Schemes for reluctant landlords
The inevitable has happened following the saturation of the buy-to-let market by every wide boy with a wedge and dreams of making a killing. Rents, and returns, have tumbled and finding good long term tenants who pay their rent on time has become the exception rather than the rule. Many new landlords find the job — for it is work — of being a landlord much harder than they had imagined. Stroppy non-paying tenants may only be the start of your problems: repairs, renewals — and the midnight phone calls when you are needed, all add to the downside of being a property landlord. This has fueled the rash of ex-landlords looking to ditch their dreams and flood the market with buy-to-let 'bargains'.
But there are options for the landlord who does not want to deal directly with tenants and yet cannot sell for one reason or another: a guaranteed rental scheme. There are two ways of approaching this option.
You could let your property to a lettings agent who pays you a guaranteed rent. They take responsibility to find tenants and take legal action on them if they fail to pay. They will manage the property, including any work or maintenance that is required. This takes a major headache away from the reluctant landlord. Another method is to let the property directly to a public body — such as a local authority or housing association - who will sub-let it to one of their tenants, usually for three years. This is especially popular in the south east where those bodies cannot accommodate the number of families in need.
There are two main advantages to this scheme: one is they always pay, the other is they will always leave the property in the condition in which they found it as they as often as not have their own maintenance team on hand to solve problems as they arise. For further information, ask about the Private Sector Leasing Scheme and the Housing Association Leasing Scheme from local authorities and housing associations respectively.
A university or college may also let your property in a similar way to the local authority if you do not want to deal with students. Contracts usually last 12- or 9-months.
The downside to this method is that they will usually pay between 5% and 10% below the market rate. But if you consider the likely void rate, you should still come out on top.
So these schemes must be balanced between setting a reliable rent to cover your costs 52 weeks of the year against accepting rent that is below the local asking price. The peace of mind alone for the reluctant landlord may be worth taking this route.
Think carefully before securing other debts against your home.
Your home may be repossessed if you do not keep up repayments on your mortgage.
The overall cost for comparison is 7.1% APR. The actual rate available will depend upon your circumstances. Ask for a personalised illustration. There may be a fee for the mortgage advice. The precise amount will depend on your circumstances, but we estimate it will be 1.5% of the loan amount with a minimum fee of £500 added on to the loan.
Mayfair Consulting Limited is an Appointed Representative of The Mortgage Times Group Limited, 279 Tottenham Court Road, London , W1T 7RJ , which is authorised and regulated by the Financial Services Authority no. 303007.
