Introducing The LHA Expert for Landlords – @TheLHAexpert

Introducing The LHA Expert for Landlords – @TheLHAexpert

10:00 AM, 6th March 2012, About 10 years ago 44

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-By Guest Columnist John Paul- Part 1 of an 8 part series


Welcome to the first in a series of eight articles giving you top tips for renting your property to tenants in receipt of Local Housing Allowance (LHA).

I have personally built a successful portfolio by letting to LHA Tenants and the profits and cash flow exceed those I could have achieved with working tenants. In some areas rents are as much as 30% higher than market rents in the private rented sector. I think you’ll agree that’s a premium that makes some additional administration worth the effort.

I am also Managing Director of Castledene Property Management and we specialise in managing properties with LHA Tenants and believe that, with the right information, the opportunity is there for shrewd investors to increase their rental yields often in areas where property is cheaper to purchase.

There are over 4.89 million people receiving housing benefit in the UK, with 2.57 million people unemployed. With many more people in jobs which are under threat, the chances are that even a working tenant might need to claim Local Housing Allowance at some point. These tips will help you understand the system and be prepared so that you are ready even if you become an LHA Landlord by accident.

As a reader of Property News you may already be experienced in managing all types of tenants in which case please share your knowledge in the comments which is a great way to add to the value of these articles for all readers. If you are new to property investment or have never considered LHA tenants then I hope this brief guide will give you food for thought.

Buying a property and then renting it for a profit is a simple concept. What can make things complicated is the relationship between landlord and tenant. Many landlords avoid tenants in receipt of Housing Benefits, also referred to as LHA Tenants, because they perceive that such tenants represent a greater workload and greater risks to property condition and rent arrears.

My aim in this set of articles is to give you guidance on how to get the best out of the investment opportunities offered by LHA Tenants. How to maximise rewards and reduce the risks.

Wishing you every success.



Comments

by Jonathan Clarke

10:30 AM, 8th March 2012, About 10 years ago

You have a fair point and one often expressed. 
Two thoughts though as an LHA landlord. 1) Do I not  solve a problem for society by housing people who the council cannot, thus saving  tax payers money. Its cheaper for a council to pay LHA to me than to build and maintain a new council house. I give otherwise desperate individuals a home who otherwise maybe be sofa surfing / in a hostel / on the streets/ living in a car / living in overcrowded damp unsafe housing.    Thats kind of philanthropic one could argue although for me that is a positive knock on effect after the business side  is taken care of.  2)  Do you not exploit a market yourself by housing those in work but cannot perhaps afford a deposit or obtain a mortgage themselves to buy their own house? The term  `exploit` can be used  positively or negatively.I think we both do it positively with our own respective business models.Providing housing is good for others and providing  profit is good for us. Both markets are required. I cant solve the governments housing crisis but by not taken on LHA tenants the problem would only get worse.  I do not set the rates. I feel I am in fact contributing to solving the problem and do not consider myself  morally bankrupt in doing so

by

10:56 AM, 8th March 2012, About 10 years ago

Jonathan, I concur.
I also feel good about the families who have lived in my property, housed there by the council as part of their homelessness prevention scheme.
Several families have passed through before moving into more permanent housing and there damage to my property has been minimal. If they don't look after mine, they don't get a council house!
Incidentally many have been immigration cases who have treated the house with respect.
It's a win-win.

by

11:27 AM, 8th March 2012, About 10 years ago

 I think it is unhelpful in a business discussion to make it personal. Age is always less relevant than experience and that is particularly the case in this instance, which is why John has provided these articles for discussion.
Also there are assumptions being made about people because of the label  'LHA tenant'. It is possible to be working and still qualify for some housing benefit. It is also possible to be working full-time and, as Mary pointed out, lose that job and be in the position of claiming through no personal lack of integrity or effort.
Of course there is a stereotype 'LHA tenant'. There is also a stereotype of the 'Rogue Landlord'. Both stereotypes are based upon a lack of knowledge or display a particular prejudice. They are far from definitive.

by

11:30 AM, 8th March 2012, About 10 years ago

To what extent does the fact that councils will now review and fix rents annually add risk to this strategy? For example if rental values continue to rise with demand could a landlord with LHA tenants now find that his property falls behind the market rate for an area over a twelve month period?

by

12:12 PM, 8th March 2012, About 10 years ago

absolutely it has been in my experience that the councils are very experienced in manipulating the situation in fact it is government and council intentions to do so although there is no need in my opinion in 20+ years i have seen rentals go up as well as down ,we are on a down turn now unless you have a new property its like a fashion , so you have to work hard to maximize your income potential, my problem has always been the deposits and how they are dealt with not customer and customer relationship and unfortunately nothing worthwhile is coming out of this problem but more issues to be dealt with .  

by

12:46 PM, 8th March 2012, About 10 years ago

Dear Jonathan
I feel your last point is telling - "I do not set the rates". Yet here we have an article clearly espousing the benefit of exploiting a market which is obviously not functioning properly. LHA Landlords provide a much needed service and for all the risks that may be perceived with such tenants this is balanced by a guarantor who will not default on the rent.
I cannot exploit the market - I receive a market based rent or tenants would not lease my property - that is the point I was making. And when you throw in the mix that my taxes are funding this anomoly then it gets pretty frustating.....

by

13:08 PM, 8th March 2012, About 10 years ago

Interesting,
up north it looks more like that LHA rates are setting the private rents, in
that a property that is a lot nicer then what someone would get on LHA only
commands a rent that is a little bit higher.  
We brought our bungalow sooner then we may have, as we could not find a
nice bungalow to rent, as the rent level on bungalows are no more than houses,
I totally understand way we could not rent a nice bungalow.

I think the
benefit
with councils controlling LHA rates better is that whole areas that no-one
would choose to live in of their choose may see a drop in rent levels.

by

13:16 PM, 8th March 2012, About 10 years ago

 The word "exploit" has not been used in the article. There is also a point of view that LHA housing rates are driving up rental prices in the private sector (much discussed in Guardian Housing forum) Housing is a business market of suppy and demand like all others. Assuming that relationship is exploitative is like assuming I am being exploited by Tesco when they put up the price of potatoes because of rising transportation costs.... although  actually in that instance...

by Mark Alexander

13:28 PM, 8th March 2012, About 10 years ago

My point Josh is that John Paul is a hard working guy who has made a name for himself as both a sports personality, a good landlord, a good letting agent and a good businessman. Having met him on a few occasions I can also honestly say that he's also a thouroughly decent chap. Any good businessman will look for ways to maximise returns. He has done it for himself in property and 1,000 landlords have chosen to engage with him to help them do the same. Call it explotation, call it good business, call it what you like. I'm just very grateful that he has chosen Property118.com to share his tips and if he picks up some extra clients from it who want a decent return on their money good on to him. If, however, landlords prefer to read his articles and manage their own properties more efficiently then John Paul deserves credit for helping them to do that in my opinion.

by

13:31 PM, 8th March 2012, About 10 years ago

Sorry Teena,
you are being “exploited”, have a look at http://www.kssretail.com/
and http://en.wikipedia.org/wiki/Dunnhumby
.  

It is a shame that I don’t have the
same level of data to help optimizing rental returns as a landlord....
 


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