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With recent changes in regulations and unstable house prices, is property still a good investment?

If you’re looking for a long-term investment, buy-to-let property can still provide rewarding returns.

We explore the benefits and drawbacks of buy-to-let investments to help you decide whether expanding your portfolio or becoming a first-time landlord is still worth the risk.

 

Buy-To-Let Investment: The Risks

We would be lying if we said investing in property was completely risk-free. It’s important to understand the risks involved before making any big investments.

Here’s a look at some of the potential risks currently facing the buy-to-let sector;

 

Unstable Property Prices

With Brexit on the horizon, no one can be entirely certain what the after-effects will do to the UK property market. If house prices fall, you may lose out on money if you decide to sell.

However, this works both ways. If the property market experiences an uplift post-Brexit, as it often does after slow periods, your investment worth could grow by a significant amount.

 

Stamp Duty Changes

The changes to stamp duty made in 2016 mean that landlords now have to pay up to 3% more on buy-to-let properties. This can greatly increase your initial outgoings so needs to be factored into the decision-making process.

However, this doesn’t apply to first-time, buy-to-let buyers who can pay the standard home mover rates instead.

 

Reduction to Tax Relief

A new tax system is being phased in, and by 2020, buy-to-let landlords will no longer be able to deduct any mortgage interest payment from their rental income before paying tax.

These changes mean most landlords will be paying higher tax on their rental properties and may even find they move up a tax bracket.

 

Void Periods

Unfortunately, void periods can happen, and are sometimes out of your control. Extended void periods can negatively affect your annual returns and are best avoided.

To prevent void periods, there are some simple steps you can take;

  • Invest in quality marketing
  • Keep up with maintenance
  • Think about your target tenant
  • Ensure compliance with current health and safety obligations

 

Investing in Residential Property: The Rewards

When you get it right, buying residential property to rent can still be a profitable investment. Here, we explore some of the benefits;

 

HMO Properties: Higher Rental Yields

Investing in an HMO property is a good way to see larger returns on your investment.

An HMO property is shared by multiple people or ‘households’, and according to Property Investment UK, can provide rental yields up to three times higher than single lets.

With the demand for shared housing continuing to grow in cities and student towns, investing in property with the idea of renting it as an HMO remains a solid investment.

 

Location: Maximising Returns

When looking for a stable investment property, location remains key.

While larger cities in the North such as Manchester and Liverpool are currently experiencing an uplift in local housing markets, some areas of London are slowing down.

Finding the right rental market in an up-and-coming area will improve your chances of enjoying a higher rental yield.

For example, properties in larger University towns make a great investment for student landlords as there is a steady supply of students looking for housing.

To get a better idea of where to invest now, the following areas have been tipped as providing a solid investment;

  • Northampton
  • Leicester
  • Manchester
  • Leeds
  • Newcastle
  • Nottingham

Look for areas with a younger population who haven’t yet stepped a foot onto the property ladder and areas with good transport links into popular areas.

 

Long Term Rewards

As long as you’re willing to exercise patience, investing in buy-to-let property still brings with it worthwhile, long-term rewards.

The security of a steady income flow and the possibility of inflation provides a solid return on investment and a safety net for retirement.

 

The Brexit Effect: Should I Be Worried?

Due to Brexit uncertainty, many people have delayed selling or buying a home. But that shouldn’t necessarily put you off investing in buy-to-let property.

The UK population is growing, and people still need homes to live in. In fact, as first-time buyers are thinking twice, the demand for renting may even rise in the short term.

Although it’s hard to predict, unstable house prices and rising mortgage rates could result in a higher number of people looking to rent, allowing private landlords to enjoy a stable rental market.

Either way, the residential property market continually experiences ups and downs, meaning that quiet periods don’t usually stay quiet for long.

 

 

Look After Your Investment with No Letting Go

If you’re thinking of investing in buy-to-let, it’s vital to have all of your documents and property checks in order.

Here at No Letting Go, we help landlords, letting agents and property professionals alike manage their portfolio by providing reliable inventory reports and other essential services.

From check-in services to property appraisals, discover our wide range of professional property inventory services to see how we could help protect your investment.

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With several types of tenancies out there, the variations can get confusing for new tenants and landlords. So, what is a periodic tenancy?

Periodic tenancies can offer great benefits, including increased flexibility and less paperwork. However, they aren’t without their drawbacks.

That’s why we’ve created this guide on the risks and rewards of periodic tenancies, to help you make an informed decision before drawing up a contract.

 

What is a Periodic Tenancy Agreement?

A periodic tenancy is a tenancy that runs for a certain period of time, most commonly month to month. Periodic tenancies can also run on a week to week or quarterly basis, although this is less common.

Unlike fixed term tenancies, periodic tenancies work as a rolling contract which can be terminated by landlord or tenant by giving notice.

 

Types of Tenancy Agreements

Tenancies can come in all shapes and sizes, depending on the terms and conditions of the agreement. However, here are the most common types of tenancies you’re likely to come across;

 

Assured Shorthold Tenancy

Assured shorthold tenancies are the most common and apply to most private rentals with a tenancy date starting after 15 January 1989. Most assured shorthold tenancies begin with a fixed period of 6 or 12 months.

 

Non-Assured Shorthold Tenancy

If your rental property demands less than £250 or more than £100,000 in rent per year or it is used as a holiday home, it won’t be eligible for an assured tenancy. This means you don’t have to enter the tenant’s deposit into a protection scheme or serve a section 21 notice to evict tenants.

 

Assured Tenancy

It is unlikely you’ll need an assured tenancy these days unless you are a housing association. This type of tenancy gives the tenant longer-term stability.

 

Excluded Tenancy

Sometimes referred to as a license, excluded tenancies are for tenants who lodge with their landlord and share communal areas.

 

Regulated Tenancy

If a tenancy started before 15 January 1989 it may be a regulated tenancy. The difference being that tenants have enhanced rights when it comes to eviction and ‘fair rent’.

 

Company Let

When renting to companies, different rules apply in terms of deposit protection and eviction notices.

 

Fixed Term Tenancy

A fixed term tenancy lasts for an agreed set of time, depending on what is set out in the tenancy agreement. Usually this will be 12 months.

 

Short-Term Fixed Tenancy

A short-term fixed tenancy lasts for 90 days or less.

 

Periodic Tenancy

A periodic tenancy works on a rolling basis with no fixed end date. E.g. month by month.

 

What is a Statutory Periodic Tenancy?

A statutory periodic tenancy occurs when an assured shorthold tenancy comes to the end of its fixed term and the tenant stays at the property without renewing the contract. If the tenant continues to pay rent and it is accepted by the landlord, the tenancy will continue on a periodic, rolling basis.

This transition from fixed term assured shorthold tenancy to statutory periodic tenancy is automatic.

 

What is a Contractual Periodic Tenancy?

A contractual periodic tenancy differs in that it is agreed in the tenancy contract as opposed to automatically transitioning from a fixed term into a periodic tenancy. This can either be agreed upon at the start of the tenancy or shortly before the fixed term contract expires.

It is also possible to enter into a periodic tenancy from the outset by setting the initial term as one month or week.

 

How Does a Periodic Tenancy Work?

While a fixed term tenancy lasts for an agreed set of time, a periodic tenancy works on a rolling basis, from month to month or week to week. It doesn’t end until one party gives notice.

In a periodic tenancy, the period depends on when the rent is paid by the tenant. So, in a monthly period tenancy the tenant would pay rent each month.

Shorthold tenancies become periodic tenancies after the fixed term agreement expires and if there is no new contract drawn up with the remaining tenants. The assured shorthold tenancy will automatically become a periodic tenancy as long as the tenants do not change, and they are happy to retain the same contract. The same conditions will apply and there is no further action needed by the landlord or tenant.

 

Ending a Periodic Tenancy

To end a periodic tenancy, there are several legal processes that can take place;

  • Both landlord and tenant mutually agree to end the tenancy
  • The landlord decides to evict the tenant
  • The tenant gives notice
  • The landlord gives notice

 

Periodic Tenancy Notice: Tenants

To end a periodic tenancy, tenants will need to give the right amount of notice depending on the terms stated in the tenancy agreement. They also need to ensure it ends on the right day. For example, if a monthly periodic tenancy began on 1st January it will need to end on the last or the 1st day of the month. From this date, they will no longer be liable for rent payments.

 

Statutory Periodic Tenancy Notice

If it is a statutory periodic tenancy, tenants must give at least 1 months’ notice for a monthly contract or at least 4 weeks’ notice for a weekly contract. The notice must end on the first or last day of the tenancy period.

 

Periodic Tenancy Notice Period: Landlords

Landlords must give tenants a written ‘notice to quit’ which must end on the last day of the rental period, give the minimum notice period and include legal information.

For statutory periodic tenancies, it is also possible for landlords to issue a section 21 notice as long as the landlord gives the tenant at least two months’ notice and the last day is the last day of the tenancy period. If the tenant does not move out on this date, landlords have the right to request a court order to regain possession. However, changes to the law regarding section 21 notices now require a landlord to give their reasoning, alongside relevant evidence.

 

Benefits of a Periodic Tenancy for Landlords

A periodic tenancy can have wide-ranging benefits for both landlord and tenant, including;

  • Increased flexibility. If you suddenly need to regain possession of your property, a periodic tenancy speeds up this process as you don’t have to wait until the end of a fixed period.
  • Attracting tenants. For some tenants, this flexibility is a bonus. If your tenant moves a lot for work or often needs to relocate suddenly, a periodic tenancy becomes appealing.
  • Reduced letting agency fees. Periodic tenancies can dispel the need for renewals and the administration costs that come with them.
  • If for any reason you need to increase the rent, this is made a lot easier by periodic tenancies. Revisions to rent payments can be made much more quickly when operating on a month by month basis.
  • If you are having issues with a particular tenant, a periodic tenancy may be in your favour as you are better able to evict problem tenants as a last resort.

 

Risks of Periodic Tenancies for Landlords

With these advantages also come risks. If you’re thinking of entering into a periodic tenancy, watch out for the following potential dangers;

  • Naturally, periodic tenancies are more likely to attract tenants looking for shorter, more transient leases. If it’s stability you’re after, you may want to think twice.
  • Similarly, shorter term tenants can cost more in terms of marketing and vetting potential new tenants to replace them.
  • With 1 month or less notice periods, you don’t have a long turnaround time if a tenant decides to move out unexpectedly. You will need to have end of tenancy cleaning and maintenance processes finely tuned so as not to lose out.
  • If your tenant moves out during a ‘notice to quit’ period, you may be liable for paying council tax for the property. To avoid this situation, make sure you have a contractual periodic tenancy agreement in place to ensure this remains the tenant’s responsibility.

 

Periodic Tenancies: Good Idea?

Periodic tenancies can be a good idea as they offer increased flexibility for both landlord and tenant and can reduce the number of administrative tasks needed throughout a tenancy.

However, to protect your investment, we recommend;

  • Always drawing up a contractual periodic tenancy agreement. This way you have all the agreed terms in writing and won’t be liable for council tax payments if your tenant moves out unexpectedly.
  • Getting your property marketing up to scratch to attract new tenants and avoid extended void periods.
  • Making sure you have all the processes in place for a speedy turnaround to avoid any losses. This includes;
  • A detailed and fuss-free inventory report is vital when you’re dealing with potentially shorter tenancies. Having a streamlined process in place will help protect you against loss or damage and help recover any costs without going through lengthy disputes.

 

Be Prepared with No Letting Go

The easiest way to protect your investment and maintain a happy landlord/tenant relationship is to entrust a comprehensive, unbiased inventory reporting service.

Here at No Letting Go, we provide a tailor-made service, including everything from check-in to property visits.

Find out more about our property services to see how we could build them into a package that suits you.

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The subject of lodger deposits has always been one of a great many grey areas for both landlords and tenants.

Given the fact that every penny of the deposit money technically belongs to the tenant or lodger, and that deposit disputes can take time and money, it is in everyone’s best interest to ensure both sides fully understand their rights and obligations.

From carrying out a comprehensive check-in inventory at move in, to knowing your rights as a landlord, letting agent or lodger – we explore how to negotiate the return of the lodger deposit.

 

What is the Difference Between a Lodger and a Tenant?

The difference between a lodger and a tenant is:

  • A tenant pays rent and lives in a property you own but do not live in
  • A lodger lives in the same property as you and pays rent

Negotiating the return of a deposit if you are a lodger, living in student halls or living at the same property as your landlord is a slightly different process to that of the standard rental property tenant.

The most important difference in regard to rights, is that landlords and letting agents are not required to place a lodger deposit into a deposit protection scheme.

In comparison, lodger agreements are called licenses rather than tenancy agreements and landlords are legally permitted to give a reasonable notice period anywhere from 14 days to 28 days. The time period should be set out in the original license and agreed upon by both landlord and lodger.

 

How Much Is A Deposit?

A standard lodger’s deposit tends to be one month’s rent. However, this isn’t fixed and some landlords and letting agents demand up to 6 weeks.

 

Negotiating the Return of a Lodger Deposit: First Steps

When the time comes to begin negotiating the return of a deposit, the first step is for the lodger to request the return in writing. Lodgers should write directly to the landlord and ask them to return the deposit, being sure to keep copies of all correspondence in both directions. You may be required to produce evidence of such requests at a later time, so it’s a good idea to hold onto them.

The best time to return the deposit to a former lodger is after they have moved out with their possessions and you have checked the room thoroughly for any damage.

 

Lodger Deposit Protection

What’s different about this particular scenario is the way in which lodgers are not considered short-hold tenants, which means the landlord is not under any legal requirement to protect deposits using an appropriate tenancy deposit scheme. This doesn’t necessarily affect lodger’s actual rights when it comes to the deposit in general but can affect the negotiation and deposit return processes.

 

Establish a Deadline

Most professional landlord inventory services in the UK agree that problems generally occur when lodgers are not direct and/or demanding enough when it comes to requesting what is rightfully theirs. If the deposit should have been returned but has not, the best course of action is to begin with a written request for its immediate return with a specified deadline – something like two weeks.

Lodgers can also take the opportunity to ask in the letter why the deposit has not yet been refunded, along with whether or not they can expect any deductions to be made and the respective reasons.

If unsure how to go about this, there are plenty of useful templates available online.

 

Lodger Deposit Disputes and Deductions

As a lodger landlord, you are required to clearly list and explain any deductions to be taken from the deposit. If you fully agree with your lodger that the deductions are fair, you can confirm your agreement and arrange for the remaining deposit to be refunded.

If deductions are made, though no breakdown or explanation is provided, lodgers can request that this is done urgently. And if there are any deductions you do not agree with, you may need to dispute the deposit.

 

What are Reasonable Deductions?

Landlords and letting agents can deduct money from the lodger’s deposit if the lodger has any outstanding rent or if they have caused any damage to their rented living space. Damage above the level of fair wear and tear could include damage or stains on furniture or furnishings or missing items from the inventory.

 

Lodger Agreement Deposit Return: Court Action

From time to time, disputes cannot be resolved through talking alone and you may find that your lodger takes court action. Lodgers can also claim online through the Courts & Tribunals Service.

For a claim to be successful, it will need plenty of documented evidence of attempts to recover the deposit manually, as well as evidence in regard to the condition of the rented space at check-out.

Landlords do have the option of making an offer before the case proceeds any further.

 

Don’t Skip the Inventory Report

One way to ensure the return of the lodger deposit goes smoothly, without resorting to the courts is to have a detailed inventory report in place.

A professional inventory report can;

  • Provide evidence of the condition of the room or property at the start and end of the lodging period
  • Provide evidence of the condition of furniture and furnishings
  • Provide lodgers with check-out information to minimise disputes

If you’re a resident landlord or a letting agent looking to take the stress out of the inventory process, find out how No Letting Go can help with our wide range of property inventory services.