Tamworth Buy-To-Let Predictions up to 2037

On several occasions over the last few months, in my Tamworth Property Blog, I predicted that the rate of rental inflation (i.e. how much rents are rising by) had eased over the last year. At the same time I felt that in some parts of the UK rents had actually dropped for the first time in over eight years. Recent research backs up this prediction.

Rents in Tamworth for new tenancies only grew by 0.4% in the last 12 months (i.e. not existing tenants experiencing rental increases from their existing landlord). When we compare that current rate with the historical rental inflation in Tamworth, an interesting pattern emerges ..

  • 2016 – Rental Inflation in Tamworth was 2.2%
  • 2015 – Rental Inflation in Tamworth was 6.9%
  • 2014 – Rental Inflation in Tamworth was 0.7%

The reason behind this change depends on which side of the demand/supply equation you are looking from. On the demand side (from the tenants point of view) there is the uncertainty of Brexit and the fact that salaries are not keeping up with inflation for the first time in three years. Critically this means tenants have less disposable income to pay their rent. As an aside, it is interesting to note that nationally, rent accounts for 29% of a tenant’s take home pay (Denton House).

On the supply side of the equation (landlords point of view) Brexit also creates uncertainty. However, the biggest issue was a massive upsurge of new rental properties coming on to the market in late 2016, caused by George Osborne’s new 3% stamp duty tax for landlords in the first part of 2016. This meant a lot of new rental properties were ‘dropped’ on to the rental market all at the same time. The greater choice of rental properties for tenants curtailed rental growth/inflation. A slight softening of Tamworth property prices has compounded this.  Figures from The Bank of England suggested that first time buyers rose over the last 12 months as some were more inclined to buy instead of rent. Together, these factors played a part in the ongoing moderation of rental growth.

The lead up to the General Election in May didn’t help: after all people don’t like doubt and uncertainty. So now that we have a mandate for going forward over the next 5 years hopefully that has removed any stumbling blocks stopping tenants making the decision to move home.

Whether it be ‘hard’ or ‘soft’ Brexit negotiations (and with the Election result the Tory’s might have to be ‘softer’ on those negotiations) the simple fact is, we aren’t building enough properties for us to live in. Both in Tamworth, the West Midlands and the wider UK, long-term population trends imply that rents will soon be growing faster than inflation again. Look at the projections by the Office of National Statistics.

Population Estimates for Tamworth Borough Council over the next 20 years
2016 (actual) 2021 2026 2031 2036
77,313 77,993 78,616 79,030 79,428
Population estimates for the Tamworth council area over the next 20 years
Population estimates for the Tamworth council area over the next 20 years.

Tenants will still require a vibrant and growing rental sector to deliver them housing options in a timely manner. As the population grows in Tamworth, and wider afield, any restriction to the supply of rental properties (brought about by poor returns for landlords) cannot be in the long-term best interest of tenants. Simply put rents must go up!

The fact is that I see this as a short-term blip and rents will continue to grow in the coming years. With rents only accounting for 29% of a tenants’ disposable income, the ability for most tenants to absorb a rent increase does exist.

Don’t Forget you can keep up to date with all our articles on the Tamworth property Market here.   https://www.tamworthpropertyblog.co.uk

Whatever property type you are thinking of adding to your portfolio next year I am sure it will let readily as the market remains strong with a lack of supply continuing to feed strong rental prices. If you are in town and would like to discuss any plans you may have, give me a call to meet for coffee on 07531484956 or email me lorraine@hallandthompson.co.uk

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Ask Lorraine – My Tamworth tenants are stealing electricity

🙋  Landlords Question: 

I’m hoping you can offer some advice as  I found out that one of my tenants was stealing electricity and I don’t know what to do about it.

The rent has always been paid on time, both tenants work full time and  last year I seem to remember them taking two foreign holidays. They have lived in the property two years with no issues until recently when the tenant complained the cooker was not working.

On examination  from  a well trusted contractor  it came to light about the rewiring. I haven’t let the tenant know that I am aware of what’s been going on.

We have made the utility company aware and they are looking into the situation.  Since the Grenfell Tower incident  I’m worried about the dangerous rewiring and the fact that a tenant of mine was so brazen in doing this.

Am I liable for any of the stolen electricity.?

Zoe

Electricity Theft
Electricity Theft

 

Lorraine’s Answer:

Hi Zoe, Its very common for tenants to bypass, or substitute meters. Prepay meters are the most popular to bypass.

I’m assuming that all bills are in the tenants names, if so, any stolen electricity you will not be liable for, so that’s some good news.

Many offenders see stealing utility supplies as a victimless crime, in much the same way as shoplifters do – it’s a big company so what’s the harm, they can afford it, or look at the profit they make! Do the offenders not realise they have an impact on honest consumers receiving higher bills, let alone the dangers of what they are doing.

My advice if you have not done so already,  check that the other utilities have not been tampered with. Serve notice on the tenants and find new tenants who will not put themselves or your property at risk.

Good Luck.

 

 

3,300 Tamworth Landlords – Is This a Legal Tax Loop-Hole?

In November 2015, George Osborne disclosed plans to restrain the buy-to-let (BTL) market, implying its growing attractiveness was leaving aspiring first time buyers contesting with landlords for the restricted number of properties on the market.  One of things he brought in was that tax relief on BTL mortgages would be capped, starting in April 2017.  Before April 2017, a private landlord could claim tax relief from their interest on their BTL mortgage at the rate they paid income tax – (i.e. 20% basic /40% higher rate and 45% additional rate).

So, for example, let’s say we have a Tamworth landlord, a high rate tax payer who has a BTL investment where the rent is £900 a month and the mortgage is £600 per month.  In the tax year just gone (16/17), assuming no other costs or allowable items …

  • Annual rental income £10,800.
  • Taxable rental income would be £3600 after tax relief from mortgage relief
  • Meaning they would pay £1,440 in income tax on the rental income

And assuming no other changes … the landlord would have income tax liability’s (at the time of writing May 2017) in the tax years of …

  • (17/18) £1,800
  • (18/19) £2,160
  • (19/20) £2,520
  • (20/21) £2,880

Landlords who are higher rate tax payers are going to have be a lot smarter with their BTL investments and ensure they are maximising their rental properties full rental capability.  However, there is another option for landlords.

The Tamworth landlords who own the 3,300 Rental properties

Buy To Let Landlords setting up Limited Companies
Buy To Let Landlords setting up Limited Companies

in the town could set up a Limited Company and sell their

property personally to that Limited Company

In fact, looking at the Numbers from Companies House – many landlords are doing this.  In the UK, there are 93,262 Buy To Let Limited Companies, and since the announcement in November 2015 – the numbers have seen a massive rise.

  • Q2 2015 / Q3 2015 – 4,193 Buy to Let Limited Companies Set Up
  • Q4 2015 / Q1 2016 – 5,403 Buy to Let Limited Companies Set Up
  • Q2 2016 / Q3 2016 – 3,007 Buy to Let Limited Companies Set Up
  • Q4 2016 / Q1 2017 – 7,149 Buy to Let Limited Companies Set Up

So, by selling their buy to let investments to their own limited company, owned 100% by them, these landlords could then offset the costs of running their BTL’s as an ‘allowable expense’ – effectively writing off the cost of 100% of their mortgage outgoings, wear and tear and upkeep, letting agent’s fees etc.

I am undeniably seeing more Tamworth landlords approach me for my thoughts on setting up a BTL limited company, so should you make the change to a limited company?

In fact, I have done some extensive research with companies house in the 15 months (1st January 2016 to 31st March 2017 and 394 Buy To Let Limited Companies have been set up in the B postcode alone).

Well if you are looking to hold your BTL investments for a long time it could be very favourable to take the short-term pain of putting your BTL’s in a limited company for a long-term gain.  You see, there are huge tax advantages to swapping property ownership into a limited company but there are some big costs that go with the privilege.

As the law sees the new Limited Company as a separate entity to yourself, you are legally selling your BTL property to your Limited Company, just like you would be selling it on the open market. Your Limited company would have to pay Stamp Duty on the purchase and if you (as an individual) made a profit from the original purchase price, there could be a capital gains tax liability of 18% to 28%.  The mortgage might need to be redeemed and renegotiated (with appropriate exit charges).

On a more positive note, what I have seen though by incorporating (setting up the Limited Company) is landlords can roll up all their little buy to let mortgages into one big loan, often meaning they obtain a lower interest rate and the ability to advance new purchase capital.  Finally, if the tax liability is too high to swap to a limited company, some savvy buy to let investors are leaving their existing portfolios in their personal name whilst purchasing any new investment through a limited company?  Just an idea (not advice!).

It’s vital that landlords get the very best guidance and information from tax consultants with the right qualifications, experience and insurance.  Whatever you do, always get the opinions from these tax consultants in writing and you shouldn’t hurry into making any hasty decisions.  The modifications to BTL tax relief are being progressively eased in over the next three years so there is no need to be unnerved and rush into any decisions before finding out the specifics as they relate precisely to your personal situation, because with decent tax planning (from a tax consultant) and good rental / BTL portfolio management (which I can help you with) … whatever you do – let’s keep you the right side of the line!

If you are interested in the Tamworth Property Market and haven’t signed up to the Tamworth Property Blog you are missing out on critical/ important information that all landlords should consider when renting out their property.  Visit the Tamworth Property Blog at www.tamworthpropertyblog.co.uk

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Cannabis Farms and your Buy to Let

Cannabis farms in rented accommodation have been a problem for Landlords for a number of years and sadly it’s on the increase. Growers who set them up are said to produce more than 80% of the cannabis smoked in the UK today.

For landlords, the discovery of a cannabis farm can be devastating. Under S.8 of the Misuse of Drugs Act 1971 a landlord or Property Manager can receive a maximum of 14 years in prison and/or a fine if they knowingly permit the production of controlled drugs to take place in rented accommodation. Arguably, “knowingly permit” could include turning a blind eye to the production of cannabis to ensure that their rental income continues.

Landlords and their agents should therefore take steps to minimise the risk of cannabis cultivation in rented accommodation. Some signs to watch out for include:

Tenant’s paying a large amount of rent up front.

Tenant’s refusing regular inspections or restricting access to parts of the property during inspections.

Tenant’s covering up or blacking out windows.

Signs of meter tampering.

If there is a suspicion that cannabis is being grown at the property landlords should not address the matter directly with their tenant but should report it to the police. The landlord is then advised to serve the tenant with a Section 8 notice and follow the correct protocol.

cannabis farm picture
cannabis farm picture

 

 

 

 

 

 

 

So how can you spot the cannabis farm next door to you?

1/ Follow your nose. A cannabis crop takes about three months to produce and that sweet sickly smell is unmistakable.

2/ Growers require constant 2,000 watts for their crop, so look out for curtains in rooms that are never open or are blacked out to cover the brilliant sunshine in that room. No it’s not a vampire living there it’s most likely a cannabis farm.

3/ The lights give of a tremendous amount of heat. In the early days it was fairly obvious who was growing cannabis during the snowy season – the house with no snow on the roof. The growers are becoming more savy and now use internal tents which isolate a lot of the heat, therefore making it harder for the police to detect cannabis farms with their infra-red cameras.

4/ Growers have to ventilate the plants and the large extractor fans used, generally emit a low hum. Have you heard the same low hum every morning and at the same time coming from your neighbours house? It could be the cannabis farm starting the days work.

5/ Growers tend to live in a vicious world not knowing when the door is going to get kicked in and by whom so they ensure that their place is like a fortress with bars and grilles on the windows portcullises on the doors and CCTV cameras.

Not all farms are inhabited by the grower though, so watch out for signs that there is no one actually living there:  unkempt gardens, bins never emptied or the postman never having post. Watch out for neighbours that are far too friendly and try to overcompensate in their efforts not to annoy you or make you suspicious as to what they’re really up too.

landlords very rarely recover the full repair cost of the damage that is done to their property in these situations, so be vigilant if you are managing your own portfolio. If an agent is managing your properties, ensure they are carrying out regular inspections.

 

until next week.

Council House Waiting List in Tamworth Drops by 43.7% in last 8 years

Should you buy or rent a house? Buying your own home can be expensive but could save you money over the years. Renting a property through a letting agent or private landlord offers less autonomy to live by your own rules, with more flexibility if you need to move.

Tamworth Council Offices
Tamworth Council Offices

Yet, there is third way that many people seem to forget, yet it plays an important role in the housing of Tamworth people. Collectively known as social housing, it is affordable housing, which is let by either Tamworth Borough Council or a housing association to those considered to be in specific need, at rents below those characteristic in the private rental market.

In Tamworth, there are 5,869 social housing households, which represent 19.31% of all the households in Tamworth. There are a further 1,598 families in the Tamworth Borough Council area on their waiting list, which is similar to the figures in the late 1990’s. The numbers peaked in 2008, when it stood at 2,842 families, so today’s numbers represent a drop of 43.7%.

Number of families on Tamworth's housing list
Number of families on Tamworth’s housing list

Nevertheless, this doesn’t necessarily mean that more families are being supplied with their own council house or housing association property. Six years ago, Westminster gave local authorities the authority to limit entitlement for social housing, quite conspicuously dismissing those that did not have an association or link to the locality.

Interestingly, the rents in the social rented segment have also been growing at a faster rate than they have for private tenants. In the Tamworth Borough Council area, the average rent in 1998 for a council house/housing association property was £181.65 a month, whilst today its £350.05, a rise of 93% in 19 years.

When comparing social housing rents against private rents, the stats don’t go back to the late 1990’s for private renting, so to ensure we compare like for like, we can only go back to 2005. Over the last 12 years, private rents have increased nationally by a net figure of 19.7%, whilst rents for social housing have increased by 59.1%.

So, what does this all mean for the homeowners, landlords and tenants of Tamworth?

Rents in the private rental sector in Tamworth will increase sharply during the next five years. Even though the council house waiting list has decreased, the number of new council and housing association properties being built is at a 70 year low. The government crusade against buy-to-let landlords together with the increased taxation and the banning of tenant fees to agents will restrict the supply of private rental property, which in turn using simple supply and demand economics, will mean private rents will rise – making buy to let investment a good choice of investment again (irrespective of the increased fees and taxation laid at the door of landlords).  It will also mean property values will remain strong and stable as the number of people moving to a new house (and selling their old property) will continue to remain restricted and hence, due to lack of choice and supply, buyers will have to pay decent money for any property they wish to buy.

Interesting times ahead for the Tamworth Property Market!

My advice to the prospective landlord as is to you – is do your homework.  One such website, which only talks about the Tamworth buy to let Property Market, is the Tamworth Property Blog,     https://www.tamworthpropertyblog.co.uk  another source of info many Tamworth landlords use is me! What many Tamworth landlords do, irrespective of whether you are a landlord of ours, a landlord with another agent or a DIY landlord, if you see any property in Tamworth, that catches your eye as a potential buy to let property, be it a terraced house, semi or flat … email me lorraine@hallandthompson.co.uk  I will email you back with my thoughts (although I will tell you what you need to know .. not what you want to hear!)

If you enjoyed reading my article, feel free to take a look my other online resources below:

Hall and Thompson Estate Agents Tamworth Youtube Channel

Follow The Buy-To-Let Property Investment Market in Tamworth

Lorraine’s Tamworth Property Market LinkedIn Page

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Ask Lorraine – Why won’t our Tamworth landlord replace our stolen possessions?

🙋  Tenants Question: 

A couple of weeks ago the house that we rent off a Tamworth landlord was broken into and some of our possessions were taken including a small amount of cash.  The landlord is refusing to compensate us for replacing these goods, surely he can claim back off his insurance?

Why won't our Tamworth landlord replace our stolen possessions?
Why won’t our Tamworth landlord replace our stolen possessions?

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lorraine’s Answer:

The effects of a burglary can be devastating and the cost of replacing your possessions soon adds up, however responsibility lays with the tenant to take out contents insurance to cover their own contents and valuables, it’s not up to the landlord.

Surprisingly, recent research shows that 61% of tenants do not  currently have contents insurance and 48% of those admitted that they have never taken out contents insurance.

In-fact  19 % of tenants had no idea what contents insurance was!

Research carried out by Upad noted that 78% of tenants had belongings to the value of £1000 with 22% owing belongings totalling £5,000 or more. Generally we all have mobile phones and other little must have gadgets that soon add up in value and what’s the cost to replace the food in the freezer, should you have a power cut and the food gets spoiled.

So What is Contents Insurance?

Tenant contents insurance provides peace of mind that you will be able to replace your personal possessions should they get damaged or stolen.

Some policies include accidental damage cover against Landlord’s contents for which the tenant has been made legally responsible.

So why not give some thought to contents insurance, it’s not expensive as you may think and you may thank your lucky stars one day. If you would like more information, get in touch.

Until next week.

 

If you enjoyed reading my article, feel free to take a look my other online resources below:

Hall and Thompson Estate Agents Tamworth Youtube Channel

Follow The Buy-To-Let Property Investment Market in Tamworth

Lorraine’s Tamworth Property Market LinkedIn Page

Hall and Thompson Estate Agents Tamworth Facebook Page

Tamworth Hall and Thompson Estate Agents Twitter Page

 

Tamworth First Time Buyers Mortgages taking 28.6% of their Wages

I received a very interesting letter the other day from a Tamworth resident. He declared he was a Tamworth homeowner, retired and mortgage free. He stated how unaffordable Tamworth’s rising property prices were and that he worried how the younger generation of Tamworth could ever afford to buy? He went on to ask if it was right for landlords to make money on the inability of others to buy property and if, by buying a buy to let property, Tamworth landlords are denying the younger generation the ability to in fact buy their own home.

Whilst doing my research for my many blog posts on the Tamworth Property Market, I know that a third of 25 to 30 year olds still live at home. It’s no wonder people are kicking out against buy to let landlords; as they are the greedy bad people who are cashing in on a social woe. In fact, most people believe the high increases in Tamworth’s (and the rest of the UK’s) house prices are the very reason owning a home is outside the grasp of these younger would-be property owners.

Age Distribution of First Time Buyers in UK since 1990
Age Distribution of First Time Buyers in UK since 1990

 

 

 

 

 

 

 

 

 

However, the numbers tell a different story. Looking of the age of first time buyers since 1990, the statistics could be seen to pour cold water on the idea that younger people are being priced out of the housing market. In 1990, when data was first published, the average age of a first time buyer was 33, today it’s 31.

Nevertheless, the average age doesn’t tell the whole story. In the early 1990’s, 26.7% of first-time buyers were under 25, while in the last five years just 14.9% were. In the early 1990’s, four out of ten first time buyers were 25 to 34 years of age and now its six out of ten first time buyers.

Although, there are also indications of how un-affordable housing is, the house price-to-earnings ratio has almost doubled for first-time buyers in the past 30 years. In 1983, the average Tamworth home cost a first-time buyer (or buyers in the case of joint mortgages) the equivalent of 2.5 times their total annual earnings, whilst today, that has escalated to 4.5 times their income (although let’s not forget, it was at 5.0 times their income for Tamworth first time buyers in 2007).

Again, those figures don’t tell the whole story. Back in 1983, the mortgage payments as percentage of mean take home pay for a Tamworth first time buyer was 25.9%. In 1989, that had risen to 55.5%. Today, it’s 28.6% … and no that’s not a typo .. 28.6% is the correct figure.

Mortgage payments as a percentage
Mortgage payments as a percentage

So, to answer the gentleman’s questions about the younger generation of Tamworth being able to afford to buy and if it was right for landlords to make money on the inability of others to buy property? It isn’t all to do with affordability as the numbers show.

And what of the landlords? Some say the government should sort the housing problem out themselves, but according to my calculations, £18bn a year would need to be spent for the next 20 or so years to meet current demand for households. That would be the equivalent of raising income tax by 4p in the Pound. I don’t think UK tax payers would swallow that.

So, if the Government haven’t got the money… who else will house these people? Private Sector Landlords and thankfully they have taken up the slack over the last 15 years.

Some say there is a tendency to equate property ownership with national prosperity, but this isn’t necessarily the case. The youngsters of Tamworth are buying houses, but buying later in life. Also, many Tamworth youngsters are actively choosing to rent for the long term, as it gives them flexibility – something our 21st Century society craves more than ever.

 

Whatever property type you are thinking of adding to your portfolio this year year I am sure it will let readily as the market remains strong with a lack of supply continuing to feed strong rental prices. If you are in town and would like to discuss any plans you may have, give me a call to meet for coffee on 07531484956 or email me lorraine@hallandthompson.co.uk

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Ask Lorraine – I’m looking to get into buy to let in Tamworth

🙋  Landlord’s Question: 

I’m  looking to get into buy to let to help the shortfall in my pension which the government has stolen from me.  I’m keen to buy in Tamworth,  any quick hints and tips?

Welcome to Tamworth
Welcome to Tamworth

Lorraine’s Answer:

If you are considering becoming a landlord and buying a property to let out there are many things to consider. I think the number one thing is to decide exactly what you are looking to achieve.

Is it purely an income to subsidise your pension, capital growth, or even an investment that can be passed onto your children that you are looking for?

As a rule of thumb, you generally find that property with a high yield does not obtain a high capital growth and property with a high capital growth does not usually net a high yield.

The majority of landlords tend to buy a property that can give a decent growth potential with a yield that covers their costs plus a little extra.

The average yields in Tamworth are 5 % – 6%

So what  should you buy?

Landlords tend to buy locally to them as they have the knowledge of their own area and do not want to travel too far if they manage their own  properties.

I personally like a Victorian house, lots of character unlike the boxes of today, however the purse strings tend to be open a lot more on these properties, so I would say a two bedroom modern house which is in a good location would be a good bet.

Always buy a freehold property so that you don’t have the yearly maintenance charge eating into your yield and I wouldn’t recommend  buying a four bed if you are looking at single lets. Generally the bigger the house the lower the yield, plus larger properties tend to have more wear and tear from having a large family in residence.

Take into consideration any fees to purchase the Buy to Let before you start your property journey, stamp duty is payable… Details here

and have you sought advice as to any advantages of setting up a limited company, it’s usually only an advantage if you are purchasing a number of Buy to Lets, are in the higher tax band or looking to become a property tycoon.

Buy to let is still a good source of income even with the Government screwing over landlords. I’m always banging on about capital growth, so purchasing a Buy to Let should be a long term plan and not for the faint hearted, buy today and jump tomorrow.

*** If you are thinking of getting into the property rental market and don’t know where to start, speak to us for impartial advice and guidance to get the best return on your investment. For more information about other potential investment properties that we could introduce you to, or to ask about our thoughts on your own investment choices, call us now on 01827 425195, you can always email me on Lorraine@hallandthompson.co.uk***

Don’t forget to visit the links below to view back dated deals and Tamworth Property News.  http://www.Tamworthpropertyblog.co.uk

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