Daniel and Janet at our rental offices in Liverpool. The team is set up to look after our own investors and no one else.
The rental process is key to any Buy-to-Let property portfolio. We do not invest in areas that do not have an abundance of tenants.
Areas in proximity to hospitals, schools, and regenerating areas and that offer good public transportation are a few points we take into account before investing.
The rental process starts once you have purchased your property with us (if not before, depending on the property).
It is such a crucial part of the process that we have launched our own in-house rental company in Liverpool. They look after our investors' properties as well as our own.
It's not the first tenant we take but rather the correct tenant - this process can take from a week to two months after the flat is ready to occupy.
1. The critical point is sourcing the right tenant rather and not just any tenant. We advertise ourselves and use other rental companies to source the tenant. Once sourced our team then manages the tenant. Landlords will need a Landlord license per property and will be registered as a* Non-Resident landlord *(if based outside the UK) where the landlord will not be taxed at the source of the rental collection.
2. Once they have a list of the tenants that are interested in the unit, the tenants are then referenced. The standard procedure includes carrying out financial, previous landlord as well as affordability checks.
3. We will also source LHA (Local Housing Authority) tenants who receive their rental income from the UK government and tend to be more secure as tenants. They are called "benefit" tenants, for example, single mothers, disable and veterans. These are usually reliable tenants that tend to settle in and stay and their rental is guaranteed. The one small drawback is that takes two to three months to register. The rental backdated but you are without cash flow for those few months.
4. Once the lease is signed and the deposits are paid, which are held in the government bonding scheme, then the agent will meet and check the tenant in. They will do a comprehensive inventory even if the flat is empty to make sure the property is left in the same condition as when occupied. At this stage, the agent will also check that the tenant has registered with the local council for council taxes as well as any utility bills. These are all paid for by the tenant in the UK. Tenants move in on any day of the month, not necessarily the beginning of a calendar month.
5. Leases are normally signed for six months and thereafter reverts to a month to month basis. Over the years we have come to realise that this works best for both parties. After six months if the tenant is not working out then two months' notice can be given to them.
The tenant, on the other hand, can give one months' notice. This is a very common and make up around 90% of all our leases on the smaller less expensive properties.
6. In London, leases are normally a year but the tenant turnover is a higher which affects yields. In London rentals are also normally furnished whereas Liverpool we rent unfurnished. With regards to our properties in London, we tend to use a local in-house rental agent. We only buy in large, new developments and these always have an in-house estate agent who knows the area and the type of tenant well.
8. When we purchase a building which is tenanted, we look at each flat and either give notice or offer the good current tenants a flat in one of our other buildings. This would happen during the renovation period.
9. On departure, an inventory is done again and where no damage (other than wear and tear) is found the deposit is returned to the tenant. Upon notice of intent to leave, our team commences advertising the property for rent, reducing unleased periods.
10. In the case of problem tenants our management team is on hand to assist you with the legalities. However, proper screening reduces this risk.
The landlord pay's a tenant set up fee which covers advertising and screening processes. This is usually 1 month's rental. A monthly management fee of approximately 10% covers the rental collection and full property management. The Landlord is also required to pay the ground rent and monthly service fees (levies). Council taxes, water, electricity, phones and any TV fees are all paid for by the tenant unless otherwise stipulated, for example, if a deal is fully inclusive, for example, student and communal housing.
These costs are all reflected in the Cash Flow analysis and included in all our Due Diligence.
Property and tenants are a living and fluid entity. Each tenant and each flat are different. We try our best to keep unleased periods to a minimum but it's not always possible. As the UK-based team, we work tirelessly to get the best apartments, best yields and of course, the best and most reliable tenants. It's a work in progress and is ever changing but we are on the ground and committed. We believe very few companies can make that claim!
You will find that throughout all our communication we stress the importance of owner involvement. You don't need to be hands on every day but you do need to ask questions and be actively involved in your investment. This is a critically important to successful property investment. The best part is you are in control and not blindly allowing a third party to control your investment (essentially your cash).