Aldermore and Mortgages4Business have launched a range of BTL mortgages to fill a gap in the market for professional landlords.

These mortgages are targeted at individuals and limited company investors who already own Buy-to-Let property and want to borrow between £25,000 and £350,000, up to 75%LTV.

According to the Keystone website, the range aims to satisfy professional property investors, holding more than 10-properties, who have been finding it difficult to access medium-sized loans. The product range was jointly launched by BTL broker Mortgages4Business and lender Aldermore.

David Whittaker, MD of Mortgages4Business says, Over the last few years it's been increasingly difficult for professional landlords with decent sized portfolios to secure funds for medium-sized loans. This has not only inhibited their ability to purchase vanilla buy to let property but also means they struggle to find finance for more complex deals such as HMOs or multi-unit properties and to make acquisitions in limited company vehicles ... Given the importance of the private rental sector as a safety net to the housing market this gap in the market needed filling.

According to the latest research from CBRE, the total investment in student accommodation increased by nearly 50%, to over £1.1 billion in 2011, with over £246million of student housing investments in the UK transacted in the first quarter of this year. 

  

Demand for long-lease products has risen to annual yields of *5.5% in the top regional University towns for student housing.

The Universities and Colleges Admissions Services (UCAS) reveals that degree course applications from non-EU countries rose by an impressive 13.7%, primarily for students from East Asia and in particular, Hong Kong.

 

For global investors looking for the perfect opportunity, new, high quality, purpose-built, private under-graduate housing developments are an exceptional opportrunity for high-yielding, hands-off, managed accomodation.

*Discount purchase prices effectively raise rental yield to closer to 10%pa with as much as 40% saved against open market value.

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There is a simple truth about buying anything ~ never pay more than you have to.

This is true of property as with anything else. No investor however, should put him/herself in a position where the cards are stacked so high that even the slightest change in market conditions can be disastrous. Poor property investment, especially on-going purchase, can lead even a prudent, generally risk-averse investor into dire straits if s/he doesn’t plan.

The single most expensive part of an investment property is going to be repaying the mortgage upon it. Some advise always obtaining the highest permitted loan-to-value possible but is this always wise?

Borrowing the maximum permitted loan can be healthy or risky depending upon the level of equity you hold within a property. For example...

When buying a discount property at 25%-off, you know you will have this margin on-top-of your deposit as a buffer (equity) should market conditions change adversely. 

This means when buying a £75,000 property at £56,000 (25%-off) with an 85% mortgage of £47,600 you will have equity of £27,150 or, a very healthy 36%.

When remorgaging (after 6-mths), you will be using the full open market value for loan purposes, so the original discount margin will no longer apply. A 75% mortgage on £75,000 leaves you with £18,750 equity or, 25% which is still healthy. Raising this to an 85% mortgage however, will only leave you with 15% equity (£11,250). This is quite tight, though it is true that low/no equity is only of concern when a property is being sold but, you don't want to be forced into that position.

When you remortgage a discounted, BTL property using maximum mortgage funding, always know you increase risk in direct proportion to the level of loan-to-value you carry on the remortgage.

If you spend all the rent you will go bust! Not really the point of property investment. You should look to enjoy about 25% of the rental income to spend as you will.

This assumes you prudently gear your purchase/remortgage to the following formula ~ allow 33% of the gross rent to pay the mortgage, 10% pays your income tax, 10% to pay your lettings agent, 10% goes into a sinking fund, 6% pays your insurance premiums and, 6% is set aside for routine painting and decorating (i.e. one room a year).

 

This adds up to 75%, including your tax budget, leaving you with 25% or, £25 per month in every £100 rent received. Most businesses would be very happy with 25% net profit!

If you do not plan something like this, the unexpected may cost you ~ a replacement boiler, a cooker, a fridge/feezer ~ all coming out of your own pocket. Even when sensibly insured, claims may take several weeks to process and the tenant has a legal right to an immediate repair/replacement. A sound property investment means that each will be self-sustaining.

As you build a significant property portfolio your mind needs to switch into business-mode. Many investment property companies don’t proffer advice about becoming a discriminating investor. Their focus is to motivate and it is all too easy to become emotionally caught-up in marketing hype with the enthusiasm that less scrupulous agents seek to generate. 

Inspirational stories might raise plenty of hope, but this should not impair personal judgement on projections and planning, especially for the newer landlord/investor who needs to understandable that it is natural but unwise to become emotionally attached to investment property. It is after all a business and about the math. 

1. Feelings ~ Leave them at home! Don’t let your feelings about the look of a property undermine your business assessment. If your research proves the property has demand for a certain rent, don’t dismiss it because you would not want to live in that neighbourhood, or because it needs a lick of paint, or the garden is unkempt, or the kitchen/bathroom is dated. Cosmetics can be fixed quickly and cost effectively provided you are buying it at the right price.

2. Crystal Ball ~ As with the stock market, any pundit can make predictions about future trends. But there is no certaintee in life, apart from death and taxes. If you literally are relying on the market to make certain turns to allow you to operate on a very tight budget, you could easily end up in a financial mess. 

3. Repairs ~ Your Tenancy Agreement should require the tenant to attend to minor chores including changing a lightbulb, unblocking a sink or cutting the lawn but, don't assume they will do it. The better lettings agent will have a list of local tradespeople to call-in and it is worth giving your written permission for him to spend up to £100 to fix simple things without reference to you, or you could find yourself being telephoned at 3-in-the-morning. For more serious maintenance issues, most certified and competent tradespeople are going to charge maybe £50 per hour for their labour hence, the need for a sinking fund. And remember, whilst insurance may payout out, you still have to meet compulsory excesses and any future increase in premium. 

4. Tax ~ As mentioned, each prudently purchased BTL property should return at least 25% profit every month over and above operating costs. The Chancellor will receive his share in tax from the 10% you set aside in a deposit account. You may not need it all in tax so might give yourself a bonus twice a year following your tax payment. Speak with a reputable book-keeper about deductible business expences.

Planning for a sound financial future in property is all about the math and you need to know how to do this. Operating a Buy-to-Let business is fun and not rocket science. Unfortunately, there are too many firms all too willing to motivate you without fully advising about the routine of owning investment property. Finally, we are constantly asked ...

Well, Yes & No!

If you legitimately purchase a property using a mortgage application based on its purchase price, you may remortgage that property after 6-months and release your original capital to do it again. This method of rolling original capital over into subsequent purchases is acceptable to lenders and quite lawful.

If however, you declare the property open market value on the mortgage application form, when you paid less, or you make arrangements with the vendor to receive cash-back following the purchase and without the lenders consent (double-dealing), you commit mortgage fraud that can land you with a heavy fine, up to 10-years in pirson and a confiscated property portfolio. 

Governor of the Bank of England, Sir Mervyn King, signalled that interest rates will remain around their record low until the end of next year at the earliest, the Daily Telegraph reports.

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A new *study claims Q1/2012 was the strongest for mortgages since 2008, as residential property valuations increased 34% against the same period in 2011 and were 10% higher than in the previous quarter.

The ending of the Stamp Duty Land Tax holiday (April) may have had something to do with this rise on the market, coupled with a desire for Londoners wanting to move before the summer disruption of the Olympics and others before the Jubilee celebrations.

The remainder of the year will measure more of the current UK property market, as the real effect of normal Stamp Duty Land Tax is felt, especially with the introduction of the new 7% tax rate for property of £2m plus, announced in the recent budget.

The BTL/remortgage market has also grown with 37% more valuations in Q1 year-on-year.

Mortgage Brokers seem to be experiencing a busier first quarter too, as wannabe buyers who have been standing on the sidelines for the past 5-years, seem to be fed-up with waiting any longer.

Where deposit funds have been short, or incomes not enough, many first-time buyers have been borrowing from the Bank of Mum & Dad or enrolling parents as sponsor with lenders.

Remember, you don't have to pay full market value when anyone can typically save 25% through our website.

*Connell's

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Thousands of households are thought to have agreed to rent their rooftops to solar panel companies, usually for 25 years, in return for free electricity. 

According to a story in Guardian Money, owners of such properties are being turned down for remortgages, which suggests that prospective purchasers of such properties are also likely to be rejected.

Guardian Money was contacted by a Southampton couple who were refused by several companies when they tried to remortgage, even though their existing mortgage provider, RBS, apparently agreed to the solar scheme.

Applications for a remortgage have been apparently turned down by Skipton and Nationwide, although RBS has offered them a mortgage on the basis that it approved the solar installation.

Guardian Money says that although the case is probably the first of its kind, others could follow, resulting in a raft of legal disputes over the rent a roof scheme.

Peter Ambrose, of conveyance firm The Partnership says, There is an increase in litigation expected from frustrated sellers whose buyers cannot get mortgages on their potential purchases because of these restrictive leases.

Guidance to brokers by the Skipton, updated on February 20th says, The society will NOT lend where the panel provider is supplying and fitting panels free of charge, is taking income from the grid tariff scheme and is creating a long-term lease against the roof and roof air space.

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