Commentary RF

Tax bombshell may curb Airbnb-style short lets

A lot of people are using Airbnb for their travel needs and others are using to generate additional income. There is a tax relief system for those that are renting out whole properties, and depending on how big the property is, how long people stay, and where it is located, could all affect how much of a tax relief they are getting. The people who are renting out rooms in the spaces that they are occupying probably won’t qualify for the tax break.

Key Takeaways:

The U.K. government is considering charging increased taxes on individuals who rent rooms with a program such as Airbnb.
The tax structure in place has been the same guideline since the early ’90’s.
Currently, amounts under £7,500 earned from leasing a room are not taxed by the government.

“Airbnb has long made it clear that its guidance to its hosts has been to claim the relief only on the letting of rooms, not entire properties.”

Case Study: HMO in four weeks with Clair McArdle

You don’t necessarily need to invest a large amount of money and an extended amount of time into making an HMO a profitable project. Clair McArdle sets a great example of how you can revamp an HMO yourself without the help of hired contractors. McArdle ended up repainting the interior of her home herself as opposed to hiring professionals, and she ended up saving about $4,000 in the process. She chose to go for a Scandinavian look with Cornforth White.

Key Takeaways:

Claire Mcardle moved from doing simple house flipping in real estate to HMO’s or house in multiple occupation which has offered more challenges and rewards.
Key to her success is choosing the right property which is close to amenities, has large bedrooms, sufficient kitchen and bathroom space, and is organized for multiple tenants.
On a recent HMO Claire invested close to 20 thousand in pounds for 27.5 investment return.

“The only downside was the decor. There was a glut of varnished pine and the feature walls were painted peach, terracotta or green.”

Government issues new HMO and licensing guidelines

A new guidance document has been put into effect that impacts licensing in HMO catchments. There will now be minimum sizes set when it comes to bedrooms, and if a landlord is letting to five or more tenants from different households, they must be licensed by the local housing authority. These new guidelines have been put into place in order to create more amicable relationships between landlords and tenants so that letting property is more ethical.

Key Takeaways:

From now on, when five or more individuals are letting the same place, there needs to be licensing from the local housing authority.
With these changes, the HMO catchment should experience 160,000 more houses that are valid under local licenses.
Landlords will now be expected to handle garbage disposal more responsibly by managing and reducing the amount of rubbish on their property.

“Landlords letting properties to five or more people from two or more separate households must all now be licensed by their local housing authority.”

Can I evict using a section 21 notice if I have used a license agreement for my rented HMO property?

When someone rents a property, they are typically within a contract that is considered a shorthold tenancy. Even if renters have signed a license agreement, this does not necessarily mean that a license was created, and that they cannot be evicted with a section 21 notice. If the deposit was protected by scheme when you acquired it from the tenant, this may be grounds for a section 21 notice to be null and void unless the money is refunded.

Key Takeaways:

A landlord needs to be extremely careful about giving out a sham license as they can be prosecuted and jailed for doing so.
Renting out a property is much more difficult than it seems, as it’s not just a simple contract being signed and paid for monthly.
You can use section 21 to evict shorthold tenants but it can’t be used for licenses or longer term agreements.

“You cannot create a license just by getting occupiers to sign a piece of paper with ‘license agreement’ written at the top.”

Where Should You Invest in the Manchester Property Market?

The property market in the UK is showing great signs of growth and a future health market. No more than ever is a good time to invest especially in hot spots like Manchester. Manchester is a growing alternative to the established London market as a place that is undervalued and accessible to the average investor. Major investment has rewarded Manchester will growth potential in the residential and commercial sectors which extend from the city center to the suburbs. Like many growing cities, much of the residential growth is driven by student demand for housing.

Key Takeaways:

Many investors are starting to focus on the North when it comes to the UK property market as London isn’t producing a great return on investment.
Manchester has four universities and over 100,000 students and needs more places for those students to live.
Manchester is growing in demand for luxury apartments and that makes it a great place to invest as it’s becoming a very hot commodity.

“Manchester has been named by many estate agents as one of the UK cities likely to see a rise in house prices over the next decade, so now is the perfect time to invest in this market.”

Debt Financing – The Cost of Using a Bridging Loan

When you are looking to bridge a loan, there is no set amount that you will have to pay, the amount will vary greatly. It will depend on a good number of factors, but one thing you can be sure of is having to pay some fees. It is not well known what these fees are, they will vary from person to person, they are percentage based. The broker fees and a few other fees are going to be apparent before diving in.

Key Takeaways:

Property Investment U.K. recently interviewed bridge loan specialist Rory O’Mara to learn more about the costs involved with bridge loans.
Generally, the amount of the loan you will actually receive will be somewhere around 60 percent of the value of the property.
In order to avoid penalty rates, you should be cautious about not making the loan’s term too short.

“Typical rates for Bridging Loans are typically around 1% but as with any kind of debt financing, the details will depend on a number of factors.”

5 Common Off-Plan Investment Mistakes

You can never retain too much information when it comes to property investment, and Tom Hodson has taken the opportunity to share some common mistakes seen in the world of property investment. The first mistake many people make is not putting enough time and effort into the planning process. It is imperative that you take the time to figure out where you want to be, and how you’re going to get there. Forecasts and rental yield predictions are key players in this step.

Key Takeaways:

If you’re planning to invest, you don’t want to jump into it without some planning
Part of the planning stage, the most important part, is research, give yourself plenty of time to do this
Don’t let the excitement of investing take over your logic, always lead with logic instead of emotion.

“An important part of the planning stage, research is key to choosing the right location, type and term for your off-plan property investment.”

Where to move for… affordable rents

One factor when deciding where to live is how affordable the area is. London ranks among the highest rent rates in the entire world. If you want to move to an area with more affordable rents, consider moving to the eastern part of the country. Bexley and Barking were two areas with the lowest rent rates. Across England and Wales as a whole, the percentage of take home pay that is spent on rent has decreased over the last year.

Key Takeaways:

The amount of take home income Londoners spend on rent has been estimated to be as high as 89%.
Bexley and Barking & Dagenham were identified by Money Supermarket as the most affordable boroughs.
In the north-east, only 23.6% of wages is spent on rent.

“That BBC/Hometrack survey discovered the percentage of wages spent on renting since 2007 had actually decreased across England and Wales as a whole, from 31.1% to 29.4%.”

Demand for ‘lock up and leave’ homes boosting London’s Built to…

The new trend in London is called a ‘Lock up and Leave’ home. Basically this type of housing is centered around both work and pleasure. It enables people to not only enjoy affordable rentals with very little up front cost to helping the owners feel much more secure about having the leave with only a moments notice; giving them peace of mind that their homes are secure. This development is especially well received within the international airports as they cater more to those frequent travelers.

Key Takeaways:

There has been a surge in the “lock up and leave” properties because of the need for travel.
Many residents travel for business or for pleasure and need their home secured from break ins
The build to rent homes are perfect for those who have to leave their belongings regularly.

“New purposely-designed Build to Rent developments have features such as gated entrances and an on-site concierge and management team.”

More than half of UK landlords are optimistic about outlook for buy to let

Even with the UK undergoing a wide array of regulatory and tax changes, a large percentage of cross-country landlords remain positive about their choice of profession and the future of buy to let. Polling reveals that even in the current economic and political state of the UK more than 50% of the country’s landlords remain sanguine and optimistic and less than 20% have a defeatist outlook, leaving about 30% as neutral or indifferent about the prospects of landlord work in the present and ensuing years. Interestingly, Brexit was not a big concern, with only a tick over 30% considering it as worth noting. Much larger areas of concern were the costs of maintaining property and the pitfalls and probability of actually making a profit in the long-term. Both of these areas were rated at 80%+ as concern-worthy by polled landlords. Moreover, the looming specter of the upcoming tenant fee ban did arouse some passion, as about 40% of the polled landlords felt it was worth noting. Overall, however, it would appear that UK landlords are set to stay the course, with more than 60% saying the are unlikely to sell within the next year.

Key Takeaways:

The amount of people who want to get into real estate for passive income is rising.
Rents, and property values, in the United Kingdom are continuing to rise as time goes on.
People must take the necessary steps to prepare their finances before renting a home.

“?Given the number of regulatory and tax changes in the buy to let market over the last few years, it wouldn?t be surprising if landlords felt some trepidation about the future. However, it?s great to see that the landlords we surveyed do, for the most part, remain positive about the future,? said Martyn Alderton, national lettings director at Your Move and Reeds Rains.”