Eastgate, sales and marketing director of OneSavings Bank, pointed out that it is the biggest monthly rise in house prices for a year and he believes it is driven by positive sentiment continuing after the general election and also by the lack of houses on the market for sale. ‘The simple fact that demand exceeds supply will continue to push house prices upwards and as long as that is the case, it’s hard to see prices moderating. The mortgage market remains supportive, and low rates aren’t going anywhere,’ he explained. ‘If economic turbulence from China pushes back a base rate rise until late 2016, as it appears to be doing, we may well see even more people capitalise on low mortgage rates to take their first step on the ladder,’ he added. Adrian Gill, director of Your Move and Reeds Rains estate agents, pointed out that there is still a considerable gulf between the rates of growth in the East, South East and London and other regions, but this hasn’t knocked confidence nationwide. What happens in London is being affected by outside factors, according to Peter Rollings, chief executive officer of Marsh & Parsons. ‘As the first port of call for international investors and prime property purchases, the housing market in London is more exposed to regulatory and stock market turbulence than the rest of the country,’ he said. ‘We’re still experiencing tremors from the new Stamp Duty banding, and as demand for million pound homes has eased, the harsher taxes at the top end may continue to rock the boat in London for the coming months. But this all needs to be kept in perspective. London is still achieving significantly above average house price growth, and retains its position at the top table,’ he explained. ‘In addition, the Chinese stock market slump may present more of an opportunity than a threat to the London property market as while it’s made property more… Continue reading
More tenants at check out day would reduce deposit disputes, it is suggested
If more tenants in the UK attended the check out when they end a tenancy there would be less disputes, it is claimed. The Association of Independent Inventory Clerks (AIIC) wants more tenants to attend the check outs which provide the landlord or their letting agent with the opportunity to record the condition of the rental property in comparison to when the tenants arrived. The AIIC's plea comes in response to data released recently by the Deposit Protection Service which suggested that 48% of tenants had not attended their check out. What's more, some 46% of those who didn't attend said they had either not been invited or were not informed of the date or time. According to the AIIC, this is where landlords and their letting agents must ensure they are holding up their side of the bargain. ‘We were disappointed to see that so many tenants didn't attend check out and that almost half of these non-attendees were not invited or made aware of the arrangements,’ said Pat Barber, chair of the AIIC. ‘We are urging landlords and their agents to invite and remind their tenants about their check out. It is an extremely important part of the inventory process and a successful inventory can go a long way to reducing the likelihood of a dispute at the end of a tenancy,’ she explained. ‘As always, we advise landlords and letting agents to utilise the services of an independent inventory clerk in order to maintain impartiality and professionalism,’ she added. Continue reading
