It also gives an insight into the decisions landlords are making in terms of financial arrangements and the rise in ’one in, one out’ property substitution transactions.

The decline in buy-to-let remortgaging is likely to continue for some time. Of course, remortgaging is difficult at the moment, and for those on reversion rates it’s unappetising because of rate differentials and the fact they will lose their current SVR should they remortgage.

Also, for those on higher LTVs there are few deals available over 80% LTV.

But we are seeing an increase in the number of first-time landlords. Some may be surprised by this but demand for investment property has not gone away since the credit crunch and there are still bargains to be had.

The difficulty has been the lack of finance but for first-timers who can put together the 25%-plus deposit and choose investments wisely there are profitable opportunities.

It is to be hoped that this growing demand will be partly met by more lenders entering the buy-to-let fray as Aldermore and Precise Mortgages have done.

While the environment is tough it’s clear that investors are seeing the strength of the buy-to-let market and we anticipate further forays from lenders soon.

Liam Bailey head of residential research at Knight Frank commented: ‘CGT was the main story, as the proposed increase was heavily trailed in advance. In reality the rise to 28% for high-rate tax payers is a non-issue for the housing market.

‘The rise is coming into play overnight – so there will be no sudden sell-off of second homes or investment properties. The new rate takes us back to a similar rate to where we were under the pre-2008 rules, when taper relief was able to reduce a 40% headline rate of CGT to 24%. With higher-rate CGT at 28% the argument for property investment still looks strong, and capital gains still compare very favourably with income tax at 40%.

‘The other issue of note is that with strong GDP growth forecasts for 2011 and 2012 – the inference is that the Bank of England will be encouraged to maintain a very loose monetary policy for longer than recently expected, suggesting interest rates at current levels could be maintained for longer. This would underpin house prices and also contribute to ongoing low supply in the market,’ Mr Bailey concluded.

David Adams, Chesterton Humberts‘ head of Residential, added: ‘This is a brilliant budget for UK Inc.  Prime property in London and the South East and South West should see now see stable prices while the effect on northern areas with high public sector employment is less rosy.  Some asking prices will need to be reduced in the south, but this is simply because of agent overpricing during the first half of the year, when property was in short supply.

‘It will be interesting to see how long it takes people to realise that the cost of renovating and furnishing a property will be increasing through VAT and that a considerable savings could be made by moving and refurbishing before the end of December.’

Source: http://www.countrylife.co.uk

RICS says 30% more of its members reported a rise rather than a fall in rents during the three months to April, up from a net balance of zero for the previous three months and compared to an all-time low of 58% in April last year.

Some 12% more surveyors reported a fall rather than a rise in the number of new landlord instructions in Q1.

A spokesman for RICS says that with sellers returning to the housing market, lettings supply has fallen back.

He says: “This is good news for landlords as rents are set to move higher in the coming months and yield returns are likely to improve.

“The news that buy-to-let specialists are beginning to lend again may also encourage investors to return to the market.”

Surveyors are now predicting that rents will continue to rise with the rental expectations net balance climbing to 36% – the highest figure since 1998.

Here I share the three main challenges we have experienced on our property investment journey.

1. Not being able to sell a property.

This experience has caused me to lose the most sleep. We made some mistakes a couple of years ago. We purchased two properties that offered great development opportunities. One of the properties was suitable for an eight-unit residential development. The other was the last piece of large commercial land in a booming town, right in the heart of town. We purchased both properties at a good price before the height of the boom in the town.

The value of both the properties was the land. One property had an old house on it, however we generated very little income on the two properties. This meant we had to cover the loan repayments out of our own cash, rather than rental income. This would not have been a problem if we completed the development project and converted the land into eight residential units and a commercial precinct, as intended.

However, we are buy and hold passive long-term investors, not developers. As we found, passive investors, with full-time jobs, no expertise, no contacts and limited time do not make for great property developers.

We held the properties for a period of time, and then made the decision to sell them and use the money to buy our ideal type of property.

This is when the sleepless nights started. One property took two years to sell. The market changed, developers pulled out of the market and there was no demand for development land.

The lesson was we broke our investing rules. We were excited by the potential of being developers. As passive buy and hold investors, the rules we must follow are:

- buy property in an area with high potential for capital growth, and

- manage cash flow well so we can afford to hold a property portfolio over the long term, without the need to sell.

The positive of this story is because we bought at a good price before the boom, we still made money, however it is not a strategy I would chose to repeat.

2. Not feeling in control.

The process of buying a property is easy. You are in control, however when selling a property you lose some aspects of control. Suddenly the market is in control. When buying a property, you control the terms. You decide what you want to buy, what price you are willing to pay, where you want to buy, the conditions on the contract, etc. If the seller is not willing to accept your terms, you look for another property until you find a property that meets all your requirements.

You are in less control when selling a property. You are no longer the buyer setting all the terms and conditions. If the buyer doesn’t agree with the price you want, they can walk away and look for another property, whilst your property still sits on the market.

3. The ability to manage cashflow.

The two events that have caused challenges for our cashflow were properties taking a long time to sell and interest rate rises. The reality is these situations will occur. Given you can’t control when they will happen or for how long, you need to be prepared.

Our cashflow protection is to always have a financial buffer. This means we had access to funds to keep us going whilst we waited for the property to sell. Your finance structure should provide you with surplus funds to enable you to get through the tough times.

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‘The expected changes to capital gains tax legislation will particularly impact higher income tax rate paying investors and second home owners, for whom the effective rate of tax could potentially rise from 18% to 40% or 50%,’ he explained.

‘Investors looking to rationalise or reorganise their property portfolio, particularly those who have already seen good capital growth, could avoid a hefty tax burden by disposing of their asset before April 2011. This would include those who have bought investment property as a pension pot; some of whom may now be tempted to sell and invest in other asset classes,’ he said.

‘Bringing forward sales of this type could distort some local markets at a time when the early stage recovery is already looking fragile. The higher tax liability will make property investment less tradable, which in turn may limit the flow of second homes and existing investment stock to the market after next April,’ Cook added.

He also believes that those who want to pass an investment or second home property on to the next generation may look to do so within this tax year, thus incurring capital gains tax at the existing rate rather than inheritance tax at a potentially much higher rate at a later date.

Although there is no indication that principal private residence relief will be affected, meaning that for most owner occupiers the change in CGT rates will have little or no effect, some owners who have occupied their property for only part of their period of ownership face an increased tax bill when they come to sell.

‘Properties ancillary to a main residence, such as lodge cottages, staff flats, and development plots in the garden will all be under close scrutiny. Owners will be keener than ever to ensure that it meets the requirements to be treated as part of the main house,’ said Cook.

The British Property Federation is calling for target rollover relief from this doubling of the tax and also for the formation of residential real estate investment trusts (Reits), which were introduced for commercial property in 2007.

‘Buy to let landlords and individual investors will bear the brunt of this 22% tax rise and while the public at large may have little sympathy with those profiting from property sales, ministers must recognise the massive contribution that these people have made to housing supply over the last decade. Over a million more people rent now than in 2001 and this has been made possible through buy to let investment.,’ said BPF chief executive Liz Peace.

‘The government must to look to nurture new investment streams into housing – through residential Reits and from the institutions. This will mean reforming tax rules, incentivising large-scale investment from institutions and changing the Reit structure to allow housing vehicles to form. Ministers should also look to introduce a targeted rollover relief from these changes for investors who keep their money in housing,’ she added.

The specialist arm of Nationwide is now offering one-year fixed rates from 4.69% with a 2.5% arrangement fee or a 5.69% deal with a 1.5% arrangement fee.

Other options include a one-year tracker at 4.69% with a 2.5% arrangement fee and a two-year fixed rate at 5.99% with a 2.5% arrangement fee, all up to 80% LTV.

Tracie Pearce, head of products at The Mortgage Works says the increase in the LTV on its buy-to-let range demonstrates its commitment to supporting the housing market.

She says: “We are the only lender to offer this level of borrowing which will help landlords without a large deposit.  The Mortgage Works continues to have a long standing prudent approach to lending, offering landlords and intermediaries access to innovative, flexible mortgage solutions.“

Mike Fitzgerald, sales director at Emba group, says: “TMW has a can do attitude and are more helpful then some lenders when it comes to submitting a case. With house prices starting to creep up again now is a good time for it to increase its LTV. It should also help to move the buy-to-let market along and encourage other lenders to increase their LTVs and re-enter the market.”

David Whittaker, managing director of Mortgages for Business, says: “Finally we’re seeing a lender move the pieces on the chess board in a positive way. We’ve been waiting for two years for upbeat news in the buy–to-let market and TMW have made it clear they feel as optimistic as we do about buy to let’s future.

“Many portfolio landlords have been unable to expand over the last 18 months as they have reached their maximum with the mainstream lenders.

“They will welcome the news that alternative options at higher LTVs are becoming available. It will be interesting to see how other lenders react to this move from TMW. I’m sure they will follow suit, what’s not certain is how quickly they’ll decide to do so.”

This will ultimately cost the landlord money but the worst part is that it will take up your time and energy to repair. The key to making money as a landlord is to find tenants who are going to respect that they do not own the property and therefore treat it with care as well as pay the bills on time. Here are a couple of ways that you can screen potential tenants so that you can actually make money on your property.

One of the most important things that you can do is to make sure that the person makes enough money. Usually, you should verify that they earn sufficient so that one month’s rent is about one quarter of their monthly income. This will help to prevent cash flow problems in the future; don’t just take their word for it though, you need to verify the income so that you know they are not lying.

A common way to do this is to ask for a recent pay slip. If they do not have any of these available then you can ask to see bank statements or if all else fails a P60 to at least verify that they make enough per year. The rule is, however, that if they cannot show you that they have a regular income that you do not rent to them under any circumstances.

The second thing that will help you to screen out people who are going to cause you trouble is to perform a credit check. There are several websites which can do this for you and the fees are not all that expensive. One thing that many landlords do is ask for a small application fee to pay for the credit check.

The credit report will allow you to see if they have ever been evicted and whether they are behind on all of their bills, or if they are generally really good with money. Someone with a better than average score (say 60/1000) is who you want to rent to.

This week, it was revealed that a former London broom cupboard – now a 60.5sq ft micro-flat – in Knightsbridge has been valued at up to a staggering £200,000. That’s for a property that’s smaller than a full-size snooker table.

Daft? Perhaps. But it does have one major selling point: its local shop is swanky London department store Harrods. This places it in the heart of one of the capital’s hottest locations, with Hyde Park on the doorstep and where even relatively ordinary flats regularly carry a multimillion- pound price tag.

But is it really worth investing in a property little bigger than the average prison cell, even if it does come with one of the country’s most desirable postcodes?

Well, that depends on what you’re after. While small studio flats in London’s best areas can go for less than £200,000, they’re little more than tiny pied-a-terres, and are unsuitable for anything more than a single, and very tidy, resident.

But they are a worthwhile option for those willing to sacrifice space for a posh address or people who work in the capital but have a main home out of town.

Indeed, by buying a weekday bolt-hole, commuters can save a fortune on travel costs and time.

Foxtons is selling a cleverly designed ‘living space’ – it really is tiny – in the Gloucester Road area of Kensington for £189,950.

According to the Land Registry, the average property price in Kensington and Chelsea is a mind-boggling £821,496. It has a designer kitchen and bathroom, an entertainment system and a truly fabulous address. There’s even a window.

The only catch? The living/kitchen area is 10ft by 8ft, with the bed on a mezzanine. Cluttons has a slightly more spacious studio on salubrious Sloane Avenue. On the market for £225,000, it is under offer.

Again, size is limited: it features a 16ft by 15ft living/ kitchen area with a separate bathroom. But for location, it’s more or less unbeatable.

While such properties are easily outgrown, they can make sound financial sense. Ray Barker, 49, owner of the Knightsbridge bolthole, paid £120,000 for it four years ago.

It saved him a fortune commuting from Bath and has built up a healthy amount of equity. He’s happy with its snug dimensions, too.

‘My cosy flat is fine just for sleeping,’ he says. ‘There is always demand for properties in the very best areas,’ says Charlie Noel- Buxton, a partner at Cluttons. ‘As the saying goes, better to buy the worst house on the best street than the best on the worst street.

‘Studio flats are often very small, but upmarket areas benefit from a strong market, making any property within them a good investment. In some Central London areas, prices are almost back to where they were at the peak of the market.’

While national property prices have increased by 5.2 per cent in the past 12 months, Kensington and Chelsea has outperformed, rising by an extremely healthy 11.2 per cent. Marylebone, north of busy Oxford Street, has one of the capital’s most idiosyncratic shopping streets and is another good bet.

Kinleigh Folkard & Hayward has a studio flat on Park Road, close to Regent’s Park, for £257,000, it is relatively spacious, with an 18ft by 15ft living/sleeping space and small, separate kitchen and shower room/toilet.

A large bay window means it is unusually bright. ‘Small properties are always in high demand in Marylebone,’ says Mai Pexton, sales manager at KFH Marylebone.

‘They attract everyone from investors to young professionals who are happy to sacrifice space for location.’

The agency is also offering studios for less than £200,000 near Primrose Hill, where you can schmooze with the Kate Moss and Sienna Miller crowd; and sedate, but sophisticated, St John’s Wood.

There are other ways to keep costs down in an exclusive area.

Caroline MacLean, lettings manager at Brian Lack & Co, says these include buying on the upper floors of a block without a lift, or above a shop.

‘Living more than ten minutes’ walk from a Tube station – some roads in the southwest part of Chelsea can be a 20-minute walk away – will also save money,’ she says.

Now that you’ve secured a property with space at a premium, how best to decorate it?

‘People looking to buy a home like this should make sure that the studio room is light and airy,’ says Mai Pexton. ‘If you’re buying small, it’s important to pamper yourself,’ says designer Neisha Crosland.

‘Use lights with dimmers so you can change the atmosphere, and have plenty of mirrors. In a studio the bed is a central, so splash out on bed linen and cushions. You could also use a sliding panel, or screens, to separate your living space.’

Source: The Daily Mail

The net balance of chartered surveyors reporting rising rather than falling rents in the three months to January 2010 was zero. This follows five quarters of negative readings, and is in marked contrast to April last year when 58 per cent more chartered surveyors were reporting falling rents, an all-time low for the survey.

In addition, expectations as to the outlook for rents continues to strengthen with a net balance of 33 per cent of respondents believing rents will to rise over the coming quarter (up from 22 per cent).

The more positive picture for rents can be attributed to the continued decline in supply of both flats and houses in the marketplace. Twenty-three per cent more chartered surveyors reported a fall rather than a rise in the number of new landlord instructions for this period, up from 18 per cent in the previous quarter.

Although the weather may have been a factor in this, it is more likely that the upturn in the housing market has tempted many of the accidental landlords away from the lettings market.

Demand remains strong with 16 per cent more respondents still seeing it rise than fall. Would be first-time buyers, unable to get a foot on the property ladder, are still a major source of increasing demand for good rental properties. Houses remain more popular than flats and it is the supply / demand imbalance in this market that is also helping to push rents higher.

RICS spokesperson Jeremy Leaf said: “It is becoming clear that movements in the housing market are affecting lettings: the RICS housing survey has seen a steady increase in the number of new instructions coming on to the market over the past few months, whilst simultaneously we see with this survey that the number of properties available to rent has decreased.

“This is a clear sign that the accidental landlords are returning to the sales market. If demand remains strong, which it is likely to as many first time buyers are still finding themselves priced out of the housing market, then rents should continue to rise as would be tenants compete for fewer properties.”

Source: The Telegraph

Once upon a time, the only people who used buying agents were celebrities looking for £5m-plus houses. Big names and big spenders include Eric Clapton, Kylie Minogue, and Pink Floyd’s Nick Mason.

Now, though, even we little people are paying as much as £3,000 upfront for someone to sniff out and secure us the house of our dreams. At which point we have to cough up another 2.5 per cent of the agreed purchase price (£50,000 on a £2m house).

And with houses currently so scarce, some people are using buying agents to buy properties costing as little as £500,000. This means the agent walks away with a cheque for £15,000.

Is it worth it? Definitely, says mother of two teenagers Melanie Laidler, who used a buying agency to find the family house in Sussex she was looking for.

“My husband and I knew exactly what we wanted, but the estate agents seemed to take one look at us and decide we couldn’t afford it,” she says.

“After getting nowhere, we went to BDI Homefinders, who helped us buy a place we’d dismissed before because the photos on the particulars had been rather poor, and there weren’t enough bedrooms. Our agent Sam pointed out how easy it would be to add a bedroom, then negotiated us enough of a discount [£1.15m instead of £1.2m] to pay her fees and more.”

A typical story, says seasoned buying agent Saul Empson, of Haringtons. “Most people who come to us have been looking for at least two or three months,” he says. “They’re tired of hearing about other people buying places which they’ve never even got to see.”

Indeed, the golden ticket that buying agents can offer is the one that allows clients in to view a house before it has appeared in the estate agent’s window.

“In October to December last year, more than 70 per cent of houses we acquired for clients never went fully onto the market,” says Jonathan Hopper, managing director of Garrington Homefinders. Other agents report similar levels of off-piste selling.

“We know who’s out there, who’s made a bid, who hasn’t made a bid,” says Peter Mackie of Property Vision, one of the biggest agencies. “We’re all totally embedded in the business.”

Others talk of local knowledge, trade contacts, networks of past clients and even dinner-party and front-doorstep gossip.

“I had one of my best tipoffs from the man who delivers my logs,” says Tom Hudson, of specialist rural buying agents Middleton Advisors.

And once you have been whisked through the front door with a metaphorical blanket over your head, the buying agents are keen to clinch you a deal. Though not, it should be said, at any price.

“We know the history of a house, what it has sold for in the past, what comparable houses have sold for recently and whether it has been on the market, and been taken off again,” Empson says.

“In London, we have access to a trade database called Lonres,” says Jo Eccles, of Sourcing Property. “We can access any property’s history, from how much it has been sold for to what work it has had done on it.”

As well as researching the house, the buying agents investigate the area, to find out if a housing estate is liable to spring up on the back doorstep.

“The classic mistake is for unwary buyers to go and visit houses in a certain part of Oxfordshire at the weekend,” Empson says.

“The planes from RAF Brize Norton don’t fly on a Saturday or Sunday, but it’s a different story in the week.”

Naturally, all buying agencies claim they can save you from making that kind of mistake. So how do you choose between the firms?

The most noticeable difference is the fact that three of them are the buying arms of big estate agencies: Private Property Search (Strutt & Parker), The Buying Solution (Knight Frank) and Prime Purchase (Savills). Does this not represent a conflict of interest?

“Not at all,” says Philip Selway, of The Buying Solution. “We don’t have a privileged position, in terms of Knight Frank telling us about a property but not our rivals.”

“We act for the buyers, and Strutt & Parker act for the sellers,” says Ian Hepburn, of Private Property Search. “There’s a very clear division.”

Even so, Camilla Dell, of buying agency Black Brick, thinks independence is essential. “It’s our unique selling point,” she says. “No one can accuse us of divided loyalties.”

Maybe not, but what people can say is that buying agencies are expensive.

With the odd exception, perhaps, such as London Property Match, run by grandmothers Sarah Snow and Suzanne Emson. They charge only a £587.50 signing-on deposit, plus one per cent of the purchase price.

“They’re these motherly figures who talk total commonsense and cut through all the rubbish from the estate agents,” says Chelsea art dealer James Harvey.

“They held our hands the whole way when we bought our house in Battersea.”

So perhaps it is time for the ladies to put their prices up?

“Yes, a firm did try to take us over and make us charge two per cent, but we said no,” says Snow, smiling.

“I think one per cent is quite enough, don’t you?”

Not so secret agents

Do

• Ensure they have local knowledge
• Find an agent with whom you have a rapport
• Ask to speak to other satisfied clients

Don’t

• Be impressed by smart offices
• Dawdle (the service stops after three to six months)
• Forget you have to pay on purchase

Buying agent basics

• BDI Homefinders 0845 603 6110, bdihomefinders.co.uk
• Black Brick 020 3393 6091, black-brick.com
• The Buying Solution 01488 657912, www.thebuyingsolution.co.uk
• Garrington 020 7099 2773, garrington.co.uk
• Haringtons 020 7661 9388, haringtons-uk.com
• London Property Match 020 7881 5235, londonpropertymatch.com

Source: The Telegraph