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Renting to students provide ‘some of the best yields in the country’

Student property is one of the best investments available at the moment, thanks to high demand for student housing ahead of the new academic year.

Many buy-to-let landlords are reluctant to rent to students because they are concerned about the damage they could do to their property. But research reveals that student property now offer among the highest yields in the UK.

Landlords with student properties in Liverpool, for example, which is home to three universities, can now expect to achieve rental yields of almost 12%, according to recent research by Totally Money.

Middlesbrough’s TS1 town centre postcode, home to Teeside University, is another good location for student property, with an average rental yield of almost 11% typically achievable.

The research unsurprisingly finds that most postcodes in the highest yielding areas have relatively low house prices, compared to the national average, suggesting that more affordable house prices generate better rental yields rather than more costly properties.

Jeremy Robinson, managing director of Housing Hand, commented: “Landlords and letting agents that let to UK and international students know they are getting some of the best yields in the country.” 

He points out that new students often opt for halls or an HMO, which he adds “offers excellent yields for landlords”.

TOP TEN BUY-TO-LET POSTCODES FOR RENTAL RETURNS 

Rank

Postcode

Postcode Town

Properties for Rent

Average Monthly Rental Value

Properties for Sale

Average Asking Price

Yield

1

L7

Liverpool

276

£1,162

64

£118,225

11.79%

2

L6

Liverpool

287

£1,046

131

£108,940

11.52%

3

TS1

Middlesbrough

234

£595

102

£65,238

10.94%

4

EH8

Edinburgh

52

£1,962

33

£221,640

10.62%

5

M14

Manchester

787

£1,636

72

£194,733

10.08%

6

NE6

Newcastle upon Tyne

883

£883

237

£111,767

9.48%

7

L1

Liverpool

217

£953

411

£122,152

9.36%

8

PR1

Preston

675

£903

586

£125,341

8.65%

9

M19

Manchester

75

£1,331

67

£185,645

8.60%

10

FY8

Blackpool

80

£1,490

252

£209,556

8.53%

 

Source: TotallyMoney June 2018

 

 


Article courtesy of Landlord Today | Sign up for Landlord Today newsletter | Get this news on YOUR site!


Investors are starting to think twice about investing in buy-to-let

The attraction of buy-to-let is starting to wane as far as some people are concerned due to a series of recent tax and regulatory changes, new research shows.

The introduction of the 3% stamp duty surcharge, scrapping of the ‘wear and tear’ allowance and the phasing out of mortgage interest relief are among just some of the issues deterring buy-to-let investors at the moment.

While there are still high rental yields to be achieved in some parts of the country, particularly in the north, other areas are seeing ultra-low returns by historical standards.

London, for instance, is one of the worst areas across the UK for buy-to-let, with some investors achieving a rental return of less than 3%, which may explain why more than a third of investors in the capital no longer view property as a good investment, according to a new survey of over 1,000 UK investors and 500 High Net Worth Individuals commissioned by Rathbone Investment Management.

Recent changes to the tax treatment of buy-to-let investments introduced by the government over the past few years, as well as the introduction of new regulations by the Prudential Regulation Authority affecting portfolio landlords, have led to many investors now re-evaluating the cost-effectiveness of property as an investment.

In comparison, those investors with over £100,000 of investible assets are much less bearish about property – just one in 10 don’t view it as a good investment. 

Interestingly, nearly half of the HNW London investors surveyed currently own buy-to-let properties; however, just 17% planned to increase their portfolio.

Some 37% of the HNW investors surveyed had accumulated their wealth through property, whilst 27% currently had investments in private real estate, 17% in commercial real estate and 12% in land.

Robert Hughes-Penney, investment director at Rathbones, said: “Recent changes to the tax and regulatory treatment of buy-to-let has caused investors to take a step back and assess the viability of these investments.

“Whilst it’s understandable that property, and in particular residential property, has been a popular investment in the past, it’s now making less and less sense. Not only are the returns now being impacted by an increased rate of tax, but they can also prove high risk investments due to a lack of diversification.

“Property investments require a large amount of capital to be held in one single asset and landlords will often hold a number of properties within one region.

“Investors who are looking to invest in property, should make sure to assess their risk appetite, look at all alternative options and make sure this property is held within a well-diversified portfolio of investments.”


Article courtesy of Landlord Today | Sign up for Landlord Today newsletter | Get this news on YOUR site!


Have some local authorities been charging too much for HMO licenses?

Buy-to-let landlords could have grounds to challenge HMO licensing fees which could save them hundreds of pounds each year, according to Commercial Trust Limited.

The specialist buy-to-let mortgage broker points to a recent court case that has potentially opened the door for landlords to challenge the fees that local authorities are setting, for HMO licenses.

This news comes just weeks until the deadline for new HMO licensing rules, estimated to impact on 177,000 more landlords, is introduced on October 1.

For many landlords, the price of the license is not the only cost. Further expenditure may be required to make changes to the property in question, to ensure that it meets licensing standards.

But the recent court case of Mr Peter Gaskin v LB Richmond Upon Thames [2018] EWHC 1996 (Admin), has laid to question the validity of some licensing fee costs, set by local authorities.

In the above case, the High Court ruled that license fees can only cover the cost of the licensing scheme, not other costs such as enforcement.

The Administrative Court decided that the claimant, Peter Gaskin, an HMO landlord, was providing a service within the meaning of EU law, by the private letting of accommodation.

Because Gaskin had met the EU requirements for providing a service, the court determined that the fee charged by the local authority for an HMO licence, had to be structured in a way which complied with EU law.

The property in question is located in the London Borough of Richmond Upon Thames.

Under the terms of the Housing Act 2004, Gaskin needed to obtain an HMO licence from the London Borough of Richmond, before he could let out rooms in his property, located in the local area.

HMO licenses have to be renewed every five years and when the landlord came to renew his HMO licence, the council asked him to pay a fee covering not only the costs of processing his application, but also contributing towards the authority’s costs of running the HMO licensing scheme, and that eventually led to him being prosecuted in the Magistrates’ Court for operating an HMO without a licence.

Under EU Directive 2006/123/EC (“the Services Directive), there is a provision in its article 13(2), that where a charge is imposed for a person to apply to have access to a service activity, the charge must not exceed the cost of the authorisation procedures.

In this case, the question of whether the private letting of accommodation amounted to a service, would determine whether the London Borough of Richmond Upon Thames would be allowed to charge an application fee covering both authorisation procedures andthe costs of managing their HMO licensing scheme.

The Administrative Court handed down judgment on July 31st, 2018, stating that Gaskin was providing a service within the meaning of EU law.

The Court therefore held that the London Borough of Richmond Upon Thames’s fee for an HMO licence was unlawful. The charge covered costs that extended beyond the cost of processing the licence application. It was ruled that the council had therefore not been entitled to demand the fee which it had demanded.

Andrew Turner, chief executive at Commercial Trust Limited, commented: “This is an interesting case which may set a precedent for some landlords and could have the potential to save HMO landlords hundreds of pounds, if some local authorities have been charging more than they were legally entitled to, for HMO licenses.

“This is a matter of law and I would urge any HMO landlords that believe they may have been overcharged, to seek professional legal advice.”


Article courtesy of Landlord Today | Sign up for Landlord Today newsletter | Get this news on YOUR site!