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 Liz Hodgkinson
on When Overheads Exceed Income
Just as rents are rising and the lettings market is
stabilising, a new worry has arisen for Britain’s beleaguered
landlords. The fear is that even a good, steady rent may not
be anywhere near enough to cover rising mortgage payments.
With this in mind, investors new to the market are
beginning to ask agents to write an ‘option to sell’ clause into
the tenancy agreement, so that they can get out if and when
overheads are in danger of exceeding rental income.
But it’s not as easy as it looks. Tenants still have
choice, and they are unlikely to fall over themselves to rent a
property which may be summarily sold over their heads, leaving
them, potentially, with nowhere to live. Also, few tenants are
happy at the prospect of streams of
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prospective buyers traipsing round at
all hours, to view a property they have no personal interest in
selling.
On the other hand, landlords are
nervous that their investment properties may be repossessed if
they fail to meet mortgage repayments. Most lenders have little
sympathy with investors who default.
The lettings manager’s
view
A lettings manager who has been
experiencing this problem says, “We have a client at the moment
who needs to rent his place out for income, but who also wants to be
able to sell to the first serious buyer. He cannot afford to have it
standing empty while he waits for a buyer. So we are writing an
option-to-sell clause into the tenancy agreement, plus another
clause allowing people to view”.
The problem is that these two clauses
can easily put potential tenants off, especially as there is
still plenty of choice, and today’s tenants are extremely clued up.
As the manager points out, “It is mainly the new investors who are
nervous about possible interest rate rises. Old investors can ride
out the storm, but very many people just embarking on buy-to-let are
cutting everything to the bone and have nothing to spare”.
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Liz Hodgkinson is a prolific author
and journalist contributing to many publications. She
has written over 40 books on a wide variety of topics
and has a background in national newspapers. She now
falls into the 'later-life' age category and in
recent years has started writing for this 'older'
market, and contributes to Saga magazine, among
others.
Liz has two sons and four grandchildren. She is
divorced and now lives in London and on the
SouthCoast. She has written three books on property
matters and her interests include snooping round
other people's houses and viewing showhomes.
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If you
want an option to sell…
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You
have to make it perfectly clear to the tenant that he or she could
be turned out at any time.
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You can
get the agent to draw up an agreement whereby a tenant has total
security for eight weeks, then as soon as an offer to buy is
accepted, two months’ notice will be served.
As
this is by no means ideal for the tenant, the only way to persuade
somebody to take such a property is with a massive rent reduction.
Be prepared to do no more than cover your mortgage now, and take into
account that you may have to sell immediately if interest rates go up.
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