The Importance Of Doing It Right - Dawn Pianosi
With an upsurge in new customers joining us this month and a healthy stream of properties being sourced for new and returning investors through our acquisition services, I thought it might be a helpful time to look at the many good reasons why property investment works well for Landlords. Ownership goes hand in hand with the property sector’s favourite bandit – Compliance – however it’s important to hold on to this as a positive for its role in maintaining quality housing stock and keeping tenants safe.
After all, it’s always the quality of the product that drives the price and housing is no different in this regard.
Interest rates have been poor for several years now while rental yields from property have held in the 7.0% -10.0% range.
As I’ve mentioned in previous blog posts, Edinburgh’s capital values improve year on year and infrequent down turns tend to be short lived. Despite the present pandemic, the local housing market is booming as noted recently in the Financial Times. Despite some issues during winter whereby some student tenancies vacated in advance of the end of the current academic year, our occupancy rates are sitting at just over 95% on average for the period 1 December 2020 to 28 Feb 2021. As I write we have zero rent arrears across our portfolio.
Good capital growth and a healthy rental market are the essentials of a good residential property investment, but this must be managed properly to maximise that collective potential, and that’s where compliance is key.
While compliance might be costly, it doesn’t have to keep you up at night. Our professional and accredited property management team manage the booking and access arrangements for all your required safety checks. We can help you get everything installed and certified ready for your first tenancy, as well as helping with project managing upgrades and repairs to ensure you get the strongest rent from your investment. With the potential cost of non-compliance being injury or worse, professional services buy peace of mind which is, at the end of the day, priceless.
So let’s take a look at what’s involved, why it’s important, and what it costs.
Landlord Registration – renewed by landlords every 3 years, landlord registration must be held by all named owners of a property. The fee comprises a principle fee and property fee. HMO properties are exempt from the property fee element but they carry their own separate licensing costs as we’ll explore later.
To avoid the late application fee, landlords should re-apply in good time ahead of their renewal date. This isn’t something we can do on your behalf as an agent as your application carries with it certain declarations that we are unable to make on your behalf. More information is available here.
Energy Performance Certificate (EPC) -
Valid for ten years, an EPC is needed along with your landlord registration number for the property to be listed on the market. Priced generally on a scale depending on the size of the property (usually in the range of £70-£100), the true cost of an EPC is in making improvements to ensure the property is low cost for energy and therefore attractive to potential tenants while also being mindful of future minimum energy efficiency rating requirements due to come into force for the rental sector.
Electrical Installation Condition Report (EICR)
While not needed to take your property to market, it’s a good idea to obtain this early in your rental preparations as remedials can be messy as well as costly if a partial rewire is required. The certificate itself will be in the region of £130.
Smoke Alarm Installation
To be let out, your property will need at a minimum, hard wired (or long-life lithium wireless), interconnected, ceiling mounted smoke alarms in the hallway and any additional landing, common living area and a heat detector in the kitchen. In an HMO property you can expect to also have to have a smoke detector in any cupboard housing an ignition source as well as every bedroom. The wireless models are a bit more costly but as these negate the need to damage cornicing and potentially run trunking. Often the extra cost balances against the electrician’s labour.
Legionella Risk Assessment (LRA)
Landlords share the same responsibilities as business premises owners when it comes to the requirement to assess risk, mediate any risks identified and keep records. The Health and Safety Executive don’t mandate how often this should be done but the Private Rented Tenancy’s prescribed supportive documents advise incoming tenants that a ‘recent’ assessment should be provided to them at the outset. Legal advisors for the industry have suggested that reports older than 12 months don’t meet this descriptor and, at the end of the day, a landlord’s responsibility is to ensure the safety of the tenant by all reasonable means. So, in the interests of best practice while maintaining a common-sense approach, if a property does not have a cold water or other storage tank that requires by its design a regular review every 12 months, we will undertake risk assessments every 2 years unless we are moving new tenants into a property where the existing report is older than 12 months. Common remedials to address risks are de-scaling and disinfecting cold water storage tanks and removing ‘dead legs’ (sections of obsolete pipework which may allow water to collect and stagnate). Water tanks should have a tight-fitting lid or cover and be insulated. If your property has an aged heating system, it may save you money in the long term to opt for a combi-boiler where possible, thereby negating the need for a tank and allowing this to be decommissioned, saving ongoing maintenance costs.
Landlord’s Gas Safety Certificate
An annual mandatory requirement for any property with gas installations, we pair this attendance with a gas boiler service at around £130 in order to ensure warranties are maintained and reducing unexpected call out charges.
If your property has gas appliances, you’ll also need to ensure correctly mounted carbon monoxide detectors are in situ and in date.
Portable Appliance Testing
Another annual requirement costing around £55. In my 15 years in property, almost every house fire I’ve encountered has been caused by a faulty appliance. If you are purchasing new appliances, you have a year from the point of purchase before a first certificate is required, so keep your receipts.
Houses of Multiple Occupancy (HMOs)
HMO properties have a higher yield than standard one and two bedroom residences due to high demand in the City and their largely being located in key desirable areas such as Marchmont and Bruntsfield. Their compliance cost burden is decidedly higher than with other properties though for on top of all the above mentioned requirements, landlords face the cost of an initial license (which will be granted for a year), and then renewals every 1-3 years. License costs appear to have jumped a further 10% as of April 2021 with the City of Edinburgh Council.
Additional safety checks for HMOs include; installation and annual testing of emergency lighting, provision and annual servicing of fire fighting equipment and sprinklers (where required).
2021/22 Edinburgh Council HMO License Application Fees
Non-compliance related costs
I generally recommend that landlords should enter the market in a position to cover the expenses of a property for at least 3 months in any given year. While voids that long are unusual in the Edinburgh market, the COVID-19 pandemic has reinforced that we should be prepared for unexpected market disruption. In Edinburgh if your rental property is vacant and on the market for rent, you will be required to pay 90% of the standard council tax billing for the duration. If your property is vacated by students and students then move in after a short void, you can apply for a full rebate once proof of all the past and new occupants’ statuses are obtained. Standing charges for gas and electricity are as high as 30p per day and heating needs to be kept on low during any voids in winter months to prevent damage.
Interested in learning more about how to get letting right in 2021? Join our experts on Wednesday the 26th of May for a free lunchtime letting masterclass! Click here to save your space.