Buying, selling and letting - Thursday, October 18, 2007

Letting a holiday home commercially has many benefits, but what do you do if the unexpected occurs? Mark Lavington offers top tips on how ensure the correct insurance is in place.

Many holiday home owners may unwittingly be relying on normal home insurance cover or, worse, have no cover at all. If you let out your holiday home, you should make sure the insurer is aware, and that all the necessary covers are agreed.

Your policy must cover property owner’s liability of at least £2m for injury to individuals - such as your tenants, visitors or guests - and damage to their property. In this litigious society, anyone who owns a business can easily find themselves on the wrong side of a compensation claim that can seriously damage their wealth. Whether you manage the property yourself or let through an agent, it is equally important that you have liability cover. However, cover is no substitute for good risk management. It is therefore vital that you carry out a full risk assessment of your holiday home and its garden and meet relevant safety legislation.

You should also have employer’s liability insurance. As an owner of a UK holiday let, you might think this is unnecessary. However, in the course of managing your property, you will probably employ a casual cleaner, gardener, handyman or painter and decorator. A quality holiday home insurance contract should provide employer's liability insurance cover of £10m to protect you against claims made against you in respect of your legal liability for death or injury to such employees.

Buildings cover is also important. To properly protect your holiday home, you need to cover all buildings against all insurable risks for the full reinstatement cost, including any garages or outbuildings, fixtures and fittings, patios and driveways, garden walls, fences and swimming pools. You must include the cost of clearing the site in the event of complete destruction and the associated legal, architect and surveyor fees. Remember, the reinstatement cost is unlikely to be the same as the market value of the property or the price that you paid for it and is worth proper research. If you under-insure your building, any claim payment may be reduced proportionately, which could involve a significant loss to you.
Most insurers will index link the buildings sum insured so that you maintain an accurate insurance value over time but this depends on you getting the right value in the first place.

The very nature of a holiday property is that it is a `home from home' and is therefore let on a fully furnished basis. As holidaymakers’ expectations and competition increase, the owner will often spend tens of thousands of pounds furnishing their holiday home. LCD and plasma TV screens, surround sound home entertainment systems, hot tubs and expensive garden furniture are becoming increasingly common. A policy that includes full accidental damage cover on a new for old basis will provide you with the peace of mind that your property is protected. The sum insured should be adequate to cover the replacement value of the contents in total.

Owners should consider completing an inventory of contents together with photographic evidence and schedule of values in case of a total loss. A tip for photographing your audiovisual electrical equipment is to take a shot of the serial number, which can help identification and recovery in the event of theft.
Your holiday home policy should also provide loss of rental income cover for insured perils that make the property uninhabitable. For example, it may take up to two years to rebuild a property levelled by fire; you should therefore check that you are covered for sufficient loss of rental income for this period.
Finally, the holiday home owner must not fall foul of the ‘powers that be’. Remember to get permission from your mortgage lender and your landlord - in the case of a leasehold property - before you let your home for short-term holidays; otherwise your insurance could be invalidated. Make sure you understand your policy cover and your obligations regarding any warranties. You or an agent may need to inspect your property every 14 days while empty, or ensure a minimum temperature is maintained during cold spells if the water isn’t turned off and drained. Do check that you are still fully covered even if your property is vacant for long periods; some policies will reduce cover to a minimum or even exclude certain provisions completely.

If your holiday letting is seasonal, you may consider letting the property on a short hold tenancy agreement for six months. Make sure your holiday home insurance policy allows for this.
Mark Lavington is the director of Boshers. For more information visit boshers.co.uk

Good lighting really does transform a home, but it can be a difficult task to master. Leading electrical regulatory body NICEIC offers some practical advice on how to get to right.

Well positioned lights will really help to enhance the mood of a room, but just how much light is needed to create the right effect? One way to determine the correct light levels for a home environment is to measure the room size in square metres and multiply this by 25 for incandescent lamps, 15 for halogen lamps or 19 for compact fluorescent lamps. This will give you the total watts required to light the room.  It’s best to place lights at a height where the bulb can’t be seen directly to avoid and reduce any glare. Don’t hang pendants so high that the bulb is clearly visible underneath from below and if lights are to be positioned over or near reflective surfaces make sure they have a diffuser.

The lighting for each room in the house will depend on its function, and the following tips will help you decide which light sources are best.
The living room Used for relaxing, entertaining, socialising, reading and watching TV, the living room is a multi-functional space. Work out where your furniture will be positioned and where you need lighting. That way you can advise your electrician if new sockets need to installed and so avoid long cables and flexes running across the floor.

Aim to use plenty of different light sources so you can create different levels of lighting.
One central pendant light with up lighters and table lamps placed around the perimeter of the room will create a feeling of more space as the light radiates inwards. Floor lamps are effective at brightening up dark areas where it’s tricky to fit wall lights. Just one chandelier situated in a living room can provide an element of glamour – they were traditionally lit by candles so use a low wattage bulb to give the same subtle affect.

The kitchen Lots of light is required in the kitchen. Under unit lighting is important to cast efficient light over work surfaces and a good ambient light is also useful. Downlighters in the ceiling creates a glare free effect while remaining functional, but it’s important that each spotlight is fitted properly with a fire hood. Pendants aren’t best suited to kitchens as they attract grease and dust.  
The dining room How you light this room depends on its style, but usually the main light source is hung over the dining room table, which can then be supplemented by wall lights and table lamps. You could also fit a rise and fall pendant, which can be adjusted to the desired height. If candles are used ensure they are far enough away from the light fitting. Long dining room tables look great with long lights suspended on wires.

The bathroom For make-up application and shaving it’s best to have a bright light, but if relaxing for a soak in the tub you’ll want to be sure you can dim the lights. Wall lights must be out of reach, or enclosed to keep water out, especially spotlights that are installed above a shower. Lighting can be controlled by a wall switch, which must be mounted outside the bathroom. Some mirrors have sections of the reflective surface removed and lights fitted behind. You can also use LED floor lights, which are set into the floor and come in different colours.

The bedroom Here you can really be creative with your lighting scheme, using bright neon colours or sparkling fairy lights. The right lighting will help you create a relaxing retreat to wind down and get a good nights sleep, but be sure to include more general lighting for getting dressed in the morning. Adjustable reading lamps are ideal if one of you is reading or watching TV while the other sleeps. They can be mounted on the wall, hotel style, or they can be fixed to the bed head or used as table lamps. To make the most of your dressing table make sure it is lit from both sides of the mirror, so it doesn’t cause shadows across your face.
To find a registered electrician in your area visit findanelectrician.info

General tips

Bright light is not always good light
Different effects are produced when light is reflected by surfaces, so consider this when you are deciding where to situate lights
Direct lights are best for reading or working
Lights can also be used to highlight features such as paintings or objects and help add atmosphere to a room
For multi functional rooms install a dimmer switch so you have the option of more light for reading or working and lower light levels for relaxing
Incandescent bulbs give off warmer colours and will help achieve a cosy atmosphere, while fluorescent light bulbs will offer a cooler but more efficient light for utility rooms
Dark coloured rooms absorb more light, so additional light will be needed
If you have a feature wall or coloured surface, illuminate it with lighting to add colour

The Exeter office of Savills has been instructed to sell Waterside House set in the sought after village of Stoke Gabriel in the famous South Hams region of South Devon.

As the name implies, Waterside House is perfectly located on the water’s edge, enjoying spectacular views from the many windows, balconies and terraces over the unique Mill Pool to the deciduous wooded banks beyond or down stream to the tower of the parish church of St Gabriel and St Mary with the River Dart beyond.  With steps leading down to the river via the terraces and balconies, the house is ideally placed to enjoy not only the water frontage, but also the south Devon countryside, Dartmouth and Totnes being about 4.5 and 5 miles away by boat and Torbay about 6 miles away.  The stylish accommodation includes a master bedroom suite with river balcony, a guest suite, 2 further bedrooms, open living space with dining area, sitting area, kitchen, laundry room, study, cloakroom, family bathroom, shower room, games room with kitchenette, studio and workshop and would provide the discerning owner with a property which is just perfect to entertain in.

Stoke Gabriel is picturesquely scattered on the east bank of the estuary of the Dart and is surrounded by beautiful and unspoilt undulating countryside.  This ancient and unspoilt village retains much of its period charm with records showing that a church has been in the village as far back as when William the Conqueror defeated King Harold in 1066.  Set within the church grounds is the famous yew tree reputed to be nearly 1300 years old and rumour states if you walk backwards round the tree three times your wish will come true!

Richard Addington of Savills says “Looking over the Mill Pool at sunset from the balconies is amazingly calming.  Whether you had this house for a permanent or holiday residence, the benefits are obvious”
Waterside House is being offered for sale at a guide price of £1.5 million.

Tax may well be playing on the mind of many property investors as they prepare to file their self assessment tax return. Although the final deadline is the end of January next year, for those who want the Inland Revenue to calculate their tax for them the deadline 30 September.
The problem for many investors is that the complexity surrounding tax issues means it can be very hard to know what is and isn’t deductable – the end result being that investors can end up paying too much or too little in income and capital gains tax.
Before you tackle your tax return this year it is worth ensuring you have considered everything you can to correctly minimise your tax bill.

GET ORGANISED

Property investors need to be organised. A separate bank account should be set up and investors should keep track of rental income and expenditure, holding on to all relevant receipts. Hiring professionals such as accountants and solicitors will help to make the process much easier. Any professional or legal fees can be offset against the rental income. However, fees incurred during the actual buying process cannot be claimed until the property is sold.

SINGLE OR JOINT OWNERSHIP

If the property is owned by more than one person then careful consideration needs to be given to the form the ownership takes, whether it is joint ownership, partnership or through a syndicate, each method will have its own tax implications. As the Inland Revenue assess income individually, each legal owner of the property is required to submit an annual return.

OFFSETTING EXPENSES AGAINST RENTAL INCOME

Income tax is payable on rental income after allowable deductions have been taken into account and the list is extensive when it comes to what is and isn’t deductable. Investors can offset costs including utility bills when properties are empty, management agents’ fees and interest paid on borrowing costs, including mortgages and loans.
In addition, costs relating to repairs of maintenance can be offset. However, improvements made to a property, such as adding a conservatory are not tax deductable, but they can be offset against the capital gains tax liability when the property is sold.

RUNNING YOUR PROPERTY AS A BUSINESS

A buy-to-let property should be treated as a business and as such certain costs associated with running the property are deductable. These include marketing and travel costs and office costs such as a proportion of the utility bills and office equipment.

EXIT STRATEGY

When it comes to selling the property there is likely to be capital gains tax on any profit accrued on the property, which could be up to 40 per cent. However, there are steps which you can take to reduce the bill. For example, you can claim exemption on the tax for the period you have permanently resided in the property and the final 36 months of ownership, irrespective of whether you have lived there. Other tax breaks include taper relief and personal capital gains allowance of up to £8,500.

PLAN FOR THE NEXT GENERATION

It is vital to plan for the next generation and to protect your assets from inheritance tax (IHT). The current threshold is £300,000, which means you are likely to be liable for inheritance tax, especially if you have a portfolio of properties. However, there are various methods for reducing IHT. It is worth consulting a professional to ensure you minimise your family’s bill. It is essential to make a will, to ensure your estate is passed on according to your wishes and if your property is overseas you should seek inheritance tax advice and write a local will, as your British will might not be accepted.
Whether you are buying in Britain or overseas you need to be fully aware of all the tax implications. Don’t be fooled into thinking you won’t be found out, the authorities now have the power to discover exactly what your income is whether it’s here in Britain or overseas. Be prepared, pleading ignorance will never count in your defence.

David Austin is managing director of Property for Life. Visit propertyforlife.com

Most people rent because they believe they cannot afford to buy. But what if there was an option to own a place for the same or less than what it costs to rent? Amanda Shiel spotlights one such competitively priced development.

Milliners Place combines the conversion of a former hat factory three new buildings on Midland Road to create 119 luxurious one-, two- and three-bedroom apartments. Situated in the town centre, Milliners Place is a five-minute drive to the M1, making the North and South of England easily accessible. It’s also a short walk to the train station, which offers the town’s commuters fast trains to London’s St Pancras in just 23 minutes and an easy commute to Luton Airport. 

Redeham Homes has sensitively converted Milliners Place to retain the building’s original Georgian architecture, while creating stylish apartments that maximise the available space and light. The apartments have been built to a high specification including a choice of kitchen designs incorporating an integrated stainless steel oven, extractor hood, fridge/freezer and washer dryer. A choice of layouts includes open-plan and semi-open plan styles as well as those with separate kitchens.
The contemporary bathrooms include Roca Laura wall-hung white sanitaryware complemented by Grohe fittings, thermostatic showers and heated towel rails. To provide purchasers with an added level of style and luxury, a range of the apartments include en suite facilities to the principal bedroom. Some of the apartments also benefit from balconies or terraces. Private parking is also available at the development.
Milliners Place is ideally situated for Luton’s wide range of facilities and amenities including the Arndale Centre, which is within easy walking distance.

Prices for the remaining apartments at Milliners Place start at £130,000 for a one-bedroom apartment and from £170,000 for a two-bedroom apartment. For further sales information contact Redeham Homes on 01582 456692 or visit redehamhomes.co.uk.

We look at a no-nonsense guide for landlords who let to students
 
The Landlord’s Guide to Student Letting is an invaluable guide to understanding the continuous flux of a profitable market and the legislation attached to it.

Written by seasoned student landlord Catherine Bancroft-Rimmer, it is candid about the pros and cons of student letting, making complex and confusing legal procedures easier to understand and act on.
Sample letters, forms and useful addresses of organisations are included to help the landlord. Rimmer also takes into account the long-term view of the student letting market nationally and shares her knowledge about potential future changes made by the government which will have a long term impact.
If you’re interested in investing in student housing, The Landlord’s Guide to Student Letting will arm you with information about your rights and responsibilities and prepare you for the highs and lows of landlord life.
 
The Landlord’s Guide To Student Letting by Catherine Bancroft-Rimmer is published by How to Books Ltd and is available at £10.99 in major bookshops and online retailers.  
howtobooks.co.uk

Lettingagent.com offers advice for those considering entering the student property market.

Letting to students is a popular way to realise value from your property investment. But there are things you should keep in mind to help ensure success.

Think carefully about location Local knowledge is invaluable. Know where the ‘student areas’ are and be wary of up-and-coming areas. Similarly, avoid places where students wouldn’t want to live in or would not be welcome. Not all university towns are equally profitable. Do research by talking to local agents about what yield to expect.

Choose a reliable letting agency An efficient, experienced and professional letting agent is crucial for landlords with demanding full-time jobs. A third party can save the hassle of dealing directly with tenants when things go wrong – and can save a considerable amount of money in property repairs. Landlords should choose letting agents that are registered with an official organisation, such as the Association of Residential Letting Agents (ARLA).

Register with the uni accommodation service Being on the university database is an easy way to advertise a property directly to students and offers them a quick, hassle-free way to access property details and managing agent’s contact details.

Be aware of health and safety regulations Landlords should pay particular attention to the HMO Licensing and Housing Act legislation to ensure that they comply with the rulings and any recent amendments. Those renting flats to students should check this information carefully as some are exempt from certain clauses.  

Insert a clause in the lease to allow for potential damage This will allow for circumstances where students fail to follow the procedures required (for example, where damages are caused). Students should be given a clear inventory and a flat inspection should be carried out the first day of tenancy so that breakages or damages can be noted at the end of the term. A list of emergency numbers and useful contacts and dates (e.g. ‘bin day’) can also prove very helpful.

Get referencesTenants must have a reference from their previous landlord. An untrustworthy tenants means hassle, worry and expense. Make sure the rental contract clearly states when the rent is due – and in what format – to help avoid any problems over rent payment.

Consider what a student needs Student properties don’t need to be cluttered with accessories that are more than likely to be broken during the course of their tenancy. The interior should be comfortable, clean and functional with desks, chairs, bookshelves and lamps in each bedroom.

Avoid false economies Though no one would advise buying expensive carpets, curtains or sofas, the furniture provided for students does need to be hardy and able to withstand a bit of ‘wear and tear’.

Get building insurance This is important for all buy-to-let properties. Make sure your property is adequately covered – even something as small as a burst pipe could end up causing thousands of pounds worth of damage. Building insurance will sometimes cover a limited amount of public liability, so landlords should check the wording of agreements carefully.

Sort out council tax forms Properties occupied only by students are exempt from council tax. Ensure all tenants fill out the relevant forms and return them as soon as possible.

mform.co.uk analysis reveals average first-time buyer could be borrowing £200,000 by 2012.

Analysis of industry data by online mortgage company mform.co.uk reveals that between 1996 and 2006, the average mortgage taken out by first time buyers has increased by 173.6% or around 10.7% a year.  If this continues, mform says that by 2012, the average mortgage taken out by a first-time buyer will top £200,000, up from around £120,500 today or £39,811 in 1996. 

Year    Estimated median first-time buyer mortgage    
2008    £133,468.32   
2009    £147,746.94   
2010    £163,553.11   
2011    £181,050.25   
2012    £200,419.25   
2013    £221,860.37   

Francis Ghiloni, mform.co.uk marketing and business development director, said: “First- time buyers increasingly need to find huge sums of money in order to get on to the property ladder.  For a first-time buyer to take out a mortgage that is three times their salary today, we estimate that they would need to be earning £40,190, but by 2012, it would need to be a staggering £66,806.

mform.co.uk, which allows customers to compare mortgages based on the true cost including rate, fees and other features, says that many first-time buyers can dramatically cut the cost of their mortgage by making sure that they search the entire market for the best deal for them.

mform.co.uk offers consumers a free, unique and innovative online service enabling them to conduct the most comprehensive search of mortgages available. It allows people to identify all of the key features and benefits of every mortgage, and calculate its true cost in terms of rates and charges. This helps consumers develop a personalised list of best-buy mortgages that meet their specific needs.
The search process is free of confusing sponsored links and there are no distracting adverts from lenders during the mortgage search process. mform.co.uk is completely independent and it feels that adverts might unfairly influence a person’s choice of mortgage. Users of the service are able to link through directly to lenders’ mortgage application departments.
The service, which is free and easy to use, can be found at www.mform.co.uk.

Property investors are gaining in experience and confidence, according to a specially commissioned London Landlords’ Day survey from Landlord magazine. Even as the stock market felt the effects of the US sub-prime crisis, the reponses point to was optimism in the market.

Among the findings of this survey was the fact that readers of Landlord are fairly evenly divided in terms of the value of their portfolios; 21 per cent own between £250,000 and £500,000 worth of property, while the same percentage controls a portfolio spanning the £1 million to £2.5 million range and a further 20 per cent bridged the gap with ownership of property totalling between £500,000 and £1 million.
Among the remainder, representing the extreme lower and higher ends of the value spectrum, only six per cent owned under £100,000 worth of property, while a surprising number possessed a portfolio of £2.5 million to £5 million (nine per cent) and nearly as many (eight per cent) owned over £5 million worth.
The ratio of male to female readers is 65:35 and the average reader owns 9.5 properties.
Concerning the recently introduced tenancy deposit protection (TDS) system, almost half (49 per cent) of those who have agreed an AST since its April start have used Deposit Protection Services, while 17 per cent have opted for Tenancy Deposit Solutions. Nearly a quarter (24 per cent) have opted not to take a deposit at all, and nine per cent prefer an insurance-based alternative.

Optimism is the rule of the day for Landlord readers. Forty-seven per cent of the landlords expect positive performance from the private rental sector over the next 12 months, while 14 per cent expect very positive perfomance and three per cent go so far as to say the future is extremely positive. Thirty per cent expect no change, while six per cent are expecting poor performance.