Buy to Let Building Insurance

At some point, every buy-to-let investor will face the spectre of rental voids but it’s what you do about them that makes you either a victim of circumstance of a savvy investor. The smart investor takes action to minimize such down periods and here are a few tips I’ve found helpful in doing so:

Seasonality: There are certain times of the year when people stay put because they’re focused on other things. Summer holidays and Christmas are just a couple of those “things” that affect large numbers of people at the same time. After summer, you’ll find that September should see more activity (and you can probably write off most of January, too). The summer dip is particularly relevant in areas of high student density, e.g. university towns, especially if your property might normally be let to these types of people or people related to this business. Wherever possible, then, ensure that your existing tenancy doesn’t end around these times.

Apathetic Letting Agents: Try and gee them up by telling them that you’re placing your own ad and if you introduce the tenant you want a reduction in their fee. You could also make your property available to more than one agent and promise that the first one to fill the vacancy gets the management for the next year. If an agent thinks they’re the only one, they won’t be inclined to try so hard.

Be Proactive: Don’t just sit back and wait for others to do the work. Remember, it’s your money that’s dripping (or gushing) away all the time the property is empty. Here are some ideas of actions you might take:

• place your own ad
• directly contact large employers and accommodation officers in local hospitals and universities
• offer an incentive (free TV/DVD player/holiday/champagne, etc)
• drop the rent to just below market for the area (a reduction of £5 a week for the year = £260, compare this with how much you’re losing each month the property is empty and you have to continue paying the mortgage)
• find out what people are looking for that would make your property more attractive than others that are currently vacant

To Furnish or Not? Only consider furnishing the property if you’re getting people asking for it to be furnished. If you just do this on the off chance, you could end up with a bunch of furniture to get rid of if they then want it unfurnished. You might list as “will furnish if required”. Quite frankly, the achievable rental will be barely affected, if at all, and you’ll then be liable to replace things as they wear out (although you will be able to depreciate the costs of furnishings by about 10% per annum off your tax bill – see my article on “Reducing Property Income Tax”). If you do go the route of furnishing, get new (IKEA, perhaps) rather than second hand. Although the 1950s furniture will be around forever, people prefer new and modern rather than old and sturdy. In addition, if you do buy from IKEA, the products are cheap and stylish and it’s probably the only store that will be able to fill your order quickly (even though you have to do the legwork yourself). Here’s a tip you’ll appreciate if you’ve ever gone the flatpack route… get a professional to do the assembly for you, it’ll be done quicker, to a better standard and they’ll probably have spares if any of the fittings are missing. And a tip within the tip is, if you’re buying at IKEA, ask around among the loading staff in the aisles whether they know anyone who does such assembly, some IKEA staff have side businesses doing just this.

Rental Assisted Tenants? In certain areas rentals predominantly go to such tenants. The only implications I’ve found is that the proportion of the rent paid by the council doesn’t always come on the same day each month. However, if you have claimants screened in the usual way (as they have to make up the shortfall and be trusted to pay the assisted monies if it’s paid directly to them), then you should be fine.

Remember to get references from the landlord PRIOR to the one they’re about to leave as their current landlord might be glad to be rid of them and will provide a glowing reference in order to do so. Look for longevity in their past rental history. If they flit every few months it could be a bad sign. Don’t be scared to consider such tenants. Most people don’t enter a home in order to trash it, no matter who’s paying the rent.

Renting Room by Room: If you do this, the property could be classified as an HMO (home in multiple occupation) if it’s let to 3 or more tenants who form two or more households and who share a kitchen, bathroom or toilet. Each council will have an HMO Officer and you can check with them if you’re unsure where your property stands. If it is so classified, as of April 2006, your property will need to be registered. This carries a fee and has requirements covering room square footage, kitchen food security (yes, really), fire system, fire escapes, etc. You also have to prove that you’re a “fit and proper person” to hold the license. Even after the license is granted, running an HMO involves more management and might not be a route you want to go down. You might wonder, then, why anyone bothers with them. Well they can yield high income, you just have to weigh up the pros and cons. More info on HMO licensing can be found on the government website: http://www.propertylicence.gov.uk.

When It Just Won’t Rent: If this is the case, you will want to look at other options such as:

• is the property suitable for conversion to self-contained flats (if they’re not self-contained, they still fall into HMO territory)

• is it best to sell up and buy something with higher yield in a higher demand area where, this time, you do your research first? See my article: “Before You Buy-to-Let”at http://www.womeninpropertyinvestment.com.