Take the buy-to-let reality check by Finance News Bulletin

Published: 02/12/07

Buy-to-let investors countenance a series of wake-up calls as interest rates rise and new rules power them to be more professional over everything from deposits to property standardsExperts speak many investors have been making easy profits for too extended and need a reality check'For a extended time, buy-to-let has allowed investors to quite literally create money while they sleep But the type of weather is getting tougher this year and investors should get out if they aren't up for the confront,' says Philippa Gee, investment manager of financial adviser Torquil Clark in Wolverhampton

More importantly, investors require to be aware of the new rules that rule the buy-to-let market Fail to comply and you could be thousands of pounds out of pocket and might even be prosecuted 'This is no longer something you can jump into with your eyes stopped up,' says Gee Here are the reasons

Owning buy-to-let property is getting more luxurious Three interest rate rises since August and at least one more on the cards are squeezing many investors' proceeds Lee Grandin, of broker Landlord Mortgages in Wokingham, Berkshire, says abundance will be emotion the pinch as the three-year fixes that flooded the market in 2004 approach up for renewal'These investors need to start shopping around well before the deals finish to avoid an even not as good as shock if their payments move on to lenders' far higher standard variable tax,' he says

Fortunately analysts say high-quality buy-to-let deals do exist - six of the best lenders are currently Alliance & Leicester, BM Solutions, Chesham, Nottingham, Norwich & Peterborough and Stroud & Swindon structure societies, though many brokers also advocate less well-known lenders such as Mortgage Express and The Mortgage WorksLandlords and tenants signing certain Shorthold Agreements since April 6 have had to obey with new rules about deposits Landlords who put on't follow them can be ordered to pay tenants three era the value of the put as a penaltyThe regulations are designed to cut down on the number of disputes and to protect both tenant and landlord

An independent complaints auditor can now step in to give a rulingBuy-to-let landlords must sign up with one of the three Tenancy put Schemes The first is a fee-free 'custodial' system which looks after the deposit on your behalf; the other two are 'insurance' schemes where you keep the put yourself but pay a premium to the scheme to protect itMore details can be found at www

straightgovuk/tenancydeposit, or call 0845 609 0696 for official leaflets that explain how the system worksFor specific in order on the custodial scheme, go to www

tdsgbcom, and for details of the two cover schemes, visit wwwmydeposits

couk and wwwdeposit protectioncom

Landlord associations speak confusion still reigns over the rules for so-called 'houses in multiple job' (HMOs) introduced in April last day These were designed to improve standards in the kind of communal housing that normally goes to students or near to the ground and no-income tenantsThe definition of HMOs is complex - it varies according to the figure of bedrooms, storeys and amenities in each room - so up to a year was given for the regime to divan down before strict enforcement began This window has now stopped up and buy-to-let investors who are deemed to own HMOs and haven't had them approved can face fines of up to £20,000

Check the system and requirements at wwwcommunitiesgovuk under 'HMOs'

In a nutshell, if you own what is deemed to be an HMO you require to have it examined by your local authorityFees vary enormously across the country - from less than £150 to more than £1,000 If the property is not up to scratch, you will be told what improvements have to be made and when Fail to comply and you could be prosecuted and countenance big fines

There are now more than three million privately borrowed properties in the country, worth an eye-watering half-a-trillion pounds, according to research by Sainsbury's store But the bank's possessions expert Robert O'May reckons that many of them are at risk because landlords aren't taking out the right insurance'Policies do exist for borrowed properties - ours offers limitless buildings cover and pays out up to £20,000 a year for loss of rental fee,'he says And Lee Grandin at Landlord Mortgages says his experts can find inside cover for owners that create at £6 for every £1,000 of furnishings to be protected

Experts say that landlords who present unfurnished possessions should still consider low-level contents cover to protect kitchen appliances, curtains and other basics Many insurers will defend up to £5,000 of goods in unfurnished propertiesSpecialist 'rent assurance' or 'rental fee protection' policies also promise to pay out if you have tenants who stop paying or cause other evils Endsleigh and Letsure present policies and the British Insurance Brokers Association can also help find plans

call wwwbibaorguk,or call 0901 814 0015

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