Milton Keynes Landlords and Tenants : What does the Tenant Fee Banning order mean for you?

·         Tenant Fees set to be banned within 12 to 18 months

·         Rents due to rise as those fees passed to Landlords

·         Landlords won’t be worse off – and neither will tenants or agents

With our new Chancellor of the Exchequer revealing a ban on tenant fees in his first Autumn Statement on Wednesday what does this actually mean for Milton Keynes  tenants and Milton Keynes  landlords?

The private rental sector in Milton Keynes  forms an important part of the Milton Keynes  housing market and the engagement from the chancellor in last Wednesday’s Autumn Statement is a welcome sign that it is recognised as such. I have long supported the regulation of lettings agents which will ensconce and cement best practice across the rental industry and,  I believe that measures to improve the situation of tenants should be introduced in a way that supports the growing professionalism of the sector. Over the last few years, there has been an increasing number of regulations and legislation governing private renting and it is important that the role of qualified, well trained and regulated lettings agents is understood.

Great News for Milton Keynes Tenants

So, let’s look at tenants .. this is great news for them, isn’t it?  Well before you all crack open the Prosecco, read this …

Although I can see prohibiting letting agent fees being welcomed by Milton Keynes  tenants, at least in the short term, they won’t realise that it will rebound back on them.

First up, it will take between 12 and 18 months to ban fees, as consultation needs to take place, then it will take an Act of Parliament to implement the change. A prohibition on agent fees may preclude tenants from receiving an invoice at the start of the tenancy, but the unescapable outcome will be an increase in the proportion of costs which will be met by landlords, which in turn will be passed on to tenants through higher rents.

Published at the same time as the Autumn Statement, hidden in the Office for Budget Responsibility’s Economic and Fiscal Outlook on the Autumn Statement (The Office for Budget Responsibility being created by Government in 2010 to provide independent and authoritative analysis of the UK’s public finances),

it said on Wednesday …

“The Government has also announced its intention to ban additional fees charged by private letting agents. Specific details about timing and implementation remain outstanding, so we have not adjusted our forecast. Nevertheless, it is possible that a ban on fees would be passed through to higher private rents”

The charity Shelter and Scotland

Scotland banned Letting Fees in 2012. The charity Shelter have been a big voice in persuading and lobbying the Government since it managed to persuade the Scottish Parliament to ban fees in 2012. On all the TV and radio shows at the moment, they keep talking about their Independent Research, which they said showed that,

“renters, landlords and the industry as a whole had benefited from banning fees to renters in Scotland. It found that any negative side-effects of clarifying the ban on fees to renters in Scotland have been minimal for letting agencies, landlords and renters, and the sector remains healthy.”

Going on,

“Many industry insiders had predicted that abolishing fees would impact on rents for tenants, but our research show that this hasn’t been the case. The evidence showed that landlords in Scotland were no more likely to have increased rents since 2012 than landlords elsewhere in the UK. It found that where rents had risen more in Scotland than in other comparable parts of the UK in 2013, it was explained by economic factors and not related to the clarification of the law on letting fees”

.. yet the devil is in the detail….

Only yesterday Shelter were quoting this Research from December 2013 to say rents never went up following the tenant fee ban in Q4 2012. I have read that research and I agree with that research, but it was published three years ago, only 12 months after the ban was put into place.

I find it strange they don’t seem to mention what has happened to rents in Scotland in  2014, 2015 and 2016 .. because that tells us a completely different story!

What really happened in Scotland to rents?

I have carried out my research up to the end of Q3 2016 and  this is the evidence I have found..

In Scotland, rents have risen, according to the CityLets Index by 15.3% between Q4 2012 and today

 (CityLets being the equivalent of Rightmove North of the Border – so they know their

onions and have plenty of comparable evidence to back up their numbers).

When I compared the same time frame, using Office of National Statistics figures for the English Regions between 2012 and 2016, this is what has happened to rents

·         North East 2.17% increase

·         North West 2.43% increase

·         Yorkshire and The Humber 3.21% increase

·         East Midlands 5.92% increase

·         West Midlands 5.52% increase

·         East of England 7.07% increase

·         South West 5.82% increase

·         South East 8.26% increase

·         London 10.55% increase

….and let me remind you about Scotland … 15.3% increase.

Are you really telling me the Scottish economy has outstripped London’s over the last 4 years?

Is anyone suggesting Scottish wages and the Scottish Economy have boomed to such an extent in the last 4 years they are now the Powerhouse of the UK? .. because if they had, Nicola Sturgeon would have driven down the A1 within a blink of an eye, to demand immediate Independence.

So what will happen in the Milton Keynes  Rental Market in the Short term?

Well nothing will happen in the next 12 to 18 months .. it’s business as usual!

… and the long term?

Rents will increase as the fees tenants have previously paid will be passed onto Landlords in the coming few years. Not immediately .. but they will.

As a responsible letting agent, I have a business to run. It takes, according to ARLA, (Association of Residential Letting Agents) on average 17 hours work by a letting agent to get a tenant into a property. We need to complete a whole host of checks prescribed by the Government; including a right to rent check, Anti Money Laundering checks, Legionella Risk Assessments, Gas Safety checks, Affordability Checks, Credit Checks, Smoke Alarm checks, Construction (Design & Management) Regulations 2007 checks, compliance with the Landlord and Tenant Act, registering the deposit so the tenants deposit is safe and carry out references to ensure the tenant has been a good tenant in previous rented properties.

All of which the vast majority of lettings agents take very seriously and are expected to know inside out making us the experts in our field. Yes, there are some awful agents who ruin the reputation for others, but isn't that the case in most professions?

.. but business is business.

No landlord, no tenant and certainly no letting agent does work for free.

I, along with every other Milton Keynes  letting agent will have to consider passing some of that cost onto my landlords in the future. Now of course, landlords would also be able to offset higher letting charges against tax, but I (as I am sure they) wouldn’t want them out of pocket, even after the extra tax relief.

So what does this all mean for the future?

The current application fee at my lettings agency is £350 per property.

I am part of a Group of 500+ Letting Agents, and recently we had to poll to find the average length of tenancy in our respective agencies.

The Government says its 4 years, whilst the actual figure was nearer one year and eleven months, so let’s round that up to two years.

That means £350 needs to found in additional fees to the landlord, on average, every two years.

In Actual Pound Notes

In 2005, the average rent of a Milton Keynes  Property was £843 per month and today it is £1000 per month, a rise of only 18.6% (against an inflation rate (RPI) of 38.5%).

 Using the UK average management rates of 10%, this means the landlord will be paying £1269 per annum in management fees.

If the landlord is expected to cover the cost of that additional £350 every two years, rents will only need to rise by an additional 2% a year after 2018, on top of what they have annually grown by in the last 5 years.

So, if that were to happen in Milton Keynes , average rents would rise to £1269 per month by 2022  (see the red line on the graph) and so the landlord would pay £850 per annum in management fees .. which would go towards covering the additional costs without having to raise the level of fees.

.. but that is bad news for Milton Keynes  Tenants?

Quite the opposite. Look at the blue line on the graph). If the average rent Milton Keynes  tenants pay had risen in line with inflation since 2005, that £843 per month would have risen today to  an average of £1200 per month. (Remember, the average today is only £1000 per month) .. and even if inflation remains at 2% per year for the next six years, the average rent would be £1269per month by 2022 .. meaning even if landlords increase their rents to cover the costs tenants are still much better off, when we compare to the £1200 per month figure to the £1269 per month figure.

Conclusion

The banning of letting fees is good news for landlords, tenants and agents.

It removes the need for tenants to find lump sums of money when they move. That will mean tenants will have greater freedom to move home and still be better off in real terms compared to if rents had increased in line with inflation.

Landlords will be happy as their yield and return will increase with greater rents whilst not paying significantly more in fees to their lettings agency. Letting agents who used to charge fair application fees won’t be penalised as the rent rises will compensate them for any losses.

.. and the agents that charged the silly high application fees .. well that’s their problem. At least I know I can offer the same, if not a better service to both my landlords and tenants in the future in light of this announcement from Phillip Hammond.

AUCTION ALERT!! Directly Opposite Milton Keynes Hospital, 3 bed terrace, £140k guide price, 8% rental yield

Another auction gem coming up on 1st November - don't delay, these properties are great value and always let well......

Although this is located on an older housing estate, it is literally opposite Milton Keynes Hospital, and being a larger house over 3 floors it could be utilised in several ways. Firstly you could let it as a single-let family home and achieve a rental of around £930 PCM or 8% yield, very attractive in its own right. Another option is to break it down into a HMO and possibly let 3 or even 4 individual bedrooms out for £350 PCM, considerably more income is to be made like this but of course the wear & tear would increase, as could the amount of management and hassle you would have, but for some investors this is the way to go.

With a guide price of £140k, I would not suggest paying much more than this, as the market level is already around that price today, and don't forget you will need a budget to restore and refurbish the internal living space, possibly with a kitchen, bathroom, central heating and decoration. As a guide, I would budget for up to £10k worth of works, simply because you can't yet see the inside and it is best to look at the worst case scenario and be prepared for a lot of work and then be pleasantly surprised if it isn't needed.

I will regularly post what I consider to be great buy to let deals across Milton Keynes and surrounding areas on this blog 3 or 4 times a week, irrespective of which agent they are being marketed with. Maybe you should subscribe and be kept up to date?

If you are thinking of getting into the buy to let property rental market as a new investor and don't know where to start, or you would like some impartial advice and guidance to get the best return on your investment, call me now on 01908 373580 or pop along and speak to me in person at our new offices in Central Bletchley, Milton Keynes.

danielle@inspiedagents.co.uk

Fancy a game of Buy-To-Let Monopoly?

As the nights draw in, if there is nothing on TV, a lot of families like to huddle around and play the board game Monopoly, my family included. The buying and renting of property is like a busman’s holiday for me! Interestingly, the game was originally invented at the turn of the 20th Century (in 1903) and the game was initially called ‘The Landlord’s Game’! Anyway, after a few years in the wilderness, the current owners of the game renamed it in 1935 and so began Monopoly as we know it today.

Regardless if you are a homeowner or landlord in Milton Keynes, what would a Monopoly board look like today in the town? Property prices over the last 80 years have certainly increased beyond all recognition (not to mention the physical landscape which has of course changed beyond all recognition from the arable farmland that used to be seen for many miles around), so looking at the original board I have substituted some of the original streets with the most expensive and least expensive locations in Milton Keynes today.

Initially, I have focused on the MK2 postcode only, looking at the Brown Squares on the board, the ‘new’ Old Kent Road in Milton Keynes today would be Serpentine Court, with an average value £71,020 (per property) and Whitechapel Road would be Garrowmore Grove, which would be worth £113,200. What about the posh dark blue squares of Park Lane and Mayfair? Again, looking at MK2, Park Lane would be Manor Road at £309,200 and Mayfair would be Mill Road at £324,900. However, look a little further afield from the MK2 postcode, and such roads as Woodside in Aspley Guise would claim the Mayfair card at £1,130,000! Also, I can’t forget the train stations (my favourite squares), and over the last 12 months, the average price that property within a quarter mile of Central Milton Keynes station was £264,800 or 6% higher than those located in the next game square.

So that got me thinking what you would have had to have paid for a property in Milton Keynes back in 1935, when the game originally came out?

- The average Milton Keynes detached house today is worth £453,900 would have set you back 760 Pounds 8 shillings and 7 old pence.

 - The average Milton Keynes semi-detached house today is worth £248,600 would have set you back 416 Pounds 9 shillings and 3 old pence.

 - The average Milton Keynes terraced / town house today is worth £217,300 would have set you back 364 Pounds and 2 shillings.

 - The average Milton Keynes apartment today is worth £165,300 would have set you back 276 Pounds 18 shillings and 3 old pence.

If that sounds like another currency, you must be in your 20’s or 30’s, because it was back in February 1971, that Britain went decimal and hundreds of years of everyday currency was turned into history overnight. On 14th of February of that year, there were 12 pennies to the shilling and 20 shillings to the pound. The following day all that was history and the pound was made up of 100 new pence.

I hope you enjoyed this bit of fun, but underlying all this is one important fact. Property investing is a long game, which has seen impressive rises over the last 80 years. In my previous articles, I have talked about what is happening on a month by month or year by year basis and if you are going to invest in the Milton Keynes property market, you should consider the property you buy a medium to long term investment, because Buy-To-Let is pretty much what it says on the label – you buy a property in order to let it out to tenants.

When you become a landlord, you are in essence running a small business – one with important legal responsibilities. On that note, I want to remind landlords of the recent and future changes in legislation and taxation when it comes to buy to let. Failure to adhere to them will mean a minimum of heavy fines in the thousands or in some cases, prison ... it’s a mine field! That’s why I write the Milton Keynes Property Blog, where it has an extensive library of articles like this one, where I talk about what is happening in the Milton Keynes property market, what to buy (and sometimes not) in the local area and everything else that is important to know as a landlord.

If you are thinking of getting into the buy to let property rental market as a new investor and don't know where to start, or you would like some impartial advice and guidance to get the best return on your investment, call me now on 01908 373580 or pop along and speak to me in person at our new offices in Central Bletchley, Milton Keynes.

danielle@inspiredagents.co.uk

Bletchley 3 bed house in a popular rental location, £155k with 6.6% yield

As ABBA once sang - money money money..........but not everyone has bags of money to spare, so for those on a budget but wanting a decent return then cast your eyes over this.........

Todays offering may not win any beauty contests, nor will it suit many landlords expectations or fit with their middle class portfolio, but for some this will be right up their street, being both affordable to buy and popular on the rental market to the families who want, need or can only afford to live in this area.

At an asking price of £155k this is a lot of house for the money, however when you look at the location it is clearly getting on a bit, hence prices for all properties around here are at this level, BUT what that will give you is 2 things in your favour:

1. An affordable resale price, and a way into the lettings market that will not break the bank

2. A greater than average annual yield (cash flow), as lower priced properties still rent out well

The current rental market value for this would be around £850-875 PCM which is a yield of at least 6.6%, and literally whenever we get properties in this area we can have them let within a few days to families extremely keen to get a decent sized house on a tight budget. You will find that having secured the house, they will not want to move for some time, so in reality you will end up with a happy long term tenant moved in quickly.

http://www.rightmove.co.uk/property-for-sale/property-56479027.html

I will regularly post what I consider to be great buy to let deals across Milton Keynes and surrounding areas on this blog 3 or 4 times a week, irrespective of which agent they are being marketed with. Maybe you should subscribe and be kept up to date?

If you are thinking of getting into the buy to let property rental market as a new investor and don't know where to start, or you would like some impartial advice and guidance to get the best return on your investment, call me now on 01908 373580 or pop along and speak to me in person at our new offices in Central Bletchley, Milton Keynes.

danielle@inspiredagents.co.uk

Downs Barn large family home, close to the centre, £240k with at least 5.5% yield

How nice is this! A family sized house, good sized rooms, parking and garage, with a conservatory and yet within a short walk of the city centre......

This property will really appeal to a young family where one of the adults needs to get to CMK daily but doesn't want to pay high parking fees, or it also works for those who want to commute up and down the M1 motorway as it is just a few miles and an easy run to get on there and be heading towards London or the East Midlands. There are also a range of good schools locally, again within walking distance and this includes a very good independent school, for secondary education there is Stantonbury Secondary School and Sixth Form centre, and directly opposite this location is Campbell Park with acres of lovely walks, a cricket pitch, and beautiful vistas across North Buckinghamshire.

With an asking price of close to £240k, I would happily put this up for rental at around £1100-1150 PCM, which would be a yield of at least 5.5%, this is the typical figure being charged right now for a house of this size in the area, and with flexible parking & low maintenance garden it should not take long to find decent long term tenants.

http://www.rightmove.co.uk/property-for-sale/property-61590566.html

I will regularly post what I consider to be great buy to let deals across Milton Keynes and surrounding areas on this blog 3 or 4 times a week, irrespective of which agent they are being marketed with. Maybe you should subscribe and be kept up to date?

If you are thinking of getting into the buy to let property rental market as a new investor and don't know where to start, or you would like some impartial advice and guidance to get the best return on your investment, call me now on 01908 373580 or pop along and speak to me in person at our new offices in Central Bletchley, Milton Keynes.

danielle@inspiredagents.co.uk

BMV BARGAIN ALERT!! - One for the brave though, with substantial profit in this or a 5.9% rental yield once renovated

Now  I have to say I've not seen a project of this size for around 6 months, with many hurdles to overcome between now and a profit, but for certain this has money in it. Read on and find out why.....

Firstly let me start by saying any interested party ABSOLUTELY MUST get a full structural survey done on this as part of their pre-purchase checks, even though you cannot buy this with a mortgage (due to it currently being uninhabitable), it could be the best money you ever spend. I'm no structural engineer, but you really must get the roof checked, all the structural roof & floor beams looked at for compliance and signs of infestation, window lintels, brickwork, damp proofing (if there is any) and an overall assessment of the state of the structure. Don't worry about there being no bathroom, no kitchen, or the decorative state of the inside, because all of these are aesthetic and can be remedied by you, this is where you can build in value and see a significant return on investment. In fact, you want it to look as bad as possible to prevent others from snatching it from under your nose.

So let's assume that it is structurally sound, just how do you turn this around, what will it cost and how long will it take?

Don't doubt for a moment the amount of work needed here, but when you break it down to a list, it is mostly the work you would consider doing within 10 years of owning any property except for installing a full gas central heating system from scratch which will be a once in a lifetime install (boiler, radiators, pipework, all controls, maybe even having a gas supply brought into the building for the first time). For this alone I would allow £8k.

The rest of the work covers re-rendering the walls, updating the electrics, full repaint throughout, new flooring throughout, a new kitchen with appliances, new modern upstairs bathroom, possibly some UPVC replacement windows where applicable, and looking at exterior brickwork, drains, gutters and structures.

I am no more a clairvoyant than I am a structural engineer, but I would allow a total of £35k for all of the above work (including gas installation), however you will not be spending one penny of that if the structural survey says it is not viable, will you? Do you see why the survey is so very important on this property?

If the project does go ahead, I would think around 8 weeks of graft from a few teams of contractors that I have on my books would have this sorted for the new owner, and it could be project managed and co-ordinated by me while the new owner just goes about their everyday business (albeit writing a lot of cheques), it's all part of the complete service we offer. Once prepared and ready to let, we can sort out the final legal compliance checks (gas safety, smoke alarms, legionella inspections and a new EPC) before having this rented out at £1150 PCM, which would represent a 5.9% yield if you could keep to a total of £235k expenditure overall. How do I know it will rent for this? Well we have just rented the same house a few doors down, and this was also taken from being a run-down wreck to a beautiful family home just under 2 years ago, and we achieved a rental value of £1125 there last month. And if you really wanted to sell this and realise your profit quickly, this could be offered for sale at around £265-275k, depending on the sales market at the time of year it gets listed.

So there you have it - I've done this before, I've bought, worn and thrown away the T-shirt long before most other agents would have ever thought of doing this.

Do you want an agent who just sells you a project and leaves you to get on with it, or do you want a partner to work hand in hand with you to see the project through every step of the way? If the answer to the second question is yes, just call me to start the conversation today, because all any of this will cost you is literally just one phone call.

http://www.rightmove.co.uk/property-for-sale/property-56393584.html

I will regularly post what I consider to be great buy to let deals across Milton Keynes and surrounding areas on this blog 3 or 4 times a week, irrespective of which agent they are being marketed with. Maybe you should subscribe and be kept up to date?

If you are thinking of getting into the buy to let property rental market as a new investor and don't know where to start, or you would like some impartial advice and guidance to get the best return on your investment, call me now on 01908 373580 or pop along and speak to me in person at our new offices in Central Bletchley, Milton Keynes.

danielle@inspiredagents.co.uk

63% increase in use of Limited Companies when investing in BTL properties

New data from Mortgages for Business has revealed that a staggering 63% of applications by landlords purchasing buy to let properties are now being made using a Limited Company structure.

This figure is up from just 21% before the changes to tax relief on mortgage interest were announced by George Osborne in July 2015. This represents a substantial change in landlord behaviour and includes both new purchases and “transfers”, i.e. purchases made by landlords selling their personally owned property to their limited company. In contrast, the number of re-mortgage applications made via a limited company has remained at a similar level and aren’t expected to rise significantly until those who have recently used a corporate vehicle to purchase property are free from early repayment charges.

In terms of market share, buy to let mortgage products available to limited companies now accounts for 16% of all products, up from 13% in the first half of the year – reflecting the ever-evolving way in which buy-to-let property is now purchased and held. By number however, availability has remained stable at 195 (average) because the overall number of BTL products on the market dipped slightly. The index also reveals the average rate of a buy to let mortgage fell to 3.3% at the end of September, down from 3.7% in June. Of the products available to limited companies, rates fell to an average of 4.3%. This means that rates available to limited companies are only around one percentage point higher than the average market value, encouraging figures for those considering this form of borrowing.

Many lenders with products for both personal borrowers and limited companies, offer the same rates to both. At the moment, some of these lenders accept only SPV limited companies, including Foundation Home Loans and Paragon. Some of the more specialist lenders, primarily Aldermore Bank, InterBay Commercial, Shawbrook and Keystone Property Finance, also offer the same rates to trading limited companies.

(Data for the index is obtained from Mortgage Flow, MFB’s bespoke BTL product sourcing software and from its own transactional records.)

If you are thinking of getting into the buy to let property rental market as a new investor and don't know where to start, or you would like some impartial advice and guidance to get the best return on your investment, call me now on 01908 373580 or pop along and speak to me in person at our new offices in Central Bletchley, Milton Keynes.

danielle@inspiredagents.co.uk