Active participation expected from future buy-to-let landlords

On the buy-to-let property reaching the one million mark, Birmingham Midshires surveyed several would-be landlords across the UK as how they would treat their tenants. The answer was that they would use the “hands-on” approach. Eighty-eight per cent said they would drive past the property to check how the tenants were treating it.

Fifty four per cent of future landlords feel that looks are everything. They would choose tenants based on their appearance and advice tenants to smarten up if they want to rent a property of their choice.

Majority of future buy-to-letters would rather look after the property themselves than pay fees to an agent to do so. Thirty-five percent would prefer fixing any problem themselves instead of hiring services of a professional. A report reveals that landlords will play an active role in making sure their property is protected and well looked after.

While the would-be landlords viewed the attitude of tenants in rented property warily, ninety-three retired couples said they would treat the rented property as their own and would look after it well.

In 2007, landlords enjoyed an average of 16.3 percent return. Buy-to-let remains a wise long-term investment and the demand for rental property should continue for time some to come.

Renting is the best option in UK today

There is a change in the housing market. Days of easy money are gone with mortgage companies no longer offering 100 per cent or more.

Mortgage will be difficult to get and with prices most likely to stagnate in 2008, renting is a good option.

According to David Hollingworth, a mortgage broker, in many ways this is good news. It will let first-time buyers to wait and save up a deposit and they will not have to worry about house prices getting unaffordable.

Some people have decided to wait for at least twelve months before buying property says Rob Clifford, chief executive of Mortgageforce.

The positive side of renting is that it gives a person more flexibility to move where his work takes him. It saves him from the commitment of mortgage payments. There are no building insurance bills and the wear-and-tear maintenance cost has to be borne by the landlord. The rent may be lesser than the mortgage payments.

The negative is that by renting, the capital growth got from a property is lost, especially when property has been a better investment than most. The rising population in UK needs more housing so the rentals will remain high.

Choosing a good lodger

Taking in a lodger not only brings in some extra money, but a good lodger can become a great friend, a pet and child minder and a house sitter when the property owner is away from home.

To attract a good lodge the house should be clean and inviting. Provide good facilities for the lodger’s needs like cooking, entertaining, washing and drying. A comfortable double bed with a warm duvet and privacy! A bath en suit would be very welcome.

The best way to let people know about looking for a lodger is through word of mouth. Try getting local recommendations.
Colleges, universities, hospitals and local employers will have people looking for lodging accommodation. Talk to them and, with their permission, use their notice boards and intranet to advertise.

The last option is the local papers and shops. The screening process will have to be very thorough as the potential lodger will be a stranger.

If on  benefits, it will help to ask advice from the Council before you take in a lodger. For regular and timely payments, collect rent through standing order payments.

Be careful not to discriminate on grounds of
Race and ethnic background
Religion
Sex/gender
Disability
Discrimination against applicants who are financially unstable or are of dubious character is allowed.

Take in happy, hardworking and motivated people. They make the best lodgers.

House in Multiple Occupation (HMO) for a Bigger Rental Income

An HMO- House in Multiple Occupation- is a property shared by three or more tenants. It brings in a bigger income for the landlord. It also brings more responsibilities for the landlord.

An HMO is a residence where the tenants share an entire house or flat and share a kitchen, bathroom or toilet. It is the tenants’ main or only residence.

All HMOs are subject to Management Regulations and Inspections. This ensures that the landlord manages the property well and keeps it safe

The landlord has to
•    Make sure the property is safe and liveable
•    Make sure the number of occupants is suitable to the size of the property.
•    Register with the local authority. Provide details when there is a change of occupancy and details of the residents.
•    Keep fire escapes, passageways and stairways clear of any clutter.

Tenants who are a nuisance to the other tenants or neighbours, who damage the property or fail to pay rent, can face eviction.

Before taking in multiple tenants, the landlord should consult with the local council about the requirements he has to meet. Contact the local authority about rules and regulations for HMOs.

The landlord will need a special insurance policy.

The landlord or the manager has to be in control of the occupancy of the HMO at all times.

Take in a lodger to earn some tax-free money!

If you have space in your home and want to use it to earn some money, take in a lodger!

The earning from your rented room is tax-free if it does not exceed three hundred and fifty pounds per month.

The demand for single accommodation is high. Thousands of households earn an extra income by letting out a room to college or university students or temporary or transient staff of a company.

A lodger gives you more control over the situation than a full tenant does because he does not have the security of tenure.

Some pointers for renting a room:
1.    Rent a room only if you live in the main residence most year round. If you move out, the lodger would become a full tenant!
2.    Do not let a self-contained part of the property. The lodger should have to share the kitchen or a bathroom with you.
3.    The lodger has to live in the room, not use it to run a business
4.    Before letting to a lodger, get a written permission from your landlord if you are a tenant.
5.    Inform your insurers as they may have to change the cover. Ask the lodger to insure their possessions
6.    Keep the mortgage lender informed about the lodger you take in

It is your duty to care for the lodger’s health and safety. Any furniture and/or appliances provided by you should meet the safety standards.

Landlords may shy away from renting to LHA tenants

The LHA - the local housing allowance - will replace housing benefits in April 2008. Today, the housing benefit is paid directly to the landlord. The LHA will be given directly to the tenants to find a suitable accommodation and pay the landlord themselves.

According to the National Federation of Residential Landlords - NFRL – many landlords will not take the risk of not getting any.

If the landlords refuse to rent to benefit tenants, it would have a big impact on UK’s social housing. There are four hundred and fifty three thousand benefit tenants living in private rentals. If that number reduces, it would put more pressure on the local authorities and other social housing providers. They are already short of housing capacity.

Tom Reynolds, who is a letting agent in Cheshire says that after a trial in St Helens, landlords have complained about not been paid rent. The landlords did not have any problems with the housing benefit tenants as they got their payments regularly. Elizabeth Brogan of National Landlords Association tenants should have the option of the LHA paid directly to the landlord.

Tenants who live in council accommodation or other forms of social housing will continue to have their rent paid directly to the housing provider.

Some useful information about property letting

Rise in house prices has helped bring an explosion in the rental market. High interest rates are deterring would-be buyers. As a result they are renting long-term.

According ARLA the demand for rental property is very high. Prime Central London has more tenants than properties on rent. Shortage of rental properties is escalating the rental rates.

The tenants have staying power. They rent property for longer terms. For example, tenants are renting houses and flats for up to 18 months.

The opposite is true in towns and cities like Leeds, Manchester, Ipswich, Norwich, Leicester, Nottingham and Birmingham. There are surplus flats and tenants are bargaining rent rates.

According to Royal Institute of Chartered Surveyors-Rics- the most sought after rental properties are family homes. This is because families who have sold their property are waiting and watching before buying their next one.

Tenancy Deposit Protection helps a tenant from his losing his deposit. If the tenant maintains the property well, he will receive part of or all of his deposit back.

About ninety two thousand foreign executives who come to the UK every year live in rented accommodation. They add more than nine billion pounds a year to the UK’s economy.

Be clear about Tenancy Agreements and Tenancy Deposit terms

A tenancy agreement is a contract that legally binds the landlord and the tenant to their responsibilities and obligations.

Following are some instructions to ensure a fool-proof Tenancy Agreements:

•    Write it in plain and clear language.
•    The clauses and terms should be fair to both the tenant and the property owner.
•    If there is any particular clause that is important to either of them, they should discuss it before making up the contract.

Tenancy Agreements:
•    Assured Shorthold or AST is the most common form of tenancy agreement. The clauses are very flexible and have very straightforward procedures to end a tenancy. It also has the Accelerated Possession court procedure in case the tenant fails to vacate the property
•    A Contractual agreement is used when a specific condition has to be met. This is when a registered company is the tenant. Another example would be when the rent is over twenty-five thousand pounds.
•    Assured tenancy agreement is very rare and it gives the tenant considerable and very long-term security. The landlord can repossess the property under very limited conditions.

The Tenancy Deposit is usually equivalent to four or six months of rent money. This safeguards the quality of the performance of the tenant and their obligation to maintain the property and keep it clean. The deposit is usually refunded at the end of the tenancy.

Is making money from buy-to-let possible at the moment? Yes, if you research carefully!

Hundreds of thousands of investors in the UK have bought property as a safe investment since the introduction in the mid nineties of buy-to-let mortgages. Today, the buy-to-let market is worth at least a hundred and fifty billion pounds. Investing in a buy-to-let property has to be very carefully researched. Look for a property which will surpass the average as it will bring in a right amount of rent. Look for a property that is near a new commuter route or has improving infrastructure around it. Narrow down the search to one area and concentrate on that area.

Try to buy close to where you live, say, your neighbourhood. Keep eyes open for any house that is not well looked after but has good renting potential. Stuart Law, who is managing director of Assetz, feels that the UK market is safe and buy-to-let investors can still make money. According to him, the continuing inability to build new homes to meet the demand supports the strength of the market. The current slowdown is not finding many buyers and has stopped developers from building new housing. Buy property only if you can sustain it by getting the appropriate rent for its value.

Investors will profit from the reduction in capital gain tax, feel experts

Capital Gain Tax (CGT) will be 18 per cent from April according to Chancellor Darling. This fuelled speculation of turmoil in the market.

Steve Gilder of PricewaterhouseCoopers predicted pre-emptive sale on April 16 of buy-to-let property. So did numerous analysts. According to Lynsey Sweales of Money Centre, recent research shows that most of the buy-to-let landlords view their investment as a medium to long term scheme.

On other hand, Nineteen per cent intend to stay in the letting market for six to ten years. About twenty-two per cent hope to continue for eleven to twenty years. Only thirteen per cent might sell their letting property this quarter.

Ms Sweals said the rush to sell was unlikely as landlords want to hold on to their properties. The investor will profit from the reduction in capital gain tax ultimately, experts feel.