Registered with Property118.comWednesday 3rd July 2013
Reply to the comment left by Rod Adams at 20/11/2017 - 17:24I take your point Rod, but how likely is it that a student would stay only one month into the new university year? If they've stay on over the preceding summer, then isn't that a good thing (better occupancy)? And if they do leave one month in, there's always "churn" in the market as other students elsewhere realise they can't stand their housemates, and as non-students come and go with new jobs etc, so there must be a chance that someone else will jump at the chance to take over the room that comes available in November. Are the student and non-student markets in Edinburgh really so separate?
Asif - I agree planning and mortgage T&Cs and insurance are all potential killer problems. I suppose another option to cut this particular Gordian Knot is just to abandon the whole notion of "student housing" altogether. It's always been an artificial construct anyway, driven by council tax rules (the arbitrary 100% deduction for students, which surely needs repealing now that almost all other deductions have been abolished) and to suit the convenience of students with their ultra-long holidays. If the long-standing market mediator represented by the AST has been abolished, then perhaps it's time that the favoured status of "student housing" should be abolished too.
In south-east England, where I operate, specialised student housing is an increasing rarity: there are still some houses let en bloc to groups of students in the traditional way, but most shared houses are now just that - a shared house/HMO, taking undergraduate students, postgraduates who live there all year round, and young working people on group or single AST contracts. I don't know all the details of the new PRT, but ultimately students have to live somewhere, and if they want to penny-pinch and give up their rooms in June or July, perhaps that will prove to be just fine from your perspective: if you give up the notion of only serving the student market, you can simply find another non-student tenant to replace them. (I assume here that Edinburgh has a ready supply of recent graduates taking up their first or second job who are also looking for houseshares).
Since the Scottish government has insisted on this freedom of tenants to control completely their move-out date, perhaps students will have to learn that this isn't an unrelieved good thing: landlords can respond to the increased risk by ending the perk represented by so-called student housing, and students will find themselves in competition with everyone else for the available rooms. Students will have to face the risk that if they give up their rooms in June, there will be fewer rooms available for them in September, and then they will be in a "mixed" house where everyone is liable to pay council tax. This might incline them to give up their short-term cash saving at the landlord's expense and keep their rooms all year after all, especially if they can negotiate a small reduction in rent over the summer with their kindly landlord . . .... Read More
Some lateral thinking: university halls of residence deal with their loss of revenue during holiday periods by renting out their rooms as effectively holiday lets: rooms for conference delegates, postgraduate student on short summer courses, and for tourists. Why not do the same?
i.e. charge the higher rent to your ordinary students (maybe not 12 months in 9, but 10 or 10.5 months in 9, to test the market, and increase it in later years if the students prove willing to pay), then switch to "AirBnB/Holiday Lettings" mode in the summer. Edinburgh is a very popular destination for tourists and festival-goers, so adjust your offering so you can tap into that lucrative market instead with relatively little work, e.g. if your HMO/houseshare rooms don't already have locks with internal thumb-turns, add these so the rooms can easily be converted to AirBnB format. You would obviously have to research how to market the rooms effectively too.
Operating as part-holiday lettings would also allow you to deduct a good proportion of your mortgage interest from their profits, and you could deduct your new furniture and other capital costs too. I'm assuming here the the SNP hasn't tampered with the taxation treatment of holiday lettings as well.
Some undergraduate and definitely postgraduate students actually want to stay in Edinburgh all year round, or most of it. If you recruit one of these as your "house mother/father", they could administer and monitor the holiday lettings for you, say in exchange for a reduced rent, which would help you manage the business more efficiently. The rent reduction might also be chargeable as a business cost, creating another saving.
For myself, this 12 months in 9 arrangement sounds overly complicated: just charge a higher rent and see what other landlords do and how students respond. The holiday lettings income may give you a buffer while you work out how best to position yourself in the market; you may also need to look at what facilities you offer and whether you need to improve it in certain areas, though without pricing yourself too high. A lower rent in exchange for fuller occupancy is usually a less risky strategy compared with always pushing hard on the rent button.... Read More
I would choose the 10-year rate, provided it allows overpayments. Interest rates are only going one way, which is up, over the next 10 years, and I would have thought a ten-year lock-in would be great for peace of mind if you are planning to hold the property for the long term. A lower-figure redemption penalty would help too, or consider what other assets you hold which could be sold instead during a crisis to minimise your costs.... Read More
Reply to the comment left by "Rich Green" at "10/07/2017 - 07:35":
Hi Rich - Neil is quite correct. You do not "gift" the deposit to the company - you as director make a loan, which can be repaid tax-free as the company hopefully makes profits on its BTL investment. You can even charge the company interest on the Director's Loan, which can give a small tax advantage if you do not use up your annual interest allowance.
I agree there is some risk that the Government will seek to change company taxation, if it sees lots of private landlords incorporating, even though this will bring the Government into conflict with large companies that are investing in the build-to-rent market. One useful defence against a tax raid on so-called investment companies (ones that just hold property to rent) would be to ensure your company does some related trading activities as well: getting involved in renovations or new-build development, for example, or acting as a letting or managing agent for other people's properties.
Actual property development may be a step too far for many landlords, but they might be interested in investing their retained corporate profits and capital in someone else's development activities instead, perhaps in Special Purpose Vehicles, one development at a time, to demonstrate to HMRC that they are "trading" as well as "investing".... Read More
Reply to the comment left by "Robert Mellors" at "15/06/2017 - 08:59":
Thanks Robert for your reply. As you put out, you are really in the business of providing supported accommodation, in the form of hostels for people who have been homeless or perhaps experience difficulty living on their own independently. My question was more about conventional flats and houses that just happen to have more than two unrelated persons living in them, so are defined as HMOs (and licensed and regulated and often viewed as little better than slum housing), even though there is usually very little that distinguishes their living environment from a family with adult children or a couple sharing a flat and taking a lodger.
I've been to conferences where local authorities are looking to house young single people and homeless people living in hostels and "move them on" into the PRS. It just seems bizarre to me that councils and the large social housing associations don't view the accommodation of single young people on very low incomes as in any way their responsibility or a challenge for them, or a profitable source of revenue in the "80% of market rate" new-build rental houses they are given in S106 Agreements. I studied the newspapers' accounts of whom was living in Grenfell Tower, for example, and though there was a young Italian couple, single mothers with children, some young Syrian brothers, older single people, and small multi-generational families, I could see no flats occupied by two, three or four unrelated single people, either working on low wages or on benefits. But I bet there are a good number of over-occupied private HMOs in the area or in neighbouring boroughs (including the notorious beds in sheds), all apparently without a jot of competition from the public housing sector, or any intention too either, despite all the complaints about poor standards in the PRS. There just seems to be a determination to hammer every private HMO landlord, no matter how high-quality and law-abiding, with licensing costs, Article 4 Directions and all the other weapons in local authorities' armoury, with no thought for the consequences in terms of how landlords will respond as regards the supply of such housing.... Read More