Landlords with limited companies may earn £1,000 less a year

By Marc Da Silva

Buy-to-let investors who acquire properties via a limited company could be £1,000 a year worse off due to higher mortgage rates, fresh analysis from Private Finance shows.

The research found that a borrower with a limited company could expect to pay 3.41% for a two-year fixed 75% loan-to-vale mortgage deal, compared to 1.92% for personal borrowers.

A growing number of landlords are opting to acquire property through a limited company as a means of combating recent buy-to-let tax changes, including the current phasing out of mortgage interest relief.

But according to Private Finance, the high cost of mortgage borrowing for a limited company will outweigh any tax advantages for landlords who have a portfolio of containing less than four properties.

It says that a landlord earning £46,010 annually (£35,000 base salary plus £11,010 in rental income – the average for a two bedroom house in the UK) will have £36,194 in take home income if purchasing as an individual, after tax and mortgage costs have been deducted.


But if the same landlord purchased through a limited company, they would earn £34,825 in take home income, which is £1,369 or 4% less, mainly because limited company borrowers pay higher rates on mortgage borrowing, which reduces net income.

Private Finance also suggests that repurchasing into a limited company structure could also prove too costly, even for larger landlords.

For landlords who already have a number of buy-to-let properties, one option is to repurchase into a limited company structure. However, this incurs two major tax bills: capital gains and stamp duty, making it an inadvisable move for landlords with a small number of properties who do not have much to gain from being in a limited company.

The calculations suggest even larger landlords could be better off remaining as personal investors.  A landlord with five rental properties, earning £90,050 in total income (a £35,000 salary and £55,050 in rental income) would have £53,768 in take home pay once mortgage and tax costs are deducted when acting as an individual.

If the same landlord was to repurchase their homes under a limited company, they would have £54,584 in take home pay. However, once capital gains and stamp duty costs are taken into account they would be left with just £5,374. Spreading these one-off payments across ten years, take home pay would be £49,663: more than £4,000 less per year than operating as an individual.

Shaun Church, director of Private Finance, said: “The option to invest through a limited company has come under the spotlight recently as landlords look for ways to offset recent tax changes.  But landlords shouldn’t rush into this assuming it’s a safe bet for saving money. Limited company mortgage products are available through a handful of smaller lenders, resulting in higher rates compared to personal borrowing. Investors need to drive down mortgage costs as much as possible to prevent this from eating into their profits.

“Larger landlords might find the tax benefits associated with limited company ownership outweigh the higher cost of mortgage borrowing. Each investor is different and there’s no one-size-fits-all solution. Landlords should ensure they seek professional advice on how best to maximise their profits: an independent mortgage broker can help explain the range of options available to limited company and personal BTL borrowers.”

https://www.landlordtoday.co.uk/breaking-news/2017/6/landlords-with-limited-companies-may-earn-1-000-less-a-year

Why Britain has turned into a nation of storage keepers

By Rhiannon Bury

Britain is now home to almost half of all of Europe’s self-storage units CREDIT: CUSHMAN & WAKEFIELD

UK residents rent four times more self-storage space than the French, and nine times more than people in Germany, causing a boom in Britain’s storage sector.

Britain is now home to almost half of all of Europe’s self-storage units with almost 42.2m sq ft of space in total, according to a report from property advisory company Cushman & Wakefield, while growth in demand is continuing to outstrip supply.


Last year, 24 new self storage sites opened in the UK in 2016 – the greatest number in any European country. Occupancy increased by almost three percentage points in the last 12 months, to 75.8pc, despite more units being built.

Cushman & Wakefield’s report found that large self storage brands in particular have been expanding rapidly in recent years to ensure a larger chunk of the £540m UK market.

Safestore said last week that record enquiries for its space continued to boost its profits, while Big Yellow has spoken of expansion across the South East in particular.

81pc of self-storage users are between 35 and 70 years old CREDIT: CUSHMAN & WAKEFIELD

Two thirds of self-storage customers are aged between 40 and 65 years old, and 81pc are between 35 and 70, showing that younger people are the least likely to use storage facilities. This fits with the general trend among so-called millennials to settle down later in life.

Divorced or separated people are also more than twice as likely to use self storage as a single person.

Rents in London, which sit at £29.45, are almost twice that in the East Midlands and the North. Scotland, however, has shown the greatest increase, rising 23pc from £18.29 to £22.49 in the year, whilst the South East, East Midlands and the North all experienced a decline.

Rennie Shafer, chief executive of the UK Self Storage Association, said: “The longest standing customer in the survey began renting their unit in 1987. While that’s exceptional, 44pc of business customers have stayed for three years or more, compared with 31pc for personal customers.”

http://www.telegraph.co.uk/business/2017/06/20/britain-has-turned-nation-storage-keepers/

Labour proposes a two-year first-time buyer Stamp Duty holiday but would press ahead with tenant fee ban

By Marc Shoffman

http://sellingrockymountainhomes.com/wp-content/uploads/2016/04/Home-Buying.jpg

First-time buyers would get a two-year Stamp Duty holiday under a Labour government.

The Labour Party released a housing manifesto yesterday, pledging to cut Stamp Duty to zero for first-time buyers for properties worth up to £300,000.

A Labour Government would also introduce a FirstBuy Homes scheme that would provide 100,000 new-builds, with housing costs for new-build homes benchmarked at a third of local average incomes.

The Help to Buy scheme would also be extended to 2027 but only for first-time buyers and not for households earning more than £100,000 a year, according to the manifesto.

The document also proposes a cap on ground rent charges and a review into the use of leaseholds.

Labour would also press ahead with a tenant fee ban and would encourage councils to set up local lettings agencies.

The party would introduce legal minimum standards to ensure that private rented homes are free from serious faults such as unsafe wiring and appliances, problem damp and vermin.

Rogue landlords would also be named and shamed, with fines of up to £100,000 for those who fail to meet minimum standards.

Additionally, rents would not be able to rise above inflation and three-year tenancies would be the norm, although renters would have the option to end the tenancy with two months’ notice.

Labour leader Jeremy Corbyn said: “A Labour Government will start on fixing the housing crisis immediately. High prices, excessive rents and the chronic lack of affordable housing are ruining the lives of young people, families and aspiring home owners.

“This will transform the housing market and put the needs of younger house buyers and local workers first.


“Labour will usher in a new era in council house building to build more council homes than at any time for over 30 years so that the broken market is fixed to provide homes for the many, not investment opportunities for a wealthy few.”

http://www.propertyindustryeye.com/labour-proposes-a-two-year-first-time-buyer-stamp-duty-holiday-but-would-press-ahead-with-tenant-fee-ban/

TPO appoints new council chair

By Marc Da Silva

When a tenant paid his initial one month’s rent in addition to a tenancy deposit in exchange for the keys to his new rental property last year, he did not expect a few weeks after moving into the flat to be contacted by the landlord wanting to know where his money was.

When it materialised that the letting agent had had not passed on his deposit or initial rent payment to the landlord, the tenant issued a worthwhile compliant to The Property Ombudsman (TPO) which was upheld by the Ombudsman, who ordered the letting agency to pay the money owed to the landlord totalling more than £4,000, together with £250 compensation to the tenant.

But to make matters worse, the London-based company failed to pay the award, despite the fact that TPO members are required to comply with any award and direction given by the Property Ombudsman and accepted by the complainants.

Failure to pay the fine subsequently resulted in the agency’s expulsion from the residential agency ombudsman, which means that the company in question cannot legally trade as a letting agency, because as many of you will undoubtedly know, it is mandatory that all letting agents and property management agents register with one of three government-approved redress schemes, none of which will allow previously expelled agents to join.

Although in most cases disputes are resolved without a formal referral, these government approved schemes, run by The Property Ombudsman (TPO), Ombudsman Services Property and the Property Redress Scheme (PRS), provide fair and reasonable resolutions to disagreements between members of the public, including buy-to-let landlords, and property agents, ensuring that tenants and landlords have a straightforward option to hold their agents to account when required.

To help strengthen its offering, TPO has appointed Baroness Warwick, the current chair of the National Housing Federation, as the scheme’s new council chair, after Lord Best officially stepped down from the role after his eight-year term came to an end.


Baroness Diana Warwick (pictured beside) said: “I am delighted to succeed Lord Best in this important role and hope that the qualities and skills I bring will help to reinforce the commitment to high standards that he has fostered.

“I share the Property Ombudsman Scheme's values of independence and public service and strongly support its purpose in providing free, fair and impartial service to buyers, sellers, tenants and landlords of property in the UK.”

Reflecting on the appointment, the Property Ombudsman, Katrine Sporle, said: “I look forward to working closely with Diana who has spent many years helping the government make and shape laws, and debate public policy matters."

"She will be a great asset to TPO which aims to raise standards in the industry and protect consumers from unfair practices.”


https://www.landlordtoday.co.uk/breaking-news/2017/5/tpo-appoints-new-council-chair

Buy-to-let landlord sentenced for tax fraud and fined £200,000

By Marc Da Silva

A London based landlord has been given a suspended two-year prison sentence for tax fraud, following a Revenue and Customs investigation that discovered £281,000 in unpaid taxes.

Property developer and landlord Michael Charles Waddingham, 44, was sentenced on Friday at Kingston Crown Court after pleading guilty to evading the large sum in taxes and has been ordered to pay a fine of £200,000 within the next six months, in addition to the £281,000 tax he has already repaid.

An HMRC investigation found he had not submitted tax returns between 2008 and 2012; failing to declare rental income, that he had been a director of seven land and property development companies and had income above £100,000 per year due to the directorships.


Waddingham, who lives in Teddington, will also have to undertake 200-hours community work over the next 12 months, honour a six-month curfew between the hours of 8pm and 5am with electronic tag and pay a victim’s support charge of £425.

https://www.landlordtoday.co.uk/breaking-news/2017/3/buy-to-let-landlord-sentenced-for-tax-fraud-and-fined-200-000

Bank of England deputy's slip-up was astonishing – but its reaction was predictable Nils Pratley

Bank of England deputy governor Charlotte Hogg: an honest mistake. Photograph: David Levene for the Guardian

Charlotte Hogg, a week ago, could not have been clearer. “I am in compliance with all of our codes of conduct. I know that. I helped to write them,” declared the Bank of England’s new deputy governor to the Treasury select committee.

Now comes the excruciating apology. Actually, no, she was not in compliance because she didn’t declare to the Bank when she joined in 2013 that her brother, Quintin, has a senior job in strategy at Barclays, a bank regulated by Threadneedle Street. In fact, the first time she mentioned her brother was in a questionnaire she filled out for the Treasury committee. She takes full responsibility for this regrettable oversight.

Astonishing would be better description. At a push, one might say that Hogg comes from such well-connected stock (her grandfather, Lord Hailsham, was lord chancellor and her parents are serving members of the House of Lords) that a sibling at Barclays is easy to overlook.

But that doesn’t wash. The codes are designed to cover all potential conflicts of interests, plus perceptions of conflicts. Her brother’s gig clearly met the threshold.

Thus Hogg, in her previous role of chief operating officer at the Bank, had been commanding others to follow a code while failing to do so herself. There were at least two occasions when she could have corrected the omission in the records but didn’t.

For two and a half hours the Treasury committee chewed over these revelations and only one member came to a firm conclusion. Hogg’s position was “untenable” and she should resign, said John Mann. Chair Andrew Tyrie said the committee as a whole would only give its view after “a period of reflection.”

Let’s hope that reflection goes wider than just Hogg’s foul-up. Her mistake seems to have been honest and there is no suggestion that information passed improperly between her and her brother. Rather, it’s the Bank’s reaction that is alarming.

Anthony Habgood and Bradley Fried, chairman and deputy chairman of the governing court of the Bank, gave a hapless performance in front of the MPs. If they were aware that governor Mark Carney gave Hogg a verbal warning on Monday, they didn’t mention the fact. Neither man seemed to have tried to establish what Quintin Hogg’s loosely defined job at Barclays actually involves. And the MPs made mincemeat of the suggestion that Charlotte Hogg’s undeclared potential conflict of interest didn’t matter terribly in her previous operational role.

The sense of closing ranks around an “impeccable” individual whose error was serious but merited only “grumpiness,” as Fried put it, was unmistakable. Jacob Rees-Mogg, for the MPs, got it right. The court’s investigation lacked rigour. It accepted “bland reassurances and passed them on”, which is not good enough if you’re in the business not only of avoiding conflicts of interest but also the perception.

Hogg, almost certainly, will survive the affair, albeit with her authority dented. But the whiff of complacency in the court is harder to overlook. After the financial crisis, the outside world was promised firm 21st-century governance led by commanding outsiders. Tuesday’s show looked old-style cosy.

House prices: bring on the slowdown

Annual house price growth slowed to the weakest rate seen in nearly four years in February. Photograph: Yui Mok/PA

Encouraging news from the housing market: cooler winds are blowing. The rate of growth in prices fell in February to the lowest for three and a half years, according to the Halifax’s index. This development may not delight homeowners looking to sell in a hurry but, for anybody with a wider or longer perspective, a slowdown is exactly what the UK needs.

Annual house price inflation a year ago had reached the silly level of 10%, far too fast for an economy growing at about 2%. A correction was overdue and the steady decline to 5.1%, down from 5.7% in January, restores a degree of sanity. A rate of 5% is still too high given that average earnings are currently growing at 2.5%, but most economists think house price inflation should slow to 2% by the end of this year. Bring it on.

To see why, look at Halifax’s ratio of house prices to earnings, as reliable a guide as any to affordability, froth and danger. The current level is about six times (pdf), which was last seen in 2007, just before the banking crash and recession. If 10% house price inflation had continued, the UK would have been heading into dangerous waters.

The Bank of England’s monetary policymakers, already fretting about the rise in unsecured credit card debt, should be relieved. Their working plan this year and next, one assumes, will be to keep interest rates at ultra-low levels and ignore the inflationary effects of the 15% fall in the pound against the dollar.

It is a sensible plan to address the Brexit uncertainties, but it is horribly exposed to the risk of a house price bubble fuelled by cheap money. If that risk is receding, the Bank has a freer hand and the Brexit obstacle looks slightly less daunting.

https://www.theguardian.com/business/nils-pratley-on-finance/2017/mar/07/uk-house-prices-slowdown-market

The Perfect Business Opportunity for the Property Investor

by Sally Lawson | Mar 17, 2016 | Property Investors | 0 comments

If you are a property investor, you are probably experiencing a few things:

• Difficulty finding great property deals that stack up
• Never having enough free cash to buy the deals you want
• A property management headache building with all the properties you have bought that need managing

This is where running a letting agency could solve all of these issues AND be a great asset in its own right (Leverage FREE too) plus it’s a load more tax efficient.

A Letting agency builds healthy continuous on going management monthly income from the property management margins and for an established business in the Midlands this would be around 30k per month, every month (before you open the doors).

This is why letting agencies are reaching the highest levels we have ever seen in the industry at the moment, and why the big boys are buying agencies as fast as they can to build their residual income.

You also get to utilise other people’s time and property to build yourself a valuable asset, the true definition of a business.

We are all aware of the new breed of Gazelle type business that are experiencing never seen before growth right in front of our eyes right NOW, and these are not ASSET based companies, they are “SERVICE based” which means they have no limits, they can service everyone and just keep growing and growing, and they are.

Think of the following examples:

• Alibaba, the largest worldwide warehouse but owns no stock,
• Facebook, the largest content machine that creates no content
• Uber the largest taxi firm that owns no cabs…
• Rightmove owns no estate agency but valued at £95million

Slightly different but along the same lines, it’s like the gold mine rush in California in of 1855, where everyone rushed to pan for gold, because they wanted to make it rich, but quietly behind the scenes, it was the it was the suppliers of the buckets and spades that made all the money.

The problem is that relying on asset building alone as a business model is too restrictive because you either run out of leads of great properties to buy, you get short of cash to secure the ones you want, or in the end give up through lack of motivation.

Monetising other people’s assets

The difference with building a “serviced based” business is that you are monetising other people’s assets, which means there are no restrictions, you can keep growing indefinitely, no barriers, no Mortgage restrictions, the sky is the limit.

It’s no surprise that at the moment well run and systemised letting agencies are achieving 2x turnover when sold, which means if you build your business in 5 years, to a £750k turnover then your business would be worth up to. £1.5million if sold.

The real bonus is that unlike property, it would be cash, free of any debts or leverage in most cases, as well as much more favourable than property is, with entitlement for entrepreneurs relief for taxation purposes too (as opposed to capital gains tax).

Another real bonus for a property investor of running a letting agency is that you will get a never ending source of leads driven into your hands of people wanting to sell their properties, the continuous residual income to fund them and a property letting and management solution right under your nose for everything that you buy too.

The Truth is…

Which is why when I was asked last week on an interview, “What properties are you investing in right now?” and the truth is I’m not.

Now I confess I have been a very active property investor, I was buying 4 per month at one point for clients and myself, and at 27 years old, I owned over 2.7 million pounds worth of property assets and I personally had purchases for rental, refurb, holiday lets and re-sale on the go continuously throughout the 90’s and early 2000’s but not now, it doesn’t stack up for me.

You see I would prefer to buy property agency stock, I can buy 100 properties under management for around £100k and this will generate over 60k income every year, with no additional expenses, because I have the management team in place already… 60% return!

It’s a no brainer, but I accept this is not for everyone, but we handle enquiries regularly from people buying agencies that then need a “system” to put in place to handle them and of course we are happy to help, so it’s definitely catching on.

So to summarise, to build a gazelle type business, utilise other people assets, and other peoples time, which means the sky is the limit, this will release the cash you need and the opportunities to carry on investing in fixed assets with a letting and property management solution built in (if you still wish to invest in property that is)

http://www.propertyagentscircle.co.uk/the-perfect-business-opportunity-for-the-property-investor/