THE buy-to-let landlord has acquired a terrible reputation. Loathed for
snapping up homes that should rightfully go to first-time buyers, they are
accused of destroying communities and fuelling rampant house-price
inflation. James Scott-Lee, of Chancellors, the estate agent, acknowledged
concerns about buy-to-let buyers at a Royal Institution of Chartered
Surveyors briefing last week: “Investors have been very important to the
market, but some would say that they have swamped the market.”
But while the buy-to-let sector has grown rapidly over the past decade, it is
less widespread than you might think. In fact, the private rented sector in
the UK is small by international standards: buy-to-let properties account
for just 5 to 6 per cent of all UK households. The popular image of greedy
property investors snapping up row upon row of houses is not altogether
representative: 45 per cent of buy-to-let investors own just one property,
and three quarters have four or fewer. Accommodation for 17 per cent of
tenants on state benefits is provided by private landlords, while in some
areas, such as Blackpool, 58 per cent of those on benefit live in privately
owned accommodation. Moreover, recent findings from Hometrack show that
renting costs are just 70 per cent of those of buying and the Survey of
English Housing shows that tenant satisfaction is higher with private
landlords.
So how do you ensure that you are one of the better landlords? The
first thing to do is to ensure that you fulfil all your legal obligations.
If the property is one that you used to live in – or any property not
purchased with a buy-to-let mortgage – you need to inform the mortgage
lender of your intention to let it. If it is leasehold, then you need to get
permission from the freeholder, too.
If you are renting the property furnished, the furnishings must comply with
fire and safety regulations. Gas appliances must be checked by a qualified
Corgi professional, and electrical appliances should be regularly checked by
a qualified electrical engineer.
“Make sure that the property is up to spec,” says Mary Ryan, of Property
Vision, a property search agency. “Do the showers work properly? Do they
leak? Are there any quirks about the property? People who have lived in a
home that they are subsequently renting out often think, ‘Well, it was good
enough for me’. But that does not mean that it will satisfy tenants.”
Once you have found a tenant you need to have an assured shorthold tenancy
agreement drawn up. Landlords are no longer entitled to hold on to deposits,
so you need to find a tenancy deposit protection scheme to hold the money.
You must be able to provide the tenant with details of the scheme within 14
days of taking the deposit. David Salusbury, of the National Landlords
Association, says: “The penalties for noncompliance with tenancy deposit
protection are severe: a court can order the landlord to repay the deposit
plus a penalty of three times the amount of the deposit.” Landlords who
don’t sign up for a scheme will find it harder to evict tenants with whom
they have a dispute.
How do I keep up with all the regulations that govern the lettings business?
Join a landlords’ association, such as the National Landlords Association,
or sign up to a local authority-run landlord accreditation scheme. “These
are designed to give landlords varied skills and a wide range of knowledge,
ranging from legal obligations and duties as a landlord through to what you
need to look out for when getting repairs done,” says Jonathan Moore, of
Mortgages for Business, a specialist buy-to-let mortgage broker.
What about dealing with tenants? “The hardest part of being a landlord
is finding tenants,” says Lee Grandin, managing director of Landlord
Mortgages, another specialist broker. “Think about where you are
advertising. Have you chosen the sort of paper your ideal tenant would
read?” Once you have found a potential tenant, you need to carry out
security checks. You should run a credit check, which will help to verify
not just that the tenant will be able to pay the rent, but that he is who he
says he is. If you are using a letting agent, it is still worth doing the
viewings yourself, so that you make contact with the tenant from the outset.
“The vast majority of problems between tenants and landlords occur within the
first few months,” Ryan says. “It is up to the landlord to ensure that the
tenant knows how everything works.” At the very basic level, you must
respect their rights. You cannot enter the property without their
permission, or when they are not there. “As a buy-to-let landlord, you are
running a business,” Grandin says. “You have to get the customer service
angle right.”
Should I get an agent to manage my property, or should I do it myself?
Grandin says that it may be worth using a letting agent, but if you have the
time you ought to manage the property yourself. “Historically, letting
agents have been very poor managers,” Grandin says. “They are interested in
getting the property on the market and getting it let. They are not
particularly interested in the ongoing management of the property, so
tenants can get poor service from agents.” One of the problems is that,
thanks to growing competition, fees for managing rental properties have
fallen. While fees of 10 to 15 per cent used to be standard, it is now
possible to secure management for as little as 8 per cent of the rent, while
some agencies, such as Oliver Finn, charge a flat fee.
However, Ryan argues that it is worth employing an agent. “With interest rates
rising, many landlords will be tempted to make savings by cutting back on
management services. I suspect that that is a false economy,” she says. “If
you are not prepared to pay an agent, then you need to be available all the
time.” PAULA HAWKINS
www.landlords.org.uk ; Landlord
Mortgages: www.lml.co.uk www.propertyvision.com www.mortgagesforbusiness.co.uk
Buy-to-let: a benefit to society or a scourge of the community? Have your say
at: timesonline.co.uk/investmentproperty
