In February 2013 my husband and I became the proud but nervous owners of our basement flat (jointly with the mortgage company of course). It was an opportunity we couldn’t really pass up but we had a lot to learn about being landlords. When we heard Homelet were compiling an eBook for landlords, we were very keen to give our two-penneth worth, as it’s something we could have done with when we started out.
When the flat below our maisonette came on to the market we absolutely had to explore the opportunity. It was tight, as I had just turned self-employed, but with a lot of help from family and convincing the sellers we could facilitate a quick sale (as we bizarrely owned the freehold for the building acquired when we bought the maisonette), we took the plunge. I decided that instead of paying into a private pension fund, to put our money into bricks and mortar.
Housing supply is a contentious issue in Brighton. We weren’t altogether comfortable with becoming landlords, consuming a much-needed one bedroom property from the buyers market. But there were no first-time buyers lined up to buy this lovely basement flat and we wanted to control who lived under our young family, finding the right tenant.
The housing market in Brighton and Hove is under a lot of pressure. Supply of affordable first homes is low, purchase prices are high so unless you have thousands in your savings, almost impossible to get on the ladder. The ‘generation rent’ crowd are flocking to ‘London-by-the-sea’ to get away from the extreme rents in our capital city where so-called studio flats with showers in the kitchen cost around £400 p.c.m. upwards. Which means landlords may not have a difficult time finding a tenant but finding the right tenant will always be the challenge.
Based on our first few years of experience as private landlords here’s my top tips when taking on a private rental property:
1. Find a decent residential lettings agent. For your first tenant find a residential agency you can trust to handle the search, inventory, tenancy agreements and referencing, even if you’re considering managing the property yourself. Interview a few before choosing one to work with. Check how much they charge tenants for admin fees. In Brighton we’ve heard of tenancy fees ranging from between £270 and £800. Yes, that’s BEFORE a deposit. Agencies are also charging checkout fees, renewal fees, dog deposits and guarantor fees. My challenge on this would be, if an agent is skimming off exorbitant and dubious fees, are they really going to represent your best interests and find a reliable tenant who can consistently afford to live in your property?
2. Keep finances separate. Having a separate bank account and keeping up to date records of rental receipts and expenditure on the property is invaluable when filing your tax return. And it also allows you to track your profit and loss and ensure your costs are under control. Approach the property like a business and an investment.
3. Have a reliable maintenance team. Especially if you’re managing the property yourself, line up a builder, an electrician and a plumber you can trust. Have them look at the property before you move a tenant in and give an overview of any work that may need doing in the next 3, 6 or 12 months. This will help to financially plan ahead with your costs. Don’t necessarily use the people recommended by your rental agency without checking up on them yourself, or at least seeing their Check-A-Trade or Which? Trusted Trader ratings.
4. Carry out regular maintenance. Diarise boiler services and make a note of when your 5-yearly electrical check is due. Inspect the property yourself at least once a year, even if you have a managing agent. Avoid nasty surprises about how someone is caring for your property!
5. Fix everything immediately. Nip any maintenance snags in the bud. Not only would that avoid costly work further down the line but also any disputes about property maintenance with the tenant.
6. Consider generating a sustainable income. It’s tempting in Brighton to be seduced by the rising rents and laugh all the way to the bank. Especially now mortgage interest is no longer tax-deductible. Not only is that unethical and lacks community responsibility but it could be a flawed business plan. Do your homework on average salaries in the area and you’ll see that many renters will struggle with the rising rents. Which means by charging top whack you have a greater risk of losing that tenant and having gaps in your income. And in my view it’s lame to claim you are charging top rate to protect yourself from the risk when tenants can’t pay. Property is a risk, investment is a risk and the burden of reducing that risk on the landlord NOT the tenant.
We took the unusual step to bring the rent down after our blip with a tenant who failed to pay. We believe it will encourage respect for the property and a positive long-term rental relationship with proper notice periods when they decide to leave and less drama!
Look out for Homelet’s free eBook at the end of this month with more regionally relevant tips from landlords like myself.