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Residential buy-to-Let

Sitting tenants make a return

Author: Luke

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Belgravia estate agent, Best Gapp explains why a growing number of landlords are buying properties with sitting tenants…

A growing number of buy-to-let investors are taking on properties that have sitting tenants.

New research shows that 11% of all properties bought last year by landlords had a sitting tenant – a four-fold increase on 2008.

And in London and south-east England – where property values are highest – 26% and 16% of buy-to-let purchases came with a sitting tenant last year as landlords looked to minimise the impact of void periods on already squeezed rental profit margins.

Many regulated tenancies not only charge sitting tenants below market value rents, but allow them to remain in the property for an unspecified length of time. But as a long-term investment strategy, this can make sense because many landlords pay below market value for properties with sitting tenants and after they vacate the property either take advantage of the investment’s rise in value or treat it as a regular buy-to-let investment and charge new tenants market-value rent.

But is this a long-term trend? In every area of the UK sales market, sales from landlord to landlord with a sitting tenant have increased in the last 12 months.

The value of keeping a reliable, long-term tenant in place is clear. Not only does it eliminate the risk of void periods, it eliminates the need to carry out some of the regular maintenance that other landlords must do to keep their tenants happy.

The majority of regulated tenancies oblige sitting tenants to keep the interior of the property in a good state of repair – freeing landlords from many of the hassles of running a property portfolio. But beware. Tenants do not have to carry out repairs to the exterior of their accommodation.

Searching for tenants

When it comes to looking for new tenants, the process can often be drawn out and fraught with difficulties – especially if a landlord wishes to save money and carry out the job themselves.
More likely they will put their trust in an agent, but with this comes a financial drain. It can be a much better option to trust the previous landlord and gain the trust of the sitting tenant. It’s also very convenient for them too, since they can avoid any of the upheaval that goes with moving and of course they don’t have to find another place to live with possibly a higher monthly rent.

So, the advantages are pretty clear: sitting tenants mean no dreaded void periods or loss of rental income. However, it’s still worth being a little cautious. You will have no idea what kind of tenant you will be getting and the landlord could be overselling their reliability in order to speed up the purchase process. As well as this, if you meet the tenant he/she could be deliberately coming across as trouble free just so they can stay in the place they call home.

However, in most cases the transition is trouble free because most long-term tenants are long-term for a reason. They keep the property in good condition, don’t annoy the neighbours, pay their rent on time and only make reasonable demands on their landlord. So if you’re going in to the buy to let game why not choose a sitting tenant who is trusted rather than venturing into the unknown?

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