Anyone else still sourcing BTL's

[Grampa]

Just had a offer accepted on a end of terrace 3 bed house or 175k (75% Ltd Co mortgage)  but needs about 15k+ of work. I sold a mortgage free flat for 81k  just before the lock down. The thinking was what else is there to do with the cash other than stick it in property. The service charges were creeping up on the 2 flats I have on that block. They were 1k pa 5 years ago but now 1.5k pa which certainly hampered the sale of the sold one. The flat was generating 530pcm and the house when finished 920pcm and will be first to go in a LTD Co just formed. The other flat to go on the market in the coming weeks.

Good idea or pure madness???? 

[Richlist]

Generally, as we all know, putting your money into property is a good idea if all the figures make sense. Only you will know if the price, condition, location, target market, desirability, layout, costs etc stack up. As an EA you are better informed than most and will know your area like the back of your hand.

Let's face it, the way interest rates are falling ( almost weekly) makes any property look a good bet today. But remember, there is a possibility of negative interest rates later this year due to Covid19 & Brexit in December.

The caution I would have is an overriding expectation that letting property in the next few years is going to be considerably more difficult than it has been in the past due to the coming economic downturn, there is going to be massive unemployment and everything that goes with it and it will impact the property market.

At the moment I think property investment is what I would best describe as a ' proceed with care'. This time next year we could all be wishing we had invested our money somewhere else as everything around us crashes & burns........and at some point in the near future it will.

I'm sitting on a large cash pile having sold lots of my properties over the last few years. I just can't bring myself to buy more in such uncertain times as I feel reasonably comfortable bidding my time and getting 1-2% return from the bank.

So to answer your question I would only buy if the right property came along that ticked all the boxes......and even then I'd probably need a push.

But, we are all different and no two situations are the same so, if you think it will work for you ......go for it.

Good luck

 

[Melboy]

Nothing wrong in your thinking or actions Grampa as I see it.

I have never really been a flat purchase landlord even though I do have a garden flat purchased 13 years ago but that has no service charges and a 999 year lease which makes it virtually freehold. I do prefer 2/3 bed houses in good locations. The flat achieves a very good rent rate and I have an elderly tenant in that one who just loves being there..........yet again location is always the key to purchasing BTL property

My Daughter is an EA and she has reported a huge unexpected demand from buyer's and sellers this past week or so. A large property near to me has just sold yesterday for near asking price and a 2 person bidding war to get it as well.

BTL?  I think it will continue but not as strong as it was pre Covid19. Interest rates being what they are may well drive investors with a pile of cash back into the property market.  I did this 2 years ago exactly because of what I was receiving back in interest from accounts and have absolutely no regrets in doing what I did and have certainly achieved a rate of 5% even taking into account repair/ maintenance expendenture over the past 2 years.  I have just had installed a whole new long run of close board fencing as well on my properties by one of my lovely tenants who in the past was a fence erector........very handy! 

I would buy another property again but age is catching up sadly....... but the fire stills burns brightly.   😀

[lorraineA]

Good idea I'd say. Always prefer houses to flats, tenants tend to be more long term in houses and we know how expensive tenant change overs can be, so minimising them keeps profits up. I'm also looking to add to my investments, currently looking for small portfolios of 4-6 properties to buy before end of July.

[Richlist]

Given the current economic situation and what we are about to receive it means we will all have to add a few questions/checks to the already lengthy list when assessing prospective tenants.

e.g. Some occupations are now so decidedly insecure we wouldn't want to let a property to someone about to loose their job.......that also applies to the guarantor. You can draft your own list of dodgy occupations.

[lorraineA]

That's true, but I doubt we'll get to know if they are about to lose their job. This could always be the situation. As landlords we face an element of risk and exposure every time we take on a new tenant, there are never any guarantees, I've had the best tenants (on paper) doctors on good pay who went into arrears for no good reason then disappeared leaving 6 months of arrears. 

I go into this business with my eyes wide open and a healthy contingency 🙂

 

[Richlist]

2 hours ago, lorraineA said:

Good idea I'd say. Always prefer houses to flats, tenants tend to be more long term in houses and we know how expensive tenant change overs can be, so minimising them keeps profits up. I'm also looking to add to my investments, currently looking for small portfolios of 4-6 properties to buy before end of July.

What's your budget ?

[lorraineA]

2 minutes ago, Richlist said:

What's your budget ?

I am looking for 3/4 bed houses up to £130K each and have a budget of £600K

 

[Grampa]

2 hours ago, Richlist said:

e.g. Some occupations are now so decidedly insecure we wouldn't want to let a property to someone about to loose their job.......that also applies to the guarantor. You can draft your own list of dodgy occupations.

That must mean now is the time RL for you to dip you toe into the water of benefit tenants.😀. No worries (well not as much) about not getting the rent in the current  climate. 

Hard hat on, waiting for incoming fire

[Richlist]

Well you know what the experts tell us about investments.......i.e. don't put all your eggs in one basket, better to diversify, spread your risk etc.   Property is merely one asset class, there are others and that's what I've spent some of my time on the last couple of months during lockdown. When I look at the value of my portfolio I reckon I have sufficient capital tied up in property, at the moment.  Would adding another one be such bad news ? No of course not. But, I'm having fun doing other stuff and certainly have no thoughts of taking on any benefits tenants, your the expert on that.

[lorraineA]

2 minutes ago, Richlist said:

Well you know what the experts tell us about investments.......i.e. don't put all your eggs in one basket, better to diversify, spread your risk etc.   Property is merely one asset class, there are others and that's what I've spent some of my time on the last couple of months during lockdown. When I look at the value of my portfolio I reckon I have sufficient capital tied up in property, at the moment.  Would adding another one be such bad news ? No of course not. But, I'm having fun doing other stuff and certainly have no thoughts of taking on any benefits tenants, your the expert on that.

Intrigued to know what other fun stuff you are up to?

[Richlist]

Fun for me during lockdown generally =  income up, expenditure down, new business to explore, lots more free time and sunbathing.

I'm loving it !

[kanrent]

On 5/28/2020 at 2:06 AM, lorraineA said:

I am looking for 3/4 bed houses up to £130K each and have a budget of £600K

 

What area are you looking

[lorraineA]

predominantly west yorkshire

[Melboy]

I was going to say with your budget it must be purchases in the 'oop North area.   😀

Sadly down here in the South West 'ish area of the UK £130k only buys you a 1 bed flat.

[Carryon Regardless]

53 minutes ago, Melboy said:

Sadly down here in the South West 'ish area of the UK £130k only buys you a 1 bed flat

Try Prestayn, that's nearly 3 of 'em.

The great pro to benefit T's is that you can get most of the rent paid by the state.

As long as the T ticks the appropriate box,

Or as long as the T is eight weeks in arrear, but they can defend your demonstration of this.

As long as they are entitled to the benefit continually, or it is taken / claimed back.

Paid only for the period of occupancy, so forget notice periods. 

The one or two small downsides are that any guarantor is less likely to be wealthy and wise.

Such T's are usually with ongoing issues, of many kinds.

They occupy for most of the 24 hours and wear out the property more.

If / when they abscond they are less able to remove their belongings. These are now classified as commercial waste requiring a registered contractor to remove and provide paperwork, certainly for Wales. Has England done this to us yet?

Oh, and we are more likely to be considered greedy for taking the rent that is paid for them.

I most certainly am not suggesting that they all smell, bless 'em.

 

[Richlist]

'Shelter' seem to have a very caustic view of landlords generally. I have absolutely no experience of benefits tenants......other than refusing to let to them (see below) and no personal experience of Shelter as an organisation. What I have is many years of reading horror stories of how Shelter support tenants at the expense of landlords who are often just trying to do the best for them.

In the past I have refused to let to benefit tenants because:

* My mortgage lender doesn't allow it.

* My rent guarantee insurers don't allow it.

* My letting agents don't deal with benefits tenants.

* They cant provide a home owning guarantor.

* They can't pass the affordability criteria.

* They have cats & dogs which my leases don't allow.

* There are better applicants.

* I don't want to let to them.

It's a very specialist part of residential letting that often requires the landlord to commit far more time and a more hands on approach than might be necessary with a non benefits tenant.I

Having said all that, it's great that there are people who are prepared to take them on.......it's just not for all of us.

[lorraineA]

I think I have to agree with you for all those reasons, though I haven't ever let to benefit tenants so far. NO plans to do so any time soon.

[Grampa]

14 hours ago, Richlist said:

'Shelter' seem to have a very caustic view of landlords generally. I have absolutely no experience of benefits tenants......other than refusing to let to them (see below) and no personal experience of Shelter as an organisation. What I have is many years of reading horror stories of how Shelter support tenants at the expense of landlords who are often just trying to do the best for them.

In the past I have refused to let to benefit tenants because:

* My mortgage lender doesn't allow it.

* My rent guarantee insurers don't allow it.

* My letting agents don't deal with benefits tenants.

* They cant provide a home owning guarantor.

* They can't pass the affordability criteria.

* They have cats & dogs which my leases don't allow.

* There are better applicants.

* I don't want to let to them.

It's a very specialist part of residential letting that often requires the landlord to commit far more time and a more hands on approach than might be necessary with a non benefits tenant.I

Having said all that, it's great that there are people who are prepared to take them on.......it's just not for all of us.

You make a number of valid points RL. Unfortunately, I think benefit tenants as a whole do get a bad reputation mainly because only horror stories are reported by L/L's on these type of forums. I have many benefit tenants who have have been housed in the same property for 10 years plus. and far less needy than "professional" tenants. A large percentage of horror stories are also written by inexperienced landlords who should take larger blame for the situation they have found themselves in due to bad management. (not all I might add)

I do think your list though doesn't tell the whole story:

My mortgage lender doesn't allow it. Mortgage lenders are under pressure now to remove this restriction and I believe a lot have and eventually all will be forced to

* My rent guarantee insurers don't allow it. I am no great user of RG products but know of at least one that does accept benefit tenants

* My letting agents don't deal with benefits tenants. Nice to be in a position to do this, however, I think all agents should have the knowledge and skills to manage this type of tenancy as it can be common for a tenancy to fall/change into this category by accident and if a agent doesnt know what they are doing they will just muddle through at the LL expense  

* They cant provide a home owning guarantor. Many can in my experience 

* They can't pass the affordability criteria. Agreed

* They have cats & dogs which my leases don't allow. No more than other working tenants in my experience 

* There are better applicants. I think this depends on many factors such as area and demographics 

* I don't want to let to them. Quite right. However, if Shelter have their way you may not be able to "openly " discriminate but fairly easy to get around. (at the moment)

i do acknowledge RL you have your own business model that works for you and many L/L's. 

 Other reasons to avoid benefit tenants you dont mention are:

• The rent is limited to the benefit rate cap (foolish to expect the rent to be paid if a large top-up has to be paid)
• Higher wear and tear
• Can sometimes be more labour intensive.
• Payments can sometime be erratic. ( only with some)