BUY TO LET SALES | SHOULD YOU BUY WITH TENANT OR WITH VACANT POSSESION??

With the shift in tax, stamp duty and mortgage interest relief all changing at the moment landlords are moving property on as they may not be geared up right or they may have other avenues that fit their money circumstances better. But for new investor, who know and are geared up for the current rules are buying them and looking to buy more.

One question I am getting asked a lot at the moment because we have a number of these BTL sales on the market:

”Should we buy with a tenant in situ, or should they buy a property with vacant possession?”

To me, it seems a straight forward answer if you simplify it; If the property is tenanted, and you trust the agent currently managing it to tell you the truth about the management of the property, and the rent currently being paid is market rent then of course buy it with the tenants in situ. But only if they are good tenants.

Once you have established they are a good tenant, at this stage, it is about numbers. With all things equal you will make more money by buying a tenanted property because you are being paid from day 1. Costs going out are going to hurt less because you see money coming in instantly and you have no new / set up costs to pay the new managing agent as the tenant is already found and they should just continue as normal with whatever commission rate is agreed. And especially if they were the sales agency as they will want to keep you and the management of the property.

One extra thing to think about, if the property is already in a good condition and acceptable to the current tenant then there is little that will be required to be done to the property and the costs of this can be deferred to a later date when they vacate which gives you chance to build of the buffer for the works to be done.

When should you not buy it with tenants in situ? Well to me, this is where trust comes into play with the agent you are buying from. You need to find out who the tenants are, what rent are they paying, do they pay it every month, are the safety checks up to do, how long are they fixed in for, will they renew… these sorts of questions will help you to build trust with the agent but also to get the information you need to decide if the tenants are good or not and if they are likely to stay. You really don’t want to be inheriting bad tenants with the purchase.

If the property is already empty then it’s not a choice but given the choice, and if the ground work can be done to check the tenants of the property then every time, YES, buy with tenants in situ. Even pay a little more for that given there will be no immediate void, instant start of the return on the money, and tenants are already used to the property which should equate to easier management and less costs.

I am always happy to look over a possible option you’re thinking of buying so feel free to ask me – aaron@gordonbarker.

 

 

 

 

 

Stamp Duty Land Tax – What is it? How does it affect Bournemouth Property owners?

One of the most important things when it comes to purchasing a property is knowing what the actual cost is going to be, and one thing that a lot of first time biyers forget about is Stamp Duty.

Stamp Duty Land Tax or ‘SDLT’ is a tax paid by a buyer of property or land. The level of tax paid is dependant upon the value of the land and the nature of that purchase, in this article I will concentrate on residential purchases. SDLT starts a purchase price of £125,000 or over. See the below table for tax rates:

Purchase Price                                              SDLT %

£125,000 and under                                    None

Portion from £125,001 to £250,000       2%

Portion from £250,001 to £925,000       5%

Portion from £935,001 to £1.5million  10%

Above £1.5 million                                      12%

Say for example, the purchase price of a property is £300,000. Using the above table; SDLT would be at 0% of the first £125,000, 2% of the next £125,000 (£2500) and 5% of the remaining £50,000 (£2500) being a total of £5000.

The above is true for the purchase of single property, however if you are buying an addition property to ones you already own then a further 3% tax is levied above the standard rate of SDLT. Therefore in the above example, being bought as an additional property, the stamp duty would now be increased to £14,000 being made up of 3% of the first £125,000 (£3750), 5% of the next £125,000 (£6250) and finally 8% of the remaining £50,000 (£4000).

It is very important to know the level of additional tax you will have to pay as part of a property purchase. You can use a stamp duty calculator found at https://www.stampdutycalculator.org.uk/.

If you are replacing your main home you can claim a refund on additional SDLT paid on the 2nd property if the original home is sold within 3 years. Be sure to speak to your financial advisor about the detail of this refund.

The change to this current system of SDLT has had a number of effects in the property market. BTL investors are having to account for a much higher purchase price than a first time buyer / replacement purchase of the same property. Also, under the old system there was a price ceiling at £250,000 for a lot of property types as this as where stamp duty used to really make an impact on the property. Under the new system it has allowed property sitting around £250,000 to rise in value in accordance with the rest of the market which has been great news for a large number of families and owners looking to move into their next home as the value of theirs is being realised.

This is just a brief overview, and with all taxes SDLT can be much more in depth than it seems so please be sure to speak to your financial advisor abut any financial transaction you are undertaking to ensure you are doing things properly.

As always, I’m happy to have a chat about anything in the above article or anything related to property in the local area. Drop me an email to aaron@gordonbarker.com

Check out more articles at www.propertyblogbournemouth.co.uk

 

 

7 tips for Bournemouth Landlords

In my daily life running a sales and lettings agency I’m constantly asked about tips, tricks and things that clients should be looking out for. Well…while I’m sitting on hold with British Gas I’ve written out 7 things that should be considered before and during the lettings process


1 – Property presentation
When it comes to handing your property over to a agent / tenant for the first time be sure to give it over in the best condition possible and make sure an accurate inventory and schedule of condition is done. This way it helps to protect the condition of the property and slows any decline as it is starting higher, easier to see / deal with any damage and mush more chance of success with any deposit claim if there is evidence to suggest condition at start, and end, of a tenancy.


2 – Insurance
Be sure to have your property insured against the unforeseen. A standard landlord buildings insurance will do, but there are optional extras that include rent and eviction protection and accidental tenant damage (if higher than deposit taken) . These are useful items to have. Be sure to speak to your agent about this too. My agency has a rent guarantee policy, as most do, so make sure you are not doubling up but also make sure that any referencing done on the tenant will cover your protection policy too.


3 – Maintenance
Make sure you plan your maintenance as well as deal with reactive maintenance quickly and efficiently. Pick once, pick right and pay once. Be sure to use trusted contractors to fix problems to be sure they are not creating or finding further problems that don’t exist. Regular boiler servicing along with the Gas Safety Cert can uncover / fix problems before the cause serious concern.

 

4 – Paperwork
It is more important now, than ever, to be sure you have the correct paperwork in place from the very outset. From lodging and protecting the deposit to providing an EPC, from producing prescribed information to handing out the government made ‘how to rent’ booklet there are a large number of boxes that need to be ticked on move in. If these boxes are not ticked then it causes serious concerns on exit, if the tenant stop paying and you have not done what you should have then you cannot evict them until you have. Any notice, under section 21 especially, will be void if the boxes aren’t ticked at the start of the tenancy. Be sure you’re doing it right, from the start.

5 – Void periods
This is where Bournemouth landlords lose most of their money on their BTL investment. One month empty and that cold be your years profit gone, so be realistic on rents and keep good tenants in situ where you can. Is it worth losing a tenant, having an empty property for the sale of an extra £15 per month. On an £800pcm flat it will take 53 months (which is over 4 years) to get back a month’s lost rent at that increase!

6 – Suitability
There is a lot to be said for making sure a tenant is actually suitable for the property, and for you as owner. If you have a 1 bedroom flat with no garden or parking, then think carefully about letting to the couple with a child and a car.  Not only will the wear and tear be quite high on the flat, this will only ever be a short term fix for the couple. It will likely be empty again within 6-12 months, is that what you want? Also if you a particularly whiney neighbour then the family with a yappy dog, small children and pare works van and likely to cause you a lot of headaches during their tenancy with complaining neighbours, and likely through no fault of the tenant but again it will likely force them away and the property will be empty again soon. Think carefully about how suitable that tenant / applicant is for your property before letting them in?

7 – Service
And finally, what is it that you want your agent to do for you? And what can you do for yourself? Speak to them in detail about how their managed / tenant find services work for you and how they work with your ideals and ways of working. There needs to be synergy and compatibility with that you want. Otherwise you are just paying for something you don’t need or want and ultimately wont be happy with.

This is just an insight into what goes through an agents head on every let, this is what we do for a living and always offer the benefit of our experience for each and every landlord and tenant combo to get the best out of the scenario for all parties involved.

Read more articles: Why not read more articles from the Property Blog | Bournemouth by clicking this link..

Speak to me: If you’d like to speak to me about anything in this article, or anything property related please do drop me an email at aaron@gordonbarker.com. I’d love to hear from you.

 

Adding value to homes in Bournemouth – have you thought about it yet??

Whilst a drive along Queens Park Avenue is an everyday occurrence for me, as my office is based at one end, I certainly don’t get bored of it. With the beautiful trees that line the road, the large array of house types you can see along both sides of the road and the 3 holes of golf you can see just waiting for someone to shank a shot, throw their club and then not be able to find it. I know we’ve all had the moment on a golf course, and we hope no-one is watching – well I really want to be that guy that’s watching when someone else does it to make me feel better!

Queens Park Avenue really is one of the most beautiful, main roads in the area. But what makes us feel like this as we drive down it? Is it the new cars we see in the driveways? Or it the size of the houses? Or is it the different types of houses? Is it the feeling of wanting what others have? For me it is all the above, I am always fascinated by what one person does to a house. As you drive down Queens Park Avenue today you’ll see a new house being built, another having a new driveway / garage area, one has recently had a new roof  and you’ll also be treated to a fully cladded modern house.

Adding value to your house is one of the best ways to make money on it, but to do this you need to have bought it well and you need to add the right value. Sometimes adding to the rear, or side of a house is not the right option as there is no more value to add in those areas, but if the house is dated inside then a new kitchen / bathroom can add substantially more than the cost of the works. And then there is always a loft conversion to consider…

An article written by David Wilson Homes (a large housebuilder) suggests that a loft conversion could add up to 20% on the value of your home. If you are able to plan out a further bedroom and bathroom or 2 bedrooms plus bathroom into a large converted loft space then your 3 bed house could soon be a 4 or 5 bedroom house with 2 bathrooms. Figures from www.home.co.uk would suggest that there is a substantial price increase between 3 bedroom, 4 bedroom and 5 bedroom houses in our area.

So instead of spending all your hard-earned money on the new deposit, and buying the bigger house. If you’ve been fortunate enough to save the funds needed, then really do think about adding the value yourself. If the house does not allow it, planning is likely to block it or you just don’t fancy it then do go ahead and continue as planned.

I’m always happy to offer an opinion and show you the numbers on resale prices, or point you in the direction of a trusted builder to cost things out for you. But it’s important to think about the long-term plan with your house as you could be sitting on a gold mine. We have recently agreed a sale on 2 properties, 1 with a converted loft already that has fetched a good 15%-20% more than a comparable flat without the loft, and another with a partially converted loft that again has got at least a 10% uplift on price given the work already done to convert the loft.

Has to be worth thinking about??

Read more articles: Why not read more articles from the Property Blog | Bournemouth by clicking this link..

Speak to me: If you’d like to speak to me about anything in this article, or anything property related please do drop me an email at aaron@gordonbarker.com. I’d love to hear from you.