A strange new phenomenon that is emerging courtesy of The Credit Crunch is what could be called the Reluctant Landlord. With the sales market for UK and USA property falling for the first time in many years, many owners are being forced to let rather than sell their properties if they either need to move for personal reasons or indeed for financial ones.

Increasing numbers of the kind of properties that would in the past have been only offered for sale are coming on to the rental market. As a professional landlord who also chooses to rent the property in which I live, I believe I am well placed to see the effects of all this from both a tenant and landlord’s viewpoint.

Will it get like Germany?
We live in the South East of England and I notice that recently many estate style houses are coming on to the rental market, sometimes with a wistful alternative selling price being advertised by the agent. As in every aspect of the property market it is incredibly difficult to foresee the future but I do suspect that if there is a significant fall in property capital values, it may finally upset the long running love affair that Brits have had with property ownership. I certainly don’t think it will develop into the situation that exists in countries like Germany where it is absolutely the norm to rent, but I do believe that it will lead to renting being far more accepted as a normal form of tenure in the UK.

An even stranger phenomenon is builders with recently completed developments deciding to offer house to rent that they just cannot sell in the current climate.

Will rents rise or will they fall?
This is always the $64,000.00 question for landlords! Of course, most first time buyers will certainly be postponing any buying decision and waiting… and while they wait they will be rent, which should stimulate the rental market. As for the Reluctant Landlords, my analysis would be that the effect of individual reluctant landlords offering their properties to rent will be fairly neutral on the rental market as a whole. This is because as one landlord is added to the supply side, equally one tenant is added to the demand side of the equation. However, the problem may well come from developers who whilst adding to the supply side, don’t add to the demand side.

I think that the result of all this will be that in some areas where there is little new development being offered for rent that rents will rise, but in those where a substantial amount of new build property is being offered for rent that rents will fall somewhat.

Safeguard your rent
If you’re a Reluctant Landlord and also perhaps an inexperienced one, it’s a good idea to err on the safe side when letting your most prized possession to other people. It’s usually safer to let through a reputable letting agent, as dodgy tenants tend to avoid them (not always though!). Letting agents though are expensive, so an alternative option is to let privately and simply to take out Landlord Rent Guarantee & Legal Expenses Insurance. Rentalguard for example, offers one of the best value policies on the market. You can insure up to ?500.00 of rent per month for less than ?9.00 per year, and you get cover to pay for legal assistance to deal with problem tenants into the bargain.

All these policies stipulate that prospective tenants be properly credit checked with full ID being supplied. For maximum security of course you can still use an agent AND take out Rent Guarantee Insurance.

Don’t forget the Buildings Insurance
And don’t forget that if you’re letting your property you will need to make sure your current Buildings Insurance covers the property while let. Again Rentalguard offers great deals on such insurance.

As to the future, who knows that the Reluctant Landlord may become the Willing Landlord, leading eventually to a still greater expansion of the private rented sector.

http://www.fsa.gov.uk

Malcolm_Stretten

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