Autumn Statement-Letting Agents Fees

[beorhthelm]

Just so I have a better understanding of this where do NSC position letting agents? Above teachers and cyclists but below Hitler?

at least Hitler commissioned the VW...

 

[Ernest]

I do hope your baiting, if not the above is vile!

Only needs one tenant not to pay their rent for six months and trash the property to make him eat his words

 

[mikeyjh]

Only needs one tenant not to pay their rent for six months and trash the property to make him eat his words

Yeah, and this is one major problem - Speculative landlords who just think it's free cash. I had a court hearing yesterday to evict someone, hasn't paid a penny in 5 months. £4k down and counting. That's just a fact of being in the business.I actually don't feel very sorry for BTL landlords who just see it as a tenant paying for their investment and then someone doesn't pay for 3 months meaning your basically insolvent. Shouldn't work like that.

Back on topic though, one would hope the tenant also gave up bothering to use the formal bathroom facilities in the case of HastingsSeagull

 

[mikeyjh]

Article from the BBC this morning http://www.bbc.co.uk/news/business-38065249

This sort of landlord drives me nuts, okay so you expect the tenant not only to pay for living in your flat, you also want them to fund the purchase, ohhhkkaay.

But Julie Turner, who is a landlord, says the extra costs faced by landlords will lead to higher rents.

"We do not make a profit on our property we rent out because there is the service charge and insurance and mortgage, and there is a new tax law coming in," she says.

"If the administration fees come back to the landlord the rent will have to increase. It is not being greedy, it is just we need to cover our costs"

 

[Lady Whistledown]

Article from the BBC this morning http://www.bbc.co.uk/news/business-38065249

This sort of landlord drives me nuts, okay so you expect the tenant not only to pay for living in your flat, you also want them to fund the purchase, ohhhkkaay.

But Julie Turner, who is a landlord, says the extra costs faced by landlords will lead to higher rents.

"We do not make a profit on our property we rent out because there is the service charge and insurance and mortgage, and there is a new tax law coming in," she says.

"If the administration fees come back to the landlord the rent will have to increase. It is not being greedy, it is just we need to cover our costs"

I'm not sure I follow your argument here: are you saying she should rent her property out at a loss?

Declaring an interest: I have a flat which I rent out. The tenants are mostly fine and I'm as quick as I can be to respond to any issues they have. (e.g. they asked if the carpets could be replaced, so I did that as soon as I could sort it). Last week they called me to notify me that a light bulb had gone, and could I pop round and sort that out. A light bulb! I thought that was a BIT much, but, you know, did it anyway to keep them happy.

The income from my tenants covers the mortgage payments for now, which means I can keep the flat whilst I live elsewhere. If my costs to maintain that flat went up significantly (and I am talking significantly here) so that I started making a loss, then frankly I'd probably just sell it, as would many people in that scenario, surely? Which then leads to an even greater shortage of rental properties, and- by simple supply & demand mathematics- higher rents.

 

[GOM]

My only thoughts on this, as neither a renter or a rentee, is that whoever employs the agent ought to pay their fees. When I buy a house I don't pay the agent, the seller does.

 

[mikeyjh]

I'm not sure I follow your argument here: are you saying she should rent her property out at a loss?

Declaring an interest: I have a flat which I rent out. The tenants are mostly fine and I'm as quick as I can be to respond to any issues they have. (e.g. they asked if the carpets could be replaced, so I did that as soon as I could sort it). Last week they called me to notify me that a light bulb had gone, and could I pop round and sort that out. A light bulb! I thought that was a BIT much, but, you know, did it anyway to keep them happy.

The income from my tenants covers the mortgage payments for now, which means I can keep the flat whilst I live elsewhere. If my costs to maintain that flat went up significantly (and I am talking significantly here) so that I started making a loss, then frankly I'd probably just sell it, as would many people in that scenario, surely? Which then leads to an even greater shortage of rental properties, and- by simple supply & demand mathematics- higher rents.

I think it's a definition of profit and loss - I'm not sure you should be including the capital repayment in the calculation of whether you make a 'profit' or not. If you think about your scenario - Let's say you have a house worth £100,000 and you're mortgaging it over 25 years at a 'loss' (by this definition) of £1,000 a year. After 25 years, you would have covered mortgage payments of say £150,000 for an expense of £25,000 and you have a flat worth probably a whole lot more than that.

I now own most of my properties outright but it doesn't mean there any better an investment than yours that is mortgaged, it just means that I don't have the debt associated with them. it could be that I too would be better off selling, who knows? (Well, I do obviously but it's a theoretical point).

I hope that makes sense, I'm sure there's an accountant or two who may put me right. Overall though, I 'think' that's the BTL scenario that people have a problem with.....

 

[mikeyjh]

My only thoughts on this, as neither a renter or a rentee, is that whoever employs the agent ought to pay their fees. When I buy a house I don't pay the agent, the seller does.

I think there's a broad agreement on that, which is nice, apart from 1 nasty post.

 

[Audax]

I think it's a definition of profit and loss - I'm not sure you should be including the capital repayment in the calculation of whether you make a 'profit' or not. If you think about your scenario - Let's say you have a house worth £100,000 and you're mortgaging it over 25 years at a 'loss' (by this definition) of £1,000 a year. After 25 years, you would have covered mortgage payments of say £150,000 for an expense of £25,000 and you have a flat worth probably a whole lot more than that.

I now own most of my properties outright but it doesn't mean there any better an investment than yours that is mortgaged, it just means that I don't have the debt associated with them. it could be that I too would be better off selling, who knows? (Well, I do obviously but it's a theoretical point).

I hope that makes sense, I'm sure there's an accountant or two who may put me right. Overall though, I 'think' that's the BTL scenario that people have a problem with.....

This.

I think any Landlord who is including the full mortgage payments in their profit/loss calculations is being greedy, to be honest. They're ignoring the fact that underlying that mortgage is a massive asset that can be liquidated (probably at a profit) should they decide they no longer want it.

Not sure how things work out over here, but in Australia a lot of property owners *deliberately* set up their portfolios so that they "make a loss" once the interest payments on a mortgage, plus other ownership costs (agents fees, rates, maintenance etc) are taken into account (note here that capital repayment doesn't count, only the interest component). Why? Because a loss becomes a tax deduction. It's called "negative gearing". The idea is that when they eventually sell the property, the tax benefits and the capital gain on selling the property taken together are worth more than the accumulated losses while they owned the property.

On one hand, negative gearing in Australia is looked on negatively (excuse the pun) because it is effectively a government subsidy to property owners who are landlords - it helps those landlords to build a portfolio, and in so doing makes it more difficult for the average Jo(e) to get on the property ladder. On the other hand, though, it should theoretically keep a brake on rental costs, as one of the "profit margin" factors gets removed from the equation for setting the rent level. Obviously the Estate Agent profit margin remains, but back when I was last renting in Australia it was actually very easy to find properties where the landlord was managing direct, and thus get a bargain: landlord is negatively gearing, so there's *no* profit margin built in to the rent price, and the only factors coming into play is how big a loss the landlord is aiming to make in order to max out the negative gearing benefit.

 

[Lady Whistledown]

I think it's a definition of profit and loss - I'm not sure you should be including the capital repayment in the calculation of whether you make a 'profit' or not. If you think about your scenario - Let's say you have a house worth £100,000 and you're mortgaging it over 25 years at a 'loss' (by this definition) of £1,000 a year. After 25 years, you would have covered mortgage payments of say £150,000 for an expense of £25,000 and you have a flat worth probably a whole lot more than that.

I now own most of my properties outright but it doesn't mean there any better an investment than yours that is mortgaged, it just means that I don't have the debt associated with them. it could be that I too would be better off selling, who knows? (Well, I do obviously but it's a theoretical point).

I hope that makes sense, I'm sure there's an accountant or two who may put me right. Overall though, I 'think' that's the BTL scenario that people have a problem with.....

It does, yes

Mine was never a BTL, I bought it to live in, did so for a number of years, and decided to try & keep hold of it when I moved elsewhere. I like to think I'm a decent landlord, and I certainly won't be building a property empire any time soon

 

[mikeyjh]

This.

I think any Landlord who is including the full mortgage payments in their profit/loss calculations is being greedy, to be honest. They're ignoring the fact that underlying that mortgage is a massive asset that can be liquidated (probably at a profit) should they decide they no longer want it.

Not sure how things work out over here, but in Australia a lot of property owners *deliberately* set up their portfolios so that they "make a loss" once the interest payments on a mortgage, plus other ownership costs (agents fees, rates, maintenance etc) are taken into account (note here that capital repayment doesn't count, only the interest component). Why? Because a loss becomes a tax deduction. It's called "negative gearing". The idea is that when they eventually sell the property, the tax benefits and the capital gain on selling the property taken together are worth more than the accumulated losses while they owned the property.

On one hand, negative gearing in Australia is looked on negatively (excuse the pun) because it is effectively a government subsidy to property owners who are landlords - it helps those landlords to build a portfolio, and in so doing makes it more difficult for the average Jo(e) to get on the property ladder. On the other hand, though, it should theoretically keep a brake on rental costs, as one of the "profit margin" factors gets removed from the equation for setting the rent level. Obviously the Estate Agent profit margin remains, but back when I was last renting in Australia it was actually very easy to find properties where the landlord was managing direct, and thus get a bargain: landlord is negatively gearing, so there's *no* profit margin built in to the rent price, and the only factors coming into play is how big a loss the landlord is aiming to make in order to max out the negative gearing benefit.

Interesting, I'm not sure that's a 'thing' here but it does go to show you the unintended consequences of some policies and behaviour.

For me, some people are confusing affordability with profitability.

 

[mikeyjh]

It does, yes

Mine was never a BTL, I bought it to live in, did so for a number of years, and decided to try & keep hold of it when I moved elsewhere. I like to think I'm a decent landlord, and I certainly won't be building a property empire any time soon

An accidental landlord, as they say. Being a decent landlord and understanding what that entails is the important thing.

I recently read on a landlord forum of a lady who was in meltdown and 'couldn't pay mortgage' because tenant was 6 weeks behind. I think she was being rightly being criticised, what happpns when the boiler goes or the roof needs repairing.

 

[Pantani]

Rentals will go up, I do not think anyone is arguing this, they do that anyway. What does need to change is the huge upfront cost. Hopefully this change will go someway towards that.

A few years back my old landlord decided she was moving back in to my flat, two months notice over Christmas, all just about above board. Cue unexpected rental search, with minimal savings to pay for the new property. All in, my new place wanted two months deposit, plus the usual bs fees resulting in £2,600 of payment upfront. Now obviously I did not have that kind of money lying around, so I had to borrow it from my bank. Fortunately, I am a graduate so my bank was willing to lend me money. Three years later, three house moves later I have finally paid that money off.

Now imagine I am not a graduate, my bank will not lend me money. What then? The stark choice is homelessness or borrowing money from Wonga or one of those other criminals. The whole rental market needs further regulation, this is a start but is not nearly enough. From the case above you can see two months deposit, I have paid six weeks, one month, £1,000 regardless of rental cost and nothing at all during my years renting. At least now we will know what the rent is, and whether we can afford it. Deposits need to be set at a rate by the government too.

 

[m20gull]

Someone else has said this isn't the case the cost is absorbed across the agent, landlord and tenant. Do you have any evidence?

This suggests that the cost of the service ends up with the end-user, i.e. the tenant.
http://www.independent.co.uk/property/tenant-fees-ban-has-speeded-up-scottish-rent-rises-says-report-9696298.html

 

[Giraffe]

Someone else has said this isn't the case the cost is absorbed across the agent, landlord and tenant. Do you have any evidence?

Directly from an independently funded report.

Rent increases by region since the ban in Scotland in 2012.

 

[Audax]

This suggests that the cost of the service ends up with the end-user, i.e. the tenant.
http://www.independent.co.uk/property/tenant-fees-ban-has-speeded-up-scottish-rent-rises-says-report-9696298.html

Directly from an independently funded report.

Rent increases by region since the ban in Scotland in 2012.

Both interesting reading / viewing. Do wonder whether either has done any due diligence on actually finding out what the driving forces behind the increases have been. From what I've seen here there's reasonably convincing circumstantial evidence, but not actual proof, that Scottish rent increases are a result of the fees ban. There may be other factors at play. Indeed, I'd be very surprised if all of that change is due to the ban on fees (which is the implied claim in the Independent article) given that rental prices have been increasing south of the border (just by not as much) where there's not (yet) been a ban on fees.

Having reflected on it more, I think the fees ban is a little short of what was actually needed. It's going to rely on agencies competing with each other to obtain landlords, and expecting that competition to put a brake on the growth in fees (or, indeed, reduce them). Unfortunately, I suspect that's not enough: they should instead have regulated those fees to be at a level that is "reasonable" (as opposed to the current extortionate). Similar to what was done a few years back with capping fees for paying online using a credit card (remember when the airlines were starting to take the p1$$).