What I learned in the year I was agent, landlord and tenant at the same time
Thursday 07 February 2019
A few years ago I found myself in quite an interesting position that afforded me a great insight into all aspects of the private rented sector… Believe it or not for a short period of time I was a landlord, investor, letting agent, property developer, National Landlord Association rep, and a tenant.
In short I had made an offer an old public house that I intended to convert into a home. The offer on the public house was accepted and within one day of being on the market I had an acceptable offer made on my existing home.
In a tough market that was great news so I accepted the offer and progressed quickly with the sale. Unfortunately, it transpired the developer who was selling the public house had made a pretty basic mistake with his planning permission - in which he had planning for one site with 3 plots, as opposed to individual planning consent per plot. One plot was sold to a builder who had since disappeared and consequently I wouldn’t have been unable to live in the property until the AWOL builder had returned - a risk I wasn’t prepared to take. So I withdrew, continued with my sale and then proceeded to look for a property to let.
For some time now it’s been discussed that the PRS (Private Rental Sector) isn’t adequate for the growing demands of the market. Society is changing and rental properties are no longer just for people that can’t afford to buy! The emerging market is driven by the professionals and the under 30’s – who are CHOOSING to rent. Not because they can’t afford to buy but because it suits their lifestyles.
However, what that customer base finds is exactly what I found - a massive shortage of good quality properties in areas that you actually want to live! There are many reasons behind that but fundamentally the current investment model doesn’t work in order to make such properties available.
If we take a market I know very well in Doncaster, a 300k property would only let for a £1,000 - £1,200 per month. In the same town an investor could purchase six terraced house properties for 50k per property and let them at £450 per month. So you can imagine which option most investors choose. That leaves the top end of the market to the accidental landlord… and that has its own issues.
I did finally manage to secure a property to let (which was no small accomplishment as all properties in the area I was looking at would go in the first week, following an abundance of applicants).
Once I started the letting process it was another eye opener! The landlord was indeed accidental - the property belonged to a doctor who had taken an opportunity to move to Australia. Consequently, he placed the property into the hands of an agency he assumed was a market leader in the area. The danger with this whole scenario is that we now have a landlord that doesn’t know what they are doing recruiting an agent that he perceives will know what they are doing but ultimately nobody is policed. Consequently, I signed a tenancy agreement that would not have upheld in court for the landlord if there was a dispute; the agent or landlord could never have served a section 21 on me as I was never issued with the correct paperwork at the outset and the property was never inspected during the tenancy.
As it happens the landlord then decided not pay his mortgage and this was a situation I had to put up with as a tenant for the 12 months I was in the property. Not a great experience as a tenant but a great experience for someone in the industry!
So in summary - what did I learn?
Firstly the developer was able to acquire a property, commence with planning and then resell without anyone, ANYWHERE, checking he’d done things correctly. Consequently, new homes being delivered to market were held up and table developers were disadvantaged. Clearly the planning process or the architects didn’t advise the aspiring developer correctly about the potential pitfalls of the approach - and instead allowed him to focus on cost savings.
Getting on to the lettings, the landlord joined a national landlord association to create a perception he was a professional - and he opted to use an agent without doing any research. Accidental Landlords perceive market prescience as an indication of capability and therefore are vulnerable to appointing poor quality agents. In my opinion it’s too easy for agents to become letting agents. The bank has no idea that some properties are being let and wait around 3-4 months before proceeding with repossession activity. In such cases the tenants are given very little choice but to move.
The whole experience served to highlight some clear problems. It really is the Wild West out there - which as we’re dependent on the sector to provide stable homes for our population is a situation that really can’t be allowed to continue. Ultimately whist we operate in this highly unregulated market place we will constantly have the issues that I experienced first hand.
That’s why, despite everything, I very much welcome increasing regulation and the professionalisation of the sector.
We need a sector that can serve the emerging market of individuals that don’t want to buy, and need to rent properties in the right area at the right price. Such individuals are often aspiring young professionals or seasoned executives and the local economy needs them.
If you want to be part of the PRS, you need to know your stuff. You need to do your research. You need to treat it like a business. And that’s with all of my different hats on at once.
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