This week we look at buy-to-let property investment and the expectations and responsibilities of those who invest in residential property in an exclusive interview with Adam Joseph, CEO of specialists The Happy Tenant Company.
Hi Adam, please tell us a little about yourself and The Happy Tenant Company.
I joined The Happy Tenant Company (established in 2012) as the new CEO in February this year. I have a demonstrated history of working in the real estate industry having previously owned a successful independent agency for 13 years in Finchley. From my experience as an agent, I appreciate and understand the dynamic between management agent and landlord, which is what made the opportunity of joining a company like The Happy Tenant Company more interesting. There is a lot going on currently with projects in the pipeline, and I’m really excited about where the company is going to be in the next 12 months.
What's your company's USP?
Our main USP is that we are asset managers and not a letting and management agent. We do not let property, our focus is on the management only, providing landlords with a professional and totally transparent alternative to self-management, yet a more cost-effective option than management offered by letting agents. We use group buying power to negotiate discounts with our panel of approved letting agents and maintenance services, which are then passed onto landlords.
Where do you operate and are there limits to what you can take on?
At present, we operate predominately within the M25 area, but we are currently in discussions to expand this and have plans in place to roll out our model nationally.
How have stamp duty and tax changes affected the UK?
There is no denying that the changes to stamp duty last April, an extra 3% when buying a second property, hit investors hard and literally killed the buy-to-let market overnight. A year on and we are starting to see the buy-to-let market pick up again, mainly due to foreign interests with the weakened pound, but there is still a way to go to support UK investment.
Together with the removal of mortgage interest tax relief, landlords are undoubtedly feeling the pressure. Despite the changes being introduced last month and at the forefront of everyone’s mind, I’m not convinced that the majority of landlords understand what the changes are, how it works and how it will affect them.
Are there advantages and disadvantages to investors taking on new build properties for buy-to-let purposes?
The disadvantage is that you will have to pay a premium for a new build property, but there are a few advantages too – mainly that new builds will come with a NHBC building warranty and therefore maintenance costs should be lower for the first couple of years. Also, because everything is brand new, appliances should come with a decent warranty.
What are tenant expectations like and does the specification of the typical new build home meet many of these?
Tenant expectations are high and are only getting higher.
The rental market has transformed beyond recognition over the last 20 years. Tenants aren’t your typical 18-year-old that can’t afford to buy any more, there is a real diverse group of experienced tenants ranging from students to high end professionals and families. All demand an excellent service from their landlord and/or management agent who understand their obligations and responsibilities.
Do you find first-time investors have generally researched well and have realistic expectations of what their investment will bring them?
In terms of their rental return, yes, we do tend to find that first time investors have done a bit of basic research. There is so much information available to hand now, you only have to look on sites such as Rightmove and Zoopla to get a rough idea of likely rents.
On the whole, first-time investors have looked into what their initial costs might be as a landlord (agent fees/management fees etc) and the rental income they can expect. What they haven’t done is any research into the legislation that surrounds the industry, including the new tax changes.
Are there some basic points that you would recommend would-be buy-to-let investors should cover before taking the plunge?
My advice to anyone thinking of investing would be to contact the National Landlords Association in order to understand what the up-to-date responsibilities of a landlord are. In addition, it’s a good idea for a new landlord to speak to their accountant. It’s vital to know exactly what will be expected of you and what risks are involved before going ahead.
What are the most common problems you come across with tenants and are there ways investors can avoid some of these?
Unrealistic expectations of their landlord is quite common, but it’s something that can be managed. For example, if a washing machine or boiler breaks down, some tenants would expect someone to fix it immediately. Unfortunately, sometimes it isn’t just a simple repair and can take longer to get right. There will be times where every investor finds themselves in a situation where they have to manage tenant expectations. It’s all about communication and keeping them up-to-date with what’s going on. It makes a big difference.
What are the benefits of using a management agency?
Experience! Having a dedicated team of qualified property managers overseeing an investor’s portfolio, whether small or large, offers complete peace of mind. They will be up-to-date on existing and new legislation as well as any changes that happen along the way, and can manage those all-important tenant expectations.