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What value do landlords add/provide?

cells
cells Posts: 5,246 Forumite
edited 11 December 2015 at 10:10PM in Debate House Prices & the Economy
Renting and Landlords can be separated into time frames.

You have short term lets. Anything from a day to 3 months. This group are close to hotels and it needs no explanation why hotels or short term lets are value added

You have the medium term lets (furnished or not). Anything from 6 months to 3 years. The majority of the people who rent in this group are students, young workers, people working away from home, people not sure if they will stay in the area long term. This is the bulk of rentals. There is a lot of value to this type of rental. If it did not exist the groups that make use of them would need to

1: find a place to buy
2: arrange a mortgage
3: get a solicitor and pay them ~£1k
4: Pay valuation fees ~£0.5k
5: Arrange a mortgage and pay the £2k product fee
6: Find the 10-20% deposit (more on this later)
7: Exchange and complete
8: Pay Stamp duty
9: Buy furnishings
10: Live there
11: Put it up for sale
12: Appoint a solicitor
13: Go through the process of finding a buyer
14: Could take a long time depending on the town
15: Agree sale price and wait for buyer to short their side out
16: Complete
17: Hand over 1-2% + Vat of the sale price to Mr estate agent

Renting is a service which normally attracts a premium because it allows you to avoid buying and then selling. Just like buying a car to use it for 10 days and then sell it would be silly when you can rent one for 10 days instead but on the other hand if you need a car for 10 years its better to buy as the transaction cost per unit of time owned is acceptable then. since the "transaction costs" both money and time are higher for homes than cars the break even point is typically higher. You might buy a car to use it for a year and then sell it but most people would not buy a house to use it for a year if they though it very likely they would need to sell it after just one year.

Then there are Long term lets. 10+ years. This group is rare compared to the medium term lets. Often it is probably a mistake and a bad choice. The landlord for them is simply an overhead and an additional cost. There is value to some people in a long term rent if the renter though and acted as if it were a series of medium terms lets. The value is maybe similar to that of having car insurance for 10 years but never had an accident and claimed. Overall this is the group that should not be renting if they can help it but as noted its a much smaller group than the combined short and medium term lets

So the value of renting to the renter really depends on time frame. Short to medium term it has value and is a service they are prepared to pay a premium for but long term renting is not a value to the renter it is just an extra overhead.
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Comments

  • PasturesNew
    PasturesNew Posts: 70,698 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    If you can choose from all of those options, all the time, then there's no problem. The problem comes when you're stuck in ASTs for donkeys' years - being turfed out on the whim of a landlord and having to pay the HUGE agency fees to find your next place + stump up another deposit before the last one's released + the cost of moving.

    No security, no permanency, no sense of place.

    Hobos with walls.
  • cells
    cells Posts: 5,246 Forumite
    I think you can also break Long term lets down into two distinct groups.

    The subsidised housing tenants and those that pay their own rent.

    If you do not want subsidised tenants renting private property there are only two realistic choices. Build more subsidised housing or subsidise mortgages for these tenants (eg gov buy them a house and pays the mortgagee). Neither is easy and might not even be desirable.

    Then the group who pay their own rent and are long term renters. What is stopping them buying when its cheaper to buy than to rent?
  • cells
    cells Posts: 5,246 Forumite
    edited 11 December 2015 at 11:06PM
    If you can choose from all of those options, all the time, then there's no problem. The problem comes when you're stuck in ASTs for donkeys' years - being turfed out on the whim of a landlord and having to pay the HUGE agency fees to find your next place + stump up another deposit before the last one's released + the cost of moving.

    No security, no permanency, no sense of place.

    Hobos with walls.


    Do you speak from actual experience because I've never turfed anyone out on a whim nor charge any renewals and always pay deposits back same week usually same day. Likewise when I used to rent as a student and for a few years after that I was never kicked out I ended all my rentals as and when I needed to move to another part of the city/country.

    I think you have a fair point about letting agent fees they should be only one sided eg the landlord pays (maybe a regulated £15 per person max for the actual cost of vetting a person)

    Also of the list there you only have moving fees* and agent fees which are lost money to a renter. I would assume these are at the scale that it would make little to no difference to putting together a deposit to buy a house

    What do you feel are the reasons long term renters rent rather than buy?


    *surely trivial for most short term and medium term renters especially in part/full furnished homes
  • Crashy_Time
    Crashy_Time Posts: 13,386 Forumite
    10,000 Posts Seventh Anniversary Name Dropper
    Landlords have provided me with very cheap rentals for many years, and done all the repairs. Thanks.
  • PasturesNew
    PasturesNew Posts: 70,698 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    edited 11 December 2015 at 11:31PM
    cells wrote: »
    Do you speak from actual experience because I've never turfed anyone out on a whim nor charge any renewals and always pay deposits back same week usually same day. Likewise when I used to rent as a student and for a few years after that I was never kicked out I ended all my rentals as and when I needed to move to another part of the city/country.

    I think you have a fair point about letting agent fees they should be only one sided eg the landlord pays (maybe a regulated £15 per person max for the actual cost of vetting a person)

    Also of the list there you only have moving fees* and agent fees which are lost money to a renter. I would assume these are at the scale that it would make little to no difference to putting together a deposit to buy a house

    What do you feel are the reasons long term renters rent rather than buy?


    *surely trivial for most short term and medium term renters especially in part/full furnished homes
    I've not been asked to move, because I've been lucky and not had to rent for life.... but I know many are. Even on HutH the people talk of keeping it for a year/a few years then selling it.

    In most areas, for most people, you have to go through agents because you're working 12 hours/day and out of the house and it's harder to find/contact/etc a direct landlord.

    Deposit returns are quite slow for a lot - and you have to give the new deposit up front, so there'll always be an overlap - of a lot of cash.

    With a lot of agents the up front fees are huge - and not everybody is in a position to (ever) save up a deposit.

    From memory, when I last rented (3 years ago), I paid nearly £2,500 by the day I got the key. Holding fee, checking in fee, deposit, month's rent up front. And, for many, you can chuck in the cost of paying for the overlap time between rentals, where you have to pay for where you're moving to, while still having unused time at the old place. Where are most people going to (ever) get hold of £2500 just to move and pay that lot out?
  • Crashy_Time
    Crashy_Time Posts: 13,386 Forumite
    10,000 Posts Seventh Anniversary Name Dropper
    I've not been asked to move, because I've been lucky and not had to rent for life.... but I know many are. Even on HutH the people talk of keeping it for a year/a few years then selling it.

    In most areas, for most people, you have to go through agents because you're working 12 hours/day and out of the house and it's harder to find/contact/etc a direct landlord.

    Deposit returns are quite slow for a lot - and you have to give the new deposit up front, so there'll always be an overlap - of a lot of cash.

    With a lot of agents the up front fees are huge - and not everybody is in a position to (ever) save up a deposit.

    From memory, when I last rented (3 years ago), I paid nearly £2,500 by the day I got the key. Holding fee, checking in fee, deposit, month's rent up front. And, for many, you can chuck in the cost of paying for the overlap time between rentals, where you have to pay for where you're moving to, while still having unused time at the old place. Where are most people going to (ever) get hold of £2500 just to move and pay that lot out?


    Last flat I had (kept it for 7 years) gave the landlord £400 for the first months rent and got the keys. Letting agent fees are now banned in Scotland , so even if I stopped using private landlords it wouldn`t cost me much. I am always confused when I hear these "renters being squeezed" stories, most of them just sound like internet trolling by landlords to me.
  • Generali
    Generali Posts: 36,411 Forumite
    10,000 Posts Combo Breaker
    The main things they bring are capital and a willingness to take on risk.
  • cells
    cells Posts: 5,246 Forumite
    edited 12 December 2015 at 1:04AM
    I've not been asked to move, because I've been lucky and not had to rent for life.... but I know many are. Even on HutH the people talk of keeping it for a year/a few years then selling it.

    What is HutH? I am going to guess some forum and on there you suggest people are buying homes to hold onto for just 1-2 years and then sell? That is a bit silly due to the transaction costs and time involved especially soon with an additional +3% stamp duty. On the other hand plenty of landlords hold for 30-40 years.

    I wonder how many tenants are actually kicked out and for what reasons. It might be less than you think
    In most areas, for most people, you have to go through agents because you're working 12 hours/day and out of the house and it's harder to find/contact/etc a direct landlord.

    Yes this is probably ture for most places. I use a agent for tenant finding services. If I could directly advertise on rightmove for a reasonable fee I would possibly skip out the agents. Something to consider for the future
    Deposit returns are quite slow for a lot - and you have to give the new deposit up front, so there'll always be an overlap - of a lot of cash.

    This makes me a bit sad its quite shameful to hold back someones deposit without reason imo.

    With a lot of agents the up front fees are huge - and not everybody is in a position to (ever) save up a deposit.

    maybe like scotland it should only be the landlord that pays the agents fees. except for maybe a token £10 per person just so some people dont take the pee with agents and waste their time/money.

    From memory, when I last rented (3 years ago), I paid nearly £2,500 by the day I got the key. Holding fee, checking in fee, deposit, month's rent up front. And, for many, you can chuck in the cost of paying for the overlap time between rentals, where you have to pay for where you're moving to, while still having unused time at the old place. Where are most people going to (ever) get hold of £2500 just to move and pay that lot out?


    I have no doubt that some people find it difficult to save but I think its not correct to say how are most people going to ever get hold of £2,500. If someone does fall into that category they probably have other issues/problems that are a bigger problem to them than housing

    Here I think 6 weeks rent is becoming typical. Agents do charge tenants various fees I think its £150+VAT per head now. A lot of money for what seems not a lot of work but agents do offer an necessary service. I think we both agree this should be paid for on the landlord side (bar a small £10 per person to get rid of the few people who are time wasters)
  • PasturesNew
    PasturesNew Posts: 70,698 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    edited 12 December 2015 at 1:08AM
    cells wrote: »
    What is HutH?
    Homes under the Hammer, on the telly.
    cells wrote: »
    I wonder how many tenants are actually kicked out and for what reasons. It might be less than you think
    I spend far too long on here .... full of woes it is! Not good for one.

    cells wrote: »
    This makes me a bit sad its quite shameful to hold back someones deposit without reason imo.
    It's just the process, the procedure. If you do a check-out (costing often £75 or so too), the reporter then reports back to the office, who then speak to the landlord, who then signs off the deposit return, then the agent's office have to make the payment.
    It's not a case of a landlord turning up with a pocket of cash or a cheque on check out day and it happens straight away.
    cells wrote: »
    If someone does fall into that category they probably have other issues/problems that are a bigger problem to them than housing
    Single person, living in a high rent area. It's hard to save - easy to have unexpected expenses.

    Also, if you do have to move a couple of times in 2-3 years it can entirely wipe you out for a long time.

    As a single person, even a loss of a job with just one month until you find a new one (often at a lower salary) can take you months to "catch up" due to one month's loss of income. £2500 can easily be two whole months' pay.

    cells wrote: »
    Here I think 6 weeks rent is becoming typical.
    6 weeks is more the norm, through agents.
    cells wrote: »
    ....this should be paid for on the landlord side (bar a small £10 per person to get rid of the few people who are time wasters)

    I'm sure, in the olden days, there were no such fees. Agents existed by having enough properties on their books and taking 10%/month from a landlord.

    Nowadays there are too many agents with too few properties. None can "make a living" solely from a cut of the rent - so they all started charging more and more bizarre charges.
  • cells
    cells Posts: 5,246 Forumite
    Single person, living in a high rent area. It's hard to save - easy to have unexpected expenses.

    Also, if you do have to move a couple of times in 2-3 years it can entirely wipe you out for a long time.

    As a single person, even a loss of a job with just one month until you find a new one (often at a lower salary) can take you months to "catch up" due to one month's loss of income. £2500 can easily be two whole months' pay.

    I have a lot of sympathy for people in that sort of situation but I think its more often the case of earning too little and spending too much rather than the cost of life being extreme
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