Rogue letting agents have had almost as much bad publicity as rogue landlords in the last few years, but until recently the government has not done much to tackle the problem. Now, though, it looks as if the winds of change could be blowing in the right direction after a government select committee has released a report recommending that letting agents should be forced to meet minimum standards.

Landlords at Risk from Rogue Letting Agents

Landlords are just as likely as tenants to fall foul of rogue letting agents. The majority of landlords in the UK only have one or two properties, so they are very likely to use a letting agent for advertising or managing a property.

The RLA has long campaigned for letting agents to be regulated in the same way as estate agents currently are. Commenting on the topic, Richard Jones, Policy Director at the RLA, said:

“Almost 90 per cent of landlords in the country are either individuals or couples, many of which rely on letting agents to manage their properties properly. For too long these agents have been trusted with landlords’ and tenants’ monies without any robust regulatory system to protect it.”

Potential Ban on Rogue Letting Agents

The government select committee has recommended that agents found to be acting improperly should be banned from working in the sector. Their report also states that letting agents must be more transparent about their costs and fees. One common problem is that a letting agent can shut up shop overnight and disappear with a landlord’s cash. If letting agents are better regulated, landlords and tenants will be much better protected.

HMRC is determined to claw as much tax from landlords as possible. In recent months, HMRC inspectors have been scrutinising landlord activities, in particular the money generated by sales of buy to let investment properties. Two dedicated HMRC task forces have already been created in Yorkshire and the South East to make sure property investors are not evading their tax obligations.

Widening the Net

In a further development, HMRC has been publicising a ‘property sales campaign’ to try and round up people who have not yet declared income from the sale of rental and investment properties, so if you have recently sold a property that is not your main residence, you better hurry up and declare it to HMRC before 6th September.

An Increase in Landlord Tax Investigations

Industry experts believe that the current tax investigations are only the tip of the iceberg. They believe that HMRC is likely to ramp up its investigations after the September deadline has been and gone.

Joining the Dots

HMRC is like a dog with a bone once they have the scent of something awry, they rarely let it go. Tax investigators use paper trails to track down landlords who have failed to declare income. By correlating information from Land Registry records and tax information held by letting agents, it is pretty easy to identify any interesting discrepancies.

As the buy to let market continues to flourish and grow, it is likely that landlords will be increasingly thrown under the spotlight by HMRC tax inspectors. To avoid any penalties, it is wise to be transparent in your tax affairs and never try and outfox HMRC, or you may end up paying the price.

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BBC1 are showing the first episode tomorrow evening (10.35PM) of a new three-part documentary on Britain’s landlords. The filmmakers will be introducing a motley selection of landlords and tenants in an attempt to throw some light on the highs and lows of life as a landlord in the UK.

Generation Rent

With rental housing becoming increasingly popular, more and more families are being forced to live in rental accommodation. The rental boom is encouraging inexperienced property investors to jump on the buy to let bandwagon. Of course becoming a landlord is not without its pitfalls, and the programme seeks to illustrate what some of these might be.

First Time Landlords

One of the landlords featured in the programme only has one property, and has been unfortunate enough to land a tenant who refuses to pay the rent or move out. As a result she has fallen into arrears on her mortgage payments and is forced into the unenviable position of having to sell her belongings to make ends meet.

Another of the landlords featured in the show is at the opposite end of the scale: he owns hundreds of rental properties and makes serious cash from his HMO property empire.

Tenant Stories

In order to portray a balanced view of buy to let Britain, the show also features the stories of tenants. One tenant, a single mother who has recently been diagnosed with cancer, is facing eviction from her rental home because her landlord wants to sub-divide the property into bedsits.

So if you considering becoming a landlord make sure you watch the show so you can see how to avoid some of the problems faced by new landlords.

There have been dozens of reports of late stating that landlords have never had it so good. The buy to let market is booming and in some areas tenants are queuing up around the block for desirable properties. So on the face of it, the financial returns for landlords appear to be very good (some studies cite landlord returns of around 7% in the most sought after areas). However, the Landlords and Mortgages report recently published by YouGov has suggested that the figures are over inflated and the true situation is a lot less rosy.

Landlords and Mortgages Report

The authors of the report state that they believe total returns for UK landlords are in decline. They say that landlords’ returns were on average 5% between 2002 and 2006, but they have since fallen to 2.5%. The main reason for this, they say, is that a lot of landlords don’t take their costs into account when working out their profit margin.

Landlord Costs

There are several key costs associated with being a landlord, including mortgage interest payments and letting agency fees. These costs directly affect profit margins, so if you fail to take them into account, your rental returns will be falsely inflated. According to the report, although 93% of landlords allowed for mortgage interest payments, only 46% allowed for miscellaneous property management expenses.

Despite this, the buy to let market continues to grow, so there are plenty of landlords who see the rental sector as a good place for their cash, which is hardly surprising given the poor return offered by savings accounts.

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.