UK Rental Market Update: Insights into the Current Landscape

Welcome to our Property Market blog, where we provide you with comprehensive insights into the current trends shaping the UK housing market. In this edition, we'll dive into key headlines of the current Rental Market - including supply and demand dynamics, challenges faced by investors, rental growth versus earnings, and regional snapshots. Let's explore the latest findings!

 

- Annual rental inflation for new lets in the UK remains high at an average of 11%, slightly down from 12.3% in mid-2022.

- Rental growth continues to outpace earnings growth, raising concerns about affordability for renters.

- The demand for rental properties remains significantly higher than the five-year average, while the supply of privately rented homes in Great Britain has seen a minimal 1% increase over five years.

 

Supply and Demand Imbalance:

- The stock of homes available for rent is 33% below the five-year average, highlighting the significant supply and demand imbalance.

- According to the recent ARLA Propertymark Report, the demand for rental properties recorded by member agents in April 2023 was 24% higher than the previous year, further exacerbating the supply shortage.

- Factors such as rapid growth in overseas students and high net immigration contribute to sustained demand for rental properties. This follows the Government shake-up of Visa rules in 2021 to help attract more skilled workers to the UK.

 

Challenges for Investors:

- The number of privately rented homes has only increased by 1% since 2016, as new investment is offset by properties leaving the rental sector.

- Tax changes, growing regulations, higher borrowing costs, and tighter lending criteria have prompted landlords to reassess their portfolios and investment strategies.

- Mortgage rates have increased, impacting the equity or deposit levels required for new buy-to-let purchases, along with stricter lending criteria and stress tests.

 

Rental Growth and Existing Tenancies:

- Existing tenancies have seen rental increases at an average of 4.4%, significantly lower than the market average for new tenancies.

- Landlords are encouraged to review their rents periodically, especially considering challenges such as tax changes and higher mortgage rates, as rent increases can positively impact investments.

 

Breakdown of the Private Rental Market:

- The core private rented sector, comprising long-term lets, accounts for 66% of the market, offering lower hassle and workload.

- Sub-sectors such as holiday and short lets or HMOs may provide higher yields but come with additional costs, workload, and regulations.

 

Regional Snapshot:

- In the West Midlands region, average rents have seen a year-on-year increase of just under 10%, with Birmingham ranking among the top five cities for rental growth.

- Manchester, Edinburgh, Glasgow, and Nottingham also demonstrate strong growth in rental prices.

 

Conclusion:

The UK rental market continues to experience robust demand, outpacing earnings growth and raising concerns about affordability. The supply shortage persists, presenting challenges for both tenants and landlords. Investors face changing dynamics, including higher mortgage rates and stricter lending criteria. Regular rent reviews are encouraged to ensure investments remain financially viable.

Thank you for reading our Rental Market Update blog. If you are a landlord or property investor and would like some advice or to share your views, please contact me anytime...

 

Ali Durrant MARLA

Director of Concentric Sales & Lettings 

ali@concentricproperty.co.uk

UK Sales Market Update

Welcome to our Property Market blog, where we provide you with insightful information on the latest trends in the housing market. In this edition, we'll focus on the sales market, highlighting key statistics and offering valuable insights for both buyers and sellers.

 

1. Transaction Stats:

In January 2023, there was a 10% reduction in property sales recorded year on year, while new home purchases saw a 9% rise in completions. Mortgage approvals experienced a significant 46% reduction, with gross lending down approximately 7%. The decrease in mortgage approvals from the second half of the previous year largely explains the significant difference in lending statistics.

 

2. Buyer Demand:

According to the latest ARLA Housing Insight Report, there was a 30% fall in the number of prospective buyers registered across member branches in April 2023 compared to April 2022. Additionally, member branches reported a 70% increase in properties available for sale year-on-year. These figures indicate a drop in buyer demand, likely influenced by higher mortgage rates and economic challenges affecting affordability.

 

3. Market Activity and Pricing:

Rightmove reported that agreed sales numbers are currently just 3% behind the pre-pandemic market of 2019. The average price of properties coming to the market experienced a 1.8% month-on-month increase in May, reflecting robust activity levels and confidence. Sales agreed in May showed positive growth, and the level of negotiation from the asking price to the sale agreed price remained steady at around 3%.

 

4. Mortgage Rates and Affordability:

Despite an increase in the Bank of England base rate, mortgage rates have remained steady. The average 5-year fixed rate with a 15% deposit is now 4.56%, significantly lower than the 5.89% recorded last October. This decrease in mortgage rates contributes to maintaining home mover confidence in the market outlook.

 

5. House Price Growth and Market Activity:

The Zoopla house price index reveals a year-on-year price growth of 1.9%, the lowest in recent times compared to the 9.6% recorded a year ago. Prices have fallen by an average of 1.3% in the last 6 months due to higher mortgage rates and rising living costs. However, buyer confidence has improved, resulting in an increase in sales agreed, primarily driven by falling mortgage rates during the Spring.

 

Regional Property Price Movements:

The West Midlands region has seen year-on-year price growth of 3.5%, surpassing the national average of 1.9%. Birmingham ranks second among major cities, with a growth rate of 3.8%, just behind Nottingham at 3.9%. These figures indicate a significant difference compared to last April when the year-on-year price increase approached 10%.

 

The Outlook for the Sales Market:

Market activity in the UK sales market remains comparable to pre-pandemic levels. However, predictions suggest that mortgage rates may increase in the second half of the year, impacting affordability and pricing. It is anticipated that the year-end may see approximately 20% fewer transactions than the previous year. Sensible and realistic pricing is crucial for sellers, while buyers should not be discouraged as long as the numbers align. As the year progresses, increased stock levels may provide negotiation opportunities.

 

Conclusion:

The UK sales market demonstrates resilience, with activity levels approaching pre-pandemic norms. Understanding market dynamics, considering pricing strategies, and staying updated on mortgage rate changes are vital for both buyers and sellers. Seek professional advice and remain adaptable to navigate the ever-evolving property market successfully.

Thank you for reading

What Is The Rental And Property Investing Market Like In Liverpool Right Now?

We have let thousands of tenancies, worked with hundreds of investors, and managed hundreds of properties, helping landlords navigate the local Selective Licensing schemes since their inception in 2015.

Like tenants, landlords and investors come in all shapes and sizes, have different levels of experience, and have different wants and needs, but there are a few questions that we get asked all of the time, and right now, it seems like everyone wants to buy property in Liverpool and the surrounding areas... and I can see why.

We have been instrumental in letting property in and around the west of Liverpool for over 10 years now, our focus; to work with the landlord investors in the area.

We have let thousands of tenancies, worked with hundreds of investors, and managed hundreds of properties, helping landlords navigate the local Selective Licensing schemes since their inception in 2015.

Like tenants, landlords and investors come in all shapes and sizes, have different levels of experience, and have different wants and needs, but there are a few questions that we get asked all of the time, and right now, it seems like everyone wants to buy property in Liverpool and the surrounding areas... and I can see why.

There's a lot of investment opportunity in the area with great property prices compared to many other city locations, and will generate fantastic income (and now capital) returns.

So, if you are thinking of buying a property in the area, here are a few questions you should be asking yourself.

 

What are the most in-demand areas from tenants at the moment?

The top areas that are most in-demand from tenants right now are Bootle, Walton & Fazakerly.

 

What sort of property cannot you get enough of? 

There appears to be a real shortage of 2/3 bedroom houses, maybe because people want more space or a place to work from home, we have all experienced being locked in, and a 1 bed flat can become less desirable. 

 

Where are most investors looking to buy at the moment? 

Most Investors are looking to buy property in Bootle & Walton, which ties in nicely with the increased tenant demands we are seeing. 

 

What rent increase levels have YOU seen in the branch? 

With rents across the UK increasing on average by 8.5% (according to Homelet), we have seen rents across the board here increase by at least 10% over the last year and in some cases a lot more! 

 

What property price increases have you seen in your area?

According to the Liverpool Echo, Liverpool has the fastest rising house prices of any UK city. This year is set to be the busiest for the UK housing market since 2007, with Liverpool topping the house price charts at 10.6% and some areas such as Toxteth maxing out at over 20% in just 12 months.

 

Are unfurnished properties renting better than furnished? 

We find that most properties rent better if they are unfurnished, that is unless they are a house share or student accommodation, then of course furnished is best.

 

What are the key features tenants are asking for right now?

Of course they still want the usual, a good location that feels safe, a nicely presented property that’s clean and has good access to facilities and transport, but this year we have seen a rise in tenants asking for gardens, and to be allowed pets (probably due to the experience of lockdown), and with HMO’s they really do all want en-suite facilities (due to becoming more germ aware). 

 

How many applications from tenants are you getting per property?

During most of 2021, we were seeing around 10 applications from tenants per property, however, this year it has more than doubled, we seem to currently (January and February) be getting up to 25 pre-applications for each property, it's gone crazy!

 

If you were looking to buy a property right now Elisha, what would you buy?

If I was to buy a property now, I would definitely be looking to secure a 3-bedroom terraced house for around £130k, generating me a monthly rent of around £750pcm which results in a 7% gross yield, because I know I could rent it over and over again with zero problems and get good quality tenants.

 

What sort of landlords are buying at the moment?

It seems all types of landlords are buying at the moment, from 1st-time landlords, those with 1 or 2 properties looking to expand their portfolio and large landlords alike, it feels like everyone is buying right now, it’s a very busy market, driven in the main by the huge increase in demand and the shortage of stock out there.

 

What’s the big challenge for the Liverpool market at the moment?

It has to be the introduction of another Selective Licensing scheme across Liverpool from April 2022. This is going to be an additional cost and more paperwork for those landlords in the areas affected, but we have been through this before with Sefton, so we are ready to support our landlords through it.

If you have any queries regarding any of the subjects covered in this article or want to learn how the introduction of the new Selective Licensing laws could effect you as a landlord in the Liverpool area, we're running and inviting you to a free-to-attend webinar on the 23rd March 2022 at 18:30. On the webinar, we will cover all the nitty-gritty details you should 100% be aware of.

Register for the webinar on the next page.

Section 11 Repairing Obligations – what you need to know

Statutory Implied Terms

Firstly, what are the obligations of the landlord under the Landlord and Tenant Act? The official line states that:

“The landlord [is] to maintain the structure and exterior of the property, including installations for the supply of water, gas and, electricity, heating systems, drainage, and sanitary appliances.”

In simple terms, this means that if anything you as the landlord have provided as part of the tenancy, it is your obligation to keep it in good working order throughout the duration of the tenancy.

If we look a little deeper, the statement implies that the installations are ‘maintained’, which tells us that they must indeed be in proper working order before the start of the tenancy. It’s important that anything that isn’t in good repair is dealt with before the tenant moves in, otherwise, the landlord can be deemed in breach of Section 11, and therefore can be prosecuted.

So, what is included, and what do we mean by installations?

Maintenance of the structure and exterior is quite self-explanatory; by this, we would include the brickwork and external structure, roof, drains and gutters, and windows and doors, etc. It is expected that the property is structurally sound, will not be subject to leaks or damp caused by damage to brickwork or roof damage, and is secure, with adequately fitted doors and windows etc.

With regards to installations, you should include in this anything that is included in the property as part of the agreement. That includes any appliances which are already in the property when the tenant moves in. It also includes all and any water or gas pipes, electrical wiring, water tanks, boilers, radiators, and other space heating installations such as vents for under-floor heating, baths and sinks, and sanitary ware.

 

Supplied appliances

If you have provided appliances to the tenant as part of the tenancy, i.e. they are not gifted or provided as a goodwill gesture, then these must also be kept in good repair as part of the agreement. These might include:

As a landlord, it is not under your responsibility to repair items that belong to and were brought into the property by the tenant. Make sure that any items you have provided are included in your tenancy agreement, and are listed on your inventory. It is also important that you can prove the condition of provided appliances in your inventory, so that your tenants cannot claim for damages for which they are responsible.

 

Advertising the property and the Consumer Protection Act

Something you’ll want to consider when you’re advertising the property is what you’re including in the tenancy. If, in your photographs, you have shown the property with white good, and you are not intending to include them, you must state that in your advert, and make it clear whether you are willing to gift those items, or whether they will be removed before the tenant moves in.

 

Tenancy Issues

Something we’ve seen come up and have frequently been asked about is whether the landlord’s responsibility under Section 11 changes if the tenant is behind on their rent, or is under dispute for some other reason.

The answer is absolutely not. Regardless of any issues with the tenant, you as the landlord are still under obligation to make good any repairs to the structure and installations included within your property.

You must also get the permission of the tenant to gain entry to the property to make any necessary repairs. While we know that when a tenancy is under dispute, this can sometimes be difficult, but remember that if you don’t have permission to enter from the tenant, then you can be liable for trespass.

In all circumstances, the tenants right to privacy in their home should be respected.

If the health of your property is a concern, you can download our FREE compliance check download here.

Are Flats A Better Investment Than House

With legislation getting tighter and tighter within the lettings industry, the debate between landlords on whether to invest in houses or flats is back on the agenda. So where is your money best placed? The answer isn’t as straight forward as you might think – let’s take a look at some of the pros and cons for each.

Spot the difference

Some people might tell you that a new trend is emerging, and that many landlords are favouring flats over houses because they tend to give a higher yield in an increasingly difficult market. And they’re not entirely wrong – flats are cheaper to buy than houses, and therefore can bring in more cash in rent – there are other things that you might want to consider.

You might be attracted to investing in a flat based on the higher yield, the lower purchase price, and the ease of maintenance, which are all very valid. But bear in mind that a flat is a very different animal to a house – and therefore requires a different set of management skills.

Flats – the advantages

Typically, you will find that the purchase price of a flat is lower than a house, in fact in the right area, you could be looking at a saving of up to two thirds of the cost of a house. Of course, this means that yields will be much higher, increasing your profit margin.

The market for flats is very different than for a house – so if you are in an area where there is a demand from single people, young professionals, or even young couples who are looking to start out with a small, affordable property, then that’s who you need to be focusing on when you’re looking for a tenant. Cost of living has risen over recent years, which has increased demand for these types of properties.

You can save money in maintenance costs, as in most cases, the freeholder or management company will be responsible for the upkeep of flats and communal areas.

Flats – the disadvantages

You might find that lenders are less willing to finance flats, due to a higher risk. On top of this, flats often have a higher turnover of tenants as they are often taken by single people, who then move on when they find a partner, or young couples who move out when they start a family, and thus need somewhere bigger.

Due to that higher turnover, there is the added concern of having to go in and clean up and redecorate more frequently, so that you can attract new tenants. However, flats are less likely to be empty for long, which is a positive.

Unlike houses, you have less freedom to make significant alterations to a flat, and so it might prove very difficult if you are looking to increase the value for sale. Other than general modernisation, such as kitchens, bathrooms, and windows, unless the flat is in desperate need of modernisation, you’ll be stuck if you are investing for profit. In this case, the value really is all in the rental yield.

House or flat?

Whether you invest in a house or a flat really is down to your particular circumstances, the area you are in, and the amount of money and time you are able to invest. Flats can be great money-spinners, as long as you know what you’re going into, do your research, and are prepared to put the work in to find the right tenants. Where the market for flat might be smaller, more niche, and less long-term, having them as part of a healthy portfolio, along with family-friendly houses, can pay off in the long term.

Landlords – Are you compliant with the latest Minimum Energy Efficiency Standards?

Concentric's Compliance Director Dawn Bennett discusses the MEES issue at one of our recent landlord seminar events:

There’s no getting away from the fact that there have been a lot of changes in legislation in the lettings industry over the past year, not least updates in the law surrounding energy efficiency. This has been quite a big one, because there is currently a huge buzz around the need for us all to be more aware of our environmental impact, from the materials we use every day, to how we reduce the amount of energy in our businesses and in our households. 

So let’s take a look at what’s changed, and how we as landlords and agents need to look at energy efficiency within the properties that we rent out, along with the potential hurdles that might present. 

MEES – what does it mean? 

For the past 10 years, all let properties have been required to provide tenants with a copy of the Energy Performance Certificate for their home. You’ll see these also on any electrical appliance you buy, depicted by a colour coded chart along with the details of the efficiency level. It’s meant to give consumers an indication of how energy efficient the product is, so that they can make the decision about their own impact environmentally. In terms of property, things such as insulation, doors and windows, lighting, how the home is heated etc. are taken into account. 

As of 1st April 2019, all properties rented out or renewed will be required to have an EPC rated at E or above. If the property currently holds an F or G rating, it is illegal for new or renewed tenancies to be issued. 

If you have properties already tenanted, they are currently not required to comply until 1st April 2020, when every rented property will be expected to be at the required standard, and properties which fall at F or G rated will no longer be legal. 

Where can I find the current EPC for my property? 

An EPC certificate is valid for 10 years from the date of issue, and copies can be obtained for free by searching the EPCregister.com website. 

Why is improving the energy efficiency beneficial? 

There are numerous reasons why having a higher rating of energy efficiency will be attractive for perspective tenants – not least the cost impact. The average annual cost of a G rated home is £2,860. In comparison, a property rated E is £1,710. So you can see from those statistics that the potential savings in energy costs alone would mean that a property becomes much more attractive in the rental market. 

As well as this, people are becoming much more aware of their impact on the environment, and what’s more, are becoming much more savvy. An energy efficient home offers a tenant not only a more comfortable environment which cost less to run, it also means that they can feel a lessened responsibility towards their personal carbon footprint. Many renters now are consciously searching for properties which have better standards of insulation, modern heating and boilers, and even ‘green’ energy options such as solar water heating etc. A property which can promise some of these options is much more attractive, and is likely to give a higher return, and be filled much more quickly. 

How can I improve the energy efficiency in my property? 

Probably the biggest issue with properties which have a low energy efficiency rating is that of insulation and poor heating. Older properties in particular can be uninsulated, draughty, and poorly lit. In these cases, much improvement and investment might be needed to bring them up to standard, to include things like cavity wall insulation, roof insulation, double glazing, and modern boilers and heating systems. These kinds of improvements are likely to be expensive in many cases, but essential if you expect to rent out a property without falling foul of these new regulations. 

Some details of what is included in your particular property can be found on the EPC, and a guide of improvements, although not in great detail, are also included as advisory notes. It may serve as a useful starting point for some landlords. 

Things which you might consider are: 

Failure to comply 

It is the responsibility of the local authority to enforce notice where they believe there to be a breach in compliance. It’s worth noting that notice can be served up to 12 months after the suspected breach, so in the event of the property being sold, it is vital for landlords to hang on to any proof of compliance. 

A penalty of up to £5,000 may be served for landlords who fail to comply, or fail to make improvements after the notice period. 

Could Brexit be good news for landlords?

2019 is proving to be an unpredictable market for properties in the UK. As with many other industries, people are hitting pause in anticipation of the outcome of the Brexit deal. Evidence suggests that over the past few years, people putting a mortgage down on a property has fallen, and continues to do so, while people renting privately is rising, at roughly the same rate.

This of course, is not all down to the Brexit effect – the rise of house prices over the past decade will always determine the number of house sales, in part because there have been some major changes in both economy and regulations, making it harder for the new generation of 20-somethings to make their way onto the ladder. But it seems, those same threats are encouraging people to take the less risky, and more flexible option, of renting. And it seems logical that the fear of Brexit has had quite an impact.

The 2019 rentals market

Property experts predict that we will see these trends continue into 2019, which will see the market slow down at a steady rate. In contrast, this proves to be a positive for property investors and landlords, because those same experts are predicting that the uncertainty of Brexit will further fuel the huge demand for rentals in the UK, particularly in the private sector.

Figures show that across England and Wales, the number of rentals has risen by 17.4% year on year, and 24.6% in London.

It seems then, that Brexit is having no effect on the rentals market as a whole – demand is still growing for good rental properties and looks set to continue to do so.

Ongoing shortages

Contrary to the belief that rentals will begin to decline following less migration from Europe post-Brexit, there is still a huge shortage of affordable rental housing due to the ongoing chronic undersupply and difficulty in getting a mortgage due to new restrictions. This doesn’t appear likely to let up, as Government intervention makes it more and more difficult to purchase property in the UK with new legislations and tax changes.

There is more demand than ever for rentals, and that demand has increased since this time last year, and some experts are advising that property developers take advantage of the current climate and levelling house prices while they can. We are still in the very strong situation whereby the income from rents is significantly more than the cost of buying a property even with a mortgage attached.

The next five years

Along with the increase in the number of rentals, it has been predicted that due to the sheer demand of rental properties, the price of rents will increase by around 15% in the next five years. This is from a report published by the Royal Institute of Chartered Surveyors.

It ties in with the increase in demand, of course, but also follows the impact of taxes in the buy-to-let sector, which is affecting landlords decisions in buying property. This in turn is creating a further shortfall, which is having a knock on effect on the rental demand.

It seems evident that for those landlords and property developers who are able to stand firm through the current uncertainty, there could be rewards to be had, as there will never be a shortage of people looking for properties to rent.

Sally Lawson CEO of Concentric says, “after 3 decades in the rental sector and at least 2 recessions, the rental sector has held firm, never waning, with steady growth every year since 1987, and predicted to grow from being 20% of the entire uk housing stock to over 50% by 2050, I see no signs of this trend changing in the near future, Brexit or no Brexit, people have to live somewhere”

7 things landlords might not know about LHA tenancies

It’s a common phrase you see rounding off nearly every rental listing - “No DSS”. DSS – being the now-defunct Department of Social Security – refers to LHA tenants, the catch-all term for low-income tenants who claim Local Housing Allowance (LHA), named after the now-defunct Department of Social Security. 

LHA tenancies have become a bit of an enigma due to the lack of uptake on them. As such, they are an untapped market for many investor landlords, and offer a great opportunity to create a solid portfolio. 

Much is said of LHA tenancies in the lettings world – they’re unreliable lets, they’re a one-way ticket to rent arrears, and so forth - but it’s important to separate the truth from the myth. Here’s some facts you might not know about LHA tenancies:

1)    LHA is a capped flat rate allowance, calculated based on the size of a tenant’s property and the area in which they live. This means tenants need to source a property before their allowance can be calculated. Potential LHA landlord investors should research market values of low-income areas and make sure any properties they would like to let would qualify to be LHA-funded.

2)    Only 30% of available properties in a given area in the UK are affordable to LHA tenants with an even smaller percentage actually renting them due to “No DSS” policies. Due to supply and demand, if you have an affordable property, you could tap into a pool abundant with potential tenants.

3)    Landlords by default can have LHA paid directly to them if the tenant incurs 8 weeks’ arrears, but can apply for direct payment BEFORE this happens. Contrary to popular belief, local councils assess applications on a case-by-case basis and are open to paying landlords directly for a variety of reasons. If you have concerns about a tenant’s ability to pay, council help is always available.

4)    Many local councils, housing charities and letting agencies host direct letting schemes to introduce landlords to low income tenants. This means LHA tenancies are often easier and quicker to set up, which could benefit landlords dealing with vacancies and short-term lets.

5)    Some local councils in Northern England are part of the Empty to Plenty scheme, which helps house LHA-qualifying tenants by guaranteeing the safety and compliance of landlords. The scheme aims to reduce empty properties by assisting landlords with their lets, including options such as leases through housing associations or refurbishment loans for derelict properties of up to £15000. 

6)    As part of the Green Deal, LHA-qualifying tenants can also claim government benefits for replacing old appliances with new, energy efficient models. This means landlords could potentially have boilers, ovens and other expensive appliances upgraded at zero cost.

7)    If it is found that your tenant has been fraudulently claiming LHA and you have been directly receiving the payments, you will not be responsible for the repayments as long as you can prove you were not aware of any wrongdoing, so keeping of records is vital when handling LHA tenancies. 

Due to landlord reluctance, LHA tenants have developed a less-than-favourable reputation, but not all LHA tenants are the same – they can be employed or unemployed, disabled or fit for work, have families or be single. Specialising in LHA tenancies could prove to be a worthwhile investment – not only would you helping many people in need, but you could build a strong portfolio that generates regular cash flow. 

If you are interested in letting to LHA tenants, always have a full discussion with each applicant about their financial situation, what requirements they have for their property and request a full reference. If you’d like further help, you can get in touch your local Concentric branch, who can offer you further guidance and support on meeting LHA property standards and sourcing tenants.

Should I concentrate on capital appreciation in buy-to-let?

The growth of the buy-to-let market isn’t slowing down, as the housing shortage in the UK continues. Because of this, you now see a lot of information out there to help landlords get the best rental yields for their properties, but interestingly there is less information on capital appreciation. More associated with buyers and vendors, capital appreciation is also a factor that landlords need to consider when they invest in property, now more than ever.

What is capital appreciation?
In comparison to cash flow, which is money that goes straight into your back pocket, capital appreciation is the profit made on an asset that has not yet been liquidated. Many investors use property for appreciation due to being one of the more reliable assets.

Investing in private rental properties is more often than not a longer-term commitment compared to refurbishment projects and other types of property investment. Therefore, it’s in a landlord’s best interest to look into the capital appreciation potential of a property for when they or their successor eventually sells them. It’s not worth investing in a rental property only to lose capital once you leave the sector.

Why should you think about capital appreciation? 
If you’re looking to boost your personal income – maybe you’d like to add more to the retirement fund or raise more money to help out family -  then it would be wise to consider capital appreciation opportunities.

Once you reach pension age, you could stand to have a good nest egg to fall back on, especially since properties in the UK are increasing on average by 24% in value over 10 years.

Things to consider for capital appreciation

1)    Buy an asset you can actually liquidate. It’s okay investing in properties to create some steady cash flow, but if the property is difficult to sell or in a poor location, then you could end up losing more capital than you earned overall. This is called capital depreciation. Look for properties in up and coming areas or areas going through regeneration. According to statistics, you could stand to gain up to 25% in value on a property over just 5 years if a new supermarket is built in the area.

2)    Budget correctly and be aware of your net income. Only invest in properties you can genuinely afford – this includes décor and furnishing, maintenance and repairs, mortgage fees, taxation and utilities that match its size and build.  The mortgage tax relief cuts introduced by the government last year only heighten the need for you to plan your budget carefully. Pushing yourself to invest in properties that generate a large gross income will end badly if you can’t manage the financial upkeep. You could end up cancelling out any rental yield you make for a number of years, but even worse, you could end up in debt with a need to liquidate quickly. You want capital appreciation to boost your income, not make up for your losses.

3)    Be a good landlord. Don’t allow your property to become run-down and filled with bad tenants; it could influence the reputation its area has and thus decrease its market value. Looking after your tenants and ensuring a well-kempt property is heavily linked to how much the property will be worth over time. 

If you’d like to focus on capital appreciation when making a buy-to-let investment, a consultation with a local property expert is highly recommended. Many of our local Concentric branches offer buy-to-let advisory workshops, where you can get advice and guidance tailored specifically to you. Click HERE to find out more.

A quick guide to converting HMOs

With property prices ever increasing and successive governments taxing income from property more and more each year, landlords and property investors are often  turning to houses of multiple occupation sometimes known as HMOs for higher rates of return.

So why do HMO give landlords and property investors a higher rate of return?  Well essentially this is down to the fact that HMO properties are rented out by the room rather than as a whole property. 

So how do you achieve these higher rents and higher rates of return? 

What you do is you create a situation for individual single tenants where the rent is affordable. Note the word affordable here. We're not saying that it wouldn't be cheaper to rent a whole property if you were say in a couple or in a group but if you are renting on your own and have no one to share the costs with then renting a room in a shared house will ultimately be cheaper.

So what creates an attractive proposition for such a single tenant? 

Well I would say first of all it is having a room in a house which is literally ready to go. Nothing more required than bringing your own small possessions and clothes and getting settled in.  

Why is this important? Because it keeps costs down and it allows people to move quickly. 

What this means to you as someone thinking of converting a property into an HMO is that you need to ensure that the rooms large enough to be comfortable and that the property is sufficiently furnished and well equipped - to all intensive purposes so it’s ready for someone can move into it in the same way they would a hotel room.

You also need to ensure the property that you are thinking of converting into an HMO is in a location which your tenants will want to live in. Please see my article on choosing the location  for are HMO for more details on this.

But what about the legal constraints for creating or converting an HMO?

You may have heard that there is a lot of legislation surrounding converting and running an HMO and you'd be right. Due to the nature of HMOs and the number of people that live in them, there are naturally concerns about ensuring that the occupants are safe and secure. Iit is no longer a situation where there is a single family unit where people are looking out for each other but instead 5 or 6 individuals and it can't be it can't be assumed that they are all cooperating in keeping the property safe.

So what can you do as a landlord to ensure that you stay on the right side of the law when converting a regular residential property to an HMO? 

Firstly I would say invest in your own education.  There are plenty of courses run by industry experts who will teach you everything you need to know relating both to the legislation and the practicalities of converting a property to be a compliant and functional HMO.

Secondly, speak to a local agent you have a working knowledge of he knows not just from a theoretical point of view from the practical experience of actually letting and managing them.  take it from me there a lot of different skills and knowledge required to safely and successfully let and manage an HMO.

Thirdly, don't underestimate the amount of time which managing as an HMO will take.  you may think at the outset it is just a large terraced house but if it is 6 bedroom HMO then in reality what you have are six houses with six separate tenancies 6 separate tenants 6 lots of questions problems rent to chase and other usual repair and maintenance issues.

As a landlord myself and having managed my own and families properties myself I can attest to the fact that whilst it is perfectly possible to manage one rental property what even 2 or 3 whilst holding down a full time job it is very difficult to manage any more than that and retain a healthy work life balance.  This is why I say to any landlords or property investors thinking of buying or creating / converting a property to an HMO, factor in the costs of professional management.

Is there any specific legislation which you should be aware of?

The short answer is yes lots but in a nutshell the main things you need to bear in mind or and this is in no particular order

For more help, information and advice about converting the residential property to an HMO what any other aspects of owning, letting or managing an HMO in Birmingham please contact us on 0121 405 0389.