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Option Homes Ltd - News- Why managing a property should mean treating it like your own

Why managing a property should mean treating it like your own

Date Added 19/11/2015

Tighter returns and new regulations make it vital for landlords to make sure their properties are working hard as an investment. This makes it essential to examine the small print on what letting agents promise to deliver as part of their `full management` service.

It`s hardly surprising that the number of agencies offering to manage rented properties has mushroomed in recent years.

Quite simply, letting residential property is one of the nation`s biggest growth markets.

Between 2001 and 2014 the number of privately rented homes in the UK rocketed from 2.3 million to 5.5 million: it`s now one in five households. That rate of growth is expected to carry on over the next decade as the divide between those who can afford to own a house and those who cannot widens.

It`s not that mortgages are less affordable. In real terms, they aren`t (at the moment anyway) any more expensive than they were ten years ago. However, tougher lending criteria mean that bigger deposits are required, while house prices continue to accelerate away from growth in terms of earnings: current estimates put average growth at 5% per annum between here and 2020.

That makes it a situation of moving goalposts for anyone looking to get their foot on the property ladder.

Conversely, anyone already in the property market will see their asset increase in value, while being able to renegotiate ever-cheaper mortgages - so more and more people are owning their asset outright. Since 2001, the number of houses with a mortgage has dropped from 45% to 30%.

So landlords are getting it all their own way... right? Well yes and no.

Certainly the Chancellor`s `Budget Bombshell` to rein in the interest breaks on mortgages for buy-to-let landlords, plus effectively reducing what they can claim back in repairs, will shortly take some of the shine of being a landlord – especially those borrowing to buy.

Added to that, a raft of new legislation is coming in (as from this October) which will increase the workload for anyone managing a property – most significantly the right to rent rules, which effectively turn landlords or their agents into unpaid immigration officers.

But the biggest shift that landlords should take notice of is the downward pressure on rents in relation to house prices – not least as a result of tightening rules on housing benefits.

According to RICs, rents across the country should be rising by around 3% in 2016, with London actually below the average at 2.3% - well below the expected rise in house prices. And this after several years when selling prices have totally outstripped rental levels: not least in 2014, when London properties went up by an average of 17.8%.

It all adds up to squeezed returns, making it vital for landlords to ensure their property is managed with maximum efficiency.

What does that mean? Well let`s look at repairs and maintenance: vital on-going work to keep a property in good condition. It`s common practice amongst many agencies providing a full management service to commission this work... and then charge their client a fee or mark up for doing so.

To me, that`s simply outrageous, and not something we would dream of doing.

Equally, there are agencies for whom `full management` means letting a property, collecting the rent and responding if a fault is reported – and that`s it.

To me, a full management service should mean treating a property like it was your own. And would you, for instance, leave a stranger to live in your house for anything from six months up to a couple of years without regular inspections?

Our policy is to drop in after the first month and then make full quarterly inspections. It doesn`t have to be onerous for the tenant, and we find that most recognise that it`s in their interests too. We can pick up on issues – such as condensation or radiators not functioning properly – that could develop into something more serious down the line.

They could well be issues for which they could be held responsible – and face a bill. It makes sound sense to deal with them speedily.

Of course, we can also spot the signs of someone subletting a property or having more people regularly staying there than their tenancy allows.

But perhaps the most important reason to stay in regular contact with a tenant is that you pick up on small things that might be causing them problems and can sour a tenant/landlord relationship if not dealt with in a timely way: issues with a fellow HMO tenant perhaps, or electrical equipment not working properly.

Reacting quickly to small annoyances or frustrations like this help retain good tenants, and avoid tenant `churn` that costs time and money, and can lead to voids.

To us, it`s all about maintaining good relationships and it`s at the heart of what we consider to be good property management: it costs very little and it invariably proves to be a very sound investment.

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