Fair Rents (Scotland) Bill or Artificial state manipulation of free market rent?10:34 AM, 6th November 2020
About 3 weeks ago 36
As all Landlords should appreciate, property investment is a business.
It’s not something you should ever attempt to do “as a hobby”, “reluctantly”, “on the side”, “accidentally” …. . There’s too much at stake for that, up to and including the wellbeing of your tenants, who you are responsible for in the eyes of the law.
Like any business, cash-flow is king. Without it, you don’t have a business!
If you have positive net cash-flow every month, you also have a chance of staying in the investing game long enough to benefit from capital growth. (In the current market conditions, that could be a very long time … ).
So don’t succumb to the lure of capital growth. You can’t spend it in Tesco. Cold hard cash(flow) is where it’s at, and always has been.
However, in these challenging times “every little helps” as Tesco might say.
So here are my top 6 simple strategies for improving your ££££-flow:
1. Change the date of your mortgage payment(s):
I was recently reviewing my cash-flow, as all our 20+ mortgages go out on the 1st of the month, a few days before our 20+ rents start to come in.
As you might imagine, this is a significant amount of money flowing both ways and there can be several days between a mortgages going out and rents coming in.
I therefore started to phone the lenders asking if I can move my mortgage payment to the 7th of the month.
“Move your payment to the 31st of the month if you like … ” most of them responded.
Hmmmm … that means that, if I do that, I have the equivalent of one month’s rent incoming, with no mortgages going out!!
2. Write rental increases into your tenancy agreement:
I learned this one from National Property Group, who now manage all our properties.
You can write an annual rental increase into your AST, typically between 3 to 5% per annum.
Glenn Ackroyd, Legal and Policy Director of the National Property Group says:
“Most landlords are not aware that you cannot simply increase the rent without creating a new tenancy agreement, or going through the process of serving a Section 13 Notice under the Housing Act. Landlords who increase rents using an existing AST agreement run the risk of a tenant claiming back the overpayment.
However there is another way. We include a rent review provision into our tenancy agreements that enables us to increase the rents annually by up to 5% at our discretion. We also collect rent by direct debit. This means that all we have to do is write to tenants in advance of the change and amend our collection amount. There is no need to create a new tenancy agreement or cancel and create a new standing order mandates”.
3. Collect your rent via Direct Debit:
By using a Direct Debit collection set up like Landlords Rent, Landlords can increase the rent annually just by putting it in writing to the tenant, provided you have that clause in your AST (as per the above).
Landlords Rent also pings you the second a rent is not collected, meaning that you can immediately chase the tenant and minimise your exposure to non payment of rent.
For more information about Landlords Rent, you can watch an interview with the founder, Alex Caravello >>> here.
4. Deal with maintenance issues within 24 hours:
When the tenant reports a maintenance issue, it’s vital that you or your letting agent respond immediately and deal with the problem. This has two potential impacts on your cash flow:
i) You keep your tenant happy, thereby avoiding them handing in their notice.
ii) You deal with the problem promptly, thereby ensuring that it does not get worse, costing more money.
When presented with a maintenance issue, I highly recommend that you get three quotes. This will ensure that you will not pay over the odds for the work. I was once told that I needed to spend £1K to return a property to rental standard. I got another quote and was quoted £150 for the same job!
With directories like Property 118, you can easily contact three reputable maintenance people in your area to get a quote. You can also ask on forums like Property Tribes for advice of how much something should cost, to ensure you are not paying more than you need to.
5. Use tech to become more efficient:
There are many cool tech products out there now to make Landlord’s lives more efficient, thereby saving you time and money.
One such product is a mobile to web inventory app called Imfuna.
A bullet-proof inventory ensures that you do not end up paying for damages and excessive wear and tear caused by the tenant.
Imfuna takes the pain out of doing inventories. It’s clever, quick, and very cost effective and is worth its weight in gold if you have any kind of deposit dispute.
With the recent “Bedbugs” scare, you can even customise Imfuna to get the outgoing tenant to tick a box that they had not been bitten by bedbugs while in your property.
You can then show this to the incoming tenant and get them to tick a box saying they agree that the property is bed-bug free. This means that if bed bugs do arise, you know who is responsible!!
I wrote a fuller blog about tech products for Landlords >>> here.
6. Consider Rent to Buy:
If you are struggling with negative equity and poor cashflow, an “Exit” marked “Rent to Buy” might be an option to seriously consider.
It is fast becoming one of the easiest and most cost-effective ways to sell a property is to an existing tenant, saving money on estate agents fees, and avoiding a property being void while you are trying to sell it.
Typically a property is offered on a Rent to Buy scheme over a five year period. During this time, the tenant is saving for a deposit by paying a monthly sum into a separate account, ideally a secure trust account. Tenant-buyers have the same mentality as home owners – they treat the property as their own, because one day it will be – so they maintain the property and even make improvements!. This mentality is also reflected in their attitude to paying rent promptly and on time. Just as home-owners treat their mortgage payment as their top priority, Tenant-buyers have the same view as they don’t want to risk losing their home.
For more information on how Rent to Buy works for landlords, and real-life examples, download the free brochure put together by National Property Group, the leaders in the Rent to Buy arena.
Thanks for reading this blog and I hope you find it helpful. If these strategies save you a few £££, as they did for me, then happy days!
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