My buy to let business the beginning
Discussion
What percentage management fees do you pay?AlexC1981 said:
This is what puts me off. If you don't mind me asking, has anyone been in this situation and how did you resolve it? Were all costs covered by your insurance?
I was in this situation with a flat. Damage to doors wasnt covered under the policy which I wasn't aware of until I tried to claim. Ending up taking the full deposit and covering the rest of the damage myself. On the arrears side I did get a partial payout but in my case it wasn't much as the tennant moved out. They were useless in terms of chasing the arrears and taking the tennant to court. I gave them the ex tenants address the place of work but their tracing agents were unable to verify any of the details I had given them despite the details being correct. Defcon5 said:
What does the agent do for their £50 a month?
My btl story started in 2015, but by then I had 1st hand experience of letting agents with 2 kids at university, and my own midweek rental of a flat whilst I worked away from home.That and advice from my nephew who is an estate agent and started his career in lettings.
I figured that I was capable of doing everything a letting agent could do, but my business model would not want tenant churn, unlike the agent who makes money with every new tenant.
My wife's view on pricing is that we share the saving with the tenant, which means we are slightly cheaper than if we went with an agent.
I came across Openrent.co.uk and have used them 3 times successfully.
The opportunity to meet prospective tenants is not to be missed.
I won't put my figures up, but i reckon we've made as much from house price inflation as we h ave from.the rent. All my calculations assumed zero inflation and therefore any inflation of rent or house price is a bonus.
raw said:
Welcome to the world of being a BTL landlord!
I've had my own small portfolio for the last 10 + years and here are a few nuggets based on my experiences:
Manage the property yourself, drop the agents (just pay for a let only arrangement)
It sounds like you've been hands on in the refurbishment of the property, so why wouldn't you carry that on with the maintenance and running?
You will build up a relationship with your tenant, which I believe is very important. It really isn't much of an inconvenience these days having a phone call, text message or email if they have an issue. If they speak to the young girl at the agents who forgets to call the plumber about the one cold radiator they have in the house and they're chasing every few days it will leave a bitter taste in their mouth. Whats more, in this situation it could be something as simple as bleeding the radiator. Personally, I'd rather take that call, have a quick visit, bleed the radiator and save myself the cost of a plumber visiting.
Never underestimate how green tenants can be with regards to basic household tasks (changing smoke alarm batteries, light bulbs, topping up boiler pressure etc) this can escalate costs as your agents will not be interested in trying to save you a few quid.
No agent will look after the property as well as you can.
Be a nice fair landlord, but don't be a walk over.
If you've painted magnolia throughout and the tenant wants to add a bit of colour, you might be inclined to let them do so - on the agreement that they put it back before they leave. They will never put it back to the same standard you did. It is much easier for you to come in and touch up magnolia than deal with the purple paint runs they've put all over the skirting board and carpet.
Being a nice landlord can bring the piss takers "could you change the carpet in the hallway, can you fit this light fitting for us" the quickest way to stop this asking them to put their money where there mouth is "Yes of course, I can fit that but it will cost £xxx"
Look for a 12 month AST rather than 6 month. I find that tenants who are willing to stay 12 months are more likely to stay much longer, someone committed to only 6 months more often than not leave not long after.
Voids are where you will lose most money, once tenant gives their notice get it on the market immediately, make sure that it's in their contract that you can arrange viewings with 24/48hrs notice. You want one tenant walking in as one is walking out!
Don't let them leave 'that cupboard' that they bought because they don't need it at their new house. You'd be surprised how much time/cost it is to get rid of stuff they can't be arsed to move.
It's fantastic journey and you'll have some great stories to tell over the years of what you've had to deal with, I've got loads!
This is good advice IMO. As a former landlord some of this resonates highly. Agent I had was nothing more than a email/whinge forwarding service who knew some high priced/low quality tradesmen who were probably paying her a back hander and/or her brother in law. Cheaper to do the work yourself or find your own tradesmen if you were nearby. I wasn't but in hindsight it STILL would have been cheaper and easier to have sorted out repairs myself via local contacts I had. I've had my own small portfolio for the last 10 + years and here are a few nuggets based on my experiences:
Manage the property yourself, drop the agents (just pay for a let only arrangement)
It sounds like you've been hands on in the refurbishment of the property, so why wouldn't you carry that on with the maintenance and running?
You will build up a relationship with your tenant, which I believe is very important. It really isn't much of an inconvenience these days having a phone call, text message or email if they have an issue. If they speak to the young girl at the agents who forgets to call the plumber about the one cold radiator they have in the house and they're chasing every few days it will leave a bitter taste in their mouth. Whats more, in this situation it could be something as simple as bleeding the radiator. Personally, I'd rather take that call, have a quick visit, bleed the radiator and save myself the cost of a plumber visiting.
Never underestimate how green tenants can be with regards to basic household tasks (changing smoke alarm batteries, light bulbs, topping up boiler pressure etc) this can escalate costs as your agents will not be interested in trying to save you a few quid.
No agent will look after the property as well as you can.
Be a nice fair landlord, but don't be a walk over.
If you've painted magnolia throughout and the tenant wants to add a bit of colour, you might be inclined to let them do so - on the agreement that they put it back before they leave. They will never put it back to the same standard you did. It is much easier for you to come in and touch up magnolia than deal with the purple paint runs they've put all over the skirting board and carpet.
Being a nice landlord can bring the piss takers "could you change the carpet in the hallway, can you fit this light fitting for us" the quickest way to stop this asking them to put their money where there mouth is "Yes of course, I can fit that but it will cost £xxx"
Look for a 12 month AST rather than 6 month. I find that tenants who are willing to stay 12 months are more likely to stay much longer, someone committed to only 6 months more often than not leave not long after.
Voids are where you will lose most money, once tenant gives their notice get it on the market immediately, make sure that it's in their contract that you can arrange viewings with 24/48hrs notice. You want one tenant walking in as one is walking out!
Don't let them leave 'that cupboard' that they bought because they don't need it at their new house. You'd be surprised how much time/cost it is to get rid of stuff they can't be arsed to move.
It's fantastic journey and you'll have some great stories to tell over the years of what you've had to deal with, I've got loads!
Also introduces some Chinese whispers into day landlord/tenant discussions.
I once was interested in renting the house and I told the agent that if the landlord moved the washing machine to the back of the garage so I could actually use the garage to put a car in, I would take it. He refused, would have cost him next to nothing. Instead he lost a months rent, at least, and a good tenant.
When my tenants moved out it cost me thousands. Lost rent, council tax, agency fees, end of tenancy repairs and other things too. That's why a landlord should never put up the rent for a sitting tenant. It makes people reconsider their options and for the sake of £100 a month (or whatever) you will risk losing at the very least a months rent + those other costs.
Happened to me in the last place I rented, landlord put the rent up which led to me looking at the numbers and deciding to buy somewhere instead.
AlexC1981 said:
How many days/weeks would a property usually be unoccupied per year? Just a normal flat say, not a student let.
I sent out a 3 bed semi in L23. Since Jan 2016, we have had 3 couples with kids. First one stayed 22 months until Nov 2017 and left because father of the youngest moved out and she couldn't afford the rent alone, and was offered a housing association house at £200 a month less but in L21. We had a 2 week void, but in that time replaced laminate and carpet in 2 rooms and redecorated one room.
The next couple stayed 22 months, until Sept 19. the bloke and his child moved out, back to his parents, and she now being single could afford it but decided to move in with her parents to save a deposit to buy somewhere.
Since Sept 19 a couple with one child have been in. I've just done a quick inspection when.the gas safety check was done on Monday, and they've really made it home.
I hope they'll be there a while, but part of me hopes they are saving a deposit. Their joint incomes are such that they should be able to save a reasonable amount shoukd they choose to.
AlexC1981 said:
How many days/weeks would a property usually be unoccupied per year? Just a normal flat say, not a student let.
I've owned 6 properties over 8 years. We've had 2 evictions due to non payment of rent (both were existing tenants at purchase). Other then that I've had zero days unoccupied because my tenants have stayed.
I fully refurb my places, and I fix things as soon as they need it. If the tenant treats the place well, and pays on time then I keep the rent below market.
It also helps that I only buy property I would be happy living in my self. Ideally I go for 2 or 3 bed places so that I'm attracting families. Families have ties and want to stay.
The ideal for any landlord is a tenant who pays on time and wants to stay long term.
AlexC1981 said:
How many days/weeks would a property usually be unoccupied per year? Just a normal flat say, not a student let.
In one of my BTLs, I’ve just had more than two months void and have missed out on £1400 a month in rent, plus had to pay £180 a month council tax and the gas/water/electric too. The agent found a new tenant within 3 weeks but they couldn’t take it for another 3 weeks. I agreed as he was a USAF pilot at the airbase in Mildenhall (my houses are all in Cambridge) but 3 days before they were due to move in, they pulled out. So I was back to square one. Agent readvertised it and another couple moved in today. The agent now charges 60% of first months rent plus vat.
Plus a £275+vat “tenancy document” fee
Plus a £350+vat something else fee.
So I reckon it’s going to cost me £1500 for the “find me a tenant” fee and about £3600 in lost rent from the last tenants moving out. (They’d been there 7 years)
I used to sometimes use gumtree to find my own tenants and sometimes use the agent, depending on how busy I was at work.
But now that the agent isn’t allowed to charge the tenant any fees, they’ve lumped all the fees onto the landlord, and because of that, most tenants will only rent a place via an agent as it gives them far greater peace of mind than going direct on gumtree or Facebook.
So the landlord really has no choice now but To use an agent to find a tenant.
It sucks.
I am done with BTL after 20 years and 7 properties. I’ve done very well from the capital appreciation but I don’t see that carrying on like it has done over the last 20 years......
Good luck OP. You will need it!
Mr Noble said:
In one of my BTLs, I’ve just had more than two months void and have missed out on £1400 a month in rent, plus had to pay £180 a month council tax and the gas/water/electric too. The agent found a new tenant within 3 weeks but they couldn’t take it for another 3 weeks. I agreed as he was a USAF pilot at the airbase in Mildenhall (my houses are all in Cambridge) but 3 days before they were due to move in, they pulled out. So I was back to square one. Agent readvertised it and another couple moved in today.
The agent now charges 60% of first months rent plus vat.
Plus a £275+vat “tenancy document” fee
Plus a £350+vat something else fee.
So I reckon it’s going to cost me £1500 for the “find me a tenant” fee and about £3600 in lost rent from the last tenants moving out. (They’d been there 7 years)
I used to sometimes use gumtree to find my own tenants and sometimes use the agent, depending on how busy I was at work.
But now that the agent isn’t allowed to charge the tenant any fees, they’ve lumped all the fees onto the landlord, and because of that, most tenants will only rent a place via an agent as it gives them far greater peace of mind than going direct on gumtree or Facebook.
So the landlord really has no choice now but To use an agent to find a tenant.
It sucks.
I am done with BTL after 20 years and 7 properties. I’ve done very well from the capital appreciation but I don’t see that carrying on like it has done over the last 20 years......
Good luck OP. You will need it!
I haven't posted a lot on here, but felt I must when I saw the fees your agent charges. The agent now charges 60% of first months rent plus vat.
Plus a £275+vat “tenancy document” fee
Plus a £350+vat something else fee.
So I reckon it’s going to cost me £1500 for the “find me a tenant” fee and about £3600 in lost rent from the last tenants moving out. (They’d been there 7 years)
I used to sometimes use gumtree to find my own tenants and sometimes use the agent, depending on how busy I was at work.
But now that the agent isn’t allowed to charge the tenant any fees, they’ve lumped all the fees onto the landlord, and because of that, most tenants will only rent a place via an agent as it gives them far greater peace of mind than going direct on gumtree or Facebook.
So the landlord really has no choice now but To use an agent to find a tenant.
It sucks.
I am done with BTL after 20 years and 7 properties. I’ve done very well from the capital appreciation but I don’t see that carrying on like it has done over the last 20 years......
Good luck OP. You will need it!
My experience is somewhat limited, but have you tried other agents?
I agree that gumtree and facebook are not great, however have you tried openrent? I found it rather good (if you are happy to do viewings).
Good luck to the OP, following with great interest.
Car_driver said:
Mr Noble said:
In one of my BTLs, I’ve just had more than two months void and have missed out on £1400 a month in rent, plus had to pay £180 a month council tax and the gas/water/electric too. The agent found a new tenant within 3 weeks but they couldn’t take it for another 3 weeks. I agreed as he was a USAF pilot at the airbase in Mildenhall (my houses are all in Cambridge) but 3 days before they were due to move in, they pulled out. So I was back to square one. Agent readvertised it and another couple moved in today.
The agent now charges 60% of first months rent plus vat.
Plus a £275+vat “tenancy document” fee
Plus a £350+vat something else fee.
So I reckon it’s going to cost me £1500 for the “find me a tenant” fee and about £3600 in lost rent from the last tenants moving out. (They’d been there 7 years)
I used to sometimes use gumtree to find my own tenants and sometimes use the agent, depending on how busy I was at work.
But now that the agent isn’t allowed to charge the tenant any fees, they’ve lumped all the fees onto the landlord, and because of that, most tenants will only rent a place via an agent as it gives them far greater peace of mind than going direct on gumtree or Facebook.
So the landlord really has no choice now but To use an agent to find a tenant.
It sucks.
I am done with BTL after 20 years and 7 properties. I’ve done very well from the capital appreciation but I don’t see that carrying on like it has done over the last 20 years......
Good luck OP. You will need it!
I haven't posted a lot on here, but felt I must when I saw the fees your agent charges. The agent now charges 60% of first months rent plus vat.
Plus a £275+vat “tenancy document” fee
Plus a £350+vat something else fee.
So I reckon it’s going to cost me £1500 for the “find me a tenant” fee and about £3600 in lost rent from the last tenants moving out. (They’d been there 7 years)
I used to sometimes use gumtree to find my own tenants and sometimes use the agent, depending on how busy I was at work.
But now that the agent isn’t allowed to charge the tenant any fees, they’ve lumped all the fees onto the landlord, and because of that, most tenants will only rent a place via an agent as it gives them far greater peace of mind than going direct on gumtree or Facebook.
So the landlord really has no choice now but To use an agent to find a tenant.
It sucks.
I am done with BTL after 20 years and 7 properties. I’ve done very well from the capital appreciation but I don’t see that carrying on like it has done over the last 20 years......
Good luck OP. You will need it!
My experience is somewhat limited, but have you tried other agents?
I agree that gumtree and facebook are not great, however have you tried openrent? I found it rather good (if you are happy to do viewings).
Good luck to the OP, following with great interest.
30 quid gets your advert on rightmove, Zoopla, and lots of other places.
If the price is right, and the property right, you get lots of enquiries. From incoherent mumbled voice mails, to clear, well written messages. I even had one couple both leave voice mails and messages, not realising the other had done the same.
Because of demand, I organised a 4 hour window on a Saturday, with 15 mins between each viewer. I email my questionnaire, which is fairly intrusive, but only asks the questions which refencing asks. And if they want to rent, they return it.
Given a choice, I choose a couple with kids where either could afford it on thier own, and if they work in the public sector I am more inclined to see then as less risk (police and social workers being the most unlikely to not pay rent)
My wife goes on gut feel. She can see through people and spot a half truth miles away.
I won't rent to anyone that needs a guarantor. It's more hassle.
I did realise that the rental agent fees were high. They told me so at the time, but I’ve used the particular lady a few times over the last 15 years so felt I’d give them one last chance.
Plus, I was flat out renovating another property while this one came up for rent, so it was helpful that they carried out the viewings. There were about 15 separate ones apparently.
I was just about to tell the agent that I’ll give it a go myself, when they found a good couple.
I will give OpenRent a try next time.
Plus, I was flat out renovating another property while this one came up for rent, so it was helpful that they carried out the viewings. There were about 15 separate ones apparently.
I was just about to tell the agent that I’ll give it a go myself, when they found a good couple.
I will give OpenRent a try next time.
Property Number three
This is a two bedroom house and ticked all the boxes, good area, good transport links. It was slightly further away but this was offset by the fact that it needed no work at all.
The seller was a landlord and had it fully painted and cleaned and was really motivated to move it on. It’s worth saying this deal was done during the COVID lockdown as such I have only been in the house the day I viewed it everything else has been done remotely .
This is also where I ran into significant agent difficulties which I will write a separate post about.
£93,000 asking price
Agreed the deal at £85,000
£21,250 deposit (25%)
£3,520 fees
£0 refurb
Tennanted after 2 months and rented monthly for £610
Rent £610pm
Mortgage £139pm
Agent’s fees £44.pm
£427pm Net (26% ROI)
Recap on the current position, three properties in
Total spent so far £96,767
Monthly rent total £1,087 (13.5%)
This is a two bedroom house and ticked all the boxes, good area, good transport links. It was slightly further away but this was offset by the fact that it needed no work at all.
The seller was a landlord and had it fully painted and cleaned and was really motivated to move it on. It’s worth saying this deal was done during the COVID lockdown as such I have only been in the house the day I viewed it everything else has been done remotely .
This is also where I ran into significant agent difficulties which I will write a separate post about.
£93,000 asking price
Agreed the deal at £85,000
£21,250 deposit (25%)
£3,520 fees
£0 refurb
Tennanted after 2 months and rented monthly for £610
Rent £610pm
Mortgage £139pm
Agent’s fees £44.pm
£427pm Net (26% ROI)
Recap on the current position, three properties in
Total spent so far £96,767
Monthly rent total £1,087 (13.5%)
Buy2Let PJ said:
Property Number three
This is a two bedroom house and ticked all the boxes, good area, good transport links. It was slightly further away but this was offset by the fact that it needed no work at all.
The seller was a landlord and had it fully painted and cleaned and was really motivated to move it on. It’s worth saying this deal was done during the COVID lockdown as such I have only been in the house the day I viewed it everything else has been done remotely .
This is also where I ran into significant agent difficulties which I will write a separate post about.
£93,000 asking price
Agreed the deal at £85,000
£21,250 deposit (25%)
£3,520 fees
£0 refurb
Tennanted after 2 months and rented monthly for £610
Rent £610pm
Mortgage £139pm
Agent’s fees £44.pm
£427pm Net (26% ROI)
Recap on the current position, three properties in
Total spent so far £96,767
Monthly rent total £1,087 (13.5%)
In my reckoning on property no3 that is a 7.67% ROIThis is a two bedroom house and ticked all the boxes, good area, good transport links. It was slightly further away but this was offset by the fact that it needed no work at all.
The seller was a landlord and had it fully painted and cleaned and was really motivated to move it on. It’s worth saying this deal was done during the COVID lockdown as such I have only been in the house the day I viewed it everything else has been done remotely .
This is also where I ran into significant agent difficulties which I will write a separate post about.
£93,000 asking price
Agreed the deal at £85,000
£21,250 deposit (25%)
£3,520 fees
£0 refurb
Tennanted after 2 months and rented monthly for £610
Rent £610pm
Mortgage £139pm
Agent’s fees £44.pm
£427pm Net (26% ROI)
Recap on the current position, three properties in
Total spent so far £96,767
Monthly rent total £1,087 (13.5%)
Income:
610-44*12 = 6,792
Investment = 88,520
ROI = 6,792/88,520 = 7.67%
Still pretty healthy.
C350Akra said:
Buy2Let PJ said:
Property Number three
This is a two bedroom house and ticked all the boxes, good area, good transport links. It was slightly further away but this was offset by the fact that it needed no work at all.
The seller was a landlord and had it fully painted and cleaned and was really motivated to move it on. It’s worth saying this deal was done during the COVID lockdown as such I have only been in the house the day I viewed it everything else has been done remotely .
This is also where I ran into significant agent difficulties which I will write a separate post about.
£93,000 asking price
Agreed the deal at £85,000
£21,250 deposit (25%)
£3,520 fees
£0 refurb
Tennanted after 2 months and rented monthly for £610
Rent £610pm
Mortgage £139pm
Agent’s fees £44.pm
£427pm Net (26% ROI)
Recap on the current position, three properties in
Total spent so far £96,767
Monthly rent total £1,087 (13.5%)
In my reckoning on property no3 that is a 7.67% ROIThis is a two bedroom house and ticked all the boxes, good area, good transport links. It was slightly further away but this was offset by the fact that it needed no work at all.
The seller was a landlord and had it fully painted and cleaned and was really motivated to move it on. It’s worth saying this deal was done during the COVID lockdown as such I have only been in the house the day I viewed it everything else has been done remotely .
This is also where I ran into significant agent difficulties which I will write a separate post about.
£93,000 asking price
Agreed the deal at £85,000
£21,250 deposit (25%)
£3,520 fees
£0 refurb
Tennanted after 2 months and rented monthly for £610
Rent £610pm
Mortgage £139pm
Agent’s fees £44.pm
£427pm Net (26% ROI)
Recap on the current position, three properties in
Total spent so far £96,767
Monthly rent total £1,087 (13.5%)
Income:
610-44*12 = 6,792
Investment = 88,520
ROI = 6,792/88,520 = 7.67%
Still pretty healthy.
ROI is the return on your actual cash investment.
Yield is good for comparing houses and areas like for like. ROI is good for working out your specific return on that one property, including mortgage leveraging.
OP, what area are you investing in as that's a good return. Average across the country is 4-5% yield.
Edited by 98elise on Monday 28th September 12:06
ROI and yeild.
Does anyone ever look at it beyond the first decision to buy.
I'm gradually paying off the mortgage on my BTL and the value has also increased.
At any point ROI should be calculated with the current equity minus selling costs. Which means over time, ROI tends to become the same of yield.
Does anyone ever look at it beyond the first decision to buy.
I'm gradually paying off the mortgage on my BTL and the value has also increased.
At any point ROI should be calculated with the current equity minus selling costs. Which means over time, ROI tends to become the same of yield.
Pit Pony said:
ROI and yeild.
Does anyone ever look at it beyond the first decision to buy.
I'm gradually paying off the mortgage on my BTL and the value has also increased.
At any point ROI should be calculated with the current equity minus selling costs. Which means over time, ROI tends to become the same of yield.
Yes. My BTL's started of mortgaged, but I've paid a few off from other investments. That's dropped the ROI, and so has the capital gain.Does anyone ever look at it beyond the first decision to buy.
I'm gradually paying off the mortgage on my BTL and the value has also increased.
At any point ROI should be calculated with the current equity minus selling costs. Which means over time, ROI tends to become the same of yield.
That coupled with ever more attacks on Landlords by politicians have driven me to exit BTL. Prior to Covid I could get the same returns in a REIT and have instant liquidity.
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