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Location is always an important factor in property, especially when deciding on the best opportunities to expand a buy-to-let investment properties portfolio. Landlords may have a preferred niche, such as high-end apartments for professionals or semi-detached family residences, but local knowledge is key.

For example, a well-maintained rental property marketed to tenants with children is less likely to command a premium if it is outside the catchment area for the best local schools, and vice versa.

As we’ll explore below, there are advantages to working with an established agent with comprehensive experience in property sales and the letting market in any region you intend to buy.

 

Calculating Demand before Making a Buy-to-Let Investment Property Acquisition

One of the fundamental elements of making a reliable profit through property rental is demand; both having plenty of quality tenants to select from when letting a new rental asset and ensuring that tenancies are longer-running and sustainable.

Every city, town and village has specific neighborhoods, roads and areas that are considered the most exclusive or preferable for diverse reasons:

 

·         Falling within catchment areas for outstanding schools.

·         Excellent views, with sea or river views a particular draw.

·         Off-street parking or free and plentiful on-street parking.

·         Easy access to transport routes, supermarkets and local amenities.

·         Being within walking distance of parks, beaches and attractions.

 

These features are unrelated to the property itself. Still, they can make a significant difference in the rental value assigned when a residence is offered to let and demonstrate a variance in the rental price achievable for two comparable properties but in different areas of the same town.

 

Understanding Tenant Demographics for Rental Investment Properties Marketing

Landlords who live locally may be aware of some of the factors that might make one address more favourable than the other, but it is also important to consider demographics and those things that will matter most to the tenant group you expect to let to.

It can be useful to assess who you most anticipate renting your newly acquired property to and then consulting a letting agent to pinpoint the most meaningful priorities for that group.

Examples include properties within ten minutes of central city office districts, homes with larger outside gardens, residences close to harbours or marinas, or even homes away from flood plains or areas more exposed to high winds in coastal areas.

While most landlords will be used to considering their tenants rather than their own preferences and tastes when selecting investment properties, local agents can provide valuable insights that can add value to your bottom line.

Another good example is the EPC rating, not least because of the evolving standards. Particularly for smaller properties, a rental investment with upgraded insulation, double-glazing and heating is far less likely to be vacant since lower-income renters will want to know what a rental home will cost to run, as well as what the monthly rent will be.

 

Evaluating the Right Rental Price

Rental pricing can be difficult to get right because so much depends on the perceived desirability of a postcode, area or property, balanced with the type of tenant you intend to market to, general market conditions and the property itself.

Setting the price too high can make it harder to attract quality tenants and will usually mean a rental property remains on the market, provided other accommodation options are available at a more competitive cost.

However, if you set the rental value of a newly purchased buy-to-let too low, without realising a feature or element could allow you to charge more, you could be inadvertently reducing your potential profits.

All the aspects mentioned above can add real value to a rental property, and a letting agent working in the area will be able to offer guidance as to the following:

 

·         The number of prospective tenants on waiting lists.

·         Average rental prices in the specific part of West Sussex.

·         Demand for property types, sizes and locations.

·         Comparable rental premiums currently being charged.

·         Marketing options to boost visibility.

 

The final point is important because although many rental investment properties are let to tenants living in the local area, that may not always be the case.

Where appetite for semi-rural living has grown substantially over the last couple of years, advertising a new rental vacancy to affluent renters around the commuter zone will positively impact your rental yield.

 

The Advantage of Local Rental Market Expertise

Local market trends and future developments can also affect the profitability of a rental property investment. However, those purchasing from outside the immediate area may not be aware of other factors that could impact the future value of a rental asset.

If new-build developments are planned within a mile or so of your intended purchase location, this could mean other relatively modern buildings draw less attention since a brand-new rental property may be considered preferable.

Other factors such as expansion work to roads, new schools or school closures, planning permission related to developing green spaces or commercial zones, or local council plans to add new roundabouts, or link roads can all make a huge difference to the rental value of a property within a few months of purchase.

A rental property purchased based on being in a quiet, safe, family-friendly area may lose value quickly if development works cause disruption or introduce a higher volume of traffic or commercial vehicles to the area.

In contrast, future plans can benefit landlords, who use local agents to make astute choices about where to invest. Keeping abreast of regional developments, investment and innovation can be an excellent opportunity to invest in rental properties in an area or specific postcode that will likely become more desirable.

Using the expertise, know-how and understanding of the local renter demographics an agent can offer, can provide a competitive advantage and ensure you invest in buy-to-let accommodation with confidence that it will return a viable profit.

For more information about buying rental investment properties in any area within West Sussex, please get in touch with Tod Anstee - estate agents chichesterat your convenience.

 

Information Source: - https://www.todanstee.com/latest-news/local-knowledge-essential-to-select-profitable-rental-investment-properties/

The government announced new rules linked to UK properties owned by overseas businesses in August 2022. Businesses and owners had until 31st January 2023 to report to the Register of Overseas Entities.

 

However, various issues, from lack of awareness to non-compliance, mean that only 19,510 of 32,440 overseas organisations submitted their details to the register before the deadline. A further 5,000 are expected to be pending.

 

This guide explains what the register means, who it applies to, and what to do if you are obliged to declare your ownership and still need to do so.

 

The Purpose of the Register of Overseas Entities

The logic behind the register relates to attempts by the UK government to enforce transparency around foreign nationals with business assets and properties within Britain – it is part of the Economic Crime (Transparency and Enforcement) Act 2022.

One of the many problems has been the scope and breadth of the scheme, which incorporates beneficial owners and expatriates, potentially including British citizens who trade through an offshore limited company or similar structure, because of the tax efficiencies available.

The pre-existing Non-Resident Landlord system is separate and may have led to confusion where owners of UK Chichester rental properties believe that they are already compliant and registered as an Overseas Landlord and therefore are not subject to the new rules. This scheme applies to individual owners, rather than those trading through an overseas business.

 

Who Needs to Register as an Overseas Entity?

This new register is aimed at businesses and the individuals that own them and applies to:

 

·         Any business registered overseas that has purchased property or land in Britain since 1st January 1999 (in England and Wales).

·         Company owners who purchased property or land within that period and disposed of it before 28th February 2022.

·         Properties or land owned freehold or leasehold for at least seven years.

·         All legal entities, including companies, partnerships and other organisations registered outside the UK, including owners of businesses in Ireland.

 

Beneficial owners can be individuals, trustees, or other companies, but the regulation requires disclosure of anybody who holds 25% of shares, directly or indirectly.

 

Verification Checks for Overseas Entities Owning UK Property

Another complication is that companies or organisations registered overseas are required to work through a verification process. However, overseas entities that had owned British land or property and sold it before 28th February 2022 are exempt.

 

A verification check can only be completed by an agent registered in the UK, who can validate the identity of the owners and status of a business registered overseas – this is necessary before the organisation can submit details to the overseas register.

 

Agents include legal professionals and financial institutions, and the verification must be completed within three months of the registration date.

 

Those professionals with the accreditations to act as agents must also contact Companies House to request an agent assurance code before they can provide services. Agents without a code cannot file verification statements.

 

Once an organisation has appointed an agent, it must also give one month’s notice to beneficial owners before their details can be registered. The notice asks the owner (or shareholder) to respond within 30 days, confirming their details.

 

Impacts of the Register of Overseas Entities

Many organisations subject to these new rules will not take any further action since the primary objective is to identify concealed ownership structures, prevent money laundering, and avoid companies from disguising the true beneficial owners of UK property and land.

 

However, restrictions will be applied to all overseas entities from 31st January 2023. An overseas organisation is prohibited from transferring or leasing any UK property or land for seven years or more without registration.

 

The Land Registry will restrict the title deeds of all land or properties considered owned by an overseas entity that is not registered and will impose this limitation until the organisation complies. Those who do not register and fail to comply with the restrictions on the use of their property or land could face criminal charges or be further limited in any land transactions.

 

Non-compliance for registered organisations could result in an initial fine and a default penalty of up to £2,500 per day, as a maximum.

 

While these restrictions are intended to incentivise overseas entities to register, the fact that 40% still need to do so, weeks past the end of the transition period, demonstrates the level of confusion, misunderstanding or deliberate non-compliance present.

 

Once organisations have registered, they must comply with further requirements to provide updated information annually or verify that the records held remain correct.

 

Why Have So Few Organisations Complied With the Register of Overseas Entities?

There are many factors at play, not least that many high-value British properties are owned by trusts with complex structures or could be owned by investment funds and institutional investors, with difficulties identifying beneficial owners – or where the beneficial owner is a corporate entity itself.

 

The scheme aims to stop illicit financing being channelled through the UK property market, estimated at around £100 billion. A second focus was to expose criminal organisations using overseas entities to launder money without disclosing the names of the beneficial owners.

 

Despite strict penalties for non-compliance, the scheme has been slow to catch on, partly because some organisations have been struck off or dissolved. The UK government may not have access to this information – expected to be around 10% of the total.

 

Another could be the inclusion of retrospective purchases, where organisations are instructed to register the beneficial owners related to property investments dating back 24 years.

 

Offshore companies controlled by trusts may also be able to claim exemptions, regardless of whether beneficial owners were required to disclose their details in confidence to Companies House.

 

In the interim, any company owners or shareholders living overseas or with shares in an organisation located overseas that owns property or has owned and sold property or land since 1999 should register if they have not yet done so or seek legal advice to resolve any queries that are preventing them from complying.

 

Information Source: - https://www.todanstee.com/latest-news/changes-to-rules-for-overseas-owners-of-uk-properties/

Property assets appreciate gradually over time and are considered a fairly inflation-proof investment since, although the economy may be sluggish, it is very unusual for bricks and mortar to drop in value.

However, with rising inflation putting pressure on other aspects of owning rental properties or managing a portfolio, there is the likelihood that higher mortgage interest rates, utility costs, and council tax will impact your bottom line.

Here we’ll run through some suggestions to help you maintain profitability, along with guidance about assessing the fair rental value of each rental property in your portfolio to recognise the increasing demand for quality accommodation, particularly in the most sought-after areas of West Sussex.

 

Why Does Inflation Impact Rental Property Profitability?

Inflation itself doesn’t normally have any marked impact on the valuation of a property, but it can affect other outgoings.

Managing those costs during times of swift price rises can be essential to ensure your portfolio achieves the returns you expect to make on your investments.

Selling up is also inadvisable, given that the highest returns are realised over at least ten years. Purchasing a residence with a suitable rental value should cover the running costs, with a profit element.

This ‘dual’ return is one of the key reasons property is such a valued asset, whether to retain towards retirement as a low-risk investment or benefit from long-term market growth.

An important consideration is that while interest rates may mean some expenses are higher, it also means that average rental premiums have risen. In many cases, the best course of action is to re-evaluate your portfolio to see where increases would be reasonable and fair.

In some situations, landlords with tenants in situ tied into a tenancy agreement may be limited in their recourse to introduce higher rent, so it can be useful to look at proactive ways to manage the costs associated with a portfolio.

Other solutions include marketing a vacant property or new portfolio acquisition as a short-term holiday rental, if permitted within any mortgage agreements you may have, seeking a higher income while interest rates settle.

 

Controlling Rental Property Costs During Rising Prices

For most landlords, the mortgage is the highest expense linked to a rental property. Although interest rates are currently high due to the successive base rate increases introduced by the Bank of England, they are forecast to revert in the coming months.

The Economics Observatory estimates that within the next 12 months, inflation will fall to 2%, in line with governmental targets, and the current average 6% mortgage interest rates will fall to 3.3% by 2026.

In the meantime, rental mortgages can be flexible, and professional property investors may have several options to consolidate, extend or reduce their payment obligations through:

Extending the mortgage term to reduce monthly repayment costs. Some lenders will offer terms of up to 40 years at the outside, but most financial institutions will offer mortgage terms of up to around 30 years.

Switching from repayment to interest-only. Although fewer buy-to-let homes are purchased on a repayment basis, this could be an effective solution in this circumstance.

Consolidating mortgage borrowing. This may benefit portfolio owners with a larger volume of properties, where lenders keen to secure their business may be more competitive when considering a larger portfolio mortgage rather than a standalone product.

Much depends on your financial position and any borrowing products secured against a rental home. Still, there are often a few options that can be advantageous, even during a period of high-interest rates.

 

Meeting Market Demand to Improve Property Portfolio Returns

The next area to consider is the income your portfolio provides and assessing how the costs of running and owning a property have changed over the last few years. We recommend landlords and investors compile detailed budgets to have comprehensive oversight of their margins, looking at:

·         Maintenance and repair costs.

·         Council tax and utilities.

·         Borrowing interest and product fees.

·         Gas and electricity safety inspections.

·         Landlord licences for HMOs.

·         Insurance coverage.

Once you have a clear picture of the costs, it becomes easier to evaluate whether the rental yields currently achieved are sufficient, and alongside a valuation, can help you make informed decisions about the best way forward.

The biggest cost driver is void periods, where a portfolio property that is not generating an income can swiftly become a drain on your broader investments, given that most of the operational costs remain, regardless of whether the residence is untenanted.

Working with an accomplished and highly regarded lettings management team can improve your prospects significantly, advertising properties to the right demographics, using outreach marketing to reduce the duration of vacancies, and ensuring your rental property is presented in a professional and appealing manner.

 

Modifying Portfolio Properties to Boost Income Revenues

Finally, there may be opportunities to increase demand, interest and the rental market value of a portfolio property, although we recommend owners consult a local agent in the first instance to ensure they understand which upgrades or changes are most relevant to the local rental market.

 

Options may include, but are not limited to:

·         Permitting tenants to take up residence with a pet, incorporating the safeguards around damage and maintenance within your tenancy agreement documentation.

·         Making improvements to the condition, décor, exterior or space inside the property – this may range from simple refurbishments to more sizeable extensions or incorporating off-road parking and dropped kerbs to enhance accessibility.

·         Investing in the energy efficiency of a portfolio asset, where tenants are keen to secure rental properties that are future-proof, low-cost to run, and have an excellent energy performance rating.

The right solutions will vary and should be tailored to your portfolio, the location of your property assets, and any shortfalls in your rental yields you wish to address. However, even where costs are rising, property investors can make astute, targeted decisions to ensure their portfolios continue to deliver the returns they expect.

For more advice about managing your property portfolio in and around West Sussex, please contact the local Tod Anstee – Estate Agent in Chichester office to arrange a convenient time to talk.

 

Information Source: - https://www.todanstee.com/latest-news/how-to-protect-your-property-portfolio-from-rising-inflation/