Source: By Gemma Hicks-Logan – The Argus Newspaper
Did you know that it’s likely a corporate letting company has approached your letting agency and offered to lease your property from them? If they have, you are probably not aware of it, and your letting agency will have deliberately chosen to not discuss the lucrative offer with you.
Why?… because your letting agency makes more money from you by having a higher turnover of tenants. If they put forward the corporate company’s offer, your property would become corporately managed for free, with a fixed, guaranteed rent for 3-5 years, and no fees and maintenance charges….meaning you gain in many positive ways, but the letting agency does not. Which is why they will continue to lie to you and not disclose such offers.
Buy-to-corporate let is taking over the buy-to let market, and the figures don’t lie, unlike your letting agent!
We have interviewed hundreds of landlords and asked them the same question:
“What’s the most profitable way to rent out your property, whilst avoiding the stresses of being a landlord and getting maximum security?”
The answer? “Find a corporate tenant”, and here’s why!
What is a corporate let?
A corporate let is when a company secures a property on a long-term basis via a management agreement (not sub-letting). The company pays a higher rent than what’s achievable from the landlord, or a high street letting agency. In addition to this, the rent is guaranteed during the fixed term, usually a period of 3-5 years.
Example. Traditional renting through a letting agent
Market rent: £1,250 pcm / £15,000.00 pa
Agents tenant finding fee: -50% of the 1st months’ rent £625.00
Management fees: -10% pcm at £125.00 pcm / £1,500.00 pa
Inventory report: -£65.00
Deposit protection admins fee: -£49.00
Voids: -£904.00 pa
(22 days on average / £904.00 pa, according to the findings by insurer Direct Line for Business)
Total rental income over 12 months (depending on the tenants paying the rent £12,761.00 / £1,063.41 pcm.
Loss of -15% of your hard-earned rental income in agent’s fees and voids!
Example. Renting as a corporate let.
Market rent paid for 3-5 years: £1,250.00 pcm / £15,000.00 pa
Tenant finding fee: £0.00
Management fees: £0.00 (Corporate managed for free)
Deposit protection admin fee: £0.00
Voids: £0.00 (Fixed rent for 3-5 years)
These figures clearly show the benefits of renting as a corporate let, with 15% higher rental returns when compared to renting out a property using a traditional letting agency.
Furthermore, when using a corporate letting company the rent is paid no matter what, even if the property is left vacant or the tenants themselves don’t pay the rent.
The property is also managed for free and all of the utility bills and council tax standing charges are paid, even when vacant.
In addition to this, should the need arise, the costs to evict a problem tenant are paid by the company, and rent will still be paid during an eviction.
Why are Landlords choosing corporate lets over letting agents?Under this arrangement, the landlord avoids the risks and uncertainties associated with being a landlord. For example, the landlord is indemnified against the corporate tenant not paying the rent. The landlord is also indemnified against any damage to the property, and avoids the risk and expenses of evicting a problem tenant who refuses to pay the rent after the first month of a traditional Assured Shorthold Tenancy (AST). The financial aspects are also causing landlords to choose corporate letting over traditional, with the 15-25% higher returns making them want to make corporate letting their preferred method.
Is my property suitable as a corporate let?
Corporate letting companies are usually looking for higher-end properties, new builds, or properties that have been recently refurbished and modernised.
Location is also a key criterion, with the companies seeking properties in prime locations, close to transport links and city centres.
On occasion, they will broaden their criteria and seek more affordable properties, so as to cater for the middle end of the corporate market, including junior employees and trainees, who are happy to house share. The companies are known to sometimes pay a higher premium, above the market rent for the right property.
We approached Brighton based Liquid Properties Corporate, who can help those who want to let out their property as a corporate let, including those who might be worried that their home doesn’t meet the criteria. They said: “We are working with some great Landlords who want a higher rental return without spending any of their money preparing their property for the corporate market, which is why we partner with them and invest up to £8,000 of our own funds preparing their properties, and we lease them back long term.”
Who are the corporate tenants in Brighton?
Usually hard working, high achieving and high earning individuals, often employed by white collar, blue-chip companies. Many will have relocated to the UK for work and are wealthy, international homeowners themselves. Quite often they will want a place they can call home, rather than be limited for choice and stay in one of the up-market hotels or apartments, such as The Grand Hotel.
How do you find a corporate tenant?
Corporate tenants can be sourced by calling the HR departments of blue-chip companies in Brighton, or surrounding commutable area, such as London Gatwick.
Another way is to use an established property acquisition company, such as Liquid Properties, and let them do all of the hard work for you!
What are the downsides of Corporate Lets?
If you are approached by a company looking to lease your property you need to know if the company will be taking responsibility for the rent and management of the property, and therefore be classed as the tenant, or, if the employee who is renting the property will be responsible.
If it’s a company, you can use the checks available on www.companieshouse.gov.uk to ensure it’s a legitimate business. It is also wise to Google the company and find up to date reviews and experiences from others.
How Landlords Can Cover Themselves
Make sure the company uses a corporate agreement, and doesn’t suggest using an Assured Shorthold Tenancy (AST). Ask to see a link to their most recent acquisition advertised on the internet, or visit it in person. In addition to this, make sure there’s a break clause in the agreement, in case the company fails to pay a single payment of rent. You should also make sure you propose amendments to the agreement.
Furthermore, make sure the company registers, or financially insures the deposit with a government scheme.
If a corporate let is correctly organised from the start, they are a low risk option and offer lucrative returns for the Landlord, with no voids. Their approach also means there are no issues with tenants, no management fees and the higher end tenants are usually homeowners themselves, which means they respect the property.
To request your free corporate let valuation and discover how much you would earn, call Liquid Properties Corporate on 01273 634 868 or email email@example.com.
Source: By Gemma Hicks-Logan – The Argus Newspaper