Don't sell rent.

Sibley

Great article from the Express.

LETTING YOUR PROPERTY: KEY MOVES FOR RELUCTANT LANDLORDS




As a landlord you will need everyone occupying the property to be on the tenancy agreement


Sunday January 9,2011

By Esther Shaw


Have your say(1)

If you are renting out a home it pays to know the pitfalls.


IF your home is for sale but you’re at the end of your tether trying to get the price you want, you could find yourself among the growing band of reluctant landlords. While there has been some evidence that property prices are improving, some analysts maintain they will be stable through 2011 while others expect a drop of about 6 to 7 per cent.
A reluctant landlord is a homeowner who cannot find a buyer because of the recession and housing market decline, so turns to the rental market.
This development has caused an influx of former private homes into the rental market, says the Association of Residential Letting Agents (ARLA), which warns owners to tread carefully.
“While owners forced to let out their home can reap significant benefits by holding on to their home, letting can be full of potential hazards, especially for inexperienced landlords,” says Ian Potter from ARLA. “This could be material issues, such as a tenant mistreating a property, to financial problems, such as a landlord not being able to meet mortgage payments.”
If you plan to be a first-time landlord in 2011 here’s our guide to renting out a property that was once your home.
Talk to your lender and insurer
Unless the property was bought with a buy-to-let mortgage you need to get permission from your lender or you could be in breach of your contract.
Lenders treat applications case-by-case but may keep your mortgage unchanged if the property is being let on a short-term basis.
If you plan to rent for longer, your rate may rise or your lender may stipulate that you must switch to a buy-to-let mortgage.
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Rates and arrangement fees can be higher than on a residential loan and you may need more equity in your home because loan-to-values (LTVs) tend to be lower.
“Check buildings and contents insurance to make sure it is suitable if the property is let out and make sure you arrange specialist lettings insurance,” says Chris Norris from the National Landlords Association (NLA).

Finding tenants
When letting, decide whether to pay an agency to find tenants or to seek them yourself through a website such as Gumtree. The key is to find someone who will pay their rent on time and take good care of the property.
“Check the tenant’s references before they move in and run a credit check to see if your prospective tenant has a history of bad debts,” says Norris.
As a landlord you will need everyone occupying the property to be on the tenancy agreement. This will usually be an “assured shorthold tenancy” in which all tenants will be held “jointly and severally liable” for the rent if things go wrong.
Before setting the rent, check on similar properties and decide whether to run the contract for 12 months or with a break clause.

Inventories and deposits
Once you’ve found your tenants, prepare a full inventory of the premises and get this signed and dated by both parties.
“If possible take photo or video footage to support the inventory,” says Norris.
At the outset you’ll also need to take a deposit, usually one month’s rent. Make sure you abide by new landlord regulations that require you to place the money in one of three Government-approved tenancy deposit schemes.
The schemes divide into two types. The Deposit Protection Service holds the deposit and only releases it at the end of the agreement.
Alternatively, MyDeposits and the Tenancy Deposit Scheme offer insurance-backed schemes under which the deposit is held by either landlord or letting agent and an insurance premium is paid to cover any claims by the tenant.
At the end of the tenancy the deposit must be returned quickly, minus the cost of putting right any damage to the property.

Furnishings and gas appliances
An important decision is whether to let your property furnished or unfurnished. “If your furniture is precious take it with you or put it into storage,” says Potter from ARLA.
Alternatively, if you do decide to provide furnishings check these comply with the Furniture and Furnishings (Fire Safety) Regulations. “There are regulations governing the installation of electrical equipment so make sure you’re clued up and get any equipment regularly tested,” adds Potter.
“The same is also true for gas appliances, which must be certified and checked annually,” he says.

Running costs and upkeep
Tenants will expect you to be prompt in responding to requests for repairs so make sure you’ve worked out how to deal with wear and tear as well as bigger problems when they occur.
At the end of the tenancy the tenants are required to give the property back in the same condition they let it in, allowing for wear and tear. It is at this stage that you will decide how much of the deposit should be returned.
During the tenancy you as the landlord aren’t entitled to visit your property as and when you please. You must first give notice to your tenants, usually a minimum of 24 hours.

Should you enlist a managing agent?
As a reluctant landlord you may want to avoid much of the hassle by letting your property through a managing agent.
“A reputable agent will know the ins and outs of the rental market much better than most novices,” says Norris. “They may also let your property more quickly, thanks to their greater ability to market it to potential tenants.”
Neil Young of letting and management specialist Young London adds that if you’re letting a former home a managing agent can help loosen any emotional ties.
“This will get you into the mindset of treating the property as an asset rather than your previous home, meaning you make sound business-minded decisions,” he says.
However, the main downside is cost, because reputable agent may charge about 10 per cent of the annual rent for a “let only” service and about 12-15 per cent for a “full management” service.
Both of these make appointing an agent less attractive if you want to maximise your earnings from the property.
To find a reputable letting agent contact an organisation such as ARLA (arla.co.uk) or the National Landlords Association (landlords.org.uk).

TENANTS OUTNUMBER PROPERTIES

If you plan to let your home in 2011 the good news is that would-be tenants are chasing an ever-dwindling number of rental properties.
According to the Association of Residential Letting Agents (ARLA), almost three-quarters of its member offices reported in the last three months of 2010 that there were more tenants than available properties.
Neil Young of letting and management specialist Young London says that with the mortgage market closed to many would-be first-time buyers pressure on the private rented sector is likely to rise. He says: “This, coupled with the underlying demographics of increasing housing demand, at a time when the supply of new homes remains at an all-time low, means the current upward pressure on rents is likely to continue well into 2011.”
The Royal Institution of Chartered Surveyors reports rents are rising, properties are being let quickly and landlords are experiencing very few voids when nobody is living in the property.
However, there are still issues surrounding mortgage availability.
“The buy-to-let market was certainly hit hard by the credit crunch and there are still far fewer providers of loans than in the past, which means rates and fees are higher and criteria tighter,” says Melanie Bien from broker Private Finance.
“However, Paragon recently returned to the market and Santander has said it is considering offering buy-to-let mortgages this year.
“This may persuade other lenders to follow suit as there will be plenty of demand.”
Further, rising rents will make it easier for landlords to meet lenders’ tight criteria.
Young also warns that with rents increasing, landlords should ensure tenants do not run into payment arrears.

PasturesNew

Not one mention of an EPC there.

Davesnave

Good luck. My ex-landlord was one of these. House on the market in 2008 for £425k. Eventually sold in 2010 for £368k.

He probably read an article like this. As his first tenants, we gave him no trouble, but then, somehow, I hear his 'experienced agent' found him some students.....

The man was deluded. The house wasn't worth what he was asking, simple as that.

Bangkok-Dave

Good luck. My ex-landlord was one of these. House on the market in 2008 for £425k. Eventually sold in 2010 for £368k.

He probably read an article like this. As his first tenants, we gave him no trouble, but then, somehow, I hear his 'experienced agent' found him some students.....

The man was deluded. The house wasn't worth what he was asking, simple as that

He made a big mistake by selling. If only he had waited a year or so. He would have got his 425k maybe more.


No need to take students. Plenty of good tenants out there. More than houses available. You can afford to be picky.

Davesnave

Bangkok-Dave wrote: »

He made a big mistake by selling. If only he had waited a year or so. He would have got his 425k maybe more.

Nobody knows this.

The neighbour across the road, whom I still speak with, took that approach. On the market first in 2008, lost a sale and still waiting to jump back in, because he's now fixated on an irrelevant old price. He's peed off staying where he is and wants to return to Surrey, where his old friends are. His wife is just peed off with him being peed off....

The world of financial statistics is very different from the real one that people are living out there.

My point is that it's often better to take a financial hit and get on with your life. You can make that money back, sometimes much quicker, by being a canny purchaser and without involving yourself with letting.

Orpheo

Sibley wrote: »

Great article from the Express.

In literature this is known as a paradox.

Pimperne1

To be honest I am selling this year and would consider this, however, there is one fairly big downside at present. Along with very many others I have a base rate tracker and am benefiting from the low rate at present. The tax man would be rubbing his hands with glee at the prospect of taxing me on my income over expenditure. No doubt I could get another mortgage for another place but the optimum for me would be to sell and port this mortgage with me. Getting a decent BtL rate mortgage for the current property would also be difficult I suspect (although all options are on the table).

chucknorris

Bangkok-Dave wrote: »

He made a big mistake by selling. If only he had waited a year or so. He would have got his 425k maybe more.


No need to take students. Plenty of good tenants out there. More than houses available. You can afford to be picky.

I have rental properties and agree renting is an option but you have to be realistic, yes of course prices will eventually return to nominal 2007 levels but not for some time. Certainly much longer than a year, my guess is about 2016-2017.

Fair enough if he intended to rent out properties anyway, but if he did not it's a long time to be doing something that you did not want to do. Whatever anyone says it's either hassle or you pay an agent to manage (which is expensive and can still end up as hassle)

Pimperne1

chucknorris wrote: »

I have rental properties and agree renting is an option but you have to be realistic, yes of course prices will eventually return to nominal 2007 levels but not for some time. Certainly much longer than a year, my guess is about 2016-2017.

Fair enough if he intended to rent out properties anyway, but if he did not it's a long time to be doing something that you did not want to do. Whatever anyone says it's either hassle or you pay an agent to manage (which is expensive and can still end up as hassle)

Exactly, being a landlord is not the bed of roses it is often painted (except for the exceptionally generous tax exemptions).

chucknorris

Pimperne1 wrote: »

Exactly, being a landlord is not the bed of roses it is often painted (except for the exceptionally generous tax exemptions).

To be honest I have had enough of it (after 20 years) and in a normal market I would probably sell up, but as it's so profitable at the moment I would be crazy to sell up now, especially when the market is low too.

So it's a case of grinding it out for the next 8 years or so. I think it's easier if you want to be an irresponsible landlord, but if you want to do it properly and look after your tenants it is real hassle at times. I can imagine it would be a nightmare for inexperienced 'accidental landlords'

Pimperne1

chucknorris wrote: »

To be honest I have had enough of it (after 20 years) and in a normal market I would probably sell up, but as it's so profitable at the moment I would be crazy to sell up now, especially when the market is low too.

So it's a case of grinding it out for the next 8 years or so. I think it's easier if you want to be an irresponsible landlord, but if you want to do it properly and look after your tenants it is real hassle at times. I can imagine it would be a nightmare for inexperienced 'accidental landlords'

Well I am on year 11 now and want to divest myself of a couple of troublesome little flats on which I might make a bit of a loss (although insignificant in the big scheme of things). I would like to come away from landlording altogether but, as you say, if you have held property for a while it is quite lucrative and, as they all say, in the longer term property prices only ever go up.