Rent Guarantee. It's a No-Brainer!

When a landlord invests in property, insurance is an area some end up neglecting. The kind of cover that a standard home policy deals with is often inadequate for the requirements of landlords. This is because they need a policy that deals with all sorts of potential issues to do with tenancies, third party damage and so on.

Landlords are aware that the usual landlord insurance policies will provide them with protection against such events as damage caused by a tenant as well as rent lost when a property is inhabitable following a valid insurance claim. However, these policies will not stretch as far as actually covering the rent when a tenant simply fails to pay up.

It is very realistic that there are occasions when a tenant simply fails to pay, be it out of malevolence, financial incompetence or a sudden change for the worse in their financial circumstances that they might not even tell the landlord about. Landlords without a rent guarantee insurance policy may be in for a shock. Those who do have such cover can rest easy. It is at this point where a landlord can make a claim on their rent guarantee policy and ensure their rental income is safe. The insurer can then chase up the tenant for the shortfall. For those landlords who don't, the implications can be awful, especially if there is a mortgage on the property and the rent is relied upon to help make the necessary loan repayments.

One of the great benefits of having Rent Guarantee insurance in place is that the policies often include Legal Expenses cover necessary for potential evictions. Lengthy court cases take up  time, energy and can stifle cash flow. However, your Rent Guarantee insurance can cover the legal costs and help reduce the process.

Indeed, with disputes often ending up in court, it is not just the repayment of the missing rental money that becomes an issue. Legal costs can be prohibitive for landlords if they are unable to get the money without recourse to such measures, so it will be reassuring to know that rent guarantee insurance can also take care of this, particularly as legal fees will be much harder to pay for those whose budgets are hit by non-payment.

There is always a chance landlords will be hit by non-payment. How much better it would be to have a policy in place that will help mitigate losses, as well as ensuring legal costs are covered to prevent a catch-22 situation occurring where an investor is too cash-strapped by the loss of income to pay for the legal action needed to recover unpaid rent.

Professional Properties offer two types of Rent Guarantee protection. Firstly, we offer the a policy that will recover rent if the tenant fails to pay. The policy includes such benefits as Nil Excess; Payable until vacant possession; Cover limit of £2,500; Total claims limit of £50,000; Full legal expense cover.

An alternative is our RentOnTime product which guarantees to pay your rent, on time, every month, whether your tenant pays on time. The great advantage of this is that the payment of rent is not retrospective, it is immediate.

If you wish to discuss either of the products in more detail, then please do not hesitate to contact me directly on 07973 666229 or our lettings office on 01283 517444,

Are we destined to own a home in Burton?

“You have to rent where you want to live, or buy where you don’t want to live.”

After the end of the Second World War, just over a quarter of the UK population owned their own home, the rest rented from private landlords or the local Council. If someone told you in the 1970’s and 1980’s that they rented, they were considered a second class citizen. Everyone wanted to own their own home.. it was the done thing. We think that we are destined to own our own property, but we aren’t!

It all changed in the 1970’s, when two things happened. Firstly, the number of people who owned their own home broke through the 50% barrier in 1971 and by 1981 it was at 57%. Tied in with that, the average house prices in Burton were doubling at one point every four years in the 1970’s so property and profit started to feed off each other.

To put that growth in context, if we were to look at the last 85 years in Burton, in 1930, the average Burton property was worth £372. It took 16 years for Burton property values to double, rising to £919 by 1946. Another 15 years and the average Burton property doubled again to £1,745 in 1961. The next doubling only took 10 years, as by 1971 the average Burton property had reached £3,547 in value.

It was, as mentioned above, the 1970’s when things really took off, as by 1975 (i.e. only four years) they had doubled to £7,424 and they doubled again to £14,861 by 1980. It took another eight years for values to double again, as an average Burton property reached £31,085 in 1988. Twelve years had to pass until the doubled again in 2000 (£63,958) and just six years to double again by 2006, when they reached £128,995. Where are we today? The average property value in Burton currently stands at £177,400.

We could blame Maggie Thatcher for making home ownership the ultimate goal, but what we now need to consider is that the country is turning on its head and we need to, as a Country, love renting again. Some blame the banks, but obtaining a 95% mortgage is hard work, but nowhere near impossible. A typical Burton first time buyer would only need to save £5,000 for a deposit and fees and they could buy a very decent Victorian two up two down in Shobnall Street in Burton, and it would be over £100 cheaper a month in mortgage payments than renting.

People might say on the surveys they want to buy, when it comes down to it. If you have been living in a lovely three bed semi in Branston  for £700 per month, but the bank will only lend you enough to buy a terraced house Shobnall Street, and don’t get me wrong, Shobnall Street has really pulled its socks up over the last ten years, but it isn’t Branston, is it? What would you do? Look again at the title of the post ... “You have to rent where you want to live, or buy where you don’t want to live.”

With tenant demand only going in one direction, that is probably why more and more people are getting into buy to let in Burton. With the new rules on pensions and the ability to use them to buy residential rental properties from April onwards, this could be the time for you to buy a rental property. You must take advice on your pension from a Independent Financial Advisor (there are plenty in Burton) and you must take advice from people who know what to buy (and not to buy) in Burton to ensure you get the best from your investment. One place for such advice is the Burton Property Blog!

The election and the private rental sector. Good news for landlords...

As the election approaches, I spotted an article on the comments of Dorian Gonsalves, director of commercial and franchising for Belvoir, regarding the consequences of Labour gaining power and implementing proposals for rent capping and outlawing agents’ fees.

Gonsalves said that Labour’s proposals were “flawed” and likely to result in landlords quitting the private rental sector en masse, making thousands of tenants homeless.

He said: “The Labour party is blatantly targeting the private rented sector to try and win votes from the UK’s nine million tenants.

“However, in my opinion their proposals are not only anti-letting agents, they are also anti-business and will in fact harm tenants – the very people that Labour say they want to help.

“The most recent figures released by the Office of National Statistics estimate that for the year ending September 2014, net long-term migration to the UK was 298,000 and yet the number of new homes built last year was only 118,760.

“A combination of high migration figures, low new-builds, plus the difficulties that people face in obtaining mortgages and changes in lifestyle choices, such as increasing numbers of single parent families, means that many more rental homes are needed in this country.”

He went on: “The majority of letting agents work extremely hard on behalf of tenants as well as landlords and it is completely appropriate that tenants bear the cost of this work rather than landlords.

“Outlawing tenant fees will simply mean that tenants will suffer, with letting agents unable to provide them with the standards of service and levels of protection they deserve.

“Tenants could easily become vulnerable to rogue private landlords who may try to take advantage of them by illegally charging for maintenance issues, failing to carry out regular property checks and leaving them without redress to an ombudsman.

“If landlords are forced to bear the brunt of increasing costs, but are unable to increase rents to help cover them, many are likely to sell up or put their property to different use, further reducing the level of good-quality rental properties in this country. As a result, thousands of tenants could become homeless, because there will be nowhere for them to go.

“I am encouraging all Belvoir franchise owners to write to their tenant and landlord clients to make it very clear to them that if Labour get into power they will implement proposals that will result in increased landlord fees.

“This will either force landlords to increase rents to help cover their costs or cause them to sell up, which could put thousands of tenants at risk of losing their homes.”

As an extension to Gonsalves' thoughts, I have also included the findings of a survey from Rentify who state:

Support for Labour among Britain’s 2 million landlords is at just 19% ahead of the General Election. Polling of the general population has Labour and the Conservatives neck-and-neck, with YouGov currently predicting 35% of the vote for Labour and 33% for the Tories.

But Rentify’s survey of more than 1,200 British landlords across all ages and locations shows that nearly half of are planning to back the Tories, with a whopping 45% pledging their support to David Cameron’s party – more than double Labour’s share – and 51% expressing their support for Cameron personally.

Rentify’s survey results suggest that landlords who previously voted for Labour and the Lib Dems are switching to Ukip, with one survey respondent referring to Miliband as “kryptonite.” While the Conservative vote share has remained steady, Labour’s drop in supporters has been almost entirely hoovered up by the insurgent Ukip.

I did write a blog about the subject a while ago which makes my thoughts clear!:

Rent Controls in Burton? - That’s one way to destroy a city says economist.

Are Burton landlords worse than politicians and traffic wardens?

At the time of the last census in 2011, there are 3,401,675 properties in England that were privately rented, of which it is estimated, were owned by over 1.25 million private landlords. The rapid growth of buy-to-let is hugely controversial, especially as only ten years before that, there were only 1,798,864 properties under private renting in England. Buy to let landlords have been held responsible for forcing up property prices and preventing our younger generations from being able to buy. There is also growing resentment toward the billions of pounds in tax relief (estimated to be nearly £10 billion) landlords claim on their mortgage interest - tax relief not available to homeowners.

They may be asset rich thanks to recently rising property values, but let us not make out the landlords to be the bad guys here and compare them to politicians or traffic wardens! Despite all these benefits enjoyed by private landlords, let us not forget the good they have done, especially in Burton.

Property values today in Burton are still 9.2% below the 2007 property boom levels (2007 being the peak of last property boom before everything dropped in 2008/9), yet inflation has risen by 26% in the same time frame, so in real terms, properties today are 35.2% CHEAPER than they were in 2007. Just think how low they would be without landlords buying all those rental properties in the city. Interest rates are at an all time low and first time buyers only need to save a £6,400 deposit to secure a lovely 2 bed semi in Branston with a 95% mortgage. Forget what the papers say, first time buyers can borrow money relatively easily on a 95% mortgage and nine times out of ten, it’s cheaper to buy than rent. So why aren’t people buying?

The number of people choosing to rent, either for lifestyle or economic reasons, has grown over the last 15 years. I also believe they will continue to grow for some time to come (as does every report on the subject). In fact I would go as far to predict the number of rental properties in Burton (and the East Staffs area) will have risen from the 6,519 properties recorded in 2011 to 9,800 by 2021. Sound fanciful? Well in 2001, there were only 2,968 privately rented properties in Burton.

It is a fact that we as a Country are more and more turning into a European model when it comes to homeownership, where the norm is renting for the first ten years, as opposed to the norm from the 1960’s to 1990’s, where first time buyers were encouraged to buy as soon as they left school and got a job.

Tenants, in particular, will also feel the benefit from potential changes in the market. The likelihood of interest rate increases in late 2015, existing economic conditions, combined with the uncertainty of new Government manifestos following the General Election in May will result in low demand for people to buy yet also put a dampening effect on increases in rent. As long as landlords buy the right sort of property, that allows for a reasonable yield, decent capital growth, everyone will be a winner. If want a  chat about what would make the best sort  a property that would offer that in Burton, then please email me via the link below!

Are landlords to blame for Burton's problematic property market?

East Midlands property asking prices jumped by more than £4,000 to £177,100 in February according to Rightmove, an increase of 2.3% from January and 4.7% higher than a year ago. After the traditionally quiet months of January and February, the property market starts to heat up, but talking to some Burton Estate Agents, they are reporting their lowest ever stocks of quality property for sale. However, asking prices have no relation to what property sells for (ie their REAL value), is the issue a lack of supply?

Putting aside Burton’s continual housing supply shortage; we only built 4,505 properties in the last decade in East Staffs BC but the population grew by 9,813, this is now, according to some people, being exaggerated by an increase in homes being owned by buy to let investors, who tend to be buying a property as part of a long term pension plan and are more likely to keep it for longer than an owner occupier would. I have also seen unwillingness among homeowners looking to move, to put their own property on the market as they can find few suitable properties to make it worth their while going through the whole moving process.

What I would say to that is that I believe this is the new norm in the Burton property market, and is the consequence of over 35 years of not enough homes being built to meet the escalating growth in household numbers, resulting in a lack of quality homes for sale in many popular areas of Burton.

When one looks at the historic data, in March 2008, there were 1014 properties on the market in Burton compared to today’s 507. Should we be worried?  Well in April 2010, there were only 381 properties for sale in Burton but eight months later in November 2010, this had jumped to 783 properties, for it to drop to 464 properties in December 2013. The number of properties on the market is a cyclical thing in Burton, it always has been and always will be. As we go into the Spring of 2015, the number of new properties coming onto the market will increase ... just as the daffodils will flower.

So are landlords to blame? Well, on one side of the coin, yes they are. If they buy a property to rent out, that means someone can’t buy it to live in. However, it doesn’t matter if someone wants to live in a property if they can’t afford the deposit and upkeep.. and the youngsters of Burton still need a roof over their head. So, on the other side of the coin, if the Council aren’t building any properties and people can’t afford the large deposit for the mortgage, then Burton landlords have stepped in and bought property to rent out to them. East Staffs and Burton landlords have bought 3,551 properties over the last decade (investing approximately £630m buying those Burton an East Staffs rental properties) and now house 14,962 Burton and East Staffs people in 6,519 Burton properties. Burton tenants are in fact getting a good deal as well, as average rents in Burton are 4.5% below they were seven years ago. That sounds like a win-win situation for everyone to me. Stop blaming landlords and start building more properties in Burton.. that is the only answer.

In the meantime, the demand from Burton tenants for Burton property is only set to rise over the coming years. If you want some advice and opinion on where to buy or not to buy, please visit our Burton office where we can discuss such matters in greater depth.

A Burton’s man’s home is his detached.. or his terraced... or his bungalow!

Ok, a slight turn of phrase there on the classic, an Englishman’s home is his castle but when it comes to the UK the ‘Brit’s are still a nation of homeowners - although wasn’t it Napoleon who thought we were all shop keepers?!

It is interesting to note that up until the mid to late 1960’s, more people rented their home, albeit mostly from the local council, than owned their own. In fact, I was surprised to read that in 1921, over 75% of homes in England and Wales were privately rented with the remaining 25% being owner occupied.

 

It was only after the Second World War, when the Beatles were rocking, that people started to buy instead of rent.. but instead of owning our property outright, we borrowed money from banks and building society’s to buy them and the roots of the growth of the private rental sector can be drawn back to the late 1970’s early 1980’s, when the council houses began to be sold off under the right to buy scheme. Even though 32,363 households in East Staffordshire were owner occupied in 2001 and that number had actually increased to 32,879 households by 2011, the percentage of homeowner properties in area dropped drastically from 75.57% to 69.58%.

Why, because whilst an additional 4,534 properties were built in East Staffs Council area between 2001 and 2011, a lot of them were bought as buy to let investments, thus more than doubling the number of private rental properties in area. In fact, the number of properties in East Staffs, which are privately rented jumped from 3,471 in 2001 to 7,152 in 2011!

With stagnation in the number of people who own their home in Burton and no more council houses being built, this is increasing the number of people looking to renting, as everyone needs a roof over their head. With the East Staffs Council house waiting lists being in the 5 to 10 year range for a decent property in a decent location, it shouldn’t be forgotten that it is Burton landlords who house tenants waiting for a council house. Burton landlords do not receive any subsidies from HMRC and income tax is paid on rent paid by the tenant combined these reduce the cost on the tax payer.

However, it’s not all doom and gloom in Burton, as we have noticed more and more of the younger generation are renting because they can‘t afford to buy - raising a deposit being the sticking point for most - and a high percentage of the expansion in private renting actually from those who need and want temporary accommodation. There are even a few landlords who rent their own Burton property out for the short term, for ease, and not necessarily purely for profit.

Therefore, with every report stating the rental market will continue to grow throughout the rest of this decade, with high demand and limited supply in the Burton, if you are considering buying a property for investment in the near future in Burton, I am always happy to give you my considered opinion on which property to buy (or not as the case may be) to give you what you want from your investment. If you are a landlord, new or old, I am certainly more than happy for you to pick up the phone and call me on 07973 666229.