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  • Buy-to-Let

    Prospective tenants

    Hi guys.

    I've just finished doing up my first BTL.  I've met a couple of the neighbours to the flat over that last couple of days (3 bed maisonette set over 2 floors). 

    As I was walking out after finishing the flat, one of the neighbours approached me to say that if I'm looking to rent it out, her aunty is looking for a place as soon as possible and has a budget of up to £900. 

    I was thinking of trying to get £675 for it but would settle for £650.

    The neighbour is actually an agent for a private landlord and said she could manage it for me if I wanted (only charges for hours rather than a set fee).  My mortgage terms do not allow "Local Authority/Housing Association Tenants where the rental contributions will be made through a DWP payment".

    Her aunty is on currently on benefits but has two daughters of 21 and 24 who work full time and are willing to go on the tenancy agreement.  The neighbour said that as they are lower earners of less than £28k, estate agents don't tend to go near them as that is a cut off.

    I said I would have a think about it and find out about the situation (from the fantastic community on here).  I wouldn't want to do anything without being able to get rent guarantee insurance as it's my first place and so a no brainer.

    The plus side is that I wouldn't need to pay higher agency fees and a monthly rate.  I could manage it myself if I wanted (would need to get licensed with RentSmartWales) or find out some more details and get neighbour to manage it.

    On the down side, I'm unsure of the risk due to not encountering this situation before through personal experience or even reading through the many threads on PT.

    Any advice from you fantastic experienced landlords would be amazing if you have some please? Has anyone had this kind of situation occur before? Could I get the tenancy in the name of the 2 daughters to comply with the mortgage terms? Would that be subletting and affect things then?

    Feel free to ask anything as I have no doubt left some info out.

    Thanks

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    I would be very sceptical of the offer!

    Why is the neighbour, an agent, suggesting £900 when you believe it is worth £650?

    What sort of tenants do they manage privately?

    How does someone reliant on benefits have that budget?

    Something illegal/immoral springs to mind

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    A good teacher must know the rules; a good pupil, the exceptions.

    Martin H. Fischer

    Be very careful of people who are aunties and will manage your property .Laws have changed now and

    anyone managing landlords properties need  to be registered with Rent Smart Wales .

    Take a look at rules for Rent Smart Wales as its important to know your obligations.

    I think all adults living in the property should be on the contract so will need checking out .Credit checks

    work references etc.

    Which area is your property in.

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    It may be that this all falls into place for you by a stroke of luck

    The neighbour is the key to  assist join the parties together

    Do a deal where she oversees management  but you learn from them as a kind of apprentice

    I would be meeting with all four and ask all your questions to sus out their credibility

    The discrepancy between your 650 and their 900 is a concern

    Who is out of synch with the market rate  - you or them ?

    But @ 300 a room it maybe what they are thinking budget wise for all 3

    Also in a few areas the HB rate is still above the market rate.

    The HB rate goes with the person not the property but this is unlikely to be the case in this instance

    If you put the AST in just the daughters name then the aunt cant claim the benefit so that wont work

    Some of the lenders have just change their renting conditions to allow HB so double check

    But there will be likely a clause in there not allowing sub letting

    Also the freeholder may not like it

    So lots of hurdles to get over first

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    Jonathan Clarke. http://www.buytoletmk.com

    Thanks for the reply guys. Their budget was up to £900, not that they'd pay £900 for that particular flat. It was when she first approached me before seeing the flat. She suggested I should market for £700 and be open to offers for £675 when she saw the place.

    It is in Caerau in Cardiff.

    They could afford up to £900 as there are 3 (2 working) of them I guess, only £300 each then as JC said.

    The agent part was separate to the fact that her aunty was looking for a place. She just offered that she could manage it for me if needed. I was thinking about the learning from her as an apprentice part as well. She is registered (obviously I would need to check it out fully first). She oversees 6 other properties for a private landlord. I would do the course and manage myself as an alternative.

    Yes it would be a hurdle with the aunty if she needed to be on the tenancy as she has no guarantor (hence why they were struggling to get a place at the moment).

    After speaking to Alan Boswell group, in order to get RGI, the aunty would need a guarantor in order to get it. If she wasn't on it, would she still get benefits for a single room (only £242.71/month)? I would need to check on the subletting rules for my mortgage.

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    I assume the 2 daughters are living with the Auntie? As why would a single person want a 3 bedroom property.. A joint tenancy with all 3 would be best but you must carry out proper credit checks on all of them and get reference from previous landlord/s.

    Sometimes things seem to good and if these checks are overlooked  you could be looking at a costly mistake.

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    Yes the daughters would be living with her. I said I wouldn't be able to do anything withut proper checks etc first. The neighbour said that they'd be able to give references of previous couple of landlords.

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    Just occasionally such deals work, but my suggestion is that you set the rules and you play by them. 

    As a known local landlord I often get asked by people wanting to rent houses what we have available and whilst I sympathise with the fact that there is a shortage of housing, nobody gets in by the back door. 

    I tend to use agents on a tenant find basis; they can sort people out for me without me having to make difficult decisions, which all takes time (I could do it myself as I am a chartered surveyor who has owned agencies).  I refer speculative enquiries to my agents and it's surprising how many are unable to complete an application form or disappear at the mention of proving their ID!

    As this is your first, I think you should find your own local reputable agent (qualified, bonded, etc.) who will be on hand to deal with everything that your first letting will throw at you; as nice as auntie may be I think she's an avoid until you have more experience.  I'd also be wary of an agent looking to let to their family - where will their advice lie when the rent stops coming in? 

    You need somebody 100% on your side.  The facts that have been put to you already indicate something less than straightforward - unless you are in an area of predominant housing benefit (in which case you've got the wrong mortgage) you need an easier life - tenants who can pay the rent directly themselves.  I routinely avoid guarantors as I have yet to find one willing to go through with making good.

    £28,000 is not usually a cut off for a tenancy; I used to use a referencing agency who based affordability on less than 40% of salary. In your case they could get in (with no adverse credit history) with just £21,000 between them.  The fact is more likely that there are plenty of higher paid people looking too.

    As you are in Wales you will need to be a registered landlord (over and above the agent's licensing).

    Also, just watch out that you're not creating an HMO if you name three people on the tenancy agreement.

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    Yes, the neighbour said the agents locally tend to just use that £28k as a cut off I think. After speaking to Alan Boswell I realised they would have to earn a minimum of £21k as I was told it was 2 and a half times the rent hence your agent's 40% I guess.

    I was thinking of using the local agent but the better returns piqued my curiosity. Plus I haven't actually heard back from an email with questions that I sent last week, after 2 visits to the shop when they were not there.

    The agent being a relation is another potential danger as my girlfriend pointed out.

    I am interested in the idea of a private letting agent though as opposed to someone who you can't get hold of easily even though it costs more.

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    When something appears to fall into your lap in property, it has always turned out to be a negative, in my experience.

    How can the auntie afford £900 pcm and why would they let you know they had that budget?

    Many tenants seek out naive/inexperienced landlords to get a property, hoping that the referencing won't be so robust.

    I would not entertain this offer at all as it is one of those cases that is "too good to be true" and I have no doubt that that will turn out to be the case.

    If this is your first attempt at BTL, go through an experienced and reputable agent to at least find the tenant, if not have a fully managed service.  That is my advice if you want to sleep at night! Smile

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    Thanks V. The neighbour said about the budget before she saw my property, while she was explaining the situation. I wouldn't say it's a case of too good to be true as I wouldn't be able to charge more than the market rent. Things can fall into your lap sometimes I find but you're right to err on the side of caution if it does.

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