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Property Portfolio Analyser

The benefits of a consultation – Unique Selling Points (USP)

Free download for Buy to let landlords

 

 

  1. Fees & the 10 Benefits of filling out the Property Portfolio Analyser

Any client that is looking to get self-help our Analyser tool is an excellent tool to do your own self diagnosis. 

Most clients prefer to get a comprehensive report for a fee of £350 which includes a simplified health check of their properties and that which can be used to provide solutions that best suit their requirements.

  1.  A hand holding exercise for a landlord – Get a free tool to analyse your properties and understand the key performance indicators in deciding what to do next with your portfolio. Organising all your information in one place to look at a 3 dimensional picture and make more effective decisions on how to grow or consolidate.
  2. Raising finance – Identifying potentials of raising finance against your properties. You can grow your portfolio once you know you have a solid foundation. You may qualify for a 100% finance facility. There are 10 options to pull finance out of your portfolio that you may qualify
  3. Health check – Access to management team at Head Office – who will assess the risks within your portfolio. Help manage your portfolio risk when interest rates inevitably
  4. New products – Access to unique solutions to consolidate your property
  5. Cost reductions – A chance to cut costs in the running of your property.
    1. Help reduce your expenditure by up to 80% in relation to your tax
    2. Find a way to deal with negative equity problems and to see if you qualify for a cash back on negative equity properties and are in a position to negotiate your debts with the
    3. Help to understand your sales, management and maintenance costs and keep them under control
  6. Legal support – Support and advise with any legal matters concerned with the banks
  7. Stopping repossession – Stopping any immediate legal action from the banks even within 24 hours
  8. Reduce Debt payments– Assist you in Debt Management. With outstanding or pending negative debt a unique formulae to write off bad debt.
  9. Repair your credit – Refer to specialist credit rating improvement company to improve your credit files, to improve your chances of raising
  10. Compensation claim – Potential stake in class one action against the banks, if you who have lost your properties to the banks
  1. There are three types of ..

 

the GOOD, the BAD, the UGLY and the

DOWNRIGHT RIDICULOUS!

2.   GOOD

The purpose of filling out a portfolio analyser form is for comparative measures to identify the strengths and weaknesses of your portfolio’s performance and risk exposure.

By filling out your analyser and keeping it updated you will be saving money rather than paying for constant reviews of your portfolio. If you have properties that you are looking to sell in your portfolio, you can see exactly what financial state each one is in. Our suggestion is that you look at each of your properties as a business unit as well as looking at the overall picture to ensure you can make clear and effective decisions.

The key to successful investing is making a meaningful return. If you are investing £100,000 into property you should be looking to get at least £10,000 net income per year. Please note your profit is made on purchase and if you rely upon capital growth you are sure to be disappointed.

The ideal Loan to Value for your portfolio is 50%. The higher it becomes the more risk your portfolio holds. This is a mute point for a lot of investors who get told all sorts of information from various sources that claim to know what the right answer is and usually they are told that 75% LTV is excellent! Your objective should be in a position where all your risks are fully covered and minimised.

Important points to consider for a healthy portfolio are ensuring right from the outset that you purchase properties with low maintenance and repair costs. Also, in the case of flats or leasehold properties you account for service charges and or ground rent as these can eat into your profits and could negatively impact your cash flow. These are simple things that can make a big difference in helping you to maintain a financially viable portfolio. One significant aspect to ensure you keep a strong portfolio is through the tenants who live in your properties. You rely on them to make consistent periodic payments. If you have unreliable tenants, you have an unreliable source of income. This inevitably affects your cash flow which, ideally, should equal 10% yield or higher.

Another key element of your portfolio is the agent you use. You need them to deliver an efficient and organised service, from a team of people who are pro-active and always ready to help. A bad agent is worse than having no agent at all. Your analyser will help you to get clarity on all the fundamentals of running a strong portfolio and allow you to create a model which can sustain any eventuality as well as understanding your financial benchmark to calculate your current standing.

Your Power Team:

When starting your portfolio there are many pitfalls, to ensure your chances of success, having the right team of professionals around you to make all the right decisions could make a fundamental difference in what you can achieve.

  1. Accountant – An experienced accountant in the field of property will help minimise your tax payments.
  2. Solicitor –Solicitors trained in the property sector will ensure the smooth handling of your property transactions. It would be even more beneficial if they are experienced in creative property strategies.
  3. Tradesmen – Your property is very important, it would be adequate to ensure the safeguarding is carried out by efficient and reliable tradesmen. They will help see to refurbishment works, routine maintenance, gas safety checks, electrical safety checks and EPC’s.
  4. Property agent – letting agents are invaluable, they will firstly help with the ability of letting out your property and once that has been established they will then assist you in letting and managing that property, they will also help with any other properties you may want add to your
  5. Investors – many successful investors are now deciding to add a property mentor to their team to multiply their results and keep their property business on the right
  6. Mortgage Broker- having access to a facility or buy to let mortgage is an essential part of securing a buy to let investment as the time taken in getting a mortgage or finance could limit the amount of credibility you hold with the So, having a structure which allows more than 3 or 4 options for purchasing could be critical to your success.
  7. Mortgage Broker- having access to a facility or buy to let mortgage is an essential part of securing a buy to let investment as the time taken in getting a mortgage or finance could limit the amount of credibility you hold with the So, having a structure which allows more than 3 or 4 options for purchasing could be critical to your success.

GOOD: Strategies to further develop your portfolio for growth:

Credit Repair
  • Improve credit – If you need to access finance then your credit will be essential to you. This product can help in assessing how to improve your credit rating and potentially allow you easier access to financial products to support your growth
  • Debt management – Deal with any complex debt issues through our debt management department which can negotiate your overdraft, loan, credit card into a lower monthly
Cost reduction

Filling in the analyser will help us qualify if you can take advantage our money saving products:

  • CGT
  • Income Tax
  • Inheritance tax
  • Stamp duty
  • Property management
Growth
  • Asset Appraisal – Getting an asset appraisal done by our team will give you a foundation to grow
  • Off-market properties – Access our range of off-market properties across the whole of the UK
  • Property Sales – We can help sell any properties across the UK
  • Property Management – We can manage properties anywhere in the UK at competitive rates.
Finance
  • Rent Advance – Ability to access finance from the strength of your existing Assured Short-hold Tenancy (AST) e.g. £14k pcm income could equate to £168,000
  • 100% finance facility – set up a facility with a bank to get 100% finance
  • 100% bridge – set up a facility with a bridging company to get 100% finance
  • 100% mortgage – set up a facility with our finance arm to get 100% finance on a buy to let or residential purchase
  • Pension release into Limited company – You can qualify to get 65% of your pension into a Limited Company even if you are under the age of 55
  • <£50k facility –Ltd company with personal assets – Set up a £50k facility to access finance to grow your business by borrowing against your assets, no security required, only a Personal
  • Bridging within 72 hours- set up a facility with a bridging company to get 60% finance very quickly , your analyser will let us know whether this is achievable
  • Portfolio Equity release – up to 85% of your portfolio equity can be released as a cash sum with no monthly payments for
Risk
  • Insurance for PG – If you have to give a Personal Guarantee we can assess if you can qualify for PG insurance
Income Opportunity

4.  BAD:

  • % Loan to Value means you have a higher risk to your portfolio and if one or two things change and act against you, you may struggle to recover from such

The yield on a portfolio in good condition ideally needs to be between 8- 10%. If your portfolio is below 8% yield you will need to tread carefully. When calculating this figure, be sure to remember the costs and expenditure you have to pay out, as this will reduce your net yield. Depending on where your properties are situated, yield is not necessarily going to be the same for each of your properties.

Typically, in central London, yield is between 1-4%. However, as you start to broaden into the outer zones it may increase to 6%. Additionally, properties out in the country can reach 12-15% yield. Again this will be dependent on your original purchase price. In addition there are certain costs such as interest rates; if they are not capped with an interest rate fix you may find that your ability to control your costs could go out of control. If you have a very high yield and low costs across the board your ability to deal with interest rate hikes is going to be a lot more realistic.

If the tenants living in your properties are constantly late with rent payments you shouldn’t have to stand for it. By having consistently late income you are increasing the chances of you missing your mortgage payments or other vital deadlines which could cripple your credit rating and also put your properties at risk to LPA receivers.

Being able to restructure the way you manage your income is essential to having a successful portfolio. Your tenants are your most valuable asset however they need to value you as well. One solution that is very effective in improving cash flow is to change payment dates with the bank, to ensure that your income is received at the end of each month and can be accrued to pay all your costs.

As well as this, most agency fees are being pushed up and you may be getting overcharged for the work they do. Your analysis will give you a better understanding of costs that can be brought down.

BAD: Strategies to deal with minor problems with your property portfolio:

Cost reduction

Filling in the analyser will help us qualify if you can take advantage our money saving products:

  • CGT
  • Income Tax
  • Inheritance tax
  • Stamp duty
  • Property management
Finance
  • Rent Advance – Ability to access finance from the strength of your existing AST g. £14k pcm income could equate to £168,000 facility.
  • 100% finance facility – set up a facility with a bank to get 100% finance
  • 100% bridge – set up a facility with a bridging company to get 100% finance
  • 100% mortgage – set up a facility with our finance arm to get 100% finance on a buy to let purchase
  • Pension release into Limited company – You can qualify to get 65% of your pension into a Limited Company even if you are under the age of
  • <£50k facility –Ltd company with personal assets – Set up a £50k facility to access finance to grow your business by borrowing against your assets, no security required, only a Personal
  • Bridging within 72 hours- set up a facility with a bridging company to get 60% finance very quickly , your analyser will let us know whether this is achievable
Homeowner
  • £20K – Unsecured loans on residential homes – see if you can qualify for a £20k loan
  • £15K Secured loans on residential homes – see if you can qualify for a £15k loan
  • Mortgages for clients with IVA/bankrupt/CCJ – you may qualify for a mortgage even with bad credit problems
  • Competitive mortgages – if you may need to get a mortgage contact us for a competitive quote
Credit Repair
  • Improve credit – If you need to access finance then your credit will be essential to
  • Debt management – Deal with any complex debt issues through our debt management department which can negotiate your overdraft, loan, credit card into a lower monthly
Negative Equity
  • Cash backs – We can do an asset appraisal to check if you qualify for a cash back product on your negative equity properties
  • Debt write-off – Short-fall on negative equity can be negotiated by our debt teams
  • Manage and sell properties nationwide – We can help sell and manage properties UK wide when solving arrears or negative equity problems
Income Opportunity

5.      UGLY:

If you have an average Loan to Value rate of more than 70%, your portfolio is at a very high risk. In addition to this, if the yield of your portfolio is below 6% you will find yourself edging into very dangerous territory.

Your main concern should be the interest rate time-bomb which is the inevitable increase in interest rates. An interest rate rise will certainly affect your cash flow and profitability which will affect your standard of living indefinitely. Your cash flow may become negative when interest rates inevitably rise. The effects of an interest rate rise can only be mitigated by a compensating increase in rents to maintain your current cash flow and profits.

For these reasons investors should subject their buy to let investments to a regular health check as soon as possible. Investors should continue to review their portfolio with a health check at least every 12 months or more frequently if possible taking into consideration the volatile market we are in.

A few examples that could cause high losses:

Repossession Problems –

If you are in arrears, your home and/ or your Buy to let properties are at risk. You need to tread very carefully as you could lose everything you have established; not just your properties but also other aspects of your financial life such as your pension, your savings and much more.

County Court Hearings –

You need to be fully aware of the implications of attending a court hearing as it can be a very prolonged, daunting and expensive course. Before attempting to deal with this problem single handily we suggest you seek independent professional advice to help redeem your case and save you incurring unnecessary fees in the process.

Property loss to LPA receivers –

This is a very complex situation as it can occur unexpectedly. If this has happened to you, you may find that you are not fully aware of how to deal with this problem effectively. It is essential for you to get advice and avoid any additional charges the LPA receivers may impose due to you defaulting on payments. Having a proper understanding of this issue, as well as professional help will be critical to your overall success in getting back control of your property (ies).

Council Tax Non-payment –

If a property is left empty then full council tax needs to be paid, if it is not paid then councils can appoint bailiffs to collect goods from your home to make up for the missed fees. It is critical that you get professional advice on how to maximise your output if you are in this position. If you are having these sorts of issues, leaving them and sticking your head in the sand will make matters dramatically worse.

Service charge Non-payment –

If you miss service charge or ground rent payments, you may be taken to court to settle the fees. This would mean you also incur additional court fines. Having expert advice in understanding how to deal with this state of affair will dictate how you can avoid this situation from declining.

Bailiffs –

Bailiffs can be appointed by repossession agents who will have the power from a court to take your belongings and change your locks. This kind of circumstance can be deterred simply by effectively managing your overall finances and getting independent advice on how to manage your money.

(Continued)

 

High Voids –

When your properties aren’t being let, they are not producing any income; however they continue to incur monthly costs. There are many reasons why landlords suffer high voids, many of which can be reduced dramatically. Making sure you have a reliable tenant is not always easy and you shouldn’t have to settle for someone who doesn’t meet your criteria; doing this could actually end up costing you more than having a vacant property.

High maintenance and repair costs –

These costs can vary substantially from £100-£200 pa to £1000-£2000 pa depending on a multitude of factors. You may find these costs can be reduced to tolerable and more predictable levels by carrying out a portfolio health check and having it reviewed regularly.

High rent arrears –

Another debilitating cost. Inconsistent rent payments could result in you being unable to pay the associated costs of letting your property; which could damage your personal credit rating. Damage to your credit rating may affect your ability to expand your portfolio in the future. There are many reasons why high rent arrears can rise, most of which are under your control but if proper steps are taken high rent arrears can be virtually eliminated.

Bad letting and managing agents –

A bad agent is worse than no agent at all. Eliminating the bad agent will make a dramatic difference to the profitability of your investment(s). To avoid your portfolio being neglected you should acquire a more reliable agent meaning your cash flow will be higher and your gross rental income will increase.

Unfortunately, there are more potential problems that can arise which will detrimentally affect your cash flow and overall financial position. These problems would surface in any comprehensive health check of your property portfolio and will definitely need to be reviewed.

Ugly: Strategies to deal with major problems with your property portfolio:

Stop Repossession
  • Compensation for any lost properties to the bank – See if you can qualify for compensation for any losses suffered
  • Within 24 hrs anywhere in the UK – We can stop repossession within 24 hours anywhere in the UK, this may be useful if you are buying properties to help negotiate a property for purchase or may also be useful if you face this difficult problem yourself
  • LPA dis-instruction – If you are in arrears or have a suspended possession order getting an understanding of our portfolio will allow us to assess the likelihood of appointment!
  • Litigation issues – If you have any issues that need a resolution the analyser will need to be filled in for us to work out the best way of dealing with the problem
Credit Repair
  • Improve credit – If you need to access finance then your credit will be essential to
  • Debt management – Deal with any complex debt issues through our debt management department which can negotiate your overdraft, loan, credit card into a lower monthly
Negative Equity
  • Cash backs – We can do an asset appraisal to check if you qualify for a cash back product on your negative equity product
  • Debt write-off – Short-fall on negative equity can be negotiated by our debt teams
  • Manage and sell properties nationwide – We can help sell and manage properties UK wide when solving arrears or negative equity problems
Homeowner
  • £20K – Unsecured loans on residential homes – see if you can qualify for a £20k loan
  • £15K Secured loans on residential homes – see if you can qualify for a £15k loan
  • Mortgages for clients with IVA/bankrupt/CCJ – you may qualify for a mortgage even with bad credit problems
  • Competitive mortgages – if you may need to get a mortgage contact us for a competitive quote
Income Opportunity

6.THE DOWNRIGHT RIDICULOUS… Balanced pragmatism over Extreme Optimism

This section is not for the fainted hearted. It may come across as a bit in-your-face. However, the idea is for you to completely understand in most cases that although the ice looks stable it may not be the case!  You could unconsciously be treading on very thin ice!

If your portfolio is currently at a manageable state it does not necessarily mean your portfolio is safe. Your portfolio could be at very high risk and the realisation of the pit falls that could hit you can be very daunting if you are unprepared. Having a clear and sound understanding of these potential issues your portfolio may entail, will soften the blow. It is a very difficult scenario to accept when there is turbulence e.g. potential increase in interest rates or other changes which can impact your cash flow or equity. Below are the remarks made by distressed landlords with varying situations and have all been caught off-guard by making assumptions with no foundation…

What if interest rates stay low for the next few quarters?

  • This situation is wonderful for landlords with negative equity and low interest repayments because it allows the majority of property owners to enjoy day to day cash However, Low interest rates will not guarantee capital growth. In simple terms you will become a slave to your mortgages and whether in the short-term there is positive cash flow it does not mean that money is yours to have, rather it is yours to save and keep for when the interest rates increase.
  • Do not be fooled as this will not last for long as the interest rates are constantly fluctuating. Your portfolio should be reviewed regularly to help you understand where you stand financially within the current affairs of interest
  • Recent calculations prove that the money you have accrued during the low interest rate period may only take you through 9-12 months during the interest rate hike; after this period any shortfalls in interest payments will become your
  • Landlords who have cash reserves have come to the understanding that the cash in their hand will probably be worth more to them at a later stage, where they will be able to purchase properties at a realistic price with good yields (worst case scenario 40% deposit for a Buy-to-let).
  • In the last 30 years, on average, interest rates have been much higher than in the last 10 years, going up as high 15%. During the financial crisis of the early 90s interest rates were well above 10% for more than three years. For example between July 1988 and September 1991 interest rates
What happens when interest rates start to rise? Do you delay the inevitable or do you take action now?
  • Very few people have been able to answer this question realising that unless they do not accrue the positive cash flow to off-set the interest rate increase then they will effectively end up paying out of their own
I am making positive cash flow, do I need to consolidate?
  • Positive cash flow is a short term position. Having the title of a property which is losing value every day and the potential for interest rate increases does not allow for a clear strategy to hold on to a Banks can also use contracts in their advantage to out manoeuvre you and take your property away from you regardless of your cash flows.
If I have a portfolio with high LTV and low cash flow… what will happen if I don’t do anything? What could be the implication? How ugly can it really get?
  • You are sitting on a major catastrophe! Hence, planning or being clear about your issues is important.
  • The following need to be addressed:
    • Your health
    • Stress and relationships
    • Impact on personal home/finances
    • Cash flow for business
    • Dealing with creditors e.g. credit cards, mortgages, overdrafts, loans, car finance, council tax, bailiffs, relentless phone calls from debt collectors, LPA receivers, repossession
    • Freedom from perpetual debt i.e. even if you give your keys into the lender the financial liabilities are still yours
    • Consider how to remove these liabilities from your life
How can I deal with LPA receivers?
  • There are few organisations that are willing to tackle the banks as they are all tied into the system to work against the landlord and not always in their best interest. Even solicitors have a duty to work on behalf of the bank and/or the government and report their clients for anything they deem not to be in the bank’s interest. There are independent consultancy’s that are not tied to the banks or to the system wanting to advice vulnerable landlords. Many have dealt with multiple complex cases in which the LPA  Act has been applied by banks with unwary buy to let
  • Approaching the right experts with experience will allow you to see that the LPA act is wrongly implemented when dealing with Landlord’s rights and tenant’s
  • There are many inconsistencies in how the LPA is presently being implemented. As a result of these inconsistencies both landlords and tenants can face serious hardship. Organisations such as immediatebankclaims.co.uk have launched a group action to provide accountability for the banks actions. Undoubtedly, there are many organisations now realising the extent of this problem market.
I have 10 properties. Is it worth holding on to my properties for the short-term with the uncertainty of events? My portfolio is just about breaking even every month and has very little equity and is being eroded by the day. How do I get out of all the liability I have taken on without it taking me under with it?

These are the points you need to reflect on:

  • There are a very small percentage of landlords with properties in this market that have had sufficient equity worth selling – most or all properties are highly leveraged, especially outside London. It is correct to assume that any equity available is being eroded by the day as the property market is forecast to decline, especially when interest rates
  • This is the question for you to answer: if the property has little or no equity why would you continue managing something with no gains. Are you happy to be a slave to the property?
  • Lowered interest rates do prolong the inevitable – they do not treat the
  • In most cases where disposal takes place in the market a shrewd buyer will be looking for a forced sale price or a below market value price which diminishes any equity
  • Rarely do we find a demand vs. supply issue where a CHANCE BUYER is willing to pay the asking price for the property and in this case you are set to make a
  • You are chased for all the redemptions and short falls that properties in negative equity
Some of my properties are fantastic and the others are completely useless.  What do I do?

You will need to understand how you define ‘fantastic’. Any property that is higher than 50% LTV of today’s value would be regarded as manageable, but clearly not fantastic. The reason for this assumption is that we are in a declining market which means 50% of today’s value could end up being 70% LTV within a year from now.

Normally most portfolios are joined in one way or another and therefore the problem is holistic. There may definitely be units you could hold on for longer but they will all fall into the same predicament one way or another. The difference is timing. So we address everything from the now and say if a property can be disposed off earlier with some equity. We operate with pragmatism and practicality on behalf of the client.

The example we give of a fantastic unit at 50% LTV if this be the best scenario? Then give a thought to the following points:

  • When is the fixed rate due to expire?
  • What if the employment market worsens?
  • What if the property values fall further?
  • How much money are you making from it?

Having a low LTV can be misleading as it doesn’t necessarily confirm that you can service the debt or whether you will able to raise any finance. In certain cases we have encountered properties that are very difficult to sell and therefore the LTV means nothing. There is one argument that can be presented and that is, a long term hold if the rental value can suffice the interest payments once the interest rates go up. Are you prepared to top up the difference that the interest payments will make?

Credit Rating Case Study

Many people believe that losing their credit rating is dangerous. The irony is the harder you try the less control you have. An example is provided below:

Landlord A: Has a successful cleaning contracting business. The landlord has 40 properties which have been in negative cash flow because of the overall impact of fixed rate and SVR, where Client A has happily been putting in £11,000.00 per quarter for approximately two years. The net result being her credit file seems to be intact but she has accumulated approximately £150,000.00 of cash debt from business income, family loans and loans from friends, overdraft to keep her portfolio sustainable – in the hope that the property market recovers. Our aim is for credit to be kept, but at an expense – the underlying question is

– how much money do you have to keep your credit intact?

Once it became unbearable because of her financial constraints she realised all her hard work was equal to nothing. Her credit rating was declining because of default payments both on credit cards and mortgages. Twenty years of work with a net result of realising that ‘credit’ in this market does not mean anything after all! She was being handled by the financial system in the same way as anyone without a credit rating would be irrespective of her history.

No one is able to improve, change or correct the credit rating of their clients. A person can just as easily lose their credit rating within months of defaulting on their payments irrespective of the history of their payments and can just as easily amend their credit rating by paying promptly afterwards.

Equally so, clients are still finding raising finance difficult, because the lenders aren’t interested in lending. Credit rating in this market has already been lost by clients due to no fault of their own. The credit rating agencies have re-written the rules of their scoring, where unlike previously just secured borrowing was taken into account, now unsecured borrowing is also calculated. Consequently a person with properties is now seen as high risk. The net result is that you are probably scoring badly already – and for this purpose we strongly recommend you check your credit rating (i.e. with Experian or Equifax) report and check your credit rating if you have doubts on this issue.

I have already lost half of my properties. I have issues with bailiffs, council tax, credit cards and loans, mortgage arrears and overdrafts.  Who can help me in these areas? Is it too late to help me?

It is never too late as you will see. There are lots of specialist solutions in the market and a comprehensive turnkey solution can provide you with answers to almost every problem to do with property. You can still be helped with the problems you are facing. Sometimes simple things like helping to reduce the stresses and strains allow people to create clarity on how to deal with the lenders. The rule of thumb is that the earlier you seek professional advice the higher the probability of reducing your stress, removing your debts and negotiating with the lenders.

7. Minimising Your Tax Liabilities

Capital Gains Tax (CGT)

CGT is a tax on the profit when you sell an asset that has increased in value. It’s the gain you make that’s taxed, not the amount of money you receive. For example if you buy a painting for £5,000 and sell it for

£15,000 five years later, you will only be taxed on the £10,000 profit, not the entire value. Hence, if you are selling property regularly you will need to consider your CGT costs into your calculations on the outset.

There are other more technical issues that will also need to be considered when making decisions about a hold or sell strategy; you will need to be clear about your strategies so that the HMRC are given the correct information to optimise your position. If you are operating under a Limited company different CGT rules will need to be considered and managed with your accountant.

Key tips for keeping your capital gains tax bill as low as possible:

·         Capital costs i.e. a total refurbishment of a property can be used to reduce your CGT costs.

  • Keep receipts and records for all assets on which CGT might eventually be
  • Husbands and wives and civil partners each have their own CGT allowance of £11,000 in 2014-15. By transferring an asset into your joint names, you can both make use of your tax-free allowance so that up to £22,000 of any gain can be tax-free in 2014-15. However the transfer to your spouse or partner must be a genuine outright
  • Paintings, antiques and other collectibles can be a tax-efficient investment, especially where they are not treated as a set and so can be sold piece by piece with each item qualifying for the £6,000 exemption.
  • Unmarried partners can each nominate a different home as their main home to get tax relief on both. (Married couples and civil partners must choose just )
  • If you live in a property as your main home for a time before letting it out, you can potentially reduce the CGT bill when you eventually sell it. See Capital gains and property.
  • If you immediately sell employee shares that you get through a Save-As-You-Earn share option scheme, company share option scheme or enterprise management incentive scheme, you may have a CGT bill. Consider selling in several tranches, so that each year’s gain is within your annual tax-free allowance of £11,000 in 2014-15.
  • If you get shares through a Save-As-You-Earn share option scheme or a share incentive plan, you have 90 days to transfer them tax-free to an Isa or pension. Gains when you eventually sell will then be tax

Inheritance Tax

For single people, the inheritance tax bracket is marked at £325,000, meaning when you die if your estate is equal to or below this figure, you don’t pay any inheritance tax. For couples, this figure rises to £650,000 between them, on the basis that when the first dies, everything is left to the partner.

If you’re married or in a civil partnership, you can give anything you own to your spouse or civil partner – so your estate won’t have to pay Inheritance Tax on what the gift is worth.

If you give something to a friend or a family member who is not your spouse or civil partner, so that you no longer get any benefit from it, the value of the gift will still be included in your estate for Inheritance Tax – but only for seven years. So, for example, if you give one of your children some money, and you live for another seven years, it won’t be counted as part of your estate when you die.

You can give away limited amounts every year and not have to pay Inheritance Tax. For example, you can give away up to £3,000 a year and you can give away money to your children and grandchildren when they get married.

Income Tax

This is a tax levied solely on your personal income. Any income up to £10,000 is tax free, 20% is then charged on any income above this and up to £32,010. If you earn between £41,451 and £150,000 you will be charged at a rate of 40% and anything above £150,000 is taxed at 45%. These figures tend to vary year on year so you should always keep up to date.

Choosing to up your payments into a workplace pension means you can beat tax increases and provide for your retirement. Pension funds are taken out of pre-tax income and so can stop you tripping over income tax thresholds. Pension contributions via salary sacrifice are even more efficient as you do not have to pay National Insurance contributions or income tax.

Salary sacrifice is a way of legally reducing your pre-tax income. It is a contractual agreement between employer and employee, where the employee gives up a part of their salary in exchange for a non-cash benefit. These can include cycle to work schemes which allow employees to “purchase” bikes off companies, child care vouchers, medical insurance, gym membership and car leasing.

If you give to charity this reduces your taxable income – if you remember to Gift Aid. Make sure you keep a note of all charitable donations and fill in the appropriate section when it comes to filling out your tax return. There are ways of reducing your income tax which need to be considered carefully e.g. your capital costs and your expenses will be considered differently under tax rules.

Stamp Duty

You have to pay Stamp Duty Land Tax (SDLT) if you buy a property in the UK over a certain price. This is charged on all purchases of houses, flats and other land and buildings. If these costs are not planned in advance you may find they increase substantially.

Your stamp duty will depend upon how much you purchase your property for. Any property Up to £125,000 you will pay 0% stamp duty. Anything between £125,001 and £250,000 will be charged at 2%, between

£250,001 and £925,000 5%. As your property value increases between £925,001 and £1.5 million you will be charged 10% and anything above £1.5 million will be 12% stamp duty.

Stamp Duty relief is available if you buy a number of different properties all in one go.

So if you bought five houses at the same time for a total of £1 million, you would face a tax bill of £43,750 under the new rules – 0% on first £125,000, 2% on the next £125,000, 5% on the next £675,000, and 10% on the final £75,000.

However, the relief means that the rate of tax is determined by dividing the amount paid by the number of dwellings bought. So in this example, £1 million divided by five is £200,000.

Transactions of £200,000 under the new system are free of Stamp Duty up to £125 000 while the £75,000 over the nil rate band will attract a 2% charge, so you would end up paying a much more manageable bill of £7,500 instead

Linked purchases need to be considered very carefully otherwise you could end up with a very hefty Stamp duty bill. This is where 5 purchases on one title could be deemed as one purchase as your rate of stamp duty could deemed as one transaction.

Depreciation

  • You can claim depreciation costs on your furniture or goods in your buy to let properties. This can be claimed under reasonable wear and tear e.g. 10% a year for a £1000 sofa, meaning you claim back £100 a year. Not all property used in your business can be depreciated. Land retains its usefulness indefinitely, and is therefore not depreciable. Inventory and property that you lease or rent is not depreciable either, but the cost of permanent improvements to property you lease can sometimes be depreciated. Your accountant can help you understand the rules about these leasehold
  • There are many other tax issues that you need to be aware of, all of which can be looked at as part of your free 1 hour consultation if you have any major concerns around any specific.

8. Starting a Buy to Let Portfolio

Let’s suppose you could raise £100,000 to invest in property. Typically most start up landlords’ follow the approach below. This is a good way of starting off but we would highly recommend that you always have a cash buffer in your bank that can put your portfolio into a 30-50% LTV position if there ever was a problem with interest rate hikes or other unsuspected problems mentioned in sections 5 and 6 above.

  1. A lot of landlords decide to buy just one £100,000 property with it. If that property were to increase in value by 5% in one year they would have made £5,000.
  2. Other strategies that landlords may carry out based upon the advice they get given. A landlord assumes that they can rent out the property for enough money to cover the interest costs on the maximum possible buy to let mortgage along with all the associated costs of owning and letting a residential property. In this example they borrow £75,000 and invest £25,000 of their cash to fund the balance of the purchase price. Now, if the property increases by 5% we will have still made £5,000 and they have only invested £25,000. This is a 20% return on their money! Again, having such a high loan to value could put your property at risk if it is not on a fixed rate or you haven’t got back up cash to reduce your LTV below 50%.
  1. Landlords and investors often get trained on this strategy. An investor could leverage their money if they were open to growing more rapidly growing their portfolio. They could potentially buy three on the basis of spreading risk. Assuming the properties are worth £100,000 each, the deposits would amount to £75,000 (25% deposit for each property). This would leave the investor with £25,000 to cover other purchase costs such as fees, stamp duty etc still leaving a healthy surplus for contingencies or a ‘rainy day’. This would mean the investor had £300,000 worth of property which, assuming 5% growth per annum, would equate to a profit of £15,000 a year. Again, having such a high loan to value could put your property at risk if it is not on a fixed rate or you haven’t got back up cash to reduce your LTV below 50%.
  2. Landlords also think that this strategy can work for them, but if the analysis on the deal structure isn’t sound our suggestion would be that you are creating a higher risk scenario for yourself:

In the previous example a landlord or investor might have decided to borrow 70% instead of 75% on the basis that the mortgage interest rate was slightly cheaper. However, you would have invested £30,000 to make £5,000. This is a 16% return. In other words, you would have reduced your return from 20% to 16% perhaps only to save a few pounds a month in interest.

9.Taking Action – Overview of each analysis sheet

Filling out section A is very beneficial in revealing your cash flow situation. It will give you a basic understanding of all of your in-coming and out-going expenses. By doing this, we can break down your expenditure and help you find the most efficient ways of managing your money.

Section B will be beneficial to you by having a clearly outlined spreadsheet with all the relevant information you need to track your rental payments. It can also help you to see how consistent your tenants’ payments are and if you are not happy with this we can help you find new, more reliable tenants.

Section C of the PAS form helps you to identify precisely how much is coming out of your account each month to pay off your mortgage(s). Having your finances set out in this format makes understanding how much money you are paying out each month much easier and can also help you with managing your finances.

It is essential section D gets filled out by you. These costs to regular landlords can be charged at a high rate, however, if we were to help you in managing your property (ies) we may be able to find you better deals on these costs meaning the gross rent your tenant pays will be higher.

By filling out section E, we may be able to assist you in cases of emergency or accidents when a letting agent is unavailable. Having an outside source being able to get in contact with your tenants is always beneficial.

Each lender has different policies and procedures to follow when dealing with their clients. Section F helps with understanding these approaches clearly and could help you change your portfolio risk. For example, if you miss repayments to the bank they may repossess your home; our services can prevent these situations form happening.

Finally, section G indicates what deals on utilities you can achieve with can benefit you as we can get better rates than an average landlord, in turn your cash flow can be higher simply from minimizing your utility bills.

Property should always be a good investment as long as you do your homework. You need to take professional advice. Choose your advisers carefully. A well established property manager will guide you to the right property type, area and tenant. We can help to refer you to sources of cost effective methods to find a tenant quickly and secure your cash flow by ensuring you receive your rent on time.

10. Step by step points to help you complete your analyser and get clarity on your results!

 

If you are too busy to fill in all the fields comprehensively but would still like to be on top of your portfolio, then we have also simplified matters by highlighting all the ‘ESSENTIAL’ fields in green.

Please fill these in to get a basic understanding of where you stand with your portfolio.

In addition, we have given you an idea of what type of portfolio numbers are ideal, reasonable and problematic for each ‘SHEET’ A-F below from our 35 years of experience in this industry.

A.    “I & E” (Income & Expenses sheet)

Start from the first page of the spreadsheet as the details you input come up on following pages.

Filling out this section can be very beneficial in illustrating your cash flow situation. It will give you a basic understanding of all of your in-coming and out-going expenses. By doing this, we can break down your expenditure and help you find the most efficient ways of managing your money.

Property Address
  • Door/Flat number
  • Street name
  • Town/ City
  • County
Postcode
  • Full postcode
Type
  • Amount of bedrooms and type (i.e. 5 bed detached, 3 bed semi, 1 bed flat, and 2 bed terrace)
Rent
  • (Actual monthly rent at present)
Remortgage/Creditor – 1st loan Amount
  • First mortgage loan amount if you have one mortgage on the
Remortgage/Creditor – 2nd loan Amount
  • Second largest mortgage loan
Remortgage/Creditor – 3rd loan Amount
  • Third largest mortgage loan
Remortgage/Creditor – Total Loan Value
  • This is calculated, so do not put anything
Rates – 1st loan monthly payments
  • Monthly payments at this moment for the first
Rates – 2nd loan monthly payments
  • Monthly payments at this moment for the second
Rates – 3rd loan monthly payments
  • Monthly payments at this moment for the third
Rates – Expiry
  • The end date of the agreed term of the
Interest PCM
  • This is calculated, so do not put anything here. (Type of mortgage – repayment or interest only information/any further info can be added in column W/X if pertinent)
Charges – Grd
  • (Ground rent)
Charges – Service
  • (Service charge on flat – would not apply to your properties)
Maintenance
  • (All monthly maintenance and repairs)
Management cost
  • Agency fees per month
Expected Refurb
  • Expected cost of any refurbishment for the
Cashflow
  • This is calculated; so do not put anything
B.    RENT (Rental History Sheet)

This section will be beneficial to you by having a clearly outlined spreadsheet with all the relevant information you need to track your rental payments. It can also help you to see how consistent your tenants’ payments are and if you are not happy with this we can help you find new, more reliable tenants.

Property Address
  • Automatically filled from “I & E” from so do not fill
Postcode
  • Automatically filled from “I & E” from so do not fill
Rental income – Statement Date
  • If you were using a managing agent – statement date would be the date of the managing agents’ last statement that was provided to
Rental income – Payment Date
  • Date of payment
Rental income – Rental Arrears
  • Fill in any rental arrears owed by the
Rental income – Monthly Mortgage
  • Automatically filled from “I & E” from so do not fill
Rental income – Monthly Rental
  • Automatically filled from “I & E” from so do not fill
Mortgage Reference Number
  • Mortgage company reference
Monthly payments since statement date – 1, 2, etc
  • Monthly rental payments since the last statement that was provided by the rental agency (if applicable).
TDS Deposit
  • Rental deposit held
C.    REPAYMENT (Lender Remortgage Repayment History Sheet)

This section of the PAS form helps you to identify exactly how much is coming out of your account each month to pay off your mortgage(s). Having your finances set out in this format makes understanding how much money you’re paying out each month much easier and can also help you with managing your finances.

Property Address
  • Automatically filled from “I & E” so do not fill
Postcode
  • Automatically filled from “I & E” so do not fill
Mortgage – Statement Date*
  • The date that the mortgage company last provided you a statement
Mortgage – Direct Debit Date
  • Date that the mortgage is taken out by direct
Mortgage – Arrears
  • The amount of arrears that the mortgage has at the time of filling out this
Mortgage – Monthly Payments
  • Automatically filled from “I & E” so do not fill
Mortgage – Monthly Rental
  • Automatically filled from “I & E” so do not fill
Bank Ref
  • Automatically filled from “Rent” so do not fill
*Monthly payments since the statement date – 1, 2 etc
  • Monthly mortgage payments since the last statement that was provided by the rental agency (if applicable).
Present Arrears
  • Automatically filled in, so do not fill
TDS Deposit
  • Automatically filled from “Rent” so do not fill
D.    IMPORTANT COST (Statutory Cost)

It is essential these fields get filled out by you. These costs to regular landlords can be charged at a high rate, however if we were to help you in managing your property (ies) we may be able to find you better deals on these costs meaning the gross rent your tenant pays will be higher.

Property Address                             – Automatically filled from “I & E” so do not fill in.

Postcode
  • Automatically filled from “I & E” so do not fill
Insurance
  • Insurance cost (per annum is fine)
GSC
  • Gas Safety Certificate
EPC
  • Energy Performance Certificate
Inventory
  • Only applicable if the property is rented as fully furnished – and if there is a monthly cost associated with the
Legals
  • Legal costs per annum
Total
  • Automatically filled in, so do not fill
E.    TENANCY (Detail of Tenants)

By sharing with us your tenant information, we may be able to assist you in cases of emergency or accidents when a letting agent is unavailable. Having an outside source being able to get in contact with your tenants is always beneficial.

Property Address
  • Automatically filled from “I & E” from so do not fill
Postcode
  • Automatically filled from “I & E” from so do not fill
Tenant – Name(s)
  • The tenant name/s.
Tenant – Landline
  • Tenants landline if
Tenant – Mobile
  • Tenants mobile if
Tenant – Email
  • Teanants email if available.
AST Expiry
  • Date of expiry of the tenants Assured Shorthold
Bank Ref Payment
  • Automatically filled from “Rent” so do not fill
Rent
  • Automatically filled from “I & E” so do not fill
TDS – Date
  • Tenancy Deposit Scheme (Date taken)
TDS – Deposit
  • Automatically filled from “Rent” so do not fill
Agent – Company Name
  • Property rental agent company
Agent – Contact Name
  • Property rental agent main contact
Agent – Mobile
  • Property rental agent mobile
Agent – Telephone
  • Property rental agent office
Agent – Email
  • Property rental agent email
F.     LENDER (Detail of Lenders)

Each lender has different policies and procedures to follow when dealing with a client. Understanding these approaches clearly could help you change your portfolio risk. If you miss repayments for example the banks may order for repossession on your home and our services can stop this from happening.

Property Address
  • Automatically filled “I & E” so do not fill
Postcode
  • Automatically filled “I & E” so do not fill
Valuation – Name of Mortgagee(s)
  • The persons responsible for paying the
Valuation – Purchase Price
  • The original price paid for the
Valuation – Date
  • The date of the
Valuation – Current Market Value
  • Best guess as current market
Total Loan Value
  • This is calculated, so do not put anything
LTV
  • Loan to This is calculated, so do not put anything here.
Equity
  • How much equity you have in the This is calculated, so do not put anything here.
DD date
  • Direct debit Automatically filled from “Repayment” from so do not fill in.
Mortgage Ref
  • Mortgage Company Account This is filled automatically, so do not put anything here.
Title Number
  • (Title number held with the land If this information is not to hand, then no need to complete.
Lender – Name
  • Name of the mortgage
Lender – Telephone
  • Phone number of the contact for the
Lender – Contact name
  • Personal contact name at the mortgage company if there is
Lender – Address
G.    UTILITES (Details of Utilities)

By changing your utility provider, you may find you can reduce your costs dramatically. This can help improve your cash flow and mean for a better grade portfolio.

Property Address
  • Automatically filled from “I & E” so do not fill
Postcode
  • Automatically filled from “I & E” so do not fill
Council – Authority
  • Who is the local authority where the house is (e.g. who demands Council tax)
Council – Ref no
  • Council tax number
Council – Telephone
  • Phone number of the local authority
Gas – Name
  • The name of the company supplying the
Gas – Telephone
  • The phone number of the company supplying the
Electric – Name
  • The name of the company supplying the
Electric – Telephone
  • The phone number of the company supplying the
Water – Name
  • The name of the company supplying the
Water – Telephone
  • The phone number of the company supplying the

 

11. Conclusions & Recommendations

If your property portfolio is 50% Loan to Value or less, it is considered to be in the ideal position and has a lower risk of potential issues. In addition to this, if your yield for the portfolio is above 10% your risks reduce even further, putting you in a very good position. Nevertheless, you can never be too safe and validating and keeping your portfolio up to date in terms of valuations and yields is critical. You should have no immediate worry if you are in this position.  In fact, you are in a position where you could look to further reduce your costs and also look at potential growth strategies.

If your portfolio is between 50-70% Loan to Value, your risks are starting to increase and would be classed somewhere closer to a risky portfolio (depending on the percentage). Furthermore, if your yield is less than 8% then again, your risk is going to start increasing and you should be starting to consider reviewing your portfolio. You may not have a major issue yet, but making changes early could save you stress and bother from potential issues impacting your portfolio in the long run.

You are in very dangerous territory if your Loan to Value is above 70%. You have a very high risk, especially if your yield is also below 6%. If your portfolio is in this position, you should be attempting to improve your income and expenditure to manage your money more efficiently. If you carry on with your portfolio in this condition you may find yourself with a lot of problems in the near future. These changes should be made quickly and not left in order to prevent any unwanted hassle further down the line.

There are scenarios where clients who have perfectly good portfolios who fail to do basic checks and are somewhat using incorrect information to make fundamental decisions which impact the smooth management and ownership of their property portfolio. As you can imagine, this situation where you can have the potential of losing your properties can be daunting and very stressful.

Hence, having a check with a professional organisation to do a MOT or service of your portfolio on a yearly or 6 monthly basis as a minimum we would suggest is crucial.

MAXIMISE YOUR CHANCES OF SUCCESS BY CARRYING OUT YOUR OWN PROPERTY PORTFOIO HEALTH CHECK & GET PREPARED FOR A PLANNED AND PROACTIVE FUTURE!

SO, HELP YOURSELF BECOME ….THE GOOD!