National Landlords Association

Transcription

1 National Landlords Association Top Ten Challenges Facing London Landlords Richard Blanco, NLA Representative

2 1. Regulation of Buy To Let Loans Drivers Lots of landlords sell, could seriously affect UK economy Rise in BTL from 5% to 16% of the mortgage market Landlords out of favour prefer homeowners and Build To Rent Two Phases: 1 Jan & 30 Sep 2017

3 1. New Criteria Phase 1 Increased stress test - 1 Jan 2017 Old criteria around 5% rental coverage New criteria 5.5% minimum Take into account tax status Different approach if remortgaging 5 Year fixes are exempt Phase 2 Portfolio Landlords 30 Sep mortgages or more Assets & liabilities, business plan, cashflow

4 Impact of Phase 1 My last purchase was 620k, rented for 2,400 Max loan I could get was 443k which is 72% 5.19% (Lender s SVR) 443k x 5.19% x 125% divided by 12 = 2,395 Maximum loan with new criteria is 361k 361k x 5.5% x 145% divided by 12 = 2,399 58% loan to value Mortgage payment at 1.99% is 599 Deposit required is 259k instead of 177k

5 Impact On Yields Yield Max LTV under old criteria 6% 96% LTV (theoretically) Max LTV under new criteria 75% LTV 5% 80% LTV 63% LTV 4% 64% LTV 50% LTV

6 2. To Re-structure or Not 1 in 5 landlords consider incorporation/spouse Move to limited company (or LLP or both) CGT and SDLT 20% corporation tax and dividend tax up to 38.1% Corporation tax falling to 19% then 17% (2020) 7.5% Tax on dividends over 2,000 from 2018 Ltd company must provide deposit for loan Restricted to commercial loans

7 BTL vs Commercial Loan My last purchase of 620k, rented for 2,400 Loan of 443k at 1.99%, 8815 per year Commercial loan at 4% 443k x 4% x 160% divided by 12 = 2,362 Mortgage payment at 4% is 17,720 per year That s 8,905 per year more Is it worth incorporating?

8 3. Uncertainty Four Factors House prices Land Registry 6.2% in Jan Down 6.3% in Prime Central London (Knight Frank) Micromarkets: 15.7% W Forest, 14% Newham Where are we in the house price cycle? Tax Changes 16% landlords say they will sell (NLA) Purchases 15-20% below long run average (C/wide) Opportunity or Negative portent?

9 Uncertainty Four Factors Brexit Economy is buoyant but will this last? Impact on rental demand? Falling pound encourages international investors Government Policy Anti landlord, pro homeowner, pro build to rent Letting agent fee ban 3 year tenancies next?

10 4. Your Business Plan Sell Up, Stay Put or Expand? Move into Buy To Sell (buzz of the refurb)? Your Plan Should Consider Tax changes Yields Rental demand Opportunity for capital growth Financing (taking account of changes)

11 5. Increasing Govt Regulation Documents when starting an AST to retain s21 EPC, GSC, DPC, How To Rent, License, Alarms Energy Efficiency No F & G after April 2018/Request improvements Digital Tax from April 2018 Housing & Planning Act Electrical Safety, Civil Penalties, CMP New HMO Mandatory Licensing Definition 5 people in 2+ unrelated households

12 6. Article 4 & Licensing Compliance 22 boroughs have or considering discretionary licensing 8 boroughs have Article 4 directions Understand types of license e.g. many landlords wrongly or unlicensed in Newham and Tower Hamlets Consider these factors when business planning

13 7. Changes In Rental Demand Sales transactions are down m, estimate 1.1m (Savills) Moves by mortgaged homeowners down by 50% Drag caused by Stamp Duty on properties over 1m Gross mortgage lending down by 8% (CML) First Time Buyers up by 8%

14 7. Changes In Rental Demand 43% of landlords report declining tenant demand in Central London in last 3 months 14% nationally trend is growing Brexit related or surge in sales to April 2017? Reconsider your target market, sell, adjust price?

15 8. Tips On Avoiding The Void Setting the right tone at the start 12 month contracts, works during tenancy Marketing photos on file Talk about renewal at 9 th month, confirm at 10 th month Viewings in 11 th month

16 8. Avoiding The Void Check out letter and follow up visit Help agent quick access to keys Flexible on price and furniture Line up contractors Quickly resolve deposit return

17 9. Is Build To Rent A Threat? 25% of new starts 2016 in London Build To Rent (but PRS is 26% of housing in the capital) GLA estimates top 90 th percentile - premium offer Drive up standards & expectations? Small landlords co-exist in student market 3% surcharge and high land values (over 1.05m) Could compete with High end HMOs Drive out lower end of market

18 10. Affordability, Subletting, Scams High occupation levels Unscrupulous rent to rent Fake landlords, serially bad tenants, Gumtree, Air BnB scams Take steps to avoid Proper referencing Induction and inspections Clear guidance and response to subletting Tell tale signs: cash up front, not lived in, evidence of extra people, befriend neighbours

19 Inside Property Podcast New monthly podcast Brexit & Investing Crime in the PRS Property in the media Scotland & Wales Maintenance Landlord tenant relations insideproperty.org.uk

20 Join Us Today for 75 instead of 99 Advice line & Library UK Landlord Discounts on mortgages, insurance and other services Your voice Be a professional 87% satisfaction rate

21 What do you think? Time For Questions Richard Blanco, NLA Representative To do business with the NLA Handout of this session at my blog next week