The Government now has a Â£200m package of measures designed to prevent some of the most vulnerable families losing their homes due to repossession. The government scheme subject to a range of eligibility criteria is aimed at households who are eligible for homelessness assistance. In the scheme housing association will be able to buy part or all of the struggling homeowners home. The owners will then be able to stay on as a tenant at a reduced rent.
Does this sound familiar to you? I think the government has decided to offer its own Sell and Rent Back scheme to struggling homeowners. Using tax payers money of course!
To what extent will the government be able to help? well lets look at the amount involved Â£200m. With the 200m they reckon they will be able to help 6,000 homes avoid repossessions across England. his may seem like a large number, but compared to the ammount of yearly repossessions, this figure is but a drop in the ocean. In 2007, 27,000 homes were repossessed by their lenders as the homeoweners could not afford to pay their mortgages. This figure rose to 45,000 in 2008. This year the number of repossession will be set to rise 75,000 (CML estimate) as the recession takes its toll. 6,000 homes saved will only therefore be 8% of homeowners that will be able to benefit from the new scheme. What about all the other 92% of homeowners who face repossession?
Will this be opportunity for the investor with private sale and rent back schemes? I think so, but any investor getting involved in rental properties will have to be cash rich as most buy to let mortgages now require at least 25% deposit.
How often should I put my rents up?
In a perfect world for my tenants rents would stay the same or come down every year. If I could do this and still earn a decent living then I would keep rents the same just to keep the tenants happy. Unfortunately in the world we live in the price of everything goes up. Petrol, food, cigarettes, clothes all go up with inflation thats a fact of life in the UK. In real affordabilty terms I therefore have to put my rents up to just to be making the same amount of money each year. It is only fair that I put my rents up in line with inflation each year. Most landlords/agents do this every 6 months.
How much of a rent increase is too much?
On an average monthly rent of Â£450 per month I will be puting the rent up by Â£10 per month. This is not much really, it works out to an increase of 33pence per day or Â£2.30 per week. Hopefully i wont be upsetting too many people by doing this.
Recent anecdotal news suggests that rents in the east midlands have been rising sharply in the last 12 months, maybe this is an effect of the interest rate rises over the last 2 years. I can’t really say the same thing about property prices though as they have been pretty stagnent for the last 12 months.
According to my letting agent in Chesterfield I must issue a section 13 notice to increase the rent. This is more commonly reffered to as a Section 13 form 4b. I love legal jargon!
I’m still waiting for the court date for my unpaying tenant, so that I can eventually get them out and get new tenants who DO pay rent in. I’m trying not to think about it too much as its not very nice to throw someone out of their home. But the fact is I really don’t want to pay any for them to live there every month, they should be paying me. The courts have set a date for Jan 2008, hopefully all will go well then.
More Rent Arrears
Just to pee me off even more another tenant who has had payment problems in the past has stopped paying rent, even though they are only meant to pay Â£85 per week, they can’t even afford that. I can’t believe it. They have about 10 weeks worth of arrears now. I must be strong and send them their final warning.
I feel really bad sending them notices when its so close to Xmas as they really shouldn’t be thinking about losing the roof over their heads during their Xmas holiday. Christmas is a time when we should celebrate with our family opening presents, eating turkey and all sit round the TV to watch the queenâ€™s speech.
Do they think about me?? Do they think if we don’t pay our rent then our landlord may not have money for Xmas?? NO THEY DON’T The fact that they haven’t come to me with anything not even excuses has made me realise that I should not be considerate to them as they are not too me. I run a business and I should be business like. No matter what time of year, if tenants haven’t paid then I need to be procedural and proceed like clockwork. Get the warnings out to them, get the notices out, get them bad tenants out!!
I often get asked for long tenancy agreements of 3 to maybe 5 years to give my tenants long term security. Don’t get me wrong I would love nothing more to be able to give them a 25 year tenancy agreement and have the tenants agree to rent the property for 25 years. However the terms and conditions of the BTL mortgages we use stipulate that the tenant must be given an AST (Assured Shorthold Tenancy) of usually no more than 12 months.
12 Month AST
But why only 12 months?
This is to protect the lenders interests as well as yours. If in the worse senario you couldn’t meet the mortgage payments either because you were not getting the rent or maybe you’ve spent it all on holidays. The bank to protect its loan would seek to evict the tenants, take the property back and sell it on to payback the loan.
Tenants can only be evicted if the contract has elapsed or the tenants are in breach of contract (usually for non payment of rent). I’ve learn’t the hard way that even when you want to evict tenants the process is long and messy.
The Banks unwanted Situation
With a longer tenancy a situation could arise where you are not paying the mortgage, but the tenants cannot be evicted as they are not in breach of the tenancy. You would still be collecting rent, but not paying the mortgage. I suppose the bank may be able to take over ownership of the property, and keep the tenants on as their own? This would be a bit of a legal minefield therefore its understandable most banks insist on 12 month AST’s
Long Term Tenants
I always prefer long term tenants, but with conventional BTL mortgages it is difficult to offer longer tenancy agreements. How do you get around this? On one hand we want long term tenants, they want to be long term tenants, but we are not able to offer them longer tenancies.
I always make a point of telling my future tenants about my portfolio and my plans for it. I put it to them that I am a landlord, this is what I do, I buy property to rent out. If they pay the rent and behave why would I not rent the house to them?
I also make a point to tell them that if they pay on time in full they will almost never see me again, I will leave them alone. BUT if they do not pay me then I will be on to them.
Do you use a letting agent to manage your properties or do you self manage?
I currently only use an agent to manage 2 of my properties as they are not long term tenancies and they are also over 1 hours drive away. I would hate to be driving over an hour each time the tenant has a problem or i have to show tenants around.
I think that using an agent for my whole portfolio is not required. They tend to charge about Â£50 per property per month (10 percent of the monthly rent) that would cost me over Â£2000 per month. A cost i cannot justify when most of my tenants never contact me or never needed anything from me.
What does a letting agent do?
I guess agents would help with the following:
Chasing the bad payers
Handle most of the mundane paperwork (tannancies, inventories etc)
Liase with workmen
Handle marketing and viewings of property.
I would appreciate someone else chasing bad payers, its not a nice thing to do, but luckly i dont have too many of these.
Doing most of the mundane paperwork would be nice although for Â£2000. I think i’ll do it myself for now.
I do not really use many workmen except for my trusted plumber, he really is a godsend. all I do is send him a list of all the jobs with the address and phone numbers. He completes them all and sends me the bill with no real interation or effort required by me.
As I mentioned most of my portfolio are on long term tenancies therefore I would not really need help with viewings / marketing.
I guess for the cost I don’t mind doing it myself at the moment. But as I buy more property i guess it will be harder for me to self manage. Even when I have 100 properties though, I don’t think i will use an agent. for the amount of money an agent would cost I could employ somebody to manage my portfolio for me. Next year after my wedding my wife will be working with me full time. I hope she likes paperwork!
I think anybody investing in property should try to self manage their properties if they have the time. Then they will understand and maybe appreciate the work that a letting agent does.
This is an update to this post about Eviction using a Section 8 Notice
well its been 14 days now since i issued the Section 8 Notice and the tenant has made an effort to contact me. about a week ago i got a text message from them asking me to call them. she tried to explain that apon visiting her back it has become apparent that loans.co.uk has been taking money from her account. they do not have a loan and the police have been informed as it could be identity fraud.
so for all the weeks that the standing order has been refused its because loans.co.uk was taking money on a direct debit from their account, which meant no money left for me. she assured me that she would now keep the rent in a jar at home and i’m welcome to come and collect it. its ok i told her, but she must deposit it in to my bank as she has my bank details.
i check my account everyday, but no deposits. i contact the tenant and she informs me that she has just paid the last weeks rent in and will pay this weeks in tomorrow. that was at least 3 days ago so the money should be in my account right? lies, lies and more lies? i’m really doubtful that this tenant will ever pay properly or tell the truth.
apply to court
the next step for me will be to apply to court for posession of the property. i can only do this 14 days after the Section 8 Notice. this will be a 1st for me too. i’ll keep you informed.
I’m gonna get you!
I have several tenants who are not the greatest at keeping up their rent payments. up to now i have been puting up with late rent, very late rent, missed rent and NO rent from some of these tenents. I have on the whole been too busy to keep chasing them or to chase them at all. most of my “property time” at the moment is spent on new deals and new purchases and very busy with these i am.
this is going to change soon… very soon… after this bank holiday will see a new begining for my property business as i take on several associates to help take on some of the new investment deals coming in. this is good news for me as it will slighlty take the heat off me to do the deals all on my own. it will also allow me to spend some time chasing the bad guys.
BEWARE – BEWARE – i’m coming after you!
i’ll have to do it all by the law, i’ll give them the chance to catch up with payments in a few weeks or otherwise i will serve notice of eviction. Harsh i know, but i can’t and i won’t pay for these people to live at my property as that is effectively what is happening if they are not paying rent or the full rent. i end up either subsidsing the mortgages i have on those properties or paying for them in full.
its not all that bad though to be fair i suppose i have about 3 out of 50 or so tenants that are giving me some grief. so about 6% which is about the quoted figure (5%) for bad tenants i guess. part and parcel of the BTL (Buy To Let) game i suppose. i do have some really good tenants that cause me no trouble at all, they maintain, redecorate and do odd jobs to the properties themselves.