LandlordZONE Newsletter - July 2008 - Problem Tenants

Welcome to the July 2008 edition of the LandlordZONE Newsletter.

Problem Tenants - July 2008 Issue 31

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With the downturn in both residential and commercial property appearing to be getting worse, there’s now a serious risk that the UK economy could enter recession territory.

Amid growing concerns from one report after another, even the Chancellor has had to admin that things are worse than the government predicted, that growth targets will have to be scaled back and that we are in for a tough couple of years at least.

Faced with the non-availability of credit, last week’s rise in inflation to 3.8% (everyone knows it’s probably more than double this official figure) and rising commodity and fuel prices, the unemployment figures we’ve already seen are likely to increase substantially.

Pressure on the retail sector will put thousands of vacant shops back in the hands of their landlords, just at a time when the government is imposing 100% vacant business rates on owners.
The general consensus appears to be: things will get worse before they get better. The big question for landlords is—how much worse can it get?

In truth, although we hear all sorts of predictions, nobody actually knows. There are forces at work here that will test and challenge and maybe even confound governments and central banks.
Bear markets characteristically go through periods of gloom with short sharp reversals—of optimism followed again by more gloom—this time it’s been no different.

Four possible outcomes, all of which have been predicted: (1) A small manageable downturn, (2) a mild recession (3) a deep recession, and (4) the doomsday scenario—the worst depression since 1929.
Evidence seems to be appearing which means we can discount the first option. Let us hope and pray we can do the same with options 4.

That means we have to deal with options 2 or 3, whatever it throws at us as homeowners, landlords and businesses.

This will mean both commodity prices and inflation remaining high, and as a result so perhaps will interest rates, putting a downward pressure on the economy.

Our own government is not in a position to raise more funds by more taxes, and without cash reserves, intends to stimulate the economy by borrowing it’s way out of trouble—not a good omen for the longer term.

However, just as the cycle goes down, inevitably it will eventually come back, presenting all sorts of opportunities for the savvy property investor.

the meantime, it’s batten down the hatches and all hands to the pumps, just in case.
Like everyone else in this situation landlords must cut their cloth to suit: they must control their costs, where possible reduce borrowings and try to avoid those unexpected crises which spell disaster for landlords: problem tenants, litigation and void periods.

Tom Entwistle, Editor.

This issue is wholly sponsored by Coverlet one of the leading providers of insurance for the rental property market.

Landlord’s Insurance from Coverlet

This month’s Topic - Problem Tenants

Tenants are the key to successful property investment—”think tenant first” should be the landlord’s motto. Forget the “armchair investment” - is there really such a thing in property?

You can have the best property in the street or even in the town, but if you can’t let it, it’s a liability to any landlord.

A property with a bad tenant is an even bigger liability, often far worse than with no tenant at all.
No rent coming in, invariably damage being done to your lovingly prepared interior, and the prospect of expensive and long drawn-out legal proceedings to get possession of the property again. Eviction specialists Landlord Action give their advice here.

If you are paying a big mortgage the whole scenario could easily spell disaster.

The answer to this is avoid bad tenants in the first place. Developing your tenant selection skills and having a proper selection and verifying process is crucial.

Another safeguard for residential tenants is rent guarantee insurance—a relatively inexpensive way to safeguard your sanity—to meet those mortgage payments.

But, no matter how good you as a landlord, or your professional agent, are at selecting and managing, inevitably, one day, you will have a bad tenant—it’s an occupational hazard.

The more properties you have and the more equity you have in your properties, the less risk this poses, but still, you need to be able to deal with problem tenants quickly and efficiently. This is what this issue is about.

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