New laws come into effect from April 2007 with effect to tenants cash deposits in England that are held against new ASTs, Assured Shorthold Tenancies.
Any new Assured Shorthold Tenancy commencing after April 2007 must now be covered by the Tenancy Deposit Protection scheme, TDP, of which there will be two kinds. It will be mandatory for all landlords and letting agents to be a member of one scheme or the other.
The British government has awarded contracts to three organisations to operate these schemes. Computershare Investor Services PLC will run the single custodial deposit scheme, while the Chartered Institute of Arbitrators will provide the Alternative Dispute Resolution (ADR) service.
This will be a free service for landlords and tenants alike and the whole operation will be paid for by the surplus cash accrued on the pool of deposits held. It is also likely that interest will be paid to the tenants, something that has never happened in the past.
The Dispute Service Limited will offer an insurance-based service aimed primarily at letting agencies. It is being backed by the professional bodies, ARLA, NAEA, and RICS, all of whom will provide further information about these new services.
The holding of cash deposits by agents and landlords has long been a source of difficulty between tenants and their landlords. The majority of landlords have been fair and reasonable when it came to returning deposits at the end of tenancies, but some looked on the deposits as an easy source of additional income and always made claims, no matter how outlandish, against this security money.
As far as letting agents are concerned, although they will miss the interest gained on these monies, in the past they always kept that for themselves, they certainly will not miss the inevitable disputes that all too often arose between the two parties. For the letting agents it was a lose/lose situation.
No tenant was ever happy having money stopped to put dilapidation claims right, no matter how justified it was, while some landlords would put pressure on the agents to make claims and deductions, and ultimately make additional payments to landlords. Often the agent would end up with two very unhappy clients through none of his or her doing.
No doubt the new schemes will have teething problems, no doubt it will take time to settle down, they do seem quite complicated and one wonders why a single overall scheme could not have been agreed upon, but in the longer term, it is likely the new arrangements will be welcomed by tenants, rental agents and landlords alike, because it will for the first time introduce laid down procedures for settling disputes.
How To Start Your Own Property Letting Business With Little Capital By David Carter
Starting your own property business from home with little capital can be done, and this enterprise can be built into a substantial company in quick time if you really work at it, and go about it in the right way. If you dont have any property of your own, it doesnt matter, as initially we concentrate on letting other peoples property.
But first things first. You need to decide on the name for your business, then set targets and goals, and thirdly you must carry out adequate Market Research (MR). All these are very important to the future success of your business. Dont skimp, and dont rush it. Your name first. What are you going to call your organisation? Most property agencies choose either to operate under the principals name, e.g. Jack Jones & Co and then may add the word "Lettings" or "Property", or alternatively a completely different name to your own, such as Oak Properties, or Star Rentals, or Hufftown Lettings. Hufftown is where you live, for the purpose of this article.
Take a little care and time over your choice, because it is very difficult and expensive to change the name at a later date. Have a look in the local papers and see who is operating already. You wouldnt want to choose Hufftown Rentals if there is already a Hufftown Properties operating locally. That would only confuse and annoy people unnecessarily.
Another thing to bear in mind is a website address. Sooner or later you will need a web presence and it would be nice if the name you choose were also available to register on the Internet. For example, imagine you were toying with the name Oak Properties. Ive just run a check to see if Oak Properties is available on the net. As it happens it isnt, but Elm Properties and Ash Properties are, so it might be sensible to choose a name where you can immediately bolt on a website address. By the way I use Lycos to check. They are a massive first-rate company and yet their prices are very reasonable. You can register a co.uk name for as little as £1.99 and that is cheap. Ten years ago that would have cost fifty quid. You can quickly check out if the name you want is available at www.partnershop.co.uk/shop/1598
If you find a still available web name you like, register it ASAP. You dont need to use it immediately, but once youve got it, its yours. Names are being snapped up all the time, and you might be surprised at how few suitable names are still available. Once you have decided on a suitable business name, test market it on a few people. Ask the kids, or your family. They will soon tell you if its too cheesy or naff! You want a name that is easy to remember, that you are comfortable with, and reflects what you do.
So weve decided a name. Lets call ourselves Little & Keen, Property Letting Agents. Onward, to setting targets and goals. Lets set ourselves a modest little target too. Lets aim to become the Biggest and Best letting agency in Hufftown! There is no point in setting targets too low is there? Set them high, aim high. No one wants to achieve a piffling goal. And a time scale too, what shall we say, 10 years? 5 years? How about 2 years max! Thats it, our target is to become the biggest and best letting agent in Hufftown within 2 years. Well start from home to keep costs down, and we may well stay at home, but that doesnt matter. Its a tough target, but by no means unachievable. So lets get started, time is of the essence.
Task 3: Market research. What are we researching and where? These are the things you need to know. Who are your competitors? What do they charge their landlords and their tenants? Where do they advertise? Do they have a website? What properties do they currently have available for rent? What rental cost are they? What are your competitors weaknesses and their strengths? And how are you going to find out these things? Youre going into mystery shopper mode, thats how.
Imagine you have applied for a job at the CIA or MI5 and as a test they have set you that same little task to complete, to obtain all that information within 3 days (always and only by legal methods.) Youd do it wouldnt you? Your job application depends on it; course you would. Get yourself a large sheet of paper and a ruler and make a chart. Primitive I know, but effective. Sometimes pencil and paper is still better than technology.
In the left column list all the competitors you have discovered in your area. Your local paper is a mine of information. Leave the bottom line free for your own business name. You can fill that in when you know what you are up against. Column two is for how much each agency charges their tenants. By the way you can only charge a tenant to process their tenancy application. You cannot charge a tenant just to register their requirements. That is illegal and a definite no-no. (That's the law in England, don't know about elsewhere, you would need to check that.)Columns three and four are how much the competition charge their landlords. Column five is their website address, and column six for any other relevant notes. Now you know whats required, lets dig! Do you perhaps feel a little uncomfortable prying into other businesss affairs? Why? Dont!
Its normal business practice to strictly monitor the competition. To not do so would be foolish in the extreme. Tescos monitor Sainsbury's who monitor Asda-Walmart every single day of the week. Indeed Tesco even boast of their website where they advertise and compare prices on thousands of products within their rivals stores. Do you think Sainsburys and Asda willingly supply this information? I doubt it. Its market research, and it is what you are doing here.
The first place to find information is on their websites. You can glean an enormous amount of market intelligence through your rivals (and yes these companies will soon be your rivals) websites. Youll be able to fill in and complete quite a few of the boxes on your chart, but probably not all. You might then need to put on your best shoes and smile, and head down to the town and raid their shops.
Some agencies will pester the life out of you as soon as you walk in. Theyll want to know everything about you, you might need to be creative, while others will let you pick up all their brochures and lists, and might not even look up from their vitally important work. When they do speak to you, what do you say? The truth of course. Tell them you are considering buying a buy-to-let property and renting it out, and do they have any information that you can take away and browse at your leisure. Most agencies have information in spades. You will be burdened with all the guff 'n stuff theyll give you. Take it all, the whole blinking lot and return home and read it thoroughly from cover to cover. Youll learn a great deal about property letting through these papers alone.
And is that a fib you told about buying property? Of course it isn't. You ARE thinking about buying and acquiring your own properties, and if you arent, you jolly well should be, otherwise what are you doing in the property business? Your ambition must be beyond simply working for others. As soon as you have the necessary deposits you will consider buying, of course you will.
You return home and gleefully complete your chart. Its looking good, almost every box is filled, except yours at the bottom of the page. You now know how much all your competitors are charging for their main services, so how much are you going to charge? Undercut them of course, massively! NO, YOU ARE NOT, because you dont need to and no one ever made a great deal of money by massively undercutting. You have several important advantages coming your way, so make the most of them.
In England the first advantage is that you are not registered for Vat. You dont need to be until your turnover tops 60,000, and thats fee turnover not rental turnover. It will be a little while before you need to register for Vat, so make the most of your Vat holiday it wont last forever. So if your competitor is charging 10% commission to their landlords PLUS Vat on collected rents, if you charged the SAME percentage fee, without the VAT, you already have a significant pricing advantage. Imagine a property is let at 1,000 per month, (nice easy figure) and you both charge 10% commission. The landlord would receive from you 900.00 net. But from Big & Swanky, your local puffed up rival, the landlord would only receive 882.50. A small advantage you might think, but over a year that tots up to 210.00, and if the landlord had ten properties, it's then 2100.00!
Landlords rent out property for one reason and one reason alone, and that is to make money. They notice things like that, believe me. If you are cheaper, they will start to become interested in you. You could in your initial period always reduce your price slightly by say 1% to attract extra instructions. You could do the management for 9%, thats perfectly possible, and it would make quite a difference to a landlord with multi properties. But be careful about reducing your fees too much. Youd be much better off thinking of ways to increase fees. Its your first USP, Unique Selling Point, courtesy of the Vat man. Youre Vat FREE.
Most property Agents offer two separate services. Find a tenant only, OR Find a Tenant and Manage the property on an ongoing basis. Make sure you have the two distinct services clear in your own mind, for if you are confused, your landlord will certainly be too. Service A is to locate and reference a suitable tenant, prepare the paperwork, collect the first months rental and deposit, book them into the property, take a fee and Bob's your uncle, thats it. (Yes I know there are other matters to think about like gas safety and reading meters but well come back to that). Its quick, its clean, and you have no ongoing worries or responsibilities. But after your one-off fee, you have no ongoing income either.
Service B is much better from that point of view. Here you find and reference a suitable tenant, prepare the paperwork, you book them into the property, and then you manage it on an ongoing basis. That means collecting the rent forever, and a fee every month for doing so. Some tenants stay in the same property for twenty years, more than you might think. All you have to do is check the property occasionally, and generally oversee that the letting is running smoothly and satisfactorily for both parties. If you can keep increasing the number of properties you manage each month, you will see your fee total, your income, steadily rising. These regular fees will also provide you with fallback income which is especially reassuring when times are quiet.
Think back to your chart. Column 3 is for your competitors charges to landlords for finding a tenant only; column 4, their charge for ongoing management. Two distinctly separate things. Dont confuse them. Once you have completed your chart, you can pencil in your own charges. You now know how much you will be charging your clients and how much you will be receiving on any particular let, from landlords and tenants, they BOTH pay you fees. Incidentally some agents charge a set fee for Service A, find a tenant only. Perhaps 300.00, or a fraction of the monthly rental, say half or three quarters of a months rent. Half of a thousand pounds is obviously preferable to a set fee of 300.00. Make sure you set your fees as HIGH AS YOU POSSIBLY CAN, while always remaining competitive.
Think about it, check and recheck what Big & Swanky charge, and Sleepy & Dull too. Then fix your prices accordingly, and remember they are NOT cast in stone. You are a small independent. You can always haggle and/or adjust your fees at any time as it suits you. Big & Swanky would probably have to have three board meetings and refer to head office before they could or would amend theirs. Its another advantage of being small and independent, of owning your own business, of controlling your own destiny. You can be quick on your feet, you can compete at all levels.
Look out for the next article in this series entitled "Finding Properties To Rent" and best of luck with your business.
David Carters latest published work is SPLAM! Successful Property Letting And Management. Splam! (New revised edition Out Now) Contains over 300 pages of hints and tips on how to start your own property business on a limited budget, and how to successfully let residential property. You can view actual extracts of the book at http://www.splam.co.uk
New Edition of SPLAM! Out NOW!
The new edition of SPLAM! has just been released. If you are interested in renting out property or would like to get into the property business then SPLAM! is the ideal book for you. Check out www.splam.co.uk for more information on the book and where to buy.
5 Top Tips For Residential Landlords By David Carter
If you have residential property you rent out, or are thinking of entering this market, one of the best ways to keep property fully let and income producing, is to look after your tenants. Surprisingly, many landlords dont do this, and ultimately they lose out. Here are my five top tips for new landlords.
1. Neutral decor is easier to let and maintain
You dont want fussy wallpapers and neither do you want over bright colours that make properties look smaller than they are, and quickly go out of fashion. It is the easiest thing in the world to touch up neutrally painted walls and you also know when you need extra supplies, your DIY store will not have gone out of stock.
2. Research the letting market thoroughly, then purchase property accordingly
If the demand is there to buy one and two bedroom apartments buy those, but you may find detached houses rent better in your locale. Dont buy small apartments if there is a glut of similar empty properties in your area, as there are in so many.
3. Vet your letting agents thoroughly
If you are using an agent, check them out thoroughly. Many agents are very good and work very hard for relatively small rewards. Other agents are a nightmare waiting to happen. Dont let them explode in your face. Try and speak to some of their existing landlords and tenants. Good reputable agents are always willing to discuss their business and their clients. It is only the dodgy agents who have something to hide who are reluctant to provide appropriate information. If an agent stalls on being forthcoming, find another one, there are plenty more fish in the sea.
4. Treat your tenants well
If you do that, not only will they rent from you again, but they will pass your name round to their friends, business acquaintances, and relatives, and before you know it, you will have more good tenants than you know what to do with. If you treat your tenants poorly dont be surprised if they treat your property in the same fashion, and dont be surprised too, if they up and off at the earliest opportunity, leaving you with an empty property and dead money to boot.
5. Join landlord organisations
These can be very useful bodies and their fees are often incredibly low. They usually offer cheaper landlord insurance policies and always provide you with more guff and information than you can handle. At least if you have this information you cant please ignorance of the law, never an acceptable defence in the event of a dispute. Landlords groups often supply inexpensive letting agreements and legal assistance too, should anything go wrong with your let.
Despite consistent warnings the buy-to-let bubble is about to burst, there are more properties being let and available for rent in Britain than ever before. Interest rates may have risen, but the rental market remains busy. If you are thinking of buying and renting in your area, make sure you thoroughly research every aspect of the market before you take the plunge.
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Letting the family home can be a nerve-racking business. We have all heard horror stories of the local conman moving in and wrecking the place and not paying the rent. But it doesnt have to be like that. Here are my five top tips that will help you to enjoy a successful let.
One: Use an agent, and a good one at that. Yes I know we have all seen and heard bad tales of duff agents disappearing to Bangkok with all the rent money, but believe me, these crooked agents are few and far between. Yes an agent will cost you money, but who works for nothing? You can expect to pay anywhere between 7.5% and 15% of the gross rental in agents fees, but good agents invariably earn that money. If you dont use an agent how are you going to carry out a credit check? You can always ask the agent to see the references too, why not? And can you be confident in the tenancy agreement you use. An agents agreement will be tried and tested and usually bang up to date.
And how long is it going to take you to let the house yourself? Good agents always have a register of potential tenants readily to hand, and even if they dont have the perfect one for you, they will locate you a tenant quicker than you could do it yourself. If they let the property a month earlier than you could, and the rental was 1,000 per month, think how much of their fees they have already covered by doing so. An agent also acts as a buffer between the two parties and that is invaluable. If you have no agent and two weeks after the let commences and there is a burst pipe, the tenant will ring you up at work, or on holiday and demand that you come and fix it. You could be several hundred miles away; you could be on the other side of the earth. An agent will field those calls for you. Believe me, a good agent will pay for their fees quite comfortably over the course of a year. So ask around about who is good and who is not. Quiz the agent too until you are satisfied that they are the correct person for you.
Two: If you can empty the house of furniture, then do so. Why? Well for a start any furniture containing foam should be of recent manufacture and contain the necessary safety marks. Secondly if the expensive TV you have included in the let goes on the blink two weeks later, you are obliged to replace it with a set of equal value. The same applies with all appliances. Many tenants have their own anyway, so let them use theirs, and when they go wrong, the tenant bears the cost of repair or replacement and not you. Good furniture has a habit of getting marked and broken too, so take your priceless possessions out of the house.
Three: Check all safety aspects, especially for gas and electricity. Make sure everything is in prime working order and that you possess the necessary safety certificates where required. The last thing you would want is a tenant gassed to death in their beds within the first month of the let, or any time come to that! You would be responsible, and you could end up in prison, and who could argue with that? So never economise on safety issues, and check that everything is just as it should be.
Four: When you get the house back dont expect it to come back as it was when you let it. Why? Because if a tenant is in that house for two or three years there is bound to be some wear and tear. Just as if you were living there yourself. You must expect some wear and tear on carpets for example, so be realistic and budget for a redecorating job and probably replacement carpets too. Some people fancifully imagine that the tenant will do all that for them, at their expense. It does happen, about once in a blue moon, so be realistic and understand that you might need to spend a little money to return the property to how you would like it.
Five: Budget for taxes. I cannot tell you whether there will be any tax payable on your collected rent because I dont know where you live and what laws apply to you, but as a norm imagine the rental income may be taxable at 25%. Imagine you had a let at 1,000 a month and the let ran on for three years. Thats 36,000 gross rental, that could produce as much as a 9,000 tax bill at the end of it all. So dont go off on world tours spending every last bean until you have checked out the tax position as it applies to you, in your territory in your time. It is normal for some tax to be paid on some part of that rental money, so be aware of it, and budget for it, and you wont have a nasty surprise waiting for you at the end of it all. Good luck.
EPCs ( Energy Performance Certificates) Now Required On All UK Residential Lets
From the first of October 2008 an EPC (Energy Performance Certificate) is now required on all new UK residential lets.
Failure to provide an EPC could cost the landlord a fine of £200 and possibly prevent the landlord renting out their properties for a defined period of time, something that could cost landlords a great deal of money when they possibly could least afford to lose it.
Research by Paragon, one of the UKs leading buy-to-let mortgage providers, reported that a staggering 81% of landlords had not obtained an EPC for any of their properties that were coming up for a new letting.
The requirement to provide an EPC relates to new lets, not to existing ones that are simply being renewed.
An EPC can be commissioned by any landlord or the letting agent but they must be carried out by a trained Domestic Energy Assessor and estimated costs of providing an EPC have been running between 40 and 150 pounds sterling.
Each certificate is valid for 10 years so there is no requirement to have it renewed every year.
Rather oddly, while the EPC and recommendation certificate is a legal requirement, landlords are not obliged to carry out any recommendations.However if they dont do so, they could receive a low energy rating which could make it more difficult to let that property in the future.
It has been widely reported that the new legislation has been badly marketed which is probably the reason so many landlords are still quite ignorant of their responsibilities.
This is the latest of a string of new property related legislation the Labour government has introduced. The HIP packs which have been almost universally condemned by the property industry, have been blamed as an additional reason as to why property markets have struggled so badly.
The opposition Conservative party, which is currently firm favourite to win the next election when ever that comes, has already stated they will do away with the HIP packs. Interestingly though, they have also announced that they will keep the EPCs.
This new requirement is being introduced to comply with the EUs Energy Performance of Buildings Directive (EPBD) which applies to all property, including rented property.
