novice landlord

mr_bluesky

Hi-I wonder if anyone out there can offer some words of advice to an about to be novice landlord. I am considering buying the house next door. It would be a cash sale-no mortgage. I would then hope to rent it out for a period of 5-10 years then sell. It seems so easy in this planning stage, but then I’m a complete novice. If there is anyone out there who has bought property to rent out, what are the pros and cons?

moesasji

The following post by G_M contains very useful information about what it involves to be a landlord, see http://forums.moneysavingexpert.com/showpost.php?p=41160642&postcount=12

The major risk I see is that you attempt to buy pretty much at the top of the market (depending on your region). Can you really expect the house to have gone up in price in 5-10 years from now?

joerugby

Prepare a ten year business plan.

TroubledLandlord

I've been a landlord now for 4 years and have two houses that I rent out. 1 experience has been nothing but sweetness and light, the other has been a 4 year train wreck of doom and disaster.

The things I'd add, above what was in that starter thread, that I've learnt the bitter, hard way:

1. Put together a spreadsheet of what numbers look like over the next decade

1.1 Put rental income in, work on the assumption you get paid 70% of the time
1.2 Put in BIG numbers for maintenance (I work on 4k a year on a 4 bedroom house, it's about right)
1.3 I worked on inflation being around 3% and it seems to work out

These spreadsheets will tell you whether it's even feasable or not. From my own pov, my sheets tell me that I tread water until the mortgage is paid off then I make a small amount of income. IFF interests rates rise I'd actually be better off selling and putting the cash in an ISA. That's the problem though, you never know what's going to happen in the future, but property has always felt "safe" to me.

2. Going with an agency

2.1 This WILL probably make things easier
2.2 They'll make sure that your certificates are up to date and you are legal
2.3 They'll find tenants
2.4 They'll do the safety deposit scheme.
2.5 As a starting point, to a total novice, it is an easier "in"
2.6 Be aware though, the agency DON'T pay any maintenance, but get paid for renting the house out, so they'll likely stick anybody in there
2.7 Fully managed does NOT mean fully managed, they'll find someone and do the admin but not necessarily quarterly checks.

3. Protecting yourself

3.1 Make sure that you meet any tenant personally. It can help keep people under control if they know the people they are screwing over, rather than it being some faceless entity
3.2 Make sure that you have quartlery inspections on the property in the contract. I've rented to 3 sets, 2 didn't have inspections, 1 did. The 2 that didn't completely trashed the place, it looked like a squat. I can't emphasise the damage that they can do.
3.3 I am now going to go as far as saying that a spring clean has to happen once every 3 months (paid for by LL). Whilst expensive it is WAY, way cheaper than sorting out the carnage when people move out.
3.4 Trust your interests, if you don't like the tenant don't rent out. It's better to have a potential house that you can rent out, than one with somebody in not paying rent and ripping your boiler out to sell on ebay.
3.5 Again, put in sky high maintenance costs because you've NO idea what you are actually going to end up with.

4 Tax

4.1 This seemed a relatively simple affair, I simply wrote to my little PAYE office (found them on the net) and they gave me a tax code which takes money out of my salary. That was relatively easy.

5 The nuts and bolts

5.1 You need a maintenance guy, who is reliable, and access to trades people
5.2 You need a "vision" for what you're going for. Students ? (tend to be extremely dirty and you'll need the inspection, but regular payers), Families ? (these guys are sought after and so your property will need to be immaculate), sharers (tend to not pay, live their life on the edge)
5.3 You need an electrical safety certiicate, phoning an electrician will sort that out for you
5.4 You need a gas safety certificate if applicable
5.5 Check your council tax, you may be liable if empty and you have furniture in there. Sometimes easier to just bin off the furniture and buy new rather than the council tax.
5.6 Set up a new current account for all house transactions so you have a total record of everything that happened.

6. My own experiences

I've two houses and they are POLES apart (pardon the pun) from each other.

6.1 The good.

One house was really nicely done up, I used to live in it with my wife, and we got a lovely Polish couple as tenants. They are completely regular payers and look after the house well. I've found you can tell a lot from the garden. If the garden is maintained then probably the inside is too.

With a higher class tenant like that you need to provide a "luxury" service. That is, if the heating breaks down you can't fiddle with it running "experiments" to diagnose what it is. You need it fixed IMMEDIATELY so go for the more expensive "luxury" option

6.2 The bad

House numbers 2 has been a total disaster, things that have gone wrong:

6.2.1 First tenants, paid their rent for the first 2 months then never again
6.2.2 I had inspection so when they moved out the house wasn't in to bad a state of repair, a professional clean later and it was fine
6.2.3 2nd tenants were students and basically trashed it.
6.2.3.1 Garden was full of roadside crap that I had to dump myself
6.2.3.2 Lavatory had urine all around the bowl where they couldn't even hit the target
6.2.3.3 Massive water damage were shower was leaking through the roof and they hadn't reported it
6.2.3.4 It was basically 3x 20 year old guys marinaded in a house, it was disgusting

6.2.4 3rd tenants have been a total disaster
6.2.4.1 Paid their rent on time, mostly
6.2.4.2 Have fixed massive satellite to the front of the house, in contravention of the landlord contract
6.2.4.3 Have drilled holes with wires in, through the walls, still waiting to take posession to see how it looks
6.2.4.4 Have had lots of people living there, who weren't meant to be (I believe)
6.2.4.5 Have been aggresive and threatening towards the check out clerk, and still haven't left the property even having given notice to leave.
6.2.4.6 I've yet to enter the property but it has been described as "like a squat" by the letting agency

So there you have it. Some of my learnings from the past 4 years distilled into an email.

Good luck, you'll need it. It aint easy, but you can get there and make some money after you've learnt the ropes.

Annisele

What would the rental yield be like? If it's less than you'd get in NS&I certificates, the scheme is (IMO) pointless.

I'm also not convinced I'd want to let out a property that was next door to my own house. You risk the Ts knocking on your door at 11pm wanted help to change a lightbulb, when they wouldn't have bothered if they'd had to call you. (I know that as a tenant I'd avoid such a property; not keen on the idea of the LL just popping in whenever he feels like it).

poppysarah

What's the reason behind selling in 10 years?

Do you plan on making a capital gain?

googler

Yes, if it turns out to be worth less in 10 years' time than you paid for it now, where will that leave you?

skipfeeney

I would never buy and rent out next door!! Just think of all the questions you will get,and the "Can you just have a look at this..." all the time. I rent a house out literally 100yards away from where i live, but i havent told the the tenants i live down the road

G_M

skipfeeney wrote: »

I would never buy and rent out next door!! Just think of all the questions you will get,and the "Can you just have a look at this..." all the time. I rent a house out literally 100yards away from where i live, but i havent told the the tenants i live down the road

Which is fine till they ask for your address - their legal right!

taxsaver

G_M wrote: »

Which is fine till they ask for your address - their legal right!

'An' address, through which you can be contacted, but I don't think the law requires that it actually MUST be your personal residence that is given.

G_M

taxsaver wrote: »

'An' address, through which you can be contacted, but I don't think the law requires that it actually MUST be your personal residence that is given.

Landlord and Tenant Act 1985

1 Disclosure of landlord’s identity.
(1)If the tenant of premises occupied as a dwelling makes a written request for the landlord’s name and address to—
(a)any person who demands, or the last person who received, rent payable under the tenancy, or
(b)any other person for the time being acting as agent for the landlord, in relation to the tenancy,

that person shall supply the tenant with a written statement of the landlord’s name and address within the period of 21 days beginning with the day on which he receives the request.
(2)A person who, without reasonable excuse, fails to comply with subsection (1) commits a summary offence and is liable on conviction to a fine not exceeding level 4 on the standard scale.

So the address on the contract for the serving of Notices can be ANY address, but if the tenant makes a written request.....