ASK MEL- “Should I risk renting my Nuneaton property to people in receipt of housing benefits?”

Dear Mel,
I have a 3 bed terraced house near Nuneaton town centre and I am advertising it privately but I keep getting a lot of people in receipt of Housing Benefit showing interest. What are the risks when renting to people on benefits? Are there any positives? What information could you offer that might help me decide?
I look forward to your reply.
-Jenny

Hi Jenny,
This is a really great question and it’s certainly a question that, I’m sure, many landlords ask themselves when it comes to renting their Nuneaton properties. To follow are the answers to your questions…

“What are the risks to renting to people on benefits?”

Who controls the money?

If the tenant receives their housing benefit, they are responsible to pay you that money each month. This means they will need to be organised with money because they get paid every 4 weeks but, normally, their rent will fall on the same day each month so, they need to be able to budget / save their money for when the rent is due.

If you receive the Housing Benefit (HB) direct from the Council, this is better for your cash flow but can carry more risks e.g. if HB discover that your tenant has misrepresented a claim, they can stop the housing benefit and even ask you, as the landlord to pay back what you have received in rent because of the tenants’ deceit. However, if you find out that the tenant has misrepresented a claim and report them to HB then you are not liable to re-pay the rent but you are likely to stop receiving the HB for some time while the situation is resolved. So, you’d better hope there is no misrepresentations because you could be stung either way.

The tenants word is gospel

We’ve recently had a landlord ask us to manage his Nuneaton property after he had a bad experience with a tenant receiving HB. He had served her notice because she was not paying the full amount of rent each month (she was supposed to pay money as well as the HB to cover the rent) and, a few days later she informed the council that she had moved out of the property so, all payments to the landlord stopped. The tenant was in fact still living in the property and had no intention of moving out “until the bailiffs kick [her] out”. The landlord rang the council and informed them that the tenant was still living in the property but he was advised that, unless the tenant rings the council to tell them otherwise, there wasn’t anything they could do. The landlord eventually managed to get the tenant to admit (via text) that she was still living in the property, as well as getting written confirmation from the neighbours and the council said that they would carry out a visit to the property to establish who lived there. It’s a long story but, you get the jist of it!

Does the HB cover the rent?

If the housing benefit does not cover the full amount of rent, the tenant is liable to pay the rest. Can the tenant afford to do this? How can you be sure that they will top the rent up each month?

Are they paying a cash bond?

Some people in receipt of benefits who apply for private housing offer a ‘paper bond’ from the Council but, you should look into this more as there are a lot of the things the paper bond will not cover…
https://www.nuneatonandbedworth.gov.uk/downloads/file/616/bond_assistance_scheme_guidance_for_landlords

Do you have a back-up?

If you do decide to let your Nuneaton property to someone in receipt of HB, I would strongly recommend ensuring that they have a guarantor in place. It’s important to ensure the guarantor can afford the rent as well as getting all the relevant ID and proof of income from them.

Are you doing reference and credit checks?

Again, something I would strongly recommend. If credit checks reveal several debts (paid or unpaid), it gives some idea of how the applicant manages their money. On the other hand, credit checks could reveal good money management and be a re-assurance to you. It’s recommended that you get proof of current address as well as people often say that they live [d] with parents to avoid having a bad reference from a previous or existing landlord.
If you’re unsure about this process or want some more advice, please feel free to contact us on 02477 674 545

Will it affect your insurance?

It’s a good idea to check your Insurance Policy still covers you if your tenant is in receipt of benefits as some do not. Similarly, you should also check that you are not in breach of your buy-to-let mortgage.

Are there any positives?

The green deals that come and go with funding are often available for free or at a substantially reduced rate if you have tenants in receipt of benefits (but this can also apply to people who receive tax credits who work full or part time too).

If the HB covers the rent in full, and the tenant pays you on the same rent day each month, and the benefits don’t change, and they look after the property, and they have a cash bond, and a guarantor and it won’t affect your insurance or mortgage policy then, renting to people in receipt of benefits would be a positive (although very rare).
As a private landlord, I have had both good and bad experiences with tenants in receipt of benefits so I am very much in the middle. I do believe that more should be done to encourage landlords to rent to people in receipt of HB and support landlords in the event of rent arrears, misrepresented claims etc because, at the moment, regardless of the problem, the landlord usually bears the brunt and it’s usually very costly!

As you can see, the risks outweigh the positives quite heavily. However, if you’re organised, committed to ensuring you have back up in place and you have an applicant that is willing to tick all the relevant boxes (as listed above) then, there is no reason why you shouldn’t rent your property to a person/people in receipt of benefits.

If after reading this you’ve decided that having a tenant in receipt of HB isn’t the route you want to take, or you would like more advice, please feel free to drop me an email m.maycock@qthomes.co.uk or give me a call on 02477 674 545. I’m happy to offer some more advice and can even help find the right tenant for you.

Alternatively, why not check out how we can help you to manage your property or simply just find you the right tenant http://www.qthomes.co.uk/

Where will Nuneaton house prices be in the not so distant future?

rising house prices

I was having lunch the other day with a solicitor friend of mine who’s properties I manage, when the subject of property came up. She asked me my thoughts on the Nuneaton property market for the next five years. Property prices are both a British national obsession and a key driver of the British consumer economy.  So what will happen next in the property market? So here is what I told her, and now wish, my blog reading friends, to share with you.

 

Before I can predict what will happen over the next five years to Nuneaton house prices, firstly I need to look at what has happen over the last five years.  One of the key drivers of the housing market and property values is unemployment (or lack of it), as that drives confidence and wage growth – key factors to whether people buy their first house, existing homeowners move up the property ladder and even buy to let landlords have an appetite to continue purchasing buy to let property.

 

Nuneaton’s MP, Marcus Jones, has welcomed new figures showing that unemployment in Nuneaton has fallen by 54% over the last five years and wage growth continuing to out-pace inflation. There are now nearly 1,600 fewer people in Nuneaton claiming out of work benefits compared to 2010. The figures also showed that average pay growth is at 2.9 per cent – the fastest rise since 2002 – while inflation was only 0.1 per cent, meaning hardworking people in Nuneaton have more money in their pockets.

 

 

Many home occupiers have held back moving house over the past seven to eight years following the Credit Crunch but with the outlook more optimistic, I expect at least some to seize the opportunity to move home, releasing pent up demand as well as putting more stock onto the market. With a more stable economy in the Town, this will, I believe, drive a slow but clearly defined five year wave of activity in home sales and continued house price growth in Nuneaton.

 

The price of the average UK home will rise by 50% in the next 10 years, say the National Association of Estate Agents and the Association of Residential Letting Agents. The average cost of renting a home in the UK is forecast to rise too, though by only 27%, taking the average rent from £134 a week to £171.

 

 

50% might sound optimistic to some, but according to zoopla, values have risen by 13.5% over the past 5 years. However, it wouldn’t be correct not to mention those potential negative issues as I do have some slight concerns about the future of Nuneaton housing market.  The number of properties for sale in Nuneaton is lower than it was five years ago, restricting choice for buyers (yet the other side of the coin is that that keeps prices higher). Interest rates were being predicted to rise around Easter 2016, but now I think it will be nearer Christmas 2016 and finally the new buy to let taxation rules which are being introduced between 2017 and 2021 (although choosing the right sort of property / portfolio mix in Nuneaton will, I believe, lessen those issues with the next taxation rules).

 

I am telling the landlords I speak to, that with interest rates at their current level 0.5%, the cash in your Building Society Passbook is going to grow so slowly that it might as well be kept under their bed. Property prices, by contrast, have rocketed over the years, even after the property crashes, far outstripping bank accounts and inflation.

 

So my final thought …  property is a long term investment, it has its’ up and downs, but it has always outperformed, in the long term, most investments. Those in their 40’s and 50’s in Nuneaton would be mad not to include property in their long term financial calculations. Just make sure you buy the right property, at the price in the right location. One source of information on such matters would be the Nuneaton Property Blog … www.Nuneatonpropertyblog.com

If you’re looking to invest in Nuneaton and want to ensure you have the best tenant possible, or you are thinking of passing on the management of your Nuneaton investment, feel free to visit our website and see how we can help http://www.qthomes.co.uk/