landlords

More Records, More reporting, More BS for Landlords

I don’t know about you, but this has all gotten way beyond insane. More productivity is wasted doing non productive things like requirements under this new law. We are falling behind as a nation because of regulations and a mountain of paperwork. Let the people live! The more disincentives to become or remain a landlord will surely reduce the housing stock of available housing and raise the cost of doing business.

http://washingtonexaminer.com/blogs/beltway-confidential/2011/01/new-law-creates-big-tax-headache-rental-property-owners

Powered By WP Footer

landlords

Six Ways for Landlords to Cut Costs to Increase Property Rental Profit

By Chris Horne

The days of 10% yields are now all but a distant memory for landlords.

Interest rates are still moving upwards and seem destined to hit 6% by the end of the year.

So what can landlords do to drive up margins & help cashflow. The answer is to cut costs and here are six ways for landlords to do this.

1. Buy cheap – landlords need to be tough negotiators

There is still money to be made in the property market whether landlords buy at auction or they find a residential investment property in the local estate agents or over the internet.

The secret for landlords is to always drive a hard bargain. Landlords should view 50 residential investment properties, put in 50 ‘ridiculous offers’; 49 will be rejected but the chances are one will succeed. Then a landlord will get a buy-to-let bargain. That way a landlords rent will reflect the value say of a £200,000 property but if a landlord has managed to secure a 15% discount their costs will only be that of a £170,000 residential investment property.

2. Landlords need to get the best finance deal

The biggest cost to any landlord is their mortgage. If a landlord can cut this by even a 0.5% that will work out as a cost saving of £62.50 per month on a £150,000 buy-to-let mortgage.

For a landlord to ensure their mortgage is competitive they need to keep checking their rate against the best BTL mortgage rates currently available.

Landlords should never, ever pay the mortgage company standard variable rate, the chances are you will be paying 1-2% above what you need to. Most landlords can save at least 0.5% on their interest rate if they shopped around.

3. Save on managing fees by DIY Landlording

How ever landlords look at it if they get in a letting agent it’s going to cost. For the full management of a landlord’s property this is likely to be between 8-12% of a landlords’ rent. For many landlords this can represent 20% of their annual costs. By landlords DIY, they can boost their profits and cashflow immediately. This gives landlords greater scope to perhaps swap to a repayment mortgage.

In this way landlords will gradually cut their loan repayments because of their reducing mortgage balance.

If landlords think that managing their investment property themself is a daunting prospect then they shouldn’t. There are plenty of Free Assured Shorthold tenancy agreements available and I provide a fully solicitor prepared Free assured shorthold tenancy agreement available for UK landlords to download within the Free Online Property Management software on my site. This saves a landlord £15 for the book, £10 for the Assured Shorthold Tenancy Agreement, £100 for the property management software. In total £125.

4. Landlords must avoid the void

Experienced landlords dread the void. This is the term given to a landlords residential investment property when it is empty. At all costs landlords should avoid this. Many novice landlords who have been told by a letting agent often desperate for business that their buy-to-let property is worth £750 pcm, will then end up with it empty for 3 months only to then have to let it for £600 anyway. Far better is for landlords to have it let at the outset for a realistic rent. Once a void is experienced then a landlord will never get this money back. The average void for a buy-to-let property is probably about one month per annum. If a landlord can cut this to zero then this is about the equivalent of cutting their annual costs by 10%.

5. Competitive insurance

It is very easy for a landlord to over pay for their buy-to-let insurance. Often buy-to-let mortgage companies will try and sell landlords their own insurance product. Never buy this. Buy-to-let mortgage companies rely on the apathy of the average consumer not to check out the best deals through a specialist landlords insurance broker which enables them to charge inflated prices. Landlords should make sure they get a number of quotes and know what landlord insurance product they are getting before they buy.

6. Don’t pay tax

Well prepared landlords should pay little or no tax. Not because they are criminals but because landlords need to be shrewd businessmen as well as good property investors. Tax avoidance is not illegal; it’s what the billionaires do. Landlords should be fully informed about their landlord tax allowances and keep up to date records to ensure that they don’t have to pay out unnecessarily.

Avoiding tax could save hundreds if not thousands of pounds per annum to a landlord. This money can then be re-invested by a landlord in growing their buy-to-let portfolio or cutting their costs further by paying down their debt.

Property Hawk is a site aimed directly at UK Landlords. The site incorporates free property management software that enables landlords to track all their financial data relating to their portfolio. It allows users to print tenancy agreements and other forms FREE FOREVER. The site generates a real time rent book for each property as well as calculating a landlords tax liability. The service is totally free to use at www.propertyhawk.co.uk

Article Source: http://EzineArticles.com/?expert=Chris_Horne
http://EzineArticles.com/?Six-Ways-for-Landlords-to-Cut-Costs-to-Increase-Property-Rental-Profit&id=725940

Powered By WP Footer

landlords

Landlords Raising Rents on Rental Property – Advice on the Tenancy Agreements

By Chris Horne

Letting agents are seeing booming demand for rental property as first time buyers and foreign workers defer buying homes amid continued uncertainty over UK house prices.

Letting agents around London and the south east in particular are seeing up to 25% more activity in their letting business compared with a year ago. Much of this rental demand is coming from young professionals and City workers who are not prepared to gamble and buy property in a weak housing market.

The result of this boom in property lettings activity are fast rising rents in certain areas as strong competition amongst potential tenants bids up prices. Reports show that landlords in these ‘rental hotspots’ are managing to secure significant rent increases.

Lucinda Richardson, lettings Manager at the Westbourne Grove branch of Winkworth said tenants renewing their agreement were typically paying 5-10% more per year, while new occupants are paying 20% more than they would have done a year ago.

Things for landlords to avoid

Therefore if a landlord is lucky enough to own residential investment property in areas of strong rental demand, what should they be doing? Firstly landlords should always be wary of offering a tenant a longer term contract than the standard 6 month fixed term tenancy in areas where rental demand is strong and rents are rising. Glynn Judd, head of lettings at the Surrey Quays branch of Kinleigh Folkard & Hayward reports that he is aware of tenants pushing for 18 month even 2 year fixed term tenancy. This is because once agreed most tenancy agreements do not allow a landlord to increase the rent during this fixed term.

Therefore the initial rent that the landlord agrees may look very appealing at the outset, but will it still look so good in 24 months time? During this time employing a standard 6 month fixed term tenancy a landlord could have legally raised the rent three times. The other alternative to a landlord is to opt for a periodic tenancy.

How can landlords raise their rents

Fixed term tenancy

How a landlord goes about raising the rent will largely depend on the type of tenancy in place. Most landlords use a fixed term tenancy agreement such as the one available on Property Hawk. In most cases a landlord will opt for a 6 month tenancy although it can be longer. This means that without the tenancy agreement you as the landlord cannot put up the rent during this period, unless the tenancy agreement makes specific provisions allowing this. These specific provisions may be by way of an escalator clause for instance stating that the rent will go up by inflation after six months.

The vast majority of landlords avoid such clauses. This is because they are seen as overly prescriptive and inflexible. Most landlords opt to review the rent when they decide whether to re-let at the end of the fixed term tenancy. This way a landlord can judge the prevailing market conditions and work out what the rental market will bare at that particular time. For instance in places such as central London and parts of the south east, rental inflation is running well ahead of general inflation, therefore for a landlord just to track inflation would mean their rents are falling behind the market.

If a landlord decides to opt to re-let to the existing tenant then raising the rent is relatively easy as all they do is create a new assured short hold tenancy with the new rent included.

Periodic tenancies

The other type of tenancy that a landlord might employ is a periodic tenancy. These are tenancies where there is no specific end date. The two types of periodic tenancy are the contractual periodic tenancy in which from the outset there is no end date, or the much more common statutory periodic tenancy. The statutory periodic tenancy comes about when a fixed term tenancy lapses.

In the case of periodic tenancies, increasing the rent is slightly more complicated because the landlord will need to go through the formal procedure as set out in section 13 of the Housing Act 1988. If the landlord wants to increase the rent and intends to keep the tenancy on a statutory periodic tenancy, they can use the special form titled Landlord’s notice proposing a new rent under an Assured Periodic Tenancy or Agricultural Occupancy sometimes known as a section 13 notice. This form allows a landlord to propose a rent increase as soon as the statutory tenancy begins. For a contractual period tenancy a landlord can use the same form to propose an increase which will take effect one year after a tenancy begins. In both cases a months notice of the increase is required for rents paid on a weekly or monthly basis (more if the rent period is longer). With both periodic tenancies a landlord can propose further rent increases at yearly intervals, after the first increase.

Potential snags for a landlord raising rents

There are a number of potential snags for landlords when raising the rent. Not least amongst these can be scaring off perfectly good tenants by making the rent unaffordable. A landlord has to be therefore confident that they their existing tenant will be able to afford the new rent or that they will be able to quickly fill any vacancy and avoid a protracted void period.

Firstly, the snag with section 13 rent increases is generally a landlord can only raise rents once a year. In a fast moving market such as the one being experienced in parts of London and the South-East currently, annual rental increases will not keep pace with market rents meaning that a landlord towards the end of the 12 month rental period will have a rent below the open market value and therefore be missing out on potential rental income.

The other aspect about a landlord with a periodic tenancy who needs to use a section 13 notice is that it entitles a tenant who is not happy with the rental increase to apply to a Rent Assessment Committee for a determination of what rent a landlord could reasonably expect to pay if he or she was letting it on the open market under a new tenancy on the same terms. The committee has the power to agree the rent or set a rent higher or lower. The rent then fixed by the committee is the legal maximum the landlord can charge. The new rent will be payable from the date specified in the landlord’s notice unless the committee considers this would cause a tenant undue hardship in which case it may specify a later date. The landlord can propose that the rent is increased a year after the date on which the rent decided by the committee was payable.

Power of the Rent Assessment Committee

All this may sound quite daunting to a landlord. The reality is it shouldn’t be. Whilst on the face of it the Rent Assessment Committee seems to have a considerable amount of power, in reality they don’t. For a start they can only set a new rent if it is demonstrably unreasonable. The other factors that limits the scope of the Rent Assessment Committee and the tenant in ultimately setting rental levels is that the landlord retains the right to issue a section 21 notice.

This means that providing the fixed term period has come to an end by the time the notice has expired a landlords ultimate response to a rent that is unsatisfactory is to regain possession of their rental property and simply re-let it to another tenant at the rent that they and the market will bare.

What should landlords do?

The simple answer is that landlords should normally opt for a fixed term tenancy such as the free tenancy agreement available within Property Hawk’s Property Manager. A landlord should avoid the tenancy lapsing and becoming a periodic tenancy. They can do this by going through the motions of issuing a section 21 notice for possession even at the start of the tenancy to ensure that a landlord can bring the tenancy to an end. In this way a landlord is in the perfect position at the end of the fixed term to either re-let to the existing tenant at a higher rent, or if the tenant objects, to regain possession and then let their buy-to-let investment property to another tenant at the higher rent.

A word of caution to landlords in less high demand areas. Tenants can be sometimes unsettled by receiving a section 21 notice and therefore a landlord needs to approach the situation sensitivity and explain that the notice is a just a formal procedure and that they have no intention of seeing it through. The reality is for any landlord is that having a tenant paying rent, even if it is not the absolute top rate, is far preferable than having no rent at all!

Chris Horne is an experienced landlord and property professional who now runs the website Property Hawk, a site aimed directly at UK Landlords. The site incorporates free property management software that enables landlords to track all their financial data relating to their portfolio. It allows users to print tenancy agreements and other forms FREE FOREVER. The site generates a real time rent book for each property as well as calculating a landlords tax liability. The service is totally free to use at http://www.propertyhawk.co.uk

Article Source: http://EzineArticles.com/?expert=Chris_Horne
http://EzineArticles.com/?Landlords-Raising-Rents-on-Rental-Property—Advice-on-the-Tenancy-Agreements&id=1041166

Powered By WP Footer

landlords

Homeline Is A Great Resource-For Tenants & Landlords

Recently I attended a landlord class put on by a non profit tenant advocacy group called Homeline.  Their website is http://www.Homeline.org. The class was GREAT.  Our presenter, attorney Mike, did a great job.  When I signed up, I was unsure about the presentation-would it be fair, would it be slanted against landlords, would it be valuable?  Well, I can tell you it was not only fair, but fun, and extremely valuable.  The class was interactive, covered the law, covered recent changes to our laws and I believe every landlord in the room left with a better understanding of how to run their business.  I am glad I took the class and I learned a lot, even though I’ve been doing this 24 years-the laws are constantly changing.  So, here’s my tip.  If you are a landlord-large or small-do yourself a favor and take the class.  The old addage “an ounce of prevention is worth a Pound of cure” certainly applies.  If you are a tenant who has tenancy questions-these folks will help field your question and point you in the right direction.  The law is the law the folks at Homeline know it better than most.

Powered By WP Footer

landlords

Good Tenants – Learn Twelve Ways Landlords Keep Them

By D. Maurice

Happy, Long-term Good Tenants Paying On Time

How to Create a Win-Win Relationship for the Both of You!

After you’ve found your tenants, how do you keep them? Establish a friendly, pleasant, business-like relationship with your tenants, so they’ll want to renew again each year. By using one or a few ideas below, you will learn how to keep good tenants. The following are some suggestions that apply to residential landlords, landladies, and property managers.

1. Move-in Gifts

Move-in gifts are a nice way to welcome your new tenants. Place these gifts in the apartment with a red bow on them before the tenant moves in. A (plumber’s) plunger and a garbage disposal wrench, known as an Allen wrench, can work wonders for your tenants. Simple idea, right? These small, practical gift items will come in handy when the plumbing backs up or the garbage disposal stops working. Often overlooked, these items are not something people think of, but these move-in gifts will save you time and money with fewer maintenance trips.

2. Welcoming Gifts

A welcome gift establishes a positive relationship with your good tenants. Present the gift after the first eight to twelve weeks of tenancy. As always, make sure the tenant(s) rent is current before presenting your welcome gift. This effective gesture shows the good tenant(s) you are a thoughtful landlord. A few examples of some welcome gifts are:

• Hanging flower baskets of petunias;
• Small potted flowering plants such as pansies; or,
• Small fruit baskets from your local grocery store.

Present your gift in person. These inexpensive gifts will surprise your tenant(s). And go along way towards building goodwill. This is also a good time to do a quick “look around” inspection. This way you can determine if the tenant is keeping the apartment clean.

Also, take this opportunity to observe any unauthorized move-ins (e.g., a person or pet.) If there was, then politely address the issue immediately. Mail a written letter of notification acknowledging the unauthorized move-in. A copy of the lease should also be mailed to the tenant. Anyways, you will be able to address concerns while you’re there, creating a win-win relationship.

3. Renewal Gifts

Renewal gifts are small reward items of appreciation you may wish to provide to your tenant(s). A small incentive goes a long way. And you’re creating a positive relationship between yourself and the tenant. Here are the benefits of lease renewal:

• You don’t have to advertise for another good tenant;
• You don’t have to screen calls;
• You don’t have to show the apartment only to wait for no-shows;
• You don’t have to build a new relationship with a new tenant; and
• You don’t have to educate new tenants about your do’s and don’ts.

Renewable gift suggestions:

• A gift certificate to a local restaurant;
• A bouquet of fresh cut flowers; or
• A special gift certificate from a local supermarket or gardening supply center

These renewable gifts range from $25 to $50. This amount depends on your budget. And, continues to build a positive relationship with your good tenants. Presenting a renewal gift in person demonstrates a caring attitude about your tenant(s).

4. Holidays

Holidays are a great time to acknowledge your good tenant(s). There are a number of holidays to choose from and depending on your time, schedule, and workload this is a personal choice. Generally, a trouble-free idea is to send a non-denominational holiday greeting card, letting your tenant(s) know you’re thinking of them.

Alternatively, such as a week before Thanksgiving, purchase a turkey as a gift, along with one you buy for your own family. This provides the tenant(s) with a nice Thanksgiving meal while saving you time and money. Either way you’re creating another win-win relationship with your good tenants.

5. Emergencies

Communication and some well-established rules are vital. Let your tenants know your property management schedule. For example, calls regarding minor problems, 8:00 a.m. to 8:00 p.m. during the week, excluding Sundays. Educating your tenants early is a necessity for your peace of mind. Following are examples of some real life non-medical emergencies.

It’s 9:00 p.m. on a New England Thursday evening. The winds are strong and it’s snowing lightly. The temperature has reached 30 degrees below zero. The phone rings and our tenants are complaining they have no heat. Quickly, a call is made to the oil company. The oil delivery is made and this remedies the situation. The landlord follows-up to make sure everything is o.k. Our tenants know even with freezing temperatures, we do care and act immediately.

Here’s another example, one of our tenants’ decided to use the laundry facility in one of our empty units. We approved her authorization to do laundry. While she was there, she discovered water spraying from underneath the bathroom sink. Already, two inches of water had accumulated. The bathroom and most of the surrounding kitchen is drenched. She called in a panic. “The water is spewing from underneath the bathroom sink,” she says. I was unsure what to do. I called my best friend, my husband, and he remedied the problem within two hours. The tenant did not have to call about this emergency. She chose to, demonstrating the importance of good, strong relationships with your good tenants.

6. Maintenance

Your property rental maintenance system will increase your real estate value and cash flow. Hence, you will be able to charge a little more rent for the up keep. When you’re scheduling maintenance projects for the year, make a checklist. Your checklist should include preventative maintenance; cosmetic, simple upgrades, and tenant renewals. Below are some simple guidelines for an effective property maintenance system.

Preventative:

• Replace the leaky toilet system;
• Replace worn out faucets;
• Replace a run-down refrigerator;
• Replace an unsafe stove;
• Replace a leaky roof;
• Replace inefficient or a potentially harmful furnace;
• Schedule pest control care;
• Seal cracks to prevent loss of heat or pest intrusion;
• Clean or check the filter in gas heaters;
• Check air conditioning unit for efficiency.

Cosmetic:

• Cutting, trimming trees, flowers, etc.;
• Landscaping – for example, add crushed stone around the building for extra drainage;
• Painting – freshen up trim, walls, ceilings, floors, railings, lattices, and so forth;
• “Curb appeal;” planting flowers and shrubs, lightly washing the outside of the building.

Upgrades:

• Replace old, worn out carpet;
• Replace or install new floors;
• Add ceiling fan(s) to provide extra comfort during summer months;
• Add a microwave.

Renewed tenants:

• Repaint walls, moldings, casings, ceilings;
• Provide new window screens;
• For more ideas, see the long-term tenants of 3 years or more section 10 below.

7. Drive-by or Walk-around Property Inspections

Throughout the winter months, you should drive-by your property every two months. Particularly if you don’t live nearby. Other areas without snowy winters may require more or less property attention. During your drive-bys or walk-around inspections, look for obstructions on the front porch, on the deck or the entranceway.

And depending on your geographic location, pay attention to the condition of the property’s lawn, flowers, and shrubs. In the spring, summer and fall a monthly drive-by or walk-around is sufficient. Below is a list of items to check:

• Bees nest – If it’s small and you know you can remove it safely then do so. The best time to remove a bee’s nest is in the morning. It’s cold and the bees are not flying in and out as much. If you’re unsure ask the person at the local hardware store for help. Pick up a can of bee spray eradicator while you’re there. However, a professional pest control company is the easiest solution to remove the nest safely.
• Clutter on the front and back porches or decks;
• Water to the outside hose is turned off;
• Lawn is mowed;
• Do you need to paint the exterior of the house, steps, fire escape, garage, etc.?
• Do you need to tar or replace the drive way or roof?
• Observe any illegal or excessive activity by the tenants.

Are people going in and out of the property to frequently?

• If the tenant happens to be outside ask if they have any concerns or requests.

8. Walk through Inspections

Property inspections are a positive way to build strong relationships with your good tenants. Tenants who call with small problems are often viewed as pesky tenants. However, inspections performed quarterly or bi-annually will likely make your tenants more comfortable. Good tenants prefer telling you their maintenance problems in person rather than over the phone. You can also correct most tenant problems immediately.

9. Death in the Family

Acknowledging a good tenants loss is a courteous and warm gesture. Send the tenant(s) a sympathy card, a bouquet of flowers, or a catered platter of food. This goes a long way towards building a long-lasting relationship with your tenant(s).

10. Long-term Tenants of Three Years or More

If you have developed a positive, respectful relationship with your tenant and they renew their lease, than consider their renewal a job well done on your part. Tenants who renew and have been in good standing with you over the last few years will appreciate some updated interior features. Below are a few ideas to make your tenant feel good while increasing your property’s value at the same time.

• Install new carpeting;
• Paint walls, casings, or ceilings;
• Add a used dishwasher or replace the existing one;
• Add a paper towel holder;
• Add a garbage disposal or replace the existing one;
• Provide new screens;
• Provide new light fixtures;
• Provide a new medicine cabinet; or
• Provide a new toilet seat.

11. Good Tenants Recommending Other Possible Tenants

Good tenants will gladly recommend other tenants because the new tenants will become their neighbors. Besides, your property is the tenant’s home and they are more apt to suggest helpful, pleasant, compatible neighbors. In addition, establishing a finder’s fee program is an excellent incentive to encourage your tenants to introduce you to responsible, prospective renters allowing you to minimize your advertising costs and the hassles related to finding new renters, while potentially signing on another good tenant.

Certainly, any finder’s fee program should be in writing, and possibly reviewed by your attorney, so that both the landlord and tenant understand how the program works, specifically how and when fees are to be paid. Retaining good tenants could create an endless pipeline of prospective tenants for you by your tenant’s word of mouth rather than employing traditional, cost-prohibitive methods.

One warning: The same due diligence should be followed with any tenants referred to you by tenants presently renting from you so that you don’t run into problems later on.

12. Provide your good tenant(s) an Information For Your Apartment Form

The Information For Your Apartment Form is important when you or your property manager cannot be reached. Below is a list of subjects the form should include:

• Window areas;
• Appliances;
• Heat;
• Air conditioning unit;
• Security;
• Plumbing;
• Electrical;
• Floors;
• Rubbish;
• Walls and ceilings;
• Miscellaneous;
• Emergency phone numbers;
• Contact manager information.

You can view, the complete form at [http://www.my-real-estate-software.com/apartment.html], so you can keep your good tenants happy and prevent those annoying middle of the night phone calls!

As you begin to integrate these suggestions into the management of your property or properties, you’ll learn how to keep good tenants. When you respect, train, and show some generosity you will create a win-win relationship for the both of you that can last over twenty years or more. Good luck and happy managing!

Article by D. Maurice. D. Maurice is the Webmaster of real estate software, my-real-estate-software.com [http://my-real-estate-software.com], a resource of Professional real estate Software for the Property Rental Manager, Landlord, Investor, Realtor. Real estate software used to Acquire It, Manage It, Market It, and Maximize PROFITS! Please visit her site for more free tips and software used to build your real estate portfolio.

Article Source: http://EzineArticles.com/?expert=D._Maurice
http://EzineArticles.com/?Good-Tenants—Learn-Twelve-Ways-Landlords-Keep-Them&id=46349

Powered By WP Footer

landlords

Landlords Looking to Make Additional Revenue From Tenants Alongside Rental Payments

By Chris Horne

Most landlords see the relationship between tenant and landlord as pretty straight forward & passive. The landlord provides the tenant with four walls and sometimes a bed to sleep on. In return a tenant pays the landlord an agreed rent. Occasionally if landlords are lucky they can put the rent up and that is about as complicated as it gets.

The main job for a landlord is to manage the costs such as the buy-to-let mortgage costs and maintenance costs as this will in turn maximise a landlord’s net rent. The net rent being the bit left over after a landlord’s costs have been paid each month generally referred to as a landlord’s cash-flow.

Additional revenues for landlords from tenants

However, recently and prompted by the credit crunch I’ve been seeing more and more landlords using their relationship with their tenants to make additional revenues. This is only sensible and reflects what many companies and businesses do in the wider economy.

Once a business has a customer, their next step is to see how they can retain that customer but then see if there are any way that they can make additional revenue from that customer by selling them additional services. In business parlance it’s all about increasing the average spend.

Let’s examine where it is possible for a landlord to look to make additional income from their tenant in perfectly legitimate and legal ways in order to help landlords cope with their rising costs.

Firstly, the main area where some landlords have for some time being legitimately charging a tenant money is in connection with the management costs of setting up and ending a tenancy.

For years landlords have accepted the whole vetting, letting and moving out of tenants as just part of the process of renting their investment property. However, increasing demands by government in terms of additional regulations such as the Tenancy Deposit Scheme (TDS) and HMO licensing and the soon to be introduced Energy Performance Certificates (EPCs) all increases the time burdens on landlords. These regulatory burdens often come with extra financial costs but most importantly they all take additional time without producing any additional revenue for landlords.

These administrative tasks are what in the service sector would class as professional services. For years many letting agents have been ‘making hay’ out of charging large fees to carry out these basic tasks. Residential landlords on the other hand being largely small amateur outfits have largely chosen to absorb these costs within their overall costs to their business. Given that landlords carry them out themselves and it mainly involves their own time and therefore does not involve incurring any direct financial cost; landlords have generally seen it as just part of the letting process. However, closer research amongst letting agent shows that many of these tasks are charged for.

Some are charged individually, or others collectively as part of the initial letting fee. A breakdown of these costs produces the following as legitimate fees that a landlord could charge their tenant for their professional services as part of the setting up and management of the tenancy.

Possible letting services & possible charges

Credit check £20

Interview charge £20

Tenancy Agreement £20

Setting up DD £20

TDS (guarantor fee) £50

Check in / inventory £50

Check out £50

TOTAL £230

Toby Hone of the website the-home-place in his book on surviving the credit crunch urges landlords to not ignore the potential revenue benefits of charging. He makes the simple point that:

“Why don’t you as the landlord charge your prospective tenant a fee. In most cases the letting agent would do this as a matter of course anyway. ”

His view is that a landlord could charge between £150-250 each time they let a property. Given that the average tenancy last 9 months then this could equate to £200-£330+ each tenant each year. Where a landlord has a multi let where each room is rented out then this could equate to many hundreds if not thousands of pounds each year.

Another example of charging your tenants a fee is where landlords shun the TDS in favour of using a guarantor. This is particularly popular in student letting and our student landlord expert Bee in the bonnet shows how this can be done. In this case it is perfectly legitimate for a landlord to make an admin charge for this.

Once the tenants moves out the landlord also needs to carry out a ‘check out’ for which it is also reasonable to charge a fee for.

Non-performance tenancy charges

There are other charges that the landlord should have set up automatically as part of the tenancy. These are more penalties in respect of non-performance of the tenancy agreement but nevertheless they should be in place. In a tenancy agreement it is worth installing a provision with the Assured Shorthold Tenancy agreement that includes a £35 admin charge for any late payment along with an interest charge payable by the tenant on any overdue amounts of 5% above the Bank of England base rate.

Additional services

Landlords should be aware of the possibilities of charging their tenants for additional services. Just as today consumer is always looking to ease the burden of everyday humdrum chores so tenants are often quite often happy to pay for extra services. For instance many busy professional tenants would be happy to splash out a few extra quid in rent in order to benefit from a wireless computer network or satellite TV. Once installed, these things will generate small but tangible additional revenue for a landlord.

Other services that could be charged for are a laundry & ironing service, together with a cleaner. These are all services that could potentially be attractive to your tenant and which could provide you with valuable additional revenue.

When the tenant leaves

Even when the tenant leaves this could be an additional source of revenue for a landlord. This is because if the tenant fails to clear there rubbish then a landlord is quite within their rights to make a reasonable charge for the disposal of this. Not only is there the disposal of these items but, with the advent of E-bay frequently one person’s junk is another person’s lucky find. An enterprising landlord can often find a use or value out of a previous tenants cast offs.

PropertyHawk is aimed directly at UK Landlords. The site incorporates free property management software letting a landlord track their financial data relating to their property portfolio. A mass of information on BTL mortgages and landlord insurance.

Article Source: http://EzineArticles.com/?expert=Chris_Horne
http://EzineArticles.com/?Landlords-Looking-to-Make-Additional-Revenue-From-Tenants-Alongside-Rental-Payments&id=1464234

Powered By WP Footer

landlords

Should Landlords Look To Sell Their Property Investment?

By Chris Horne

House prices in Britain have risen at an average annual rate at least 10 times higher than in other developed nations, such as Japan and Switzerland, and twice as fast as in the United States. The research by Policy Exchange, a Right-wing think-tank, shows that since 1970, prices have gone up by more than four per cent a year over inflation.

Property prices in Britain have risen for 13 successive years, and in the past decade the increase has been particularly steep. The price of an average home has risen from £70,000 when Labour came to power in 1997, to nearly £200,000 today. In the same period, the retail price index rose by only 30 per cent.

Should landlords sell & lock in gains

This all suggests on the face of it that a landlord should sell now and thereby lock in the capital gains they have made over the last few years on their residential buy-to-let investments.

However, a simple analysis of figures that show by how much the value of an asset has gone up doesn’t always give a clear indication that an asset is over valued. Any investor who has watched the rise in the price of gold in the last few years can verify that. Equally landlords who have watched the value of their property investments double in the early part of the Millennium only to watch them continue to spiral upwards in value all the way to the end of 2007 would have lost out on huge amounts of capital growth if they had taken such a view & sold.

An evaluation of the correct value of housing and residential property investment is far more complex than ‘prices have gone up a lot & therefore its time to sell’.

We as landlords really need to understand the factors that drive the value of residential investments and the housing market.

One key factor is affordability.

Affordability

The fact remains that buy-to-let investing takes place in a housing market which is still dominated by homeowners. Therefore a key factor in setting a price for a property is its’ affordability, particularly by the vast majority of purchasers who are buying a property for owner occupation.

Traditionally, the key metric has been the multiple of average income to property value. Historically this has been about 3.5 times average household income; it now stands at over 6. Some economists argue that this measure is no longer relevant because of a paradigm shift downwards in long run interest rates, making higher multiples more sustainable.

In the 80s interest rates were for most part in or near double figures; in the 90s they probably averaged 6-7%. This is still high by current levels; particularly when the fact that mortgage margins have reduced i.e. the differential a borrower pays above the prevailing base rate. In the 90s it ranged between 1-2%; before the recent credit crunch this had shrunk to in some cases to zero reducing the real costs of a mortgage even further. Even today after the ‘credit crunch’ it is possible to get a lifetime tracker at 6.39% or 0.89% above the Bank of England base rate.

House price “Bulls”

What the housing ‘bulls’ (those individuals that still believe we are in a rising market) argue is that what is more relevant in judging housing affordability is the proportion of household income paid out each month on servicing housing debt. After all they argue, people don’t think of multiples or margins when judging whether they can afford a property.

Their first thoughts are how much it will cost per month and how much income they have got after tax and other vital household expenses. For an indication of this we can go to the statistics provided by the Council of Mortgage Lenders (CML). These stats make interesting reading. The good news for the ‘bulls’ is that the latest figures for interest payments as a percentage of median household income was 18.8% in November 07 which is well below the 27.1% reached in the first part of 1990 at the time of the house price crash of the early 90s.

However it should be remembered that this high rate was prompted by interest rates which reached 15%. What is important is that this rising figure is the highest since 1992 when the housing market was still languishing in the depths of the last housing depression. Whilst these figures are not conclusive on their own; it shows that by any measure the costs of servicing a housing debt are becoming an increasing constraint on future house price rises.

Yields

One measure which has always been popular with property investors is the gross yield.

For landlords with a good memory, they may be able to recall when gross yields on some investment properties were in double figures. It was also up until relatively recently that many landlords could secure a reasonable level of income from their residential investment properties. However, for many residential landlords those days have gone. Small rental increases have not been sufficient to keep pace with rising capital values and rising interest rates.

The result is that the last Association of Residential Letting Agents (ARLA) review showed that gross yields had fallen to less than 5% as a UK average. This falls to 4.6% when taking into account rental voids. If management charges are also taken off, then the net yield is likely to fall below 4%. All this means that many landlords now face a cash outflow, which will remain with them for a number of years whilst rents increase and / or interest rates fall.

Housing ‘fully valued’ so shouldn’t I sell?

In conclusion then it looks on the face of it that UK housing is fully valued. Therefore, shouldn’t a landlord sell up and lock in their profits now? The decision on whether to sell a buy-to-let investment property isn’t quite as straight forward as it might first seem for a landlord. For instance, here are 5 things to consider before a landlord puts their buy-to-let property up for sale:

1 There is the small case of capital gains tax (CGT)

The Chancellor is proposing a new tax regime with a 18% band for all. However, that is still near enough a fifth of any gains a landlord has made. If a landlord has held their property for 10 years or so this is going to be a fairly high percentage of the overall value of their asset, meaning that they will have considerably less assets to reinvest in any alternatives following a sale.

2. Selling a residential investment property is not cheap.

Where an estate agent is involved and including legal fees and the new Home Information Pack (HIP) a landlord is probably looking at a minimum of 1.5% of the value of their property and that could easily increase to 2.5 or 3% in certain cases such as investment properties in London.

3.On top of this a landlord who tries to sell their residential investment property is probably best selling their buy-to-let property with vacant possession i.e. without tenants.

By doing this a landlord’s residential investment property should also appeal to the almost 90% of the residential market that are owner occupiers. This means that their investment property is empty and no rent is received during the sale period. A situation that can be particularly painful for a landlord where they still have a mortgage in place because not only are they missing out on rental income but they are also having to pay out ‘dead money’ whilst the property is being marketed. Even worst, every property speculator come opportunist knows this and assumes that you the landlord is in trouble and has to sell up. Therefore and in particularly at the moment be prepared for silly offers unless you are the lucky owner of a ‘trophy asset’ property.

4. Many landlords also buy a residential property for security.

In a world of increasing family & relationship break ups, having an additional property should the worse happen is seen by many landlords as an insurance policy against themselves or a member of their family being homeless. In addition many landlords have invested considerable time and effort buying, refurbishing and setting up their buy-to-let investment so the outright sale of their buy-to-let investment property is a large step for many landlords to take.

5.The other dilemma for landlords is what to do with any investment funds released following the sale of their residential investment property.

Many landlords have been ‘stung’ by previous investments in other asset classes such as shares. Whist the short-term gains are potentially higher, these investments are far more volatile than investments in a physical asset such as a residential investment property. At the moment cash savings are attracting a good rate of interest in the order of 6%, however most experts predict interest rates to fall throughout 2008 which means that the base rate could be as low as 4.5% by the end of the year reducing significantly the returns on cash investments.

Long -term landlords

The reality for landlords is that it’s not easy to respond quickly to trends in the housing market. For instance to sell up now and then wait 12 months to buy on a low. For a start, on a cost basis, the transaction costs of buying and selling will probably amount to 5% of setting up an investment by the time estate agents fees, legal costs and stamp duty have been factored in. Then there are the practical issues and time of identifying a suitable residential investment property, agreeing the deal and then putting it into a lettable state, not to mention finding suitable tenants. This probably goes a long way to explaining why a recent survey by the Alliance & Leicester revealed that the average period that a landlord planned to hold their investment for was 18 years. This means that most landlords choose to take a long-term approach and thereby ‘ride out’ any short term weakness in the housing market.

Financial sustainability & opportunities

A key objective for landlords now should be to ensure that their residential investment portfolio is financially sustainable. Landlords should focus on their cash-flows and take a conservative view over future property price projections.

The very nature of a property market in a slump, which appears to be the likely outcome for the UK housing market in 2008 is that it will throw up potential residential investment opportunities. Distressed sellers, repossessed buy-to-let investment properties sold at auction all make potentially excellent investments if a landlord has done their research properly, does not over borrow & invests in a ‘cash cow’ using a traditional repayment mortgage. This way a landlord will be sheltered from any down turn in residential values, as the tenant will be paying for any costs associated with these investments. A repayment mortgage will deliver a constantly reducing loan amount that should protect a landlord’s equity even in times of small falls in residential property values.

Therefore, my thoughts are that landlords thinking of selling should think through their decision carefully and make sure they are comfortable that it is the right long-term decision for them. Equally, for some landlords they might want to see the current turmoil in the credit markets and slump in house prices as a long-term buying opportunity. One thing that we are sure about is that landlords can no longer bank on rapid gains in housing values that they may have become accustomed to over the last decade. Whether a landlord decides to buy or sell; they should make sure that their investment strategy adjusts to this ‘new reality’.

Chris Horne is an experienced landlord and property professional who now runs the website Property Hawk, a site aimed directly at UK Landlords. The site incorporates free property management software that enables landlords to track all their financial data relating to their portfolio. It allows users to print tenancy agreements and other forms FREE FOREVER. The site generates a real time rent book for each property as well as calculating a landlords tax liabilty. The service is totally free to use at propertyhawk.co.uk

Article Source: http://EzineArticles.com/?expert=Chris_Horne
http://EzineArticles.com/?Should-Landlords-Look-To-Sell-Their-Property-Investment?&id=999974

Powered By WP Footer

landlords

Letting Tips for Landlords Renting Property to Students

By Chris Horne

Here are further tips and advice for landlords letting rental property for students. A potentially high maintenance sector of the property rental market can be made easier for landlords by following these helpful tips.

An Inventory or Schedule of condition is vitally important when landlords let a property to students. Landlords should try and find a free example of an inventory on the Internet and compile a detailed ‘Inventory, Schedule of Condition and Safety Check List’. It is worth landlords spending time on compiling an inventory that records every detail of a rental property, its contents, decoration and condition so that any damage or loss occurred during a tenancy can be claimed back.

The safety section should include: number of smoke/heat alarms, carbon monoxide alarm, make a note ‘all tested and in working order’; Landlord’s Gas Safety Certificate, PAT (Portable Appliance Test certificate of the Landlord’s electrical goods) and the 5 year, electrical certificates all supplied; burglar alarm, include note ‘demonstrated and in working order’ and fire safety equipment has been checked.

Landlords should attach photos, dated and signed by both tenant and landlord on the reverse. They should include photos of all rooms, showing positions of furniture plus key potential problem areas such as inside the cooker, behind kitchen appliances, cleanliness of lounge carpet and the condition of the garden and lawn, if they are maintaining this area.

Landlords should write ‘cleaned to a good standard’ against rooms in the inventory and provide a definition, so there can be little doubt as to what this means, such as: ”No dust or debris behind, underneath and on top of furniture, fixtures and appliances; cookers are clean and virtually free from burnt on grease, particularly on oven racks and trays; fridges, freezers and microwaves are clean and empty; Venetian blind slats, curtains and covers are clean; hard floors are mopped and any mirrors are clean; bins are washed; walls are free from washable marks and blu-tak type stains.’ and so on. A detailed inventory will support claims for damage and cleaning at the end of the tenancy.

Checkout leaflet

Landlords should devise a simple checkout leaflet, outlining the procedures and expectations at the end of the tenancy. Give it to the students at the start of the tenancy. When issuing a Section 21 notice, probably towards the end of the tenancy, remind them about the checkout leaflet.

Duty of care

A landlord’s ‘duty of care’ should include a thorough safety check of their buy-to-let property. A landlord should also provide a ‘Household Folder’, packed with helpful information. Contents could include: Moving and Living in the Premises, Student and Landlord Responsibilities, General Health and Safety, Location of Services in the House and Electrical Safety, Disposal of Refuse, Condensation, Pest Control, Use of Candles, Noise, Nuisance and Neighbour Disputes, Who is Responsible for what Repairs, Cleaning, Visits by the Landlord, Crime Prevention, Fire Safety, First Aid and Useful/Emergency Telephone Numbers. The landlord’s ‘Household Folder’ could also contain the legal certificates, instructions on the use of appliances and the buy-to-let investment’s property’s checkout leaflet.

Avoid the Tenancy Deposit Scheme (TDS)

Landlords should stop taking a security deposit and avoid the Tenancy Deposit Scheme altogether. Instead when the contract is signed, landlords should charge each student tenant a perfectly legal, £50 non-returnable administration fee. Landlords shouldn’t bother paying for a credit reference check. Students usually have very little credit history. Instead, landlords should create a separate guarantor agreement, which is usually a parent, for each tenant and include ‘joint and several’ responsibility. Landlords should remind guarantors that if they default ‘you may record this with a Credit Referencing Agency and IDS Ltd, who may supply the information to other credit companies or insurers in the quest for the responsible granting of tenancies, insurance and credit.’ Landlords should give guarantors the checkout leaflet, so they understand the standards expected at the end of the tenancy. Landlords should make sure the agreement is a deed by including the statement ‘This document is a DEED and has been executed as a DEED. This Deed of Guarantee is governed by English Law and is subject to the exclusive jurisdiction of the courts of England and Wales.’ Increasingly foreign students rent buy-to-let property and in an extreme case landlords don’t want to end up in a foreign court. If landlords are storing guarantor details, register under the ‘Data Protection Act’.

If you as a landlord no longer take a security deposit; you must not harass students for money for damage and lack of cleaning, instead send a duplicate copy of your request for compensation to the student’s guarantor and they will do the legal harassment for you. Landlords should keep copies of all correspondence.

Insurance cover for a landlord’s emergency plumbing

Landlords should purchase 24-hour emergency plumbing cover. One example of this is British Gas Homecare Agreement for central heating, plumbing, drains and electrics. The British Gas plumbing and drains insurance will cover the replacement of a washer in a leaking tap.

As far as the tenant’s responsibility for replacing tap washers, I would suggest a landlord includes a general clause in the tenancy agreement such as:

‘Replace all defective electric light bulbs, fluorescent tubes, starters, fuses, tap and flexible pipe connections to a washing machine washers and vacuum filters and belts ensuring all reasonable safety precautions are observed.’

Landlords should ensure that all their properties have accessible inline valves in the pipe work, so that leaking taps are easily isolated in order for the repair to be carried out by the tenant, if necessary.

Tenantable Repairs

Landlords should also include the following under the definition of Tenantable Repairs in their modified tenancy contract which aims to shift the responsibility for minor repairs onto the tenant & make this clear from the outset:

“Tenantable Repair” means you are responsible for carrying out safely, day to day small repairs that any home-occupier would normally do e.g. re-hanging a

cupboard/wardrobe door, replacing light bulbs and batteries, tightening screws on furniture and fixtures, refitting a door handle, bleeding radiators

of air, replacing a tap washer, removing mould, refitting a toilet seat or toilet roll holder, tightening or replacing a washer in a flexible water pipe on a washing machine. This list is indicative and not prescriptive of the types of reasonable every day repairs that need to be done to keep the Premises in the same condition as at the start of the Tenancy. This excludes items, which the Landlord has responsibility in law.

How does it work? The tenant either makes the repair. This is easy with inline valves in place or in one particular case they paid for someone to do it for them.

I suggest that it offers a landlord a way of reducing their repair costs. We would suggest that the wording in the clause is slightly amended to include the following sentence as well.

“BUT nothing in this clause imposes on the Tenant any duty placed on the Landlord by:

a. s.11 of the Landlord and Tenant Act 1985; or

b. this Agreement.”

Landlords in interpreting tenant repairs & responsibilities may find it useful to refer to Lord Denning judgment in the case Warren v Keen (1954)

Warren v Keen (1954)

(Court of Appeal, 1953)

In this judgement, Denning LJ stated:

“What does ‘to use the premises in a tenant-like manner’ mean ? ..The tenant must take proper care of the place. He must, if he is going away for the winter, turn off the water and empty the boiler. He must clean the chimneys when necessary, and also the windows. He must mend the electric light when it fuses. He must unstop the sink when, it is blocked by his waste. In short, he must do those little jobs about the place, which a reasonable tenant would do. In addition, he must, of course, not damage the house wilfully or negligently; and he must see that his family and guests do not damage it; and if they do, he must repair

Chris Horne is an experienced landlord and property professional who now runs the website Property Hawk, a site aimed directly at UK Landlords. The site incorporates free property management software that enables landlords to track all their financial data relating to their portfolio. It allows users to print tenancy agreements and other forms FREE FOREVER. The site generates a real time rent book for each property as well as calculating a landlords tax liability. The service is totally free to use at http://www.propertyhawk.co.uk

Article Source: http://EzineArticles.com/?expert=Chris_Horne
http://EzineArticles.com/?Letting-Tips-for-Landlords-Renting-Property-to-Students&id=948253

Powered By WP Footer

landlords

A Tenant Dissapears from a Rental Property – What Should a Landlord Do?

By Chris Horne

In many ways it’s the landlord’s worst nightmare.

You as the landlord turn up one morning unexpectedly and there it is; your buy-to-let property, empty and abandoned like the ‘Mary Celeste’. With any luck the tenant has just removed themselves and their possessions and not any of your residential investment property. Unfortunately, I was not so lucky as one New Year when I arrived at my residential investment property to discover that half of my new kitchen had also been removed, along with a new washing machine and fridge freezer. To make it worse just as I was digesting this information I heard a knock on the door. It was a prospective tenant coming to have a look around my buy-to-let property. I was it would be fair to say, pretty speechless.

What to do?

The first thing a landlord shouldn’t do is over-react and panic. Take a sharp in-take of breath and then a landlord should try and remain calm.

Unfortunately, if there are no forced signs of entry then buy-to-let contents insurance will not cover a landlord for their losses. It is worth a landlord reporting any theft to the police so that if should you catch up with your tenant at some stage the extent of your losses are documented and can be verified.

The other thing is a landlord should not assume abandonment, and go about changing locks on the assumption that the tenant has given up their tenancy. A tenant’s disappearance does not bring a tenancy to an end, even where the tenant is no longer paying the rent and has removed half a landlord’s kitchen as in my particular case. What a landlord needs to do is follow the legally required steps to bring a tenancy to an end by either issuing a section 8 or section 21 notice.

Landlords tracing a tenant

A landlord firstly should ensure that they obtain possession of their buy-to-let property legally to enable them to re-let their residential investment property. Landlords however will also want to ensure that they get any monies that were due to them before the tenants disappeared. This will probably involve taking the tenant to court.

The problem with taking court proceedings against a tenant is that a landlord needs an address for the tenant to serve the legal documents on.

The process for landlords tracing a tenant can be easy or it may prove to be impossible, particularly where a tenant is a ‘professional tenant’ & is well versed at doing a bunk and leaving their debts behind whilst disappearing into the ‘ether’. The first step a landlord should use to try and trace a tenant is to compile a comprehensive list of information that a landlord has on the tenant. A landlord should have some basic details resulting from the original credit check they carried out on the tenant. Information such as previous address and date of birth will be useful in being able to potentially trace the absconded tenant.

For instance a landlord could then use these details and the facility provided by a company such as Tracemart to try and locate the tenant.

Alternatively a landlord could employ a dedicated tracing agent such as 1st Locate who will do all the leg work for a landlord. 1st locate offer a service where they assign one of their dedicated researchers to a landlord’s case on a no results no fee basis. This service will cost a landlord £35. They also offer landlords a trace and collect service which means that they will do the work of collecting the debt as well as tracing the tenant.

Once a landlord has a tenants address they are able potentially to take legal action through the courts against the tenant to recover the debt.

Landlords employing a private investigator

Where a landlord has a very large debt amounting to several thousands of pounds and is confident that the tenant has a sizeable income or assets, in which case a landlord could consider employing a private investigator. PI’s aren’t cheap and you will be looking at paying £30+ per hour for them meaning that bills can easily run into the hundreds if not thousands of pounds. However, a good one may be able to access information that you and I couldn’t and if it means finding a solvent professional tenant it could easily be worth it.

Word of warning for landlords

However, a word of warning also gained from personal experience. Even if the landlord is successful in getting a County Court Judgement then if the tenant has little or no income and no assets, the amount that a landlord will receive could mean that a tenant will take many years to pay off the debt. The likelihood is that payment will not be continuous. In this case a landlord is right to ask themselves whether it was worth the cost and effort involved & this question should always be asked early on in any proceedings.

Even where the tenant is working and the landlord obtains an attachment to earning Order the landlord will need details of where the tenant is working. This is because the landlord or solicitor acting for them will need the employer’s details in order to be able to write to them and instruct them to make payment. The good thing once this has been done an attachment of earnings order means that a landlord’s payment is automatically taken out of their tenant’s wages, by a tenant’s employee, before they receive their net wages in the same way as tax is paid through PAYE (pay as you earn).

Selling a landlords debt

I have heard about some landlords who have attempted to sell on their tenant’s debt to a debt collection agency. The reality is that a landlord who does this will forgo most of their debt. Even for a primary debt source i.e. a debtor who might also be a home-owner the most a landlord is likely to receive from the debt collecting company is around 30p in the pound or 30%. Where more likely it is a case of a tenant that has absconded and cannot be traced; the amount a landlord is likely to receive is in the low single figures – in other words effectively nothing!

The importance of landlords vetting their tenants

All this highlights the importance of a landlord doing a good job of vetting the tenant in the first place.

This includes carrying out a credit check on their prospective tenant. Getting a good tenant at the outset will minimise the chances that the tenant is likely to abscond. Where they do; a landlord should then have the background information necessary to stand a reasonable chance of at least getting part of their money back should the tenant decide to disappear into the night!

Chris Horne is an experienced landlord and property professional who now runs the website Property Hawk, a site aimed directly at UK Landlords. The site incorporates free property management software that enables landlords to track all their financial data relating to their portfolio. It allows users to print tenancy agreements and other forms FREE FOREVER. The site generates a real time rent book for each property as well as calculating a landlords tax liabilty. The service is totally free to use at http://www.propertyhawk.co.uk

Article Source: http://EzineArticles.com/?expert=Chris_Horne
http://EzineArticles.com/?A-Tenant-Dissapears-from-a-Rental-Property—What-Should-a-Landlord-Do?&id=877132

Powered By WP Footer

landlords

Six Ways for Landlords to Cut Costs to Increase Property Rental Profit

By Chris Horne

The days of 10% yields are now all but a distant memory for landlords.

Interest rates are still moving upwards and seem destined to hit 6% by the end of the year.

So what can landlords do to drive up margins & help cashflow. The answer is to cut costs and here are six ways for landlords to do this.

1. Buy cheap – landlords need to be tough negotiators

There is still money to be made in the property market whether landlords buy at auction or they find a residential investment property in the local estate agents or over the internet.

The secret for landlords is to always drive a hard bargain. Landlords should view 50 residential investment properties, put in 50 ‘ridiculous offers’; 49 will be rejected but the chances are one will succeed. Then a landlord will get a buy-to-let bargain. That way a landlords rent will reflect the value say of a £200,000 property but if a landlord has managed to secure a 15% discount their costs will only be that of a £170,000 residential investment property.

2. Landlords need to get the best finance deal

The biggest cost to any landlord is their mortgage. If a landlord can cut this by even a 0.5% that will work out as a cost saving of £62.50 per month on a £150,000 buy-to-let mortgage.

For a landlord to ensure their mortgage is competitive they need to keep checking their rate against the best BTL mortgage rates currently available.

Landlords should never, ever pay the mortgage company standard variable rate, the chances are you will be paying 1-2% above what you need to. Most landlords can save at least 0.5% on their interest rate if they shopped around.

3. Save on managing fees by DIY Landlording

How ever landlords look at it if they get in a letting agent it’s going to cost. For the full management of a landlord’s property this is likely to be between 8-12% of a landlords’ rent. For many landlords this can represent 20% of their annual costs. By landlords DIY, they can boost their profits and cashflow immediately. This gives landlords greater scope to perhaps swap to a repayment mortgage.

In this way landlords will gradually cut their loan repayments because of their reducing mortgage balance.

If landlords think that managing their investment property themself is a daunting prospect then they shouldn’t. There are plenty of Free Assured Shorthold tenancy agreements available and I provide a fully solicitor prepared Free assured shorthold tenancy agreement available for UK landlords to download within the Free Online Property Management software on my site. This saves a landlord £15 for the book, £10 for the Assured Shorthold Tenancy Agreement, £100 for the property management software. In total £125.

4. Landlords must avoid the void

Experienced landlords dread the void. This is the term given to a landlords residential investment property when it is empty. At all costs landlords should avoid this. Many novice landlords who have been told by a letting agent often desperate for business that their buy-to-let property is worth £750 pcm, will then end up with it empty for 3 months only to then have to let it for £600 anyway. Far better is for landlords to have it let at the outset for a realistic rent. Once a void is experienced then a landlord will never get this money back. The average void for a buy-to-let property is probably about one month per annum. If a landlord can cut this to zero then this is about the equivalent of cutting their annual costs by 10%.

5. Competitive insurance

It is very easy for a landlord to over pay for their buy-to-let insurance. Often buy-to-let mortgage companies will try and sell landlords their own insurance product. Never buy this. Buy-to-let mortgage companies rely on the apathy of the average consumer not to check out the best deals through a specialist landlords insurance broker which enables them to charge inflated prices. Landlords should make sure they get a number of quotes and know what landlord insurance product they are getting before they buy.

6. Don’t pay tax

Well prepared landlords should pay little or no tax. Not because they are criminals but because landlords need to be shrewd businessmen as well as good property investors. Tax avoidance is not illegal; it’s what the billionaires do. Landlords should be fully informed about their landlord tax allowances and keep up to date records to ensure that they don’t have to pay out unnecessarily.

Avoiding tax could save hundreds if not thousands of pounds per annum to a landlord. This money can then be re-invested by a landlord in growing their buy-to-let portfolio or cutting their costs further by paying down their debt.

Property Hawk is a site aimed directly at UK Landlords. The site incorporates free property management software that enables landlords to track all their financial data relating to their portfolio. It allows users to print tenancy agreements and other forms FREE FOREVER. The site generates a real time rent book for each property as well as calculating a landlords tax liability. The service is totally free to use at www.propertyhawk.co.uk

Article Source: http://EzineArticles.com/?expert=Chris_Horne
http://EzineArticles.com/?Six-Ways-for-Landlords-to-Cut-Costs-to-Increase-Property-Rental-Profit&id=725940

Powered By WP Footer

landlords

Landlords Raising Rents on Rental Property – Advice on the Tenancy Agreements

By Chris Horne

Letting agents are seeing booming demand for rental property as first time buyers and foreign workers defer buying homes amid continued uncertainty over UK house prices.

Letting agents around London and the south east in particular are seeing up to 25% more activity in their letting business compared with a year ago. Much of this rental demand is coming from young professionals and City workers who are not prepared to gamble and buy property in a weak housing market.

The result of this boom in property lettings activity are fast rising rents in certain areas as strong competition amongst potential tenants bids up prices. Reports show that landlords in these ‘rental hotspots’ are managing to secure significant rent increases.

Lucinda Richardson, lettings Manager at the Westbourne Grove branch of Winkworth said tenants renewing their agreement were typically paying 5-10% more per year, while new occupants are paying 20% more than they would have done a year ago.

Things for landlords to avoid

Therefore if a landlord is lucky enough to own residential investment property in areas of strong rental demand, what should they be doing? Firstly landlords should always be wary of offering a tenant a longer term contract than the standard 6 month fixed term tenancy in areas where rental demand is strong and rents are rising. Glynn Judd, head of lettings at the Surrey Quays branch of Kinleigh Folkard & Hayward reports that he is aware of tenants pushing for 18 month even 2 year fixed term tenancy. This is because once agreed most tenancy agreements do not allow a landlord to increase the rent during this fixed term.

Therefore the initial rent that the landlord agrees may look very appealing at the outset, but will it still look so good in 24 months time? During this time employing a standard 6 month fixed term tenancy a landlord could have legally raised the rent three times. The other alternative to a landlord is to opt for a periodic tenancy.

How can landlords raise their rents

Fixed term tenancy

How a landlord goes about raising the rent will largely depend on the type of tenancy in place. Most landlords use a fixed term tenancy agreement such as the one available on Property Hawk. In most cases a landlord will opt for a 6 month tenancy although it can be longer. This means that without the tenancy agreement you as the landlord cannot put up the rent during this period, unless the tenancy agreement makes specific provisions allowing this. These specific provisions may be by way of an escalator clause for instance stating that the rent will go up by inflation after six months.

The vast majority of landlords avoid such clauses. This is because they are seen as overly prescriptive and inflexible. Most landlords opt to review the rent when they decide whether to re-let at the end of the fixed term tenancy. This way a landlord can judge the prevailing market conditions and work out what the rental market will bare at that particular time. For instance in places such as central London and parts of the south east, rental inflation is running well ahead of general inflation, therefore for a landlord just to track inflation would mean their rents are falling behind the market.

If a landlord decides to opt to re-let to the existing tenant then raising the rent is relatively easy as all they do is create a new assured short hold tenancy with the new rent included.

Periodic tenancies

The other type of tenancy that a landlord might employ is a periodic tenancy. These are tenancies where there is no specific end date. The two types of periodic tenancy are the contractual periodic tenancy in which from the outset there is no end date, or the much more common statutory periodic tenancy. The statutory periodic tenancy comes about when a fixed term tenancy lapses.

In the case of periodic tenancies, increasing the rent is slightly more complicated because the landlord will need to go through the formal procedure as set out in section 13 of the Housing Act 1988. If the landlord wants to increase the rent and intends to keep the tenancy on a statutory periodic tenancy, they can use the special form titled Landlord’s notice proposing a new rent under an Assured Periodic Tenancy or Agricultural Occupancy sometimes known as a section 13 notice. This form allows a landlord to propose a rent increase as soon as the statutory tenancy begins. For a contractual period tenancy a landlord can use the same form to propose an increase which will take effect one year after a tenancy begins. In both cases a months notice of the increase is required for rents paid on a weekly or monthly basis (more if the rent period is longer). With both periodic tenancies a landlord can propose further rent increases at yearly intervals, after the first increase.

Potential snags for a landlord raising rents

There are a number of potential snags for landlords when raising the rent. Not least amongst these can be scaring off perfectly good tenants by making the rent unaffordable. A landlord has to be therefore confident that they their existing tenant will be able to afford the new rent or that they will be able to quickly fill any vacancy and avoid a protracted void period.

Firstly, the snag with section 13 rent increases is generally a landlord can only raise rents once a year. In a fast moving market such as the one being experienced in parts of London and the South-East currently, annual rental increases will not keep pace with market rents meaning that a landlord towards the end of the 12 month rental period will have a rent below the open market value and therefore be missing out on potential rental income.

The other aspect about a landlord with a periodic tenancy who needs to use a section 13 notice is that it entitles a tenant who is not happy with the rental increase to apply to a Rent Assessment Committee for a determination of what rent a landlord could reasonably expect to pay if he or she was letting it on the open market under a new tenancy on the same terms. The committee has the power to agree the rent or set a rent higher or lower. The rent then fixed by the committee is the legal maximum the landlord can charge. The new rent will be payable from the date specified in the landlord’s notice unless the committee considers this would cause a tenant undue hardship in which case it may specify a later date. The landlord can propose that the rent is increased a year after the date on which the rent decided by the committee was payable.

Power of the Rent Assessment Committee

All this may sound quite daunting to a landlord. The reality is it shouldn’t be. Whilst on the face of it the Rent Assessment Committee seems to have a considerable amount of power, in reality they don’t. For a start they can only set a new rent if it is demonstrably unreasonable. The other factors that limits the scope of the Rent Assessment Committee and the tenant in ultimately setting rental levels is that the landlord retains the right to issue a section 21 notice.

This means that providing the fixed term period has come to an end by the time the notice has expired a landlords ultimate response to a rent that is unsatisfactory is to regain possession of their rental property and simply re-let it to another tenant at the rent that they and the market will bare.

What should landlords do?

The simple answer is that landlords should normally opt for a fixed term tenancy such as the free tenancy agreement available within Property Hawk’s Property Manager. A landlord should avoid the tenancy lapsing and becoming a periodic tenancy. They can do this by going through the motions of issuing a section 21 notice for possession even at the start of the tenancy to ensure that a landlord can bring the tenancy to an end. In this way a landlord is in the perfect position at the end of the fixed term to either re-let to the existing tenant at a higher rent, or if the tenant objects, to regain possession and then let their buy-to-let investment property to another tenant at the higher rent.

A word of caution to landlords in less high demand areas. Tenants can be sometimes unsettled by receiving a section 21 notice and therefore a landlord needs to approach the situation sensitivity and explain that the notice is a just a formal procedure and that they have no intention of seeing it through. The reality is for any landlord is that having a tenant paying rent, even if it is not the absolute top rate, is far preferable than having no rent at all!

Chris Horne is an experienced landlord and property professional who now runs the website Property Hawk, a site aimed directly at UK Landlords. The site incorporates free property management software that enables landlords to track all their financial data relating to their portfolio. It allows users to print tenancy agreements and other forms FREE FOREVER. The site generates a real time rent book for each property as well as calculating a landlords tax liability. The service is totally free to use at http://www.propertyhawk.co.uk

Article Source: http://EzineArticles.com/?expert=Chris_Horne
http://EzineArticles.com/?Landlords-Raising-Rents-on-Rental-Property—Advice-on-the-Tenancy-Agreements&id=1041166

Powered By WP Footer