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10:00 AM, 24th November 2011, About 11 years ago 8
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Now you may think this sounds all too easy. Don’t get me wrong, I have also made some bad investment mistakes. Two out of ten mistakes is acceptable as long as you learn from them and shed such investment mistakes as soon as you can. Albert Einstein said “Anyone who has never made a mistake has never tried anything new”. Do not become so cautious that you never buy anything. With property investment there’s always ups and downs, a lot of hard work, and a fair share of bad tenants.
Bad tenants, now there’s a subject in itself. You really have to be hardened in this game, and not get too emotional when a tenant damages your property. Using the courts to recover one of your properties is no quick fix.
There was one time when I finally recovered and reopened the door to one of my properties only to discover a previously painted property needed repainting all over again. Not to mention the animal faeces and drug needles everywhere. It was all very disheartening. Some tenants on hard drugs can and do literally live like animals. No worries, we rolled up our sleeves, repainted, repaired the damage and made it ready to let again. A few days later the previous tenant broke in, and removed the gas central heating boiler in broad daylight. The ex-tenant was last seen walking off into the sunset with a gas central heating boiler strapped to his back. It was probably sold for as little as £50 just so he could get high. “It’s a Mad, Mad, Mad, Mad World” (I loved that funny movie), you just have to laugh sometimes or you will cry!
Another time I had to evict a tenant that was selling drugs from the one of the properties, she had CCTV cameras on Police guard looking up and down the street. She took her revenge after we evicted her by breaking into the property at night and proceeding to light a fire under the stairs. Fortunately she couldn’t even do that right. Maybe she was too high at the time? But the property was badly smoked damaged in several rooms.
Don’t worry, there’s always a silver lining somewhere, you just have to find it. The insurance company paid for the repairs, so in the end the property was better off. So if you want to play the Landlord game you better toughen up your emotions. Remember after all it’s just bricks and mortar so enjoy the ride, and don’t take it personal!
For some diversification, from 2005 to 2007 I concentrated on sourcing and buying new build properties at discount by pooling my buying power with other investors. Even back then buying four to six properties at a time from National Home Builders created a nice price advantage. That coupled with the ever increasing property appreciation created even more equity. However, the buying was no longer about rental yields. It was all about the expected capital appreciation.
In hindsight such expectation philosophy was fundamentally wrong. You should never buy a property just because you are expecting it to go up. That is not a given, what if it doesn’t, and what if it goes down? After all what goes up must come down at some stage or another, nothing can keep going up forever.
By 2007 I had bought and sold some properties for a profit in places like Manchester and resold some houses in Grimsby too. It just didn’t make sense anymore, every one man and his dog were now investing in property. Therein lies the answer, “When everyone is buying you should be selling, and when everyone is selling, you should be buying”. Don’t follow the herd, trust your instincts, be a “Maverick”.
I remember attending a launch open day for the Edge apartment building in Manchester City Centre, located next to the 5 star Lowry hotel. It was just madness; people had literally lost their minds. Reservation cheques were literally being thrown at sales agents. Newbie investors were paying £200,000 for Studio apartments, some costing £500 a square foot. That was London pricing and just plain silly for Manchester. I thought then that this is all going to end in tears.
Early in 2008 it was time for me to exit stage left. There was literally no value to be found in the UK property market, rental yields were around 5% or lower. With that in mind I headed back to Cape Town for some R & R to contemplate my next life and wealth journey move.
My R & R didn’t last long as it turned out the property madness both on the lending and purchasing front was far more insane on the other side of the pond. Over there a state of delirium existed and financial lenders became blind and drunk on their success.
“Why has the West forgotten that only lasting wealth is created from a manufacturing base”? “You just can’t go on creating and taking money out of fresh air with clever paper shuffles”. I just wish I could understand Chinese. There must be plenty of Chinese jokes circulating about reckless Westerners?
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1:22 AM, 27th November 2011, About 11 years ago
Would you advise as to who paid you rent whilst your property was being repaired from the fire damage and if on rent wasn't paid how did you manage to pay the mortgage?
This as you had no tenant at the time.
Kelvin Kingsley
21:04 PM, 28th November 2011, About 11 years ago
Hi, Paul. This is quite a few years ago now. At the time the property was empty and advertised to let. Don't remember the insurance company putting a figure as to the rental income lost. They would have if it was occupied at the time. They basically paid us £4,000 and that was tocover all. We haggled over fixtures and fittings with them. With them saying they were worn anyway. In the end I was happy, it wasn't a bad result. As for covering the mortgage whilst empty, I had many other properties let at the time to cover the loss of rent on this one. That's an important point to remember, and the danger of having say just two properties. If one is empty then you have a 50% drop in rental income. On say 20 properties it would only be just a 5% drop in rental income.
21:51 PM, 28th November 2011, About 11 years ago
Yes appreciate your response.
Clearly you have been able to manage issues as you are not what I call a small landlord.
Have you any advices for such as the only way I can see of being able to service a mortgage a guaranteed way is to obtain RGI on the tenant.
Problem here is that not all tenants would qualify.
The landlord is then faced with taking a livlihood risk or taking on a tenant who would pass the RGI checks etc.
This obviously restricts the market for the landlord who wishes to guarantee the mortgage is ALWAYS paid.
I have lost 2 properties now due to wrongun tenants losing £70000.00 plus potential capital increase and income over the coming years and as a small landlord I do not and have not the available funds to cover the period of eviction for a tenant who fails to pay rent which took me recently 9 months to evict a non-rent paying tenant and damage to the flat.
Not even taking into account any thefts or damage caused at the property a small landlord is most unlikely to be able to sustain such losses.
Therefore I will not take on any tenant who fails a RGI check.
I can obtain cover for £89.00 per year.
Had I done so on all my properties I would not have suffered losses of £100000.00!!
As the county court system is so useless I am very sorry for any tenants I cannot take on due their failure to pass an RGI check; but I am not a charity.
More and more landlords will be refusing to take tenants on who fail and RGI check and those type of tenants will increasingly be unable to source rental property.
This will be the case as the economic situation worsens and even more so if the EU regulation restricting BTL mortgages to income only criteria is enforced in 2013.
Mark Alexander - Founder of Property118
22:16 PM, 28th November 2011, About 11 years ago
Hi Paul
You are paying way OTT for your rental guarantee insurance. I use Let Alliance, they charge aboyt £40 for referencing and throw in a guarantor reference check for free and six months quality RHI. Check them out and mention I referred you.
Let me know how you get on.
Regards
Mark
22:49 PM, 28th November 2011, About 11 years ago
My RGI policy is for 12 months;
£50000.00 per claim
Includes legal costs
No need to reference if policy is continued for another year or 6 months even if tenant's domestic circumstances have changed which could result in refusal to renew policy and result in tenant having to be evicted; particularly as the LL couldn't leave the risk of retaining a tenant without an RGI policy in place.
If you could do a RGI policy check in the UK and get ALL the RGI policies and their details on your site it would be very easy to come to your site and get the best deal.
You could get referral fees and the LL gets the best RGI policy by coming to your site.
You know what you are talking about so I am sure you you could do the rounds and put the RGI details in one place on your website....whadya think!?....it would save us LL some time!!
Mark Alexander - Founder of Property118
23:01 PM, 28th November 2011, About 11 years ago
Hi Paul
Thanks for the idea. We don't want to compete with the Meerkats though. I'm happy to recommend the businesses I use and I encourage all landlords to do the same by leaving testimonials for them here http://www.property118.com/index.php/leave-a-testimonial/
I'm not interested in earning commission, just helping landlords, which is the reason this website was created. Of course the plan is to make money from the website but not at the expense of landlords and we don't want to be compromised by accepting commission. Everything we share with landlords, either personally or via the vast experience of our guest authors is done so with the same levels of sincerity and integrity. That's why we are a favoured website of the UK Private Rented Sector, as evidenced by our Alexa rank and our eNewsletter circulation.
Regards
Mark
Kelvin Kingsley
10:52 AM, 29th November 2011, About 11 years ago
Hi, Paul.
If we are talking say terraced houses in Grimsby then most tenants will be on social security to some degree or another. In that case a lettings rental guarantee insurance cover will not be forthcoming, they just wouldn't pass the reference check to the required level. In such circumstances it then becomes a numbers game, or money must be put aside to cover worst case scenarios. Even if you use a lettings agent to find and or find and manage your tenants, always ask who, where, what and why the tenants are before they move in. If you have a gut instinct or feel they could carry a higher risk then just say no to the lettings agents and ask for a different tenant to be sourced. Today landlords can be a bit pickier about the tenants they will or will not accept.
However if we are talking much better properties or city apartments where rents are higher so no social security tenants apply. A landlord can then use one of the lettings insurance rental guarantee schemes on offer. However read the small print as some only kick in once 2 or 3 months rent is lost. Some letting agents offer this rental guarantee cover as part of their full management option. Again always check the small print of the cover as some are not worth the paper they are written on.
So to summarise if the number of properties owned are few and tenants are not social security then hedge your risks with a cost effective rental guarantee policy. On my side I do not take this option because once the portfolio is over say 20 the risk of default is down to 5% and that's acceptable. Again tenant selection and risk profile is key; know your tenants before they move in not after. Also make sure all inventories, and condition inventories and pictures, and agreements are all signed and completed properly. The proof of paperwork and traceability is key to getting a tenant out quickly if problems arise. Good luck and be safe.
Mark Alexander - Founder of Property118
11:03 AM, 29th November 2011, About 11 years ago
Hi Paul
This thread also includes a variety of tips http://www.property118.com/index.php/how-i-choose-my-tenants/