Renting to DSS tenants anyone?

[ATV]

For this post I'm still using the old term DSS as that's what most adverts ("no pets, no DSS") still refer them as, even though it's been replaced by Local Housing Authority (LHA) and now universal credit.

I've been reading as much as I can on this market and spoken to a few people who invest exclusively in this market and are doing very well. The major risk is when the Housing Benefit gets paid direct to the tenant rather than the landlord but I'm told there are ways around this (using credit unions, or if the tenant has a history of medical or financial problem)

From my calculations, this is a business that can be very lucrative because of the low prices involved and the return on investment. In my area, I saw a property for sale which the broad market rental areas (BMRA) rates show as follows:

• 3 bedroom Property being sold for £49,995

• £12,500 Deposit

• £37,500 Loan (75% LTV)

• Mortgage £171 pcm (@ 5.49%)

• LHA rent for 3 bed from council £650 pcm

• Gross Profit £478 pcm

• Gross Yield on Investment 45.88% per annum

I'd welcome input from anyone else who is involved in this market as it seems very lucrative and for a £12,500 investment, can easily be scaled up once the rental income starts rolling in and you can save for more deposits.

Edited by ATV on Sunday 25th January 17:49

mod note: no need to be mentioning other PHers negatively in your post #

Edited by eybic on Monday 26th January 10:29

Edited by eybic on Monday 26th January 10:30

[ATV]

DocJock said:

I doubt you'll get much in the way of a response given the way you have commented negatively on two members in your first post.

Really? Telling the truth is now considered being negative is it? In the first instance, I queried a discrepancy in figures which can easily be checked online https://glasgow.gov.uk/index.aspx?articleid=4189 . Given that some PH'ers are prone to bullstting, I'm entitled to call someone out on financials, especially as I posted in the "Passive Income" thread are never got a response.

In the second instance, I sent a few PM's but never got a response. Fair enough, no one is obligated to reply or his inbox might be full. Turns out he was lending money to poor people at big rates of interest and has wisely kept off PH lest he get called out on it. Is that my fault that I didn't know about this and sent PM's off which never would have got a response?

[ATV]

OP here, thanks for everyone's replies.

The conclusion seems to be it can be a money-maker but watch your step carefully and don't over-burden yourself.

dazwalsh said:

I rent 9 properties to LHA, all 3 beds to families and given the sheer demand you can be quite selective as to who you rent to.

Here in leeds the council seem happy to pay direct to landlords, and for reducing advertised rent to affordable levels (LHA rate) they pay direct no questions asked. Currently the rates are at a high level so yields are great.

You do have to tailor your approach to renting to LHA, section 21 notices issued the day they start the tenancy, and extra efforts to make the properties more robust to handle extra wear and tear.

In short - very lucrative but cover your arse and prepare for extra wear and tear.

I presume the serving of the Sec 21 is to cover yourself quickly to gain repossession if they stop paying you, is that correct?

Do you use an agent or self-manage? A lot of agents I contacted said they don't deal with any DSS tenants, only working or retired. One agent told me they had stopped a few years ago because the work-load was very heavy. A lot of the tenants came with severe medical (alcohol/drug), or financial problems and the agents had become a de facto social services so the M.D. stopped it.

(would you mind if I contacted you on PM for a few other questions?)