What’s in store for Chichester’s landlords in 2021?

Whilst attention was largely focused on tackling the coronavirus pandemic in 2020, new laws were still implemented that affected the lettings industry. Indeed, the pandemic seems to have provided the excuse to fast-forward into law a few matters that were previously only ‘on the horizon’ and, as such, 2021 looks set to be another busy year for landlords.

Letting agents must have Client Money Protection - confirmed
The deadline for this mandatory requirement has been pushed back twice in the past few years, but a firm date of 1^st April 2021 now exists. From that date, all letting agents must have Client Money Protection, which covers the misappropriation of their landlords’ and tenants’ money. So, check your letting agent has it in place!

Electrical safety checks - confirmed
Since 1^st July 2020, an Electrical Installation Condition Report (EICR) must have been carried out (and a copy provided to the tenants) when starting a new tenancy. From 1^st April 2021, EICR’s will become mandatory for all tenancies.

 

Changes to stamp duty - confirmed
In July 2020 the stamp duty exemption rate was increased from £125,000 to £500,000. Although landlords are still subject to the 3% additional property surcharge, it has meant big savings have been on offer on property purchases (of upto £15,000). This is set to end on 31^st March, although it’s quite possible that this period will be extended. What is confirmed though is that, from 1^st April, all non-UK residents will be liable for an additional 2% stamp duty surcharge.

 

Changes to Section 21 - highly likely
Emergency legislation in light of Covid-19 currently means landlords must provide tenants with six months’ notice (compared to the normal two months). This is set to end on the 31^st March, but it’s likely that political pressure will see this period extended. Worryingly for landlords, this ‘temporary’ measure could set the way for the full abandonment of the current ‘no fault’ Section 21 notice system. This has been lobbied for by pro-tenant groups and discussed for years, and would result in all evictions needing to go through the courts (which are already stretched beyond capacity…).

Increase in tax - highly likely

Nothing has been confirmed in this regard, but Rishi Sunak did say that tax increases in 2021 were “inescapable” after the vast sums of money spent dealing with the coronavirus pandemic. One likely candidate is Capital Gains Tax, whereby the rates are increased to match those of the income tax bands (for which many landlords are now in higher brackets, due to the full ramifications of the ‘Section 24’ mortgage interest relief changes being felt).

Changes to Right to Rent - likely

Since February 2016, landlords in England have had to check their prospective tenants’ immigration status to ensure they had the right to live in the UK. Brexit has brought in a new points-based system, but landlords have been told to continue with the existing checks until 30^th June. Guidance for what to do after then is due to be released in the Spring.

 

No more ‘no pets allowed’ - likely

A bill has been put forward that would allow tenants to have a pet without requiring their landlord’s approval. Whilst I am typically pet-friendly as a letting agent / landlord, some people and types of property simply aren’t suited to having a certain type, or number, of pets. Many landlords also simply do not like being dictated to, as further control about their property gets taken away from them.

Further impact from coronavirus & Brexit - who knows!!

Whilst no one knows what the future holds, we can at least prepare ourselves for what might happen. Those who are able to adapt to the frequently changing world of lettings should be well-placed to cater for the growing number of tenants, at a time when the number of landlords and available properties is decreasing.

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How profitable is buy-to-let in Chichester?

I was recently running through some rough figures with a couple who were contemplating buying a rental property for the first time, having first considered it shortly after the credit crunch. A lot has changed in the world of buy-to-let over the decade since then, but as many people ultimately invest to make money, I thought it might be interesting to see how things have fared in that regard.

The biggest impact upon rental profits has been the collapse in interest rates. Consider that mortgage rates a decade ago were around 6% based on a 75% loan-to-value five-year fix. That meant that every £100,000 of mortgage cost £500 per month (interest only). Today, that same loan can be had for around 2.1%, which lowers the cost for every £100,000 borrowed to just £175 per month. At the same time rents have increased, so it’s been a double whammy of income increasing alongside the cost of finance decreasing.

Of course, house prices have gone up a lot in the past ten years, so you now need to borrow more to buy the same property. But they haven’t increased as much as interest rates have gone down, which means the profits on offer from buy-to-let today have actually increased for landlords. That of course assumes you’re utilising mortgage finance for your buy-to-lets. If not, then the returns on offer from buy-to-let now are lower than they were a decade ago as rents haven’t increased as much as house prices have.

On the negative side though, there have been serious tax changes that are starting to have an impact on landlords’ bottom line. You see, whereas finance costs used to be offset against income before calculating your profit (the same as in any other business), tax changes mean this is no longer the case. Instead, by the 2020/2021 tax year you’ll only be given a ‘tax reducer’ of 20% of the total finance costs. Whilst many have said this won’t affect basic tax-rate payers (technically correct) it will push a huge number of landlords into higher rate tax brackets as their gross rent now counts towards their income.

Many people buying rental properties now are side-stepping these negative changes by purchasing through a company. The mortgage rates to do so can be slightly higher, but overall it is a more profitable way to buy (unless they change the rules again…). Whatever way you buy though there’s no avoiding the 3% stamp duty surcharge that now applies to landlords!

Back to those rough figures though and here in Chichester a typical two-bedroom rental property might cost £250,000. With buying costs, stamp duty and a 25% deposit you’ll need around £75,000 to buy that property. The £187,500 mortgage will cost you around £330pcm on an interest-only basis, whereas such a property should rent for around £875pcm. So, a potential £545pcm could be yours, which is a pretty decent 9% return on the £75,000 you’ve invested. Of course, that completely ignores management and maintenance costs and assumes everything runs perfectly….as well as ignoring the fact the taxman will be waiting come the end of the year too.

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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:

• Follow The Buy-To-Let Property Investment Market in Chichester
• Chichester Property Market LinkedIn Page for Clive Janes
• CRJ Letting Agents Chichester Facebook Page
• CRJ Letting Agents Chichester Twitter Page
• Chichester Investment Property Management Specialist CRJ Letting Agents Website

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

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How much are Chichester’s landlords spending on property maintenance?

As the tax year recently came to a close, annual account statements were sent out to all of my landlords who employ me on a full management basis. It’s not something I publicise I do (free of charge) as part of my lettings service, but I think it will make my landlords (or their accountants!) lives easier come self-assessment time. 

The statement breaks down the total rent they have received in the tax year for each property, along with any deductions that were made (my management fees and any property maintenance costs). It’s similar to what I send each month when the rent comes in, but this time for the whole tax year.

Not only is this a nice overview for the landlord, whilst again demonstrating my complete transparency in regards to fees, but it also ensures all costs are accounted for so that they can claim the maximum tax relief. This is increasingly important at a time when mortgage interest relief for landlords is reducing.

It also gives me some great figures to analyse, which I wanted to share with you.

The average rent my landlords are achieving is £1,100pcm, which is 11% higher than the current average rent in Chichester of £995pcm. Plus, they have received all of the rent due to them i.e. there were no non-paying tenants all year - phew!

What’s more is that my unique fixed-fee structure is proving to be excellent value for my landlords; demonstrated by my average landlord being charged just 9.2% in total for a full tenant find and ongoing management service. One landlord is paying just 6.2% as their property achieves a particularly high rent, meaning my fixed fee proves to be even cheaper for them.

What was also interesting to see is that my landlords are spending £470 a year on average on property maintenance, which is just 4.5% of the total rent they receive. 

Common lettings advice is to set aside 10% of your annual rent to account for property maintenance, but my landlords are doing far better than this. I suspect this is partly because I focus on more modern properties, which should inherently have fewer issues, and because I tend to endorse the attitude of ‘prevention being better than cure’ i.e. spending a little in the short-term to save a lot in the long-term.

I hope it’s also partly down to the carefully selected maintenance contractors I use, who offer good value for money, plus the fact I don’t add a mark-up to maintenance costs or charge additional commission. I also often check issues for myself to see if they can be rectified by me, free of charge, before getting in the paid help. 

If you’d like to discuss the ins and outs of how I can make the management of your rental property a little bit easier and perhaps more cost-effective, please get in touch. 

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This article was featured in...

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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:

• Follow The Buy-To-Let Property Investment Market in Chichester
• Chichester Property Market LinkedIn Page for Clive Janes
• CRJ Letting Agents Chichester Facebook Page
• CRJ Letting Agents Chichester Twitter Page
• Chichester Investment Property Management Specialist CRJ Letting Agents Website

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

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Is the letting fees ban good for Chichester’s tenants?

I’m sure you’ll have heard about the big property news in last week’s Queen’s Speech - the ban on letting agents’ and landlords charging tenant administration fees (details still to be confirmed).

CRJ Lettings charge the lowest tenant fees of any letting agent in Chichester - £200 is all a couple will ever pay. Queried by some applicants in the past for being low, this is the actual cost to process the administration (excluding my time, which the landlords’ fees cover), so it seems right that is what I charge.

Unfortunately I found the average tenant fee (for a couple) in Chichester is £454 and the highest £760! That ludicrous sum is made up of a £300 admin fee, £300 to produce a tenancy agreement, £60 towards the inventory and a £100 check-out fee, which is payable at the start of the tenancy. If you feel like staying with this particular agent they’ll charge you a £100 renewal fee to do so. They’ll even charge you £30 after you leave should you need a letting agent reference for your next property!

It seems that some letting agents’ inability to self-regulate has caused the discontent amongst the growing number of tenants that has led to government intervention.

Unfortunately it is government intervention that I believe has yet again been hastily thought out for the benefit of their own political popularity rather than their electorate’s best interests.

You see, letting agent fees to tenants were banned in Scotland in 2012 to much fanfare. Unfortunately, whilst many advocates of the ban in England claim rents haven’t risen in Scotland as a result (from agents passing the costs to landlords), that simply isn’t true.

In fact, according to the CityLets Index, rents in Scotland rose 15.3% between 2012 and 2016. In England the average increase in that timeframe was 8.5% (according to the Office of National Statistics), whilst here in the South-East rents rose 8.3%.

And the crux of it is this; in the past 18 months landlords have been hit with additional safety legislation, a 3% stamp duty surcharge and troublesome tax changes; all of which will cost them money.

And like any business (and being a landlord is a business), if costs go up so will prices. I believe the letting fees ban will lead to rents rising; meaning any short-term savings for tenants will be more than offset by the monthly increase in rent. Perversely this will penalise those tenants wanting to create a long-term home the most, which is something I thought the government was in favour of?

I personally believe a cap on tenant fees would have been the correct action rather than a draconian ban. This penalises the worst offenders yet takes into account that there is a cost involved in the application process. It would also stop prospective tenants applying for multiple properties at no cost to themselves.

The ban might actually be a positive for my business though. As landlords see fee increases from other letting agents, they may take another look around at the competition to find that not only does CRJ Lettings offer the best value to the majority of tenants, but also to the majority of landlords too.

             

 (This article was featured in the Chichester Observer's property section on 29th June 2017) 

Clive Janes, CRJ Lettings.

                         www.crjlettings.co.uk                               

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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:

Follow The Buy-To-Let Property Investment Market in Chichester

Chichester Property Market LinkedIn Page for Clive Janes

CRJ Letting Agents Chichester Facebook Page

CRJ Letting Agents Chichester Twitter Page

Chichester Investment Property Management Specialist CRJ Letting Agents Website

c/o CRJ Lettings, 30B Southgate, Chichester, West Sussex, PO19 1DP

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Tax just got more taxing for landlords

Today marks the start of a new tax year. This one will be particularly significant for existing landlords as the mortgage interest relief changes start to come into play.

Previously, finance costs would be deducted from a landlord’s income to calculate their profit, just like any other business. They would then pay tax on this profit at the appropriate rate.

Let’s say a landlord has rental income of £30,000 per year with mortgage interest of £25,000. Currently this would mean a £5,000 profit, which the landlord would pay tax on at their normal rate i.e.

Basic tax-rate payers @ 20% = £1,000

Higher tax-rate payers @ 40% = £2,000

Additional tax-rate payers @ 45% = £2,250

However, in the 2015 Summer budget it was announced that landlords will lose the right to deduct their mortgage interest costs from their income. Instead, the amount you can offset will gradually fall over the next few years, until it is completely replaced from the 2020/21 tax year with a 20% tax ‘credit’.

That same landlord as earlier, with £30,000 in rental income and £25,000 of mortgage interest, will now have to pay tax at their taxable rate on the full £30,000 income before deducting just 20% of the mortgage interest.

This should mean there is no effect to a basic-rate taxpayer, as they would still pay £6,000 of tax (20% of £30,000) before recouping £5,000 (20% of £25,000) as a tax credit. They might, however, find that the significant increase in their taxable income will push them into a higher tax band; which will be affected by the changes.

Higher tax-rate payers will be lumbered with a £12,000 tax bill (40% of £30,000) before recouping that same 20% tax credit i.e. £5,000; resulting in a net tax bill of £7,000 - more than triple what they would pay now and £2,000 more than they have made in profits!

It gets even worse for additional tax-rate payers, as they would be faced with a tax bill of £8,500 when the new system comes into full force in 2020/21 (nearly four times as much as now!).

Meanwhile those without mortgages won’t be affected and nor will large corporations, leading many landlords to complain that the wealthy are unaffected by the changes, whilst the already squeezed middle are having their purses raided both unexpectedly and unfairly.

Some landlords have set up a company to eliminate the impact of the new tax system, as companies can still offset all of their finance costs. With corporation tax dropping to 17% by 2020 this could be a smart move for many, but it needs to be weighed up with possible capital gains tax liabilities if transferring existing properties as HMRC deems this to be a ‘sale’ to the company. The same applies if trying to transfer property to a spouse or partner who is in a lower tax-band.

The impact of all this is likely to translate into some landlords selling up, alongside fewer people entering the market. The resulting drop in the supply of rental properties, coupled with landlords needing to earn more to make the venture worthwhile, suggests rents are likely to increase.

It is perhaps more important than ever to get good advice not only in regards to what property to buy but also how to buy it. I’m happy to point you in the right direction in regards to both questions if you’d like to give me a call.

(This article was featured in the Chichester Observer's property section on 6th April 2017) 

Clive Janes, CRJ Lettings.


www.crjlettings.co.uk

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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:

Follow The Buy-To-Let Property Investment Market in Chichester

Chichester Property Market LinkedIn Page for Clive Janes

CRJ Letting Agents Chichester Facebook Page

CRJ Letting Agents Chichester Twitter Page

Chichester Investment Property Management Specialist CRJ Letting Agents Website

c/o CRJ Lettings, 30B Southgate, Chichester, West Sussex, PO19 1DP

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What's going to happen tomorrow?

Maybe it was all an April Fools’ prank from George Osborne, but assuming that isn’t the case; why might the 1^st April 2016 go down as a particularly unhappy day for many?

I am of course talking about the additional 3% stamp duty charge for second homes and buy-to-let purchases, which comes in to effect from tomorrow.

It was only in the Spring Budget a couple of weeks ago that some of the previously unanswered questions were addressed, but still the new rules drag many into paying the additional charge that you might not expect. Some parents helping their children on to the ladder as well as those with second homes anywhere in the world will be penalised whenever they move home.

As for landlords, they will have to pay the taxman an additional £5,520 if buying the average priced (£184,000) buy-to-let property. Meanwhile, here in Chichester, there will be an additional £10,132 stamp duty to pay on top of the £6,887 already due, based on an average property purchase price tag of £337,736 locally.

The question remains as to whether we will see prices drop by 3% to absorb this tax increase or whether owner-occupiers will take up the reigns whilst investors simply have to take it on the chin?

Some say that in a years’ time it will simply be the norm and that in the scheme of things, a 3% one-off charge will pale into insignificance over the long-term (it’s taken just four months for prices to increase 3% in Chichester).

I however question whether there is enough demand from owner-occupiers in Chichester who have the (minimum) 10% deposit (£33,774 average in Chichester) to replace these investors. This, at a time when we have seen the proportion of private renting in Chichester increase from 8.5% of households to 12.8% in a decade (which is still below the national average). 

The real sting in the tail that I fear many will face tomorrow due to this legislation will be the sudden collapse in their property sale or onward purchase. Having spoken to local estate agents and solicitors, there are many sales agreed with the caveat that it either completes by the 1^st April or the buyer will pull out.

There could be a lot of vendors unwittingly affected by this, either directly or indirectly by a transaction elsewhere in the chain that could scupper proceedings. I think there will be a spike in properties coming back on the market, which could yet offer a glimmer of hope to those looking to buy.

If, on the other hand, you have just completed on a buy-to-let purchase before tomorrows ‘deadline’ and are now looking for tenants or someone to manage the property for you, please get in touch to see if I can help.

(This article was featured in the Chichester Observer's property section 

on 31st March 2016).

Clive Janes, CRJ Lettings.  

www.crjlettings.co.uk

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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:

Follow The Buy-To-Let Property Investment Market in Chichester

Chichester Property Market LinkedIn Page for Clive Janes

CRJ Letting Agents Chichester Facebook Page

CRJ Letting Agents Chichester Twitter Page

Chichester Investment Property Management Specialist CRJ Letting Agents Website

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Rush to beat the buy-to-let stamp duty hike

The big news last week was the Autumn statement piling the misery on to landlords. From April 2016 any property purchase for the purpose of buy-to-let will be subject to an additional 3% stamp duty charge.

With the average UK buy-to-let purchase of £184,000, that will mean a £5,520 increase in stamp duty. Here in Chichester, the average property purchase price is £348,741, meaning stamp duty is currently £9,237. From April 2016 this will increase to £16,699 for buy-to-let purchases.

Frankly, I’m getting a little tired of the landlord bashing from George Osborne and the wider public. Yes, there are some landlords who overcrowd their properties that aren’t fit for habitation, but this is rare. Most landlords abide by the 400+ pieces of legislation to provide safe and proper homes to those who aren’t in a position to buy.

The tax changes announced in the Summer budget and now the additional 3% stamp duty to new buy-to-let properties will reduce investment in rental properties. There is already a shortage of rental properties on the market and the new legislation will further limit the options available to tenants, which will ultimately increase rents.

People say the homes won’t just disappear if landlords don’t buy them but instead will be bought by an owner occupier. The problem with this is that many don’t have the (minimum) 10% deposit (£34,874 average in Chichester) nor the money left over for all the other fees to be able to buy.

There is also a growing number who choose to rent rather than buy. They do this for both financial reasons but also the flexibility it offers in not having to tie themselves to a particular property (without enduring the added time and expense of selling). 

As UK housing has returned an average 7% compound annual growth rate over the last thirty years, investment bank UBS doesn't think the attractive investment case will diminish with the additional one-off 3% stamp duty charge. It can also be partially offset against the capital gains tax when you come to sell the property too.

In the long-term, I agree that buy-to-let is still a strong investment if implemented correctly. The consistent lack of new properties being built in the country and continued strong demand from tenants means the 3% penalty charge will pale into insignificance in the long-term.

In the short term there could be a rush for those who were considering buying a buy-to-let to do so before the additional 3% fee comes into force in April 2016.

If you’re considering investing in a buy-to-let I’d advise you to start putting those plans into action. If you’d like some free advice and assistance in beating the buy-to-let stamp duty hike, please get in touch.

(This article was featured in the Chichester Observer's property section 

on 3rd December 2015).

Clive Janes, CRJ Lettings.  

www.crjlettings.co.uk

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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:

Follow The Buy-To-Let Property Investment Market in Chichester

Chichester Property Market LinkedIn Page for Clive Janes

CRJ Letting Agents Chichester Facebook Page

CRJ Letting Agents Chichester Twitter Page

Chichester Investment Property Management Specialist CRJ Letting Agents Website

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