UK Property Investment Forum & Blog

Most landlords have heard of or dealt with tenants from hell – freeloaders who do not pay their rents on time, rip off wallpaper and smash windows in a drunken state, have hidden criminal records, or own three dogs and four cats (or exotic animals) in complete violation of all “no pets” agreements. Some tenants try to earn a few extra pennies by subletting the premises to more problem tenants. Some tenants are demanding enough to contact their landlords at 2 a.m. to demand repairs to a leaking tap or a broken window.

As an experienced and shrewd property owner, you probably know how to avoid problem tenants. You have the names and phone numbers of all tenant finding services in your area. At the end of the AST cycle, you will probably contact your most trusted tenant finding agent and tell them, “Find me a tenant”. If you are not worried about payment of mortgages, you can probably find a reliable tenant through a tenant finding service.

Mortgage Problems? Read on…

However, the property market being what it is now, there are very few property owners who are not facing trouble repaying mortgages. Negative equity is a serious problem for many landlords. If you are paying more mortgage than your property is actually worth, then you are probably facing negative equity on your home. Negative equity prevents many property owners from selling their homes and getting rid of a property that is only creating financial loss for them. Last year, a Standard & Poor study found that property repossessions had touched a high of 19, 000 in the first quarter of 2008. This coincided with a drop of 35% in property prices. The prices are expected to further fall through 2009 and 2010.

Here is an example of how negative equity can hurt landlords: Suppose John purchased a house for ?150, 000 in 1989, and paid ?143, 000 through a mortgage. If, in the next three years, property prices decrease by around a quarter of 1989 prices, the house would be worth only around ?112, 500. That is a deficit of ?30500. While negative equity alone will not give the bank claim over the property, John might find it hard to make monthly payments on the mortgages from rent alone; because John’s tenant, found by a tenant finding service, does not pay enough to cover the monthly payments. Yet the landlord cannot evict them legally before 6 months. And if John has the misfortune to rent out to the “tenant from hell”, he will be facing a mortgage debt and damage to his property, which is already difficult to sell. Gradually, as John starts falling behind on his payments, his creditors will move in and take possession. That is not the end of his troubles. He is deprived of his property, and he is still under debt, because his property’s value does not completely cover the mortgage amount.

There is a solution to this problem…

It is known as Property Lease Option. John can draw up a contract that allows his tenant to buy the property at the end of a fixed term, usually a minimum of 3 years. Now he can rest easy – the tenants will take good care of the property they might wish to purchase later, he does not have to call up “find me a tenant” agents, and he does not have to find a tenant at the end of every AST period. The cash flow might ease John’s mortgage problems, enabling him to sell the house to his tenants.

If you are new to property investment or are a landlord worried about negative equity, find out how Property Lease Options can help you by reading the e-book offered by UK Property Ladder. You can read a chapter of the e-book before you buy – at no cost. Visit this page to find out more:-

 http://www.ukpropertyladder.com/upl-apc-testimonials.htm.