Private Rented Sector Access Scheme - Reaching Landlords is the Key. Plus A Comment on HMOs and Shared Houses

I’m extremely busy with corporate work right now.

I am working with banks, insurance companies and with the public sector to help them improve their landlord facing products.

For local authorities and housing associations this typically involves helping them make a better job of Local Letting Agency Models, Private Rented Sector Access Schemes and Supported Access Schemes – which really boils down to getting landlords to let their properties to people on their housing waiting lists.

Many clients in the public sector have a fair understanding of what landlords want but the main area they could do a much better job of is to understand how to get large numbers of good landlords on their books.

For the banks and insurers my work usually involves improving the strategy, marketing, product design and training issues around buy to let mortgage and landlords insurance products.

Understanding among the banks of the landlord sector is usually quite poor (and apart from a few banks they tend to be less inclined to accept new thinking than is the case with the public sector).

This lack of understanding of what landlords want is in my view is partly because in the past they have typically relied on mortgage brokers to sell buy to let mortgages and because they still use the same systems that they use for residential mortgages.

For example, most banks send statements at end of the calendar year not end of the tax year – which is, of course, totally inconvenient for landlords who all have to complete a tax return.

But it is still nice to help private landlords from time to time (though my time to do this is ever more limited and I simply don’t have the time to answer every email.)

Multiple Tenants in a Shared House

One enquirer recently wrote to me enquiring about multiple tenants in a shared house and the situation where there are four co-tenants that are living in a house.

When the lease was up, two of them who were now married wanted to sign the lease without the other two but one of the others says that he is not leaving.

He asked me, “If the lease is signed without the others, do they have any right to stay? If they do stay how can you get rid of them?”

This case highlights one of the dangers with shared houses and HMOS because no matter how you do it this sort of situation does come up a lot.

Basically though, this is not the landlords problem.

The fact is, unless stated otherwise in the agreement all tenants are jointly and severally liable so must all start and end the contract together.

This means they are all in practice individually responsible for whole rent until such time that all of them end the agreement, even if one or more does not live there anymore.

So the onus is on tenants to agree about leaving among themselves and if they can’t, that is tough on them - they should not have entered into the agreement with the others in the first place!

In this instance, if the landlord really wants to force a resolution (and he doesn’t have to), the only way out is for him to give them ALL notice under S21 and follow normal steps to recovery.

Then once the old agreement ends, he can start a new agreement with whoever he likes.

This case is a pretty good example of why shared houses are a headache.

And despite what the promoters of HMOs say, large shared houses involve a lot more of this kind of work which in practice eats into the extra yield you can earn from HMOs and shared houses.

Election Fever

So, the election is on us already and the newspapers are now more biased than ever - reflecting their particular political allegiances.

I was reading the “Telegraph” the other day (someone left it on the train) and after having read it, I can see how readers of it could really feel that we are on the edge of Economic Armageddon in the UK. All caused by “This Labour Government” as the Telegraph would undoubtedly put it.

That’s why I stick to the non political FT - to understand what is really happening in the economy. I love to read it on a Saturday. And though things are bad, they are not that bad!

However, even in the FT, there are some bits I skip.

For example, I can never see the point of studying charts to predict a stock or currency’s future performance.

What happens to a stock’s price, just like in property, is driven by fundamentals and cannot be sensibly predicted by charts in any way.

Well, that’s my view, at least.

MORE ABOUT LETTINGFOCUS AND WHAT WE DO

LettingFocus.com is the home of landlord information.

I’m David Lawrenson, a landlord and property investor myself for over 25 years and author of “Successful Property Letting” – the UK’s top selling commercially published property book for the last 3 years.

Services to Businesses and the Public Sector

Primarily I am a consultant to banks, local authorities, social housing providers and other organisations – helping them with their landlord facing or buy to let product strategies and services.

For example, I help banks improve their buy to let mortgage lending practices and I help housing association / local authorities find private landlords (private rented access schemes, local letting agency models etc.)
I also write for property websites and am regularly quoted by the broadcast media.

Services for Private Landlords

We also find some spare time to help landlords and property investors by coaching them in how to make money in the private rented sector using ways that work, which are ethical, fair to tenants and which involve minimal risk to the investor.
We pride ourselves on giving independent unbiased buy to let advice on either a one-to-one mentoring / coaching basis or through our occasional group seminars. With no links to property firms, developers or bridging loan providers we can advise on where and what type of property to buy for investment and when to buy it. We also show you how to manage tenants properly.

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Property Seminars and a Word on HMOs by Letting Focus

For our NEXT SEMINAR AND NETWORKING EVENT for Landlords and Property Investors click here:
Next Property Investing Seminar and Networking Event
Our latest seminar event took place on 4th November 2009. Sorry, if you just missed it!
These events take place only once every 6 months and at each event we have somewhere between 18 and 30 people - so it is all very small and informal and a world away from the big property shows.
At our events, unlike some "Landlord Meets" and "Property Meets", no one will try a hard sell on you but you will learn a lot from our very eloquent speakers and from other attendees in the hour before we start the talks, in the short breaks between the talks and afterwards.
To reserve a place at the next event, please email me David@LettingFocus.com

Speaking At the Property Shows
As usual, over the autumn, I have been speaking at the big property and landlord shows.
They are well worth going to but you sometimes do have to work hard to find the good people to listen to.
If you go, the Old Grand Daddies of property investment and fountains of knowledge Tom Entwistle and Richard Bowser should not be missed.
And it’s always worth listening to Paul Shamplina of Landlord Action too. I’m pleased to say that Paul came down to speak at our Seminar Event on the 4th November.
Paul’s business is mainly about recovering property for landlords from defaulting tenants for a fixed fee but recently he has also been recovering money from property firms too who supplied less than value "below market value" leads on property to wpuld be investors.
You an see Paul on BBC1 Iplayer on the "Inside Out" Programme. He is seen doing a recovery from a property sourcing firm who supplied leads for below market value properties for investors.

Duff Property Leads
Some of these property firms have been in the business of supplying leads for what were supposedly below market value property.
What happened was that would-be Landlord-Investors seeking the Holy Grail of “financial freedom fast” paid property firms up front cash for access to high quality “below market value” property deals –which turned out not to be er, well, not that much below market value at all.

Paul Shamplina’s Talks
Paul Shamplina is a real mine of information. He usually talks about how to recover property from non-paying tenants, how to avoid getting a problem tenant in the first place and also on the danger of using property finders and sourcing companies to get access to “great property deals”
(There are good sourcing companies - just make sure you use one.)

Tax and Landlords
Another speaker, Geoff Everett talked about tax and how it affects landlords.
And this is an area that has got very interesting recently.
In my view, taxation on landlords is relatively light.
Capital gains tax was reduced 2 years ago to 18% and there are lots of legitimate ways a landlord can ameliorate (and often completely reduce) the impact of tax with a bit of forward planning.
Now that there is real talk of the Government stopping higher rate tax relief on contributions to pension schemes, property as an investment will become relatively more attractive still.

HMO, Houses in Multi Let Properties
Finally, I would like to say something about HMOs
Many people think you can get a much greater return by letting rooms in big houses individually to tenants (i.e. room by room) rather than putting them all on one agreement.
Well, I have done it both ways over many years with a “mid market, nothing special” 6 roomed house in S London.
I can tell you that the excess on NET RENT of individually let rooms compared with doing it via a “single let” is about 18%.
But what about net PROFITS?
Well, the downside of letting room by room is that there is definitely more work as tenants change over quite a lot and you sometimes have to get involved when they don’t “get on” - which is a a real pain, very time consuming and a real “no win situation”

Disputes
You also have more wear and tear and more disputes over inventory with singly let rooms, sometimes an HMO licence fee to pay too (though on the plus side you do normally have less voids overall).
Based on my long experience and the type of property I have, there is not much in it profit wise, certainly after allowing for the cost of your own time.
Letting individual rooms in big multiple let properties is not a panacea to riches, nor a way to huge yields compared to other property investment opportunities.
But it would be good to hear what others experiences with singly let rooms in HMOs is in different types of market is – especially more up market places and properties in different locations.
Click on the Categories box at the bottom of this post for more posts by me on HMOs and Houses in Multiple Occupation.

ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
We are LettingFocus.com - the landlords’ expert and I’m David Lawrenson, the author of “Successful Property Letting” - the UK’s top selling property and buy to let book for the last 3 years.
I have been a landlord and property investor myself for over 25 years.
At LettingFocus we offer independent unbiased seminars for buy to let investors and landlords as well as one to one advice covering all aspects of being a landlord and investing in property.
Unlike many in the still largely unregulated buy to let and property “advice” business I am not linked to a property company, developer, estate agency or bridging loan provider.
As such I am able to give unbiased independent advice on where to buy (which areas), what type of property to buy, when to buy and how to buy property at a low price. I can also explain how to reduce the risk of getting a bad tenant.

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Houses in Multiple Occupation Rules in Relation to 2-storey Houses?

Suppose a landlord has a 2 storey, 3-bedroomed house, not covered by mandatory licensing (as it’s less than 3 storeys) and assume also that the local authority has not extended licensing locally to smaller HMOs.
In this scenario is there anything to stop a landlord putting in six or more tenants in such a property and staying outside the HMO regulations? If so, what regulations would then apply to prevent this?
This is a tough question which even I did not know the answer too and I’m grateful to the guys at the Residential Landlords Association at http://www.rla.org.uk/ for supplying the answer.
The RLA experts say that the property would, of course, be an HMO (assuming the tenants are not members of the same family). However it would not nned a license as it is only three storeys.

'Elf and Safety
But a landlord trying to stuff it full of tenants would be stopped by other rules. The legislation applying would be: the HMO Management Regulations, the Housing Health & Safety Rating system coupled with Part 1 of the Housing Act 2004 which provide local authorities with the powers to deal with any hazards at the property, the Housing Act 1985 Part X which deals with minimum room sizes and the Housing Act 2004 which deals with the prevention of overcrowding in HMOs.
So there you have it!
If you want to find out more, ask us.

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ABOUT US

LettingFocus.com are the experts on landlord issues and I’m David Lawrenson. I have been a landlord and property investor myself for over 25 years and am author of “Successful Property Letting” – which has been the UK’s top selling property and buy to let book for the last 3 years.
We help landlords and property investors make money in property by coaching them in ways that work, which are ethical and which involve minimal risk.
At LettingFocus we pride ourselves on giving independent unbiased buy to let advice for property buyers and landlords both on a one to one mentoring and coaching basis as well as through occasional group seminars.
With no link to property firms, developers or bridging loan providers, at LettingFocus, we can advise on where and what type of property to buy for investment, when to buy and how to buy property at a low price. We also show you how to manage tenants properly and in ways that take up as little of your time as possible.
We also do consultancy and writing for companies such as banks, local authorities, property websites and social housing providers – helping them with their landlord or buy to let facing strategy.

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HMO, Houses in Multiple Occupation - Still Money There (In Brum at Least!)

Whilst at the Birmingham Property Investors Show, I stayed with my young nephew in his multi let student house in Selly Oak.
What a fascinating area - it's pretty well all student HMOs here.
My nephew's place was not fully compliant in respect of the fact that though there were 6 of them living there, they did not have wash basins in each room.
However, it was decent enough accommodation - there were lots of other amenities - and for all I know Birmingham City may have adopted a softly softy attitude on when the wash basins must be put in - perhaps giving landlords time to make the changes (and for the government to change its mind on this rather daft aspect of licensing).
But wow, the yields here were good.

Good Yields on HMOs
I calculated his landlord would have been getting about 6.75% gross, though running costs on this kind of property will probably peg back net yields to 5%.
And student demand was very high. This was clear from the fact that most properties had notices on them to stop students calling to make enquiries about next year.

Downsides of Houses in Multiple Occupation
However, there are downsides to HMO lets for a landlord.
There is a lot of work checking people in and out and recruiting new tenants - especially if the tenants are all on separate tenancy agreements.
HMO properties also tend to get a lot of wear and tear -and it can be hard to get people to pay up for damage - as each tenant will blame the other. Expect to be asked to mediate a lot between warring tenants. This all takes a lot of your time up.
Often you have to pay the council tax and electricity and gas, especially if you are letting each room separately. And you may have to pay an HMO licensing fee if the property is big enough or if the local authority requires it.
This all hits the net yield.

ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
We are LettingFocus.com - the landlords’ expert and I’m David Lawrenson, the author of “Successful Property Letting” - the UK’s top selling property and buy to let book for the last 3 years.
I have been a landlord and property investor myself for over 25 years. I know all about HMO and multi let property as I have let one for over 20 years.
At LettingFocus we offer independent unbiased
seminars for buy to let investors and landlords as well as one to one advice covering all aspects of being a landlord and investing in property.
Unlike many in the still largely unregulated buy to let and property “advice” business I am not linked to a property company, developer, estate agency or bridging loan provider.
As such I am able to give unbiased independent advice on where to buy (which areas), what type of property to buy, when to buy and how to buy property at a low price and whether or not to go for Houses in Multiple Occupation. I can also explain how to reduce the risk of getting a bad tenant.

CHECK OUT THESE PAGES AT OUR SITE LETTINGFOCUS.COM:
Our Events only take place twice a year.
For our NEXT SEMINAR AND NETWORKING EVENT for Landlords and Property Investors click here:
Next Property Investing Seminar and Networking Event
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For general info on our SEMINARS AND CONSULTING click here: Property Seminars, Networking Evenings and Consulting
ONE TO ONE CONSULTING click here: Property Consulting
CLIENT TESTIMONIALS from past customers click here: Testimonials
BUY THE BOOK click here: Buy the Book at Amazon
THE HOME PAGE OF THIS BLOG click here: Blog
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Read this Related article on Multi Let Houses: http://www.lettingfocus.com/pages/myarticles_HMOAdvice.html
Read this article on landlord licensing:
http://www.lettingfocus.com/pages/myarticles7.html

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