Pick me begging letters, tax rises and red tape!
The Times - Jane Mulkerrins
The multiple offers over the advertised rental price from potential tenants were a pleasant surprise. But I hadn’t reckoned on how much the pleading, “pick me!” personal statements — how much they all admired my flat’s aesthetic — tugged at my heartstrings, as well as stroked my ego. What quiet, careful, non-smoking, quasi-monastic tenants they would all make.
Hobbies include being an actual house-lover and a plant Mum, curling up on the sofa with a book,” wrote one, before going on to enthuse about the “gorgeous” (read: completely standard) gas stove.
They all gushed about the garden, the built-in bookshelves and the exposed brick, which, to be fair, were three of the features that had sold it to me 14 years earlier. Another pair of prospective tenants, living with one half’s parents, wrote: “Wanting to take the next step as a couple and move into somewhere we can call home for a long while, with our house plants!”
I’d read, of course, about the dire dearth of rental properties, and younger colleagues had related tales of horror, from black mould and mice infestations to brutal gazumping, in recent hunts to find homes. But when, in July, a matter of hours after posting the ad for my west London flat, the overwhelmed estate agents had to close the list for viewings, I realised just how chronic the shortfall has become.
Three days later, on a sunny Saturday morning, 25 applicants arrived over the course of an hour to hustle for a small one-bedroom flat on a busy main road, the site of a recent stabbing. By Monday morning, the agents had collated the four offers they considered the best — all of whom were offering more than the advertised rent (an already ludicrous £1,600 per month) — and sent them to me for consideration.
I felt like Simon Cowell on a talent show panel. All the prospective tenants were solid, financially solvent options and all had written strong personal statements. I had no idea how to choose between them.
It was a far cry from the spring of 2017, when, unable to find a single private tenant for the property, I’d let it to a council tenant. I had no objection at all to doing so: rent is rent, and everyone needs a home. I mention it merely to illustrate that six years ago it was a struggle to fill the same flat that this summer was the subject of a bidding war.
I bought the flat in the summer of 2009, when the UK property market was in the toilet — which, happily for me, offered my best shot at being able to get a first footing on the ladder. At the time, £200,000 still felt like a stretch, but I’d managed it. I had bought myself my very own little split-level, 50 square metres plus bijou garden home, backing onto a railway line.
And when, four months later, the newspaper I was working for folded (squeezed by the same global economic forces that had meant I could finally buy a flat) and we were all made redundant, I figured at least I’d snagged a mortgage before my credit score totally tanked.
With no job and no boyfriend, I moved to New York to freelance for a year (two years max, I promised my parents), and rented the flat out. When (many) things inevitably went wrong in my absence, I sent my cousin, who handily has a property services company, around to sort it out.
Almost 11 years later, I finally came back. And while I’d been running around the US, my little flat had doubled in value. I had no intention of becoming a landlord again, though. My plan was to sell up and buy a place in Brighton, where many of my friends had moved. But a decade of tenants had taken their toll, so I first needed to spend a year sinking significant time and money into it, tearing up carpets, reflooring, damp-proofing and rendering, plus fixing up the roof, repeatedly.
With the work all finished and the flat finally looking ship-shape, I put it on the market in August 2022, excited for my imminent new life on the coast . . . we all know what happened next. A month later, Liz Truss’s disastrous mini-budget sent interest rates spiralling and mortgage approvals plummeting.
Mine is the perfect flat for a young first-time buyer — but young first-time buyers don’t stand a chance with 6.5 per cent interest rates and strict stress tests from lenders. Financial instability meant even investors and cash buyers were exercising caution.
By spring this year, the flat was still on the market. Viewings had slowed to a meagre trickle. So I came up with a new plan: I’d remortgage the flat, releasing equity to allow me to buy a two-bed I’d fallen in love with in Brighton, and I’d (grudgingly) rent the London flat out again.
Taking on two mortgages, in a time of terrifying interest rates! What could possibly go wrong?
The 25 applicants queueing along the street to see my flat is by no means an unusual occurrence in this market. In a report published in July, commissioned by the BBC and Rightmove, a property to let in the UK now receives an average of 20 applicants (up from six in 2019). In London, 43 per cent fewer homes are available to rent compared with 2019, and those that are available grow ever more expensive. The London estate agent Martyn Gerrard claimed that in November last year, it had 45 would-be renters per advertised property on its books.
Interest rate rises mean landlords have been forced to increase rents to cover their mortgages. This, coupled with tax rises, has led pressure groups to claim a wave of investors will soon sell up — potentially worsening the shortage of properties.
Since April 2020, landlords can no longer deduct mortgage expenses from their rental income to reduce their tax bills. Under the old system, higher-rate taxpayers effectively received 40 per cent tax relief on mortgage payments, but under the new system they receive a tax credit based on 20 per cent of their mortgage interest payments. In short, the tax bill on rental income for higher-rate taxpayers has doubled, drastically reducing overall earnings from rent.
That’s certainly the case for me. Yes, I can charge a frankly obscene amount of rent, but I won’t be turning any sort of profit, as I’m getting clobbered by tax too.
A friend revealed last week that she’s selling her south London rental flat in a “fire sale”, as her mortgage on it has tripled, and, with the tax increase, she can no longer even cover her costs.
She’s far from the only one. According to a report by the National Residential Landlords Association (NRLA), these cuts in mortgage interest tax relief have led directly to 1.2 million fewer properties available in the sector. However, evidence of a mass sell-off has, so far, been mixed.
In addition, as I discovered via a mind-boggling recent bill, the upfront costs of installing a tenant are now exorbitant.
Renting a property out demands the following: an electrical installation condition report (I paid £180, plus 20 per cent VAT, of course) — and, what do you know, the electricians carrying out the report found some remedial work that needed to be done to make it compliant (another £165 plus VAT); a gas safety check (£95 plus VAT); an inventory (£140 plus VAT); a landlord tenancy agreement and administration fee (£165.83 plus VAT); a deposit fee (£50 plus VAT) — yes, that’s £60 just to keep hold of my tenant’s deposit — and mandatory professional cleaning (£210 plus VAT). Safety first, of course, but blimey, bureaucracy is expensive.
Now that I’m back in the UK, I don’t need an agency to manage the property or even collect the rent, but to simply find me a tenant — and I agreed to pay 7 per cent of the yearly rental fee for that, plus a renewal fee of 5 per cent.
When the agency asked if I’d be happy to give the tenant a two-year lease with a 12-month break clause, rather than just one year, I said yes, of course: the longer the better. As a result, that mind-boggling bill — some £4,600 in fees — also included, without warning, 7 per cent of 24 months’ worth of rent.
In spite of doing nothing to secure that second year of rent, beyond issuing a longer initial lease, the agency is attempting to charge me for two years of fees. I am therefore pushing back. Wish me luck.
In the long term, I realise that holding onto my little London flat may prove a sound financial move, but there are many moments when it feels like more of a millstone. And the irony of being unable to sell it, but able to rent it out 25 times over, is not lost on me.
As for my new tenant, after much deliberation, I accepted the offer (£1,710 per month) from a young woman who’d detailed the reason for moving out of her previous property as “infidelity” (not hers). All else being equal, and ever keen to give a sister a break, I felt a fiancée who’d been cheated on — and her new kitten — were the most deserving of a fresh start at my flat.
Jane Mulkerrins is an associate editor for The Times Magazine
Investment Synergy - Property ownership in its many guises can become a form of gambling, rolling a dice, or being at a funfair on a roller coaster......
Comments