Landlord's Property Assessment

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BUY TO LET – 1 February 2007 – from the desk of Soffi Searle

The telephone in the office rings for me. An excited prospective Buy To Let Landlord is on the line to tell me that they have found a brilliant investment property to buy, are poised to put in an offer and once they have secured it they will bring it to HARDCASTLES to manage.

Initially, it sounded too good to be true but – surprise! Surprise! - there IS a sting to the tail because this single three storey property (which includes the basement) with seven Tenants sharing the kitchen and living space will be classed as a “House in Multiple Occupation”. Granted, it is a highly lucrative investment with a yield of rent seven times over and so the figures and returns make any prospective owner’s eyes light up.

It’s a get-rich-quick dream! Or is it?

HMO legislation was enforced on 6 April 2006 and introduced the licensing of these dwellings. An HMO is a building, or part of a building (such as a flat or bed-sit) that:

• is occupied by more than one household and where more than one household shares – or lacks – an amenity, such as a bathroom, toilet or cooking facilities

• is occupied by more than one household and which is a converted building but not entirely self-contained flats (whether or not some amenities are shared or lacking)

• is converted into self-contained flats but does not meet as a minimum standard the requirements of the 1991 Building Regulation and at least one third of the flats are occupied under short tenancies

For clarification, the term “household” is qualified as

• families (including single people, couples and same sex couples)

• other relationships, such as fostering, carers and domestic staff

So already an alarm bell rings for the property that the excited prospective Landlord was about to buy and which we were about to manage seemed to fall neatly into the HMO classification given that it contained seven “households”. So I gently asked him if he was aware of this new legislation and explained the cost implications which should be considered against the collection of seven rents.

TEN IMPORTANT REASONS FOR CHOOSING HARDCASTLES TO LET YOUR PROPERTY AND SOME FAQs

1 WHAT HAPPENS AT A MARKET APPRAISAL?
A realistic market appraisal is carried out at no charge - at this first meeting, an ARLA qualified member of staff will visit you at the property to assess its current rental value, give advice on any improvements or repairs that are necessary and guide you through all the steps to successfully letting your property. A comprehensive brochure with details of our Terms and Conditions will be given to you at the initial meeting so that you have time to consider all that we have to offer.

2 WHAT KIND OF ADVERTISING DO YOU DO?
Once you have instructed us to let your property, we will advertise the property with colour photographs on our own dedicated website as well as via other property portals, it will be featured in our prominent High Street window and advertised regularly in the local press.

3 WHO WILL VIEW AND SHOW MY PROPERTY?
We will contact applicants and encourage them to view the property and we will monitor their reaction and give you the feedback. All our viewings are accompanied by a member of the HARDCASTLES team if you so wish but if you prefer to do your own viewings then, of course, this will be respected.

4 WHAT KIND OF REFERENCES DO YOU TAKE?
Successful applicants are referenced as soon as a tenancy is, in principle, agreed. An independent, off-site professional referencing Agency is used and the references required include a financial and credit search, the current employer's reference, the previous Landlords' reference (if applicable) and a personal reference. Once these are all satisfied, if you agree the tenancy can proceed.

5 CAN YOU DRAW UP THE APPROPRIATE TENANCY AGREEMENT?
After discussion and if you wish, we can draw up the Tenancy Agreement to suit both you and the Tenant. Each Agreement is tailor-made to suit your requirements and those of the property.

6 WHAT ABOUT THE INVENTORY AND STATEMENT OF CONDITION?
We recommend that an independent Inventory Clerk draws up the Inventory so that there is no bias and we arrange this for you. The document is comprehensive and detailed and shows photographs where appropriate. Again, if you wish to discuss your requirements we can ask the Inventory Clerk to discuss these direct with you.

7 WHAT KIND OF SAFETY REGULATIONS ARE REQUIRED?
There are two main safety regulations that must, by law, be satisfied. These are:

1 The Furniture and Furnishings (Fire) (Safety) Regulations 1988 -
this requires that all soft furnishings (mattresses, padded headboards, bed bases, sofas, armchairs, chairs, cushions, duvets and pillows) left in the property comply with the regulations. Failure to meet the regulations can result in a fine or imprisonment.

2 The Gas Safety (Installation & Use) Regulations 1988 -
this requires that any let property with gas appliances (boiler, gas fire, gas hob, gas oven) is maintained and checked annually by an approved CORGI registered contractor who can issue a CORGI Gas Safety Certificate. Failure to do so can result in a fine or imprisonment.

3 Electrical Equipment (Safety) Regulations 1994 -
this requires that any electrical equipment in a let property is safe, will not cause danger and meets the required regulations. Currently, there is no mandatory requirement to have the electrical equipment checked but it is advisable to do so, especially if this is the first time you have let the property.

4 Smoke Detectors - we recommend your property has smoke detectors
by the kitchen, in stairwells and near bedrooms to avoid any danger.

8 WHAT ARE THE TAX IMPLICATIONS?
You will need to pay tax on the profit you receive from your rent. If you are a UK resident, you will need to declare this on your annual tax return. If you are a non UK resident, there are special issues for tax purposes and you will need to apply for an exemption certificate so that we do not need to deduct tax at source.
Please discuss this at the Market Appraisal so that we can supply you with the relevant form but you may prefer to discuss the subject with your Accountant.

9 WHAT DOES BEING A MEMBER OF ARLA MEAN?
As with all regulated professional bodies, there is a strict Code of Conduct imposed on us as members of ARLA.
This means that the letting of your property is handled professionally and personally so you can be sure that you and your property are in safe hands.

10 HOW DO WE CONTACT YOU TO DISCUSS THINGS FURTHER?
You can choose from telephone on 01285 658656 and speak to any member of staff for a more in-depth discussion, or you can fax us on 01285 641613.
Alternatively, you can email us at enquiries@hardcastles.co.uk

Getting the right mix - Sofi Searle from Hardcastles offers her 10 tips for purchasing a successful buy to let property

1. Consult a local ARLA-registered agent about ‘hot spots’ and what’s in and what’s not. For example ask about supply verses demand in popular areas, as well as what is the easiest size of property to let.

2. Buy an investment with a view to letting it for, say, five years. Be aware that this is not a get-rich-quick investment. The capital value of your property will increase in time, but this rarely happens overnight. Also, tenants like being able to stay for about a year before moving on so they can make the place feel like home.

3. Ignore personal taste but acknowledge ‘gut reaction’. Try to remain completely unbiased in your preference with regard to type of house, decoration and so on, but listen to instinct.

4. Ask the agent to visit and give an initial reaction and discuss an appropriate ‘betterments’ – maybe even give an initial rent assessment. A decent ARLA-registered agent will be happy to visit the property with or without you to give their opinion on the property and its letability. This should help you to make up your mind.

5. Some outside space is better than none, but avoid properties with lots of gardening requirements, or provide a gardener. Generally speaking, tenants love a place to sit outside, but hate having to weed and mow in their spare time!

6. Accessible parking and/or a garage will attract more tenants. Allocated parking is always attractive as it helps with insurance. A garage is a bonus and will help to give a higher rent, but is not absolutely necessary.

7. Ensure kitchens and bathrooms are of the highest standard to attract a good level of rent and more tenants. Generally speaking, these are the most important rooms that tenants look at, closely followed by living and bedroom spaces. Old sanitary ware and old or dated kitchens are not attractive and the general expectations of tenants are that they should be of good quality.

8. Ensure the property has central heating. This means gas or oil for preference. Electric heating by night storage heaters is becoming dated (and expensive!). Tenants take this into consideration when choosing a property because, on top of the other utilities (water, sewerage, telephone, council tax, parking permits), this increases the actual rent figures quite considerably.

9. Ensure any furniture complies with the furniture and furnishings regulations – ie don’t break the law. Old or secondhand soft furnishings (mattresses, bedspreads, duvets, pillows, upholstered chairs and sofas) without the appropriate labels are no longer acceptable in let properties. If possible, provide new items in the property so that there is no room for question. The penalty for breaking the law in this respect is £5,000 or six months in jail!

10. Ensure the property is let with all the proper legal documentation: tenancy agreement and inventory. These are readily available through the ARLA- registered agent who will have had them checked by the Office of Fair Trading. Do not be tempted to buy the documents off-the-shelf – they will probably not cover all eventualities of the tenancy and will leave you legally exposed. An inventory and/or statement of condition of the property when it is handed to the tenant are vital if you want to avoid any arguments at the end of the tenancy agreement.