Removing tenants from a property can be a tricky business. In my honest opinion it is best to instruct the services of a legal professional to assist you with these matters. Judges seem to want to favour tenants and even if there are massive rent arrears and your tenant is not paying you if you have not served the notices in the correct way then your case will be thrown out. By using a professional to assist you with this matter you will have the best chance of resolving it promptly. A cost of £350 to remove someone is better than a build up of £1000’s of rent arrears.
There are differing views on this question and I suppose it all comes down to how comfortable you feel and your personal cash flow situation, along with the quality of your properties. Ask yourself what could potentially go wrong and do you have the funds to fix it in an emergency? Many landlords allocated one months rent a year to spend on their properties but if your boiler and your roof has issues this may not be enough to cover it.
Maintenance is often very seasonal, boilers going in winter as they are used heavily. Be prepared for a few more maintenance jobs in the winter months in my opinions as people are in their properties more. Property is a business where cash flow is key to success. If you have sufficient funds in the pot then if a boiler does break it should not be a huge stress for you and your tenant. You have an obligation to your tenant to provide them with a habitable home so ensuring you can repair any issues is an important part of your responsibility.
As an agent we inform all utility companies of start and end meter readings, the difference is then the landlord’s responsibility to cover. Although usage should be minimal when a property is empty.
Council tax is something to be aware of and you should check with your local council, as there have been changes to the rules lately. Some councils are charging 150% of the council tax for longer term empty properties. You may also be liable for a council tax payment even if your property is empty and unfurnished in between tenancies.
This is something to bear in mind when re letting your property. If an offer is made on your property and you feel it is a little less than you were hoping, consider the cost implications of having the property empty for another month.
During the tenancy the tenant is responsible for payment of all utilities, if there are issues at the end of the tenancy with non payment of bills then by providing the supplier with a copy of the tenancy details and the final meter readings will confirm you as the landlord are not responsible.
Rent arrears are a real problem for landlords and can especially impact at times of economic difficulty like we are experiencing now.
If you feel that one of your tenants may be struggling to meet their rental payments I would advise you to open a line of communication with them immediately.
Perhaps it is as simple as the fact that the date the rent is due and the date they get paid is not synchronised so they experience a cash flow problem within the month. You can easily change the payment date of their rent and pro rata the difference so the rent is up to date. One conversation here has resulted in a win win for both landlord and tenant.
Perhaps the rent is too high for your tenant? With the cost of living increasing monthly at the moment, more and more households are stretched. I have recently reduced one of my tenants rent by £25 per month so that she did not fall into rent arrears and ultimately have to leave. When you have an excellent tenant who looks after your property a reduction in the rent of £300 across a year is much more agreeable to me than an empty property and a one month void of £500.
If the rent is late then you need to be contacting your tenant on the very first day and you need to find out why. Perhaps there has been a problem with their bank or standing order, if they say the funds have left their account then ask for a screen shot from their banking to prove this.
If your tenant says they can’t pay the full month rent at this stage for whatever reason ask them for something. Do not let a month go by without them making some form of payment. In order to minimise an arrears situation they need to be making payments regularly rather than letting the debt build up to an unmanageable amount.
If after 48 hours the rent has not landed in your account then follow up your phone calls with a letter and or text message. It is good to have a paper trail of correspondence.
Become friendly with your local solicitor, perhaps the one who does your conveyancing could send a formal letter to your tenant asking for prompt payment. You can also instruct the services of www.tenantarrears.co.uk which offer a great service for landlords, I have used them myself and can personally recommend the service.
Some landlords are now requesting multiple months rent up front from their tenants. This means your rent is paid in advance and rent arrears can not occur. We often find that some of our foreign tenants do this and it is a great way to have security. Of course it is still important to reference these tenants to check their rental history.
Ultimately you can really minimise the risk that rent arrears poses to your business by selecting the very best tenant you can initially and keeping a good line of communication open throughout the tenancy. Perform quarterly inspections so you see your tenant often and can get a feel for their situation and if they are struggling financially in any way.
We use various strategies to ensure we let properties to the very best tenants.
Let a good property – firstly you as the Landlord has a very important part to play. It is imperative that you have a good quality property that is presentable and clean from the viewing stage. The best tenants will want to live in the best houses, the level of your property will reflect the level of your tenant and the success of the tenancy.
Advertise on Rightmove – this is by far the best portal for finding a tenant. We find that the quality of the leads that come from Rightmove far out way those from other portals.
Be judgemental – when you are at the viewing you need to ask yourself a few questions about the prospective tenants you meet. How are they presenting themselves to you? The viewing process is as much about you selling them the house and the area as they are selling themselves as a tenant to live in it. Are they clean and tidy? Are their shoes clean? If a person can look after themselves then we hope they can look after a property. I have met a tenant who came to the viewing with half of their lunch down their shirt, I did not let to them.
If they come with a member of their family, be inquisitive towards them as well. Family members will often be guests at the house so you need to ensure they are also of a good nature and presentable.
Perform references – I would never let to a tenant without performing a reference check on them. I would always use an external company to do this. Do not just take a name and number that the prospective tenant gives you as a reference, that could be ANYBODY! Ask them to fill out a full reference form and submit it to a professional company to perform the check for you.
Visit their existing property – on the pretense that you want to collect the application form. How are they living now?
Ask your existing tenants to allow viewings during their notice period, this means you could start viewings immediately and only have a few days in between tenancies, as long as there is not a lot of maintenance to be done.
Ensure the property is looking at its very best at the viewing stage. Do not perform a viewing where you are saying, oh this will be done, and I am repainting this purple wall magnolia. For some reason many tenants can often not see past what is in front of them and it will put them off. Show your house in its very best light and it will let quicker.
Think about the offers that are made on the property. Even if you have an offer which is a little less than you would hope think about the cost implications of having the property empty, utilities and the new rules on empty property discounts for council tax. See further details below.
You need to find the best tradesman that you can, they need to be reliable, professional, clean and tidy. Before you have a maintenance issue invite a few local tradespeople to your property, tell them you are looking to build relationships with local tradesman who can assist you when matters arise. If you do it this way you will have a list of tradesman you have already met who you can call in an emergency. They will have already met you, know that you are a professional landlord and will want to impress you.
You could join forces with other local professional landlords and invite tradesman to be on all of your lists.
Ask to see examples of their work, particularly if you are looking at larger refurbishment projects. Ask for a price list so you can have an idea of what you should be paying for certain items.
Create a note in your diary for seasonal items that you should undertake to minimise maintenance issues that may result. After the Autumn it is advisable to have the gutters cleared, before the Winter it would be a good time to get the boiler serviced. In summer you may need to remind your tenant to keep an eye on their garden or if it vacant tidy the garden at this time. If you are proactive in your care for your property you will save money in the long run.
We do get asked frequently to take over the management of a property that is with an agent already. The first thing I advise the landlord to do is ensure they have given the correct notice to the existing agent or if relationships have broken down then we would just ask to be copied in on correspondence advising that we are taking over. That is all you need to do. We would do everything else. This includes, collecting keys and paperwork from your existing agent, setting up your tenant on a new tenancy agreement, visiting the property to establish condition and reporting back to you if necessary. We ensure the tenant is aware of the change in where they pay their rent to and we also request the deposit to be switched over to our DPS account.
When letting a property an annual gas safety certificate must be in place prior to move in and a ten yearly energy performance certificate must be in place at the advertising stage.
If you provide appliances annual pat testing is advised but not a legal requirement. The Electricity at Work Regulations 1989 require that any electrical equipment that has the potential to cause injury is maintained in a safe condition. However, the Regulations do not specify what needs to be done, by whom or how frequently (i.e. they don’t make inspection or testing of electrical appliances a legal requirement, nor do they make it a legal requirement to undertake this annually)
You must have buildings insurance, this will have been requested through your mortgagee or at the point of purchase.
As an agent we ensure that the Gas Safety and EPC element of your requirements are in place and keep copies on file electronically and in paper format.
Having mentioned previously the benefit of inspecting properties here is a quick guide on how to do so. Take the inventory with you that was performed at the start of the tenancy so you can refresh yourself on the condition of the property at that point.
Look out for signs of poor ventilation which can often be a problem in rented properties. Any black mould on the walls is as a result of poor ventilation and condensation. Advise tenants that they have a responsibility to keep the property well ventilated to avoid these issues.
Look for any severe wear and tear that seems out of the ordinary, have the walls been unusually marked, are the floor surfaces stained or worn.
It is important to remember you cannot criticise how a tenant is living, for example if the washing up has not been done! You would hope they would present the house to you in the best light but if not then you can only advise on matters that will affect the property.
Look at the property from the outside also, are the gutters clear, is the roof in good shape. This is your time now to look for any issues that a tenant may not have noticed but could result in additional costs if not actioned promptly. You may wish to take one of your trusted local maintenance contractors with you to assess the property.
Very often when your tenant advises you that they have damp, what they really have is condensation that has been caused by a lack of ventilation. This shows up in the form of black mould. This mould can be easily wiped off and cleaned away then in order to prevent it returning there are some easy preventative measures.
Make sure there are vents on the windows and that these are open. Do you have a fan fitted in the kitchen and the bathroom that comes on automatically as soon as the light is switched on?
Always advise tenants that drying their clothes on the radiators is not acceptable, nor is using a dryer without venting the air from it through a window.
Does your property have air bricks fitted and are they open, sometimes you find that they have been filled in for some reason I cannot think of! Do not be drawn into DPC’s and major works when all your property has is a lack of ventilation through it that can be easily resolved.
We provide all our tenants with a Condensation Report at the move in stage and advise them that they have a responsibility to keep the property ventilated.
If you are working alone full time on your portfolio or if you are building your empire whilst working you may feel that you would benefit from meeting other local property professionals. People that you can share your experiences with and learn from. The amazing things about our industry is the openness and the willingness of experts to share their knowledge. I think it is because there is enough property to go round and different people have different strategies so you are rarely fighting over the same deal. It helps to share best practice with other like minded people as well as helping you keep focused on your goals.
So where do you find these people? Networking events! There are lots of networking events across the country. The format is often similar and you will have time to meet other professional landlords as well as hear from a speaker who will share their expertise.
If you are based in and around Greater Manchester then you may like to attend the networking event that I host on the first Tuesday of every month. For more details have a look at the website www.manchesterpropertymeet.com.
If you have a property portfolio you will need to submit annual accounts showing the profits you have made. It is possible to do your own book keeping through many of the great simple to use accounting software packages that are available. I use Xero.
If you are in full time employment your rental income may affect your tax liability so I would always seek the advice of an accounting professional.
We find Inventories to be invaluable to us and the success of our tenancies. By clearly showing the status of the property prior to move in you are setting clear guide lines as to how the property should be when it is returned to you. Remember to particularly ensure that you take photographs of the defected areas. Taking 100s of photos of carpets and light switches will not be time well spent but photographing a small stain on the carpet prior to a tenant moving in is most useful. Your tenant then knows that you will not be blaming them for something that has previously occurred.
There are many formats of Inventory ranging from simple typed to videos. We use a Photographic system that works excellently for us. Our landlords are always delighted with the quality of our inventories.
It can be a little confusing when presented with buy-to-let yields that are somewhat light on detail and vague at the best of times when you are looking at investments. It is also important to be able to calculate the yield of your existing portfolio.
The UK Land Registry House Price Index for May 2012 shows an average house costs £160,417 and in the same month the average rent in England and Wales rose by 0.4% to £712 per month.
In this instance we will use simple calculations for a quick yield comparison, so there will be no consideration of the full purchase costs or running costs, just purchase price and rent.
Rent (£712pcm x 12 = £8,544pa) / House Price £160,417 = 5.3% Gross Yield.
Take a more detailed look at calculating yields
What matters fundamentally is how much of your own money you are actually spending, i.e. a cash purchase or cash deposit with a buy-to-let mortgage.
The two most common errors are investors adding in the whole purchase price when they shouldn’t, or leaving costs out that are essential to achieve an accurate yield.
Firstly calculate the Gross Purchase Costs, combine capital costs including the cash purchase price. For the Net Rent, take the rent and subtract all running costs.
e.g. The Gross Purchase Costs is: (Purchase Price + Legal Fees, Surveys, Refurb Costs.) The Net Rent is: (Expected Annual Rent – Agent Fees, Property Insurance, Annual Safety Checks.)
To complete the Rental Yield calculation: (Net Rent / Gross Purchase Costs X 100 = % Rental Yield Gross before tax.)
Cash deposit with a buy-to-let mortgage
The key point to focus on with an investment is the amount of money you actually pay out of your own pocket to achieve the return i.e. the rental income or capital growth.
When you are using an interest only Buy-to-let Mortgage the only part of the Purchase Price you must include is your cash deposit. Why? Because the yield should only be based on the money you actually spend i.e. the deposit, as the cost of the mortgage will be funded out of rent.
e.g. The Gross Purchase Costs is: (Your Cash Deposit + Legal Fees, Surveys, Refurb Costs.) The Net Rent is: (Expected Annual Rent – Buy-to-let Mortgage interest payments, Agent Fees, Property Insurance, Annual Safety Checks.)
To complete the Rental Yield calculation it’s the same: (Net Rent / Gross Purchase Costs X 100 = % Rental Yield Gross before tax.)
Whilst the basic calculation is the same, some figures used within the calculation are different. Using an interest only Buy-to-let Mortgage gives you leverage on your investment however it’s a Red-Herring to include the full Purchase Price, only the Cash Deposit part should be included. It might be wise to ask which figures are included in the yields you are presented with when you are looking at a particular deal.
Please remember that there is always the probability of maintenance costs to be deducted from the annual rent to calculate Net Rent, however there’s no way of knowing in advance what might go wrong on a property throughout the rental year, you can only assume some contingency. As mentioned above you could allocate one month’s equivalent rent as a maintenance allocation for the purposes of the calculation.
The coronavirus pandemic has been a challenging time for renters and landlords and the reality is, the effects of this dreadful event will be with us for many more months to come. It will leave many
facing financial insecurity for the first time. Despite this challenge, it is important to stress that the landlord and renter relationship remains a strong and productive one.
The NRLA has produced a thorough guidance with support from across the entire sector, which is helpful to tenants who may or currently are facing financial uncertainty.