Tag Archives: Property Investor

Landlords Life Insurance Calculator Buy to Let News, Insurance, Landlord News, Landlords Insurance, Latest Articles, Property Investment Strategies, Property News

What is the minimum amount of Landlords Life Insurance we really ought to purchase?

I suspect the reason most property investors choose not to purchase Landlords Life Insurance is cost. For example, if you are 40+ years of age and your buy to let mortgages balances are £1 million plus the premiums can appear to be very scary if you ask for a quote for enough life insurance to repay all of your mortgages in the event of death.

For borrowers without family and/or business partners whose finances could be affected adversely by death during a mortgage term, the risk of having no Landlords Life Insurance is perhaps an acceptable one for them. However, for people who have borrowed jointly or would like to leave their properties to loved ones the risks are far higher.

In the event of the death of a borrower, even if it’s a joint mortgage, it is usually well within the rights of a mortgage lender to call in their loans. This is more likely to happen post credit crunch as several lenders have closed their doors to buy to let lending and want to recover as much money as possible. Lenders which are still actively in the market can now lend money at far higher profit margins so there is every incentive for them to call in their loans in the event of death too.

I am not a financial adviser and the following should not be construed as financial advice. It’s just my opinion as a landlord on what the minimum amount of Landlords Life Insurance should be purchased.

If I were to die tomorrow my wife would have two or three choices:-

1) Sell the property portfolio and pay off the loans

2) Refinance

3) Do nothing and force the mortgage lender to call in the loans, eventually reposes the properties and sell them. This would cost a lot more than options 1) and 2) above.  The reason is that substantial fees and penalties would be incurred and the mortgage lenders primary incentive would be to recover as much money as possible. Now I know that mortgage lenders have a duty to sell the properties for as much as possible, however, is that really what you think happens?

In my case, I want my wife to continue to receive rental income as I genuinely believe that property is the best form of investment. Therefore options 1) and 3) are out of the window for me.

On that basis, refinancing is her only viable option. However, to get a decent deal and retain the same level of cashflow she will need to be borrowing around 50% LTV. This is because it will cost her a lot of money to refinance and the interest rates she will be paying are far higher these days than when I arranged my tracker mortgages at bank base rate plus 1% to 2%.

I have concluded that the minimum amount of Landlords Life Insurance I should buy is the difference between my outstanding loans and the amount those loan balances would need to be to get 50% lending. As a simple example, if I were to own one property worth £100,000 with an £85,000 mortgage, I reckon I would need to purchase £35,000 of life insurance to enable my wife to be able to pay £35,000 off the mortgage and take a new mortgage for £50,000 (which is likely to have a higher interest rate) in order to maintain the status quo in cashflow terms. Now that’s very much a rough estimate as everybody’s circumstances are different but I hope you will find it a useful rule of thumb. The other reason I think the minimum amount of Landlords Life Insurance should be enough to reduce loans to 50% LTV is because at that level of lending, most mortgage lenders would be falling over themselves to offer decent interest rates, pretty much regardless of any market conditions I can realistically imagine.

To help you to work out the minimum amount of landlords life insurance you would need based on the strategy I have outlined above I have created a very simple calculator, see below …….


Capital Allowances – Tax savings for HMO and Multi Let owners Landlord News, Latest Articles, Property News

Council Tax CalculatorPart 2 of 2 written by Bill Loryman

The first reactions from Property Investors hearing about Capital Allowances are that they sound too good to be true and that,”surely my Accountant has identified them for me?”

Well, firstly they have been around since 1878 and are not a tax loop-hole or tax avoidance scheme. If you own a commercial business property, including an HMO or Multilet, you are entitled to claim Capital Allowances for them.

Secondly, the process of valuing the likely tax savings has to be completed by Capital Allowance experts who need to send Surveyors into the property to assess the “plant & machinery” – fixtures and fittings – assets etc. that are in the fabric of the building. They then prepare a typically a ten page report, with photographs, plans and a detailed analysis of all the qualifying assets that will satisfy the HMRC guidelines on submitting Capital Allowance claims.

This is a very specialised tax service that many accountants simply outsource in order to help their clients. A specialist will help you submit a claim, or work with your accountants to work out how much tax and money you can save, either as a tax rebate or off-set over future years.

• You need to be a UK tax payer. The investment property can be owned by a Company or a person. Whether the tax band is 20%, 40% or 50%, the higher rate you pay the greater the tax benefit and savings.

• The minimum value of a property really needs to be £150k but total value of portfolio qualifies. If you are buying this year or last you can qualify for AIA (Annual Investment Allowance) of up to £250,000 which can help make the claim successful and give substantial tax savings.

• Your accountant will claim for the furniture and general repairs but Capital Allowance surveyors look into what makes the building work, so the hidden assets unclaimed in the fabric of the building, items such as heating installation, wiring, lighting, fire alarm systems etc. are all valued using Quantity Surveying rules that confirm to the HMRC guidelines on submitting Capital Allowance claims.

Three of our recent examples are shown below:

Sussex Hearts Norfolk
HMO/Multi Let Purchase Price £280,000 £155,000 £205,000
Capital Allowance Identified £28,000 £12.500 £9,200
Net Tax Saved £14,500 £3,500(refund) £7,680(refund)

Clearly everyone’s tax situation is different and you will need to discuss preliminary details in order to get an illustration of the likely tax savings such as property address, type of business – Multi-let, HMO, student let, holiday let etc, date of purchase and the price paid plus the value of any improvement work you have carried out.

When you (and your accountant) decide to go ahead an engagement letter to be signed which gives the authority to contact the Land Registry to ensure no previous claims have been made. The property will then be surveyed for qualifying assets and a full report prepared for submission to HMRC.

The whole process typically takes about 10 – 12 weeks and should always involve your accountants. Fees for this service are usually generated out of a small percentage of the claim value on a ‘no claim – no fee’ arrangement.

Bill Loryman is the Managing director of HMO Tax Limited and has 20 years experience in the property world involving franchising, licensing, acquisitions and property development.

If you would like an illustration form of your likely tax savings on your investment property please complete your details below.


Renting by the room – a FREE guide to maximising profits Landlord News, Latest Articles, Property News

Renting By The RoomA new ebook has been released by Spare Room and is available to download as a PDF via Property118 free of charge. It’s called “Renting by the Room – A Guide to Maximising Rental Profits”.

The media has a fascination with house prices, and together with Property Investment gurus and Estate Agents, spend a lot of time talking about the money to be made from investing in property. However, they rarely mention the single biggest factor in maximizing your return on investment – renting property by the room.

Why?

The truth is that renting by the room can bring in two or even three times the income of the same property let as a single unit. So why does it feature so rarely on property programmes or investment research reports?

Perhaps there’s a belief that this type of letting is too complex for amateur landlords to handle? Maybe they want to keep the juiciest returns for themselves? Either way, it’s high time someone challenged the status quo, and revealed why savvy property investors and landlords are getting into renting by the room.

SpareRoom’s Guide to Renting by the Room reveals:

  • The Origins of Generation Rent
  • The Growth of Flatsharing
  • The Benefits of Renting by the Room
  • Where the Demand for Shared Housing is strongest, around the UK
  • … as well as a Case Study of a Property Expert who only rents to sharers, and a Special Offer to get discounted advertising on SpareRoom.co.uk

To download your free copy, simply enter your name and email address below.

Download the FREE Guide to Renting by the room


Funding for Lending scheme changes allow BuytoLet investment Buy to Let News, Landlord News, Latest Articles, Property News

Funding for lendingThe Bank of England Funding for Lending scheme will now allow Small and Medium sized enterpises (SMEs) to lend the money available on to property investors.

The Funding for lending scheme has been extended another year until January 2015 and from 2014 banks will be able to borrow £10 of cheap Bank of England money for every £1 the lend to SMEs. This has double the previous allowance of £5 for every £1 banks lend.

This doubling of incentive to try and stimulate the economy could have a very positive effect for property investors for the first time as Buy to Let is still seen as relatively low risk by banks compared to taking an educated gamble on a start up business.

Rob Wood, chief UK economist at Berenberg Bank, said ‘It could be a no-brainer. Lend to a landlord and get 10 times that lending back as essentially free funding, then recycle some of that back out again on mortgages or BuytoLet.’

£80 billion has been set aside by The Bank of England for this scheme to kick start the economy and get lending available to business, but to date the take up by banks has been disappointing with £14 billion being taken between August and December last year. However it is hoped that the extended scheme and greater incentive will boost the take up and for the Private Rental Sector add a much needed injection of competitive financing.


Buy to Let Estate Agents Landlord News, Latest Articles, Property News

If you had told me this time last year that I would soon be adding Buy to Let Estate Agent to my CV I would not have had a clue what you were talking about.

However, that’s exactly what we have become as a result of selling buy to let developments.

We have no plans to become a conventional estate agency where you can buy or sell your next home, however, estate agents is what we now are according to a law known as the Estate Agency Act 1979.

It’s all come about as a result of wanting to let you know about properties which could make ideal buy to let investments.

We didn’t want to charge fees to property investors but we often get the “heads up” on developments which make ideal buy to lets. Given that we have ‘filled our boots’ with deals personally (we’ve built our portfolio’s to a point we are comfortable) we decided to share the deals we would buy ourselves if were will still building our portfolio’s.

Clearly we can’t do this for nothing so we have started negotiating commissions with vendors (typically developers and insolvency practitioners) in return for referrals leading to sales.

To help ease the burden we have also teamed up with Kelvin Kingsley and we’ve created a new brand called “Your Property Concierge”.

The Property Ombudsman

To keep ourselves compliant we have registered the Trading Name “Your Property Concierge” with the ICO and also become a member of The Property Ombudsman redress scheme (membership number – D8072).

If you would like to be kept informed of properties we are marketing please complete the form below.


Newbie property investor seeks advice Landlord News, Latest Articles, Property News, UK Property Forum for Buy to Let Landlords

Newbie property investor seeks adviceI am just getting started off in the property game and my ambition it to set up a small portfolio of properties for a steady rental income. I aim to keep this portfolio long term as a pension for my wife and I and something to leave for my children.

I am looking at the low end of the property scale in Liverpool and have been to one auction so far without buying basically just to familiarise myself with this new world to me. I have also visited several potential rental areas around Liverpool and spoke with a few contractors. I’m looking at properties that either have tenants in all ready or that are ready for immediate occupancy. Continue reading Newbie property investor seeks advice


Student buy-to-let investment property review HMO's & Student Lets, Landlord News, Latest Articles, Property Investment News, Property News, Property Sales & Sourcing, Property Sourcing

Student buy-to-let investment property reviewIs there a solid grounding behind the hype surrounding student buy to let investment property?

The positive market fundamentals of the student property market, as quoted by Knight Frank, point out that student property investment was the best performing property investment in 2012 and that rental income is increasing by five per cent (5%) per annum. These are, however, macro fundamentals that are covering the whole sector.

How can a property investor make a good investment?

What are the items one could look out for to safeguard ones investment? Continue reading Student buy-to-let investment property review


Simple solution to bills-inclusive burden Buy to Let News, HMO's & Student Lets, Landlord News, Latest Articles, Property Market News, Property News

Simple solution to bills-inclusive burdenHalf of all students find their first venture into living away from home a stressful experience.

That’s according to a recent NUS survey into student mental health, called Breaking the Silence, which reported that 49% of students said they found paying rent and bills reasonably or very stressful.

No wonder then that sharing tenants increasingly want fixed monthly rent, inclusive of bills. Continue reading Simple solution to bills-inclusive burden


Am I missing a trick by owning my own property? Landlord News, Latest Articles, Property News

Am I missing a trick by owning my own propertyTwo of my best friends are far more successful property investors than I am, however, they rent their own homes. 

Am I missing a trick by owning my own property?

One of them is a Director/shareholder in a property company which owns nearly 10,000 properties. He lives in a very modern barn conversion, A rated for energy efficiency, gated, top notch property. I would happily live there. It has to be worth well over £500k (which is a lot for mid Norfolk) and yet his rent is just £1,200 a month. My other friend tells a very similar story. Continue reading Am I missing a trick by owning my own property?


The 2013 Budget and how it affects Landlords and property Investors Landlord News, Latest Articles, Property News

Budget 2013The 2013 Budget is hoped to boost the housing market and construction industry. Yesterday Chancellor George Osborne announced new plans to help people buy their first homes homes with the Help To Buy Scheme and an extension of the previous NewBuy Guarantee scheme to include older houses as well as new-builds.

For three years from the start of 2014 the government will support £130bn of first time buyer mortgages by guaranteeing 15% of the loan leaving borrowers at risk of losing only their 5% deposit and lenders liable for only 80% of the purchase price.

Lenders taking part should therefore be happier to accept smaller deposits as security for loans, but it is still a relatively small proportion of the total mortgage market worth £1.2 trillion, according to the Council of Mortgage Lenders (CML).

The theory is that giving more people the ability to purchase a home will increase demand for property resulting in an increase in price and promoting an increase in supply (more construction) to fill the demand. It is very simple Supply and Demand economics that will work, but it is the amount that it works by that is the question.

Of all the sectors that contribute to the UK’s GDP it is the construction industry that has been most badly affected helping to drag us back into a double dip recession and a stagnating economy, so it makes sense for the government to try and stimulate demand for construction.

The Housing Market is also a very important barometer for confidence in the economy and when people feel confident they spend money and invest in business which includes Landlords.

Any kind of confidence boost in the housing market has got to be a good thing for Landlords and property investors in the long run. If the value of property strengthens then lenders will feel more confident to lend on better rates and Loan to Values. Landlords may eventually be able to remortgage again after the death of the remortgage market for the last four years. We will no longer be stuck locked into existing lenders and at the mercy of their desire to either get rid of Buy to Let mortgages or fleece Landlords for greater profit margins as the Bank of Ireland are trying to do.

A competitive Buy to Let market is essential for the long term planning of Landlords taking control back from the banks and into the hands of investors once again.

However we cannot get too excited as it all depends on the degree by which government support works that is all important, and with the revision of GDP growth forecasts halved it would indicate that there is a long road to recovery to travel yet.


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