A. Is for Accidental Landlords
With the current uncertainty in the house sales market we are seeing more novice Landlords coming onto the market as they struggle to sell their property. Now is the time when agents must have duty of care in pointing out the risks involved in letting a property and give proper advice from the start.
The current view of the rental market is that demand for property is out stripping supply in many areas resulting in increased rents. This together with the signs that it is becoming easier to for new landlords to borrow, with reported deals of 85% loan to value mortgages we could be on the brink of a new buy to let boom of new landlords.
History shows that inexperienced landlords can get caught out if they haven’t planned for the risks associated with renting their property. Loss of income through tenants defaulting on their payments or unexpected costs, as experienced during a winter freeze, causing burst pipes and broken boilers. This can result in landlords putting their investment at risk. Agents need to highlight the measures landlords could put in place to ensure their rental income is protected and they could have legal expenses cover should any problems arise with tenants. It is usually the accidental landlord with one or two properties who relies on rental income to pay their mortgage obligations that are at the most risk. If a tenant defaults on payment it can cost the landlord £1000- £2000 in legal costs to regain their property.
Although we are seeing a buoyant rental market at present in comparison to other sectors of the economy we have yet to see the full impact on the UK economy of the Governments proposed public sector cuts and the hike in University tuition fees. Once these factors kick in we could see in increase in tenants defaulting on their rent payments. It is accepted that unemployment is one of the main reasons why tenants don’t pay their rent. In the current uncertain times for public sector employees even the best referenced tenant may not guarantee they can meet their financial obligations.
It is therefore essential that agents inform and educate novice landlords of the possible risks and make them fully aware of the measures available to protect their investments.