Do you dream of living beside the seaside? Well millions of people apparently do because
seaside towns and port cities are the most lucrative places for landlords interested in
expanding their property portfolios.

Where are the Most Lucrative Places?

Blackpool, Southampton and Hull are apparently the best places to purchase a buy to let
property. If you own a rental property there, you can look forward to a rental yield of around
8%, which as we are all too painfully aware is considerably higher than the average savings account.

According to the head of mortgages at HSBC, “Buy to let remains a good investment for those looking for above-average returns. Twenty-three of the top 50 areas offer yields above 5%, significantly more than is available from more traditional savings options.”

A Fine Line

Unfortunately, choosing the right area for your buy to let properties is not an exact science.
Rental property in London is in very high demand, yet rental yields are a lot lower than
Manchester or Coventry. This is mainly because of the far higher property prices in London. If you were looking to buy an average sized house in Kensington, for example, expect to see a price tag of around £1 million, which most landlords can’t afford.

However, some boroughs are performing better than others, so if you want to invest in the
London area, stick to Southwark where prices are lower and rental yields are around 6%.
Southwark may not have Blackpool Tower, but it does have the Shard.

There was a good article in the Telegraph yesterday that talked about the problem of tenant fraud. This is an interesting subject because although we are all used to hearing about landlords who rip off tenants, tales of tenants who go out of their way to defraud landlords are a lot less publicised. But for all that and we don’t read so much about this particular problem, it can and does happen. So what are the most likely scenarios and how can landlords protect themselves?

Identity Theft

If the property was previously your main home, there may still be post addressed to you being delivered to the property. A dishonest tenant can easily open your mail and steal your personal details. Tenants viewing the property could also do the same if you are not careful.

Identity Fraud

If a tenant has access to any of your personal information, they might use it to make credit
card applications or even take out a mortgage or loan on the property. You probably won’t find out until debt collection agencies come looking for you.

False Identity

Some tenants pretend to be someone else when they apply for a tenancy. There could be a multitude of reasons for them choosing to hide their true identity, but not one of them is
likely to be legitimate.

How to Prevent Tenant Fraud

The best way to prevent tenant fraud is to be extremely careful with your personal information and never allow post addressed to you to be delivered to a property where a tenant is living.

It is also essential that landlords check tenant references thoroughly, and if the tenant is
offering a guarantor, check their references out, too.

According to a government think tank, the answer is “yes”. Two reports published by the
Strategic Society Centre have looked at UK landlords and how they borrow money.

The authors of the report concluded that landlords should be prevented from buying new build properties and a cap should be placed on mortgage lending to landlords.

Unequal Division of the Wealth

The reports state that landlords are growing rich as a result of the buy to let property boom, mostly at the expense of their tenants. This situation has created an unequal distribution of wealth and the only way to restore the balance is by doing the following:

•  Stop landlords buying new build properties
•  Cap mortgage lending to landlords
•  Homes less than 3 years old must be owner occupied rather than let out to tenants

James Lloyd, author of one of the centre’s reports said: “Most private landlords are not
getting rich off the taxpayer, but instead are receiving transfers of income and wealth from
tenants, who are significantly poorer than they are.”

Of course landlords are unlikely to agree with the report’s recommendations. Private landlords are providing a valuable service to the housing market. Without their assistance many more people would be homeless as a result of the dire shortage of social housing in the UK.

The Average Landlord

Further research comparing the wealth of landlords and tenants has highlighted some
interesting facts about landlords and tenants.

• 45% of landlords have assets of more than £30k
• The average landlord has a financial wealth of £75k
• The average age of a landlord is 48; the average age of a tenant is 32

According to a report on Sky News yesterday, the situation for first time buyers in the UK is looking increasingly grim. The housing market is still fairly flat, but because lenders are insisting buyers have large deposits before they lend them any money, wealthy landlords are the only people who can afford to buy.

Average Financial Wealth

Research carried out by the Strategic Society Centre and published by Sky News indicates that the average landlord in the UK has around £75k whereas most first time buyers are lucky if they can raise £10k to their name. Since even a cheap property in some parts of the UK is currently on the market for more than £200k, clearly £10k is nowhere near a big enough deposit to secure a mortgage.

Growth of the Rental Market

The rental market in the UK is growing steadily. The number of households renting a home has risen by more than 2 million in the last thirteen years and this tremendous growth shows no signs of abating any time soon.

Boom Time for Landlords

First time buyers may be finding it tough, but landlords are cashing in on the demand for rental property. Existing landlords are taking advantage of the favourable economic  conditions and expanding their property portfolios while interest rates are low and demand is high. First time landlords are also jumping on the bandwagon and investing in buy to let homes. And according to the experts, the private rented sector is going to play an increasingly important role in the future housing market, so if you have the spare cash, property is a far better investment than a UK savings account.

Landlord licensing for HMOs has proven to be a contentious issue. Many landlords feel that councils are introducing licensing schemes unnecessarily, which is why landlords in the Bath and North East Somerset area have decided to fight their corner in an attempt to try and overturn the council’s decision to introduce such a scheme.

Raising Standards in Rental Properties

The council’s main argument for introducing a licensing scheme for HMOs is that it will help to improve the standard of multiple occupancy rental properties. Licensing schemes are a way of regulating landlords operating HMOs for three or more tenants. Licensed landlords will have to meet minimum standards in their properties, which will be better for tenants.

Landlords in Dispute

Landlords in the Bath and North East Somerset area are unhappy at the extra burden that comes from being forced to register for an HMO licensing scheme. They say there is already an accreditation scheme in place to protect tenants and extra legislation is entirely unnecessary. Registering for the scheme will cost landlords money, which in turn will inevitably passed on to the tenant in the form of higher rents. They also think that the introduction of a licensing scheme will discourage new landlords from investing in the area, which could be detrimental to the rental housing market.

HMO Licensing Nationwide

HMO licensing is not a new idea. Licensing schemes have already been introduced in a number of areas and several landlords have been convicted as a result of council prosecutions against them for failures to provide suitable accommodation for their tenants.

Renting a home is fast becoming more common than buying. Despite the fact that interest rates are at a historic low, it is still incredibly tough for first time buyers to gain a foothold on the property ladder. Because of this, in many cases, families are choosing to rent rather than buy. In the traditional buy to let scenario, a landlord buys a property and rents it out to a tenant. Most of the time, this works very well, but with the availability of rental property far outstripping demand in some areas, some property entrepreneurs have come up with a new way of making money on the back of Generation Rent.

Rent to Rent

Rent-to-rent is a new concept. It is basically a form of sub-letting—an investor rents a property from a landlord and then sublets it to tenants. Usually any spare communal rooms are converted into sleeping accommodation. For example, a one-bedroom flat would be converted into two bedsits with a communal kitchen and bathroom. This approach allows rents to be increased. In fact by all accounts it is possible to gain a further £500 per month from a rental property just by maximising the available space.

Big Profits

This type of multi letting is proving to be incredibly profitable and one London investor who sub-lets 200 rooms claims to be making £35k profit every month.

Advantages of Rent to Rent

There are a number of advantages to this type of business plan. By renting from existing landlords, you don’t need any capital. Rent to rent entrepreneurs are also more likely to let a room on “licence” rather than hand over a traditional tenancy agreement, which means the tenant is a lot easier to evict.

Since the government first introduced the notion of housing benefit
payments being made directly to tenants instead of landlords, many
social landlords have been concerned about the prospect of rent
arrears building up. Most believe this would happen as a result of
vulnerable tenants finding it impossible to manage their finances.

In an attempt to sooth landlord concerns, Lord Freud, minister for
welfare reform, has clarified things by stating that any tenant who
falls behind more than two months with their rent payments will have
their direct payments suspended. Once a tenant has paid off their
arrears, direct payments would resume once again. Landlords would
hopefully recover their money within nine months.

Lord Freud Comments

Speaking to delegates at the Chartered Institute of Housing’s annual
conference, Lord Freud spelled out the measures the government would
put in place to try and help tenants if they fall behind after one
month of direct payments:

“Options at this point could include a reassessment of an
individual’s financial capability, a possible move to managed
payments, or possibly extra support to get the individual on the
right track to prevent the accumulation of further arrears.”

Government is Confident Tenants Will Pay

Despite scepticism from social landlords, the government is convinced
that the majority of housing benefit tenants will be able to manage
their finances and pay their rent on time. They suggest that only
about 20% of tenants could fall into difficulties. Of course, whether
this estimate is proven to be correct remains to be seen, as the
direct payment scheme has yet to be rolled out nationwide.

According to the Guardian newspaper this morning, Nationwide is now willing to lend to landlords wishing to offer three year rental contracts on their properties. This is something of a turnaround because previously, Nationwide, in line with other lenders, would only make finance available when tenancy agreements were capped at twelve months. So if you were looking to let a property on a tenancy agreement lasting longer than twelve months, there was little point in applying for a buy to let mortgage.

Security for Tenants in the Buy To Let Sector

Renting a home is becoming increasingly common in the UK and the housing charity Shelter has been campaigning for a while now for greater security in the private sector. They are particularly concerned about families with school age children who stand to lose the most when a tenancy agreement ends and they are forced to move to another property, sometimes at short notice.

A comment made by the chief executive of Shelter: “This news is welcome recognition, as six or 12-month tenancies just aren’t working for England’s nine million renters.”

Greater Security for Landlords

It isn’t just tenants who stand to benefit from long-term tenancies. As any landlord knows well, if you have a reliable tenant who pays their rent on time, the last thing you probably want is to lose them. With this in mind, a 3-year tenancy agreement is a sensible idea. Both you and they each know where you stand and the tenant is more likely to look after the property if they are likely to be staying for a while.

In an effort to reduce the numbers of slum landlords operating so-called “beds in sheds” rental accommodation, Slough borough council in Hertfordshire is the first to use a spy plane to catch out unwitting offenders. The exercise cost Slough council an estimated £24k, but no doubt they feel it was money well spent after it picked up around 210 suspicious properties in the town.

Thermal Imaging Cameras

The police are no stranger to the benefits of thermal imaging cameras. Police forces across the country regularly use helicopters equipped with thermal imaging cameras to chase fugitives at night or identify cannabis farms in residential neighbourhoods. However, this is the first time such a technique has been used to identify suspicious heat sources in outlying buildings and sheds.

Council Housing Officials on the warpath

Thanks to the two-hour flyover across Slough, housing officials now have a handy map to work with. Over the next few weeks, housing officials will be paying a visit to see if any of the dwellings identified by the thermal imaging camera are currently home to tenants. If they are, the landlords can expect to be issued with fixed penalty notices. The fines will continue to increase for as long as tenants remain in the properties.

Appalling Living Conditions

Some tenants living in sheds are subjected to appalling living conditions. They often have no water or heating, yet are still expected to pay up to £100 per week for the privilege. The council is also keen to claw back some of the unpaid council tax they miss out on when tenants are living in illegal accommodation.

The Residential Landlords Association (RLA) has hit out at housing
charity, Shelter, for suggesting tenancy agreement laws need to be
revamped. The charity is calling for buy to let rental agreements to
be a fixed five-year term, but the RLA thinks this is grossly unfair
to buy to let landlords. Shelter is also calling for rent rises to be
restricted during the agreement and for tenants to have the power to
break a tenancy agreement with only two months notice.

Why does Shelter want 5 year tenancy agreements?

Shelter is concerned about the effect living in rental accommodation
is having on families with children. They say that forcing landlords
to offer minimum 5-year tenancy agreements will increase stability
for families with kids. However, the RLA says that the reason most
tenancies end early is down to the tenant rather than the landlord.

Striking a balance

The RLA thinks Shelter’s proposals are too one sided in favour of the
tenant, which is unfair on landlords. The charity says that a large
number of tenants don’t want to be tied into long-term tenancy
agreements because they are only renting for the short term. The
worry is that longer fixed tenancies could dissuade new landlords
from investing in buy to let properties, which would put even more
pressure on the housing market.

The RLA is also concerned about Shelter’s proposed plans to fix rents
in line with inflation. They say the majority of landlords rarely
increase their rents every year so indexed linked rents could end up
leaving tenants out of pocket.