New How to Rent Guide from the Government

Today the Government released a new version of their How to Rent guide.

All tenants must be provided with a copy of this guide at the start of a new tenancy. So all tenancies from today (June 26th 2018) must include the new version.

The latest version includes largely the same information but has been given a completely new design, cover image and layout. The checklists are much clearer to read and there’s a bit more supporting information included.

Here’s the previous cover and the new one:

How to Rent guide Jan18 coverHow to Rent guide Jun18 cover

 

I quite like the bricks on the cover of the previous edition (from January) but I have to agree that the latest one looks more modern.

The How to Rent guide is issued by the Ministry of Housing, Communities and Local Government. You can download the PDF directly here.

How to issue the guide to tenants

So what’s the best way to legally issue the How to Rent guide to your new tenants?

Well the simplest method is to use the automated tenancy start process in PaTMa. Just enter the basic information for your new tenancy and tenants, click to generate the AST and send it straight to your tenants for online signing. The default AST template includes provision for serving the How to Rent guide (and other documents) by email. So once your tenants have signed up, it’s just another click to send them a complete welcome pack – including the How to Rent guide, the property’s EPC, your latest gas safety certificate and your chosen deposit scheme terms.

We’ll always make sure the latest How to Rent guide is included – you’ll never have to worry about checking with the Ministry of Housing and downloading the latest guide again.

If you prefer the manual approach you can always email the guide yourself – just make sure your tenancy contract allows for it.

Or for those few who’d really rather collect bits of paper, the guide can be printed out and physically handed to your tenants. However the electronic version of the guide does include lots of links to extra information so I really recommend issuing the PDF version if you can.

Build to Rent Panel Debate – Landlord Investment Show

While I was at the Landlord Investment Show last week I managed to catch the build to rent (BTR) panel debate. This post is a summary of the things presented and discussed there. It turned out to be more of a presentation for build to rent than a debate though. I also watched and wrote about the expert property panel which was a lot more varied and interesting.

Update: since I wrote this, Property Tribes have published a video of the discussion – scroll down to the bottom if you’d rather watch that instead of reading.

What makes Build-to-Rent (BTR) different?

Longer and more tenant focussed tenancy agreements. They’re typically trying to do 5 year tenancies and only tenant can terminate (without fault) after 6 months.

The annual rent increase is defined in advance, generally 2 – 5% and often based on RPI.

No fees to tenants – no setup fees and no renewal/extension fees.

They’re exploring not taking deposits. Experience is showing that no fees and no deposit is a big selling point for tenants.

In 18 months, it’s predicted that no institutional developer will take deposits on their properties.

Generally BTR properties allow pets – they believe that pet owners typically have more structure in their lives and pets can also help to build a community.

Developments are trying to facilitate a community, helping neighbours to interact.

Lots of extra, on-site facilities are being included – gym, concierge, on-site maintenance, etc. Often using technology to help facilitate contact and access to make it easier for tenants.

Many developments are offering more choices for tenants. For example, allowing them to paint walls, move within developments (if circumstances change) and select between furnished, part furnished or unfurnished.

Including Internet access (via WiFi) is a particularly popular benefit, mostly because it avoids lead time in connections. Although it also helps with the perception of value for money.

Costs

Build to rent apartments typically achieve rents slightly higher than the rest of the market. Perhaps 9% to 20%. [That’s a lot – not sure I heard it correctly!]

Demographics

Vanessa pointed out that build to rent is focused mainly on apartments, hence generally town centre and for smaller families. Vanessa suggests that house based landlords have nothing to fear from build to rent. There are occasional build to rent schemes doing family homes but very few. Build to rent probably needs a time span of 10-15 years to gain traction.

The panel pointed out that the last decade has seen a lot of re-urbanisation.

The main speaking started with build to rent six years ago. They expect build to rent to be providing 80,000 to 90,000 units by 2021.

There’s a surprisingly large mix of tenants renting build to rent units – including older renters who may have sold their family home and are wanting to live in town again with more of a community.

What happens if tenants can’t pay?

Build to rent schemes are very keen on supporting their tenants when they can, they will find the time to speak to individual tenants if needed and have the flexibility to make changes, eg moving tenants to a smaller apartment.

Does built-to-rent damage the market for others?

Current experiences are that build to rent developments actually increase general rental demand in an area, including for other properties. The extra people and facilities also help to improve (and cause others to improve) the area.

Video

There’s also a forum discussion about this build to rent debate on the Property Tribes site. That discussion includes some interesting points from a recent  build-to-rent survey, eg “The survey also found that over a third of tenants across all groups are becoming increasingly aware of Build to Rent initiatives, and that 53% of all tenants said they were interested in them”.

Expert Property Panel – Landlord Investment Show

On Thursday 14th June 2018 I attended the landlord investment show in London. The main show kicked off with an expert panel debate which I really enjoyed listening to. This post is a loose (ie paraphrased, not direct quotes) record of what was discussed.

The panel consisted of (from left to right):

After introductions the discussion started with some topics from the chair.

How and why use the High Court for evictions

GB: There are reducing county court resources so more people are using the High Court.

Tips for getting a case transferred to the High Court (which must be applied for from the County Court) – tell a story to help explain why you want a section 42 transfer to the High Court. Explain why speed is important – perhaps there are threats of violence or animals are involved. Make sure you include it in the initial submission.

Tenant eviction costs

CH: Top tip – use good local lawyer and get insurance in advance!

Audience: They had a tenant in a property with £1,900/month rent, they’d gone six months without paying and then left belongings when leaving. It cost £3,000 for goods removal plus eviction fees, etc. Total cost to the landlord was over £15,000!

The property market

NB: Property sales in the south are currently very stagnant, the Midlands is now also looking softer, the North probably still a bit better.

Levels in prime London are nearly back to 2009 levels. Help to buy is essential to sell in London at the moment. Auction results have also been really low recently.

Tax changes

CH: Recent tax changes have backfired. Forcing smaller landlords out of the market but not bringing in first time buyers due to them not having deposits. Will reduce the number of properties on the rental market – while more people are choosing to rent.

As an aside, there’s now less stigma in renting. We’re catching up a bit with Europe in that way. Institutional investors in the rental market will be growing though.

Audience: Only one is planning to get out of the rental market [probably unlikely to find many retiring landlords at a property show]. Quite a reasonable number (although far from majority) are planning to buy. One other is thinking about about shrinking their portfolio. [So presumably most are planning to just hold what they currently have.]

TG: Don’t worry about the tax changes, long term being a landlord is still a really good proposition.

CH: The changes have taken out high leverage landlords, which is a good thing. Generally 30%+ is a good base to be putting into property deals. Property is still a good investment.

NB: With interest rates so low you’re losing money on cash in the Bank so investment money has to go somewhere.

Interest rate rises

DW: Now is a good time for landlords because there’s lots of money available. Discussing when interest rates will go up – Brexit will land badly, so the Bank of England needs to get the base rate up to 1% before Brexit so it can lower it again to help cope with the impact when Brexit lands badly. Probably increments of 0.25% starting in August or November.

CH: Probably no rate rise until well into 2019. Otherwise completely agrees. The challenge will be that many young purchasers have never seen a real increase in interest rates and hence it may be a shock to them.

Limited companies

DW: 70% of purchases are now coming in [to his business] for limited companies.

Audience: The majority are personal owners, only a handful of limited company owners.

Impact of tax changes (again)

[Several “not advice” disclaimers came with comments in this section.]

TG: It’s best to start with end objective, generally wanting to grow yield. Don’t look at capital growth as it’s too hard to predict. So small or accidental landlords, especially if only paying basic rate tax – don’t sweat it, stay as you are. Portfolio landlords or higher rate tax payers – get some good advice.

Never switch to a limited company just to avoid Section 24. Using a limited company has lots of complications, higher costs and inheritance issues. Probably best to own personally and have a company or LLC for management.

CH: The cost of borrowing in limited company has come down a lot, it’s now comparable to personal borrowing.

Institutional investors prefer new builds. The come with a warranty, lower maintenance and renters like new properties. This means higher tenant retention and hence reduced costs.

Fix for two or five years?

CH: Two year fixes are currently more popular, but only just. Five year fixes have been getting more popular. There’s less difference in rates between two and five recently.

HMO refinancing

DW: Changes to HMO licence requirements are a big worry to lending institutions. Lots of ordinary houses will become HMOs, lenders will do nothing about it until refinancing. But at refinance they’ll insist on changing to an HMO product. The product set will widen though, more products are already available.

TG: Changing to an HMO doesn’t change the tax. There might be tax advantages because of extra allowances for running an HMO, including allowing for improvements in shared areas.

Rental demand

NB: There’s strong rental demand in central and outer London. Good quality products are especially popular resulting in very low voids. Developments are renting some floors while still finishing others.

What’s a good LTV?

NB: Likes to keep property debt to around 50%. Currently doing a lot of investment outside property (but most have a relationship to it).

CH: Obviously can’t give real advice as it always depends on the persons situation. Personally, intending to deleverage as heading towards retirement. If younger would buy another property but choose that property very carefully.

GB: Would get rid of borrowings but generally worries more about tenant risk.

Big tenant debts

GB: The highest debt eviction had £78,000 owing. It was a property in Mayfair rented to a private tenant. They paid it off in full when they turned up to evict! The eviction was a combined writ so they’d clamped the tenant’s Rolls Royce in the car park – the tenants were keen to sort it out!

It’s best to prevent the situation in the first place – prevention is all about communication and building a good relationship with tenant.

The return rate of chasing rent debt after the tenant has left a property is about 4%. Not many have a Rolls Royce.

Rogue tenants – a central database?

Chair: There are many concerns about rogue tenants. Should there be a central database for deliberately bad tenants?

GB: It’s best to use local landlord meetups but you need to be careful about the risk of discrimination. Has evicted the same tenant three times, they’ve never paid any rent!

CH: Experian tracking of rent a good thing, it helps good tenants too. Although it may not catch really deliberate rogue tenants.

Rogue landlords – a central database?

Chair: Should there be database of rogue landlords?

Audience: A builders experience – they see lots of disgusting rental properties.

A small amount of general support from the audience. Some concerns about how it would be managed.

DW: Due to the new portfolio rules that require a lot more information from larger landlords, lenders now get a better view of rogue landlords and they actually won’t lend to them.

Planning

NB: Infill increases have been claimed but not witnessing it yet.

CH: Planning regime improvements are often talked about a lot but nothing actually changes.

Panel audience

That’s it, I found it really good to listen to and I hope this summary has been interesting for you to read. There are more landlord shows coming up if you want to join in with the next one.