Buy to let in 2012
Posted by Kate Baigent on 24th January 2012
Predicting what will happen to property prices has over the last 20 years been a favourite pastime of many in the property industry and an army of advisers and commentators have made their livings engaged in this imprecise science.
Most of us are all too aware that many of the more optimistic predictors have a vested interest in getting us to part with our hard saved money to invest in property. However with interest rates historically low, house prices more affordable than they have been for some years and rental demand remaining strong we have over the past year seen renewed activity in the buy to let market with many of our clients seeking our advice and assistance in their property investments.
The driver behind the renewed interest has been the increasing availability of buy to let (BTL) Mortgage Finance. Major names including Abbey for Intermediaries (the name used by Santander for BTL lending) Skipton and Yorkshire Building Societies were last year attracted back into the BTL market and it appears more will follow.
It does seem as if BTL for the ordinary investor is here to stay at least in the foreseeable future and we believe that done properly with sufficient planning it could work well for many of our clients. Our experienced solicitors are able to give good sound advice both in connection with the original BTL purchase and its on-going management. So to give food for thought for new and experienced landlords alike here are a few points to consider:
Plan Well
- Work out the costs
Whilst the returns can be good the transaction costs are considerable and must be meticulously worked out. Include mortgage arrangement fees, conveyancing costs, stamp duty land tax, land registry fees on acquisition and factor in the fees charged by a good letting agent (if you intend to use one) on-going maintenance costs, outgoings not payable by the tenant and the cost implications of safety legislation.
Whilst not guaranteed your investment if held long term should increase in capital value. However consider the impact of selling agents fees and capital gains tax.
For some landlords there might be advantages in holding property investments in a company or in a family trust. Brachers can help with advice on these and related tax matters.
Choose well
There is a mass of advice available on considerations for choosing a buy to let property. Whilst there are some golden rules, which are worth paying heed to, once you have settled on an area or property we are happy to discuss with you many special considerations that might arise. These could be;
- Conveyancing
You will want to ensure that your purchase will hold its value and be attractive to buyers once you come to sell and your lenders will want to know the property will provide good security. We will balance the need to buy quickly so that the property can start producing a return with making sure that long term interests of the landlord and mortgagee are looked after. - Houses in Multiple Occupation
Some landlords like student areas where yields can be high. However, be aware that special rules on multiple occupancy might apply meaning that an additional licence is required which can be expensive to obtain. - Developer’s schemes
Occasionally special opportunities are offered to buy to let investors. In the boom times schemes often involved flats in city centres bought “blind” by investors hundreds of miles away and not surprisingly many resulted in large scale losses for private individuals. However other sound schemes are available. Developers for example often look to investors to purchase a show house or houses on a large development and offer a licence back arrangement generating a rental for a fixed term. We are happy to advise on any such schemes and point out advantages and pitfalls.
Manage well
Whether or not you employ a good letting agent you will need to be informed of landlords rights and perhaps more importantly responsibilities to enquire smooth running of your investment.
Consider :
- How a tenant’s deposit must be held and the choice of schemes available
- The landlords responsibility to provide a safe environment to employees and visitors and the statutory requirements including EPCs and gas safety certificates
- The importance of a good drafted tenancy agreement. Many letting agents agreements are on a “one size fits all” basis. Whilst rarely disastrous these can leave a landlord at the mercy of a determined tenant seeking to take advantage of unclear terms.
Be prepared for things to go wrong
If well planned and managed the investment should prove a sound one. However no landlord is immune from the rogue tenant or simply one who unfortunately for reasons beyond his control falls behind with the rent. At Brachers we can offer practical and cost effective advice and assistance in recovering rent arrears, obtaining possession of the property and evicting squatters.
So whilst we at Brachers have no “crystal ball” as to what 2012 will bring in terms of activity and movement in the property world we are happy to discuss your buy to let plans and work with you to get the most out of your investment.
