Rental Insurance - is it worth it?

Apologies in advance - there's a sales pitch in this blog! However it's a sales pitch that has a benefit for the landlord.

A landlord can purchase Rent & Legal Insurance for his property. There are a number of different providers in this area, offering very different policies. The more basic policies are usually given away by lettings agents as a freebie at the start of tenancies - they offer some cover, usually with a number of restrictions, if the tenant doesn't pay the rent. As such the landlord may be able to recover some of the money he loses. 

Other policies are chargeable to the landlord. The Belvoir Rent & Legal Cover is one such. Because it's chargeable, some landlords don't take it, although to be fair the majority do. But what do you get for your £126.00 per annum? Let's look at the case of 2 landlords with problem tenants:

Mrs Singh

• Mrs Singh did not have Belvoir Rent & Legal Cover.
• Tenants lost job and lost their ability to pay rent. They applies to the Local Authority to be housed, but were told this was not possible until they were homeless and their landlord had a court order making them vacate their property. As such the tenant did not leave the property.
• Mrs Singh had to apply to court for possession of her property, again for an eviction order, and again for the bailiff to visit. She could not attend court herself, so had to pay for a solicitor on each occasion - total cost including court fees £1050.00.
• Whilst the court process was ongoing, Mrs Singh received no rent from the tenant. This represented a total loss of £2400.00.
• When the property was reclaimed, Mrs Singh had to pay for a lock change, some clearing and clearance, and it was a month before another tenant was found. Total cost to Mrs Singh of £840.00.

Total cost to landlord £5,250.00

Mr Cornish

• Mr Cornish did have Belvoir Rent & Legal Cover.
• His tenant didn't pay rent, vacated the property, and he ended up with third parties living there who would not leave.
• It took 5 months to end the tenancy, via a court application, an eviction order, and a bailiff visit. No rent was paid in this period. 
• Mr Cornish DID have to manage his own cash flow on a short term basis. However when the property was finally reclaimed, Mr Cornish received £5460.00 from the insurer covering ALL his rent, ALL his legal fees, and ALL his court costs. 

Total cost to landlord £326.00 

(£126.00 insurance premium, £80.00 lock change, £120.00 cleaning) .

It should be noted that very few tenancies fail, and those that do can usually be resolved amicably between landlord and tenant. However if you do end up with a rogue tenant, the law is heavily stacked in the tenants favour - this is when the insurance cover becomes worthwhile as although it cannot remove the frustration, it does remove the financial worry.

Richard.

What's happening with rental prices?

Recently, there's been a lot of talk in the national press about an increase in rental prices. People are struggling to buy houses currently due to strict lending criteria, and people also aren't moving out of rental property, so if you're looking for somewhere nice to rent, it's a lot harder to find something than it was say 12 months ago. This is the case in both Rugby and Northampton.

So have we seen rental prices increasing as a result? Certainly not across the board is the answer, and there are probably a few reasons for this:

1. The natural time to change the rent is when your tenant vacates and you have a new one going in - only this isn't happening much at the moment. To change the rent, landlords have to apply for an increase mid tenancy - and whilst there is confidence in the market, it's still a brave landlord who calls his tenants bluff and risks losing them over a small rental increase.
2. Property condition remains a massive factor in a landlords ability to increase rent. When the newspapers state there is a shortage of rental property, they mean a shortage of good quality rental property. Whatever the market conditions, there's never a shortage of poor quality property to rent, and it's always hard to command a premium rent if the property is in poor order.
3. In certain sectors of the market, there's still oversupply of property. Two bedroom apartments in Northampton for example, are still in plentiful supply, and getting a significant rental increase in this area is tricky business.

Irrespective of this, there have been examples recently of properties getting excellent rents:

1. Two bedroomed house, St Crispins, Northampton, rented at £695PCM. Granted, it was in excellent order, but still the usual price for this would be around the £600 mark. Lucky landlord!
2. Two bedroomed house, Coton Meadows, Rugby, rented at £595PCM. This was in decent condition, and would usually fetch around £550PCM. However the landlord benefitted simply from a complete lack of competition and was able to get more rent.
3. Three bed house, East Hunsbury, Northampton, rented at £795PCM. Whilst a staple rental area, Hunsbury 3 beds usually peak at around £700PCM, with higher prices being achieved across the A45 in Wootton and Grange Park. Again this was a well presented property, which the landlord was able to achieve as the internal condition was genuinely spot on.

And what does the future hold for rental prices?  This isn't an easy question to answer, and if you ask three different 'experts', you'll get three different responses. As such the brutally honest response is probably "who knows"!

From my own perspective, I believe very strongly that the answer remains tied in to people's ability to buy property - as long as this remains difficult, people will have no choice other than to rent. This should keep demand high, and hold prices up too. If you are a landlord that has good quality property, you shouldn't have a problem 1) attracting a good quality tenant and 2) charging a decent rent. This hasn't always been the case though, so don't 3) start to think it's the norm and 4) base your future financial decisons on it!

Richard.

Property condition - speculate to accumulate!

As a student, I rented houses with issues! There were some structural problems with one property which meant that you could see daylight through the crack on the staircase wall. In another there were no internal doors upstairs – definitely a fire risk, but not something that particularly bothered the four of us that shared the house at the time! Why did we do it, I ask myself? Quite simply because we had no choice – 15 years ago there was a shortage of rental property so as a tenant, you took what was available.

This isn’t the case today. The buy to let boom of the last 10 years means that generally there’s a good supply of rental property for prospective tenants. Yes, there are periods of scarcity – right now there are fewer properties available than there were 9 months ago because people aren’t moving, but it’s still the case that if you are a tenant, you can be a bit selective over where you live.

As a result of this, it’s important these days that landlords maintain properties in good order. Gone are the days when you can get away with offering a substandard property. Northampton, which has seen a huge amount of new build in the last decade, has responded as a market to accommodate this – the stock of Victorian properties is generally in good order with landlords having updated to compete with the new build. New kitchens, bathrooms, and neutral décor are common. Rugby is going the same way too – although the Victorian stock is generally more dated in condition, Belvoir is now arranging the refurbishment of 1-2 properties per month for landlords who want to guard against empty periods. The properties that sit empty in Rugby, are the ones that need work.

It’s also a fact that updated properties have fewer void periods. Landlords sometimes tell me they can’t afford to update a property – finances may be tight, but there’s also an argument that they can’t afford not to, as an empty property will cost them more. I also see the ones that do spend on the property being rewarded in terms of better rents and fewer voids. One of the first properties I took on as a lettings agent was a refurbished Victorian terrace – the owner had spent about £8,000 getting it refurbished properly, and in the 60 months since, he’s had a void period of 1 month. The identical property opposite, also managed by ourselves, needs refurbishment. It’s been empty for 5 months out of the last 36, and the owner still has about £8,000 to spend to get it up to a decent standard. Financially, one has invested much better than the other.

My team will always contact landlords when a tenancy is coming to an end and advise if we think works are required. Our advice to landlords is always to keep properties tip top – it’s a classic case of speculate to accumulate.

Richard.

Need somewhere to rent? See a video of potential properties!

As part of our aim to make lettings easier, we're now offering video clips of many of the properties we have available. Have a look at this flat, available at £595PCM!

3 Bed Flat in Town Centre Rugby

We're streaming these videos from our own websites: http://www.bevloirlettings.com/northampton and www.belvoirlettings.com/rugby so tenants can see what they are getting before they view. We're not 100% there yet - not all properties have videos, and our technique will get better. At least it's something else the competition can copy! Good news is:

1. This is great for potential tenants who aren't in the area or who don't have the time to view multiple properties.
2. It's great when the existing tenant isn't giving easy access for viewings.
3. It's great when the existing tenant isn't the tidiest of creatures!
4. It weeds out the potential tenants who want to view everything, but still can't decide what they like.
5. It works for properties that look good inside, but maybe aren't that that photogenic externally!

We'll be working over coming months to improve our videos. Tips and feedback, as ever, will be much appreciated.

Richard.