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

13:37 PM, 8th March 2012, About 10 years ago

I recall someone saying...

     It is every tax payer’s duty to behave in legal ways to
     reduce the tax he/her pays as otherwise the government
     can’t influence behavior var the tax system. 
It is the  government’s responsibility to create a tax system
that leads people to behavior in the way that is best for solitary.

I think we can say the same about the benefit system.

So I don’t have a morally problem with people exploiting the current system by acting in the way that the current benefit system leads them to act. I do have a big issue with the political system that is unwilling to sort out the mess it has created, due to being more concerned about opinion polls and special interest groups then the good of the country.

But Churchill did say.
       democracy is the worst form of government except all
the others that have been tried

PS, can we have a comment editor that can at least do basic formatting...

by

14:32 PM, 8th March 2012, About 10 years ago

 HAHA! That's a whole other debate! I was in the industry and remember well the week that Tesco overtook Sainsbury's as UK's no.1 retailer!
Meanwhile I shall boycott potatoes! 🙂

by Jonathan Clarke

14:52 PM, 8th March 2012, About 10 years ago

Hi Mr Beige
Its this word exploit which is seemingly  sensitive. It depends much on the individual  circumstances and  your point of view. In football your skillful centre forward for your chosen team   will exploit a weak defence to score a goal. ( good) . In relationships a manipulative control freak will exploit a weaker more  vulnerable partner ( bad ) . In property do I exploit the vendor who is desperate to sell, the agent by complimenting him on his choice of tie, the mortgage advisor by saying I`m not paying a fee in addition to their proc fee, the solicitor by negotiating a reduced fee  for given him  volume business etc etc . We all try to get the best deal for ourselves hopefully fairly and legally by using our business acumen. You I still would suggest exploit ( in a perfectly legitimate way) the market conditions for private rents. You borrow at x % knowing you can make x £`s on top of your monthly mortgage payment in rent. You surely `exploit` just as much as me our capitalist system so slated by some other cultures..If your perfectly good pay on time  private tenant for 2yrs  lost his job tomorrow through no fault of his own and was thereby  forced down the LHA route would you immediately serve a Sec 21  saying to him - quote -  .......``I aim to make money from my small portfolio but to be able to exploit a market - which is an oxy moron as it is clearly not operating properly - is something I could never be comfortable with.... ``   so presumably you would in addition say to him -   `Thank you for being a good tenant but its time to say goodbye`! ?    My sympathies would be with him I`m afraid as he has suddenly become an unbeknowing victim of your personal morals and is thus being discriminated against. I think he may be well entitled in thinking he was being made a scapegoat  and was perhaps the one being exploited? 

On the point you made about  taxes. About 9 years ago I took on some LHA ( or DSS as it was known  then)  tenants who had made the front page of our local paper. Their case briefly was that they had fallen behind with their rent on their council home to the tune of  £1400  and  were evicted but then put up in B&B at the council expense at a cost of £350 per week. Your tax money pays for all that. I took them from the B&B and housed them at a cost then to the taxpayer of about £150 per week. So I saved the taxpayer £200 per week or £10,400. They are still with me today 9 years later. So one could argue ( stretching a point I know but for illustration purposes ) that I`ve saved the taxpayers £93,600. I feel good for providing a home for them and their 3 children, saving the taxpayers money and making myself a profit on the positive cash flow of about £32,000. The last bit is the best bit of course -  I`m no angel 🙂 

by

15:39 PM, 8th March 2012, About 10 years ago

Dear Jonathan
My original point is being lost. The article stated returns of up to 30% above market rate can be achieved and my comment is simply why?
Too true my ideal looking tenant could sign a lease 1 day and become unemployed the next - I have no problem with him being an LHA tenant under these circumstances. What I wouldn't do is go to the council in 6 months and say "right then, another £150 a month please, or your man's on his bike"!
Can someone tell me why there is this rental disparity if t is not simply exploiting a system where everyone fails to take responsibility for such a crucial issue as housing in this country? And no Teena, it is not like buying a bag of potatoes.

by

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

 Perhaps the disparity is because councils acknowledge that private business people are providing social housing stock with the risks of capital investment that requires, taking on the complex issues surrounding some tenants on benefits and the insecurity of their financial position and also, not to be disregarded and as the article states, the 'additional administration' which often falls upon the landlord.

by

16:35 PM, 8th March 2012, About 10 years ago

Landlords in the public or private sector risk their capital and though complex issues can surround some tenants my forlorn hope is that it is exactly these tenants that social housing provided by Councils should be providing for... I know,I know I live in a dreamworld but too often our society out-sources these problems and the result - additional expense, even though as Jonathan Clarke admits he can spend less money because LHA tenants are too grateful too kick up a fuss.

by John Paul

16:42 PM, 8th March 2012, About 10 years ago

Hi Paul
Thanks for your comments, until we know exactly what UC involves and not speculate we can only use what knowledge we have. LHA tenants can be and is very lucrative in certain areas. this is fact. I do appreciate its not for everyone but i think advising everyone to get out of LHA property is a bit drastic when no one has hard fast facts
 

by John Paul

16:49 PM, 8th March 2012, About 10 years ago

Hi Joshriza, firstly thanks you for the compliment about how young i look. Can you briefly explain why it "borders on the illegal" to run a property portfolio and start a property managment business ? im a little confused as to whcih law i have broken. please let me know so i can hand myself into the police right this instant. I think you might have my system of running a the propertie confused with councils leasing properties. The councils do not lease properties from us in any way shape or form. If you could explain yourself a little clearer i will try and answer

by Mark Alexander

16:51 PM, 8th March 2012, About 10 years ago

Mr Beige said "
The article stated returns of up to 30% above market rate can be achieved and my comment is simply why?"

I don't target LHA tenants so I'm possibly not the best person to answer this question. However, logic tells me that the answer is based on capital values, rental values, demand, availability of property and location. Private tenants have more choice and will generally get first choice to live in an area which is convenient to their lifestyle, e.g. on the local bus route. An LHA tenant may not have that luxury. A similar property in a less convenient area for amenities will be less attractive to private tenants but that area may well fall into a band for LHA payments which are compared to the more attractive area, thus making yields better in the less attractive area due to capital values being lower. An identical house a mile down the road may be more desirable to a private tenant for a variety of reasons, in which case, capital values are also likely to be much higher but rents may not be and hence a differential in yield exists.

by

16:52 PM, 8th March 2012, About 10 years ago

 It is expected very soon that the Private Rented Sector will be the main provider of 'Social' Housing. Councils know they have to work with private landlords if there is not to be a gaping hole in housing provision. However Government policies (in particular Universal Credits) seem still to be in denial about that fact.
I have no doubt Jonathan Clarke could also tell stories of extreme expense due to tenant abuse of his properties. I know that the respect in which he holds his tenants is such that he always speaks of the positives and does not dwell upon that negative minority.


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