Thursday 11 April 2024

Five things to check when choosing a letting agent

Using a letting agent to manage your rental property should relieve you of hassle, whilst improving your return on investment. Here are five things to look out for though to prevent you being stung by a poor performing or sneaky letting agent.

1. Legal requirements
It is a legal requirement for all letting agents to be a member of a property ombudsman or redress scheme, which ensures you have a port of call if you have reason to complain about their service. Letting agents should also have indemnity insurance to protect you against any mistakes, as well as Client Money Protection insurance, which will compensate you if the agent should misappropriate your funds. Certificates for all of these should be provided upon request and be available on their website - if they don’t have them, they are breaking the law!

2. Service
Ensure you understand what level of service you expect from a letting agent and whether they can deliver it. Discuss what options are available and what the proposed service includes as letting agents’ interpretation of ‘fully managed’ can vary, and this can be at odds with landlords’ expectations. Ask what marketing the agent will undertake, what tenant referencing they perform (and if they’ll supply you with copies) and what the move-in process entails (including which deposit scheme they use and the level of detail to their inventories). Ask how often they will undertake inspections at your property and what their process is if rent isn’t received on time.

3. Fees
A major factor in choosing any service is its cost (although I’d argue value for money is more important than ultimate price). Fortunately, it is a legal requirement for letting agents to list all their fees on their website and in their offices. You should question those who aren’t doing this - firstly because it’s illegal not to, but secondly…what are they hiding?! A myriad of extra fees hidden away in the small print of their management contract can soon add up. Also, ask if they add commission to maintenance invoices; this isn’t illegal (if it’s made clear), but you might wonder why organising repairs isn’t simply part of their management fee.




















4. Reviews
Perhaps the best way to choose a letting agent (like with any service) is by seeking a recommendation or referral from someone you trust. Failing that, letting agents are likely to offer up testimonials from their current clients, although it’s perhaps better to seek them out for yourself by looking up their reviews online.

5. Contracts
Whichever agent you decide upon, make sure you receive a written management contract. This should set out the service the letting agent will undertake for you, whilst clearly listing all the fees you’ll ever need to pay. This will provide clarity for both parties and should help avoid any mis-understandings or disputes at a later date. Be sure to carefully read the contract and raise any terms you are unhappy with before you sign it and the agent starts working for you.

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If you are looking for an agent that is well establishedprofessional and communicative in Chichester, then contact us to find out how we can get the best out of your investment property.

E-mail me on clive@crjlettings.co.uk or call 01243 624 599.

Don't forget to visit the links below to view my previous buy-to-let deals and Chichester Property News articles:

c/o CRJ Lettings, 30B Southgate, Chichester, West Sussex, PO19 1DP



Chichester rental valuation

Monday 1 April 2024

BUY-TO-LET DEAL OF THE WEEK: 2 bed house in Tangmere, £255,000, 5.2% yield


Summary
2 bed house in Tangmere
Listed for sale on 21/12/23 @ £265,000
Now = £255,000
Rent = £1,100pcm
Yield = 5.2%
Last sold for £111,500 in 2002 (+129% in 22 years)

The property is on the market with Henry Adams and full details can be found on Rightmove via the following link: www.rightmove.co.uk/properties/143111261







Thursday 28 March 2024

Rent increases - what is fair?


In my last article I explained why it is becoming difficult for landlords not to have to increase the rent. But what is a fair increase?

There is no law (in England & Wales) on how much rents can be increased at any one time. Facebook posts providing ‘advice’ to tenants that their landlord can only increase it by a set figure or a set percentage are simply wrong. Any increase must however be ‘fair and realistic’, which is to say it is in line with average local rents i.e. the property’s value if it were to be re-marketed. If the tenant believes the increase is unreasonable, they can refer the matter to a (free) rent tribunal, which will then set the rent.

Conversely, it does irritate me a little when landlords say they want to increase it because their mortgage has gone up, or because of inflation, or simply by a nominal figure e.g. a £50pcm increase each year. This is especially unfair in my opinion if it is written into the tenancy agreement, rather than being properly calculated on the only thing that actually matters…how much that individual property is worth!

Unless otherwise agreed between tenant and landlord, the rent cannot be increased for the first 12 months of a tenancy and it can then only be increased once a year (using a Section 13 notice). The tenants should be given at least one month’s notice before any increase applies.

Assuming tenants have looked after the property and paid their rent on time, I personally recommend meeting them half-way in regards to the amount of any rent increase i.e. keeping it slightly below market value to reward their good behaviour and incentivise them to stay longer in what is now their home.

Ultimately though, different landlords will have different thoughts on this; some will never increase the rent (thus not ‘rocking the boat’ so tenants stay longer; aware of the re-let costs and possible need for refurbishment if the current tenants leave), some will want the maximum rent at all times (likely seeing a higher turnover of tenants / risk of issues or resentment from tenants arising), whilst others take the middle ground.

There are a couple of trains of thought when it comes to the timing of rent increases too; a set routine of annually reviewing the rent versus doing so on an ad-hoc basis (typically only increasing it when the current figure is out of kilter with the market). 

Even this can cause consternation amongst tenants though. Some prefer the ‘little and often’ approach, whilst others can actually do the math and realise even though a less frequent but greater increase may appear more painful, they are in fact better off this way. Let me explain with a real-life example…

Tenants of mine had moved in at £800pcm. It was four years later when the market rent was £1,000pcm (having increased slowly for a few years and then suddenly in an 18-month period) that I decided to increase the rent for the first time to £900pcm. You might expect the tenants to be grateful they had received no increase for four years, or to appreciate that they were still paying significantly less than the market rate (having met them ‘half-way’). Instead, I was lambasted for ‘suddenly’ increasing the rent by £100pcm and was told by them that I should have done so by £25pcm each year instead to have softened the rise. Simple math says they were better off with my method, but I have been happy to change tact in subsequent years for this set of tenants so as to give them what they want i.e. a ‘smaller’ annual increase.

I have come to learn that you aren’t necessarily doing your tenants a favour by not increasing the rent on a regular basis (I now typically review matters every 18 months). They can become ‘trapped’ in your property if they are paying well below market rate, as to move would see their rental payment increase dramatically. There are cases of families sticking with a property they have otherwise outgrown simply because they are currently ‘getting a deal’. There is also the shock if the landlord suddenly needs to sell the property as the tenants then realise they have been outpriced from the local rental market. 

Ultimately, and especially with rents having increased so strongly over the past few years, tenants do expect rent increases throughout their time at a property. As long as this is done both sympathetically and in line with the law, it can remain a fair deal for both landlords and tenants.


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Monday 18 March 2024

BUY-TO-LET DEAL OF THE WEEK: 3 bed house in Chichester, £300,000, 5.0% yield


 Summary
3 bed house in Chichester
Listed for sale on 31/01/24 @ £320,000
Now = £300,000
Rent = £1,250pcm
Yield = 5.0%

The property is on the market with Leaders and full details can be found on Rightmove via the following link: www.rightmove.co.uk/properties/131241017







Thursday 14 March 2024

Rent increases - are they necessary?

I must admit my thoughts as a landlord on rent increases have changed over the years. Previously I believed in not unduly increasing the rent if a tenant had paid on time each month and looked after the property. In fact, there were tenants of mine who had not received a rent increase for a number of years after moving in.

This was all well and good when the average rent in the UK was increasing by just 2.4% per year (as was the case, on average, between 2015 and 2021), meaning the original rental figure did not become too far off the ‘going rate’. Since the middle of 2021 though, rents in the UK have been increasing at an average of 9.2% per year (totalling an increase of 28% in the past three years), which has made it a little harder not to follow suit.


This is not just about ‘taking advantage’ of tenants though. The fact is that the financial landscape for landlords has changed drastically. An increase in legislation and a change in the way landlords are taxed has increased costs. And then we have interest rates…which have massively increased the cost to any landlords with a mortgage.

Now I’ll admit, when mortgage rates went down from around 6% in 2009 to 2% in 2020, I didn’t slash rents. But I did take into consideration that I did not need to increase rents because my mortgage costs were so low. This was a key reason I chose not to increase rents to good tenants during this period - a true win-win! Now that rates have reversed though, and with monthly mortgage payments suddenly doubling or even tripling, you cannot escape the fact that more income is required to counteract this i.e. rents need to go up. 

The alternative, which is one many landlords have taken, is to simply sell the property instead. This would result in the tenants both losing their home and facing much higher rents anyway on their next equivalent rental property when looking on the open market. 

But what about landlords without a mortgage - surely it is not necessary for them to increase the rent? Well, on the face of it perhaps not (although there are other costs that have increased), but there is also the opportunity cost to consider. Basically, if the rent is not increased, they will be getting a lesser return on their investment. When you consider they could sell up and stick the money in a savings account instead, which comes without the effort or associated risks of being a landlord, an increase in rent is necessary for it to remain worthwhile.

So, it seems rent increases probably are now necessary for most landlords. With that in mind, for my next article I’ll consider what is fair when it comes to rent increases. 

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Monday 4 March 2024

BUY-TO-LET DEAL OF THE WEEK: 2 bed house in Chichester, £285,000, 4.6% yield



 Summary
2 bed house in Chichester
Listed for sale on 13/10/23 @ £285,000
Rent = £1,100pcm
Yield = 4.6%

The property is on the market with Bell & Blake and full details can be found on Rightmove via the following link: www.rightmove.co.uk/properties/86645421







Thursday 29 February 2024

Getting your property ready to rent

In my last article, I listed the basic things you’ll need to put in place before you can legally let your property. Assuming they’re all sorted, the next thing you’ll need to do is get the property ready for marketing and viewings. With that in mind, here’s a few things to consider to get the property ready to rent:
 
Consider improvements
We’ll assume any necessary repairs are done and the house is watertight and fully functioning. That being the case, you could now let it…but will anyone want it? It’s a lot easier to undertake improvements before a property is tenanted, and doing so is likely to attract a better, longer-term tenant, who may be willing to pay a higher rent for a nicer home.
 
So, are the windows and heating up to scratch? How old are the bathrooms and kitchen? Is there a decent shower and suitable kitchen appliances? Could the walls do with re-decorating or the flooring upgraded? It may seem boring but a crisp neutral d├ęcor is easier on the eye and provides a blank canvas that tenants can see themselves living in. 
 
Factor in the cost to undertake these works versus the uplift in the property’s value and the gains in tenant satisfaction, longevity of their tenancy and increased rental income.
 
De-clutter
Taking photos of a property with lots of ‘stuff’ in it won’t show it off to its full potential. It’ll also put people off when they come to view the property as it will make the rooms feel smaller and less inviting. Simply clearing surfaces and stacking things away neatly can bring some much-needed calm to a property.
 
Dress the rooms
Whilst the majority of properties are let unfurnished, you can at least straighten the lightshades and pull back the blinds or curtains to let in the most amount of light. If you are providing furniture though be sure to dress the rooms so they reflect who you’re targeting i.e. setting the dining table makes more sense for families than it does sharers.
 
Keep it clean
No one wants to rent a dirty property, so make sure it’s spick and span so it’s looking its best. Don’t forget the outside spaces either; make sure the frontage is clean and tidy, ready to make a good first impression. Tidying up the garden and creating a low maintenance space will make it more inviting, rather than looking like something tenants will have to be working on every weekend.
 
Once the property is up to scratch and made to look its best, it’s time to call in the professionals and get it valued, photographed, measured-up and marketed. A well-presented property that is priced correctly will stand above those on the market that have had less care taken with them and, as a result, should make finding tenants that bit quicker.

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