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Peter Merrick

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High LTVs are gradually coming back which will encourages prices to stay resilient and thereby justify offering these mortgages which are premised on the assumption that prices will increase. The stamp duty holiday will also encourage some to make a move in higher value areas where SDLT is a hefty drag on top of the deposit. Those whose employment prospects have significantly deteriorated will have no choice and many others will opt for renting for a while to see where things are going before making any long-term decision. And then there is the ever-increasing trend for mobility that the rental sector enables, where you can make a career move and just move house after a couple of years with no hassle.

From: Peter Merrick 28 July 2020 09:27 AM

It isn't a bung to investors in BTL and second home owners. The 3% penalty charge still applies and indeed will now be funding the entire stamp duty take for properties up to £500,000. Most first time buyers will not benefit unless low-deposit mortgages are reinstated. I suspect many will want to wait and see which way property prices are going to go anyway in case they get stung by a dip in prices, which may not be of so much concern for a long-term investor who can ride out any temporary falls..

From: Peter Merrick 13 July 2020 09:37 AM

Simple solution to the problem ... if government are concerned about the plight of renters not being able to afford market rents then they should give housing benefit to furloughed workers if needed, set housing allowance to cover rent and automatically allow direct payments. Problem solved!

From: Peter Merrick 01 July 2020 13:26 PM

For most LLs, income is still taxed less overall than PAYE. Mortgage payments can be set against tax at a maximum of 20%, so if you are a lower rate taxpayer for your income (excluding mortgage deductions) then it makes no difference. However, tax on property income has a hidden 12% advantage over "earned" income up to the higher rate due to the lack of NI, as long as you have other employed or self-employed earnings. Once you get into higher rate tax, NI is only 2% and interest relief is restricted to 20%, increasing the marginal rate well above PAYE, so the overall advantage starts to dwindle. My guess is is that they could start charging NI on private landlord income to level the playing field at the lower rate, creating a big disadvantage for higher rate tax payers. Fortunately, interest rates are currently so low that mortgaged LLs on higher rate tax may still be slightly better off overall than they were 5 years ago.

From: Peter Merrick 30 June 2020 10:52 AM

No point in handing over the cash when it could be earning interest or otherwise be invested to make a return, unless you are going to be tempted to just spend the money.

From: Peter Merrick 29 June 2020 10:45 AM

Government and pressure groups continue to suffer from tunnel vision when it comes to evictions, thinking that they are carried out almost exclusively for financial reasons by greedy and unreasonable landlords whose only consideration is money.

From: Peter Merrick 16 June 2020 09:05 AM

Keep the money and invest it profitably until it needs to be paid.

From: Peter Merrick 12 June 2020 10:55 AM

They do eventually answer (at least I know they did before the virus), but make sure you have unlimited calls, plenty of other things to do whilst waiting, and leave your phone on speaker for when they do eventually answer.

From: Peter Merrick 12 June 2020 10:54 AM

David, people like you worry me and give landlords in general a bad name for the perception that they are purely in it for the money. Yes, any business has to make a reasonable amount of money or it would not be viable. No, business is not an amoral undertaking. Those businesses that take care of their clients instead of screwing them for every penny they can get are the ones that win in the end through the loyalty of those they have acted fairly and equitably towards. If you are only interested in money, then invest in stocks and shares including housing providers if you will, and you will probably make as much money for far less hassle if you have a good nose for this business and a good fund manager.

From: Peter Merrick 09 June 2020 23:05 PM

Is there any other industry where providers are being effectively forced to provide a free service at their own expense, to be paid at the whim of the consumer? If the government were prepared to underwrite the potentially crippling costs like they have done with the furlough scheme, then I'm sure most landlords would not have a problem with renters not paying during the crisis.

From: Peter Merrick 08 June 2020 10:05 AM

There is nothing in that letter that goes beyond what has already been instigated, namely that tenants can request a rent suspension (not cancellation) for up to three months if there is a significant deterioration in circumstances, and that landlords can do the same with their mortgages. I'm sure most landlords will be happy with rent cancellation if the government are prepared to fund this, as is being actively proposed by some US democrats. Otherwise, it's a bit like going to the the supermarket for your weekly shop and then walking out without paying for it. Normally that is called theft, but if it is a landlord you are defrauding then apparently it is called social justice.

From: Peter Merrick 29 May 2020 09:46 AM

Michael, mandatory licensing for 5 or more people HMOs came in in 2018.

From: Peter Merrick 18 May 2020 23:45 PM

Good luck with the alternative payment arrangements. These are only being allowed as a last resort for renters who are vulnerable or at least a couple of months in arrears, even though a lot of tenants prefer direct payments to the landlord.

From: Peter Merrick 03 April 2020 09:15 AM

“The latest advice is that people stay put, and as long as the Government helps tenants pay their rent, there will not be a large build-up of debt from rent arrears, meaning there will be no logical reason why a landlord would start eviction proceedings.” Are these people totally naive or what? Do they not realise that there are many legitimate reasons to evict a tenant, not just rent arrears, such as antisocial behaviour, illegal or dangerous behaviour, damage to the property for example. So any tenant in those categories now has carte blanche to create merry hell for an extra three months whilst the landlord has to just sit and watch their property being trashed and neighbours lives blighted whilst having to accommodate the tenant at their own expense. And what about tenants who set up cannabis factories in rented properties? Are they also exempt from eviction? Perhaps ARLA and the government could advise landlords on what to do in such situations?

From: Peter Merrick 30 March 2020 10:44 AM

Labour's proposal is perfectly fine - as long as they include proposals to compensate landlords for the potentially crippling loss of income. Otherwise they are saying that we should essentially act as an ersatz welfare state at our own expense through no fault of our own, purely because we happen to have one or more tenants who have lost their job and income. But surely that is precisely what the welfare state is there for in the first place!!! So essentially they are saying that the welfare state has failed and a certain group of private citizens should be forced to pay instead, regardless of whether or not they can afford to do so.

From: Peter Merrick 30 March 2020 10:31 AM

I feel sorry for anyone who has a malicious tenant who will be able to play merry hell and deliberately not pay "because I can" and/or trash everything thinking they can do it with impunity for the next three months. Of course, to add injury to injury, the eviction process will take twice as long to deal with the flood of applications once the emergency rules have ended, so a lot of landlords are going to go bankrupt or just decide that enough is enough.

From: Peter Merrick 27 March 2020 09:14 AM

No doubt landlords with take some pain (with govt rubbing its hands in glee at the thought). However, it will obviously not be as much as £15bn: A certain proportion of rents are direct payments from UC even if fewer than used to be the case. It is likely that most tenants will continue to be paid once the government have sorted out a suitable support package, so they will have no reason to need a payment holiday. In any case, the rent is just deferred rather than cancelled. As they won't be spending a substantial chunk of their income on non-essentials like eating out and other entertainment like most people do, a fair few may actually find themselves better off until things return to normal. So when it comes to it, this is yet more irresponsible scaremongering.

From: Peter Merrick 24 March 2020 11:13 AM

Be prepared, keep plenty of cash ready just in case. A bit late too say that now, of course, but if you can fit in a judicious remortgage, go interest-only (if you are not already) or have some funds that could be re-purposed, any of those could do the trick to hold you over until tenants can catch up with payments.

From: Peter Merrick 16 March 2020 09:50 AM

Thank you, this is the most useful thing so far on LT. I have recently taken on a couple of UC tenants who are nice enough but hopeless with managing their finances. Hopefully the UC47 form will do the trick!

From: Peter Merrick 06 March 2020 11:47 AM

Duh, the whole point of all the tax changes and regulations was to shrink the supply of ordinary letting properties in favour of company BTL and anything else that wasn't being targetted by tenants' organisations. And at the same time to fill the depleted tax coffers at the expense of landlords and tenants. There is a scientific rule called Le Chatelier's Principle which basically says that if you exert pressure on one side of an equilibrium, then the equilibrium will shift to compensate. The same applies to any kind of economic activity, including the rental industry.

From: Peter Merrick 24 February 2020 11:04 AM

First GR complains that landlords are renting out properties to them, so the govt cripples our ability to make a return by unfairly hiking taxes, then they complain that some of us turn to other ways of making a return. Perhaps it will give govt pause to rethink, but probably not, they will just start trying to squash the FHL sector as well, except it helps tourism which adds to the economy. And the FHL cat is well and truly out of the bag anyway. Personally I don't think I will bother with that but I do find that HMOs are still worthwhile on the whole.

From: Peter Merrick 07 February 2020 10:25 AM

Is anybody going to borrow from these people when you can get 5 year 75% rates at around 2.5%? Add to that the tax restrictions, the effective rate for higher rate taxpayers amounts to about 6%, all but wiping out any return from their investment.

From: Peter Merrick 15 January 2020 10:40 AM

Another factor that I have noticed recently is the sheer amount of time it seems to take for Universal Credit payments to come through. I have a couple of tenants who have had to wait 2-3 months for their money to come through after their work dried up, so I have likewise had to wait for them to be able to pay me. I even had to lend one some money for food so that he didn't starve whilst he was waiting, and the other was looking at the same issue when her first payment finally came through. Add to that that they only pay LHA in arrears (as if that is true of the real world) and I am certainly very cautious about the whole thing.

From: Peter Merrick 15 January 2020 10:36 AM

Tenants will all have to refuse consent, otherwise thousands of properties will simply be removed from the rental market as they will be uneconomical to upgrade, especially if they make C the minimum allowable rating. In any case, few tenants in situ will be happy to have major disruptive work carried on around them when they already have enough to deal with in everyday life.

From: Peter Merrick 09 January 2020 10:29 AM

A very good set of points there Robert. I too am very sceptical of these deposit replacement products as they always involve a non-returnable charge to the tenant. At least with Landbay you only pay once, but then you are limited to landlords that are on their books and the landlord will be having to pay their service charges as they are presumably acting as the letting agent as well (I self-manage all my properties). The whole point of a deposit is that is is fully refundable (for a good tenant). Unfortunately there are cases a-plenty of unfair deductions taking place for hapless tenants who can lose tens or even hundreds of pounds at a time. I think as landlords we need to be sympathetic to tenants who don't have the money upfront, for example after a relationship breakup where the person having to leave may be left with little more than the clothes they are wearing even though they are in long term employment. Or someone who has just got a job and is therefore still building up their finances.

From: Peter Merrick 30 December 2019 12:53 PM

"I am establishing use as a Residential property before I sell each one" You can only claim CGT exemption for the time you used the property as your primary residence (minus any allowances). So if you rented a property for 9 years and lived in it for 1 year as your primary residence, then you pay CGT on 90% of the gain. If you have more than one lodger then you only get partial CGT relief on your residence as it is classed as commercial use.

From: Peter Merrick 09 December 2019 10:49 AM

Long term tenancy models and the concomitant abolition of section 21 are a contradiction when government policy is to drastically reduce the "out of control" PRS by making it unprofitable. Clearly the intention here is to give further discouragement to landlords by reducing the amount of control they have over their already less profitable investments, which will leave the slack to be picked up by institutional landlords. Social landlords are for the few and not the many, whilst most private sector organisations have higher administration costs than sole trader landlords plus shareholders and offices to pay for and therefore have to charge higher rents. So yet again your everyday renter is the one who pays for all this.

From: Peter Merrick 25 November 2019 10:27 AM

"All they are achieving is driving landlords to leave the market" Isn't that precisely what the changes introduced by the last government and continued by the current government were intended to do? As well as to collect a bit of extra tax in the meanwhile.

From: Peter Merrick 21 November 2019 09:58 AM

The reason for the apparent flattening out of rental demand is at least in part due to the fact that EU nationals, who are more likely to rent, are abandoning the UK due to Brexit. Otherwise, the demand would likely be increasing.

From: Peter Merrick 07 November 2019 22:23 PM

This is a good way of increasing the overall cost of renting by charging a non-refundable extra week rent on top of the usual costs. No doubt for agents they will get some commission which will make up for some of the fees lost as a result of the letting fees ban. Anyone who has to move with any kind of regularity would be advised to steer well clear of this scheme.

From: Peter Merrick 02 August 2019 13:03 PM

Incorporation means you have to pay 20% tax on profits plus 37.5% tax on dividends if you are a higher rate tax payer, not to mention all the extra obligations that come with running a company. Is that really worth it vs being a private landlord, even under the current regime?

From: Peter Merrick 28 June 2019 10:09 AM

The deposit replacement schemes work by making the tenant pay for an insurance in lieu of a deposit, usually at a cost of about one week's rent. This is effectively a tax on the tenancy agreement or indeed a tax on poverty for those with so little money that they can't pay upfront. If the tenant is staying several years, then it may be worthwhile For a tenant who is on a fairly short let or moving frequently, the cost of insuring each new tenancy is soon going to mount up and even exceed a traditional deposit, and this money will stay in the pockets of the scheme providers rather than being returned to the tenant at the end of each tenancy at nil or very little cost to the tenant. The only tenants who would benefit in the long term are going to be those bad tenants who would have had significant deductions at the end of the tenancy. A better and more equitable arrangement would be for the agent or landlord to have a blanket or bulk insurance scheme, the cost of which is then split between the tenants either via a small fee (if legally permitted) or paid for by the agent/landlord and recouped via a slightly higher rent. As a small landlord I have often taken a different approach. I sometimes find myself with a perfectly decent person who has been kicked out of a relationship and through no fault of they own their clothes and a few pounds in the bank are their only possessions. In this situation I can take advantage of the flexibility my position affords to allow them to pay what they can afford up front and they agree to catch up over the first few weeks, enabling me to gain a good tenant, and the tenant to have a place to stay, with no extra costs incurred other than taking a temporary risk on the tenant.

From: Peter Merrick 28 May 2019 09:31 AM

Please could someone write an article on this that does not make vague, contradictory and utterly useless statements? To quote the return on BTL for the last 10 years as evidence that it is still lucrative shows how completely ignorant the author is since tax changes only started in 2016 via SDLT for new purchases. The reduction in tax relief on finance costs only began last tax year so will have barely been noticed as yet. The full force of this is not going to be seen until the 2020-21 tax year, by which time many landlords on a mortgage in low yield areas will be facing negative cash flows in return for their time and money and risk. BTL is a completely different investment from shares and classic cars as it is about people's lives as well as making money out of what is normally a very non-volatile asset. In actual fact many landlords buy properties at below market value, often improving them prior to making them available to live in (for which they have to pay a penalty SDLT rate). By the time they have mortgaged the property at 75% of full market value, the return on capital investment may actually be incredibly high since the mortgage returns much of the capital investment back to the landlord whilst they keep the balance of rent minus running costs and tax, although this equation does not factor in the personal time costs. It would be incredibly unwise for the ordinary person to use such leverage in the volatile world of stocks and shares, as shares can rapidly fall below the value of the loan used to buy them, whereas a BTL house will normally cover the mortgage costs from the rental income and will be unlikely to drop 25% and thus go into negative equity. In short, there are many ways of handling a BTL investment. Unlike stocks and shares and other tradeable assets, the returns on BTL vary enormously depending on where and how you buy and manage the property. What is absolutely certain is that costs have gone up and tax relief has gone down, so landlords will need to be creative in how they respond rather than just seeing BTL as a traditional fairly passive income investment.

From: Peter Merrick 20 March 2019 10:08 AM

Thus is potentially a bonus for those landlords that charge fees. Fees are usually one-off, whereas the higher rent will no doubt apply for the duration of the tenancy. Potentially the cost will be recouped several times over by the time the tenant leaves. I saw that as soon as it was announced, although it makes no difference to me as I have never charged fees anyway.

From: Peter Merrick 17 January 2019 09:00 AM

That's sounds very interesting! Unfortunately I own and run mine in my sole name and my partner does not have anything directly to do with it.

From: Peter Merrick 07 January 2019 00:24 AM

It depends on the area ... I am in the Humber Area where the yields are still ok if you play it right. I have four small HMOs and three whole property lets, hopefully getting the next one soon. I usually look for something undervalued and get most of my investment back remortgaging it later. However, I notice that the amount I can get for a room has gone up considerably if I wanted to take advantage of that. Obviously it's different in other places as most of the return is via capital growth and the rent just about covers running costs, so if there is a property downturn then these people could be in serious trouble with negative yields and negative capital growth! I think in my case I would just carry on as usual, maybe charge a little more rent, unless demand for rental property fell through the floor or the tax regime became impossibly hostile. The reduction in interest rates is quite noticeable. When I started in 2015, it was 3.6% for a 2 year fee free fix and 4% for a five year, but now it's about 3% for a 5 year which is about 25% less. If you are on higher rate tax, the effective rate for this is still only 3.6% and only one lot of agent fees in 5 years. I'm still a bit sceptical of setting up an Ltd SPV as the extra work and bureaucracy, higher interest rates and other costs of running a business may not be worth it. You may get full tax relief but you have to pay for business banking, file trading reports, and pay both corporation tax and dividend tax if you take any of the profits out. One big advantage is that if you want to sell the property as a going concern, then you just sell the (shares in the) company rather than the actual property, which continues to be owned by the company. This is vastly quicker and cheaper than transferring property, and presumably avoids future SDLT.

From: Peter Merrick 06 January 2019 21:30 PM

Yes, I read read an article in the Guardian complaining about availability going down and rents going up saying that landlords we ripping off councils who had no choice but to give temporary according to more and more homeless people. It turns out that landlords are evicting them so that they can sell up as it was no longer worth their while to provide rental accommodation, or were trying to raise rents to compensate.

From: Peter Merrick 04 January 2019 00:10 AM

Surely someone has noticed the quite inaccurate statement about mortgage relief? It is simply being reduced to 20%, not removed altogether! This makes no difference if you are still on basic rate tax (and the threshold is going up to £50000 next year from £45000 last year). If you do end up paying higher rate then it basically adds 20% to the effective rate of interest. Given that rates are so much lower now then even three years ago, finance is still cheaper than it was then ... and rents have gone up in the meanwhile. There are downsides if you are looking for income generation, since property prices and stamp duty have also gone up, meaning that it is more expensive than it was to start up and to run a new buy to let, and for those that have furnished properties, the 10% allowance is sadly missed.

From: Peter Merrick 03 January 2019 19:49 PM

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