A proposal for an ethical way forward for the BTL market
Turning the buy to let market in its head
A recent article written by the director of Trellows, has had an incredible response, all of it positive. In the article. Antony Antoniou presents a proposal for an ethical way forward for the BTL market. Attempting to rectify the disaster, that the BTL market has become, will not be a quick fix, it will firstly require a U-turn on the way residential property is viewed in the UK. If we accept that homes are a fundamental right, we must also accept that everyone should have the opportunity to own their own home, or at the very least, have a home that they can build their lives around, without living in fear of their next section 21. There is also the moral issue, of those who are in a privileged position, with easier access to funds, being able to compete with first time buyers, for the same property, leaving the disadvantaged first time buyers unable to buy their own home and being left at the mercy of short term rentals, which the modern AST actually is. If a family move in to a property in January and take a couple of months to settle in, they are then literally just eight months away from their next section 21, this is not a situation that is acceptable in modern Britain.
We at Trellows, aim to lead by example, therefore we will now be operating to an ethical strategy, which will raise the standard of property, then offer these properties for long term rental to families, with leases of FIVE YEARS, plus an option to buy plus a contribution towards their deposit.
Here is an overview of our strategy:
The basis of our strategy is as follows:
- We will seek to find properties that are in a poor state of repair, un-mortgageable or those with an EPC rating that falls below par.
- We will completely renovate these properties, ensuring that they are brought up to top-spec, along with suitable insulation that will raise them above the impending minimum EPC level 3, although we will endeavour to exceed this where possible.
- We will offer the properties for rent on an Assured Shorthold Tenancy of FIVE YEARS, with a clear scale of rental increases, based on RPI, to ensure that everyone knows where they stand. This of course is dependant on securing a fixed five year term with the lenders, as we must know our outgoings, before we can commit to income.
- In month 53, the tenants will be offered the ‘Right-to-Buy’ the property at the median of three independent valuations, which they must accept by the end of month 54.
- We will offer to contribute 10% of the purchase price to the tenants by way of a gifted deposit, this will only be made available if they choose to exercise their ‘Right-to-Buy’ and will not be available for any other reason.
- The tenants must exchange before the end of month 59, with completion set any time after the end of month 60. This is to ensure that should the sale not proceed, we have time to prepare another fixed term, with the same option.
- We will pay for a financial adviser to give the tenants a ‘Financial Health Check’ early on in the tenancy and this adviser will be available at our expense, to advise them on how to prepare themselves financially, so that they will be able to purchase the property, should they wish.
- At the end of the period, we will have brought a derelict property back in to use for a family, made that property available on a long-term AST, we will have achieved some capital growth and rental income for five years. Thereafter, we will re-invest the proceeds of the sale, in to another property, repeating the process.
- We would like to petition the Government to match our gifted deposit, by re-introducing ‘Help-to-Buy’ for resale property, which will leave the tenants only needing find 5% of the deposit, to qualify them for the best and cheapest mortgage deals. It is unfair, that those who are most in need, should be paying the most in interest.
- We aim to encourage our investors, partners and the industry as a whole to adopt this model, thereby creating an ethical property market, that will also be open to those in need.
- The UK housing stock is a national asset and our strategy is to encourage properties throughout the country to be renovated, insulated and rented on similar terms, this strategy could also be applied to new-build homes, where investors contribute to the build and subsequently rent the properties on similar terms, offer people a real and stable home to build a future.
We would like to encourage larger developers to follow suit and contribute towards changing the landscape of residential homes in the UK.
If you would like to get involved, please get in touch.
Read the full article by Antony Antoniou HERE