Reply With QuoteManaging a property is easier than managing the tenants.
Use an agent and if things go sour with a tenant, the agent will deal with the worst of it.
My wife and I have saved up a reasonable amount of money and we are in the process of buying a couple of flats with a view to building up a portfolio over time.
Our initial purchases with be 2 (well located in our opinion) long leasehold flats worth 320k and 330k respectively. We are buying them in a UK limited company to benefit from interest/cost offset. The deposit and bank financing is in place and we are going through the final stages of the legal process with a view to completing before the end of June to take advantage of the stamp duty holiday. We have local trades lined up to paint/decorate/etc
We are in the process of starting to think about finding tenants and I had some questions:
- should we be using an estate agent to find a tenant? What are the alternatives?
- my wife works part time and she has capacity to 'manage' the properties. Should that be ideally done by an agent/professional - or is that something she can realistically do? what does property 'management' involve
- what are best practices to ensure we get good tenants/avoid non-payers?
- what should we realistically be looking to pay estate agents for various service levels?
Any other tips for first time landlords would be much appreciated!
Managing a property is easier than managing the tenants.
Use an agent and if things go sour with a tenant, the agent will deal with the worst of it.
Yes managing two properties is very doable.
Agents fall into two categories, "okay and rubbish", you'll only find out how good when there's a problem.
There are no guarantees when finding "good tenants" all you can do is "minimise the risk" references from employers and previous landlords are good but again no guarantee, try to visit them in their current property.
Other landlords may have different opinions.
"Once is happenstance. Twice is coincidence. The third time it's enemy action."
'Populism, the last refuge of a Tory scoundrel'.
Make sure you have full details of the service charges as these can eat into all your profit
Make sure there is no cladding issue or perceived cladding issue (lots of blocks that are ok are getting tainted) as this can make it impossible to sell
Ensure the long lease lets you let on ASTs. Some blocks prohibit it
Personally for the same money Id buy one larger house and one much smaller one. Both ends of the spectrum covered and with freehold you can control your own destiny
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I manage my rental on my own, joining NRLA is well worth the money , they have all the templates for documents you need and their advice line is brilliant .
I would avoid flats unless theyre house conversion with share of freehold. My first property was a flat which i now rent out; management fees have increased every year and with spurious charges etc and replacements for items and it will be very much out of your control.
I find tenants for most of my properties myself but thats partly down to doing this for 25 years and them being in very rentable locations. I use agents for a couple.
As 1st time landlords maybe you should use an agent ( for at least 1 anyway) as a learning curve. Find out all the dos and donts and all the small things that you may not even consider.
Getting it wrong could cost you far far more than saving fees to get it done properly. Just my two penneths.
Re: the stamp duty holiday, are you aware you'll still pay the 3% BTL levy?
If you/your wife has the time, you can manage them yourselves
I manage a small portfolio myself and have never paid an agent. It makes a huge saving, but it costs time/hassle
I find tenants on social media, and it works well. Join the local buy-and-sell groups, and local property rental pages.
You'll be able to effectively vet tenants based on their SM content.
It's always a little bit of a punt with a new tenant, but that's no different to one obtained via an agent.
Get your tenancy agreement drafted up (easily available free online) and get the deposit and first month's rent up front
Lastly, and most importantly, treat the tenants with respect, fix issues quickly, and be reasonable with them.
You can do that without being a soft touch, or taken advantage of.
Get 2x plumbers, 2x sparks and 2x handymen and use them in rotation for dealing with issues.
I used an agent to find and vet the Tennants for a one off fee ( around 200 ) After this I take care of any issues myself. When I get a good long term Tennant I have always kept the price stable to help encourage them to stay.
Definitely use a reputable agent, find a letting specialist with proven success in the area.
Id use their tenant find service - they will find the tenant, do the credit and reference checks, arrange the deposit into an approved scheme, provide a standard AST agreement and manage signature, etc.
You could also pay them a bit more to do the inventory for you and move in day stuff.
Get them to give you a checklist of everything you need to have for regulatory purposes - smoke alarms, CO monitors, gas safety check, electric check, etc.
Once the tenant is in, you can manage it yourself. It might be you have nothing to do at all or it might be the flat has lots of maintenance problems. Either way, if you have a good plumber and a handy man, why pay the agent 10% or so of the rent to arrange the fixes themselves?
Do a hybrid agent arrangement. I find the mundane stuff of running a flat (doing safety certificates annually etc) a real bore and am delighted to let an agent do all that, as well as manage the rental deposit and collection etc. where the hybrid comes in is that I like to select my own tenants and get to meet them before approval. My agent lets me meet prospective tenants and I choose which (subject to references). Once selected I hand over everything to the agent.
If you're first time landlords hire a local reputable estate agent to find a tenant and manage it for you.Originally Posted by Indio
The best practice to find a good tenant is as above plus make sure the property is clean, tidy and presented well. Also make sure you're not asking ridiculousy high rent. Good tenants are smart enough to not want to over pay.
Most half decent agents will charge you 10% plus vat of the monthly rental income. There will also be a set up charge to cover initial work and reference costs. Expect to pay around half the first month's rent. Personally I would steer clear of tenant find only for now. In addition to this I would also steer clear of social media. If you want bad tenants that can't go through normal agencies because they have bad debt, ccjs, a pack of alsatians... Whack an ad on Facebook... You'll get all of thpse guys applying!
Regarding leasehold flats... They always rent well and you don't have to worry about fencing blowing down. But you will have to consider the lease lengths and the ongoing yearly maintenance charges. Nothing is more important if you're buying leasehold. I would want at least 100 years remaining on theease really.
I'm a landlord of 13 years and I also run an estate agency which does both sales and lettings.
Not in my experience. Used a fairly large letting agent last year and paid for fully managed service. Had issues getting the tenant out at the end and they wouldn't assist...as much use as a chocolate fireguard. If things go sour, I honestly don't think many letting agents will assist.
You honestly don't get much benefit from a fully managed service. They just act as a point of contact for the tenant and collect the rent. I found they have significant downside...any repairs needed, they use their contractors so you end up paying more than you need to. Managing a property really isn't rocket science...the only reason to use a letting agent to manage a property is if you really don't want to speak to a tenant directly, are unable or are unwilling to be contactable, or if the property is a distance that you can't travel to occasionally so you just want to hand everything over.
When I let my property out, the small estate agent I used contracted out the management service to a larger national chain ("Sequence"). If you end up with one of the larger operations, they manage so many properties that even if you have cause to speak to them daily, it will be obvious they can't even remember yesterdays conversation. Expect broken promises and a dreadful service.
Read any contract carefully...I'd bet no contract includes assistance if your tenant doesn't pay the rent or needs evicting...all they would do is serve the section 21, which sounds very legal but is just sending one recorded letter. Any issues you'll be on your own wondering why so much of your income was spent on them. On top of that, I found them to be totally greedy...on one occasion, they tried to bill me 120 for sending me an (unsolicited) account statement. 120 for one letter!
Last edited by Christian; 31st May 2021 at 11:10.
Some good advice here to which I'd add, do the sums realistically. The idea of owning/renting a couple of flats sounds good but does it work financially? My experience is that when you cost everything in, including voids, refurbs between lets and myriad other costs you won't have even thought about yet, it's marginal.
I'd actually recommend buying house/s rather than flats. The tenancies are usually longer, capital appreciation better, and you're not at the mercy of the freeholder - some of whom can create problems on a grand scale.
Agree with this. Being a landlord has become too high risk, low reward…it’s been chipped at for years by the government trying to force out private individuals both from a tax perspective (no mortgage relief) and trying to get private landlords to solve societies social problems by making them liable by removing most of their rights when a tenant can’t or won’t pay. I know with interest rates so low opportunities to invest aren’t great but I wouldn’t touch short term assured tenancy letting with a barge pole.
I don’t know a single person, myself included, who hasn’t rented and had a bad experience with tenants.
I think holiday letting is a different ballgame. I have no idea why someone with spare cash would choose to invest in a permanent let when they could tap what is guaranteed to be a huge market for the next couple of years.
It is a tricky one as on paper it is a great way to have recurring income and on the flip side the moral consideration may be factored in around landlords making property buying ever more difficult for youngsters wanting to get on the ladder.
Only yourself or your wife can decide if that's something you can look at yourself in the mirror and be comfortable with - of course not every youngster is able/willing to buy so they do need landlords.
But because of the above, which is a view shared by most of Gen X who will be the voting majority soon I'd imagine at some stage the government will go in dry and hard on landlords so factor that in as 5 years down the line there may be an unfortunate surprise or 2
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The “onboarding” obligations for a new tenant are significant. Copy gas and electric safety certificates, right to rent checks, How to rent booklet
https://www.propertyinvestmentprojec...e-for-tenants/
deposit protection, etc..
Not insurmountable but a b*** ache. Needs to be done as it can cause issues down the line if not.
I’m not sure buying via a company is universally seen as a good idea. I can’t remember all the pros and cons off the top of my head.
This is a useful resource. Not cheap but tax deductible!
https://landlordlaw.co.uk
Last edited by David_D; 31st May 2021 at 14:04.
If the stories are true of the hugely expensive "green" energy upgrades, that will be required in a few years, not owning property could be a very smart move!
There's always future scope to bring the level down on the annual tax on enveloped dwellings. Currently only applies to properties over 500k but is currently 3700 pa. Historically the level at which the tax bites has come down. However could be viewed as an easy win with the electorate should any chancellor want to raise income without impacting a significant no of voters e.g. everyone must pay fair share etc. However to unwind would be costly as well in SDLT
All crystal ball stuff but good luck with whatever you decide
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Hadnt considered that. Does it apply to commercially let property? Not something Ive ever dealt with and cant recall the rationale for the legislation!
In fairness, there are good and bad agents. I would interview at least 3 agents and focus on ones that specialise in residential letting or have a specialist letting side if they also sell property.
See if there is a local landlords group in your area. That could provide useful contacts and steer on agents, etc..
It only applies to dwellings but not commercial properties. The rationale was to stop stamp duty avoidance for dwellings. Normally you would pay SDLT at whatever % based on the value so for a house purchase in August 2021 of 650k SDLT would be 39500
The mischief is to put the property in a company known as enveloping. When you buy the house you buy the shares of the company that owns the house but not the house. The stamp duty on share purchases is much lower 0.5 or 1.5%
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ATED is only relevant to dwellings held through companies that are used by the owner, not rental property. It was introduced to discourage non-doms from sheltering their London homes from inheritance tax by using offshore companies to hold the property.
When it was first introduced the threshold was 2M, and I recall saying to some non-dom clients that I fully expected that threshold to reduce. On the basis of my advice they de-enveloped their circa 600k UK home. My crystal ball served me well on that occasion.
Thanks. That rings a bell now youve explained it!
Really helpful advice. Thank you for sharing your experiences. Not sure we are brave enough to venture into finding a tenant on social media - I think we will go with the agent tenant finding service and manage the property ourselves. I spent some time on the NRLA website - some excellent information there also.
Does anybody use homeserve landlord insurance? Is it any good/worth it?
Do you mean gas central heating/ boiler cover?? And/or plumbing, etc.?
Pretty sure they aren’t good value and I’m not sure how good they are if an emergency does arise and a quick response is required.
That said, it’s something and, absent a local reliable tradesperson who you can call on, might be worth it, at least for 12 months while you look for alternatives. Suspect there are introductory offers so year 1 might not be as expensive.
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