Long void periods can be a real concern to landlords, especially
those with only one or two properties. No tenant means no rental
income, so in an ideal world, most landlords prefer a long-term
tenant who pays their rent on time.

Strong demand for rental properties

Figures released from the National landlords association (NLA)
indicate that void periods are now at an all-time low. Only 33% of
landlords have had void periods in their properties during the last 3
months, a reduction of 13% on the same period from the previous year.
This is largely due to consistently strong demand for rental homes, a
situation that is unlikely to change any time soon.

What is the average void period?

Figures indicate that private rented homes are empty on average for
60 days, which is 9% lower than the same period last year. The last
time figures were this low was back in 2010, which is good news for
landlords.

How to avoid void periods

Given that demand is so high, unless your properties are very
unappealing or you are overpricing them, you shouldn’t have too many
problems finding new tenants. However, it makes sense to do
everything you can to find new tenants quickly once the old ones have
vacated the property and essential maintenance work has been carried
out. And even if your tenants have not mentioned any plans to move
on, ask them to keep you in the loop so you can prepare for when the
property does become empty.

According to the UK’s biggest property website, Rightmove, property investors are flooding into the private rental market to make the most of the great returns on their money. And with the average gross rental yield at 5.9%, who can blame them?

Dismal interest rates for savers

Interest rates on savings accounts are currently terrible. Many high street savings accounts are paying little more than 1%, so you may as well keep your cash stashed in a suitcase under the bed. But whilst the interest on savings accounts is low, so are the interest rates on mortgages, which can work in your favour if you want to spend money to make money.

Remortgage and release some equity

Many investors are seeing the potential in borrowing money against their current home and reinvesting it in a buy to let property. When you are paying a mortgage rate of 2% on a cheap fixed rate deal, it makes financial sense to invest that cash in a rental property and enjoy a return of nearer 6%.

Cheap mortgages available for investors

The government’s Funding for Lending Scheme (FLS) has helped push down mortgage interest rates to an all-time low. Last summer, the government made more than £80 billion of loans available to lenders at a rock bottom rate of 0.25%, in an attempt to boost the stagnant property market. Whilst this influx of cash caused savings interest rates to fall even further, it has certainly helped improve the availability of cheap mortgages to borrowers. So if you have been sitting on the fence up until now, start making plans because it is currently an excellent time to invest.

A recent survey carried out in Scotland has revealed some startling
information according to the BBC. Apparently more than half of
tenants renting properties in Scotland have no idea that tenant
deposit schemes even exist. 55% of those polled claimed to be unaware
of the scheme and 76% said they didn’t know deposits needed to be
placed in such a scheme. Less than 20% were also unaware that their
deposits needed to be placed in a deposit scheme no later than May
15.

Concern about the lack of awareness

By the time the May deadline rolls around, all Scottish landlords in
the private sector must have lodged eligible deposits. But the
authors of the survey, SafeDeposits Scotland, have expressed concern
about the low levels of awareness from tenants.

“At a time when the private rented sector is growing, we need to
provide safe, secure renting. And the new tenancy deposit protection
legislation goes some way towards this, but only if tenants know
about their rights,” said Rebecca Johnston, director of operations at
SafeDeposits.

Scottish government pledges to increase awareness

The Scottish government claims the tenancy deposit scheme has been a
huge success so far and around 112,000 deposits had been protected by
the scheme. However, they do add that,

“We will continue to work with the three approved tenancy deposit
schemes – who have a legal responsibility to promote their schemes –
to increase understanding and awareness of the schemes amongst
tenants, landlords and their agents.”

Hopefully awareness amongst tenants increases before the May when
deposits are legally obliged to be deposited in a protection scheme.

The Eastland’s Homes housing association caused a massive furore yesterday when it published advice in its monthly newsletter advising its tenants to give up some of life’s luxuries if they were worried about the effect of the forthcoming “bedroom tax” on their household budget.

Their not so sage advice: ‘Can you really afford Sky, cigarettes, bingo, drinks and other non-essentials?’ was roundly considered to be patronising and insensitive by residents and dozens took to social networking sites to complain about the insult.

Outrage from housing association residents

One resident commented: “It is deeply patronising. Talk about stereotyping those who live in former council homes. They should be ashamed.”

Another said: “This is patronising nonsense. People are having a tough time as it is without having to be fed this nonsense. Anyone who heard this would think we were living in the lap of luxury. Many of us have had to make severe cutbacks, and we’re not all sat there with our tins of lager watching daytime telly.”

We apologise for the offence caused…

In an attempt to pour oil over troubled waters and do some belated damage limitation, the representatives from the housing association quickly went online and published an apology.

“Our message is that we are here to help wherever possible and we’re sorry if we worded that clumsily.”

The housing association insisted they were just trying to help residents, out of concern that some were likely to fall into arrears once Housing Benefit is cut for those deemed to have more bedrooms than they need in their rented accommodation.

Although some landlords treat their buy to let properties as a full-time business and pay their taxes accordingly, there are an awful lot of new part-time landlords with only one or two properties to their name, who may not have thought too much about the potential tax implications of their second rental income. Well unfortunately for them, HMRC IS thinking about it and is taking steps to try and identify those landlords who are not declaring their income and therefore not paying the right amount of tax.

HMRC targets letting agents

Prior to the recent tax crackdown, HMRC tax inspectors operated a ‘spot check’ policy whereby they made random visits to letting agents and rental properties to carry out checks. Aside from being universally unpopular, this was not the best way of collecting information on landlords and tenants. However, since January, HMRC has been contacting letting agents and asking for information on all properties on their books that are managed on behalf of landlords.

HMRC cross checks information on landlords

By cross checking financial information from letting agents against other sources, HRMC are looking to make sure landlords are declaring any extra income they are earning from buy to let properties. The process is likely to be long and painful for HMRC employees, but since there are bound to be a number of landlords who have not declared extra income, it should be a lucrative one.

Declare your extra income

Landlords have until October 5th to declare any extra income from buy to let properties, so if you are a new landlord, start putting your affairs in order now!

Rent Arrears Rise In South Wales

Some parts of the UK are currently taking part in pilot schemes to test the government’s new benefits reforms and in one of them at least, the indications are not good.

Huge increase in non-payment of rent

Social landlords in Torfaen, South Wales, have seen a seven-fold
increase in rent arrears since the introduction of the Universal
Credit test scheme. In the existing benefits system, Housing Benefit
is a separate payment normally paid directly to the landlord. Under
the government’s reforms, Housing Benefit will be rolled up into
Universal Credit and the whole amount will be paid directly to the
tenant. This puts the onus on to the tenant to pay their rent, which
in a lot of cases in the pilot area of Torfaen, is simply not
happening.

Rent arrears rising

One social housing landlord in Torfaen, a community housing project
with more than eight thousand properties on its books, has seen rent
arrears rise from £20k to nearly £140k in the seven months since the
scheme was introduced. Tenants with previously good credit records
are falling into debt because they cannot manage their money. Up
until now the number of evictions has remained low, but this will not
be the case for long.

Bedroom tax

Another change on the horizon that is likely to cause havoc in the
social housing sector is the so-called “bedroom tax”. If a tenant has
a spare bedroom in their rented home, it will be deemed as
unnecessary, and therefore the housing benefit they receive will be
reduced. This change is designed to reduce the number of under
occupied properties, but it will also lead to a rise in the number of
tenants unable to afford their rent.

When a tenant behaves badly, fails to pay the rent, and/or absconds
during the night, a landlord often has limited means at their
disposal for making the tenant see the error of their ways other than
trying to pursue them through the courts. But when two landlords from
London were faced with similar problems, they decided to take action
and contact the tenant’s employer, which caused a great deal of
embarrassment to the tenant!

Email shame

The tenant, a senior lawyer at a London law firm, was mortified when
his landlords fired off an angry email to his co-workers claiming
that he owed them rent for the previous two months and alleging he
had simply vanished from the property without clearing his belongings
or returning the key. They asked his co-workers to confirm the man
still worked at the firm and to contact him on their behalf.

I’ll see you in court

The angry tenant issued court proceedings against his landlords,
claiming he had been “injured in his reputation” and that he had
suffered great embarrassment and emotional upset.

In return the landlords fought back with a strongly worded reply
making counter claims about the tenant’s atrocious behaviour and
referring to an anonymous text message alleging the man had spent all
his cash on unsuitable female companions (a claim that was strongly
denied by the tenant). The landlords said their email was entirely
justified because they felt the tenant was acting in an unscrupulous
manner and bringing his law firm into disrepute.

The tenant later dropped his court action citing “disproportionate
costs” as a reason, although he admitted he had been a “problem
tenant”.

According to figures from the General Lifestyle Survey carried out by the National Statistics Office, the number of households renting properties from private landlords has increased by 5% between 2008 and 2011. In the same time period, the number of people with a mortgage fell by 5%.

Reasons why more people are renting

Analysis of this trend would suggest that a fall in the number of people with a mortgage ties in with the beginning of the housing market crash—once house prices dropped into the doldrums, lenders made it extremely difficult for borrowers to get a mortgage, and so far nothing much has changed. Interestingly, figures revealed indicate that the proportion of people renting homes was even higher in the 1970s.

Good news for landlords

The rise in the number of people living in private rented accommodation will come as no surprise to many landlords. After all, in some areas of the UK, demand far outstrips supply, which is why unscrupulous landlords are able to rent out sheds in gardens under the guise of a “compact bedsit with a scenic view”.

Other interesting statistics from the General Lifestyle Survey

 The number of unmarried women has risen by 25% since 1979, which is good news if you are a man on the lookout for a wife

 The number of cigarette smokers has fallen by 25%, which is bad news for the tobacco companies and excellent news for the beleaguered NHS

 Three-quarters of all households now have access to a vehicle

 The number of people drinking on five or more days per week has fallen by 7% in men and 4% in women—hardly surprising when you consider how much a drink costs these days!

Estate agents have been subject to the controls of statutory regulation since 1979, but despite the fact that letting agents often deal with large sums of cash on behalf of tenants and landlords, they have thus far avoided the same regulation.

A change to the law

Many in the industry have been campaigning for a long time for the government to introduce legislation to help cut down the incidence of poor practice in the industry, so yesterday’s decision in the House of Lords to make an amendment to the Enterprise Bill, which allows for statutory regulation of letting agents to be introduced, has been widely welcomed.

“Renting is now the only housing option for millions and our research has shown this market is dogged by poor practice and there is an alarming lack of consumer protection. Tenants deserve much better and the Government must take this opportunity to improve regulation and redress in this sector. We want letting agents to be covered by the same rules as estate agents, overseen by an independent ombudsman,” commented Richard Lloyd of Which?

How will the changes affect landlords?

Rogue letting agents have long been the scourge of landlords (and tenants) and although there are a great many reputable letting agents who provide an excellent service, there are still all too many who act improperly. With the recent change to the law, landlords will now be protected and the Office of Fair Trading will have the power to ban agents who rip off their customers, which is good news for everyone.

Most savvy landlords are aware that some areas of the UK are more
attractive than others when it comes to investing in rental
properties. But a recent survey conducted by Home.co.uk has shown
that there are some surprising anomalies in the profitability (or
not) in some parts of the UK.

North – South divide

It doesn’t take a genius to figure out that properties in London are
going to offer far higher returns than a deprived part of Teeside,
and sure enough, some of the best performing rental areas are in
London. However, rather surprisingly, the areas that are the worst
performing in terms of return on investment are spread right across
the UK.

Don’t buy beside the seaside

Three of the worst performing areas are popular seaside resorts in
Kent: Margate, Ramsgate, and Broadstairs. I don’t know why this is
the case, but the figures indicate that you would lose money even
owing a property in any one of these towns, irrespective of whether
you were unable to find a tenant (and that wouldn’t be easy either
since the average void period here is 134 days).

Do your research

It is always sensible to do your research before investing in a new
area. Ask agents how easy it is to find tenants and check out what
the average property prices and rental incomes are. Think about what
type of tenant you are targeting and find something to suit. After
all, there is little point in targeting young professionals in a run
down town where the unemployment rate is more than 50%.