Can investors still get into buy-to-let?
April 10th, 2011
The outlook seems bright for those considering looking to dip a toe in the property investment market as the continued shortage of good rental properties available and high tenant demand due to first-time buyers struggling to find the larger deposits required by many mortgage lenders, has meant that the current buoyant state of the rental market is likely to persist for some time.
Historically Buy-to-let mortgages have always come at a premium so for many balancing the income from the property against the expense of the mortgage has given them cause to steer clear of property investment, but with a growing rental demand come higher rents and rental income.
‘The good news is that, although buy-to-let lenders have tightened their criteria with higher deposits and rental cover calculations, rising rents make it is easier for landlords to meet these demands,’ says Melanie Bien, director at broker, Private Finance.
Steering clear of high street lenders and going through a specialist broker with access to ‘limited distribution’ mortgage deals, can uncover some gems. Mortgages for Business for example, is currently offering a 3.99% two-year discounted tracker in return for a 25% deposit, for all types of landlord.
Bear in mind however that, while fixed rate buy-to-let deals are available, they tend to be disproportionately expensive – and interest rate rises are looming large on the horizon. Credit Scoring requirements for the most competitive buy-to-let deals are also pegged high so it’s worth applying for a copy of your credit file through one of the credit reference agencies if you are in any doubt.
Good News for first time investors
March 15th, 2011
There has been a very interesting change of attitude by lenders in the buy-to-let market. Historically lenders have always favoured the established landlords, those with a history of buy-to-let borrowing and have build up a good sized portfolio.
Since the beginning of the year lenders have begun to change their lending patterns and started to look more favourably at the first time landlord rather than the professional landlord. Not surprisingly these new buy-to-let customers are borrowers who have large credit balances earning very little interest who have become very disillusioned with standard bank accounts and are now looking for alternative ways of getting a decent return on their investment.
With the lenders easing many of the restrictions around buy-to-let mortgages such as deposits, interest rates and other criteria thus making them more affordable and readily available, coupled with the demands on the rental market increasing month on month and rental income providing a better return on investment than your standard bank accounts there has never been a better time to become a property investor.
With up to a 15% return on your investment Happy Homes Investments can help you get your savings working for you again. Call us today for a free consultation.
Working out your Return On Investment
January 14th, 2011
This is an extremely important calculation to make, only by doing this you will avoid the trap that many investors fall into that of purchasing a liability rather than an investment.
Robert Kiyosaki (motivational speaker and author of the “Rich Dad, Poor Dad” series of books sums up the definition of an investment perfectly “To be an asset it must pay you cash every month, AND appreciate in value”
Far too many “investors” concentrate on the later part of this quote and forget about the income, many are enticed by the promise of a huge growth in the value of their property and are left with a cash flow negative property (outgoings and commitments higher than rental income) that they cannot sell, there is no longer the guarantee that a property will immediately increase in value as soon as you have done any alterations or repairs, Many investors are then left with a liability which they have to pay out cash for month on month. The results of which are:-
Reduction in your standard of living, an investment is supposed to enhance your lifestyle not restrict it.
Problems should your other income streams fail through unemployment, dividend payments; this may force you to sell your property at a loss causing more financial problems.
Increasing your portfolio becomes impossible if you are already subsidising 1 property at £200 per month do you want to increase this to 10 properties and £2000 per month.
It really is important to do your homework and ensure you purchase a property that gets the balance between income and growth right and the only way this can be done is to follow the steps laid out to you throughout our guide.
1. Find the right property
2. Pay the right price
3. Keep refurbishments within budget and timescales
4. Factor in any hidden costs
5. Ensure you have tenants ready to move in as soon as the property is ready
At Happy Homes Investments we ensure these points are covered every time for every investor, as we want to make sure our Investors buy a good solid investment not a liability.
Beware of the overspend.
November 10th, 2010
Overspends can happen so easily if either you or your builder haven’t put enough thought into the refurbishment budget from the get go. In fact some builders have been known to deliberately over estimate in order to increase their income from a job. Be aware of this possibility and do your sums and research so you are confident you are getting value for money.
Beware of getting emotionally involved; you’re not going to be living there. This is a business not a home. It is so easy to spend £5,000 extra on “creative luxuries” on a job and at the end discover you’ve not added a single penny to the achievable rent. What a waste.
Also think about time overruns. There is nothing that annoys tenants and letting agents more than being told a moving in date, only to find the refurbishments aren’t complete by the date you set. So the tenant is left either homeless or living on a building site.
Beware also of under spend; cheapest isn’t always the best value for money. You want that new kitchen to last 10 years otherwise you’ll have to spend more money replacing it every five years or so. Tenants don’t like living in properties that start to “fall apart” and they are likely to vote with their feet, leaving you with an empty property, no income and the mortgage to be paid. A false economy if ever there was one.
A great way to avoid many of these pitfalls is to use a quality reputable company such as www.buildingservices.com or www.buildingsolutionsmidlandsltd.co.uk
Increase in numbers of new tenants
October 8th, 2010
A recent report issued by Countrywide Integrated Solutions, one of the country’s largest Letting agents, has shown that quarter three of this year saw a 19% rise in the number of new tenants looking for rental property. This means that in the three months leading up to October, over61000 new people have registered with them to enter the rental market. During 2010, the demand for residential rental properties has increased by over 40%.
It’s the old story of supply and demand, with mortgage criteria still very tight and with uncertainty in the employment market, more and more people are turning towards the rental sector rather than risking buying their own property. In the Midlands and the North, two bedroom houses are in the greatest demand with almost a quarter of potential tenants looking for this type of property. This means there are usually around 10 tenants applying for each rental as soon as itis advertised.
Some see the private rental market as the only option in the current economic climate, tough mortgage criteria and the Government’s cuts to the Social Housing Budget.
The high demand for rental property means that many landlords are able to maintain a god level of rental income whilst enjoying low mortgage interest payments and so maximising their return on investment.
Building a relationship with the Estate Agent
June 14th, 2010
Estate Agents have a legal and moral obligation to act in the best interests of the vendor; after all they are the ones paying their fees. No Estate Agent should ever advise a client to accept an offer which could be detrimental to them so whatever your relationship with them do not expect this. Where a good relationship with the Estate Agent can be invaluable is: –
In a rising market.
When house prices are rising and there is a shortage of property on the market, the vendor may have accepted your offer but if you have not exchanged contracts any higher offers that come in the Estate Agent must pass these onto the vendor. A good relationship could see the Estate Agent let you know when if any offers are received, or helping you re-negotiate your offer and making sure your offer is the one the vendor finally accepts also the Estate Agent will be more receptive to progressing the sale at a quicker pace to exchanging contracts by making sure any obstacles in the way are dealt with rather than being left on the desk.
In a declining market
When house prices are falling and there is a glut of properties on the market, you will find Surveyors will start to down value properties, your relationship with the Estate Agent will become invaluable if you find yourself in the position where your purchase has been down valued and you need to re-negotiate your price down, remember the Estate Agent must at all time act in the vendors best interests, so your relationship with the Estate Agent is vital if you want them to convince the vendor that your offer is the best offer they will receive.
Over the years Happy Homes have built up excellent relationships with Estate Agents and this enables them to offer, exchange and complete on the purchase of properties within excellent timescales reducing the amount of worry and hassle for its clients.
The Impact of the end of the Stamp Duty holiday
April 2nd, 2010
The end of the Stamp duty holiday had a dramatic effect on the housing market as the Council of Mortgage Lenders reported 49% fewer house purchase mortgages were granted in January than in December. However the 32,000 loans granted was still an increase on the 23,000 for the same time last year. The biggest drop was in first time buyers where the number of loans dropped by 54% compared to the number of mortgages granted in December.
The end of the Stamp Duty Holiday saw an increase of 49% in mortgages granted in December followed by a 71% drop in January.
The Director General of the CML Michael Coogan said, “When the December and January data are taken together, they show little change in the underlying market conditions compared with recent months, with activity still slow but well up on the lows of a year earlier.”
Happy Investing!
How to Rent out Your Home
February 26th, 2010
The property slump, recession and the phenomenon that is Buy-to Let has led to more and more accidental landlords. These are home owners who for whatever reason have decided to rent out their property rather than sell. Here are a few things they had to consider:
1] Do your maths: Do all your figures add up? Does your rental income cover all your houses outgoing costs? Don’t forget your tenants will be paying the utility bills and Council Tax.
2] Go it alone or get an Agent: letting Agents take the hassle out of renting out your property; they will find a tenant, collect the rent, arrange repairs and manage the rental from start to finish. What they will also do is charge a fee, and this can be anything from 5%-15%. Do your homework and choose a good agent not a cheap one.
3] Let your current lender know: You need your lender’s permission to rent out your property. If you do not inform them, you could be in breach of your mortgage terms and conditions. The majority of Lenders are not going to object, so what have you got to lose.
4] Know the rules: It is vital to know the rules and regulations, now you are a landlord. This may not be an investment property but you may still be liable for tax. Don’t forget you are now responsible for gas, electricity and fire regulations, Energy Performance certificates, Tenancy Deposit Scheme, etc.etc. etc.
5] Don’t forget Insurance: Your buildings insurance will be invalid as soon as you rent out your property, so this will need to be taken out as a landlord, and don’t forget to get cover if your tenants default on their rent.
Happy Investing!
Tenants outnumber properties
February 15th, 2010
According to the Association of Residential Letting Agents (ARLA) the rental market is seeing an upward trend in the number of tenants. A survey conducted by ARLS showed that the previous surplus of rental property is reducing at an unprecedented rate wile the demand growing even quicker.
During the last quarter of 2009 ARLA reported that 41% of its members were reporting more tenants than properties, compared to just 21% in the previous quarter.
Demand for tenanted accommodation is coming from previous homeowners who have been forced to sell their property during the last year due tot either moving jobs, or financial instability and they are now finding it difficult to find the right property or funding according to ARLA Operations Manger Ian Potter. He added the rise in Tenants is a positive sign for the industry as it indicated increased market movement, it also shows more people will learn the benefit of living in rental accommodation.
Happy Investing!
Naughties see biggest rise in house prices
January 21st, 2010
House prices in the UK have risen by a massive 273% since 1959 according to figures published by the Halifax. The last 10 years alone have seen house prices rise by a huge 62%, just beating the Eighties where growth was 61%. The accolade for the worst performing decade goes to the nineties where property prices fell by 22% in real terms.
The jump in housing prices during the eighties can be attributed to the introduction of the Right to Buy Scheme, which also counted for the fall in the number of people in rented accommodation from 33% of the population in the sixties, to just 9% by the start of the nineties, however the rental market is making a come back with that figure now rising to 14% by the end of 2008.
Happy investing!