Chichester Property News: Chichester properties to rent

Showing posts with label Chichester properties to rent. Show all posts

Thursday, 23 January 2025

Why you should let tenants turn your house into their home

I often get asked by prospective tenants whether they’d be allowed to put pictures up on walls should they rent a property of mine. I’m amazed some landlords charge thousands in rent but won’t allow their tenants to put a few pictures up, especially when you consider it from a business perspective.

Having such stringent rules about how a tenant can live won’t make them want to stay for long. This will naturally create a higher churn of tenants, leading to more void periods (and less rent in the landlord’s pocket). Furthermore, the coming and going of tenants will lead to greater wear and tear; which presumably is what the landlord was trying to avoid in the first place!

In my view it’s quite simple; yes, the tenant should respect the property they are renting, but for the time they are there they should see it as their home and treat it accordingly.

If tenants want to put pictures up, they would simply be instructed to return the wall in the same condition as when they started the tenancy. That would mean filling any holes and touching them up. If the touch up doesn’t match the rest of the wall, they should paint the wall. Alternatively, I’d probably give them the advice to buy special hanging strips, which can be used to hang pictures on walls securely without making any holes!

To further protect the landlord, an inventory is created before the tenancy begins, which includes a thorough description and photos of the property’s condition (including the walls). The tenants get the opportunity to check through it, so all parties understand how things need to be returned at the end of the tenancy (less fair wear and tear).

Inspections will soon show if tenants are abusing the tolerances afforded to them, whilst a visit before their move-out with a few pointers as to what is needed to be done to get the property back to the required standard is a good idea. This will help tenants know what is needed to get their security deposit back and it should reduce any required maintenance come the end of the tenancy (again reducing the dreaded void periods).

As ever, choosing the right tenants is important in allowing them the flexibility to live in the property as if it were their own. Whilst the best tenants will ask before making any changes and implement them in a reasonable manner, bear in mind that the worst tenants will just go ahead and do it anyway. Having a more collaborative approach should see happy and content tenants wanting to stay longer in the landlord’s house, having turned it into their home.

Thursday, 15 August 2024

Energy efficiency proposals for buy-to-let reintroduced

The Labour Government has confirmed that landlords will need to have at least a ‘C’ energy efficiency rating from 2030 via their EPC (Energy Performance Certificate). This comes less than a year on from when Rishi Sunak dropped this requirement, which was due to come into force in 2028 (having previously been delayed from 2025).

This hasn’t come as too great a shock to landlords though, as I noted last year when the policy was dropped. At that time the Labour party had already said they would reintroduce the policy if they came to power (which became ever more likely to happen as Sunak’s time at the top went on). Regardless of who was in power, it seemed to be a matter of when targets would be brought in rather than if. It is a shame though that the policy has come back in its original ‘one size fits all’ criteria, which seems overly simplistic for such a complex subject.

If you’re unfamiliar with EPC’s, they show a property’s energy efficiency on a scale from A (highest) to G (lowest). They are valid for ten years and you can easily look-up a property’s certificate online by visiting www.epcregister.com.

Whilst every rental property has needed an EPC since 2008, from April 2018 it became unlawful for new tenancies or tenancy renewals to proceed in a property with a rating lower than an E. From 1st April 2020, these rules expanded to ALL tenancies i.e. no property with an EPC rating below an E should currently be tenanted (although some exclusions apply). Those who fail to comply with these laws face significant financial penalties; from £5,000 all the way up to £150,000 for repeat, long-term offenders.

Updated lettings legislation also stipulates that if you don’t provide the EPC to your tenant before they let the property, you are unable to serve them with a Section 21 notice should you want to regain possession of the property.

It is therefore a good idea for landlords to check their property has a valid certificate in place with at least an E rating and that the tenants were given a copy before any tenancy agreement was signed after 2020. If you use a letting agent, be sure they are on top of this for you, as ultimately it is the landlord that faces the consequences (and fines) for not abiding by the legislation.

It should be noted that, legally, the EPC is only needed at the point of marketing and at the start (or any renewal of) the tenancy. So, if the EPC expires during the tenancy, it doesn’t technically need to be renewed straight away. This is something of a grey area though, as how can you prove the property satisfies the minimum rating if you don’t have an in-date certificate? Also, you need an in-date EPC to be able to serve notice to tenants, so it is wise to have one in place in case this becomes necessary.

Until they were dropped last year, most landlords had accepted that the more stringent energy efficiency rules were incoming, with some having already spent sizeable sums in preparation for the anticipated legislation. A study by Shawbrook Bank at the time suggested 80% of landlords were already prepared for the ‘C’ rating requirement.

Nevertheless, that same statistic means around 550,000 landlords weren’t prepared!

Further worrying research that has been published estimates it would take until 2042 for all rental homes to become compliant with the new rules; some 12 years after the 2030 target. This is for several reasons; most notably the extensive works many properties would require to actually achieve a C rating, alongside a lack of qualified tradespeople able to undertake the works (whilst also supposedly building 370,000 new homes a year…). Critics of EPCs argue they are inaccurate and largely based on (flawed) assumptions anyway. They also appear non-sensical when certain upgrades (most notably energy efficient electric heaters being installed in place of old storage heaters) actually lower the perceived energy rating! Some ‘improvement’ works are also known to negatively affect the structure of a property and lead to damp; such as the fad of ‘insulating spray foam’ being used in lofts a few years ago, which is now being shown in the media as leading to condensation issues such that the properties affected have become unmortgageable and unsaleable without costly removal.

Most are also of the opinion that once the C rating is commonplace it will only be a matter of time before the goal posts are moved to a required ‘B’ and then an ‘A’ rating. Meanwhile, why is it only rented properties that need to meet the criteria, as opposed to all properties (both residential and commercial).

On the flip side, many landlords are responsible and environmentally conscious enough to realise there are benefits of improving energy efficiency without being forced to do so. Rising energy prices in the past couple of years has focused the minds of many tenants, such that they are now actually taking note of the EPC rating prior to choosing a property. Previously, so few people paid attention to the EPC that there was little value in improving the energy efficiency of the home, nor to then instruct and pay for another assessment to prove it.

Similarly, the value of a property should benefit from being more energy efficient; with 74% of those looking to purchase within the next two years advising that a home with an EPC rating of an A or B is more attractive than less energy efficient homes. There are also a growing number of ‘green’ mortgage deals, with incentives or improved terms reserved for those with the most energy efficient homes.

I suspect the reintroduction of the enforced energy efficiency proposals will now mean a swathe of properties being sold rather than let. This will be especially true of older properties and leasehold properties, whereby the required improvements are simply impossible to implement, or are far too costly to justify at a time when landlords’ margins have already been squeezed. I guess those properties will be sold to an owner-occupier who doesn’t need to meet the minimum requirements, whilst those in the rental market will face a further supply shortage and, inevitably, higher rents.

Thursday, 28 September 2023

Energy efficiency proposals for buy-to-let scrapped

There has been a lot of talk this past week about the environmental policies dropped by Rishi Sunak as he pushed back the UK’s net zero carbon emissions goals. Amongst the policies scrapped was the proposal that all rental properties would need to have a ‘C’ energy efficiency rating from 2028 (previously delayed from 2025) via their EPC (Energy Performance Certificate).

It should be noted, that legally the EPC is only needed at the point of marketing and the start / any renewal of the tenancy. So, if the EPC expires during the tenancy, it doesn’t technically need to be renewed straight away. This is something of a grey area though, as how can you prove the property satisfies the minimum E rating if you don’t have an in-date certificate? Also, you need a valid EPC to be able to serve notice to tenants, so it is wise to have one in place in case this becomes necessary.

Until last week, most landlords accepted that more stringent energy efficiency rules were a given, with some having already spent sizeable sums in preparation for the anticipated legislation. A study by Shawbrook Bank suggests 80% of landlords were already prepared for the 2025 EPC rule change (although that suggests around 550,000 landlords weren’t!). This effort and expenditure might not all be in vain though; it is likely the minimum rating will be increased at some point in the future. Indeed, the Labour and Liberal Democrats parties have already said they will reverse these reversals if they get the opportunity…meaning the need for a C rating by 2028 could still become a reality if they come to power (a General Election is due next year…). Besides, improving the energy efficiency of your buy-to-let not only has a benefit to the environment but also to your tenants. Rising energy prices in the past couple of years has focused the minds of many, such that tenants are now taking note of the EPC rating prior to choosing a property. Previously, so few people paid attention to the EPC that there was little value in improving the energy efficiency of the home, nor to then instruct and pay for another assessment to prove it.

Similarly, the value of the property should benefit from being more energy efficient; with 74% of those looking to purchase within the next two years advising that a home with an EPC rating of an A or B is more attractive than less energy efficient homes. There are also a growing number of ‘green’ mortgage deals, with incentives or improved terms reserved for those with the most energy efficient homes.

So, although the ‘stick’ of having to ensure all rental properties meet at least a C rating rather than the current E rating on the energy efficiency scale has gone, there are a growing number of ‘carrots’ as to why landlords may wish to adopt this regardless. This seems sensible to me, as there were some homes (e.g. older, solid brick properties, which have stood the test of time despite their perceived shortcomings) that simply required too great a cost to warrant the works (which could also cause damp and defects to the property).

For now, the scrapping of the energy efficiency proposals should mean there is one less reason for landlords wishing to sell their property. This is especially true for those with older housing stock, who feared the cost implications for them to meet the standards was simply not worthwhile, perhaps showing the proposal in its original form was unrealistically simplistic with its ‘one size fits all’ application.

Thursday, 16 March 2023

Why you should let tenants turn your house into their home

In my view it’s quite simple; yes, the tenant should respect the property they are renting, but for the time they are there they should see it as their home and treat it accordingly.

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If you are looking for an agent that is well established, professional and communicative in Chichester, then contact us to find out how we can get the best out of your investment property.

E-mail me on clive@crjlettings.co.uk or call 01243 624 599.

Don't forget to visit the links below to view my previous buy-to-let deals and Chichester Property News articles:

^{_{c/o CRJ Lettings, 30B Southgate, Chichester, West Sussex, PO19 1DP}}

Thursday, 27 October 2022

Should you renew your tenancy agreement?

You see, most tenancy agreements make provisions for the contract to continue on a contractual periodic basis. And even if they don’t, by law it will continue on a statutory periodic tenancy. In layman’s terms, these are both monthly rolling contracts, whereby the tenant is required to give one month’s notice to vacate the property, whilst the landlord may give two months’ notice to end the tenancy and regain possession of the property (this has been extended to three months during the Coronavirus pandemic).

Whilst some tenants like the certainty of a fixed contract, many actually prefer the flexibility of not being ‘locked in’ to a long-term rental contract in case their circumstances change. Consider the uncertainty around job security currently and tenants who can give a month’s notice to leave their current home certainly have more opportunities available than homeowners or tenants in a fixed contract.

As a landlord and letting agent I have always operated like this i.e. not re-signing contracts, finding it to be the best and easiest way to continue a tenancy, both administratively and in providing flexibility to both the tenants and landlord.

For me and my landlords, there’s also the added security that should the tenants conduct change or they start to fail in their obligations e.g. they stop paying the rent, we can regain possession with the set notice, rather than having to wait until the end of the new fixed term (or having to take them to court, which is time-consuming, expensive and uncertain).

And whilst a landlord can, if they wish, increase the rent with two months’ notice during a periodic tenancy, you may have read in my previous articles that I prefer to promote long-term tenancies by avoiding this where possible; only increasing the rent when it is significantly out of kilter from the ‘going rate’.

So why then do most letting agents insist on renewals? Well, whilst some may argue there’s more stability for their landlords that way, I think the only stability many of them are interested in is receiving their fees i.e. locking in a prolonged management fee and charging a renewal fee to both the landlord and tenant. Funnily enough, since letting agents were banned from charging fees to tenants, many have decided it might be best to just allow tenancies to continue on a rolling basis rather than renewing them like they’ve always done…

Are you a landlord or a tenant and, if so, do you prefer to renew contracts each year or let them amicably turn into a periodic tenancy? Please get in touch and let me know.

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Thursday, 9 April 2020

Have new rules made your property unlettable?

Despite the challenges surrounding the Coronavirus, new regulations on energy efficiency still came into effect on 1st April, which could now make it unlawful to let your property. The Minimum Energy Efficiency Standards (MEES) have been known about for some time, so I hope this isn’t coming as a shock to landlords, but let’s take a closer look at what the latest changes mean.

Whilst every rental property has needed an Energy Performance Certificate (EPC) since 2008, from April 2018 it became unlawful for new tenancies or tenancy renewals to proceed in a property with a rating lower than an E. From 1st April 2020, these rules have been expanded to ALL tenancies i.e. no property with an EPC rating below an E should currently be tenanted (although some exclusions apply).

If you’re unfamiliar with EPC’s, they show a property’s energy efficiency on a scale from A (highest) to G (lowest). They are valid for ten years and you can easily look-up a property’s certificate online by visiting www.epcregister.com. Landlords should therefore check their property has a valid certificate in place with at least an E rating and that the tenants were given a copy before they moved in (not doing so prevents you from serving certain eviction notices).

Those who fail to comply with the new laws face significant financial penalties; from £5,000 all the way up to £150,000 for repeat, long-term offenders. If you use a letting agent, be sure they are on top of this for you, as ultimately it’s the landlord that faces the consequences of not abiding by the legislation.

If your rental property falls short of the necessary rating, there are a couple of options available (although these should have been instigated before 1st April). It may help to know that the parameters of the rating system have changed recently too. I advised a new landlord of mine whose property had an EPC with an F rating from 2014 to get it re-assessed, which resulted in a newly updated D rating; making it legal and ready to rent with the minimum fuss, effort and cost to the landlord.

In many cases though, improvement measures will be needed to increase the energy efficiency sufficiently so as to achieve the minimum rating. Landlords could previously apply for an exemption based on improvements costing them money (if funding was unavailable). These were removed last year however, so landlords must now spend upto £3,500 of their own money to achieve the required rating, before an exemption will apply based on excessive costs.

There are some other exemptions that can be applied for, such as for flats whereby the freeholder won’t improve the building or where it would have a negative impact to do so (such as with listed buildings). New landlords also get a six-month exemption to give them time to get improvements done, although the nature of them would typically mean works will be necessary before tenants occupy the property.

It is likely that the energy efficiency rules will become more stringent in the future too. Whilst an E rating may be okay for now, calls for further environmental improvements is set to see the minimum requirement rise to a D rating by 2025 and a C rating by 2030. Landlords should therefore consider this when viewing properties for investment, or factor in the need for money to be spent on energy efficiency improvements in the future.

If you’re in the process of purchasing a buy-to-let property and would like me to check its long-term viability, please get in touch.

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Thursday, 2 April 2020

Should you renew your tenancy agreement?

Most tenancy agreements last for a fixed period of six or twelve months. This means the tenants are obligated to pay rent and remain in the property for that length of time, whilst the landlord can’t increase the rent or ask the tenants to leave (without applying to a court). Many take it as read that as the end date of the contract approaches they’ll need to renew it, but that isn’t actually the case.

You see, most tenancy agreements make provisions for the contract to continue on a contractual periodic basis. And even if they don’t, by law it will continue on a statutory periodic tenancy. In layman’s terms, these are both monthly rolling contracts, whereby the tenant is required to give one month’s notice to vacate the property, whilst the landlord may give two months’ notice to end the tenancy and regain possession of the property (this has been extended to three months during the Coronavirus pandemic).

Whilst some tenants like the certainty of a fixed contract, many actually prefer the flexibility of not being ‘locked in’ to a long-term rental contract in case their circumstances change. Consider the uncertainty around job security currently and tenants who can give a month’s notice to leave their current home certainly have more opportunities available than homeowners or tenants in a fixed contract.

As a landlord and letting agent I have always operated like this i.e. not re-signing contracts, finding it to be the best and easiest way to continue a tenancy, both administratively and in providing flexibility to both the tenants and landlord.

For me and my landlords, there’s also the added security that should the tenants conduct change or they start to fail in their obligations e.g. they stop paying the rent, we can regain possession with the set notice, rather than having to wait until the end of the new fixed term (or having to take them to court, which is time-consuming, expensive and uncertain).

And whilst a landlord can, if they wish, increase the rent with two months’ notice during a periodic tenancy, you may have read in my previous articles that I prefer to promote long-term tenancies by avoiding this where possible; only increasing the rent when it is significantly out of kilter from the ‘going rate’.

So why then do most letting agents insist on renewals? Well, whilst some may argue there’s more stability for their landlords that way, I think the only stability many of them are interested in is receiving their fees i.e. locking in a prolonged management fee and charging a renewal fee to both the landlord and tenant. Funnily enough, since letting agents were banned from charging fees to tenants, many have decided it might be best to just allow tenancies to continue on a rolling basis rather than renewing them like they’ve always done…

Are you a landlord or a tenant and, if so, do you prefer to renew contracts each year or let them amicably turn into a periodic tenancy? Please get in touch and let me know.

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Thursday, 5 March 2020

What can you rent in Chichester?

Last week I looked at what properties were for sale in Chichester, but for those wanting to move home there is of course also the option to rent. With that in mind, I thought I’d take a look at what’s out there at the moment in Chichester for potential tenants.

There are 257 rental listings currently online in Chichester, of which 153 are still available to rent, with the other 104 ‘let agreed’. However, when you start to browse through these properties you’ll notice there are a lot of house shares (which is no good if you want your own place), student properties (only available to students) and holiday lets (not suitable as a permanent home). When you take those properties out of the mix, you’re left with just 84 to choose from.

Those looking to rent a two-bedroom flat have the most choice, with 47 currently to let, whilst those at either end of the market have the least to choose from, with just 13 one-bedroom flats and 12 four-bedroom houses on offer.

Of course, what you can rent will largely depend on your budget. The cheapest of the 84 whole properties available to non-students on a long-term basis, is a very nicely presented studio apartment on the road between Chichester and Fishbourne, priced at £575pcm. On the other end of the scale, the most expensive property to rent in Chichester today is a large Grade II listed four-bedroom townhouse in West Pallant, priced at £3,250pcm.

Assuming your budget is somewhere in the middle of those two extremes, it might be interesting to know that the average property marketed for rent in Chichester is priced at £1,000pcm. This figure is up around 3% compared to the £975pcm average of twelve months ago.

Breaking the averages down by property type provides a good indication of what your budget is likely to be able to afford in Chichester:

Interestingly, the average price of the three-bedroom houses are the only ones to have dropped on average compared to a year ago (albeit only by £5pcm). Meanwhile, both two and four bedroom houses have increased on average, whilst flats across the board have remained at the same level.

It seems this relatively low supply of rental property in Chichester is a key reason why rents remain stubbornly high. Due to the negative impact of recent legislative and tax changes, this supply issue isn’t likely to improve any time soon, which will make it increasingly difficult for tenants to find their dream home at an affordable price.

For a weekly digest of the average rental figures by property type in Chichester, be sure to subscribe to my free weekly e-newsletter at http://bit.ly/chipropertynews

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Thursday, 6 February 2020

Why you should let tenants turn your house into their home

At a viewing last week, I was asked by prospective tenants whether they’d be able to put pictures up on walls should they move in. I’m amazed some landlords charge thousands in rent but won’t allow their tenants to put a few pictures up, especially when you consider it from a business perspective.

Having such stringent rules about how a tenant can live won’t make them want to stay for long. This will naturally create a higher churn of tenants, leading to more void periods (and less rent in the landlord’s pocket). Furthermore, the coming and going of tenants will lead to greater wear and tear; which presumably is what the landlord was trying to avoid in the first place!

In my view it’s quite simple; yes, the tenant should respect the property they are renting, but for the time they are there they should see it as their home and treat it accordingly.

If tenants want to put pictures up, they would simply be instructed to return the wall in the same condition as when they started the tenancy. That would mean filling any holes and touching them up. If the touch up doesn’t match the rest of the wall, they should paint the wall. Alternatively, I’d probably give them the advice to buy special hanging strips, which can be used to hang pictures on walls securely without making any holes!

To further protect the landlord, an inventory is created before the tenancy begins, which includes a thorough description and photos of the property’s condition (including the walls). The tenants get the opportunity to check through it, so all parties understand how things need to be returned at the end of the tenancy (less fair wear and tear).

Inspections will soon show if tenants are abusing the tolerances afforded to them, whilst a visit before their move-out with a few pointers as to what is needed to be done to get the property back to the required standard is a good idea. This will help tenants know what is needed to get their security deposit back and it should reduce any required maintenance come the end of the tenancy (again reducing the dreaded void periods).

As ever, choosing the right tenants is important in allowing them the flexibility to live in the property as if it were their own. Whilst the best tenants will ask before making any changes and implement them in a reasonable manner, bear in mind that the worst tenants will just go ahead and do it anyway. Having a more collaborative approach should see happy and content tenants wanting to stay longer in the landlord’s house, having turned it into their home.

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^{_{c/o CRJ Lettings, 30B Southgate, Chichester, West Sussex, PO19 1DP}}

Thursday, 12 December 2019

Is it worth buying boiler insurance?

The cold season is upon us and in an effort to keep warm many of us will have turned to a plain looking metal box called a ‘boiler’. When the heating was turned on for the first time it may have been off for months - so did yours work perfectly first time or was it coughing back to life?

Nowadays, many boilers are used all year round to provide hot water so you shouldn't encounter any nasty surprises when turning the heating on too. Still, the fact they’ll ‘just work’ is often taken for granted and these mysterious contraptions do have a habit of breaking down just as you need them most. And a broken boiler can be an expensive fix, landing you with a nasty bill to pay. So, to avoid a dent in your savings, is it best to buy boiler insurance instead?

Many opt not to buy boiler insurance as it becomes yet another monthly expense that seems unnecessary (until it’s needed!). However, each household is different and you should assess whether it makes sense for your own financial circumstances and peace of mind to set aside a fixed smaller amount each month versus the potential of facing a large one-off payment out of the blue.

Quickly browsing some boiler insurance policies online, I found that for £15 per month you can have unlimited repairs, with no excess to pay. Whilst this would equate to £180 per year down the drain if it wasn’t used, most boiler repairs will cost at least that much to resolve; one boiler I had broke down three times with three different faults in a 12 month period, costing a total of £720 to fix (that’s four years’ worth of boiler insurance payments!).

Looking through my records though, only 9% of boilers had repair bills above £180 in any one year; meaning boiler insurance would have been an unnecessary expense in most cases, which I guess is how insurance companies make their money!

Some households may be more susceptible to a breakdown, such as larger families with multiple users using hot water for showering/bathing and with more radiators in the house demanding heating from the one boiler. The boiler’s age may also help determine the likelihood it’ll breakdown; although many insurers stipulate a maximum age for boilers they’ll cover as they know this too!

If you do decide boiler insurance makes sense, you should first check to see if your home insurance covers it or whether it could be added as an extra. Alternatively, there are specialist providers, but whoever you use always be sure to understand what the policy actually covers.

Taking all of this into consideration, it seems to me that if you're on a tight budget, have an older boiler or don't want the hassle of phoning around for plumbers, then boiler insurance might be worthwhile. Having it would certainly help me avoid uneasy calls to landlords with the news of a large repair bill!

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Thursday, 30 May 2019

All change for the lettings industry as the tenant fee ban looms

Perhaps the most significant changes to the lettings industry for 20+ years are upon us, as the Tenant Fees Act commences on the 1st June. What was initially set to be a change of law to ban tenants having to pay administration fees to letting agents and landlords has morphed into something far more impactful.

And whilst the proposal was first announced in the Autumn Budget of 2016, the act was only officially confirmed in January of this year, with further details and guidance released in April, just two months before the act came into effect.

Not only has that not given letting agents and landlords much time to dissect, assess and change a heap of processes they need to undertake, but there is still some confusion and debate over certain parts of the guidance (which amounts to 59-pages). There has been a total lack of clarification from official sources as to the full ins and outs of how some of the most widely disputed elements should be interpreted and thus implemented.

I find it rather frustrating therefore that a large number of my processes are now defunct - processes that had led to 100% of all rent being paid and 97 out of 97 online reviews from my landlords and tenants being five-star. It wasn’t broke…yet it’s been ‘fixed’ against my will.

And it might come as no surprise to those within the industry that the government also hasn’t updated their ‘How to Rent’ guide for tenants or ‘How to Let’ guide for landlords. Providing the How to Rent guide to all new tenants is a legal requirement…and yet this government-produced document was last updated in July 2018 and therefore still mentions tenant fees and other incorrect information.

Putting the poor implementation of the act to one side, I wrote in late 2016 how a tenant fee ban would have minimal effect on CRJ Lettings, as we charged just £100 per adult i.e. a couple would only ever pay us £200 for the duration of their stay. That was the cheapest tenant fee of any letting agent in Chichester, with the average being £454 (plus renewal fees thereafter). I actually saw this as an opportunity as it was widely perceived that letting agents would increase their fees to landlords to accommodate for this loss of income, which is exactly what has happened in most cases (whereas my fees remain unchanged for now).

Unfortunately, it is the ‘other stuff’ that has been bolted-on to the banning of fees that I believe will cause the biggest issues for letting agents and landlords. Falling foul of the new rules, even due to an innocent mistake, will result in a £5,000 fine - so make sure you’re aware and up to date with things, or get in touch with someone who is!

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Thursday, 23 May 2019

Should Chichester’s retirees invest in buy-to-let property?

I was contacted by a recently retired couple who were considering investing in buy-to-let property to supplement their pensions. Whilst I can’t offer financial advice, here’s a few snippets of what I suggested they consider first.

Is it too much hassle?

Retirement should be the time to relax and undertake the pursuits you enjoy whilst spending time with those you love. Property is not an ‘armchair investment’ like sticking money in the bank; you need to buy the right property at the right price…and then the hard work starts!

Even if you use a letting agent, ultimately the landlord is responsible for what goes on at their rental property. And whilst a letting agent should take the bother out of receiving those emergency maintenance calls from tenants, for some people the worry over whether the tenant will pay their rent or whether the property will require costly repairs is enough not to want to invest in property in the first place.

How much will you earn?

In Chichester the average net rental return from a single-let property will be around 4%. Whilst this is more than double the best savings accounts at the moment, is this enough to warrant the additional effort and risk it entails?

And don’t forget the taxman will be keen to get his mitts on a chunk of your investment return as well. Rent is recorded as income for tax purposes, so higher rate taxpayers will be stung accordingly, but bear in mind that even lower-banded tax payers could get dragged into the higher tax bands with the added income.

What does the future hold?

Property is not an asset you can easily sell quickly to cash in your chips if you suddenly need the money e.g. for care fees. And whilst capital growth can be strong with property, consider whether you’ll actually get the benefit of this.

If you do decide property is right for you it is worth spending some time with an estate planner to assess the best way to purchase the property. For example, in a company or trust, or possibly in your children’s names rather than your own, for optimal tax planning when it comes to future inheritance tax liability.

In summary

Property can be a great store of wealth and, with interest rates so low, the returns are better than you can get from many other investments. But I’d question whether it’s worth it for retirees with only a modest sum to invest if they’ll then need mortgage finance, as new rules on mortgage tax relief could see their net returns don’t warrant the hassle. But for higher net-worth retirees, property is certainly a logical place to put some of that wealth, preferably in a tax-efficient holding that can mitigate future inheritance tax, whilst providing a decent income for you to enjoy your golden years.

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