Part 2. In the last issue, I addressed the main question asked when considering a buy to let property – Should I? - In this issue, I will answer a few more of the most commonly asked questions. They are in no particular order, although the question of compliance will likely be answered over the course of two issues – as there is a lot to do before a home can be let.
If I buy a property to rent out – how long will it be before I find a tenant?
Our office in Great Torrington takes 31.2 days Average based on our Year to date figures. This includes some commercial and residential mixed properties. Some have found good tenants within a matter of days. Most standard properties will find a tenant within a fortnight.
What is the likely return on my investment?
4.5% to 5% per annum realistically In Great Torrington. That is more than you will receive from your bank in most cases. The price of 2 bedroom homes in Great Torrington has increased a great deal, which has squeezed the margin to approximately 4.65% based on a purchase price of £150,000 and a yield of £6,960.00 per annum. The figure will be slightly lower year one as you have stamp duty to pay on a purchase of that value. It remains true if it is your own home you are letting out.
Will the tenant look after my investment?
The tenant agrees within the tenancy contract to do so. We (at Great Torrington) will then inspect the property at 6 weeks, 12 weeks and quarterly thereafter to ensure this is being adhered to for our managed properties. We do also offer independant services for inspection reports for Landlords who prefer to manage the let themselves. This has proven useful for landlords in that there is an ongoing photographic record of the property’s appearance and state of repair. This service is available from £35.00 +VAT, and could help later if there were a dispute between tenant and landlord for whatever reason. It also ensures that maintenance works reported by the tenants are addressed swiftly. This is essential, as if there are outstanding maintenance issues at the end of a tenancy, it can affect your (the landlords) right to serve a valid section 21 notice – should you wish to have possession of the property for whatever reason. If serving a section 21 notice - Please also make sure it is the correct one. Tenancies started after October 2015 require the specific form to be issued. Please contact the office for more details as the information given at the start of the tenancy will dictate which of them is the correct notice to issue. If you issue the incorrect one, the notice may not be valid and could cost thousands in court proceedings, only for the tenant to be able to remain in the property.
What will happen if the rent is not paid?
In most cases, if the rent is not received it is usually down to a clerical error or banking issue. We will first contact the tenant by telephone to ascertain the cause. In most cases the tenant is unaware this has happened and we will offer for them to make a card payment, or to make a quick check and payment online to ensure the rent is received. If the tenant is aware, and there is a genuine problem, we would first: ascertain when the rent can be paid. If this is in short term, we will often advance the rent to you so your commitments can be met. If there is problem such as the tenant’s benefits or tax credits have been stopped, pending review, we will try and ascertain a timescale from the local authority, and seek alternative ways to obtain payment. We do also offer rent guarantee for an additional one off fee. This includes a legal service should the worst happen and we have to issue a section 21 to evict the tenant. We manage some 200 properties from the Great Torrington office alone and have only issued such notice once in the last 12 months for this reason. Because we carry out really quite stringent checks before we agree a let, we do not generally suffer this problem.
The Big Question-
Q: What do I need to do to comply with current regulation?
A: There is a lot to do before one can rent a home out. Luckily we have a large team here in Great Torrington to make sure these requirements are carried out for you, so you will have peace of mind. These include:
A Gas safety certificate/Boiler check must be carried out every 12 months. A copy must be given to the tenant. This is mandatory, and required by Law. Failure to do so will not only invalidate your insurance and invalidate your right to serve a section 21 notice of possession, but may carry a prison sentence of to 6 months or a fine of up to £6,000.
If the property is mortgaged, the landlord must get permission from the lender to the let the home, or make sure the product is changed to a mortgage specifically designed for letting the property. Agents are now being asked to check these facts before we can act for you.
The home must be equipped with smoke detectors on all floors and carbon monoxide alarms supplied for each gas appliance and the boiler. These must be hardwired if the property is thatched. This is mandatory and carries the same consequences as above if not adhered to.
The chimney or flue for stoves (where applicable) must be swept annually or twice annually if the property is thatched. Again this is mandatory and carries the same consequences as above if not adhered to.
An EPC (Energy Performance Certificate) must be carried out and a copy of the report given the tenant on occupancy. It is likely the home will have one if you have recently purchased the property as it cannot be sold without one. If however, you are letting your own home out, or have inherited the property, one will need to be carried out. They cost approximately £60.00 including VAT and are valid for 10 years. If you have recently purchased the home and made changes, you may consider having an up to date one carried out. If the property is listed – an EPC may not be required. To check if the property already has a valid EPC you can visit www.epcregister.com and search by postcode.
Right to rent checks. Part of the Immigration Act 2014. The act sought to prevent landlords and letting agents from renting residential property to people who are unlawfully present in the United Kingdom. It did so by prohibiting letting of residential property to those who did not have “the right to rent” (in general terms, those people not lawfully present); enforcement was by way of civil penalties on Landlords and Agents. In December 2016 New Criminal offences were introduced. Section 35 – The immigration Act 2016 adds further force to the ‘right to rent’ scheme by creating new criminal offences for landlord, landladies or their agents to rent the property to an adult whom they know or have reasonable cause to believe is disqualified from renting as a result of their immigration status. The offences are committed regardless of whether they are named in the tenancy agreement provided the landlord or agent had reasonable cause to believe they were present. The offences carry a maximum prison sentence of 5 years. To avoid this potential problem we at Great Torrington take care to inform the applicant of Right to Rent and obtain Identification to prove eligibility. E.U. and Swiss residents are regarded eligible. If the applicant is from outside the E.U., you must check their Visa. A student for example would carry a visa which excludes them from working and the question of where funds come from to pay the rent will have to be checked very stringently to avoid the inevitable Money Laundering regulations checks.
The Deposit: The landlord or agent must put the tenants deposit in a government-backed tenancy deposit scheme (TDP) if you rent your home on an assured shorthold tenancy that started after 6 April 2007. In England and Wales your deposit can be registered with: The DPS Deposit protection Scheme, My Deposits or Tenancy Deposit Scheme. Failure to do this could result in the tenant being able to sue the agent or Landlord for up to 3 times the deposit.