The buy to let mortgage market has undergone tumultuous change in the past few years and has impacted on landlords’ bottom lines.
Andrew Turner, chief executive at Commercial Trust Limited, explains why a conversation with a specialist buy to let mortgage broker could make a difference to maintaining profit.
The value to landlords of utilising a broker working with a wide breadth of lenders, has never been greater.
Buy to let landlords have seen enormous changes in the tax regime and a progressive set of rules which are professionalising the industry, adding further cost along the way.
Renting property is a business, so like any other, landlords want to operate at a profit.
The changes that have taken place mean that research and meticulous planning are essential to doing so.
Immense mortgage choice
Over the past five years there has been an enormous influx of new buy to let products in the market place, as lenders compete for new and existing borrowers.
In February 2019, financial data provider Moneyfacts listed 2,162 buy to let products, the most since October 2007, just before the financial crisis struck.
Competition is healthy and has raised the game in terms of the amount of choice available to borrowers.
But one-size does not fit all, in terms of borrower circumstances. That is where a broker can save time and money.
Considerable divergence in lender criteria
Changes to the underwriting of buy to let mortgages came into force in 2017. Lenders interpreted these in a huge variety of ways. As a result, there has been a significant impact on products a borrower qualifies for, regardless of whether their circumstances have changed or not.
This can present challenges to overcome, restricting product choice – or can open up a wider variety of available products.
New rules for HMOs
Houses of Multiple Occupancy (HMO) licensing rules changed in October 2018 and made it mandatory for thousands more rental properties to require a local authority license.
This will have possibly added licensing costs and potentially renovation costs to a landlord’s outgoings, putting further stress on the need to review finances, to maintain a profit.
Similarly, the phasing out of mortgage interest tax relief, changes to the wear and tear allowance and the 3% stamp duty surcharge on second homes, will have affected a landlord’s bottom line.
Criteria in general
Some other criteria that can impact on a buy to let mortgage application include: income, potential rental income, age, employment status, property type, local licensing rules and the borrower’s residency status.
Sourcing the right mortgage or remortgage product, is a far from straight forward process.
A recent Legal and General report suggested that 69% of consumers, including buy to let landlords, had not remortgaged in the previous five years, believing they were on a good deal.
What was a good deal five years ago, may not look so tempting in today’s market. Borrowers who have stuck to their guns, might have paid hundreds or thousands of pounds more, by not remortgaging to cheaper deals.
Moneyfacts data reveals that in January 2013, the lowest two-year fixed buy to let mortgage rate was 3.19 per cent, at 75% loan to value, with a 3.5% fee. On a £200,000 loan, that equated to a fee of over £7,000.
Today, borrowers can access an equivalent two-year fixed rate buy to let mortgage from 1.69%, with a £1,499 product fee and a free valuation.
The research showed that brokers have access to six times more products compared to going directly through a lender.
The numbers support the broker argument
According to mortgage sourcing platform Twenty7Tec, brokers have access to 12,000 products across the whole mortgage spectrum, while just 2,000 are available directly from lenders (and each lender will only offer you their own products, vastly reducing this number on a case by case basis).
The Legal and General report reflected strong support for using brokers, with 98% of borrowers finding the help they received ‘valuable’ and 95% saying they would recommend using a broker to friends or family.
An increasing array of choice definitely favours investors, but as is demonstrated in the statistics above, using a broker can be invaluable in finding the wood amongst the trees.
As rental prices in cities rise, young professionals are increasingly looking to suburbs and areas away from the city to rent in. These areas need to be close enough to a larger city to allow for an acceptable commute, but far enough away that their rental prices aren’t too high. Southend-on-Sea seems to be this perfect rental hotspot, and it even ended up topping the UK’s buy-to-let investment table last year.
This phenomenon is because graduates and students in London are looking to maximise their savings as they search for places to live, yet still be able to commute to the city centre, and it’s making a real difference in the buy-to-let market. Areas that were once considered "undesirable” areas to live are now seeing new life as those looking to save money flock to them. This makes now an excellent time to get in on this new profitability.
Why is Southend the perfect spot to rent? Firstly, it’s within commuting distance of London, while still being far enough from the city centre to be peaceful and inexpensive. Additionally, the investment cost for properties there is only slightly higher than the national average, but they still yield over 6% rental profits.
Southend’s success also comes partially from its competitive real estate market, its easy commute to the city, and its high rental yields for landlords. Its beautiful seaside location doesn’t hurt, either. The town also has good airport connections in addition to the other things going for it. From a landlord’s standpoint, though, the most important thing about Southend is its investment to payoff ratio. For a relatively small amount of money, real estate investors can buy up properties and let them out to rent-savvy people – like the graduates and students we mentioned above – who don’t mind commuting to the city. Southend may not have the highest rental price outright, but it’s the ratio between the investment and the payoff that really matters to most investors.
Investing in suburban rather than city areas has some upsides and downsides. The most obvious upside is that you get much more bang for your buck when you’re willing to look outside the city. This means, for the same price, you’ll be able to afford a much larger dwelling than you would be able to in the city. Though this might not make a huge difference to singles, it’s excellent for family living. Properties in the suburbs are also almost always quieter and safer than alternatives in the city.
There are a few downsides to suburban buy-to-let investing too, though. For one, there’s historically been less interest in them than there has been in inner-city locations. However, this is slightly balanced out by the fact that renters in the suburbs tend to stay for much longer than city renters do. Additionally, some people view the suburbs as boring if they’re too far from the city. However, when someone’s willing to make that sacrifice of not being in the city, they might find that the cost savings and safe location is worth the humdrum.
Guest Blog by Kylee Ryers
When it comes to renting out your property, you need a property lettings agent you can trust. At Griffin Lettings, we believe in making the letting process as simple as possible, finding you the right tenant and all for one transparent and affordable price. Whether this is your first property rental or you have been renting out properties for years, we would be delighted to assist.
One of the most important priorities for us as a company is to give our customers value for money. Where other letting agents might hit you with confusing or hidden charges, we make it very simple with our fixed fee listings. For just £19.95, we’ll list your property with the UK’s leading property rental portals, including Rightmove and Zoopla, so that your property is put in front of thousands of people looking for a property like yours.
Signing up and listing your property really is as easy as 1, 2, 3, and we’re on hand to help you every step of the way. If you’d like to have a chat with us about listing your property, our team is available to give you advice on the important things like taking photos, choosing a rental price, formulating a tenancy agreement and writing a great description.
In 20 minutes or less, your property will be listed online using some of the most well-known and reputable property portals in the country.
You can upload your property in mere moments. Our letting experts will check the details before your listing goes live to the nation. Once your property is live, you can sit back, relax and wait for prospective tenants to get in touch. And because we’ve carefully selected the most popular portals used by tenants today, we are sure you’ll be hearing from them very soon!
If you are looking for a no-nonsense approach to renting your property that will help you to get maximum exposure and maximum returns on your property investment, come to Griffin Lettings. We have years of experience and are on hand to help with every aspect of the lettings process.
Viewing a property with a view to renting can be a very exciting time, but one where you will need to have your wits about you and also do a little research beforehand. Whether this is your first time renting or you are a seasoned tenant with a few properties under your belt, this is going to be your home and so it pays to ensure you get as much as you can out of the viewing. Here are a few tips for making the most out of that first viewing so that you can make a smart decision.
We live in an age where technology has brought the information we need into our homes and pockets. Most letting agents now publish the properties they have available on sales and lettings portals such as Zoopla and Rightmove and also on their own websites. These listings often have a lot of detail included like photos, floor plans, additional fees or charges, details about the area and many more nuggets of information that can help you to decide whether to book a viewing.
If you are looking for a property on your own, it’s a great idea to take a friend or family member along with you for advice. You can view each room together, taking note of any defects or features along the way. The best bit is discussing the viewing over a coffee or glass of wine afterwards!
A property listing online can give you a good idea of what to expect before you view a property for the first time. However, photos can be deceiving and they can be out of date. The best way to remember what a property looks like is to view the property and take photos and make notes as you walk around. Afterwards, you can make a list of pros and cons to help you make a decision. For example, there may be a lot of noise from traffic outside. Photos can never tell you this and while your agent may be honest about the fact, you really do need to experience it for yourself and decide whether you can live with it.
From mould and condensation and the brightness in each room, it is important to look closely during your viewing to find the things that might not have been mentioned in the property listing. Also, is that airy bedroom really airy or freezing cold?
Arriving early for your viewing and checking out the area beforehand can give you a real sense of what it would be like to live there. Spend some time walking around, taking in the daily traffic and the amenities as you go.
Wherever you plan to move, that first viewing is one of the most important aspects of renting a property. Take your time, take in as much information as possible and do your research. That way you can reduce the chances of any nasty surprises and increase your chances of finding a property to suit your needs.
The buy-to-let market is booming. As more and more young people struggle to build up the deposits they need to afford their own homes, they are turning increasingly to rented accommodation. If you see yourself as something of an entrepreneur or simply want to create a new source of income for your family, becoming a landlord could be a great idea. In this article, we’ll look at some of the things you’ll need to consider and how to get the best from the experience.
One of the best ways to learn how to become a landlord is to listen to others who have been there and done it. The National Landlords Association, for example, is a great way to meet landlords and letting agents and get trustworthy advice based on years of experience.
At some point, you’re going to need to decide which type of property to let. Perhaps you already have a property or perhaps you are looking to invest in a property. Speak to a lettings agent in the first instance to see which type of properties are in demand and which areas have the most demand. This can give you a good idea of the type of property that will not only be easy to let today, but long into the future. For example, if you let out a property near a university or hospital, you will no doubt have many students and hospital staff looking for accommodation all year round.
Doing your property and area homework will also give you a good idea of the rate of rent you can comfortably expect. If you are considering a buy-to-let mortgage, seek the advice of a mortgage broker to help you to find the best rate of interest. You should also think about the amount of profit you can generate once the mortgage payments and any other charges are taken into account.
Once you have decided on the property you wish to rent out, ask yourself this question - would you want to live there? If the answer is no, then it’s time to take action and prepare your property for the first tenants. In addition to decorating and making each room presentable, you will need to consider safety aspects of your property, such as the boiler, electricity and whether there is any condensation or mould that could potentially cause health issues. All of these things should be in order before you put your property on the rental market.
Many landlords choose to use a lettings agent to handle the administration and management of their rented property. From arranging viewings and drawing up paperwork to managing rental payments and dealing with any issues, a lettings agent can do much of the hard work for you.
If you are considering renting out your first property, we’d be delighted to tell you more about the properties we have available and how to land your first paying tenant.
Renting your first home can be a very liberating and exciting experience. It can also be a stressful and daunting one. However, with a little planning and research and a great agent behind you, there is no reason why you can’t have a hassle-free and happy moving day. In this article, we’ll take a look at the things you need to know and prepare for before you are handed the keys to your new home.
Remember when your teachers would say doing your homework was important? Well, they were right, and that advice still applies outside the school gates. Thanks to the technology we have available today, there is no excuse or reason not to do some thorough fact-finding before renting your first property. From checking out the local area to finding the perfect property, all of these tasks can be carried out online.
When renting a property, it is always important that you choose a property that you can afford. Living beyond your means could land you in hot water further down the line. Unpaid rent or late payment could mean you are evicted or that you find it hard to get a favourable reference from your landlord. In addition to your monthly rental costs, also be aware of any hidden costs, such as utility bills.
Most rented accommodation requires a security deposit to be put down before you can move in. This down payment is usually kept by the landlord to pay for potential damage that is caused to the property while you are living there. If you decide to move to another property, a final inspection will be carried out by the landlord and your deposit paid back to you if everything is in order. Details of deposits together with their terms should be included in your tenancy agreement.
Before you agree to move into a property or part with any money, it is important to have everything drawn up in writing. This will ensure you know exactly where you stand as a tenant. A tenancy agreement is a legally binding document that details the rights, rules and regulations that you and your landlord need to agree on. It is essential that you understand the document before signing on the dotted line. If there are any areas you are not sure of, be sure to take them up with your agent or the landlord directly.
These are just some of the things you should be aware of a first-time renter. If you have any questions about finding the right property or your rights as a tenant, our team would be delighted to help.