… and the 5 ways on how
all Southampton landlords can escape the worst of the coronavirus downturn on
their Southampton rental property.
With the second
lockdown starting on the 5th November 2020, does this mean Southampton
landlords can wave goodbye to their Southampton buy-to-let investment and see
it go up in smoke on the bonfire of buy-to-let dreams, like a Guy Fawkes
puppet?
With many Southampton
tenants at risk of losing their jobs after the furlough scheme ends in March and
as the reverberations of the coronavirus recession hit this winter, what does
this all mean for Southampton landlords and what can they do to mitigate the
risks?
Since the spring,
most Southampton tenants and buy-to-let landlords have been protected from the coronavirus
crisis thanks to the banks with their mortgage payment holidays and job support
schemes.
Before the
second lockdown was announced on the 31st October, it was expected that
as the furlough and mortgage payment holidays were due to end on Halloween,
there would be some serious fallout from those schemes finishing. One silver
lining from the lockdown (if you can call it that) is that mortgage
payment holidays and furlough have been extended, yet does all that just kick
the can down the road?
The
question is, what can Southampton landlords do to mitigate the financial risk
on their Southampton buy-to-let investment?
1.
Help Your Southampton Tenants get the Financial
Support They are Entitled To
Billions
of pounds are being spent by the Government to help those people whose income
has been hit by coronavirus. The better Southampton letting agents and
self-managing landlords are supporting, guiding and helping those Southampton tenants
in financial difficulty to gain a better understanding of the Universal Credit (UC)
processes, systems and payment levels, to enable their tenants to pay the rent
and ultimately indirectly help their Southampton landlord. Also, if you are a Southampton
tenant, and that support isn’t given when you ask, don’t forget Southampton
City Council do hold special cash reserves for discretionary housing payments,
which can be utilised to close the gap in rent between what UC pays and your
current rental commitments. Also, the Government’s Money Advice Service & Citizens
Advice are a good online resource for what you are entitled to.
2.
Adopting, Adapting & Improving Your Southampton
Buy-to-Let Property
Demand for
gardens or office space means Southampton landlords will need to think outside
the box. Those Southampton homes with tenants sharing (e.g. HMO’s and shared
houses) might need to price their pre-coronavirus 4 bed sharing house to maybe
a 3 bed sharing house plus a work/office room and, if you haven’t already,
installing a top of the range, fast and dependable internet connection could be
the thing that swings it. Outdoor space and gardens are really high on housebound
tenant’s wish lists, in fact I have come across some Southampton tenants
demanding that new rental properties have a landscaped garden or those that bought
a dog or cat for company during the first lockdown, are looking for their landlords
to relax their ‘no pets policy’.
3.
Hold On to Your Good Southampton Tenants
Those Southampton
buy-to-let landlords with decent tenants, who find themselves in financial dire
straits should consider attempting to keep them, even if their own monetary
circumstances mean they have to decrease their rent somewhat over the short
term. Now of course, I would expect that tenants need to prove their
circumstances, yet if their plight was real, surely it would be a wise choice
to reduce the rent by perhaps £50 a month and support your tenants? You know they
are taking great care of your Southampton rental property and rather than risk
the issue of advertising your empty buy-to-let property – particularly when there is no assurance you
will achieve your existing rent and ultimately risk drawn-out void periods with
no rent coming in at all. What I would suggest therefore, in such circumstances, is that you create a
new Assured Shorthold Tenancy agreement with a longer term with your existing
tenant at a lower rent – a temporary measure but with peace of mind for both
parties which can then be reviewed once that tenancy is up for renewal.
4.
Carry out Firmer Checks on Your Prospective Southampton
Tenants
Many
private Southampton landlords and a few slipshod Southampton letting agents
tenant checks are somewhat lacking in their depth. Trust me, there is tenant
referencing … and then there is ‘proper’ forensic tenant referencing. As
certain parts of the British economy have been hit harder than others, Southampton
landlords must consider when choosing their new tenants, the type of work they
do and who their employer is, to enable them to decide on
their future capacity to meet their rental commitments.
5.
Rent Guarantee Insurance for your Southampton Rental
There are
still insurance companies offering landlord rent guarantee insurance if your
tenants become unable to pay the rent. Many insurance firms removed these insurance
products in the first lockdown, yet some have returned to the insurance market
although insurance premiums have gone up in price. Remember to check the small
print of the insurance, although you will get a lower insurance premium if you
can show stringent tenant referencing (as per the previous point).
The Nuclear Option – Eviction
Southampton landlords need to be conscious that, should their tenancy run into trouble, the Government have changed the rules when it comes to eviction during the coronavirus pandemic. Going into the first lockdown, there was already a backlog in the courts and now, just before going into the second lockdown, bailiffs have been instructed not to enter rental properties in high risk Tier-2 and Tier-3 Covid-19 areas.
Eviction
really does have to be the very last option. Negotiation or arbitration will nearly
always deliver quicker and improved outcomes for both parties. Southampton
landlords who do come to mutually agreeable arrangements with their tenants by briefly
reducing the rent, or allowing payment holidays with legally enforceable pay
back schedules should ensure they get the agreed terms in writing and run
by a solicitor or their agent (feel free to drop me a note if you need advice).
However,
if eviction is required, it doesn’t mean the tenant gets off ‘scot free’.
Evicted tenants, depending on their circumstances, will either be placed
temporarily into an inexpensive B&B, asked to move in with family or given
one of the local authorities temporary accommodation properties, with the goal
to then move them into long term council accommodation (as the chances of
obtaining private rented accommodation would be slim with agent’s heightened
reference checks – more of that at the end).
The Potential Cost of Evicting a Problem Southampton Tenant
The average rent for a Southampton property currently stands at £1,372 per calendar month.
Thankfully, evictions are very rare. Last year before lockdown, tenants from 201.4 rental properties were evicted each working day in the UK ... but if yours was one of those, that is still a potentially large cost.
Working on the basis that most
evictions from the first rent not being paid, through to eviction,
refurbishment of the kitchen, bathroom, carpets and décor (because often
these do need sorting/replacing) were taking on average between eight to
nine months before coronavirus hit, (plus the mortgage payments), this means a Southampton
landlord could be hit by a £34,951 bill, broken down as follows:
|
Missing rent (8½ months) |
£11,662 |
|
New kitchen |
£4,133 |
|
Bathroom |
£2,479 |
|
Carpets |
£2,261 |
|
Redecorate |
£1,878 |
|
Agents fees |
£1,225 |
|
Legal fees & court fees |
£3,500 |
|
Mortgage payments |
£7,814 |
|
Total |
£34,951 |
This is why it is so important to get the best tenant from day
one. Many Southampton tenants, who know they wouldn’t pass the references of
letting agents, are attracted to those private landlords who don’t use a
letting agency, as they know their referencing checks are not as strict and may
be a softer touch. That’s not to say going with a letting agent is a guarantee
you won’t need to evict; it just means the chances are much, much smaller. Like
anything in life - it’s a choice.
Whether you are a Southampton landlord who uses a letting agent or
not, and feels their reference checks are not to the standard or level you
might hope or want and you need a chat
about the best rental guarantee insurance, then give me a call ... what have
you got to lose?
If you would like to pick my brains on the Southampton Property Market – Just drop me a line on social media or email me @ brian.linehan@belvoir.co.uk you can also call me on 023 8001 8222.
If you are looking for an agent that is well established, professional and communicative, then contact me to find out how we can get the best out of your investment property.
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