Changes to LHA Rates : How will this affect me?

On 1^st April 2011, Local Authorities in England and Wales will change the way they calculate people’s entitlement to housing benefit. From a taxpayer’s point of view, this is long overdue, and will reduce the extent to which Local Authorities massively overpay for larger properties. From a landlords perspective this is bad news for the same reason!

What will happen?

·               You can see projected new rates across the UK at http://www.voa.gov.uk/LHADirect/Documents/LHA_percentile_rates_Jan_2011.html

·               Current indications suggest the result of all this will be a  rental reduction across the board, as follows:

NORTHAMPTON			RUGBY
Current Rent	Future Rent		Current Rent	Future Rent
£450PCM	£410PCM	1 bed	£410PCM	£375PCM
£550PCM	£525PCM	2 bed	£525PCM	£475PCM
£600PCM	£575PCM	3 bed	£575PCM	£550PCM
£850PCM	£750PCM	4 bed	£825PCM	£750PCM
£1000PCM	£750PCM	5 bed	£1000PCM	£750PCM

How will it be implemented?

·               It applies to benefit claims made after 01 April 2011 only. As such if your tenant already receives benefit they will carry on at the existing rate. No need to worry.

What should I watch out for?

·               If you have a tenant already in your property whose circumstances change, and they make a new claim after 01 April, it will be awarded at the new rate.  As such they could have a tenancy agreement with you at £1000PCM, but the Local Authority cuts their benefit to £750PCM. You need to watch out for this.

How does this affect my investment properties in Northampton or Rugby?

·               Many landlords have bought properties specifically to cater for the Housing Benefit market, as there’s massive tenant demand. These are usually larger properties in the poorer areas of town.

·               These landlords may see slightly reduced yield as a result of this change. However as the properties in question tend to be relatively cheap, we are still expecting landlords with housing benefit tenants to enjoy far better yields than landlords with private tenants, as a rule.

·               Landlords who are buying property to cater for this market will invariably now look for 4 bed properties. This will enable them to hit the top pay band whilst minimising their purchase cost. Currently the entry points for 4 bed properties are about £90,000 in Northampton and Rugby.

If you have a tenant in receipt of housing benefit, or are thinking of buying a property to cater for this market and want further advice, please feel free to contact me.

Richard.

Buying Investment Property in 2011? We Can Help!!!

Through our links with local estate agents, and the close eye we keep on the local market, we helped landlords buy 19 properties at competitive prices in 2010. This will continue in 2011. So far it has mainly been confined to Northampton - with immediate effect our service will also now cover Rugby.

How does it work?

Agents know we have landlords that buy, so when they get a decent property in, and they want a quick sale, they contact us. At that point we go and look at the property and advise 1) whether it really is a good deal and 2) whether additional works are required and what they will cost. The vast majority of properties don't make it past this stage - those that do, get emailed to our list of 'actively purchasing' landlords who get in touch as required.

Do we charge?

It depends what you want us to do. For providing the basic service above, we don't make a charge - the fact that we get a property to rent at the end of the process makes it worth our while.

However we are engaged to actively seek properties for a small number of investors, and do charge for this. An example would be a couple from the South West, who want to buy 2 properties in the area, but are insistent on a rental yield of over 8%. We'll seek out suitable properties, negotiate on behalf of the purchaser, and generally organise everything on their behalf. It's a bit like Phil and Kirsty! This tends to attract people who do want a property, but don't have the time to search for themselves. We do make a charge for this, when a property is successfully found.

"I'd like to buy a property!"

Really? Email me and let me know then! I'll contact you for a quick chat, and to establish what your purchasing criteria are. richard.baker@belvoirlettings.com. We find that landlords who involve us in the purchasing process get better results in the long run, because it's in our interests as much as theirs that they end up with something that's very rentable.

Let me know if we can help you in 2011.

Richard.

Getting Rid of a Tenant

Getting rid of a tenant, where that tenant doesn’t want to go, is never easy. It’s not usually necessary either, as the vast majority of tenancies don’t end up at the stage where the landlord ‘wants rid’ of the tenant. Occasionally, maybe in about 1% of cases, the landlord does need to end the tenancy, and when he’s doing so, it’s a good idea to note the following:

1.       Any tenancy is always best ended amicably, because it’s quicker and cheaper. If you can persuade your tenant to leave within a reasonable period of time, that’s always going to be your best option. As such even if you are having problems with your tenant, maintaining good communication is always beneficial.

2.       If things can’t be done amicably, you’ll need to apply to court for possession of the property. Certain notices have to be issues to the tenant beforehand and a landlord needs to make sure that all dates and tenancy paperwork are 100% correct, or the court won’t hear the case. Note that if the tenancy deposit hasn’t been registered in accordance with the rules, the landlord will not be able to make a successful claim for possession.

3.       The length of time it takes the court to award possession can vary massively. We had one case recently where the landlord applied at the start of a month and had possession at the end. Equally there have also been periods in recent years where the court has been 3 weeks behind with just opening mail, and as such possession has taken 3 months.

4.       If your tenant is in receipt of benefits, you’ll get no assistance from the Local Authority at this stage, although of course they’ll make noises about working with landlords at the same time. The Local Authority is responsible for re-homing anybody made homeless as the result of eviction, but they won’t do this until the landlord has been all the way through the court process, right up to the point of a bailiff visiting. As such getting rid of a Local Authority tenant can take time.

So what does it cost? Well if you go all the way through the process, you’re looking at about £400.00 in court costs, plus what ever legal fees you incur.  If you’ve purchased good quality landlords insurance (such as the one we sell!), you should get reimbursed for the lot. Alternatively you may need the services of a solicitor, although a competent lettings agent should be able to assist at reduced cost. Either way evicting a tenant isn’t a cheap option.

The main message, if you do manage your own tenancy, is to avoid an eviction situation wherever possible!

Richard.

Need help with property refurbishment?

Since opening as a lettings agent in 2006, one of the main problems we’ve had is with the reliability of contractors. What you read in the newspapers is true – there really IS a shortage of decent electricians, gas fitters, plumbers etc! If you want a job done quickly, properly, and at a sensible price, it actually isn’t that easy! Also, if you’re after a career change, becoming an electrician could prove quite lucrative!

We spotted this early on and realised it was going to cause us a problem as the business grew – no point in having X hundred properties under management if you have no way of fixing the (many) repairs that these properties generate. We took the decision in late 2007 to partner with 1 main contractor, based on a clearly defined service level agreement – good for them because they get nearly all our work, good for us because we supply the majority of their work and as such can demand more from them in terms of price and service.

3 years on and this has proved a good decision. When a property needs a new bathroom, we can usually arrange installation without delay and the job is completed in 3-4 days. Kitchens can be done in about the same. When a property needs painting and carpeting, this can start the day a tenant leaves and is done within a week. We market test quarterly, and pretty much always find the job can’t be done as quickly, or for the same price. Because we work constantly with the same contractor, everything is done on a fixed price basis, so landlords know there won’t be any hidden extras and can budget correctly. If there’s a problem, because of the amount of work we give to them, the contractor sorts it out without any fuss.

The range of work varies from repairing a leak, to the refurbishment of a whole property – landlords who buy cheap repossessed properties use us to refurbish the whole house at a fixed price. The service is available anywhere within a 30 mile radius of Northampton.

If you know someone who has a rental property that needs work, we can help – give them our details or give us theirs!

Richard.