Reader wants to know if she should let with her head or her heart?

Hi Michelle,

You are obviously a very caring person and I am sure you will get some great advice from experienced readers. I would normally recommend you go with the plan that makes the most business sense as then you will be in an even better position to help the people you would like to help.

Two comments here.

First always, always let with your head. Some of the worst problems I have seen have involved letting with the heart, usually to family members or even worse, friends and with minimal paperwork!!

Second I am allegedly an expert in Guaranteed Rent Schemes (GRS) and letting to local authorities/housing associations etc so if you do decide to go down that route and want more advice then post to let me know.

Good luck with it - main thing to watch with LAs especially is they offer a piece of pper and some sort of guarantee instead of a deposit. Problem is to get them to pay up on that guarantee they have to agree the proposed deductions. So all they have to do to wriggle out of any liability is disagree!!

Other problem is these guarantees usually only cover dilapidations - NOT rent arrears if any.

Same applies with the old HM Forces scheme used to be run by Countrywide from Basingstoke.

Good luck with it, go in eyes wide open and don't think letting on a GRS or to LA/HA as tenant is as good as it looks. If it was all Landlords would do it!!

Hi Michelle,

The answer so much depends on your individual circumstances in terms of finances, amount of time you have to spend, your attitude to risk, how much hassle is involved etc.

Higher returns generally involve higher risk and hassle, so there is an "emotional" cost for going for a higher rent.

At the bottom of the risk threshold is a Guaranteed Rent service like the one offered by Northwood. This transfers the financial risk of the property from the landlord to Northwood.

See http://www.northwooduk.com/guaranteed-rent for more information.

At the top end of the risk spectrum is an HMO or multilet as this can be labour intensive, not to mention getting a property up to standards and licenced (depending on the regulations imposed by your local council).

Getting professional tenants in paying a market rent is the middle ground and this is the ground I personally tread.

But as I said, you must look at your overall situation and do what is best for you, both financially and from a risk and emotion perspective. Property is not "one size fits all" and one of the joys of it is that we can create bespoke approaches that suit us as individuals.

Hope that helps clarify your thought processes?

Hi Michelle
Given you are about 3 hours away then a HMO may be more of a strain on you despite the probably higher financial return. I don't know the rental demand in Clay Cross but it is a few miles out of town so that may impact occupancy levels.

I don't let to a Housing Association but at my local PIN a few other landlords were saying how good it was. They expect to get their property back in 5 years in a better state than when they handed it over as it will have been refurbed at the end. Might not be true with your HA of course. Also, you won't get voids with the HA so the business case may be closer than you think in reality.

Good luck with whichever way you go.

Michelle

One other thought following on from Vanessa's comments re Northwood. What I say now applies to all GRS schemes not just theirs though I know theirs inside out and whilst one of the best it still has big drawbacks.

Four of these are as follows:-

First you cannot control who ends up living in your property. This may not matter to you if it is not a former or intended future home, on the other hand it may matter very much. But the GRS provider is your tenant, they then let to whoever they like, possibly on a multilet basis to maximise their income.

Second the rent you get can be anything up to 30% less than the actual market rent.

Third and just to pile it on top of (2) you need to be EXTREMELY careful to check where the repairing obligations lie under s11 L&T 1985 as unless you are very cautious and have the agreement thoroughly checked the GRS tenant will try to leve such obligations with you.

Fourth a GRS will be unlikely to pay you a deposit either

As I say GRS is not all it is cracked up to be, otherwise the only agents managing propertiues would be those ofering such schemes.

Michelle

The reverse of Peter's point is true too - if you let to LA or HA you will have to bring the property up to the standards they would demand if they had built the property themselves.

Hi Industry Observer,

Sorry, but I disagree with your comment ...

*As I say GRS is not all it is cracked up to be, otherwise the only agents managing propertiues would be those ofering such schemes*

GR is a very niche service that suits a very niche set of landlords - those that want to "let and forget". There will of course be pros and cons of using such a service, and each landlord should make it their business to understand what these are to ascertain if it is right for them or not.

Northwood happen to have a blog called Guaranteed Rent Myths - Busted to help landlords understand the service:

http://blog.northwooduk.com/2013/11/top-5-guaranteed-rent-myths-busted/

Coincidentally, it busts two of the myths you allude to in your comment! 🙂

I share this information in the light of helping novice landlords understand options that are open to them to make wise choices.

I am not telling any landlord what to do and what is best for them. I just want to empower them to make up their own mind as that is always far healthier for them in the long run.

With HMO you will get more involved with a lot of paper chase/cost to comply with regulations, your lender may not allow, more tenants more involvement & wear & tear.

Renting to Housing association is not something I would recommend. You will lose control of who is there and what do they get up to as a result your neighbour may not talk to you any more, they will not maintain the property for you & you will need to bring the property up to standard.

Your kindness to be applauded but this is business & the head must rule the heart.

.

When it comes to investments, use your head every time. I've used my heart too often and while it might be good for the soul, it might not be so good for cash flow.

However, using your head doesn't mean it's all about the figures, it's about the practicalities too. As Vanessa says, there is no one size fits all, and it can be better to take a smaller income if the management practicalities are likely to be too onerous and cause problems as a result. Work out your baseline income level for the property, what you want to put into it in terms of time and effort, and go from there.

@Vanessa

I won't argue with you Vanessa I respect you too much and I tend to save my arguing and debates for private exchanges with Mark!!

If you re-read my posts I am not saying do not do a GRS with Northwood LA or HA or anyone else. Just go in with eyes wide open.

Just a couple of points. In a previous life well over 20 years ago I pioneered this type of scheme with HAs for a major Building Society (the major one now!!).

Second so Northwood have a blog extolling the virtues of their flagship scheme, no surprises there then. Even though they now have many imitators their scheme is good, but not faultless.

As I say I agree Northwood's is a good scheme but having read the link to their blog you kindly provided, and Iresearched these schemes again about 18 months ago for a big lettings company thinking of offering a GRS.

Having again examined Northwood's scheme and several others in great detail, I stand by my comments.

They do not all apply to Northwood, they do not all apply to all schemes, but various of them do all apply to various schemes. It is indeed horses for courses, GRS will suit some and not others. But if you read the Northwood blog you have to ask again why wouldn't everyone do it?!!!

After all if you want to "let and forget" then you only have to deal with a real quality agent, though you will pay a lot more than 8% or 10% for the privilege!!