Landlords & Tenants Have Been Set Up To Lose On Clause 24

 

Update:  We've moved our blog to www.folkestone-estateagent.co.uk


For those who haven't heard, Clause 24 first came to light in the Summer Budget of 2015 and has been subject to a great deal of controversy since.


In simple terms, the Government is proposing to start applying tax to a portion of the rent paid to a landlord which s/he then pays into the mortgage as interest.  This flies in the face of standard business practice of taxing businesses on actual profit.


If you don't run your own business, the best analogy I can come up with is if HMRC started taxing ordinary folk on expenses we claim from our employers in lieu of having a company credit card.  Imagine the kerfuffle!


So why is this important to both landlords and tenants?  Because increased costs for landlords will inevitably lead to some landlords either selling their properties or putting the rent up*.

Higher Costs for Landlords + Less Properties on the Market = Rent Increases For Tenants.

The truly ironic part of this whole debacle is that the purpose of these tax changes was to make it easier for first time buyers to get on the property ladder. I think it's safe to presume that most of these first time buyers will be in rented accommodation.

Want to Know More?

Visit the saynotogeorge.co.uk/ website, follow this Facebook Page set up by Platinum Property Partners who have crowd funded a legal case to challenge, and if you don't like what you're reading...

Write to your MP

*survey conducted by spareroom.co.uk found that nearly half of landlords intend to raise rents in 2016.

Folkestone Buy To Let Property of The Week

£550pcm - £125,000 - Broadmead Road

Update:  We've moved our blog to www.folkestone-estateagent.co.uk




I've chosen this lovely little one bedroom flat on Broadmead Road this week because it's the sort of property which ticks all the boxes for a potential tenant.  

It's ground floor with a lovely little garden, double glazing, gas central heating, good sized rooms and a bit of storage.  Literally around the corner from Folkestone Central Station (0.2 miles according to Rightmove) which takes you to London on the fast train in 54 minutes.

Assuming the property is kept in good condition, all those lovely ticked boxes will help by keeping the rent up, reducing voids, lengthening tenancies and attracting quality tenants.  (found for you by us, of course!)

All this with a potential yield of 5.5%.

Oh, and it's share of freehold...  take a look on Rightmove...


P.S. See update below in comments>>

6.57% Yield Folkestone Buy To Let Property of The Week

Radnor Park Avenue £105,000 and potential of £575pcm

Update:  We've moved our blog to www.folkestone-estateagent.co.uk


What's That? Yield Under 7%?!???!


Before you start throwing rotten veg, take a closer look....



The location and size of this property is amazing, the lease is long, there's off-road parking, double-glazing and just around the corner is Radnor Park and Folkestone Central Station which will get you to London St Pancras in under an hour.



OK, the yield isn't as high as other deals I've written about recently, however the potential for capital gain is there too and that's something that should be factored in here.



Based on the advert I think that the agent's photos seem to be avoiding the radiators which are likely to be storage heaters and there's no photos of the bathroom so either one of the vendors was in there taking a really long bath when they came round to take photos or we should expect an avocado suite or DIY tiling.  <eek>



Take a look at this property on Rightmove and see what you think... http://www.rightmove.co.uk/property-for-sale/property-32448309.html

£185,000 inheritance - Is buying Folkestone Property still the best place for my windfall?

Two Bedroom Ground Floor Flat in Julian Road

Update:  We've moved our blog to www.folkestone-estateagent.co.uk


I had an interesting email from someone in Folkestone a few weeks ago that I want to share with you (don’t worry I asked his permission to share this with you all). In a nutshell, the gentleman lives in London, he is in his mid 60’s and still working. He has a decent pension, so that when he does retire in a couple of years’ time, it will give him a comfortable life. He had recently inherited £185,000 from an elderly aunt. One option he told me was put it into a savings account. The best he could find was a 2 year bond with the Post Office which paid 1.9%; meaning he would get £3,515 in interest a year. One of his other options was to buy a property in Folkestone to rent out and he wanted to know my thoughts on what he should buy, but he had concerns as he didn’t want to take a mortgage out at his time of life. He was also worried about all the tax changes he had read about in the papers for landlords.

Notwithstanding the war on Folkestone landlords being waged by George Osborne, the attraction of bricks and mortar endures for many. As our man is a cash buyer, he would not have to deal with the intricate cut to mortgage interest tax relief that will diminish, or even eradicate, the profits of many Folkestone landlords. It’s true he would face the extra 3% in stamp duty to buy a second property, but with some good negotiation techniques, that could soon be mitigated.

I told him that buying a Folkestone buy to let property is all about the total return on investment. True, he could put the money in the Post Office bond and receive his interest of £3,515 a year or, as he rightly suggested, invest in property in Folkestone. The average yield (yield being the equivalent of the interest rate on the property) at the moment in Folkestone is 3.74% per annum, meaning our potential F.T.L (First Time Landlord) should be able to, depending on what he bought in the town, earn before costs £6,919 a year. (However, I told him there are plenty of landlords in Folkestone earning half as much again (if not more), if he was willing to consider more specialist investment types of properties – again, if you want to know where – look at my blog or drop me an email).

The bottom line is that the success of investing in Folkestone buy to let property versus a savings account with the Post Office (or whatever Bank or Building Society is offering the best rate) will depend on the performance of those assets. Unlike with a savings account, with property the capital you invested can also go up (and yes, it can go down as well – more of that in second). Property values in Folkestone have risen in the last twelve months by 8.4% meaning, that if our chap had bought a year ago, not only would he have received the £6,919 in rent, but also seen an uplift of £15,540 …meaning his overall return for the year would have been £22,459 (not bad when compared to the Post Office!).

..  but the doom mongers amongst you will say, property values can go down, as they did in 2008, and in 1988 and 1979. Yes, but after 1979 prices had bounced back to their ’79 levels by 1984 and went on to grow an additional 58% in the following four years. Then again, they dropped in 1988 and did take 13 years to reach back to those ’88 figures, but the following six years (between 2001 and 2007) they then increased by an additional 66%. Now, according to the Land Registry, average property values in Kent currently stand 10.42% below the January 2008 level, and anecdotal evidence suggests that in the nicer parts of Folkestone, we are well above these sorts of levels. Therefore, all this talk of property crashes is unfounded.

… and what would that £185,000 get you in Folkestone? A superb 2 bed apartment in West End, a lovely 2 bed terrace in Cheriton or a stunning 2 bed apartment with sea views in Sandgate .. in fact, the world is your oyster. But which Oyster? Well, my blog-reading friends, if you want to read similar articles like this and what I consider to be the very best of buy to let deals in Folkestone, irrespective of which agent is selling it, scroll back to the top and subscribe by email!

4,048 Folkestone Homes bought by private landlords in the last 20 years – Is this the end for first time buyers?

Update:  We've moved our blog to www.folkestone-estateagent.co.uk


There I was, out with the family at Lower Leas Coastal Park last weekend, when a smart gentleman approached me. ‘Hello’, he said, ‘You are the person writes that Property Blog aren’t you? We have met before at that Business Networking event in Folkestone a few months ago’. I did then recognise him and, whilst I wont mention his name, he runs a small but perfectly formed well known independent retailers in the town ... It’s amazing who you see when out walking! Anyway, I was at a loose end for five or ten minutes as the other half was encouraging offspring number one down the slide, so we had a chat.

He wanted to know my thoughts on the future of the Folkestone property market, and I would now like to share with you that conversation, my Folkestone property Blog reading friends. People are always going to need a roof over their heads and somewhere to live will never go out of fashion – it’s a necessity for every single person. The 22 to 30 year olds of the town have a choice to what type of roof they have ... they rent from the Council, they can rent from a private landlord or finally they can get a mortgage and buy one. In the 1970’s/80’s and 90’s, the expected thing was to save like mad for two years for the deposit (going without luxuries) whilst living at home or renting a cheap two up two down, then buy your first house. However, more recently fewer Folkestone youngsters have been buying, choosing to rent instead – mainly from private landlords (as Councils have been selling off council housing on the Right to Buy Schemes). The numbers are truly staggering ... and I want to share them with you.

Roll the clock back 20 years and Folkestone was a different place. There were 22,020 households in Folkestone and 13,022 of those were owner occupied. Move to the present, and with all the building in the town, the total number of households has increased by 4.23% to 22,952 and quite surprising (to me at least), the number of owner-occupiers has decreased to 12,195 (although as a proportion, it is only 53.1% compared to 59.1% twenty years ago).

However, it’s rented sector that is truly fascinating … twenty years ago, only 3,308 properties were privately rented in Folkestone ... and now its 7,356, a rise of 4,048.

The twentysomethings of Folkestone housing difficulties haven’t been helped by the local authority selling off council housing, with the number of council houses dropping from 2,218 to 1,739 over the same twenty-year period. Demand for decent rented property remains high, as Cameron’s much vaunted house building program is years away and has decades of under investment to catch up on before it starts to affect supply. Even with the Buy to Let tax rule changes over the coming few years (which will see the maximum tax relief available to landlords drop from 45% to 20%), private landlords still have an important role to play in housing the people of Folkestone and those who educate themselves and treat it as a business will survive and prosper.

The best way Folkestone landlords can protect their income from property (and mitigate the affects of the tax rises) is to keep the homes they let out in Grade A condition. I have found, especially over the last three or four years, Folkestone tenants have ever-growing demands from their rental property, but many are prepared to pay ‘top dollar‘ for houses and apartments that meet their high expectations. You must not forget, letting property in Folkestone (in fact anywhere) is a business, so all private landlords should also seek the advice, opinion and commentary of property professionals.

... And just as the other half had sorted the family, he asked ‘What of the news of Stamp Duty changes for Landlords coming in April?’ My thoughts are with such low supply (i.e. numbers of property for sale), and high demand it is hard to imagine Folkestone property values will see much impact – but I predict, ever so slightly, the proportion of owner occupiers should increase slightly compared to buy to let landlords in the coming decade as the the housing market should return to balance.

If you're researching a potential buy to let investment in Folkestone then give us a call for a guide to the best areas to consider for your portfolio on 01303 212797.

Heavy Fines For Landlords Not Conducting Immigration Checks

Update:  We've moved our blog to www.folkestone-estateagent.co.uk


Landlords and Letting Agents could be fined up to £3,000 for not conducting immigration checks on new tenancies from February this year.  The amended Immigration Bill, which received royal ascent in May 2014, places additional responsibilities on landlords and their agents to ensure that incoming tenants have the right to live in the UK.

Put simply, a tenant should be either:

• A person who automatically has the right to live in the UK (either a British Citizen, a national of an EEA State other than the United Kingdom, or a national of Switzerland)   or
• A person who has been given permission to live in the UK either permanently or on a temporary basis.. (more about that later...)

If you're researching the full requirements here's a link to the .gov website.

So what does that mean for us at our Folkestone Estate Agency? Nothing changes for us - best practice at Martin & Co has always been to collect proof of identity and proof of residency during tenancy preparation - it's just plain common sense and also a requirement for the prevention of money laundering.  I would hope that most landlords & agents are already collecting proof of identity at the bare minimum.

Who's Liable?

At the moment the person liable to pay the fine is the landlord, or the landlord's agent if they had agreed to conduct checks on your behalf.  Ask for copies if you're unsure.

What if I've Already Been Caught Out?

If it's just come to your attention that your tenant isn't eligible to reside in the UK then I would recommend reading the section entitled "Excuses Available to Landlords" in the full document.

How To Collect Proof of Residency

Ask all the tenants who will be signing the tenancy agreement to bring their proof of identity and residency as soon as they apply to rent the property from you or ensure that the agent who represents you does this on your behalf.  

They should bring their passport and a current utility bill (not a mobile phone bill and certainly not a bank statement - unbelievably neither of these types of companies conduct enough checks that the person is currently living at that address)  

Do this with every tenancy, whether you think they're British or not.   This isn't just about immigration - this is about ensuring that this person is who they say they are.

• Take a photocopy of the front of the passport and the detail page with their photo.  
• Check the expiry date of their passport
• Check the passport is complete (passport officials cut a corner out of a passport which is no longer valid)
• If the person is not a national of an European Economic Area state then also take a photocopy of the visa which will be inside their passport.
• Check that the date of expiry of their visa is after the end of their tenancy (i.e.  check that they won't be forced out of the country during the tenancy).  Make a note in your diary.
• Take a photocopy of the utility bill so you can demonstrate that they were already living in the UK and paying residential bills prior to them renting a property from you.  This will also ensure that you've got at least one accurate address for your reference and credit checks.

Renewing a Tenancy or Allowing a Tenancy to Become "Periodic"

This is the point where I would expect quite a few landlords and agents to come unstuck under these new requirements and the reason why I suggest making a note in your diary of the date of their visa expiration.  Here's an example:

Your tenant applies to live in your property for a period of 6 months after which he plans to leave the country and end the tenancy.  As the date of expiration of his visa is after that date, you don't worry too much about it.

Four months into the tenancy he rings to say that his employer has offered him a promotion and he'll be staying after all.  You're delighted because you don't need to re-advertise and find another tenant, right?

Right!  (well, one more thing to check...)  Under the amended immigration bill you will be required to ensure that he does have an extended right to remain in the UK before allowing him to stay in the property beyond the expiration of his visa.  They will consider you to have allowed it either by passively allowing his tenancy to become periodic or if you renew his tenancy.  In other words - don't renew his tenancy or allow it to become periodic without seeing his extended visa.

As always, laws can change so do seek legal advice if in doubt or make use of the various .gov websites which are available to us all.

Is this a bit harsh?
Well, yes.. probably.  As a Letting Agency it doesn't change much for us because we've always had a robust process for referencing which includes checking that the tenant is entitled to live in the UK (using the above process).  I've always considered that as a pre-requisite because it would be poor service to our landlords to let a property to a tenant who could be turfed out of the country at any moment.

Having said that, it's an added level of complication for landlords who manage their own properties when border control should really be in the hands of the authorities.  In reality I would guess that this bill is less aimed at actually fining landlords, and more at incentivising honest landlords to report those who aren't supposed to be in the country.  It's a sad, but efficient approach to a problem that the authorities are all too aware of.