Sunday, 30 October 2016

Are sky-high rents finally running out of steam?

Rental prices have slowed to their lowest annual growth rate this year, according to HomeLet, which provides insurance for landlords.

Tenants signing up to a new rental agreement now pay an average of £910 per month, which is up 3pc on last year.

By contrast, in March, the annual rate of growth of rents was 4.5pc.
On a monthly basis, average rents across the country fell in September by 0.8pc from August, as the market was flooded with newly marketed properties bought before stamp duty was hiked by 3pc for investors.

In the last 12 months, the north-east of England and Scotland are the only places where rents have not increased.

But HomeLet said that the slowing growth in rents suggested that they may be hitting a threshold of affordability.

Landlords will also be hit by new changes to the tax system to be phased in from 2017. This will remove their ability to deduct the cost of their mortgage interest from their rental income, effectively meaning they will be taxed on turnover, not profit.

Buy-to-let tax changes | Mortgage interest relief

  • From 2020, landlords will no longer be able to deduct the cost of their mortgage interest from their rental income when they calculate the tax due
  • So tax will be paid on turnover rather than profit, meaning tax could be due on non-existent income
  • For higher-rate taxpayers, mortgage costs above 75pc of rental income will make their BTL investments loss-making
  • Mortgage interest relief will be restricted to 20pc, meaning that higher and additional-rate taxpayers will be particularly affected
Martin Totty, the chief executive of HomeLet, said that landlords were trying to keep rents within affordable levels.

He said: "Despite factors such as higher stamp duty on purchases for buy-to-let investors, and the tax changes coming in from April 2017, it would appear so far landlords have absorbed any actual or expected decreases in their yields, rather than pass this on through higher rents.”

The average monthly rent in London is £1,555, down 0.4pc in September. The cheapest rents in the country are in the north-east of England, where they average £530 per month.

Sunday, 16 October 2016

Don't overlook the importance of a detailed inventory when letting a property

For landlords who have spent significant funds on getting their properties in top condition to attract tenants, the last thing they want is to see all that work undone through damage or neglect by the occupier.But, if they fail to take a proper inventory at the start of the tenancy, this is a situation landlords could find themselves in.

The Inventory is a listing of all the contents of a property and a record of the condition of each item. It’s also referred to as a “schedule of condition”. The form is designed to help monitor the condition of the items before a tenant moves in and just before a tenant leaves, so it can be made clear what damages, if any, need to be paid for.

A lack of an inventory, or one that has not been completed to the correct standard, could mean that, if the tenant does damage the property or its contents, the landlord may not be able to withhold the deposit to cover the costs.

Some landlords who let properties unfurnished mistakenly believe that they do not need to complete an inventory because there is very little that can be stolen, broken or damaged.
However, as proper inventories also include details on the condition of a property, such as cleanliness and decor, even the barest of properties should have one.

They may be able to use their landlord contents insurance to claim for lost, stolen or intentionally damaged items, but many property owners insurance policies won't pay out for accidental damage.
As such, it is perhaps no surprise that many landlords choose to use professional services to ensure that the inventory is carried out correctly.

The inventory acts as a legal contract between the tenant and landlord that shows they agree on exactly what was in a property and in what state it was in at the start of the rental period.
Therefore, it must be signed by both parties at the start of the tenancy and initialled on each page. It is highly recommended that tenant attends the check-in inspection but the tenant should also be allowed a period of time to advise you of anything they disagree with or wish to be amended so you should allow them a reasonable time to do so. 

The Property Ombudsman Code advises a period of five days for the tenant to respond with corrections however be sure that if the tenant does not sign and agree the report you have a clear audit trail that shows you have done everything to allow them the opportunity to comment.

It is also advisable to note the readings of the gas and electricity meters to avoid disputes both with the tenant and energy suppliers.

Stacey Wren of First Assist RLS said
"A true inventory is not simply a list of items in a property - it also includes a description of the condition and cleanliness at the start and finish of the tenancy, enabling one to be compared against the other with clarity and accuracy," says Ian Potter, operations manager at the organisation. It is also vital that an inventory clearly defines any terms used for describing condition and that these are used consistently and using a clear scale.

For more information on Inventories and other First Assist landlord services visit or call 0800 0830122

Sunday, 9 October 2016

Landlords Home emergency insurance. Is it good value?

All landlords have to make a call on how they will handle the upkeep of their property with boilers topping the list of issues that give the most cause for concern. Well that’s not surprising as it can be a very expensive fix when the break down.

We have taken a good hard look at the boiler insurance market and here is what we have found.
Banks and insurers see household emergency cover as a way of making extra profit from customers. Policies can cost about £200 a year and are supposed to cover emergency problems, such as a boiler breaking down or a pipe bursting.

Experts warn that polices are riddled with exclusions, for example, most providers do not cover lime scale damage and heating controls. Some will not pay out for boiler repairs during the summer or cover boilers more than ten years old. The limits on payouts can vary wildly.

Energy providers are no better. You could find that your old boiler system doesn't meet the standards requested by your energy provider, in which case you'll probably have to pay extra – more than £100 in places – to get your heating system revamped before being offered cover.

So is insurance always the answer?
Not according to consumer group ‘Which’? The consumer group analysed the costs of cover and compared this with the average amount spent calling out engineers when needed.
While boiler breakdown cover, including an engineer's annual check-up of boilers and systems, typically costs between £150 and £200 a year, most households do not need to call out an engineer for repairs each year, according to Which?

Vera Cottrell, financial services expert at ‘Which’ states; ‘Some people may feel reassured by having a home emergency policy or boiler cover but it doesn't make sense financially’.
Over 40% of Which members have at least some type of boiler cover and most say they chose to buy cover for peace of mind or value for money. However, based purely on cost, you'd probably be better off paying for repairs on an ad hoc basis - rather than paying monthly for boiler cover.

Our annual survey of boiler owners shows that the average gas boiler has almost a 50% chance of needing a repair in its first six years - although this drops to less than 40% if you buy a boiler from the one of most reliable boiler brands. 

Which analyzed the results of their boiler reliability survey against the cost of a typical boiler-servicing contract (£183)? They found that 93% of people would be at least £50 better off in any given year if they didn't pay for a boiler-servicing contract, and instead had their boiler annually serviced by an independent repairer and paid for any repairs and faults as they happen. 

You can also cut the cost of expensive repairs by making sure you buy a boiler from a reliable brand.
Also watch out for attractive introductory prices. Many boiler cover companies quote only the cost of the first year of cover, and then as much as triple the amount they charge in the second year. Always ask the provider what the cost of its contract is beyond the first 12 months.

While boiler breakdown cover may provide you with peace of mind, you should also bear in mind that not everything will be covered by a boiler-servicing contract. A typical example is where sludge build-up occurs in your boiler. This is not covered by any of the companies Which looked at and would require a full system flush, which can cost on average more than £15

Check your policy for the following exclusions:
  • ·         Boiler age - if you have an older boiler you may find not all providers will accept you as a new customer
  • ·         Boiler life - existing customers should also be wary. Some providers won’t renew the cover if your boiler reaches a certain age.
  • ·         Call-outs - if your boiler breaks down twice in a year, some policies won’t cover you more than this.