Rent Guarantee. It's a No-Brainer!

When a landlord invests in property, insurance is an area some end up neglecting. The kind of cover that a standard home policy deals with is often inadequate for the requirements of landlords. This is because they need a policy that deals with all sorts of potential issues to do with tenancies, third party damage and so on.

Landlords are aware that the usual landlord insurance policies will provide them with protection against such events as damage caused by a tenant as well as rent lost when a property is inhabitable following a valid insurance claim. However, these policies will not stretch as far as actually covering the rent when a tenant simply fails to pay up.

It is very realistic that there are occasions when a tenant simply fails to pay, be it out of malevolence, financial incompetence or a sudden change for the worse in their financial circumstances that they might not even tell the landlord about. Landlords without a rent guarantee insurance policy may be in for a shock. Those who do have such cover can rest easy. It is at this point where a landlord can make a claim on their rent guarantee policy and ensure their rental income is safe. The insurer can then chase up the tenant for the shortfall. For those landlords who don't, the implications can be awful, especially if there is a mortgage on the property and the rent is relied upon to help make the necessary loan repayments.


One of the great benefits of having Rent Guarantee insurance in place is that the policies often include Legal Expenses cover necessary for potential evictions. Lengthy court cases take up  time, energy and can stifle cash flow. However, your Rent Guarantee insurance can cover the legal costs and help reduce the process.

Indeed, with disputes often ending up in court, it is not just the repayment of the missing rental money that becomes an issue. Legal costs can be prohibitive for landlords if they are unable to get the money without recourse to such measures, so it will be reassuring to know that rent guarantee insurance can also take care of this, particularly as legal fees will be much harder to pay for those whose budgets are hit by non-payment.

There is always a chance landlords will be hit by non-payment. How much better it would be to have a policy in place that will help mitigate losses, as well as ensuring legal costs are covered to prevent a catch-22 situation occurring where an investor is too cash-strapped by the loss of income to pay for the legal action needed to recover unpaid rent.


Professional Properties offer two types of Rent Guarantee protection. Firstly, we offer the a policy that will recover rent if the tenant fails to pay. The policy includes such benefits as Nil Excess; Payable until vacant possession; Cover limit of £2,500; Total claims limit of £50,000; Full legal expense cover.

An alternative is our RentOnTime product which guarantees to pay your rent, on time, every month, whether your tenant pays on time. The great advantage of this is that the payment of rent is not retrospective, it is immediate.

If you wish to discuss either of the products in more detail, then please do not hesitate to contact me directly on 07977 235545 or our lettings office in Derby on 01332 366171.

Government plans to allow subletting.. What effect on landlords?

George Osborne's Budget seemed to be aimed at homeowners and first-time buyers - but hidden in the small print is a change of rules for renters. And it could be a big deal. Renters sometimes face strict rules on sub-letting, which can create a sticky situation if one tenant suddenly needs to leave.

But could this be about to change? In the 2015 Budget, the Government outlined plans to make it easier to sub-let rooms. In particular, it plans to ban landlords from introducing rules preventing us from sub-letting on a short-term basis. This could be on the cards for longer-term tenancies as well.

Almost buried on page 51 of the Budget Red Book the Chancellor gives a very brief outline of his intention to prevent the Private Rental Sector from stopping tenants being able to sublet.

This document states:

“Support for the sharing economy 1.193

The government wants to ensure that Britain is the global centre for the sharing economy, enabling individuals and businesses to make the most of their assets, resources, time and skills through a range of online platforms. This Budget therefore announces a comprehensive package of measures that will break down barriers, create opportunities for sharing, and unlock the potential of this dynamic and growing area. Building on the recommendations of the independent review of the sharing economy, the government will:

Make it easier for individuals to sub-let a room through its intention to legislate to prevent the use of clauses in private fixed-term residential tenancy agreements that expressly rule out sub-letting or otherwise sharing space on a short-term basis, and consider extending this prohibition to statutory periodic tenancies.”

The government hasn’t given any further details about the proposal which could mean anything from letting spare rooms in rental properties to giving tenants the power to sub-let entire properties to third parties.

Residential Landlords Association (RLA) chairman Alan Ward described the move as a “nightmare in the making” and said it smacked of “back of the fag packet” policy making".

Key questions remained unanswered such as who will be responsible for a property if the tenant sub-letting leaves the house but the tenant they are sub-letting to stays? Similarly, given the Government wants landlords to check the immigration status of their tenants, who would be responsible for checking the status where sub-letting occurs?

Eviction specialist firm Landlord Action said the move would be “catastrophic for the rental industry”.

Founder Paul Shamplina has repeatedly warned about the increase in subletting scams in the private rented sector.

“We have never seen so many subletting cases going to court because of unscrupulous tenants trying to cream a profit from a property they have rented,” he said. “We experience continual problems with tenants taking out tenancy agreements and then, in some instances, not even moving into the property themselves, but putting up partitions and subletting to as many people as possible. They draw up separate agreements and trick sub-tenants into thinking they are the landlord. By the time landlords find out, damage to properties from over-crowding can run into thousands, and the tenant who holds the legitimate tenancy agreement is nowhere to be found.”

Sub-letting also throws up problems from an insurance point of view. Pricing for landlord insurance policies is based on the tenant type, among other factors, with insurers attributing higher risk for certain types of tenant.

“It will be difficult for a landlord to disclose the details of their tenants, and answer the risk question accurately if they no longer have the final say on who occupies their property” said Steve Jones, director of Rentguard Insurance. “The real problem would come if underwriters decide to charge the higher rate to everyone to factor in the likelihood of damage cause by tenant’s sub-letting the property.”

Problems may also arise as tenants are unlikely to professionally reference those they sublet to and may as a result know very little about them, their lifestyle, background and ability to regularly pay the rent.

So, it remains to be seen if the government will rethink this move after the backlash it has faced from the private rented sector, as at the moment it is hard to see who this new ruling actually benefits.

Keeping reading my blog for further updates.

Rents paid by tenants In Derby are on the rise…

With Easter almost upon us and considering we are a quarter of the way through 2015, I was talking to landlord from Allestree the other day about what is happening to the level of rents that are being achieved in the Derby property market.

In terms of rents in Derby, it appears that rents being achieved for new rentals (i.e. when the tenant moves out and new tenant moves in) have risen by 4% in the last 12 months on top of the range modern semis, yet remained static for older Victorian terraced houses. However, landlords with existing tenants, irrespective of age, are not increasing their rents, as most landlords prefer to keep their existing tenant paying the same rent and have the peace of mind that their tenant remains, paying the rent thus reducing the risk of a void period.

It must be remembered rents dropped by 7.8% over 2008/9, due to oversupply in the rental market in 2009.) A lot of the people who couldn’t sell their property in Derby in 2008/9 when the Credit Crunch hit in 2008, decided to let their house out instead of selling at a loss. In fact, the number of houses on the market in Derby dropped by 62.5% between March 2008 and March 2010, a lot of which came on to the rental market in Derby. However, looking at the longer term though, tenants have had it good  because since the turn of the Millennium, average wages have grown by 46%, but rents outside London have only grown by 36% rental growth over this period.

I told the landlord that there is a lack of new rental properties in Derby coming on the market, in fact according to the Office of National Statistics, there are only 81 new rental properties are coming to the market each month in Derby but the population of Derby is rising by 225 people a month – something will have to give soon! This is compounded by the fact a number of landlords are looking to sell their rental properties in the coming months, as the property market in Derby has improved. This further compounded as tenants in existing rental properties appear to be staying in properties for longer periods of time.

Looking at the rents charged in Derby, historic evidence in the UK suggests private market rents have moved in line with general inflation. Government figures only go back as far as the year 2000, but looking at other countries with similar housing markets (America, Australia, Ireland and Holland) the fact is rents paid by tenants tend to rise in line or just ahead of inflation.

As short term wage growth in Derby has eased off recently, rising by only 1.3% in the last 12 months, taking average salaries in Derby to £26,241p.a, with the tax breaks announced by The Chancellor in the Budget, I believe, even though rents have kept pace with inflation in the past, renting as an option has become more affordable, and is increasingly seen as a lifestyle choice. With returning economic growth and expected increases in the rate of growth of wages, above inflation rental growth could rise.

If you want a chat about the local Derby property market, pop in for a coffee or email me via the link below!

Your Pension could now buy a Buy to Let property!

In a recent article, I mentioned that pension rules are changing this April. It certainly created a few emails, with people asking questions about it. Therefore, this week, I want to look a little deeper into the subject of your pension and the Derby property market.

George Osborne, in last years’ Budget, announced pension reforms that come into effect this April, which will give people with pensions unprecedented access to their pension pot and the freedom to look for alternatives. In a nutshell, after the 6^th of April, anyone aged over 55 will be allowed to withdraw all or part of their pension pot and spend it as they wish. Until now, you were allowed to take out a quarter of it and were forced to buy an annuity policy with the rest.

However, my readers always know that I like to tell it ‘as it is’. There are always two sides to a story, good and bad. Let me tell you the bad news first. There are some hefty tax implications by taking money from your pension pot. As before, as per the old rules, the first 25% can still be withdrawn from the pension pot tax free but, here is the sting in the tail, if you take more than a quarter of your pot (25%), anything above that initial 25% level will be taxed as income. So if you took the whole lot out, the first 25% will be tax free but the remaining 75% will be taxed at your income tax rate of 20%, 40% (or even 45% if you earn over £150,000 a year).

..and now the good news!

Under the old scheme, if you bought an annuity, when you died your annuity normally died as well. You would have no asset to pass on to your family. Also, the returns from pensions are awful at the moment. The best rates according to Hargreaves and Lansdown (big wigs in the City) state if you were 55 years old, the best rate you would get on your annuity pension would be 4.4% fixed for life (so it would never go up) or 2.2% but the payment would go up with inflation.  The sort of rates (also known as yields in the property investing game) being achieved in Derby are in the order of 4% to 7%, and they tend to rise in line with wages.

The other aspect of property investment is how the fact property values have risen consistently over the last 50 years.  According to the Office of National Statistics, the life expectancy of a 65 year old male in Derby is 18.4 years (its only 16.9 years in Nottingham). If we roll the clock back 18 years 4 months to November 1996, property values in Derby have risen by 153.1% to today .. you wouldn’t have had that with your pension!   But this is the biggest win, even by taking a hit in income tax now,  by buying a property, you buy an asset that you can pass on to your family when you die.... (or the cats home if they aren’t nice to you!).

So where next? It totally depends which strategy you are going to look at, one strategy is to look to achieve relatively small rental returns (ie low yields) in an up market area which has decent capital growth or, alternatively, another strategy is to buy properties in not so good areas known to produce a high returns (ie high yields) but low capital growth (ie how much the value of the property goes up). Now, I am not financial adviser, so cannot offer financial advice on what the best thing for you with your pension is. However, I can share my knowledge and experience of the Derby property market, what to buy, what not to buy and where to buy etc etc.  

My thoughts on the Derby Property market can always be found on the Derby Property Blog! 

Is home ownership inevitable in Derby?

“You have to rent where you want to live, or buy where you don’t want to live.”

After the end of the Second World War, just over a quarter of the UK population owned their own home, the rest rented from private landlords or the local Council. If someone told you in the 1970’s and 1980’s that they rented, they were considered a second class citizen. Everyone wanted to own their own home.. it was the done thing. We think that home ownership will inevitably happen, but it won't.

It all changed in the 1970’s, when two things happened. Firstly, the number of people who owned their own home broke through the 50% barrier in 1971 and by 1981 it was at 57%. Tied in with that, the average house prices in Derby were doubling at one point every four years in the 1970’s so property and profit started to feed off each other.

To put that growth in context, if we were to look at the last 85 years in Derby, in 1930, the average Derby property was worth £361. It took 16 years for Derby property values to double, rising to £893 by 1946. Another 15 years and the average Derby property doubled again to £1,696 in 1961. The next doubling only took 10 years, as by 1971 the average Derby property had reached £3,449 in value.

It was, as mentioned above, the 1970’s when things really took off, as by 1975 (only four years later) they had doubled to £7,217 and they doubled again to £14,418 by 1980. It took another eight years for values to double again, as an average Derby property reached £30,221 in 1988. Twelve years had to pass until the doubled again in 2000 (£62,181) and just six years to double again by 2006, when they reached £125,111.  Where are we today? The average property value in Derby currently stands at £174,700.

We could blame Maggie Thatcher for making home ownership the ultimate goal, but what we now need to consider is that the country is turning on its head and we need to, as a Country, love renting again. Some blame the banks, but obtaining a 95% mortgage is hard work, but nowhere near impossible. A typical Derby first time buyer would only need to save £5,000 for a deposit and fees and they could buy a very decent Victorian two up two down in Rose Hill in Derby, and it would be over £100 cheaper a month in mortgage payments than renting.

People might say on the surveys they want to buy, when it comes down to it. If you have been living in a lovely three bed semi in Littleover  for £700 per month, but the bank will only lend you enough to buy a terraced house Rose Hill, and don’t get me wrong, Rose Hill has really pulled its socks up over the last ten years, but, some would say, it isn’t Littleover, is it?

What would you do? Look again at the quote at the top... “You have to rent where you want to live, or buy where you don’t want to live.”

With tenant demand only going in one direction, it is probably why more and more people are getting into buy to let in Derby. With the new rules on pensions and the ability to use them to buy residential rental properties from April onwards, this could be the time for you to buy a rental property. You must take advice on your pension from a Independent Financial Advisor (there are plenty in Derby) and you must take advice from people who know what to buy (and not to buy) in Derby to ensure you get the best from your investment. One place for such advice is the Derby Property Blog!

Are Derby landlords on a par with politicians and traffic rangers!

At the time of the last census in 2011, there are 3,401,675 properties in England that were privately rented, of which it is estimated, were owned by over 1.25 million private landlords. The rapid growth of buy-to-let is hugely controversial, especially as only ten years before that, there were only 1,798,864 properties under private renting in England. Buy to let landlords have been held responsible for forcing up property prices and preventing our younger generations from being able to buy. There is also growing resentment toward the billions of pounds in tax relief (estimated to be nearly £10 billion) landlords claim on their mortgage interest tax relief not available to homeowners.

They may be asset rich thanks to recently rising property values, but let us not make the landlords the warlocks they could easily be called! They are not quite on a par with the traffic rangers who raise around £1.4 million a year for the Council! Despite all these benefits enjoyed by private landlords, let us not forget the good they have done, especially in Derby.

Property values today in Derby are still 11.5% below the 2007 property boom levels (2007 being the peak of last property boom before everything dropped in 2008/9), yet inflation has risen by 26% in the same time frame, so in real terms, properties today are 37.5% CHEAPER than they were in 2007. Just think how low they would be without landlords buying all those rental properties in the city.

Interest rates are at an all time low and first time buyers only need to save a £6,000 deposit to secure a lovely 2 bed semi in Chellaston or Oakwood with a 95% mortgage. Forget what the papers say, first time buyers can borrow money on a 95% mortgage and, nine times out of ten, it’s cheaper to buy than rent. So why aren’t people buying?

The number of people choosing to rent, either for lifestyle or economic reasons, has grown over the last 15 years. I also believe they will continue to grow for some time to come, as does every report on the subject. In fact I would go as far to predict the number of rental properties in Derby will have risen from the 15,943 properties recorded in 2011 to 21,800 by 2021. Sound fanciful? Well in 2001, there were only 6,739 privately rented properties in Derby.

It is a fact that we as a Country are more and more turning into a European model when it comes to homeownership, where the norm is renting for the first ten years, as opposed to the norm from the 1960’s to 1990’s, where first time buyers were encouraged to buy as soon as they left school and got a job.

Tenants, in particular, will also feel the benefit from potential changes in the market. The likelihood of interest rate increases in late 2015, existing economic conditions, combined with the uncertainty of new Government manifestos following the General Election in May will result in low demand for people to buy yet also put a dampening effect on increases in rent. As long as landlords buy the right sort of property, that allows for a reasonable yield, decent capital growth, everyone will be a winner. If want a chat about what would make the best sort a property that would offer that in Derby, then please email me on simonj@professionalproperties.co.uk.