Buy to Let - Guaranteed rent -Good/Bad?

pinarelloman

Wondering if you could offer any advice... we are looking to rent out or flat in East London (as we are returning to Oz) and I have been told about Local Authorities renting places for 3-5 years and returning the property in the condition they took it in. They look after everything - boiler breakdowns, problems with the property etc. Downside seems to be less rent than the open market but as I will be in Oz as long as it is G'teed I can budget around it and forget about it. This guaranteed system is preferred, given I will be looking for properties to move into and jobs, all with a very young family. So the idea of easy is very attractive.

Or the alternative, to get it fully looked after by an Estate Agent who hopefully will do right by us and the tenant. giving up 16% of the rent is bad enough but then, if we found out it was not what we thought it would mean major hassle to re organise keys etc from Australia.

As we are very new to the whole game of renting as a landlord we would love some sound advice from people who are doing it from abroard or who have done it. Any recommendations for books or magazines to read, things to look out for... :eek:

BitterAndTwisted

Check the landlordzone forum before you even dream of becoming a professional landlord. Being tens of thousands of miles away sounds like a recipe for disaster to me. Renting to the Local Authority long-term may not be the solution you are seeking. Please bear in mind that you will have absolutely no say in who LA puts into your property and it is not unknown for LAs to not put the property back to its original state, despite what assurances they may be giving you now. Why not just sell?

I have neighbours who are renting long-term to our LA and they have experienced unending trouble from their tenants. They have been called round to make repairs constantly since the beginning of the tenancy, even to repair windows which the tenants have broken themselves. The final responsibility for the property falls on the landlord not the LA who acts purely as an intermediary and I suspect this is not what you might find terribly convenient from thousand of miles away. Same goes for letting agents. What control do you expect to have over the agents for basic repairs and maintenance. Sounds to me like you could risk writing an open cheque. Why don't you sell?

clutton_2

the first thing to do is find out if your BLT insurance covers such a council let... the vast majority dont... for the very reason that B&T has outlined above..

Councils generally use such private LL properties to house folks who are either new to our culture and dont know how to behave, or yobs who cannot get housing anywhere else....

also if you are in Aus your letting agent will be responsible for deducting your tax from the rent...

if you insist on renting then please use a top quality, (expensive) letting agent, and leave it entirely in their hands, and assume that you will make no money and may even have to subsidise it......

Nosht

I think that you are taxed at a higher rate if abroad.


N.

N79

Nosht wrote: »

I think that you are taxed at a higher rate if abroad.


N.

No - residence has no impact on tax bands. The 0%, 20%, 40% and 50% bands and allowances all start and end in the same place.

mlz1413

The councils do take on properties for long term lets, but check with your council as some return it to you less wear & tear which I think is open to abuse over a 5 year period.

Some agents do guaranteed rental schemes for 1 year, check the company is reputable (anyone can be a LA) and the T&C's as you will need to know who is responsible for utilities bill and council tax if it is un-let.

If you do not have an address in the UK then you will probably have to use an agent as I think you need a UK base for the AST. Also the tax due has to be paid out of the rent I think. Both things you need to check.

Why not just sell the place?

pinarelloman

Thank you all for your replies....

Um... Just bought the flat and thought that renting it would be a good way of holding on to it for investment purposes. Figured that lots of people rent out places from elsewhere in the world - property tycoons and the like and thought I would jump on in! Joke. Seriously though, I figured that renting through a LA would be good if the contract stated something like - return to owner in a similar position as taken and they look after all the maintenance for that time. I haven't found the contract or the LA that do it yet just rumours of friends and stuff.

So, LA is off and SELL SELL SELL. BUT I really want to keep the flat. There must be decent landlords that keep on top of the issues and can control tenants! We have friends who could sort some things if asked. We could pay some of them to be bothered. Surely the 'expensive' ones would be able to maintain it?

We are happy to break even on it. We will pay extra off the mortgage from Australia. If the place could pay for the basic rent - £800 and all the bills I would be very happy. We have a £6000 sink fund for un-rented times and issues with the property. Could increase this if necessary.

Flat (2bed, 1 en suite, 1 bath )is in East London 20min walk from Canary Wharf - 150 000 left on the mortgage and properties in the building rent for between £900 to £1000.

Who are the EXPENSIVE estate agents anyway? Foxtons?

BitterAndTwisted

I suggest you take a walk around your neighbourhood, the estate agents boards should give you a fair indication of who the popular agents are. What I think you are thinking of is a full letting service including repairs and maintenance. The charges are likely to be quite high, expect about 12% of the monthly rent plus you get charged in full every time they have to instruct a workman and at a price which is not often negotiable. There's a fair bit of mark-up to be made in this game. Contact at least half a dozen agents and talk to them about the various different contractual services they offer and compare prices. You might be better off trying to get a personal recommendation.

SouthCoast

Local friends own an investment flat in Scotland.

They will tell you that manageing from a distance is a nightmare and that letting agents are greedy, lazy and incompetent.

mlz1413

Say you go with an agent and have no problems for a year, receive rent, no phone calls to repair anything, then tenants wish to move on, it all goes well and next lot of tenants move in but market has changed and you get a slightly lower rent, then next lot of tenants take longer to find and so you take a lower rent.

Then in 5 years you come back to find that the carpets are stained, kitchen worktop has been ruined as no one used a chopping board, the cupboard doors are all loose, the bath is scratched the shower has been dripping for a year, the curtains are dirty & torn the rails hanging off walls. Not malicious damage but lots of thoughtless use over the years.

Your flat needs serious money spending to get it back to was it should look like and the LA aren't interested as everyone's inventory was signed off and deposits returned. What will you be able to do about this? Take the LA to court? None of the employees who talked to you 5 yrs ago will probably work there so make sure you have your 'guarantee' in writing and confirmed by a solicitor as worth the paper its written on.

Google guaranteed rental income for agents that offer what you are looking for, but be prepared to either come back once a year or insist on photos once a year and put the effort in to ensure the LA are doing what they say.

5 yrs of renting is a gamble, but investing is a gamble, so be prepared to put in the work before and during to maintain your investment.

Jowo_2

My friend leased her property to a local council for 3 years and expects to spend around 6-7k, a third of the rental income, in restoring it back to its original condition.

The terms of the lease which puts the risk back onto the landlord means only £1k from the council as they exclude all decoration and floors from compensation and dismiss most of the damage, including damaged light fittings, broken door/window furniture, baths scratched with sharp objects, and similar as 'fair wear and tear'.

These types of leases typically allow the council to terminate it or extend it at short notice but doesn't allow the landlord to do this.

With my friends property, the council failed to attend to repairs in a timely way and did not deal very well with the dozens of reports of anti-nuisance behaviour reported by the neighbours, dismissing it as hearsay. The neighbours reported the tenants for noise, for theft of the mail, for fly tipping their furniture in communal areas. The police were regularly called to the property. The tenants would not let an engineer in to undertake the gas safety certificate.

The last tenant was in an abusive or violent relationship and there were many windows smashed and most of the doors had holes punched in them, most of the fixtures and fittings were damaged in some way (door/window furniture ripped off, smoke detectors missing, bath scratched with a sharp object). They decided to customise the kitchen cabinets by glueing shiny paper to them. They kept pets and it stank of animals. They installed many shelves (badly), painted some of the rooms (badly, including painting around a wardrobe instead of behind it...) and installed a satellite dish. The broken bathroom fan was either not reported or not fixed if reported which led to extensive mould.

The last tenant refused to move out at the end of the lease and the council then admitted the local courts would probably not grant them possession because she had a child and the courts never make homeless a family because of the human rights act. But that didn't matter, since it appeared the council had forgotten to serve them eviction papers anyway months after they had overstayed.

Now, all that remains after the refurbishment, is to deal with the stream of debt collectors calling for the previous tenants and to get the token/card energy meters swapped back (the tenants got into arrears and credit meters were installed).