Worries that rent arrears will increase with job losses

It has been predicted that more and more tenants will now default on their rent following the news that unemployment has reached a 12-year high as 2.26 million are now unemployed.

The Office for National Statistics released these figures on Monday, showing that the number unemployed has grown by over 200,000 in just three months. The Managing Director or HomeLet responded by stating that we should expect a proportional rise of the number of landlords not seeing rent for their tenants.

The figures from the Office for National Statistics also showed that the number of people currently in work has seen its biggest slump in one quarter since records began in 1971.

One of the worst areas to be hit is youth unemployment for those aged 18-24. This has increased by 74,000 to those out of work now at 695,000.

HomeLet provides tenant referencing services in the UK, and the majority of its 30,000 applicants each month are aged in this 18-24 bracket.

The figures for youth unemployment are at the worst they’ve been for 15 years, and this is expected to get worse over the next few month as a whole new batch of school leavers will be attempting to find work.

It is expected that this figure could impact the private rented sector in areas that rely heavily on young people finding jobs and taking rented accommodation as opposed to staying in their family home.

This rising unemployment in young people could delay the recovery. Even those who manage to find jobs are facing an uncertain time ahead.

In the case of landlords, many rely on monthly rent to pay the mortgage – so missed payments could be a huge problem. HomeLet director urges landlords to take out landlord insurance to protect themselves in these circumstances.

Things Looking Good for Landlords

Things are looking good for property investors after signs that the housing price falls are now easing off in many areas. Rents, that were seeing sharp decreases, are also getting more stable.

Agents are now seeing an increase in investors who are looking to buy a second home or add to their portfolio of property. Even those who only expect modest returns are attracted to buy-to-let property as a way of boosting their income.

In the second quarter of the year, the gross return on houses has increased since the last quarter from 4.8% to 5.1%. This is according to the Association of Residential Letting Agents, where the yield for flats has risen to 5% from 4.9%.

Housing analyst, Hometrack, predicts that gross yields could make it to 7% next year as cheaper properties are likely to continue losing value.

However, potential landlords should still think about many of the costs involved in renting out their property – which can take a large portion of their income. This may include income tax, maintenance, agents fees and more.

Smartlandlord estimates that these costs can take around 1-1.5% of all rent profits, even within using a letting agent. This is coupled with the fact that many landlords have been forced to lower their rent in recent months.

There are now signs that the market is improving, and letting agents claim fewer tenants to be demanding lower rent. Certain properties, including one and two bedroom flats in London, seem to be improving more quickly than others.

Landlords Reminded to Research

One industry representative has recently reminded landlords that the buy-to-let property process is all about the research.

Editor of website Property Hawke, Chris Horne stated that there are a number of amateur landlords around the UK who must ensure they conduct research in a number of areas before they decide to make a purchase.

Horne added that it is important to understand the kind of property they are buying alongside the location and the rental demand.

Earlier this month Citizens Advice reported that there were three million private rented sector households across the country. As such, it is important for new landlords to understand the competition.

Once properties have been purchased, decisions still remain as to interior decoration and what should go into the home.

Huge Cost in Not Performing Inspections

A man from East Kilbride recently found himself £20,000 worse off after a tenant renting his property completely destroyed it.

Ricky Montgomery is urging other landlords to regularly check up on their tenants and properties to avoid making the same mistake. Ricky only visited the house a few months ago in order to pay a heating engineer. He couldn’t believe his eyes when he say the damage.

The shock came in the fact that internal doors had been completed ripped off, the furniture was in complete pieces and spread through the house, the walls were covered in different paint, the kitchen fittings had been destroyed, a window had been smashed and the home was generally completely destroyed.

The smell of the property was also unbearable due to the fact that litter and left over food had even left across the building.

Ricky is telling his story in the hope that it will warn others who also rent out property. If he had checked on his tenant regularly he would have been able to save him and his wife a great deal of stress and money.

After this damage and mess caused by the tenant, Ricky and his wife have been forced to remortgage the property in order to cover the cost of fixing up the property and bringing it back to a liveable condition.

Ricky told the news that he and his wife originally agreed to let the property to a young women with her two children. The rent was always paid on time through the DSS, and the tenant never phoned with any problems.

During the five years the tenant stayed at the property, she had another five children. There were therefore 6 children living at the property at the time Ricky was called out to fix the problem with the heating. A routine visit to pay an engineer suddenly led to the shock discovery of the mess and destruction to the property.

One room of the property was used for Ricky’s wife to store her father’s good furniture. The tenant used this room to pile junk on top of the furniture, so much so that the door will need to be taken off in order to get into the room to remove the mess.

In total, the damage and mess is costing up to £20,000 for repairs and replacements.

Landlords Must Adhere To The Law

A reminder about landlord responsibilities has been issued by the managing director of the Buy-to-Let Show, Oliver Romain.

When it comes to landlord law, Romain stated that it is vital that private landlords know the legal requirements and obey them where they apply.

There has been a steep rise in those who have become an ‘accidental landlord’. If this is the case, you should tell mortgage company and insurance firms of the situation so that they are aware your home is being used for business purposes.

There are a wide range of legal landlord issues that those in the buy-to-let industry must abide by, explained by Romain.

He stated that there are more than 80 different laws and regulations covering this area of the rental sector that all affect landlords. It is important to take time to learn about the regulations due to the impact they can have on landlords.

Earlier in the week the National Landlords Association was warning that landlords should be aware of the possible problem of drug use in rented properties.

Landlords Should Get The Right Cover

In today’s housing market there are now more and more properties available to let in the UK. Not only have there been a rise in the number of houses that have been repossessed, but tenants are generally staying in properties for longer in order to save money when it comes to paying a bigger deposit.

It is important that landlords insure their property for the right amount and the right levels of cover according to their circumstances. There are a number of online tools that can help landlords to consider how much to insure their properties for.

Once you have considered the sum that your property should be insured for there are a number of landlord insurance companies who can provide the cover for you.