One does wonder…

…why a landlord needs the services of a lettings agent.  What a landlord needs is the services of a good agent to facilitate their (the landlord’s) property being rented out to the right people for the right price-for all parties.  Thank you for pointing out the blindingly obvious Chesh, I hear you mutter.  My pleasure.  Further to the earlier blog that featured ‘We’ll have the pennies out of a dead man’s eyes” Agency, we were contacted by a landlord who had a tenant in his property that had been found by an agent on a ‘let only’ basis as the landlord was of the opinion that he “knew best” regarding letting his house.  The tenant that had been found for him was four months in arrears, had a Dr Dolittle thing going on in the property that was now “wrecked”.  Most excellent.  The subsequent conversation then took place:

GC: “Mr Landlord, have you served the Section 8 Notice?”

Mr L: “What’s that?”

GC:  Ohhhhhhhk. $%^& me. “Have you carried out the bi-monthly inspections?”

Mr L: “They would not let us in, so we had to go when they were at work.”

GC: Double $%^& me. “Ah, good.  So you know where they work and can issue papers at their place of work?”

Mr L: “No, I haven’t a clue where they work.”

GC: Triple $%^& me. “No problem, do you want me to get them out of the property?”

Mr L: “No. The original ‘find only’ agent has re-housed them. Can you believe it?”

Actually, yes.

GC: “Would you like us to manage the property so all this hassle is taken away from you and all you have to do is look at the monthly rental sitting in your bank account?”

Mr L: “You must be joking mate.  I am not paying you £50 a month to do f”£$ all.”

After I had pointed out that this approach had left him £2000 in the hole and that wasn’t including the cleaning and redecorating of the property, I respectfully suggested that we were not the agent for him.

Trust me, when as a landlord you-through a combination of luck/judgement-get the right tenant without using the services of an agent, it is wholly understandable to ask, Why use an agent, this is easy?  When things do go wrong, that is when a good agent earns their corn, with the emphasis on earning it. Errant/missing tenants, missed payments, boiler’s having a nervous breakdown at 3am when it is -5 degrees, those are the reasons why you pay for an agent to manage your property.


Why do people hate us so much…

…. other than an inherent dislike of people who have it all; looks, flair, sartorial elegance, exquisite taste, Errol Flynn-like measurements… Anyway, enough about that lucky %^&£$) who we would all like to be.  It is though an interesting question. Having popped across to advise the Cordoba football team on the benefits of a diamond formation and enjoying a post-training sangria, I met a couple who had every reason to think letting agents were the spawn of the devil.  Over a six year period, renting throughout through the same agent, they had changed properties four times as every time they had finally agreed upon where to put the sofa the landlord had decided to sell the property.  Each time, their dutiful agent ‘rescued’ them from their plight by sourcing another property for them straight away.  Four times?  Of course, on each occasion, as it was a new landlord the agent said that they had to be re-referenced; at £300 each time.  Really.

On my return, I researched their situation a little further as I had the details of where they had lived throughout their own version of Changing Rooms.  At no time did the properties that had been claimed that the landlord wanted to sell ever appeared for sale.  They had though appeared as available to rent on several occasions, (at the exact time when a tenancy would be up for renewal) and had been let within weeks.  The four properties had, in a six year period, generated a total of twelve new rental contracts.  So that is twelve lots of charges to the landlord for “finding” a new tenant (one can just hear the conversation, “Sorry Mr Landlord, the tenants want to move out, but don’t worry, we will have it let again soon..”) and twelve lots of administration/referencing fees to the prospective tenants.  As Noel Biderman replied when asked why he ran the online ‘dating’ service Ashley Madison for married men and women that has 30 MILLION members, “You do the math!”  In these parts, it is commonly known as, ‘having someone’s pants down’ but not in the capacity envisaged by the Ashley Madison members.  Others may call it a variant on a Ponzi scheme.  It is obtaining money under false pretences.  Much like half of the Cordoba football team.

Yes, we are all in the business, indeed any business, to make money.  That is the aphorism.  Unless of course you run a charity like Kids Company where you don’t want to make any money, but you don’t pay any tax or VAT and then get the Labour chancellor to write off £600,000.  I wonder whether that comes up in the current leadership election? But that is for another blog.   Without wishing to have sole occupancy of the moral high ground, how does a letting agent reconcile this and be able to sleep at night?  Very well indeed I would imagine, in the master bedroom beside the pneumatic blonde PA.  There lies a whole new meaning to the question, “Do you take shorthand?”

If it ain’t broke…

Whilst partaking this week in a brief sojourn in Spain, I found myself in the same hotel as the football team Cordoba FC.  Having imparted my Harry Rednappesque pearls of wisdom, ‘Don’t tell the taxman anything ….’ (That was a joke Harry, you can send your libel lawyer back to his golf club), I found myself comparing the realities of life with what our national newspapers were choosing to report.  As the pound has been sent on a meteorite-like trajectory against the euro to reach its highest level since 2007, the news has chorused how the British can now have their cheapest holidays for years. £500 now buys you close to 700 euros, which is 132 euros more than two years ago.  The cost of a 5 euro drink has now fallen to £3.60.  So why change £500? Why not change just £440 and still benefit from the strength of the pound once you have cleared Customs?  If you take the money, however strong the pound is against Johnny Foreigner you will spend it.  All of it.  Just look at my bank balance after being away with the current Mrs Chesh.

This encouragement to buy industrial quantities of sun cream was accompanied by dire warnings from the Governor of The Bank of England (BOE), Mark Carney.  Interest rates will rise in the near future and those borrowers who took out mortgages at rates lower then One Direction wear their trousers will be in mortal danger as they have never experienced a sudden increase in costs.  Let’s look at this.  If someone obtained a mortgage at rock bottom rates, they either took it out after the crash at which time they would have been subject to stress testing and the mortgage market review to see if they can still afford the mortgage should rates rise, so the buffer is built in to the original mortgage offer; or they have strapped themselves up with Porch finance that they acquired after obtaining their original mortgage.  A little dishonest? Very much so, but lenders do still seem to think that they are  worthy of an honesty not often seen outside the confessional.  Let’s face it; what are three Hail Mary’s in comparison to having your home repossessed…Is that the Holy See calling..?  The BOE are apparently worried that any rise in interest rates will halt the recovery.  So why do it then?  On the basis that the economy is recovering why change things to put it in jeopardy?  I have a theory:  George/Gideon and Mark are muckers-one was given his job by the other- and last week a whole range of cuts to our benefit system were announced (‘about bloody time’, I hear the masses cry).  Maybe, just maybe, the announcement that interest rates will go up at some time is Mark helping out his mate to prove that we are all in it together.  Speaking of changing things, having watched Cordoba train this week, I now understand why they are flopping about in the murky depths of the pond that is the Second Division of the Spanish League.  Boys, If I can see that you need to make some changes, it isn’t so much broken but almost beyond repair.

Where to begin…

It may be the middle of ‘The Season’ and the social butterflies are whizzing between the Summer Party at The Serpentine Gallery, watching the Ashes, attending the Hilton/Rothschild wedding (now that must be some pre-nup) and parking their well-clad posteriors in the Royal Box at Wimbledon (if one can squeeze past the omnipresent Middleton tribe), but for those of us who do not appear regularly in Hello, Vanity Fair and their ilk, it has been a week of much to digest on the property front that may or may not affect one’s ability to flog a house. For some instead, it may be a case of flogging a dead horse.  Let me explain.

Pre Gideon’s budget we had an example of what may be wrong with our society and its rewards for earnest endeavour, or let’s be frank, for doing absolutely $&^£ all.  We had a second time buyer who made an offer on a house.  As any professional agent should do prior to taking somebody to view a property, we checked that he had a deposit, plus funds from the equity from the sale of his house, plus a Mortgage in Principle (MIP). Having had his offer accepted, he went back to his lender of choice to complete the mortgage application.  All was rosy in the garden.  That is until the lender came along with industrial-strength weed killer and nuked everything within a five mile radius.  Our buyer had failed because on affordability, the lender (or should one say the minion completing the form on the computer), had deemed that the cost of looking after and feeding his dog pushed him over the limit.  Of course it did.  For the sake of procreation! (work it out).  The answer is get rid of the dog (unfair) or don’t declare the dog on the mortgage form (untruthful).  Incidentally, he has had a mortgage with the lender for four years and has never missed a payment.  On the same day, a young female (I would be done under the Trade Descriptions Act if I used the word ‘lady’), came in to the office to enquire about renting.  She was on benefits, had three children and the DSS were going to pay her first month’s rent as she was deemed to be ‘vulnerable’.  The bond scheme were going to underwrite the deposit, so the system, the state and those members who earn and pay their taxes (see Exhibit 1-the gentleman above), were funding the entire enterprise.  Added to this, she wanted to know whether the landlord would allow pets as she had three dogs.  I checked with the DSS and the bond scheme and neither of them had taken into account, or seemed unduly perturbed that the taxpayers were subsidising Operation Pooch.  Yet the bank that likes to give that “little xtra” fell at the first when learning of the existence of one dog.

Fast forward twenty four hours and I have-after consideration, excogitation and deliberation-deemed that the future prime minister has played a blinder.  Let us consider the headlines, misquotes and budget induced hysteria and soothsaying.  The Budget Special in the Daily Mail Thursday 9 July 2015  hollered, “Tax Relief Blow to Buy to Let Market”.  What a load of tripe.  Phillip Waller reported that shares in Baretts, Taylor Wimpey and Bob the Builder Enterprises “tumbled” due to Osborne-limited tax relief on buy-to-let mortgages.  There was another corker on page 9 of the same publication penned by none other than Louise Eccles (who has previous on this subject).  Apparently, “…shares in house builders…estate agents… and buy to let lenders… tumbled”.  Do I sense a pattern emerging here?

Firstly, any professional landlord who is a 40 or 45% taxpayer who was operating pre-budget as a sole trader and not a limited company should consider having their accountant shot and if post-budget the moves are not in place to arrange a limited company, then the said accountant should be hung, drawn and quartered and then shot.

Secondly, in Louise’s article, she religiously quotes many experts including Paul Emery at PWC who opines that, “this is going to make landlords put up rents and does nothing to resolve the issues of a lack of housing supply and credit availability which is creeping up”. ibid  The Chancellor is then quoted, “Buy to let landlords have a huge advantage in the market as they can offset their mortgage repayments against their income, where as home buyers cannot”.  I wholly agree on the credit situation.  But.  Nowhere was it mentioned that landlords pay a higher rate of tax on any annual profit and their capital gains tax liability is greater when they come to sell the property.  When a home buyer comes to sell their home, there is no capital gains tax.  The Big G said that these reforms would create, “a more level playing field between those buying a home to let and buying a home to live in”.  People do not buy homes to let, they buy properties.  Look at the dictionary definition of a home.  But George knows this and is merely letting the poor saps come to the (erroneous) conclusion.  Louise (whose fire is well and truly stoked by now), also decries the removal of the automatic 10% wear and tear allowance for furnished properties.  So that’s one in every hundred that could be claimed automatically by ticking a box and not having to show any receipts.  Again, I think that the man with the red box is well aware that any landlord worth his salt keeps all the receipts for maintenance and that this always comes to more than 10% of the rent.  C’mon people, wake up.

My respect for the Chancellor is driven by the fact that, like any truly consummate politician, he does not actually mean what he says in the manner in which the great unwashed have chosen to interpret it and he wants the proletariat to come to their own conclusions about what it means for them.  Anyone who is a professional landlord will/should be operating as a limited company and subjecting themselves/their limited company to corporation tax and dividends.  Just check those rates out as opposed to higher rate personal tax.  If a professional landlord isn’t doing this I refer you to my earlier comment about using accountants for target practice. The area that the Chancellor appears to be going after is the amateur landlord division, referred to in Louise’s article, as “the boom in amateur landlord investing in property in recent years”. ibid That’s right, because 7% yield is better than 2% interest in the bank.  If any of these “amateur landlords” are basic rate tax payers then they will lose absolutely nothing and if they happen to be higher rate taxpayers, I would imagine that they are already, or soon will be acquainted with the incorporation forms.  What should be noted is that, “The changes only affect residential properties and individual landlords, not those who operate property companies. The changes do not apply to properties let out as holiday homes” ibid

So the G-man has ‘appeared’ to go after those people who have made a major contribution to the housing “crisis” and as a result has tipped his cap to the left wing, property owner hating, ‘down with the capitalist pig’ brigade when in actual fact he has done nothing of the sort.  If you are running your property empire as a sole trader you possibly will get what you deserve.  These changes are due to come in in 2017, when, ooh, what a coincidence, the rate of corporation tax is being reduced.  People, does the Chancellor have to give you an even bigger shove?

The passing of another sunrise and sunset brought news that, “House builders shares recover as buy to let clampdown  fears ebb” Hugo Duncan Daily Mail Friday 10 July 2015  Well that didn’t take long.

I can’t quite work it out…

Firstly, why, having returned from my er, ‘training camp’ in Ibiza, my suits all seem to have shrunk… Whilst contemplating this conundrum-aided by a cup of tea and a piece of cake- I found myself facing a second puzzlement.  Why are house prices continuing to reach stratospheric levels-if the media are to be believed-whilst the mortgage screw is being tightened?  An article this week penned by Louise Eccles  in the Property Section of the Daily Mail detailed how the Bank of England (BOE) are prepared to step in if the amount of debt incurred through peo0le borrowing through mortgages continues to grow to the size of Piers Morgan’s ego.  The BOE have already imposed a cap on lenders to ensure that “no more than 15 per cent of its home loans were for sums greater than 4.5 times people’s incomes.. ” [sicDaily Mail 3 July 2015  This is all very sensible, but from our daily experience of the species of mortgage brokers, we are continually finding that lenders are looking for any reason not to loan, never mind offer a seemingly excessive amount.  As a result, many genuine  prospective buyers are being refused mortgages. Taking this as a ‘driver’ (get me with my corporate speak, soon I will be indulging in some ‘blue sky thinking’…), I cannot understand how house prices are  ‘rocketing’, ‘soaring’ and any other aviation inspired verb that the journalist chooses.  In the same article, it was commented upon how house prices have risen sharply during the past 12 months amidst a, “chronic housing shortage”.  Casting a wearied eye back to 2007 and 2008, house building was at the same levels as today, but nobody was beating their chest urging house builders  to slow down their output in order to either create an increase in prices or at least slow down the price crash.  Yes, property prices can sometimes be linked to the simple dynamic of supply and demand, but it is overly simplistic to say that rising prices are due to a lack of stock, when stock levels are the same as they were at the time of the last collapse.  The main driver (see, there I go again..) is the confidence of and in the UK economy.

What was presented as a novel idea this week was that being pushed by the newest kid on the block, YouSpotThe  The clue is in the title; get someone else to find a property for you.  In this case, it is Joe Public finding properties for the agent to market.  Whilst walking, jogging, kerb-crawling (that was a joke, Officer), members of the public are encouraged to note any properties that they think are abandoned and report them to the gang at the aforementioned company.  The latter will then attempt to track down the owner, purchase the property, upgrade it and then put it on the market.  A successful sale will deliver 1 per cent of the sale price to the eagle-eyed finder.  According to the website, this sourcing of  deserted dwellings will mean that, “abandoned properties are put back to use, creating homes that contribute to rather than spoil their local community”.  Ah, that’s nice.  They are driven by charitable endeavour rather than hard-nosed commercialism.   Of course they are.  It does seem like a very plausible scheme that should work in the Capital.  I would be less sure of its success in Varteg.  Many properties do indeed look abandoned, but have a couple with 18 offspring living in them.  “We are led to believe that your property is derelict” would be met with the Varteg version of, “Go forth and multiply, you £$%&”.  For comedic value and/or to check one’s fitness levels whilst running for your car it might be of some value.