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Thursday, July 31, 2008

Weeding out the dodgy tenants

How well do you know your tenants? And do you really know what's going on in your rented properties? You may think that it's none of your business what your tenants get up to behind closed doors. But what if one of your investment properties is being used for illegal activities – such as growing cannabis?

Forgive the pun, but cannabis farms are a growing problem for landlords and also for their insurers. Over the past year, the landlords insurance team at Alan Boswell Group has seen a number of very substantial claims for damage arising from use of let properties for cultivation of cannabis. In some cases, the weed production has been on a truly industrial scale with the property being severely damaged through structural changes, modified electrical supplies and water leakages.

From the outside these "grow houses" often look much like any other property in the same street. But inside they will have been transformed into a forest of cannabis plants; fed and lit by an array of pipes and electrical wires.

Occasionally there will be signs to see from the outside: perhaps the windows will be obscured to hide the activity or they may be lined with polythene for insulation. There will generally be considerable condensation which may be visible on windows and a distinctive, pungent smell may be noticeable.

Fire Hazard
If your tenant is a dedicated weed farmer, he will set up a fully-fledged factory system. Holes will be punched through your walls and ceilings to make way for pipes and cables. The walls themselves may be lined with reflective (and flammable) materials and modifications will be made to the electrical wiring to bypass the electricity meter.

As you can imagine, apart from the obvious damage to the fabric of the building, tampering with the electrics dramatically increases the risk of fire. This is heightened by the use of high powered lighting systems which draw a huge current and throw out vast amounts of heat.

Guarding your Investment

As a serious property investor you will already have comprehensive
landlords insurance in place. But you shouldn't simply rely on insurers picking up the pieces. You have a duty to protect your property and to minimise any potential losses.

Whether you manage your property yourself or use an agent, thorough vetting of tenants is essential:

  • Conduct background checks including bank details

  • Obtain references

  • Do not accept payment of rent in cash

It's best to avoid short-term lettings, especially if the tenant is offering to pay up front for the full term of the tenancy. Once the tenancy has begun, regular inspections should be made so that you can spot the warning signs.

Remember that your insurer might decline to pay for any damage if it is found that you have been negligent in your tenant vetting and property management obligations. And with claims costs averaging around £40,000, landlords insurance providers tend to look very closely at the background to these losses and examine the processes the landlord has followed.

In the longer term, it's possible insurers will want to exclude cover for these kinds of losses. Even if your insurer indemnifies you, you'll have the hassle of dealing with a damaged property and a policy excess to pay. Clearly the best solution is simply to get to know your prospective tenants better and steer well clear of the problem cases.

Wednesday, July 30, 2008

London landlords - hassle free letting

London landlords with a social concience are now able to get a guaranteed income from renting out their buy-to-let property without the hassle of having to manage the rental property.

No Frills - LANDLORD INSURANCE - access profesional landlord rates

This kind of arrangement could well be attractive to the increasing numbers of accidential landlords. These landlords are those property owners that have been unable to sell their residential property in the current market slump and therefore are opting instead to let out their property.

However the scheme is not appropriate to London landlords that are only intending to rent out their property for a short period as the scheme is aimed at landlords who are prepared to rent out their property for between 3-5 years.

The scheme has been devised by Broadway, the homelessness charity, with the principal objective of helping single people who have experienced life on the streets move out of supported housing.

The tenants register with the Real Lettings scheme or participating councils. As well as the guaranteed rent for the landlords, all maintenance is covered and the charity undertakes to return the property in the same condition at the end of the contract.

For more details about how to help homeless people and rent out your property london landlords should contact Real Lettings

Tuesday, July 29, 2008

Landlords going abroad for their buy-to-let loans

It's alright for some landlords!

NO FRILLS - landlord insurance - SIMPLE

The rich always get more choices and that seems to extend to obtaining buy-to-let loans as well according to the FT at the weekend.

Wealthy buy-to-let property investors are by passing mainstream UK lenders to take advantage of more favourable terms provided by some foreign banks.

Some European lenders are offering lower arrangement fees, higher loan-to-values and less stringent rental requirements.

buy-to-let finance - 1 FORM - 4 leading brokers

All I can say, it's all right for some. The rest of us have to endure the tightening mortgage conditions and exorbitant mortgage application fees. Although it is still possible for landlords to avoid paying application fees altogether. Property Hawk reported this lenders as offering fee free buy-to-let mortgage products

The only thing is with these products is that landlords will probably need to jump through plenty of hoops to be able to access these buy-to-let mortgage products and also that the lenders pay rate on these buy to let mortgage products could be higher.

Talking of jumping through hoops, Bettie my trusty border terrier wants to go for her walk and mustn't keep the lady waiting!

Wills & Trusts

What makes you laugh?

I love 'one-liners' My favourite is from an American Civil War film. One side is charging the other through a cloud of gun smoke and an officer turns to his men and orders "Fire at will". One of his men shouts back "Which ones's will?"

Speaking of wills, I was talking to my friend Ron Bateman of Sterling Wills, who gave me this interesting snippet of information;

"Most couples own their house as joint tenants, ie. If one dies the other automatically becomes the sole owner. If the survivor then has to go into a care home, he or she is means tested. The house is sold (because no-one’s living in it) and the proceeds of sale are taken to pay the fees. With average fees of £650 p.w there may be nothing left for the children to inherit.

If however, they change ownership to ‘tenancy in common’ they then own 50% each, which means in their wills, they can leave half the house into a trust for the ultimate benefit of the children, giving the surviving partner a ‘life interest’ in the half of the house he/she does not own. If the house sells for £300k, £150k is ‘ring-fenced’ in the trust and cannot be claimed by the authorities. It’s all perfectly legal and every couple in the country who own their own property should do it."

Their website at gives a case study demonstrating this.

Monday, July 28, 2008

Buy-to-let mortgages- return to endowments?

As an investor and property investor I have found that sometimes challenging the conventional wisdom has resulted in some of my best investment decisions.

Take for example my decision in the early 90s to disregard the doomsayers who predicted that residential property would take a decade to recover in value and those investors in the share markets in 2003 that predicted that we were in for a long run bear market. Both decisions to invest when others were fearful rewarded me handsomely.

Where do professional landlords go for their landlords insurance?

Thinking outside the box
Sometimes landlords and investors need to think outside the box as they say to really maximise their investment returns. All this leads me to my latest idea.

Endowment mortgages
Does anybody remember the ill feted endowment mortgage? These financial tools are probably familiar to anybody who remembers the Human League and wedges. For those younger landlords they are probably a mystery. I remember my father trying to explain them to me once. In essence old school endowment policies were savings vehicles which had the objective that they would rise in value sufficiently to pay off the outstanding mortgage at the end of the loan period. This in theory allowed the mortgagee to pay the interest on the loan in the certainty that the endowment policy would clear the loan at the end of the mortgage period.

Everything went swimmingly for several years as returns on these endowment policies easily outstripped their projections because of booming share prices which meant that many investors ended paying off their mortgage and also having a tidy profit on their investments after the mortgage had been paid off.

Avoid the credit crucnch - 4 leading brokers - 1 FORM

However, the wheels all started to fall off the cart in the 1990s when it became apparent that the returns being obtained on endowments were no longer enough to pay off the mortgage, let alone produce a profit. From that point on the endowment mortgage waned in popularity to the point that they are now probably as popular as the Human League and the wedge cut.

Buy-to-let endowment mortgages
Unfortunately, as far as I am aware there has never been an endowment investment mortgage for landlords. This is a shame because landlords are just the type of mortgagee that could benefit from this type of investment product. Why is this? Well unlike a owner occupier a landlord is less dependent on when they repay their mortgage. Many owner occupier need to time the repayment of their mortgage to a point when their income changes, such as their retirement. Landlords who are in receipt of a rental income often do not have the same financial constraints. There are therefore more flexible about when or if their buy-to-let mortgage is repaid.

Self select endowment
This brings me to my 'big idea'. Many landlords do not have a buy-to-let mortgage at all. Latest statistics show about 40% of buy-to-let property has no mortgage. This means that many landlords could raise relatively large sums of money by obtaining a mortgage on their investment property at relatively low rates of interest. This is because despite the 'credit crunch' lenders still see lending to landlords as a relatively low risk activity. I've been speaking to the brokers at Mortgages For Business and they have given me several buy-to-let mortgages around the 6-6.5% mark. Having secured a buy-to-let mortgage then landlords are able to arbitrage the differential in rates of return available in the equity markets which are now 10%+ with the cost of borrowing on their buy-to-let mortgage. The result is that it is now possible to generate a 5% differential on the income derived from the portfolio that a landlord invest their funds in and the cost of the buy-to-let loan.

The figures
Landlords can then use their self select endowment fund to repay their mortgage. For example the monthly costs of a £70,000 buy-to-let loan are £367 in interest on a pay rate of 6.29% or £602 for a 15 year repayment mortgage.

The return on this £70,000 could be £612.5 month on a projected investment income of 10.5%. This means in theory the buy-to-let loan could be paid off in 15 years.

This all means that it is possible for a landlord to use the income from their buy-to-let self select endowment to repay their buy-to-let mortgage. At the end of the mortgage period landlords are still left with their endowment fund which hopefully if invested wisely will be worth more than what it was purchased for.

The result for a landlord could be a:

a. buy-to-let mortgage that is repaid
b. separate endowment fund with its own income generating properties
c. potential profit on the endowment fund from any capital appreciation

It all makes you think doesn't it. I'll keep landlords posted with the progress of my new idea.

Friday, July 25, 2008


As the check-in season for the student landlord approaches, what is going to make your relationship with the tenant that little bit special? How are you going to create a feeling of a more personal approach?

We like to start off on the right foot at the check-in with a small welcoming present such as a bunch of flowers or a bottle of wine. Then there's the short welcoming letter, written inside a card:

"We hope you settle down in your new temporary home and trust that you will have a pleasant stay here. If you have any questions or situations please contact us. We are here to help make your tenancy a safe and enjoyable experience.
(signed by the landlord)"

For many students this will be their first time living in the community and we find, once they have checked-in, that they value some simple ideas on what to do next. Our suggestions go something like this:-

"(A header with the full address of the property and your contact number(s) and email)

If you haven't already done them, here are some things to do immediately:
  • Check and sign the 'Inventory, Schedule of Condition and Safety Checklist'.
  • Set up your standing order(s) for rent payment. Your rent is paid in advance on or before the 28th of the month. Unless your bank is part of the new faster clearance system, transferring money between accounts can take up to five days, particularly over weekends and bank holidays, so your rent should leave your account on the 24th of the month. See your 'House Handbook' for details of our account.
  • Contact the Council Tax Department at the (District Council?) and tell them you have moved into this property. Their address is (add address) and their telephone is (add telephone). Full time students are exempt from Council Tax, so do this soon, otherwise they may start to charge you.
  • Contact the utility companies below and tell them you have moved into this property. Give them the meter readings of gas, electricity and, if appropriate, water. You will start to pay sewerage and environmental charges for water from the day you move in. You must keep the same water company, however you are free to change gas and electricity companies. If you are going to change companies we strongly recommend you do this now, otherwise they will consider you are on a 'deemed contract' and start to bill you, as if you have agreed to continue with the same utility company.
  • We strongly recommend that you get more than one person's name on the bills (preferably everyones' name), so that, if someone is away, at least one other person can talk to the utility companies. They will usually not discuss anything with people who are not named on the bills. These are your existing utility suppliers to the premises:
  • Gas (Name of utility company) (Contact telephone)
  • Electricity (Name of utility company) (Contact telephone)
  • Water (Name of utility company) (Contact Telephone)
  • Redirect your mail to this property. See full address above.
  • Read the House Handbook. Most of the information is common sense, however it contains some important useful information.
  • Read the Check-out Guide. Your check-out seems a long way off, but by reading this guide now it may change the way you clean, use and maintain the property during your tenancy, so as to avoid any situations at the end of your tenancy.
  • Go round and check where things are and how they work again, before you forget.
  • Re-read your tenancy agreement so that you are familiar with the Landlord and Student responsibilities (e.g. only smoking in the garden or examples of tenantable repairs).
  • Security mark your property. Take photos and, if appropriate record serial numbers of all your valuables.
  • Read the section in the House Handbook on security.
  • Keep the House Handbook, the Tenancy Agreement and Inventory, Schedule of Condition and Safety Checklist in a safe place. You will need them during and at the end of the tenancy.
  • If the previous tenants have left their forwarding addresses they would be grateful if you could redirect any mail that arrives for them. If you are not sure how to do this you will find instructions in the 'House Handbook'. You will probably appreciate your mail being redirected when you leave the property.
  • There will be three inspections during your tenancy to check the cleanliness, tidyness and condition of the property and they are likely to be on (Date A), (Date B) and (Date C) between (11am and 4pm?). Please put these provisional dates and times in you diary and we will confirm nearer the time."
These suggestions, on one side of paper, will give your student tenants a feeling of being valued by the personal landlord service you are going to offer. Small details, such as the above, will help to enhance your reputation in the future. Several of our properties were let this year via friends of our existing tenants, before they were advertised.

By managing your own properties you are in control and often your enhanced reputation will enable you charge higher rents in the future. Now that's shrewd property management!

When is a HMO not an HMO?

Any landlord who has the unfortunate pleasure of coming across the Housing in Multiple Occupation (HMO) regulations is likely to end up completely confused by reading even past the first couple of paragraphs.

Where do professional landlords go for their landlord insurance?

As is the case with much of the current government's legislation the Housing Act 2004 was poorly drafted. As far as New Labour was concerned, legislation was and is; more about grabbing a headline than creating a more constructive environment for the private rented sector.

Do I have a HMO?
If you have a converted property that is let to more than 3 tenants each with their own separate bedroom then it's most likely that you have an HMO. However, in saying that you do but you don't. What do I mean by this? Well you have an HMO - BUT luckily you as the landlord will probably not need to apply for a HMO licence. This is because mandatory licensing only affects properties with 5 or more tenants and that have 3 or more stories. There is however a chance that if your Local Authority has introduced a licensing scheme that even though your investment property does not require a licence under the mandatory scheme it still might require one under a 'selective licensing' scheme introduced by your local authority. The best thing a landlord can do is to contact their local council's housing department to check with them to see if a scheme exists.

Penalties for not having a HMO licence
One of the penalties as well as a potential £20,000 fine for a landlord that does not have a license with respect to their HMO property is that as stated by s.75(1) of the Housing Act 2004. "No section 21 Notice may be given in relation to [an AST] of a part of an unlicensed HMO so long as it remains such an HMO."

Need a buy to let mortgage quote - 4 brokers - 1 form

At least the provision is clear. Just as where a deposit should be protected but remains unprotected, when no s.21 Notice can be served, the same is true where a property should be licensed as an HMO but remains unlicensed.

Serving a section 21 notice (non fault based possession)

This means that the non fault based route to possession is NOT available to a landlord with an HMO property that is not correctly licensed.

HMO landlords - clear as mud!
OK now you are clear about whether as the landlord you still need an HMO licence Well not quite. This only deals with HMO legislation under the Housing Acts. You as the landlord may also need planning permission.

Just to complicate things further there is another piece of legislation concerning the control of HMO properties. This is legislation under the Planning Acts which govern the use of property as well as physical development. This means that ordinary housing is classed as within use class C3. This use class extends to include "use as a a single person, or by people living together as a family, or" [the important bit] "by not more than six residents living together as a single household...". However, any more than six residents or where the planning authority consider that the individual are no longer living together as as single household (in other words sharing facilities such as bathroom, kitchen, etc) they may deem it that there has been a change of use to either a institutional use or the creation of separate units of accommodation. In both these cases they may require a planning application to decide the planning case.

There you go - I did warn you that deciding when a HMO is not an HMO was not straight forward!

Why should you use a lettings agent?

Why should you use a lettings agent?

The experts from Belvoir give their tips on why savvy landlords use a property management agency… and why it’s good for their tenants too!

With a rapidly growing lettings market and ever increasing legislation it’s easy to understand why more and more landlords are putting their properties in the hands of an experienced lettings agent.

For a small one-off fee a letting agent can help find you a tenant - or for a percentage of the monthly rental payment (usually between 10-17%), they can take on the full management of the property.

But do they provide a value-for-money service? Is it better to put your property in the hands of an agent than go it alone?

The answer is YES!

Here are the top five reasons why taking on an agent can benefit you as a landlord - and five reasons why it’s better for your tenant too…

[PANEL ONE] Minimising the risk for landlords:-

1. Tenant trouble?
An agent will have a large portfolio of prospective tenants and, if they haven’t already got the perfect match for you, they’ll soon be able to find one!
An agency is often the first place potential tenants look, plus most agents extensively advertise on their own websites and elsewhere. Once found, the agent will vet the tenant for you, performing credit checks and taking up references.
As well as finding you a suitable tenant they will also be able to help out if a good tenancy turns bad. An agent can help chase rent arrears and even help guide you through the eviction process if necessary.
2. Vital viewings
All properties will have dozens of viewings during their periods as rental investments. An agent can save you considerable time by arranging those viewings, as well as accompanying potential tenants during their visit.
3. Making a deposit
All rented properties need to have a full inventory of contents and furnishings, and an agent will take this on for you. A complete list of the contents and their conditions will be drawn up at the beginning of the tenancy for the tenant to sign and will be thoroughly checked at end of the tenancy too.
An agent will also be able to help with the legalities of claiming damages and help you deal with deposit retention if necessary.
“An agent can help a landlord go through the proper channels when claiming damages from the deposit,” says Kate Jackson, proprietor of Belvoir Bournemouth. “As from 1st April 2007 the deposit now has to be put into a government-run scheme and, as such, has to be managed through the scheme. It is now down to the landlord to prove why a tenant should not receive the full deposit back if indeed this is the case.
“By using an agent the landlord has access to a professional inventory with supporting photographs so the landlord’s property and possessions are protected. Also in the event of a dispute an agent can perform the administration required by the scheme to prove why a tenants’ deposit should be held.”
4. Insurance insight
Your agent will be able to supply you with good value insurance against regular rental claims, such as tenants who cause accidental or malicious damage and any unknown person who causes malicious damage. Plus, an accredited agent will have Professional Indemnity Insurance and Clients Account Protection Insurance.
“Belvoir’s home and content insurance is very good value for money,” says Terry Lucking, proprietor of Belvoir Peterborough. “And, what’s more, the excesses are unusually low for the rental industry.
“As a group our block insurance scheme covers close to £0.5 billion of residential properties so that makes us a very attractive customer to underwriters and enables Belvoir to negotiate a service level agreement that provides fast and comprehensive repairs carried out by professional tradesmen for its clients.”
If something does go wrong, or emergency repairs are needed, an agent will have many local contacts and will be able to arrange for repairs to be made on your behalf.
5. Navigating the legal maze
As well as organising a legally current lease agreement to be signed by the landlord and tenant, an agent will also be able to keep you up-to-date with current changes in legislation, including the forthcoming EPCs.
“The skill of being a professional property manager goes far beyond simply finding landlords a tenant,” says proprietor of Belvoir Sheffield, Rick Flay. “Keeping abreast of changing legislation is a major headache for private landlords - in the last few years alone we have seen changes to laws, such as HMOs, Tenancy deposits and Energy Performance Certificates to name only some of them. Belvoir offer a free legal helpline to all landlords and such are able to minimise the risks of landlords being fined.
“Another big issue is to ensure that the lease document being used is both legal and up-to-date - at Belvoir we constantly get updates so are able to offer our landlords the best protection.”

[PANEL TWO] Maximising the ease for tenants:-
1. Starting the search
A lettings agent will have many properties available so the potential tenant will have plenty to choose from without having to scour the property ads in the local press or search the internet. The agent will also be able to point the tenant towards the right property for their needs.
“An established agency will have a selection of properties to offer,” says proprietor of Belvoir South Hampshire, Paul Cartwright. “There are many variables looked for by prospective tenants including, but not limited to, location, age of property, condition and running expenses. A professional agent will take all these factors into account before showing a tenant a property – from their point of view it is a direct business cost to show tenants around unsuitable properties.
“For tenants, viewing unsuitable properties is a frustrating waste of their time. A private landlord will show a tenant their property and attempt to persuade them to take it – often making promises they will not ultimately deliver.”
2. Quality quarters
Properties advertised through a lettings agent have high basic minimum standards with a guaranteed programme of maintenance, so a tenant is likely to find a good quality home.
Plus, an agent will always have an expert on hand should the tenant develop a problem with the property or the landlord later in their tenancy too. If renting from a private landlord, the tenant has no third party to turn to should they have a substantial breakdown in relations.
“From a tenant’s perspective it is better to live in a property that is managed by a lettings agent,” says proprietor of Belvoir Sheffield, Rick Flay. “They can always be assured of having any issues dealt with quickly and in a professional service like manner.”
3. Money matters
An agent fully understands the local market and will not be able to overcharge on the going rate for properties in their area.
Private landlords can make up their own prices and thus, while you may sometimes get a bargain, you could just as easily end up paying more than you bargained for!
4. Covering that contract
An agent will be able to sort out the contract, make sure the landlord has fair expectations of you as a tenant and talk a novice tenant through what those expectations may be. They’ll be able to answer any questions tenants may have and alleviate any fears too.
A lettings agent will also take care of all the legal elements. “All properties on the books of a professional agency will comply with current HHSRS (safety) laws and, if it’s a House in Multiple Occupation (HMO), it will be correctly licensed,” says Paul Cartwright of Belvoir South Hampshire. “They will also legally deal with the deposit by holding it in a Government approved scheme; as part of this they should supply a comprehensive inventory of the property and have a full understanding of what can and what cannot be legally charged to a tenant following move out at the end of the tenancy.”
5. Emergency services
With their list of local tradesmen, and some even with their own maintenance team, a lettings agent can give tenants the confidence that repairs will be made quickly if an emergency should happen. They sometimes have a 24-hour emergency number too.
“At Belvoir we have contact numbers in place with local contractors in case an emergency should arise,” says Susie Geddes, office manager of Belvoir Corby. “Repairs can then be made quickly and easily for the tenant and with minimal disruption to the landlord.”
It’s impossible for private landlords to be on hand 365-days a year – for example, what happens if a tenant’s boiler blows up while their landlord’s on holiday? A lettings agent is always on hand to help.

• For more information on how renting could work for you or your family, visit the Belvoir website at Please feel free to get in touch. Contact Belvoir central office on 0845 331 2741.

Thursday, July 24, 2008


We know Margo has given up managing, however we're still interested enough to do our own thing, so what are the advantages and disadvantages of managing your own property?

One advantage is no management fee to pay to a letting agency, which can be up to 15% of the monthly rent. That's an annual saving of up to £1,800 on a rent of £1,000 a month or £18,000 on a portfolio of 10 properties. We make sure everything is in place to provide a faster, superior service to letting agents and this develops our local reputation as landlords.

The electrics, plumbing, gas and major kitchen appliances are all insured. We recently received a call from a tenant at 6.30pm. The wall sockets were dead and they couldn't solve the problem. Our insurer's electrician arrived at the property that evening. Within two days this was followed by a further visit and three days later a faulty washing machine had a new motor - all arranged via the tenants without our involvement and all on our insurance.

Developing a good local network of electricians, engineers and builders and paying bills by return ensures our contractors never let us down, responding promptly to emergencies and maintenance.

Student tenants receive a comprehensive 'Household Handbook' with detailed information on how to deal with common situations. We ask them to contact us in an emergency, however if we are unavailable our tenants contact our insurers directly - they do the job of an agency!

An obvious disadvantage is that managing requires a little of our time and sometimes an inconvenient time, however we charge a non-returnable admin fee of £200 per property per year to cover our expenses.

We usually find ways around most situations by:
  • Advertising our properties on free local sites such as 'Torent' or 'Gumtree'.
  • Receiving emergency phone calls from tenants when on holiday (this has only happened once) - we phone our insurer/builder and ask them to deal with it.
  • Ensuring prospective tenants make appointments with the existing tenants to view.
  • Providing existing tenants with a supply of Energy Performance Certificates to give to prospective tenants when they view.
  • Asking our builder to handle a recent insurance claim when the 'owner had to be present'.
  • Making our builder a key holder (after all they are going to get the work!).
  • Delivering a new mattress, for example, by asking the tenants to contact the company if the delivery time arranged is not convenient for them to receive the mattress.
  • Arranging our annual landlord's gas certificate to be organised directly by the company with our tenants.
  • Developing simple systems for managing accounts, making financial projections and employing an accountant (you would have to do this anyway).
  • 'Borrowing' and adapting a free tenancy agreement and inventory from the Internet - taking photos for the detailed inventory.
  • Visiting properties three times a year over a weekend. This ensures the property is tidy and clean on at least three days a year!
  • Developing contacts with the university. They ring us now for any vacant properties.
  • Asking the Council to inspect the property as part of the local 'Student Accreditation Scheme'. You can charge higher rents if you are accredited.
  • Corresponding with guarantors and vetting the guarantors at the tenant's expense.
  • Responding to activated burglar alarms, because we are the call out centre. Accidental activations occur a couple of times a year and we only respond during a long vacation.
  • Researching the Office of Fair Trading to ensure our tenancy agreements are appropriate.
  • Subscribing to free landlord sites such as Property Hawk and keeping up-to-date with legislation. We have never paid to join an organisation in order to get advice or access documents. You can always find everything you want free somewhere on the Internet.
  • Designing your own, usually much better, comprehensive check-out booklet and giving it to the tenants at the start of their tenancy!
  • Keeping a record of correspondence.
  • Issuing a Section 21 notice at the start of the tenancy.
  • Checking students in and out over a couple of days of our holiday. Sometimes tenants check-out themselves (posting the key though the door in an envelope) and we inspect later at our convenience.
  • Not taking a deposit from the tenant, which saves a lot of hassle!
  • And so on.
It looks like a very long list and inevitably it doesn't cover everything, however once things are up and running and as your experience grows, it takes very little time to manage.

If you maintain your properties at a high standard and build a trusting landlord relationship with your student tenants you will receive very few phone calls during the year. Word will get around and your properties will be snapped up.

Is it worth it? With a little extra time and effort what would you do with the money saved? Did your letting agent earn their money last year?

The 'wombling' landlord

One of the sidelines of being a landlord is that you some how get recruited into the recycling industry. This is because when tenants leave they often leave you all sorts of unexpected gifts behind.

Landlords should always ensure where possible that a thorough tenancy 'check out' will reveal any rubbish and unwanted items left by the tenant. However, this is not always the case. To date my largest item to be left was a car!

The result is that many landlords can feel like modern day recruits into that 1970's puppet phenomenon the 'Wombles'. Having being placed in the position where they have to dispose or recycle the tenants rubbish - what is a landlords position legally?

The legislation

The legislation controlling this is contained within the (Interference with Goods) Act 1977 replaces an earlier (1952) scheme. It applies only to E&W and NI (not Scotland).

Section .12, s.13, and the Act's Schedule are most pertinent. These deal with goods left with someone else when the owner of the goods does a flit.

The Act uses the technical terms BAILEE and BAILOR. The former is the person in possession/control of the goods; the latter is the owner of the goods. Let's call them Landlord and Tenant, for convenience.

Section 12 and Part I of Schedule apply, for Landlord & Tenant purposes, if:
a. Tenant is in breach of obligation to take delivery of goods; or
b. Landlord cannot trace or contact the tenant to impose such obligation.

If the Landlord's duty as custodian of goods has ended, he can give Notice to the tenant in writing (specifying the landlord's name/address, location of goods, that goods are available for collection, and amount owed by the tenant). If by post, Notice should be sent to the tenants last known address.

If the landlord serves Notice but the tenant does not reply (or the landlord cannot serve Notice, after taking reasonable steps to locate the tenant), and the landlord is reasonably satisfied that the tenant owns them, the landlord is entitled to sell them under the Act's procedures. The landlord then owes the tenant the sale proceeds less:
a. costs of sale; and
b. whatever the tenant owes the landlord (to set-off).

To sell them the landlord must serve another Notice on the tenant- Part II of the Schedule- on same lines as in 6 above but, this time, by Recorded Delivery. Landlord must give the tenant sufficient advance warning of the date of sale so that tenant has reasonable chance to take delivery (at least three months, if the tenant owes money to the landlord which will be set-off against sale proceeds).

The reality
If the tenant leaves items behind they generally do it intentionally and therefore are unlikely to be anticipating that they are going to get anything back for it.

Wednesday, July 23, 2008

Give the dog a bone / home

I almost dropped my washing up after reading this news that 75% of landlords are shunning tenants with dogs. For a nation of so called dog lovers I thought it was a poor show. However, in some ways I am not surprised.

I'm a dog lover, but equally I know what a mess and smell they can cause. This is acceptable if the mess is created in your own home because it is only you that has to endure it. However, in the case of rented property very often the tenant will not be there for more than a few months (the average is nine). This means that a landlord is then confronted with trying to clear up after Rover has left the building.

Landlord insurance - where do professional landlords go?

Flipside to letting to tenants with pets
The flipside to all this is because so many landlords are put off tenants with pets such as dogs once they have found somewhere because of the inherent difficulties of having to find replacement accommodation the tenant is likely to stay much longer. The essential thing for a landlord is to have a strategy in place and for this to be worked out and agreed in advance with the tenant. For instance if you are going to accept a tenant with a pet ensure that you take a sizable deposit which will cover any redecorating costs or damage. Make sure that you as the landlord prepare a thorough inventory so that if any disputes arises that you can prove categorically to the courts the condition the property was in before Fido appeared on the scene.

Here's a thought; what about including an additional rental charge for Fido during his occupation? Lets face it kennels don't come cheap!

Don't worry Bettie (my trusty Border Terrier) I wouldn't give you up for all the terraces in Kensington.

Would you take a tenant with a pet? Post your view below

Tuesday, July 22, 2008

How many TV licences does a landlord need?

TV is rubbish. It makes your eyes go square and as I think you will find Karl Marx once said it is the laxative of the masses! Not that I believe anything a politician says especially a commie one.

I don't watch it therefore I have no need for a TV licence.

That student lodger came down the other day hassling me to get one. He seemed to think that as the landlord it was my responsibility to legalise the consumption of his media fix.

Landlords - where do professional landlords go for their buy to let insurance

This gave me an opportunity to put him right on a few legal matters concerning our relationship as landlord and lodger.

Regulation on TV licences
Firstly, it is not a legal requirement that the landlord provides a TV licence. If those nice men in the white van come knocking it will be him that gets the fine not me. He reckons he is safe because he thinks he is uber cool because he watches his TV on his laptop using some strange contraption called the I-player. Well I have news for him. He does! This little bit of guidance on what devices qualify backs me up.

The only time a landlord may be liable for paying for the TV licence is if they provide a TV for the tenants in which case both may be jointly responsible depending on what the tenancy agreement says. The chances of me doing this are absolutely zero. There is no way I am going to proliferate this platform for porn and left wing liberal propaganda. I hope this little post puts landlords in the picture on their responsibilities with respect to TV licences.

Anyway I must go, I've promised to watch "Sex In The City" with Miss Jones.

Monday, July 21, 2008

Property Sparrow enjoys a day out

Last week, as a change from fluttering around in the garden, Property Sparrow enjoyed a day out in London.

She took with her: a packed lunch
a small plastic trowel for light weeding
an old carrier bag for litter
her notebook

Journey time from her garden in a small market town in the Home Counties to her Lettings Agents’ office in SE25 – 2 hrs 10 mins. As the crow flies, 51 miles.

Property Sparrow:-

1. Chatted to her Lettings Agent in person for the first time in over a year.
2. Went inside one of her flats with her Lettings Agent (this flat will be void at the end of the month and the tenant had kindly allowed access).
3. Saw the water leaks on the ceilings caused by a hole in the roof of the flat above, an ongoing saga.
4. Spotted that the kitchen window was smashed and that no one has reported it or done anything about it
5. Thought that, after a continuous tenancy of five years, that the flat is not half bad and that it has been well looked after.

6. Asked her Lettings Agent to give her best wishes to her tenant.
7. Was dismayed at the state of the hedge at the front of the building and the scruffy and smelly entrance hall.
8. Drafted a stern letter to the freeholders’ agent about a permanent solution to the roof and the state of the management of the building.
9. Wrote a brief spec for void works and took it back to the Lettings Agents’ office.
10. Flew on for about half a mile to the outside of one of her other flats.
11. Weeded the allocated parking space and a communal brick planter that no one else ever touches.
12. Pecked at and picked up three crisp packets, an ice cream wrapper and a discarded Bic lighter.
13. Looked round the whole complex at the main car park and a communal garden and jotted down some repairs.
14. Went on to the head office of the freeholders’ managing agent for this complex in time for the AGM at 5.30PM.
15. Met the freeholders' Estate Manager there for the first time and some of the neighbours. With them, sorted out the repairs and fussed over litter and weeds.
16. Made soothing noises to two of the residents who were bickering about the car park.
17. Got a blister on her little toe.

Property Sparrow spent:
Travelcard £13.80
Small cappuccino and a KitKat £2.50
Caesar salad and orange juice £5.75
Total £22.05

On the train on the way home, Property Sparrow thought she had enjoyed her day out. Was it worth it? DEFINITELY. She thinks that there is no substitute for seeing your properties with your own beady eyes, even if it’s only once in a while.

Four Ways you could try to reduce.....

......your Inheritance Tax liability.

What is inheritance tax (IHT)?

Inheritance tax is commonly referred to as both a 'gift tax' and also as a 'death tax.'

If, during your lifetime, you 'gift' part or the whole of your estate, then the inheritor will be liable to pay inheritance tax.

Similarly, if, at the time of your death, you pass on part or the whole of your estate, then again, the inheritor will be liable to pay inheritance tax.

Is there an IHT allowance?

YES - but it is not really that favourable, given the property price increases over the past few years.

For the 2008-2009 tax year, the IHT threshold level is £312,000. Anything above this amount is taxed at 40%, i.e., at the highest rate. This means that if, at the time of death, your whole estate is valued at less than £312,000, then the inheritor will have no tax to pay. But, if it is over this amount, then anything above the £312,000 threshold level will be taxed at 40%.

Now, given the dramatic property price increases over the past few years, this threshold level seems to be VERY LOW. If parents living in London and the South East, in particular, were to pass away today, then it is highly likely that they would trigger an immediate tax liability on their loved ones. This is because a very large number of properties in these areas are already valued at above the threshold level! The average property price in the UK in 2020 is predicted to be in excess of £330,000.

One VERY important point to note!

If YOU die tomorrow and leave the estate to your children, then any IHT liability is due immediately by them

FOUR ways to reduce inheritance tax

Here are four common ways of reducing inheritance tax.

a) Utilising the £312,000 threshold level.

If circumstances are such that your estate is not worth more than the current threshold level, then as mentioned earlier, there is no tax liability for the inheritor. However, as we have seen earlier in this strategy, this scenario is becoming more and more unlikely!

b) Gifting to a spouse.

All gifts between husband and wife are exempt from tax, as long as they both live in the UK. This means that even if a husband has an estate valued at £10 million pounds, then he can gift this to his wife.
It does not matter if it was gifted during his lifetime or at the time of his death; his wife will incur no tax liability.

c) Gifting as soon as possible during your lifetime.
During your lifetime it can be tax-beneficial to gift sooner rather than later, especially if you know who your estate is going to go to.
There are two significant benefits of gifting during your lifetime.

(i) The longer you live, the less tax your inheritors will have to pay.

This is because there is a scaling taper relief that is available, which reduces the amount of tax that is liable.
So, if you transfer a property or gift it away and survive for seven years, then the inheritor will have ZERO IHT liability.
(ii) You can use the IHT allowance again. If, after gifting, you survive for more than seven years, then you can use the IHT allowance AGAIN!

This means that if you gift properties to the value of £156,000 each to your son and daughter and survive for seven years, then you can use the IHT allowance to gift up to £312,000 again!

d) TRUSTS You have already learned that husband and wife incur no IHT liability when gifting to each other. However, if you want to gift to your children, then setting up a trust may be the best option.

Trusts can be used to hold properties as well as other appreciating assets such as stocks and shares. Properties can be placed into trusts in a tax-efficient manner, which can help to significantly reduce and even avoid capital gains or inheritance tax.

There are a number of different types of trusts that can be set up to make tax savings.

Each has its own merits and is suitable for different scenarios.

I strongly recommend that if you are considering transferring to your children or other members of your family, then you take tax advice from a TRUST expert.

DON'T forget YOUR capital gains liability!

Remember, if you decide to gift/transfer a property, then YOU are still liable to pay capital gains tax on any profit that YOU have made. If you transfer/gift a property, it does not eliminate YOUR OWN tax liability.

DON'T forget this important point! Timing of the transfer is CRUCIAL.

The rise of the lodger and landlady

Apparently I'm back in fashion, along with landlords taking in lodgers according to this article in the Telegraph.

Firstly, I'd like to point out I've never been away. Just because you lot were temporarily distracted by sharped suited "property investors" strutting the streets of their provincial centres, eying up the next "off-plan" opportunity. Where are they now I ask? No doubt nursing their negative equity and living off gruel and vimto.

Landlord insurance - where do professional landlords go?

Some of us landlords who have been around for a while are used to hard times and cutting our cloth to suit our means. In my case Miss Jones does most of the cloth cutting and patching. She made me a fantastic 3 pieces suit last Summer out of an old jumper, a pair of pants and one of my old tank tops.

I started my property investment empire by taking in a couple of lodgers. For a young professional as I was in the supplies section of Frumpton and Ribblesdale Council there was no better way of supplementing my meagre council salary than by taking in a couple of lodgers.

The Governments Rent-a-Room scheme, is a perfect introduction to landlording and allows landlords to earn up to £4,250 a year (around £350 a month) tax-free from rental income. This means taking in a lodger doesn't have to give a landlord a tax headache.

The only thing I would warn potential landlords about before getting a lodger is to make sure they have a padlock for their milk.

Thursday, July 17, 2008

Landlords Suffering from ' Credit Crunch' Should Look to Buy Near a Hospital

Landlords suffering from an extreme case of " credit crunch" should look to buy future rental properties near to a hospital.

Apparently, research released by points to higher property values in areas in close proximity to a hospital.

Propertyfinders, Michael O'' Flynn commented: "People take comfort from knowing that there are good medical facilities on the doorstep, so perhaps it''s time that hospitals were added to the traditional list of key selling points - schools, transport links and green areas."

Landlords could also see higher rental values achieved in properties with good access to hospitals because of rental demand from hospital staff.

So for you landlords suffering from 'credit crunch', get down to your local hospital to try and ease your 'cash-flow'.

For a thorough check up of your finance use our btl mortgage enquiry form to get the all clear from our panel of the major BTL brokers.

Buy-to-let newbies -time to invest?

I'm heartened as a long standing residential investor when I start seeing articles like this one on the non specialist landlord site Motley Fool. It is the fact that the general media is starting to tire of buy-to-let and believes that no longer is residential property investment the way to make instant profits. This is great because it scares away the hoards of amateur landlords that in recent years has made picking up a property investment bargain almost impossible.

Landlords - buy-to-let mortgage quotes - 1 SIMPLE FORM

Potential buy-to-let investors should not be put off by the change in the general medias 'mood music' towards residential property investment. What potential landlords and investors need to do is stay focused on their long-term goals. Newbie buy-to-let investors should be thinking in terms of a 15-20 year investment which will take us well past the current down turn in the housing market and probably into another boom and possibly another bust given they tend to come along every 15-20 years.

Buy-to-let newbies - keep your powder dry

My advice to potential newbie property investors is to "keep your powder dry" so don't rush in to the market now whilst prices are still falling. However, once they stabilise ignore the general media who will no doubt be peddling stories that "buy-to-let is dead". Find yourself a nice investment property bargain at auction, probably a solid 2 bed Victorian house in a good area that need a little bit of work. Stick to the 3 pillars of buy-to-let and in 20 years time you wont regret it.

Landlord Hassle is it Worth It?

Landlords know that managing property is in reality a non-glamorous occupation, which basically involves many tedious tasks.

I'm talking about meeting prospective tenants at 6.30pm on the way back from work when all you really want to do is sit down and have some food and watch TV after a long day.

Facing up to a broken sanuflo unit that has been macerating some big hairy tenants business ( bad enough facing up to your own).

Cleaning out gutters on a rental property on a Sunday afternoon instead of chilling out with a glass of white wine on the patio.

Sitting on the phone for 50 minutes, listening to 'musak' whilst trying to sort out a utilities bill.

I'm sure there are landlords out their that can think of other ' most hated tasks', please leave your comments and suggestions.

Anyway all this seemed far more worth it when the cash was rolling in and a landlords property portfolio value was growing at 20% per annum.

Landlords were on such a high they would literally whistle whilst they worked. ( probably not wise when up close with the broken sanuflo unit).

Anyway is been a landlord worth the hassle in a climate of falling property prices and increasing mortgage payments?

I found this article on the Fool website that gives a fairly balanced evaluation for landlords.

Worth a read - if you can be bothered. I'm off to lie down.

Landlords - Student lettings

I've got a house that I rent out. It's full of student tenants. Student tenants are horrible. Smelly, dirty creatures that leave mess and create havoc.

Unfortunately student tenants need furniture. I'd give them an orange crate and a mattress if I could get away with it. Apparently that's not allowed.

There are all sorts of regulations for landlords controlling the type of furniture that is acceptable for a landlord to use in their residential investment property. Not only has a landlord got to comply with these regulations a landlord who lets through one of the university approved letting schemes such as UNIPOL or uses a specialist website such as Accommodation for Students produces a whole raft of furniture that they require a landlord to have.

Student landlords - do you need specialist landlord insurance?

One thing that landlords need to watch out for is that bedding and upholstered furniture is fire resistant and meets the correct regulations affecting rental property. Personally I don't see why the government bother. From what I've seen of student tenants behaviour they are all going to burn in hell anyway.

I must go...Miss Jones is having some teething problems with here new water bed. I suggested she get one because I can't afford the new sprinkler system that the council wanted.

Wednesday, July 16, 2008

Landlord TV - a study on cheese?

Landlords who like to get their information from the TV should find this website hosted by a number of professional bodies such as the NAEA and ARLA interesting.

One of the highlights is some suited gimp giving a lengthy discourse about the content of the Carsberg Report. No this isn't the study of a Danish cheese. It's a full scale report on the state of residential property sales and residential letting in the UK. Only for those landlords who are interested in the structural side of the letting industry. I will look at a future date about the implications for the lettings industry of the 30 recommendations that came out of this report.

Landlords - watch our for regulation regulation regulation

Landlords know by now that our current government real mantra is not education education education but REGULATION REGULATION REGULATION.

LANDLORDS find out where professional landlords go for their landlords insurance

If they are not meddling, putting their oar in, getting landlords to fill out more forms such as the section 213 Notice - they are just not happy.

I was reading recently that the government have commissioned several additional pieces of research that could well end up heaping more REGULATION on landlords.

Firstly there is the Private Rental Sector Review commissioned at the start of the year by the Housing Minister Yvette Cooper. She has employed several intellectual bods from the Centre For Housing Policy at York University to do it. What is the betting that these academics will come up with a raft of problems which are no doubt the landlords fault. Their solution. You've guest it - more REGULATION REGULATION REGULATION.

HMOs targeted for more regulation

Unfortunately landlords with Houses in Multiple Occupation (HMO) are not safe from the governments gaze. They to are being targeted for a study into Houses in Multiple Occupation aimed at "improving the management and conditions of people living in Houses in Multiple Occupation (HMOs)"

You now what that means in plain English. All the problems that occur in all around these properties are the landlords fault - never the tenant or the government. Therefore inevitably what the government will suggest to save us from these problems will inevitably be more REGULATION REGULATION REGULATION.

A nation of 500,000 landlords

Here's a thought. There are approximately 500,000 private landlords. That makes us quite a significant proportion of the adult population - perhaps its time we said NO to more REGULATION.

In the coming weeks Property Hawk will look in more depth at these studies and the potential impact on landlords and the private rental sector generally. We also will be interviewing representatives of the three major political parties to get their views on the sector and what they propose to do for landlords.

Perhaps it's time that a nation of 500,000 landlords stood up to make sure that they were no longer the scape goat of too many misguided politicians who feel its their mission in life to save us from our own actions.

Monday, July 14, 2008

Landlords tax - don't forget your losses!

I was chatting with my accountant today.

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We were trying to work out in the midst of this crazy mixed up weather that calls itself an English Summer when we could fit in a game of tennis without getting washed away, blown away or incinerated by lightening.

During the conversation we discussed various things relating to property investment. One comment he made was that in his experience many of his clients with buy-to-let property who make a rental loss do not bother with declaring this on their tax return. This is because as they are not making a pofit from their residential investment property they seek to avoid the hassle of computing and submitting these figures.

This view is short sighted. I myself have accumulated over £20,000 worth of rental losses over the years. In the future as rents rise and my buy-to-let mortgage costs fall. I intend to use these rental losses to make sure that I dont pay any tax on my rental profits for a very long time.

Landlords compute your tax for FREE using our free lettings software

Given how the current government has wasted money over the last decade I intend not to give them any more tax than I have to.

Landlords we are quite normal people really

I was reading this article in the Guardian over the weekend and it struck a chord.

What is it about people and the media in the UK that they have to knock everything including buy-to-let and landlords.

For several years all areas of the media have been taking pot shots at landlords and the buy-to-let sector in general for:

driving up the price of residential property
stopping first time buyers getting on the housing ladder
and probably even the bad weather

Landlords - how do you escape from the credit crunch?

The banks were the real villans
The reality was that inflated investment property values were nothing to do with landlords and residential investors. The real villans in the piece were the banks. They were the institutions that were gate keepers to landlords aspirations to invest in residential property. The fact was they were greedy and wanted to lend to more and more to investors because they were making money out of it and more money than to lending to home owners.

A landlord only has to look at the costs to them of mortgage fees, survey costs, admin fees, early redemption fees as well as the obvious interest costs.

Now house prices are dropping and landlords are left with a depreciating asset. The bleating crowd of first time buyers and general wingers who were complaining that buy-to-let was squeezing them out of the residential market have disappeared. Presumably ensconced now in a nice rental property, where they as tenants don't have to worry about:

leaking taps
failing boilers
decorating exteriors
and falling capital values

Finance Act 2008 gives new powers to the HMRC

And you thought they had enough already!

I wasn't going to go over this subject again, but because of its implications, I thought it important to cover the subject for the last time.

This new act brings together some issues that are going to effect your future relationships with the tax man (as I still like to call him).

In short you will be penalised if HMRC believe you have not taken reasonable care in preparing any information (accounting or otherwise) that underpins any returns made to them.

It is likely that any undeclared tax will be subject to a penalty of 30% and if HMRC can prove negligence or fraud this could rise to 100%

The way in which these errors can be discovered are set out in changes to HMRC's legal powers to to investigate your returns.

These include checking that:

An amendment to a return or claim or return is correct,
statutory record keeping requirements are being met,
tax has not been underpaid or over-claimed,
any issues concerning possible tax avoidance are considered.

So you can see that any tax officer who may visit will take a special interest in the way you have kept accounting records. Particularly those records that effect your VAT & payroll.

There is no right to appeal against HMRC seeing records as there have been changes to the law in the Finance Bill 2008.

Another interesting development recognises the use of computers in storing relevant data. HMRC are quoted as saying " Any authorised person may, at any reasonable time, obtain access to, and inspect and Check the operation of, any computer and any associated apparatus or material which is has been used in connection with a relevant document"
This would provide officers access to any computer which has been used in connection with accounting records (including supporting documents) required of the tax payer. This is a new development, as normally tax payers would expect HMRC to have access to the records themselves, but not the computer(s) on which the records have been prepared or maintained. The practical implications of this are significant. You may want to ensure that no vital business information is kept on the same computer as accounting records. so that any breach of confidentiality, or even business business disruption is kept to a minimum.should they want to access your computer during an enquiry.

For most businesses the new rules will have an effect for accounting years ending March 2009. So the records you are presently updating for this period may be open to inspection.

I suggest that if your accountant hasn't already told you about these new rules, then contact him straight away and ask them if they know about these new rules and how it effects you (if at all)

AS usual, I can't take telephone calls, but can be contacted via

Landlord Upset by Keen Horticultural Tenants

Following on from my last post complaining of what students leave behind in landlords rental property I found this article relating the story of a poor Welsh landlord who turned up to check on the state of his rental property's garden to find that the rented house was full of a cannabis farm.

The police reported that they uncovered £80,000 of cannabis plants inside the house.

This all came as a surprise to the landlord who hadn't expected to found that amount of 'weed' at his property.

As a landlord it always great to get a tenant who is keen on horticulture and will keep any garden areas in trim but this is taking it a little too far.

Landlords Left to Negotiate with a Slippery Character Thanks to Student Tenant

Landlords have some strange things left by student tenants.

Students are a funny, dis-organised bunch who haven't quite got it all together to reach a level of full adulthood.

The end of term can get very busy and it all gets a bit too much for the little sensitive souls.

When it comes to sorting out their possessions often there is a last day of feverish panic that ends up in some items been left behind, for the poor landlord to take down the local tip. This is all very annoying and tedious for us landlords, and for me always resulted in a couple of hours of chuntering and dis-content as I queued at the local tip to unload some forgotten, dirty clothes and a broken record turntable.

Kids heh - who'd have em?

This article in a local paper refers to the amount of stuff that is left in rented accommodation by student tenants, it reveals that traffic cones and shopping trolleys are still very popular.

However, it also recounts an incident when a live snake was left by a student tenant for a landlord to get to grips with.

Now that goes beyond the call of duty for any landlord.

Whats the worst or most bizarre item you've had left at a rental property?

A snake will be in the post for the winner.

Landlords and Property Investors Should Look to Set the Fashion and not Follow the Fashion

Property as a pension is so last season.

The fickle world of investment fashion has decided (with good reason) that property is not a guarantee to future security.

This article in the Financial Times tells of a 73 percent drop this year in the number of people intending to use property to fund all of their retirement.

This is an incredible drop in numbers from 3.2 million investors last year to just 878,000 this year.

Thats what you call a quick fashion change.

These figures reinforce the nature of the majority of investors who charge after past performance as a indicator of potential future investment returns.

Unfortunately as with fashion, as soon as everyone is saying something is cool and groovy , by definition it is already out of fashion and definateley not cool and groovy, that doesn't stop the 'non-thinkers' running in and buying into it. Ouch! Bad investment decision.

This swing the other way is a result of this same group momentum, the media tells the non-thinkers - this is not 'cool and groovy' and off they all rush again.

Great - good times to buy property again coming soon.

But not quite yet. Fashion is all about timing.

Friday, July 11, 2008

Two thirds of landlords avoid TDS

Landlords should be aware by now that if they are taking a rental deposit that they should use one of the government approved schemes with respect to the protection of their tenant's deposit. This is the so called Tenant Deposit Scheme (TDS).

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However, according to the providers of the government's custodial scheme the Deposit Protection Service (DPS) 62% of lanldords are failing to protect their tenants deposits.

What happens if a landlord takes a rental deposit and does not use one of the approved schemes?

Landlords that fail to protect their tenants deposit will be:

a) Unable to use ‘accelerated possession procedure’
Currently, a landlord can obtain an order for possession of an assured shorthold tenancy at any point after the first six months of the tenancy providing any fixed term has expired and the landlord gives the tenant at least two months' written notice (Under Section 21 of the Housing Act 1988). This is known as ‘accelerated possession’.

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However, under Tenancy Deposit Protection (TDS), the landlord is unable to regain possession of the property using the usual 'notice only grounds', if the deposit has not been safeguarded and the prescribed information passed onto the tenant within 14 days of the landlord receiving it.

b) Payment to the tenant
Tenants can apply for a court order requiring the deposit to be safeguarded or the prescribed information to be given to him about the scheme in which the deposit is safeguarded.

Where the court believes that the landlord has failed to comply with these requirements, or the deposit is not being held in an authorised scheme, the court must either order the landlord within 14 days of the making of the order to repay the deposit; or order the landlord to pay the deposit to the custodial scheme administrator.

The court must also order the landlord to pay to the tenant three times the deposit amount within 14 days of the making of the order.

Avoid the TDS

There is potentially a way around using one of the approved schemes by landlords not taking a rental deposit at all. Have a look at Bee in the bonnets post on the subject.

Help needed for the UK landlord?

What a time to be a UK landlord! The Great Credit Crunch of 2008! I feel like I'm stuck in the midst of a badly directed horror movie. The theme is Doom & Gloom - backed up with some great newspaper selling headlines - House Prices Crashing! UK Recession Looming! Unemployment rising! Soaring Oil & Food Prices! Inflation skyrocketing! Companies are beginning to lay strewn across the economic landscape like a scene from Saving Private Ryan...

Taking a look at the current economic climate - mortgage lenders are running for the hills, and those that are brave enough to stay are hiking their prices and fees! I read on forums how landlords can't get decent re-mortgages because their Loan To Value's (LTV's) are too high (what about in a years time when house prices have dropped even more - how many landlords will be sinking then?), their rents are too low, or the Standard Variable Rates they are switching to are too high.

Then their is one of the reasons we are in the mess in the first place - the two largest US mortgage guarantors (Fanny something or other) who between them have about half the value of the US mortgage market, have had their share price free-falling because of fears that they might need to be bailed out by the government! You could not have written a book with this much bad news! I wonder if Arnold Schwarzenegger has anything to do with this?

Why all the focus on the problems? That's my point exactly!

I'm a landlord and my goal has always been to own property for the long haul and part of that commitment is dealing with ups and downs. So what, should I lie down and admit defeat? NO!

I decided to find ways to ensure I could get through this difficult time and meet my long term goals! I got advice from solicitors, mortgage brokers, property professionals, estate agents, lettings agents and anyone else who spoke sense that could ultimately help me. The end result is 6 months of writing and a book titled - The Landlords Guide to Surviving the Credit Crunch!

If you are interested in getting practical advice on how to survive the credit crunch then visit my site and take a pro-active step to ensuring you survive - but if not, then I wish you all the best - we're all going to need it!

Hasta la vista - Baby! (you said it Arnie!)

Property investment capitulation draws near

Its exciting time for investors in commercial property shares. Why? Because we are reaching the capitulation point. This is the mythical stage where investors are so sickened by their financial losses that they give up, walk away and vow never to invest in commercial property or shares again. CAPITULATION!

At that point so the theory goes the last of the force sellers exit the market and from that point on the share price and company values start to rebuild.

We are getting close to that point, but no quite yet. Confidence in bank shares is starting to stabilise, housebuilding stocks have probably hit the bottom. The next sector to stage a recouvery is likely to be commercial property shares and this is why.

1. commercial property shares have been obviously hit by a huge slump in commercial property values. However, shares have fallen faster and further than values of their underlying assets leading to massive discounts of share price to underlying asset values. Whilst this can be explained by the fact that investors are pricing in further falls, some time soon probably towards the end of the year real values will start to stabalise and these discounts will be revealed as ludicrously large
2. sentiment - the share market is all about sentiment at the moment. Fear has taken hold and many investors battered by massive and often inexplicable falls have bolted for the door. Once this sentiment changes as a result of capitulation investors will awake to the fundamentals.
3. fundamentals - share prices for commercial property stocks are pricing in an apocolyptic scenario. Things are bad and going to get worse. Fundamentally though alot of occupiers will continue to need property and accommodation. The market is full of property shares yielding over 10% and I have checked out there consolidated income statement to show that these yields are sustainable unless the property companies suddenly start having massive voids. A year ago no body would have believed that these kind of figures would have been achievable. How quickly a market changes from greed to fear!

What stocks should I be buying?

As I said landlords and investors should be looking out for tell tail signs of capitulation, but here is a property investment share to buy, more tips in subsequent posts


Share price £10
NAV £17.32
dividend £1.27

Mapeley is a classic case of the City not understanding a company. Mapeley is a hybrid which has confused the City. It is partly property investment company but mainly an outsourcing company deriving much of its income from managing other companies property requirements. The result is that it generates much greater levels of income than traditional property investment companies.

In its unaudited quarterly results for the three months ended 31 March 2008 it announced that it owns and manages a commercial property portfolio of over £2.0 billion covering some 2.4 million square metres throughout the UK.


• FFO* the key measure of operating performance up 226% to £45.0 million,
equating to 153 pence per share** (31 March 2007: £13.8 million, equating
to 47 pence per share)
• Excluding the effect of above average asset management receipts in the
quarter, FFO remains stable at 48 pence per share (31 March 2007: 47 pence
per share)
• EBITDA*** increased by 8.9% to £35.6 million (31 March 2007: £32.7
• Revenue down 4.3% to £99.6 million (31 March 2007: £104.1 million)
• Loss before tax of £27.4 million (31 March 2007: profit before tax of
£11.4 million) due to non-cash revaluation losses in the quarter of £39.2
million in line with market trends
• Total asset value of £2,253.9 million (31 December 2007: £2,317.6
• NAV per share decreased to £17.32 per share (31 December 2007: £18.62)
• Dividends to be paid at the half year and full year rather than
• Over 90% of our income is derived from government and investment grade corporates, with low vacancy rates and a 10 year average lease length across the

The current price is at a discount to asset value of 43%. However as Citi property analyst Harry Stokes observes Mapeley should not be valued as an investment company

"We use enterprise value/EBITDA because we consider property outsourcing an earning play, not a property play" he said.

This all means that you have a company with a cast iron and rising income stream, most of its properties are let to government or the Santander Bank (formerly Abbey). The company is paying a whopping and rising dividend and trading at a discount to underlying asset values into the bargain.