The UK is facing its biggest housing shortfall on record. England needs to build four million new homes to deal with an escalating crisis, according to research, prompting calls for the government to dramatically increase funding and set more ambitious targets. Groundbreaking research by Heriot-Watt University says England has a backlog of 3.91 million homes, meaning 340,000 new homes need to be built each year until 2031. This figure is significantly higher than the government’s current target of 300,000 homes annually.
The findings come as rough sleeping has risen by 169 percent since 2010, while the number of households in temporary accommodation is on track to reach 100,000 by 2020 unless the government takes steps to deliver more private, intermediate and social housing. Major homelessness charities are now calling on the government to use its upcoming social housing green paper to urgently redress the shocking shortfall in affordable housing, by committing to funding new homes and overhauling the way it sells land. Catherine Ryder, head of policy at the National Housing Federation, which represents housing associations, told The Independent the findings demonstrated a “real emergency” in the already worrying housing crisis.
On the other hand, more than 11,000 homes across the UK have been empty for 10 years or more, research by the Liberal Democrats has found.
The figures, from 276 local councils, show there are more than 216,000 homes across the country which have been empty for six months or more. Lib Dem leader Vince Cable called it a "national scandal", at a time when "the homelessness crisis is worsening". The number of empty homes is down a third since 2010, the government said. Durham had the most empty homes (6,500) followed by Leeds (5,724), Bradford (4,144), Cornwall (3,273) and Liverpool (3,093).
My business will purchase disused property; and renovate it into affordable housing which is much needed in the UK and let out the property to then gain long term income whilst the property appreciates in value.
The UK suffers from a housing crisis which my business by no means is going to solve on its own. However, for every disused property my business does bring back into use it is one less the Government needs to find to meet its target and end the housing crisis.
In Manchester where I am planning to base my business there are more than 11,000 empty homes in Greater Manchester. The latest government data shows the problem is greatest in Wigan, which has 1,644 ‘long-term vacant’ across the private and public sectors. More than 11,000 homes across Greater Manchester have been standing empty and unfurnished for more than six months.
According to the data, Bolton has 1,637 long-term empty properties, while Oldham had 1,219 and Salford just below with 1,121. Stockport recorded figures of 1,059, while Tameside 1,042, Rochdale 1,008, Bury 907 and Trafford 637. Manchester had a total of 1,599 empty dwellings but compared to just a decade ago, where there were 10,059, there has been a big reduction in the number of long-term vacant.
When I purchase one of these empty properties I will renovate the property to a high standard - I will then look to either sell the property or alternatively let the property, whilst the value of the property appreciates and then repeat the process over.
Demand is high all across the UK at present and for the foreseeable future for housing. Properties stand empty and abandoned across the UK why we just build more properties to meet Government targets. Bringing these empty properties back into use we will be solving the housing crisis and transforming the look of areas.
Finance to start-up
When forming the company and registering it as a ‘Limited Company’ on companies house - This will primarily only to be used as a ‘Special Purpose Vehicle’ (SPV). An “SPV” is a company that only exists for the purpose of holding property. I will set up a company called “TOCO Holdings Ltd” and have that company buy a house. The company doesn't conduct any business activity at all – it just holds the property, has rent coming in and expenses going out. The SPV will hold property and over time more properties will be bought and held in the same company.
How Mortgage lenders see the difference between trading
company and SPV?
If a trading company wants to buy a property with a mortgage, the lender will need to look at the performance of the company. How strong is its balance sheet? What are its outgoings? What projections is it making for the coming years? That's because if the primary activity of the company suffers (for example, the manufacturing company loses its biggest client) it might be unable to make its mortgage payments – or could even go bust.
For an SPV, none of this matters: all it does is hold the property, so there's no risk from its primary activity running into difficulties. But there's another challenge: the company has no financial standing at all, because (if it's buying its first property) it doesn't do anything yet.
The role of the directors
In both cases, a lender will normally take a personal guarantee from each company director. This just means that if the company ceases trading or is unable to pay its debts, the lender can pursue the directors personally for the money owing: you can't just say “oh sorry, the company failed” and expect the debt to be written off.
This is particularly important in the case of an SPV (especially a new one), because the company doesn't have any ability outside of the property to generate cash to pay its obligations. It's, therefore, the ability of the directors to pay their debts, rather than the company, that matters to the lender.
How long must the company have been running to obtain a Mortgage?
There's a common misconception that a company needs to have been trading for a certain number of years in order to get a mortgage.
If a company wanted to get a business loan (for example, a manufacturing company wanted a loan to buy a new machine to increase production), this would be true. But for mortgages for SPVs, this isn't the case: you could set up an SPV today, and apply for a mortgage tomorrow. (Actually, you could even apply for the mortgage before the company exists at all.)
This is because – again – the company isn't really relevant here: it's all about the directors. I, Tom Cooke, who will be the only director of the company have a 90% chance of getting a buy-to-let Mortgage according to three eligibility checkers and according to a Mortgage Broker an excellent chance. With this in mind the only thing holding me back is funding.
To summarise, using a limited company to invest through (primarily for the tax advantages), the situation is:
Your company doesn't need to have been trading for any length of time: you can set up a company online now for £20, and use it to apply for a mortgage immediately.
You, as director, are what matters. The lender will want to see that you can meet your obligations – by looking at your job, income, credit history etc – in exactly the same way as they would if you were taking out the mortgage in your own name.
You will be asked to give a personal guarantee – meaning that you're personally on the hook for the company's debt.
How does the process of getting a mortgage for an SPV differ from an individual?
Really, it doesn't: because again, it's a pseudo-personal mortgage anyway. There are a few points to consider though:
The lender will tend to charge a higher arrangement fee because they've got more paperwork to look at: there's now you and the company to consider.
Your solicitor will generally charge more for the purchase too. They'll need to check the company's articles of association and prepare board minutes, which is straightforward but extra work nonetheless.
You'll generally be required to obtain independent legal advice about the personal guarantee you need to give. This means that another solicitor (who isn't acting for you in the purchase) makes sure you understand what you're guaranteeing, and watches you sign. For the lender, this means you won't be able to wriggle out of it later by saying you didn't understand what you were signing – and for you, it can mean extra expense in paying for this extra appointment with a solicitor.
Other funding needs
Besides from all the aforesaid, funding will also be needed to be sourced for the following to enable the business to start-up:
Tools and equipment
Funding for first project / renovation
Cash to have in hand (emergencies)
Total amount required £21,500.00
The business will make an income through receiving rent payment from tenants. I will ensure that sufficient insurance is in place in case the tenants don’t pay so that the rent is paid in full each month. Direct Line for Business Landlord Insurance offers high levels of standard cover, options to increase limits, and extend your cover if you need to.
When I purchase property I will try to pay less than £60,000 on each sale. I will try to buy property that need between £5,000 - £8,500 spending on renovating each property. Therefore the most I will spend in total is £68,500 plus other fees £70,000 approx total.
One example of the maximum total being spent (£70,000) - I will ensure that the resale value is between £120,000 - £135,000 and a rental income of between £500 - £600.
If a property is rented for £550.00 per month this will produce an annual income of £6600.00 providing a monthly rental yield of 9.43%.
I will try to invest in property in the following criteria:
Areas you can easily get to by train from where you live
Not in rural locations
Avoid towns with poor transport links
Avoid towns with just one big local employer - whether that's a heavy industry or a university
Avoid “Prestige” locations
I will use a 'Let-Only' service. This service includes the following services by an estate agent:
Markets the property
Finds a tenant
Reference checks them
Draws up the tenancy agreement
Conducts the inventory
Moves them in
Then once the tenant is in, I am on my own.
Fees for a Let Only service are typically charged as either:
A percentage of the annual rent (5-8% is typical)
A one-off fee (maybe £300-600)
When funding has been sourced of approximately £21,500 I am immediately ready to start-up the business. The business will be registered on companies house as; “TOCO Holding’s Ltd” - and will be based in Manchester and will only purchase and renovate property and carry out all of its business in Greater Manchester.