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"accidental" Landlords Feeling The Squeeze

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http://www.ft.com/cms/s/0/ad2445c0-602a-11...0077b07658.html

Stalled house sales prompt rash of 'to let' signs

By Elaine Moore

Published: August 2 2008 03:00 | Last updated: August 2 2008 03:00

Property owners unable to sell their homes are being pushed into the lettings market, but many are finding rents insufficient to meet their mortgage repayments. [NO SURPRISE THERE THEN! :lol: ]

Lettings agents said these "accidental landlords" were not only having to top up rental income from their own pockets, but were being forced to pay for renovations and safety checks to meet requirements.

With mortgage approvals at a record low, estate agents said even those sellers who cut asking prices by 20 per cent were still often unable to find a buyer. [GULP! :blink: ]

"As summer moves on and there are fewer buyers than ever, those sellers who have to move for career or personal reasons are getting more desperate and are listing their properties to let in order to meet mortgage payments," said Miles Shipside at property website, Rightmove.

This has led to a significant increase in the number of homes with both "to let" and "for sale" signs outside.

"There has been a drift of stock from sales to lettings and a rise in the number of people who list on both," said Matthew Hobbs, directors of lettings at Savills. Around a third of Savills properties are now dual listed for sale and rent, twice as many as last year.

The big influx of properties to the rental market has led more estate agents to offer lettings as well as sales, according to Rightmove. Halifax, one of the UK's largest estate agents, is operating a number of lettings agencies on a trial basis and hopes to expand the scheme.

Peter James Estates took over a lettings department last month and has seen a 15 per cent increase in stock so far, specifically in family properties. James Court, director, said many owners were actively choosing to rent rather than sell at a loss in the hope that prices would improve over the next two years.

Hamptons International, which has seen a 44 per cent year-on-year rise in the number of properties available to rent, said the increased competition in the lettings market meant owners were having to spend more money repainting and renovating their homes to attract tenants.

According to the Association of Residential Letting Agents, new landlords are often unaware of the requirements necessary to rent out a home, which include deposit protection and gas and electricity checks.

So,

- 20% cuts in asking pricing not working = put it on for rent, BUT

These accidental landlords (deliberate, more like, they could sell if only they weren't so greedy) then bleed over time through rental subsidy, letting fees and maintenance charges, PLUS

- Glut of rentals on the market = rents down significantly = more pain for these people.

- Importantly, this pain is being felt across all types of properties. This is not restricted to inner-city, BTL 2 beds! :o

At present unrealistic sellers can pretend that renting is an option. Hell they can even integrate it into the usual dinner party chatter. But as rents and house prices continue to fall, they will find that deferring the day of reckoning will become increasingly harder.

God forbid they become "genuine" forced sellers (e.g. redundancy). 40%+ falls would instantly manifest themselves, as sellers would be unable to subsidise. It would then be a panicked stampede to the exit, the earlier you sell, the smaller the hit.

Sadly, this grim scenario is likely IMO.

Monty

Edited by uncle_monty

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Really interesting article and comment

I wonder what the majority of the "accidental landlords" are doing for a place to live - buying another property or becomign tenants themselves.

What are the consequences if a very large number of people do this? Presumably rents will come down but how will it affect hosue prices? - not able to think it through for myself

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Really interesting article and comment

I wonder what the majority of the "accidental landlords" are doing for a place to live - buying another property or becomign tenants themselves.

What are the consequences if a very large number of people do this? Presumably rents will come down but how will it affect hosue prices? - not able to think it through for myself

I have noticed in the local property rag for rent pages a lot of properties for rent are showing reduced rent on them.There does not appear to be any shortage of rental property in my yorkshire area.

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James Court, director, said many owners were actively choosing to rent rather than sell at a loss in the hope that prices would improve over the next two years.

Oh yes they are going to improve. They are going to be 30% less.

Just one bad decision after another after another. Well at least there consistant.

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Trouble is, if a property is advertised for rent and sale as the same time, smart potential renters will think twice to rent them. Who would like renting a property with the knowledge that they may have to leave (after a short tenancy and notice) if a buyer is found?

Worse what happens when something needs fixing in the property? Would the already stretched landlord have a care in the world?

Is the property adequately insured for renting?

I would stay well away of these properties if I was looking to rent.

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I do wonder how many of these LL's have considered the other costs such as :

Tax

Maintenance costs

Gas safety inspections

Energy certificate

LA fees

Voids

Subsidizing the mortgage while house price drops

Loss of interest on any equity you might make at a sale

Plus the non-financial hassles :

Permission from lender to let

Abiding by DPS scheme

Hassle from LA or Tenant

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Trouble is, if a property is advertised for rent and sale as the same time, smart potential renters will think twice to rent them. Who would like renting a property with the knowledge that they may have to leave (after a short tenancy and notice) if a buyer is found?

Worse what happens when something needs fixing in the property? Would the already stretched landlord have a care in the world?

Is the property adequately insured for renting?

I would stay well away of these properties if I was looking to rent.

Well I would only consider renting it if they took it off the market, which I think they would if they found a tenant.

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Not necessarily good news for people looking to rent, though. If "Accidental" landlords are:

Property owners unable to sell their homes are being pushed into the lettings market, but many are finding rents insufficient to meet their mortgage repayments. [NO SURPRISE THERE THEN! :lol: ]

Lettings agents said these "accidental landlords" were not only having to top up rental income from their own pockets, but were being forced to pay for renovations and safety checks to meet requirements.

... then they are very risky from a prospective tenant's point of view. The chances of a swift eviction from the landlord's bank are quite high.

I think from now on tenants should quiz their EAs about the financial stability of the landlords before taking on a new letting (nice role reversal that!)

I'm slightly disappointed that "Accidental Landlords" isn't a Carry-On style double entendre - it sounds like it should be. "Oops Missus, I slipped on my mortgage and ended up on my arrears. Would you like to see my leverage" etc etc

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Not necessarily good news for people looking to rent, though. If "Accidental" landlords are:

The term "accidental landlord",just springs visions of Frank Spencer into my head.

Maybe they should use the theme tune for "some mothers do 'ave 'em as the opening to kirsty and phils new property escapade.

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I think the term 'reluctant' landlord may be more appropriate.

Anecdotal:

Girl meets boy and moves into his gaff, puts her house up for sale. Her dad wouldn't let her accept several offers last year as 'it's worth more than that'. (yes I did frown). Nearly a year later house is unsold, no viewings for ages. Now going to rent it out and keep it on the market. Still not lowered the price.

Her dad is going to manage the rental for her. God help the poor beggars who rent it.

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they are basically supporting the cost in an effort to outlast the downturn.

i think most of these 'thinkers' are of the opinion this is a blip and will be all over by next feb.

oh how little they know.........muhahahahah....

keep supporting. keep ploughing your savings into it. just a few more months now my pretties...

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Well I would only consider renting it if they took it off the market, which I think they would if they found a tenant.

If you are renting it, there is little point in the landlord keeping it on the market, as prospective purchasers are not entitled to get inside the property!! That does not hold good if the property is DSS/BTL auction fodder whereby the interior is irrelevant. The tenancy agreement will give the landlord the right to show new tenants/potential purchasers the property during the notice period of 2 months (if he gives notice) or 1 month (if you give notice)

But you do want a minimum of 12 months tenancy in case the landlord is dumb enough to think that the 'market will have picked up' in early 2009 and hence thinks that giving a 6 month assured tenancy means he only wants you there for 6 months.

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If you are renting it, there is little point in the landlord keeping it on the market, as prospective purchasers are not entitled to get inside the property!! That does not hold good if the property is DSS/BTL auction fodder whereby the interior is irrelevant. The tenancy agreement will give the landlord the right to show new tenants/potential purchasers the property during the notice period of 2 months (if he gives notice) or 1 month (if you give notice)

But you do want a minimum of 12 months tenancy in case the landlord is dumb enough to think that the 'market will have picked up' in early 2009 and hence thinks that giving a 6 month assured tenancy means he only wants you there for 6 months.

if iw as trying to sell a house that had tenants in id sent them packages of 'freshly baked bread' on the morning of any viewings.

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Yeah, great idea.

Can't sell your house? Then move some tenants in, that'll make it much easier to sell at a moments notice in the near future when people want to buy over-priced houses again. Meanwhile, buy another house and double your exposure.

I'd imagine most tenants will be after at least a 1 year agreement in the current climate, if not 2. I'm assuming that a tennant has the right to refuse viewings from potential buyers? That means that they'd have to wait until the end of the agreement, or give 2 months notice even before they put the house on the market, if things get really bad, which they will.

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I personally know 3 sets of accidental landlords. Well actually that's not quite true as they aren't actually landlords yet, but rather aspiring "accidental" landlords.

In one case it was a new relationship thing, but the other 2 couples suffered from a syndrome called "housing delusion" characterised by the belief that house prices could only ever go up, so to them it made sense to buy their new homes right at the top of the market before selling the old ones.

The worst case, was the couple I've mention before who got a big inheritance, and have now squandered it all on property. Firstly they have overpaid by at least £300k on the new house (the result of a summer madness bidding war) and so also have a large mortgage on that (at least £650k), but meanwhile they haven't yet been able to sell the old house, which also has a large mortgage on it (probably about £500k). They do earn very good money, but some how I think having to service over £1m of mortgage is proving somewhat tricky. Anyway the house is currently up to both buy and let and I think they are getting increasing desperate -I can see the sports cars and school fees being first to go.

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I have a friend who has moved for their job. They couldn't sell after dropping 10% off of the price so now rent it out. It barely covers the mortgage which went up by 10% when they told the bank they were renting it out. They now rent nearer to their new job.

In this instance its not too much of a financial strain as they got a huge pay rise and promotion ... but in this market how many jobs are secure?

Again, more rental property brings rental prices down.

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Considering I do lots of property rental accounts , I have noticed there is a big hole in most of them , a couple years back as a land lord you had to insure or put into a trust fund the deposit of your tenants, as said only 2 out of 32 actually have done this....

The penalty is 3 months rent for not putting it into such a trust or insured status... which adds even more pressure to these 'landlords'.

I often tell my clients they need to put it in a trust or insure it, but they ignore me and most of them don't to save a few quid, so if people who know they have to do this don't do it what chance do people who don't know about it and want to save even more money have of following this?.

Ontop of this prices going up means tenants will look for avenues to increase their income, may well spot this and go claim.

meaning a landlords 12 months of rent is only worth 9...

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Time for Noel to bring back Swap Shop..." jenny on line 4 ello Jenny you have a 3 bed semi in Basingstoke and you need to live near Bristol cos you have relocated.."

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One thing learned from GC1, was that borrowing to subsidise your losing balance sheet is the route to disaster.

This is what these guys (the ones who need to move that is) are doing.

they are borrowing to move, and they are hoping the existing borrowings are going to be covered by extra income. Whatever happens, they have now twice the risk of capital loss, and much more gearing.

Funny thing is, if letting was such a good idea, wouldnt professionals be getting IN the market?

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A further illustration of how deluded landlords (whether accidental of deliberate) are.

The following FT article is by Assetz ( :lol: ) encouraging student's parents to BTL for their sprogs. Yields may look attractive, and will certainly increase as house prices fall, but these investments do not wash their faces on a monthly basis. This table is in the paper version

University Price (£K) Monthly Mtge Monthly Rent

Cam 300 373 250

Exeter 200 246 233

Oxf 325 405 224

Edin 263 328 211

Briz 212 264 207

Durham 133 166 201 [Good God, a positive cash flow!]

Leeds 136 170 186 [And another!!]

Forget yields. You're looking at a capital loss (and monthly cash flow loss in 6 out of 10 key university towns), so why buy?

Madness!

High yields attract the fresher landlords

By Alice Ross

Published: August 1 2008 18:23 | Last updated: August 1 2008 18:23

Parents about to wave children off to university could guarantee a roof over their offspring’s head, while achieving a decent return on their money.

Rental yields on student housing are rising, strengthening the case for parents to invest in buy-to-let property.

Stuart Law, managing director of Assetz, the property investment company, estimates that annual yields in university towns tend to be around 7 to 9 per cent, compared with 5.5 per cent on other buy-to-let properties. “The great opportunity is to buy a house and convert it to student use,” he says. “You’re buying into a weak market, but student rents are on the increase.”

While a number of new private halls of residence have been built in recent years, Law says this is not enough to keep up with the growth in student numbers. According to Savills Research, private halls of residence could supply 78,000 more beds by 2014, but the number of students is expected to rise by 650,000 over the same period.

The sustained demand for property is good news for those investing for capital growth, as student properties are considered more likely to retain their value through the current downturn.

Law says: “We don’t think student houses are as susceptible to house price falls as traditional housing.”

However, waiting until next year to buy a house could bring the benefit of further price falls. Savills is forecasting average house price falls of up to 25 per cent between January this year and December 2009.

This will vary by region, however, and student markets tend to be more stable. “These markets, with higher shares of older and period property, will be more resilient in terms of price falls and rental demand,” says Jacqui Daly, director at Savills Research. “In addition, with some buy-to-let landlords forced to sell, a reduction in supply is also possible, which bodes well for rental growth in student markets.”

Investors should be alert to rules governing “houses of multiple occupation”. Law warns that estate agents may advertise properties as student houses even though they do not comply with the HMO criteria.

“Just because a property is being let at the moment for student purposes doesn’t mean it’s legal,” he says. “It could just mean the House in Multiple Occupation officer hasn’t caught up with it. So check before you buy.”

Parents also need to consider the time frame, as it is likely they will have to let out the property after their child has left university.

“You should treat student houses as long-term income generators firstly and growth investments secondly,” says Law. “Most investors buy property purely for growth, and without the income element could end up losing money if they sell within a year or two.”

The good news is that buy- to-let mortgage rates, while still higher than a year ago, are starting to come down. Woolwich said this week it was cutting rates on some less risky buy-to-let mortgages by up to half a point. Royal Bank of Scotland has also cut its buy-to-let rates.

But lending criteria has tightened over the past year. Melanie Bien, director of independent mortgage broker, Savills Private Finance, says: “Compared with a year ago, you will need a bigger deposit, around 25 per cent of the purchase price, to access the most competitive deals, while rates, fees and rental cover requirements are also higher.”

Student buy-to-let is only an option for those with access to funding. Bien says: “If you can get funding you can access a steady stream of tenants and good yields, which are typically better than the mainstream buy-to-let market.”

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In one case it was a new relationship thing, but the other 2 couples suffered from a syndrome called "housing delusion" characterised by the belief that house prices could only ever go up, so to them it made sense to buy their new homes right at the top of the market before selling the old ones.

I know a couple in that position - the new place is financed 100% through a mixture of two loans and a mortgage. They've found a temporary solution, though: Her elderly parents have moved into the unsold place and given them 50% of the equity, with the remainder to be paid when the parents' house has sold. Anyone spot the fatal flaw? :blink:

Just after they exchanged the wife said "All this doom and gloom is getting out of proportion because the Press keep exaggerating it!". :rolleyes:

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were being forced to pay for renovations and safety checks to meet requirements.

How dreadful! Just imagine, poor Tarquin and Jessica are struggling because greedy buyers won't pay what their house is worth, and to add insult to injury, they are being made to pay for renovations and safety checks as if they were common landlords doing it as a job! Disgraceful. And what right do these 'tenants' have to safety checks? If you're too lazy to work hard and buy property, you shouldn't expect 'safety' as some sort of god given right, you should be grateful anyone is willing to put you up! What next - people smoking in the house, or keeping pets? I ask you.

*Withnail voice* 'We've become landlords by mistake!!'

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  • 401 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
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      • Even
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      • up 5%



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