Cashflow benefits of 2 x 2  benefits tenant stratagy

by Readers Question

10:45 AM, 9th November 2014
About 4 years ago

Cashflow benefits of 2 x 2 benefits tenant stratagy

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Cashflow benefits of 2 x 2  benefits tenant stratagy

I watched a webinar the other day extolling the undoubted cashflow virtues of 2 x 2 ‘s (putting two separate Housing Benefit tenants into a single family house). The webinar leader went through the technical details of the process, most of which I would have been aware of or able to put together myself, but he didn’t answer the single question I would have thought most important, namely, how to deal with the psychological element to achieve a happy and stable household? Cashflow benefits of 2 x 2  benefits tenant stratagy

1) Are there strategies and channels to best deal with in selection of this type of tenant?
2) How do you make sure the pair get on with each other?
3) How do you ensure stability of tenancy from a tenant group (single mature unemployed individuals) who are statistically likely to have instability in their lives?

I am sure there are tricks to all these elements. One landlord I know set up a house only to find the second tenant had absconded within six weeks and before any rent had been paid. I should have thought this is a risk for this type of tenancy, after six weeks or within six months. My present average tenancy length is 32 months.

Are there landlords on this forum who can tell us of their success in this respect of this strategy, and who can they tell us how they achieve it?

Thanks

Mike



Comments

Mark Alexander

10:47 AM, 9th November 2014
About 4 years ago

Hi Mike

This is an area I know Mick Roberts and Jonathan Clarke have a lot of experience in. Hopefully they will be along to comment in due course 🙂
.

Robert Mellors

11:55 AM, 9th November 2014
About 4 years ago

I have done this with some of my properties, but on the basis of giving separate occupancy agreements to each person, i.e. they rent a room each and have shared use of communal areas. That way you create a mini HMO and you can retain the right of entry to the communal areas, thus giving you more control over the premises.

In the past I have given a joint tenancy (AST) to two unrelated tenants (both DSS), but the problem with that is that you have no right of entry to the property so you have no control, and if one of them ends their tenancy, then the tenancy as a whole comes to an end, so you then have to do a sole tenancy to the remaining resident, or find someone else to do a joint tenancy with.

There are advantages and disadvantages both ways. Unless you are very familiar with the advantages and disadvantages, and how you would manage each situation, then I would advise you to stay well clear as it can get very complex. Also, quite often there is little difference in rent achieved between the "let to two individuals" or "let to a family" options, so why are you wanting to do this? I don't know the area you operate in, so I suppose it could be financially advantageous in some areas?

You can't make sure the two get on with each other.

You cannot ensure stability. Turnover of tenants is likely to be much higher than when letting to a family, with the consequential costs of voids and reletting.

Jonathan Clarke

14:21 PM, 9th November 2014
About 4 years ago

Robert rightly raises many of the pros and cons about this strategy. For me I don`t go chasing this strategy but if the opportunity arises by default because I happen to have a suitable property available and suitable tenants on my list then I`m ok with it.

So on a 3 bed where you would get a standard 750 you might get 1250 which is an attractive increase. Many of my tenants have links with my other tenants through referrals so they may both be in a small 2 bed flat each but want a bigger house with a garden together. Its useful for them as they can act as childminder for each others kids etc .

Or sometimes i have had a 3 bed which the mum and 2 kids get 625 for 2 bedrooms and a brother of the mum gets 300 for the 3rd bed so total 925 is achieved instead of 750.

But the brother is single and likely to move out on a whim ( like he did with me once) leaving the 2 bed rate in a 3 bed house. But the mum understandably does not want anyone else living in the house except for her brother so you are then stuck in no mans land a bit.

It can work but like with a traditional HMO the management is inevitably more intensive and when it works its great and you count the pennies but when there is a fall out you kinda sometimes wish you had just stayed with a single let and not have been so greedy

What I prefer is a single let but in accommodation smaller than their entitlement. The LHA rate goes with the person so where they have no choice or even when they do they sometimes elect to have a smaller property (maybe for location reasons ) than what their rate dictates. So I`ve had a 625 2 bed rate in a studio flat worth really only 500. Ive also had a 750 3 bed rate in a 2 bed 625 rate flat.

There are all kind of combinations which work so sometimes its just a case of piecing together a big jigsaw between rooms/ properties and tenants and their entitlement to maximise profit. A big rubiks cube puzzle. I`m sure mangers of restaurants and hotels develop similar problem solving skills to maximise income from the space they have available to them.

AA Properties Wales

15:14 PM, 9th November 2014
About 4 years ago

Hi all, sorry I haven't logged in to check your very excellent comments, but I had a social worker turn up and take a poor 10 yr old away from his carer (uncle) as they were sofa surfing on another tenant's couch, so I had to work like a madman to house the uncle. Interesting here...so now am I a rogue landlord for helping even though the accommodation is not quite ready...or do I let this poor guy live on the streets. I mean do Shelter Cymry give me a Blue Peter badge...or..?

ANYWAY..in regards to the original post.

1. I have sent J (female joint tenant) a 14 day notice to comply to pay her two months arrears.
2. Should I send D male and J jointly a section 8, remember they are joint tenants?
3. Should I also send a section 21 (b or a??), and what date should be on that (is is February 5th 2015? as their tenants agreement is dated Aug 4th 2014?
4. Another problem. When we split the flat (in accordance with hb advice) is that this flat was allowed to have a separate own bedroom for D (a £220 rate), and a 2 bed flat rate for J (a £515 rate). (This pushed my insurance up of course), plus more costs involved in decoration and garden improvements for the child.
4. After J did not receive my rent she has phoned the council and stated that she never lived there and was visiting her boyfriend, but on her hb form it states that she is single. She has committed fraud. The hb officers have been out 3 times and not caught her there, curtains withdrawn. The problem with undertaking a schedule visit is that J will take her clothes (D will cover for her and refuse us entry). I am very close in going to the police, really not sure how to handle this.
5. Jonathan I think was right in that we can maximize our rental, but you can imagine the costs in going back and forth, etc, it is our rights as landlords to do our best to gain this so we can put the money into our other good tenants.
6. For the record I do my repairs asap, plastering, plumbing, rendering, roofing. I never retaliate as this is what we all mostly do.

Thank you Mark for posting this for me, I will of course be contributing to this great site that helps all. Kevin (AA Properties)

AA Properties Wales

16:18 PM, 9th November 2014
About 4 years ago

Reply to the comment left by "Jonathan Clarke" at "09/11/2014 - 14:21":

When there is two 1 bed rates (aged over 35). If you have BOTH tenants on a JOINT TENANCY in a big house with both having their own lounges, then hb wont be paid as two single 1 bed rates anymore, but will be classed as a single room rate for both (half the rent paid). BUT if you make a case to hb that they have to have a joint tenancy as their is a hallway where they are both liable and garden etc, then where do you stand? Do you pay the ctax and give them separate tenancies? Why would you when you need that money for repairs etc?

Mick Roberts

7:40 AM, 10th November 2014
About 4 years ago

I do specialise in HB, but not specialise in the separate tenants HIMO tenant.
I do take separate tenants, but either accidentally, when the existing tenant asks to move their family member in, or at the beginning when Mum is moving in with 19 year old son or daughter & her kid.

Rob Mellors is the expert on the HIMO tenant.

And yes, even with my family member separate HB tenants, there is fall outs, constant one of ‘em wanting to move in & out, so I wouldn’t like at all the completely separate tenants that the HIMO specialists like Rob deals with. But these Landlords do it, & more reward/yield for them ‘cause of the extra hassle & management.

Ha ha & yes, would u believe it, Jonathon saying what I was thinking, opportunity arises by default. Yes, an extra rent for the brother brings in Brucie Bonus.

Yes, me too, I’ve had what was 5 bed rate £220 in 2 bed house worth £110pw.

AA Properties Wales

8:06 AM, 10th November 2014
About 4 years ago

Hi Mick, I thought the 5 bed rate was abolished? It is loads more hassle but families just want to be together, it creates a problem with insurance as well. The HMO route is a difficult one.

Jonathan Clarke

8:25 AM, 10th November 2014
About 4 years ago

Reply to the comment left by "AA Properties Wales " at "09/11/2014 - 16:18":

When the case arises I always do a joint tenancy so i dont pay council tax and makes them both liable for CT and the rent in case of default so one cant just walk away. Yes if shared facilities it drops to the room rate naturally so I factor that in. I just look at the entitlement of the individual and marry that up to the number of bedrooms I can offer. Sometimes the figures work sometimes it doesnt.

The 5 bed rate rate yes has been abolished but Mick did say `what was` the 5 bed rate so i guess he is rightly just thinking of one he had back in the good ol days before the council started all their meanie austerity measures with their over 25 then over 35 rule / HB caps / 30th percentile tricks etc etc.

Its a constant cat and mouse game. They got to do what theve got to do to appease the voters the government and the taxpayer. . LHA landlords job is to stay one step ahead and make sure the business works in our favour. We need them but they need us more these days as they just cant get enough of them houses built...
.

Alan Loughlin

15:44 PM, 10th November 2014
About 4 years ago

just say no yo all benefit aided tenants and most problems are avoided.

Jonathan Clarke

21:19 PM, 10th November 2014
About 4 years ago

Reply to the comment left by "Alan Loughlin" at "10/11/2014 - 15:44":

Yes I guess you could say a blanket no to all HB tenants - but then all the fantastic financial rewards of a high yielding LHA strategy would be lost just for the sake of a bit of extra paperwork.
.

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