Covid-19 Bounce Back loans for property businesses16:06 PM, 5th May 2020
About 3 weeks ago 46
Please remember that my properties are all mid range to upper end of market properties aimed at the professional tenants and retired couples. Some of the strategies outlined may be transferrable to other market sectors but not all of them.
I could use a TDP (Tenant Deposit Protection Scheme) for free whereby I would invest the tenants deposit with a government approved scheme. However, I prefer to control the deposits myself so I register deposits with http://www.mydeposits.co.uk/
This isn’t free as it’s an insurance backed scheme but it does suit my business model better and leaves me in control as well as providing quality advice in the event of disputes.
Don’t sign a tenancy agreement until move in day
I very nearly learned this lesson the hard way. Two days before a new tenant was due to move in the outgoing tenant said he was staying in the property for another week. There was nothing I could legally do to force him to move out in those timescales. I had already signed the new tenancy agreement for the incoming tenant. Therefore, I was responsible for housing the incoming tenant until he could move in. I was also responsible for storing his belongings. This could have been a nightmare scenario and very expensive too. What if the outgoing tenant had postponed moving out indefinitely? I may have had to wait until I could get a court order to get him out and that could have taken months! Fortunately I managed to incentivise the outgoing tenant sufficiently to comply but it was a very close shave. Lesson learned, never sign an AST until move in day or you are absolutely sure the property is ready for the new tenant to move into.
It could be argued that I’m a bit behind the times on this as I’m still not using video inventory agencies. Perhaps it’s because I’m a bit tight or set in my ways? Ever since one of my tenants re-painted the internal walls of one of my houses in gloss green, blue and purple paint I’ve used inventories because he argued that the walls were like that when he moved in and I couldn’t prove otherwise. I couldn’t believe it when I got the results the first property inspection after 3 months. My brother had some great pictures on his web-site http://themodernizer.com/
Nowadays I complete a very detailed paper inventory when I check new tenants into a property. I list everything from colour and condition of walls to light bulbs, colour and condition of door handles and plug/light sockets. Anything that can get worn is recorded along the following lines “Walls are freshly pained in magnolia and should be good for at least three years” or “carpets are three years old, have just been re-cleaned and should be good for another 7 years”. This makes it far easier to work out what proportion of works required on checkout is due to fair wear and tear and what can actually be reasonably recorded as damage and debited from the deposit.
Serve section 21 notices on day one
This ensures the tenant is not allowed to stay in the property beyond the tenancy period unless we negotiate otherwise. Two months prior to the scheduled move out date I begin negotiating a new tenancy with the tenant. This is not fool proof though as some tenants agree to move and don’t. The only way to get possession if this happens is through the courts and this still takes time and costs money. For this reason and several others, it’s always best to maintain a good relationship with tenants.
Quarterly property inspections
I make sure that my tenants know from day one that I will need to inspect the property every three months. Where possible, dates and times are pre-agreed. When I visit the property I do so primarily to ensure that the tenant has no problems. If problems are identified I deal with them quickly and effectively. We discuss and agree the problem, I confirm the problem in writing and keep in regular contact with the tenant until the problem is rectified. As an example, I picked up on a damp problem at a property inspection. I gave the tenants a leaflet on preventing damp. A month later I followed up with a telephone call and they advised us that the problem was getting worse. On further inspection it was discovered that the roof was leaking. They had a young baby and I was concerned that a child should not be exposed to damp. I offered to put them up in a B&B whilst the problem was rectified but they didn’t like that idea as there wasn’t a good one in the area. Accordingly, they decided to stay in the house and put up with the workmen and the mess. I spoke with them every few days whilst the work to fix the roof was undertaken. I also gave them a one month rent free period to compensate them for their inconvenience. They can’t say enough nice things about me now. They are the sort of people who will rent the property for the next 10 years. They will also have no hesitation to recommend me to their friends.
Informing the local Council and utilities companies of new tenant move in dates and meter readings
In the early days I relied on tenants doing this for themselves. Guess what? They didn’t! The bills were in my name and they didn’t do anything about them until they were about to be disconnected from services. Then I had to negotiate what element of the bill was theirs and which was mine. I wasn’t always as good as I am now at letting properties quickly between tenants so this often got very messy. It didn’t take long for me to realise that I needed to sort these issues for both incoming and outgoing tenants myself. From the tenants’ perspective it’s good service and a few less things for them to have to worry about doing too.
Letter to neighbours
Whenever I buy a property or change tenants I write to the neighbouring homes to introduce myself. I give them my full contact details and explain that I am a very conscientious landlord. I explain how I select tenants and how I manage my properties. I encourage them to contact me with any concerns they have at any time. Many landlords I speak to cringe when I tell them this. My view is that if there is a problem I need to know about it and deal with it quickly. What’s the point of sticking ones head in the sand? My strategy doesn’t prevent problems but it does minimise risks and enables me to resolve problems with the minimum of damage/destruction to property and relationships.
Throughout these explanations I’ve explained what I do. The reality, however, is that I don’t actually have sufficient time to do all of this. I’ve had to employ people to help. My original portfolio was based around where I live in Norfolk. Most of the properties are in Norwich, Kings Lynn, Great Yarmouth and Dereham. For the last three years I’ve also been buying properties with my brother. This portfolio stretches from Whitley Bay in the North to Portsmouth in the South. We have properties in the Wirral, Manchester, The Midlands and Yorkshire. Everybody we employ is trained to manage our properties in this way. For the past 12 months or so my brother has taken responsibility for most of the management and maintenance. Since then, touch wood, we haven’t had a tenant from hell story to tell. My brother runs his own property management and maintenance companies which deal almost exclusively with our family property portfolio. That said, I do still get involved from time to time with several of the aspects of lettings that I’ve explained above.
To learn more about my property investment strategy please read the following posts in this order:
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