"Finders Fee"

[GrosAve]

Hi there,

I have had my property on the market with one agency and have had some interest but the 1st couple's references were not good enough. I've had a couple of girls round too but they tried to knock the price down and are first time renters and told me they don't earn much money which could indicate that they might have a problem paying in the future.

So, I've been to another agent and discussed the possibility of renting it to someone on a scheme called "Finders Fee" which is run buy the housing benefit. In brief they give you a "gift" of up to £1200 dependent on the state of your property, from that you can pay the agent their 8% fee and the rest you keep. They don't give you a deposit but this "gift" could be used for this too. Once it has all been agreed by all parties and the tenants move in, I eventually get my rent between 3-6 weeks later and it will be back dated to the date the tenant moved in.

I actually met a young pregnant lady today (with her boyfriend) who seemed very excited at the prospect of moving in and really loved my flat. The benefit is; The rent will come direct from the Housing benefits place so I wouldn't have to worry about non-payment as long as the tenant is in.

Has anyone heard of this scheme or could offer advice or suggestions?

I am a complete newbie.

Cheers,

Paul

[Trojan]

Hi GrosAve (Paul)

To start with I would say “All that glitters is not necessarily gold”.

My thoughts on what you have been told are as follows.

I am a letting agent of 17 years experience and have been running my own agency now for 13 years, I have not come across this scheme and I cannot see it being unique to just one local authority because guidelines on how they spend their budgets on housing needs are quite strict and whatever one does they all do.

This does however seem similar to a scheme that was launched about 18 months ago, maybe 2 years ago now. It caused a major rush for properties by Buy to Let landlords.

The local authority would take your property into their scheme for a fixed period and subject to it being approved as suitable.

They would let it for you by placing homeless families or individuals into the property. You would have no say in who goes in. The could be the most anti social tenants, but if they are homeless and the property fits their profile, they’re in.

Your rewards for this scheme is a rent higher than the current market value, but you have no deposit. Believe you me, from landlords I have spoken to the extra was usually needed to cover cleaning and repairs. An oh yes, you managed the property, not the local authority.

Specialist agencies opened up to manage these tenancies and to be honest I am not certain these companies are still around. Some mainstream agencies attempted to take on the work in the beginning, but you don’t hear mush about it anymore.

I spoke to some serious private sector landlords who had many years of experience who all give this scheme a miss.

I have also heard from many landlords who joined the scheme only to find that they wanted out after only a short time.

I don’t mean to put a damper on this, but if it seems to good to be true then that in itself must be warning sign.

I know its is hard, and void periods in your Buy to Lets are a paid to say the least, but start finding out whey it has not rented and act upon that rather than a scheme that could jeopardise your whole buy to let project.

Contact me if I can be of further assistance.

Regards

Trojan (Mark)

[GrosAve]

Hi Trojan (Mark),

Thank you very much for your advice and suggestions. It's great to hear from veterens... I'm attaching a link which explains it in more detail.

http://www.hillingdon.gov.uk/housing/priva...finders_fee.php

Rgds,

Paul

[Trenners]

Hi Paul,

I have experience of similar schemes - backed by the homelessness department of my local council - and they have worked out very well for me over the last few years.

The problem is that tenants cannot claim housing benefit until AFTER an assured shorthold tenancy has been established - but the tenants cannot establish a tenancy unless they have got the security deposit, 1 months rent etc etc - many DSS tenants do not have that kind of money lieing around.

Therefore - if the council were not running a scheme where they effectively lend the tenants the 1st month rent and the security deposit (by paying a lump sum to you at the commencement of the tenancy) - these types of people would be homeless.

I've taken a look at the Hillingdon scheme - as per your previous link - and it looks pretty good to me and I would definitely consider using it on a case-by-case basis.

ie: I would assess each tenants circumstances and then decide whether to take them as part of the Hillingdon scheme or not.

Hope that helps ...

Mark

[sifly]

Hi GrosAve,

Hope I'm not too late in assisting with this one.

I used the Finders Fee scheme in Harrow and a friend rents two flats in Pinner using the same scheme.

Basically the council introduce council tenants for you to rent to. Like any agency that finds tenants it still depends upon both parties wanting to go ahead with the agreement.

The benefits of this type of scheme compared to say, Housing association contracts, is that you decide who comes into your property and not the housing association (like the situation Trojan was talking about).

Basically the council send you council tenants to view your property. You have a chat with them about their circumstances etc and then decide if they are appropriate. They also look at your property to see if they want to stay there, they don't have to take it. You can say you don't want the people sent round for a variety of reasons apart from the usual discriminitive reason (race, sexuality, age etc).

If you both want to go ahead, then you ask them to sign a 12month short term tenancy agreement. You send a copy to the council.

The council will then send you a letter to say how much of the rent will be covered by housing benefits (which come directly to your bank account, not via the tenant). If there is a shortfall between this and the rent you want you ask the tenant if they are willing to pay it. If they wont, then contact the council and they'll send more prospective tenants round.

They then pay you the "Finders Fee", which varies depending upon the property. £1200 is top the range big house. 2 bed flat between £500 - £900. Yes, use this like a deposit that you don't have to give back. ie keep it safe for any repairs for when they move out. If none are needed....bonus!

If you want a tip, best tenants for the income front are single mums (if it's a 1/2 bed place). This is because close to 100% of the rent will be covered with only a small difference - guaranteed rent!

You still have to have the judge of character, but that's the same even with private tenants. The only difference is you're not paying £100 a month to an agency for finding them.

Also, to let you know, if the tenant gives their 2 month notice during the last 6 months of the contract, you can then get another tenant.....and another finder's fee..

Hope this helps.