Welcome to March's Newsletter!

We're starting to see the rental market pick up again. The latest figures from HomeLet, Rightmove and Zoopla are all pointing towards Swansea being a good place to own rental property, and we're pleased to report that we have been able to let a property on the first viewing - twice!

The end of the tax year is nigh and is bringing with it some important changes you should be aware of. I've also got some tips and advice for you on how to stay profitable as a landlord in 2019.

On a more personal note, after some technical difficulties, I have now resumed my sponsored swim to raise money for Dunvant Park Playground. More on that coming soon!

- Hannah, Managing Director

Whilst there’s no doubt that there are turbulent times ahead, Swansea landlords should be feeling pretty confident based on the latest rent reports from HomeLet, Rightmove and Zoopla.

HomeLet’s Rental Index for February 2019 shows rents in the UK were 3.8% higher than they were in February 2018. The average monthly rent in the UK (excluding London) was £782pcm, and £616pcm specifically in Wales.

According to Rightmove’s Rental Tracker, Swansea saw an 8% increase in rents between December 2018 and December 2017. This is the second highest annual growth reported in the whole of the UK.

Looking back at February 2018 vs February 2019, Zoopla’s data shows a 4.6% increase in rents for Swansea.

As we reported in the McCartan Rental Tracker, the average rent in Swansea last month was £787pcm – significantly higher than the national average!

There are a number of factors that could be contributing to the rise in rents.

Higher standards of rental property may also be driving rents up as more modern, more desirable accommodation will command a higher rent.

With changes to legislation surrounding things like licensing, tax, and mortgage criteria, landlords are leaving the Private Rented Sector. ARLA Propertymark reported each of their registered branches lost an average of 4 landlords last month. As supply decreases, rents will increase due to scarcity.

Landlords and agents across the UK are now also bracing themselves for the Tenant Fee Ban, and could have been making minor increases to rents over the last year to adjust for the loss of income.

Demand for good quality rental property remains high. The English Housing Survey shows the Private Rented Sector has doubled in size since 2002.

Reports of housing shortages in the UK are now old news, and the Government’s popular solution of building more houses sounds good in theory, but could take 20 years or more to complete. In the meantime, the number required could increase.

Whilst some landlords are choosing to sell rather than re-let, Brexit uncertainty is causing disruption to the sales market.

Neil Cobbold, Chief Operating Officer of rental payment automation platform PayProp, warns landlords against selling just yet.

He explains: "If landlords look to sell now, there’s no guarantee they'll secure a quick sale for the best possible price. And in the event they sell and then decide to revisit buy-to-let in the future, they'll be required to pay an additional three per cent in stamp duty when purchasing a property and could be faced with stricter mortgage lending criteria."

Landlords considering selling should really take some time to look at how positive staying in the PRS will be.

Securing solid rental returns when times ahead look challenging will protect your property investments.

Landlords need to ensure they are presenting your property in the best way to attract their ideal, target tenants and thus avoid lengthy void periods.

“You should expect your letting agent to have expert knowledge of their local area and be able to seek out opportunities for their landlords to maximise the investment potential of their buy to let property,” comments Hannah McCartan, Managing Director of McCartan.

“We have been working closely with our landlords and advising them accordingly over the past 12 months on how they can make their Swansea property portfolios work better for them.

“We are actively encouraging landlords to review their portfolios, look at market trends in their areas and seek additional support from our professional partners working in mortgage and tax advice.”

Sources: Homelet Rental Index / Rightmove Rental Tracker / Zoopla Swansea Stats

 

Image Source: Visit Swansea Bay

Related: The Importance of Positive Property Management / New Law for Welsh Lettings Due This Year

Sometimes the best of tenancy applications don’t go to plan - even for highly desirable properties in sought-after areas like Dunvant.

At the start of the month, we began marketing a superb 3 bedroom semi-detached family home on Derlwyn, Dunvant. The property had been lovingly renovated for the rental market, was immaculately clean and extremely well presented. We knew straight away that it would be a hit with tenants, and we were able to take some great photos for marketing.

Within 24 hours of receiving the instruction to start marketing, we were advertising the property on all the property portal giants (Rightmove, Zoopla, and OntheMarket), as well as our own website, and our social media pages.

Interest was high. The landlord’s greatest concern was that we find the right tenant for the property; we received lots of enquiries for viewings, and after vetting them carefully, booked viewings for the first available date.

We were pleased to be able to report to the landlord that we had let it on the first viewing - and the applicants wanted to move in the following week.

We processed their application, sent for and received back satisfactory references, and drew up the tenancy start paperwork.

However, an hour before the tenancy was due to start, the applicants called to let us know that, due to circumstances out of their control, they weren’t going to be able to complete on the let.

Whilst their reasons were genuine, having a tenant pull-out of a tenancy on the day they were supposed to move in is a landlord’s worst nightmare. All applications are subject to contract, so if the contract isn’t signed, there is no tenancy.

Taking immediate action to mitigate the landlord’s loss was key.

Within 10 minutes of getting the call from the applicants, we had begun re-advertising for let. Though we don’t book viewings once a property is reserved, we will continue to vet and take contact details for people who enquire about viewings right up until the tenant moves in, just in case something should go sour. We were thus able to contact potential applicants that day and get another batch of viewings booked in.

We immediately started receiving new interest, too.

The landlord was informed of the loss of their tenancy within the hour, but also reassured by the swift, positive action we had taken to secure a new tenancy as quickly as possible for them.

Once again, we were pleased to be able to report that the property was let on first (since re-marketing) viewing – with more applicants that wanted to move the following week!

It might seem obvious, but if you know who your ideal tenants are, you need to ensure you’re presenting your property in the best way to attract them.

If you’re working with a letting agent, you need to make sure they have a good, coherent marketing plan – and that the agent knows how to adapt if the market is slow, or over-saturated, or if a particular method isn’t working as well as another.

A well-presented property will photograph well; good marketing photos paired with correct pricing should generate enquiries – from your ideal tenants - thick and fast.

In the unusual circumstance, then, that the proposed tenancy doesn’t quite make it to fruition, new viewers will still be lining up to take the property, reducing any possible void period.

No matter how perfect an application may seem (or even how good your agent!), things don’t always go to plan. It isn’t something to fear; it’s part and parcel of the risks involved in being a landlord in the first place. What matters is how you – and your agent – can prepare for them.

Aligning our core values with our landlords’ means that when things don’t go to plan, we are able to communicate clearly and action plans to resolve the issue. In this case, acting quickly, taking good photos, keeping proper records, and proactively contacting suitable applicants helped us to let this property for our landlord on the first viewing – twice.

With the end of the 2018/18 tax year just over a week away, now is the time to squeeze in some planned maintenance or improvements if you are going to offset them against tax.

This is especially important due to the changes in taxation on rental income for landlords with buy-to-let mortgages.

Previously, the interest element of monthly repayments could be offset against tax, meaning landlords wouldn’t pay tax on the interest. Now, the amount of tax relief on that interest has been reduced, and will be reduced further on rental income received after 6th April 2019.

While spending money on maintenance now wont necessarily make your rental investment more profitable immediately, it can reduce your tax bill and prevent costly emergency repairs in the future.

Firstly, look at how well (or not) your rental property has performed this past year. Here are my top 4 easy questions to help you evaluate:

1. How much rent did you receive in total for the year?
2. How much did you spend on maintenance and repairs?
3. How much did you spend on mortgage interest and insurances?
4. How much did you spend in legal and professional costs?

Remember, it’s not just about how much money you have spent or gained, but also how much time.

Next, simply switching these questions around could make the 2019/20 tax year a lot more profitable for you:

1. Should I review the rent, and when? Increasing rent, either for an existing tenant or at the point of re-let, will obviously instantly increase profits for the forthcoming year. Not every tenancy will warrant a rent increase, however, especially if the tenancy is relatively new or you have already increased the rent, but many rents are well under market values in Swansea at the moment.

2. What maintenance should I be planning to undertaken in the forthcoming year? Will the boiler need changing soon, and do the gutters need cleaning out? Planning maintenance ahead of time not only reduces unexpected emergency costs, but also helps you to plan your overall expenditure for the year and know how much you can off-set against tax. Another way to prepare for maintenance is to put between 5-10% of rent aside for emergencies to give you peace of mind your cash flow will be OK if a situation does arise.

3. When does my mortgage term finish, and when is my landlord insurance due for renewal? Reviewing your mortgages and insurance premiums annually is a great way to make sure you are on the best deal available at the time and ensure you’re not paying out more than what is necessary.

4. Am I getting good value for money from my professional fees? Legal and professional costs (such as letting agent fees) can be offset against tax and are part and parcel of a good property investment plan.

The best letting agents in Swansea will be looking at all aspects of your property investment rather than just taking the rent and passing it on. Look at the service you are receiving: is your property being regularly inspected and are you receiving a report to show they have been? Do you receive the rent in a timely manner? Do you have to spend time chasing them for information? Does your letting agent have your best interests at heart at all times?

If you currently manage your property portfolio yourself, look at the time-cost involved in doing so. Is it taking up too much of your time? Does it take up time you’d rather be spending with your family, or growing your own business? Is now the time to look at taking on a managing agent?

Once you have an idea of what your tax liability will be for the next financial year, you can sit back and relax knowing you have put in solid foundations to manage your cash flow. Should the worst happen - your boiler needs replacing unexpectedly, or the tenants split up and need to be released from contract early -, at least you will be able to make informed decisions about how to move forward in these situations.

As a landlord myself, these are the questions I ask myself to manage my own property portfolio and ensure it will be as profitable as possible, whilst also keeping my long-term tenants happy.

If you are looking for a dedicated letting agent to manage your Swansea property investment portfolio who truly understands the needs of landlords, please get in touch - call us in the office on 01792 430100 or click here to email me.

Disclaimer: The information presented in this article is with information title only. Each landlord’s situation is unique, and you should seek professional tax advice before implementing any measures. The information in this article is not intended to be a source of tax advice.

Related: The Importance of Positive Property Management / Spring Cleaning 2019

Landlords could be in for a rude awakening next week when they come to file their 2017/18 taxes, as research conducted by BDRC Continental on behalf of Kent Reliance found 15 % don’t fully understand the implications of the new tax changes.

The changes affect landlords with mortgages on rental property. Previously, the interest element of monthly repayments could be off-set against tax, meaning landlords wouldn’t pay tax on the interest. Now, the amount of tax relief on that interest has been reduced.

Due to this reduction, more of a landlord’s income will be taxable, which could push them into a higher tax band, which in turn could mean they have to pay more tax overall.

Any rent received between 6th April 2018 – 5th April 2019 must be declared by law to HMRC, but the tax doesn’t have to be paid until the following January (2019).

 

Leaving it until January to work out tax liability and pay what is due is not advisable as by then, more changes will have come into effect.

Hannah McCartan, MD of McCartan Lettings, comments “The problem with tax is that it is always based on historic figures, so it can be difficult to plan ahead – however, a forward-thinking accountant will be able to give you options how to plan for your future bills, and help you to make sense of how upcoming regulations could affect you.

In a bid to help all of the landlords on our management service, McCartan Lettings will be sending out a free consolidated Statement of Account to all of our managed Landlords for the last tax year, to help our landlords submit their accounts early.”

Below is an example of how the change would affect a landlord with a £40,000 per annum employment and a rental portfolio which is highly geared:

 

	Before Changes (2016/2017)	After Changes (2020/2021)
Employment Income	40,000	40,000
Gross Rents Received	100,00	100,00
Other Rental Costs	20,000	20,000
Loan Interest	70,000	70,000
Taxable Rental Profit	10,000	70,000
Gross Taxable Income	50,000	120,000
Personal Allowance	11,000	nil
Tax Due, Basic Rate @ 20%	6,400	6,400
Tax Due, Higher Rate @ 40%	2,800	35,200
Total	9,200	41,600
Less Interest Relief @ 20%	nil	14,000
Next Tax Liability	9,200	27,600

The underlying rental profit is unchanged at £10,000, but the tax payable increases by £18,400. £4,400 of this increase is due to loss of the tax free Personal Allowance.

The new legislation will result in more landlords being pushed into higher rates of tax due to the way the relief on mortgage interest will now be calculated under the new legislation. For example, the taxable income is now £120,000 rather than £50,000. This measure also affects those residential landlords who are more highly geared i.e. with a medium to high percentage of mortgages/loans.

If you are looking for a letting agent who understands all aspects of buy-to-let investments and who can put you in contact with recommended professionals such as specialist tax advisors, contact McCartan on 01792 430100, or click here to email us.

Disclaimer: the information presented in this article is with information title only. Each landlord’s situation is unique, and you should seek professional tax advice before implementing any measures. The information in this article is not intended to be a source of tax advice.

 

This article has been updated from 2018.

Source: Landlord Knowledge

 

Related: How Can Landlords Stay Profitable in 2019? / Planning for 2019

My Buy-to-Let Deal of the Month is a 3 bedroom terraced house in Manselton with an impressive 9%+ potential yield.

 

Click here to view the brochure.

Since writing this article, it has proven popular and is now SSTC!

Manselton is a great little area on the outskirts of Swansea City Centre. Although within walking distance of the centre, it is its own little community.

 

It sits in between two major arteries in and out of Swansea – the A483 to Fforestfach and J47 of the M4 (west), and the A4067 towards Morriston and J45 of the M4 (north). It is also only a few minutes’ drive to SA1 and Fabian Way, the main route to the M4 (J42) for Cardiff.

The convenient location, combined with affordable rental prices in Manselton attract young professional families. The demand for modernised properties in this area, thus, is high.

Currently on with Dawsons Estate Agents, this property is "keenly priced" as it requires modernisation throughout. A fully renovated property in this location should achieve between £600-650pcm, which would give a 9.17% yield if bought for the asking price.

 

Even allowing for £20,000 renovation costs, the yield is still a favourable 7.4% and there will be instant equity, making this an ideal investment opportunity.

Renovating a property like this is no mean feat, so it is essential you instruct qualified tradespeople who have experience of getting properties ready for let.

 

In older properties like this, the first issue to look at is damp, and the second is electrics. Both can involve/cause structural issues that can be costly to rectify; if you don't address them first, they can hold a project back and throw the budget and timescale for completion completely out the window.

It is also essential to know who your target rental market is, and what they will be looking for in a property. You want to ensure your property will attract the tenants you're hoping for!

 

That’s where we can help. I have over 15 years’ experience of knowing what lets well, and I have seen landlords make mistakes that hinder the letting of their properties, from questionably coloured carpets to ill thought-out kitchen design.

 

Our aim is to ensure we can achieve the highest rental price possible in the market, as quickly as possible, and to the right tenants who will treat your investment as their own home.

If you are considering a renovation project and would like to discuss your ideas, please give me a call on 01792 430100 or click here to email me.

 

 

   

	1 bed	2 bed	3 bed	4 bed	5 bed
Houses	£520pcm	£617pcm	£735pcm	£803pcm	£818pcm
Flats	£543pcm	£766pcm	£819pcm	£1,104pcm	£826pcm
All	£537pcm	£718pcm	£757pcm	£837pcm	£818pcm

Difference from February

Number of Properties Available

Difference from February