Tuesday, September 27, 2005

Landlord nightmares - how many of these do you relate to?

Price falls aren't the only worry in buy-to-let land, as seasoned pros confess all to ROSIE MILLARD

We are querulous types, it seems. Everybody thinks we are sitting laughing our heads off, tycoon-style, when the opposite appears to be more the case. A survey of my buy-to-let buddies has revealed the top 10 fears that keep us awake at night.

1. Bad tenants
The sort who pass all the references and credit checks and just turn out bad, says Oscar Lennox, who owns a clutch of buy-to-let flats in central Leeds. That is my key fear. One of my flats was raided at 5am and my tenant taken away by the police under suspicion of fraud and rape. All his references were wonderful.
Landlord fear factor: 50%
Likelihood: 20%

2. Price crash
A collapse in property values would, of course, wreck thousands of pension plans, nest eggs and mortgages, and smash the fragile structure on which many buy-to-let businesses are constructed. I started buying in 1999, says Lennox. Some of my flats have almost doubled in value since then. A crash is unlikely, but not impossible. The only defence against it is to make sure your portfolio comprises quality property, because quality will always sell. Of course, if prices do go down, a comforting thought is that rents are likely to go up.
Landlord fear factor: 20%
Likelihood: anybody's guess

3. Fire
“Getting a phone call to say that somebody has been hurt in a fire is my biggest fear,” says Andrew Levy of the Brand New Heavies, who owns several houses in Margate and London. “My houses are all covered and have no liabilities, but when personal safety is at risk, I get scared. I would feel very responsible if somebody got hurt.”
Landlord fear factor: 15%
Likelihood: fit those smoke alarms

4. Trashing of flat
“Mercifully, my London flats are at the other end of the market where I avoid what I most fear,” says Susan Browne, who owns properties in South Kensington. “But I also have a property in Sydney, Australia, that was utterly trashed by corporate tenants. There wasn’t a piece of furniture left undamaged. I am now in the process of going through a tribunal.”
Landlord fear factor: 15%
Likelihood: 15% (as long as you avoid medical students, who specialise in trashing flats)

5. Squatters
“Squatters are my numero uno fear,” says landlady Barbara Goldsmith, who has 40 flats across the country, “because I have had them. The property in question was empty for a couple of weeks. I had new tenants ready to move in. My builder went in to fit a couple of doors and came back with a white face. ‘There are 15 people in there with about five dogs,’ he gasped. I had to go to court to get them out. Oh, they know the law. My advice is to get good insurance. I had top insurance and they paid for everything. The bill came to £14,000.”
Landlord fear factor: 10%
Likelihood: depends on your locks

6. Voids
“I don’t think anybody at first realises what a disaster this is, financially,” says Browne. “It’s not just loss of revenue, but the fact that you are still having to pay council tax, services and keep the flat presentable. Voids can quickly send you into the red, so you must be flexible when negotiating a price. You are far better off asking for £300 a week than holding out for £375.”
Landlord fear factor: 10%
Likelihood: 90%, but reassure yourself that it happens to everybody at some point

7. Sitting tenants
“This is my Room 101,” says Richard Savage, who rents out several holiday cottages in Gloucestershire. “It happened to my father. He had a small bungalow in Cornwall that he rented out to somebody for six months. Thanks to my father’s incompetent solicitor, the man realised that as long as he paid the rent, he could not be moved. He ended up staying until he died, 30 years later. It was meant to be a family holiday home, but there was nothing that could be done. Of course, with assured shorthold tenancy agreements now this is much rarer.”
Landlord fear factor: 5%
Likelihood: zero if you bother to use a proper contract

8. Complaining tenants
“We get wonderful tenants from the holiday company Rural Retreats, but about once a year somebody does this,” says Savage. “You know perfectly well that what they are complaining about is totally fatuous, but they try it on in the hope they’ll get some kind of compensation or get away without paying a bill. They go on and on and never give up. These are litigious times, remember. I suspect there are guidelines as to how to do it on the internet.”
Landlord fear factor: 3%
Likelihood: 3%

9. Fireworks (rural areas only)
“The neighbours get very unhappy about it, so we have to advise tenants not to bring in fireworks for birthdays or New Year,” says Savage, whose cottages are in swathes of silent countryside. “Because they aren’t the fireworks we all grew up with, are they? I’m talking minor military weapons, giving out fountains of flame.”
Landlord fear factor: 2%
Likelihood of annoying neighbours: 1%, unless on November 5, in which case 95%

10. Collapse of entire rental market
Highly unlikely, unless you are a born pessimist.

Interesting... but I would put voids and a property price crash at the top of the list.

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