George Osborne – The Oakham landlords’ friend?

Well, the last few weeks has been rather hectic as Oakham landlords, some who use us to manage their properties and other landlords who just read our Oakham Property Blog, have been sending me emails or picking up the phone to ask me about the new rules on buy-to-let taxation announced in the recent budget. George Osborne confirmed in the recent summer budget that the tax relief given to landlords on mortgage interest payments, on their buy-to-let (B2L) properties, would be reduced over the coming years for higher rate income tax payers. The Chancellor said the tax relief for private buy-to-let landlords (who pay the higher rate of income tax) would change in 2017 from the current 45% / 40% and would steadily reduce over the following 4 years to the existing 20% by 2020.

With 14.1% of residential property in the Parish of Oakham being privately rented (as there are 659 privately rented properties in the town), these changes are potentially something that will not only affect most Oakham landlords, but also the tenants and the wider property market as a whole. The choice of rental properties could drop, especially at the top end of the market which could push up rents.

However, Oakham landlords could protect themselves by reassigning 1 or more rental properties into a company structure (e.g., a Limited Company, Partnership or Sole Trader) and by doing so, the total tax paid is greatly reduced, because a company only pays tax on the profit. Nonetheless, before everyone goes off setting up companies for their B2L portfolios, it must also be noted, if a sole trader firm is started, stamp duty needs to be paid, yet if the owner is in business with a partner, they could enjoy some stamp duty relief.  The biggest tax variation is Capital Gains Tax (CGT) where the tax bill will be much higher when you come to sell your portfolio. In essence, by going into business with your B2L properties, you will potentially have a modest stamp duty to pay when you start, but you will have a lot less monthly tax to pay, irrespective of the interest rate, but the CGT bill will be much higher when you come to sell ... as you can see, it is not a ‘get out of jail card’. Now it must be remembered, I am not a tax advisor, so you must take advice from a qualified person.

Those planning to purchase a B2L property will have to factor these new rules into their calculations, and this could affect the offers they are willing to make. However, I am not that concerned, as the scaremonger reports fail to see the fact that two out of three B2L properties that have been bought since 2007 have been purchased without the support of B2L mortgage. With those two thirds of landlords paying cash for the purchase of their rental properties, that means two thirds of landlords will be totally unaffected by the changes.

So what of the future? The British love their 'Bricks and Mortar', it’s an asset that they can touch and feel and has a 70 year track record of capital growth that has out-stripped inflation. Buy-to-let will still be attractive to Oakham investors and let me explain why. If you invested £30,000 in Oakham property in September 1987, today it would be worth £132,797. If you had invested the same £30,000 in to the London Stock Market (the FTSE 100 to be exact), it would be only be worth £85,879 today, whilst Inflation would have taken the original £30,000 and pushed it up to £62,345.

It’s true some central London landlords relying solely on the tax breaks rather than high yields may be forced out of the market, but even those landlords could seek to recoup any losses by increasing rents. However, those landlords may leave the market and this could constrict the availability of rented houses even more than it is already, increasing rents and thus pushing yields even higher for landlords and B2L investors still in the market... thus attracting new landlords into the market because of those higher yields.

The reality is, there is too much demand and not enough supply of homes for people to live in in the town. Official figures show the population in Oakham is rising by 94 persons per year (i.e., demand rising), but only 58 properties are being built each year (i.e., supply is low). This sets up the Oakham (and UK) property market to continue to create strong and steady returns, irrespective of any tax loophole being there (or not as the case maybe).

To see the 3 interesting B2L properties currently for sale that I’ve got my eye on, please read my post from earlier this week.

Latest B2L's I have my eye on...

There are 3 properties I have my B2L eye on this week...

1) Firstly, a great family house on Willougby Road in Stamford.  3 bedroom semi-detached.  Would be a great rental property for a young family looking to put down roots and some security for a few years, would achieve circa £695pcm.  On the market with Nest Estates for £185,000 - click on this link for its on-line property listing...

http://www.rightmove.co.uk/property-for-sale/property-54652307.html 

 

2) Secondly, a charming 2 bedroom end terraced home on West Road in Oakham. On the market with Gilbert and Thomas for £160,000. It's close to the town centre, train station etc.,  and you could expect this property to receive in the region of £625pcm, and would be ideal for a young professional couple, divorcee or retiree.  Again, click on this link to see its full details:-
http://www.rightmove.co.uk/property-for-sale/property-36281997.html

3) And lastly, this property on Willow Close, Uppingham has been successfully 'tried and tested' as a great rental home for a number of years, now achieving £525pcm.  It is well maintained, already in good decorative order, situated close to the town centre and has the added benefit of a parking space and rear garden.  Everything a savvy landlord, or indeed a tenant, is after. 

 

Brand new to the sales market, it is encouragingly priced at £137,500.  Remember, this property would achieve you a rental income of £525pcm. 

 

 http://www.rightmove.co.uk/property-for-sale/property-36528990.html

 

 

For more details, please call:-

 

Call Adrian McCarthy

 

 UPP Property Agents on 01572 725 825

 

or via email: Adrian.mccarthy@upp-property.co.uk

Stamford Landlords' mortgages top £83million!

The Brits can’t stop talking about property. The hot topic of discussion at the dinner parties of Wothorpe, Barnack, Uffington and Great Casterton’s movers and shakers is the subject of the Stamford property market, but in particular, buy-to-let (B2L). These people are buying up buy-to-let properties quicker than an ace Monopoly player... or so it would seem if you read the Sunday papers. So is the buy-to-let market a sure fire way to make money?  Is it something everyone should be jumping into? Is it a sure fire way to make money? The answer is Yes and No to all those questions!

Firstly, a landlord only has to flick through Rightmove or Zoopla, pick any property at random and agree a price. Then, find a modest deposit of 25% (often by remortgaging their own home) which, for an average Stamford terraced house, would mean finding £50,852 for the deposit (as the average Stamford terraced house is currently worth £203,409) and borrow the rest with a low interest rate buy-to-let mortgage.  Finally, the landlord would rent out the property in a matter of hours for top dollar and live happily ever after, with the rent then covering the mortgage payments, with loads of money to spare and come retirement have a portfolio of property that would have quadrupled in value in fifteen years. Sounds wonderful – doesn’t it? Or does it???

Let us not forgot that the half of one per cent Bank of England base rate is artificially low. The international money markets can be fickle and if interest rates do rise quicker and higher than expected because of some unforeseen global economic situation, that monthly profit will soon turn into a loss as the mortgage will be more than the rent.

Even though tenants are staying longer in their rental property, tenants still come and go and my guidance to landlords is they should allow for void periods, plus the maintenance costs of a rental property and of course, agents fees...all things that eat into that profit.

Interestingly, by my calculations, there are approximately 448 Stamford landlords owing in excess of £83 million in mortgages on those Stamford buy-to-let properties.  An impressive amount when you consider Stamford only has 0.042% of all the rental properties in the country. It really does come down to a number of important factors going forward to ensure you are water tight for the future.

A lot of my existing landlords are fixing their mortgage rates. One told me that the Metro Bank are currently offering a 5 year fixed B2L re-mortgage rate at 3.79% for 5 years (based on a 75% loan). I don’t give financial advice, so you must speak with a qualified mortgage advisor - but that sounds very fair!

However, one thing I do know is that buy-to-let is a long term investment, it’s a ten, fifteen, twenty year plan and property prices will go down as well as up. You wouldn’t dream of investing in the stock market without advice, so why invest in the Stamford property market without advice? We give bespoke detailed advice to our landlords to enable them to spot trends in the Stamford property market before others, enabling them to buy better properties at better prices.

For example, did you know that flats are selling for around 35% lower than 12 months ago in Stamford, yet detached properties are selling for 41% more (with every other type in between). This means we can advise on which properties will go up in value better (or lose less if property prices drop), we can also advise which have lower voids and which properties have higher maintenance issues.  

Information on the local property market and ability to process it is the strongest asset we can give you.

As Lois Horowitz, the famous author says, ”Not having the information you need when you need it leaves you wanting. Not knowing where to look for that information leaves you powerless. In a society where information is king, none of us can afford that”.

If you are also considering purchasing a property for Buy-to-Let purposes, then why not run the property details past me?  I'd be happy to discuss it with you in confidence.

The "Liquorice Allsorts" Oakham property market

Despite the UK economy heading in the right direction with record low mortgage rates and unemployment  figures dropping,  the rate of property prices rising in Oakham have tempered since the start of the year. This slow, but sure, downward trend in the rate of growth has been in evidence since mid-2014.  The increase in property values continue to outpace the growth in salaries.  However, the gap is closing, helped by a lift in salaries over the last 6 months.  Property values in the East Midlands region as a whole are 2.9% higher than a year ago.  Compare this to the neighbouring regions of the West Midlands at 3.5% higher and Yorkshire at 1.1%, the majority of the country continue to see annual house price gains - the exception being Wales which recorded a slight  decline of -0.6%.

Even with the tempering in house price inflation, it does not necessarily change my outlook that property prices are likely to be firmer over the second half of 2015 amid heightening activity in the Oakham property market.  As stated in a previous article, there is a current shortage of properties on the market, restricting supply, which in turn will provide stability and support to Oakham property prices. Therefore, my overall opinion is that Oakham property prices will rise by 5% over 2015 and roughly the same in 2016.

Property investment is a long term business.  Buying the right sort of property is vital. I have recently been speaking with a number of Oakham landlords about the importance of a balanced portfolio, when buying and renting out property. The balance between buying properties that offer good monthly returns (high yields) but quite often offer poor capital growth (i.e. they don't increase in value that much over the years compared with the average) versus properties that do go up in value quicker but often offer a lower yield.  So, what type of properties have performed best over the last few years in Oakham, especially in terms of their capital growth?

When comparing what the average price of detached, semi-detached, terraced and flats were selling for back at the start of the Millennium to the present day, the results are quite remarkably different, almost like a bag of “Liquorice Allsorts”, as the different types of property have performed poles apart over the last 15 years:

·         Detached Houses in 2000 were selling on average for £107,115 and so far in 2015, they have been selling on average in Oakham for £320,707 a rise of 199%

·         Semi-Detached Houses in 2000 were selling on average for £62,328 and so far in 2015, they have been selling on average in Oakham for £176,488 a rise of 183%

·         Terraced Houses in 2000 were selling on average for £51,750 and so far in 2015, they have been selling on average in Oakham for £170,180 a rise of 229%

·         Flats and Apartments in 2000 were selling on average for £53,950 and so far in 2015, they have been selling on average in Oakham for £96,500 a rise of 79%

Moving forward, what should new and existing buy-to-let landlords do with this information?  Well, the questions I seem to be asked on an almost daily basis by landlords are:

·         “Should I sell my property in Oakham?”

·         “Is the time right to buy another buy to let property in Oakham and if not Oakham, where?”

·         “Are there any property bargains out there in Oakham to be had?”

Many other Oakham landlords, who are with both us and other Oakham letting agents, like to pop in for a coffee,  pick up the phone or email us to  discuss the Oakham property market, how Oakham compares with its closest rivals (Stamford, Melton Mowbray, Peterborough and Grantham), and hopefully answer the three questions above.

I don’t bite, I don’t do hard sell, I will just give you my honest and straight talking opinion and look forward to hearing from you.

This week's BEST Buy-To-Let options...

Firstly, let's look at the tidy 3 bed mid-terrace on Edinburgh Road, Stamford.  Currently on the market with Sowden Wallis with a guide price of £160,000

http://www.rightmove.co.uk/property-for-sale/property-53925233.html

• It's a good size with 3 bedrooms
• Situated in a popular Stamford location, close to town and easy access for A1 commuters
• Well presented throughout to maximise on your rental income.  No need to renovate first.
• Sitting room with modern open plan kitchen / diner.  It's light and airy.
• Bathroom with shower - a bit dated, but the shower is the important factor here.
• Enclosed low maintenance rear garden.
• Gas central heating.  uPVC double glazing.

This will appeal to a broad spectrum of tenants such as young families, young professionals and retirees.

Would achieve in the region of £595pcm - -£625pcm.


My second (and much cheaper) option already has happy respectful tenants in place wishing to stay long term.  Currently on the market with UPP Property Agents, with a guide price of just £125,000.  Call Adrian McCarthy on 01572 725 825.

It's well located on Queens Road, Uppingham.

http://www.rightmove.co.uk/property-for-sale/property-36068631.html

Very spacious, good proportioned home with 2 bedrooms.
Immaculate order. Well presented and maintained. Happy tenants in place.  IMMEDIATE income. Win win!
Great central town location.
Bathroom a bit dated, but don't forget the tenants have made this their home and are keen to stay put.
Fabulous, established rear garden.  Well stocked.  Huge appeal.
Gas central heating.  uPVC double glazing.

This little gem will be achieving you an instant rental income of £450pcm (and we understand they are due a rent increase soon too) from the date of completion.  They don't build 'em like this these days, do they?

If you would like to discuss either of the above in more detail with me, in confidence, please contact me.   Alternatively, if  another Buy-to-Let property has caught your eye and you would like to chat it through, again, please call me.  I'd be delighted to talk to you about it.

david@upp-property.co.uk /TEL:  01780 484 554