Rent related questions

[TooNice]

For all the wonderful things I've learned during my MSc in International Real Estate Market, I still lack 'worldly experience' when it comes to finding places to stay. So far, I've somehow managed to avoid any complications in the two places I've rented outside of University accommodations. I just pay the agreed sum to the account provided by the landlord every month, and that's the end of it. I don't even hear from them to be honest.

I've spoken to some friends on Saturday, and realised that it might not always be so simple. In their case, the landlord asked for 6 months rent upfront, as they are students, and can not find a person with the necessary income to guarantee their payment. This is where my questions comes in:

1. Is it common practice to ask 6 months rent upfront for people with limited income?

2. Would it be frowned upon to try and negotiate such a lump sum payment? Generally speaking, I am likely to pay the asking price in the ads. And that's what my friends did. I also understand that the landlord will want to protect him/herself against default risk. However, a six months lump sum is rather significant. Assuming that the monthly rent is £900 (I forgot how much it was exactly, but it's a little less than that), that's £5400. Left in a high interest fixed-term account of say 6.5-7%, and the opportunity cost can be up to £150, which translates to a £25 premium per month. It may be less than a pound per day, but I can't quite write it off as insignificant. And if you were to negotiate, how much would you offer (would you still give them a small premium just to avoid giving a bad impression)?

3. What are the tenant's risk, if the property is not fully owned by the landlord (i.e. there is still mortgage to pay). I heard that the landlord who own a couple of flats in the area is feeling the squeeze, and asking for another £200 per month in the next rent review (almost make £25 insignificant). Personally, I would be concerned about putting down 6 months rent if there is no tenant protection scheme of any kind in the event the place you are staying in get repossessed (property law wasn't my strong point). Would it be seen as rude to ask a landlord whether s/he fully owns the place you are renting? [Going back to point 2., if anything, I would actually say that it's rational for the tenant to get a *discount* under the circumstances]

Thanks for the input

[rufeo]

1. never had 6 months up front, but currently in bristol for students 3 months upfront seems to be the norm. when signing through a letting agency they ask for pre-dated cheques for the whole year which i'm assuming are then past onto the landlord.

2. never had to negotiate and that probably wouldn't have made a difference, as student accommodation will get snapped up quickly so they'd probably tell you to go find somewhere else. 6 months is a bit long i must admit though. the deposit should take care of a bit of the risk if the person can't pay. if worst case scenario the tenant couldn't pay for the rent then the landlord could just take the extra month's rent not paid for in the form of the deposit and tell them to leave the house/flat. would a parent not guarantee any of your friends?

3. no idea about this, sorry....

[TooNice]

They are oversea students, and I imagine that the person providing the guarantee must be resident in the UK. To honest, I don't really see the place as a 'student' accommodation. It's got a massive living room, and is not near any University that I know of (not that I know London that well), and certainly a distance from where they were/are studying.

[Blitzen]

If you want the place then pay.
If it sounds too steep then dont.

We are all feeling the effects so i dont blame the landlords.

[Lucio]

I think you've really answered your own question, they're international students, probably THE most likely group to just up and disappear without any notice & with rent arrears. Asking for the money up front is the only way to be sure you won't loose out & given they don't have a job to guarentee the rent, also the only way to guarentee they have the money to afford the place.

It's not *nice* to have to do it, but it's only way to rent out to foreign students safely.

The risk to the tennants is minimal if they get a standard short term tennancy agreement. The landlord would be contractually obligated to provide reasonable notice, and provide a refund of any overpayments promptly.

[rufeo]

They are oversea students, and I imagine that the person providing the guarantee must be resident in the UK. To honest, I don't really see the place as a 'student' accommodation. It's got a massive living room, and is not near any University that I know of (not that I know London that well), and certainly a distance from where they were/are studying.

it's not too uncommon for students living in london to be quite far from their university. in fact if you think about the rent in general for somewhere central in london then i think you get the idea, its expensive excessively so. think a lot of the students would prefer to live a bit further out and commute, unless they're loaded that is. heard clapham is where alot of students look at for places.....

yeah the overseas part does make a huge difference lol

[TooNice]

@Blitzen: I am not blaming anyone per se. However, £5400 upfront is not equivalent to £900 per month as advertised. The landlord can freely make the decision to reject any offers - what I wonder, is whether it is acceptable practice, given that the landlord has indirectly 'changed' the rent from what was advertised, to provide a reasonable counter-offer (to be accepted, or rejected). The alternative would be to walk away as, but that seems like a waste of both parties time. Then again, I am not into breaking good etiquette, if there is one for such thing, hence my question.

@Lucio: Wouldn't one or two additional month's rent be enough as a 'cushion'? One month of deposit against damage, running off with the key and requiring to change locks etc., and another month or two for missed payment which will give them enough time to write them a notice for non-payment if it were to happen. And after putting down a rather significant amount University fees, I can't quite imagine where overseas student are expected to disappear to (but maybe I missed something *shrug*).

And about the tenant risk, does that mean that in the uncommon case where a property is repossessed, the tenant would be given enough notice to find another place too?

[Zak33]

If you want the place then pay.
If it sounds too steep then dont.

We are all feeling the effects so i dont blame the landlords.

Blitz makes lots of sense ... and he;'s right.

If you like it, you must find the dough. If you can't or don't, then you won't.

It's his place after all.

The money squeeze is on...in a biiiiiig way

[Zak33]

@Blitzen: I am not blaming anyone per se. However, £5400 upfront is not equivalent to £900 per month as advertised.

is 6 months x £900 not £5400?

Even if you presume that he/she is keeping it all in a high interest account and earning, as you say 6% per annum then they get 6%/12 = .05% in the first month (£27) which they pay tax on (presumably 40% as the are renting out large houses) so -£10.80 = £16.20 and it goes down from there for 6 months. I don't own a house to rent, so I am presuming things here..... but one month later, they've paid their own interest on the mortgage, presumably a 100% interest only motgage so that it's all offsetable against their tax bill, and the £5400 dropped to £4500 ish....once again, 0.5 % interest from good savings account =£22.50 - 40% tax = £13.50 etc so I think they are unlikely to be creaming it in from your £5400.

And that presumes that the tentants leave it in mint condition, and pay every month thereafter....

AND presumes that the £900 per month pays the mortgage interest AND helps the investment work...cos most "buy to let" work on inflating house prices...and not on paying the mortgage off...and house price increases are just NOT happenng this week

[TheAnimus]

when renting my last place i hammered £20 a week off the asking price, gave only 1 months rent in advance and a £1k security deposit.

I did however have to pass a credit check, and also prove my income with a letter from my employer.

[greenalien]

Choose your landlord carefully! There's no doubt that the credit squeeze, rising interest rates on mortgages and the fall in house prices are putting the squeeze on many BTL landlords who have entered the letting business over the last few years. They'll be trying to raise rents to cover their increased costs ; however, there are plenty of other landlords who bought their properties before the house price bubble, and they'll be less likely to hike the rent, especially if it means keeping a reliable tenant - try and find this sort of landlord! You can research on the internet to see when the property you are considering renting last sold, which is useful info! Finally, beware of anyone who has a house bought on a personal mortgage that they are then letting out - doing this without the permission of the lender breaks the mortgage contract, and if the landlord defaults on their mortgage payments you could be evicted at short notice and lose any deposit - this is likely to become increasingly common as the credit crunch bites, I'd strongly advise against paying more than a month's rent in advance unless it is held by a trusted 3rd party such as a solicitor (not a rental agency, they're not regulated and could go bust!).

[Blitzen]

@Blitzen: I am not blaming anyone per se. However, £5400 upfront is not equivalent to £900 per month as advertised. The landlord can freely make the decision to reject any offers - what I wonder, is whether it is acceptable practice, given that the landlord has indirectly 'changed' the rent from what was advertised, to provide a reasonable counter-offer (to be accepted, or rejected). The alternative would be to walk away as, but that seems like a waste of both parties time. Then again, I am not into breaking good etiquette, if there is one for such thing, hence my question.

@Lucio: Wouldn't one or two additional month's rent be enough as a 'cushion'? One month of deposit against damage, running off with the key and requiring to change locks etc., and another month or two for missed payment which will give them enough time to write them a notice for non-payment if it were to happen. And after putting down a rather significant amount University fees, I can't quite imagine where overseas student are expected to disappear to (but maybe I missed something *shrug*).

And about the tenant risk, does that mean that in the uncommon case where a property is repossessed, the tenant would be given enough notice to find another place too?

Personally i think the landlord is 100% right to charge whatever he sees fit as some kind of insurance for the house.
I am not saying all students are dirty/bad....but alot certainly dont look after where they live.

This is the ONLY way the landlord is guaranteed to cover his costs if:
1. The place gets trashed.
2. The tenants do a moonlight flit.
3. You refuse to pay the rent (he cannot just throw you out).

I dont know you personally, and for all i know you the most hygenic, house-work minded person on the planet. The landlord doesnt know this though so he just wants to makes sure you cant take him for a ride.

If he wants to charge £20,000 up fromt (although i doubt he would have many takers), he can. Its his house

[TooNice]

is 6 months x £900 not £5400? [...]

£900 over a period of 6 months starting from today is not equivalent to £5400 from the tenant's perspective. As far as I am concerned, £5400 upfront is akin to having to pay £925 per month over 6 months. If I find the rent to be 'cheap' in the first place, then I might be willing to go ahead and pay the premium. But if I thought that £900 was the 'fair' price, then I'd find an additional £25 to be significant.

And wouldn't the landlord still have to pay the taxes and mortgage whether it is in the form of 6x £900 or 1x £5400? Any way I look at it, £5400 today will benefit the landlord more than just in terms of security.

@TheAnimus: Is the security deposit equivalent to 1 months rent? From the sound of it, rent can is negotiable, but whether the landlord is willing to negotiate in his favour or the tenant's favour (from the advertised price), depend mainly the perceived default risk. Did you just ask the landlord that you would like a £20 cut, or did you show evidence that you would be a 'safe' tenant and ask if he give you a cut.

@greenalien: Thanks for that comment, it reaffirm an important (and scary) risk I suspected (if the landlord default his payment, the tenant can find him/herself in the street in rather short notice). My friends will move out at the end of the contract because the £200 price hike is more than what they are willing to pay (note that I am not condemning a price hike, it's a free market and if the landlord can find a new tenant willing to pay more, it would be foolish not to do so - all else being equal).

@Blitzen: As per the last thing I said in bracket to greenalien, I am not disputing the landlord's right to charge whatever they fancy. I was asking if it is acceptable to negotiate and try to reach a mutual agreement. I was rolling my eye (in my head) when someone was trying to get 20p off a bottle of Vodka yesterday at a convenience store, because it's not something that's done in the UK (AFAIK - and he didn't get it). However, it's clearly acceptable to negotiate when it comes to purchase an apartment/house as long as the offer isn't too cheeky. And TheAnimus' post suggest that rent negotiation does occur though it may take certain conditions that a student miss - i.e. security of payment.

[TheAnimus]

@TheAnimus: Is the security deposit equivalent to 1 months rent? From the sound of it, rent can is negotiable, but whether the landlord is willing to negotiate in his favour or the tenant's favour (from the advertised price), depend mainly the perceived default risk. Did you just ask the landlord that you would like a £20 cut, or did you show evidence that you would be a 'safe' tenant and ask if he give you a cut.

No security deposit was a simple 1k. Rent was £170 a week iirc.

I basically said i'm a good tennent will take care of the property, not going to have problems with payment, i don't want to pay £190 a week.

[Zathras]

Deposits have to go into a government-run tenancy deposit scheme. If the landlord loses the place, you're guaranteed your money back.

http://www.direct.gov.uk/en/TenancyDeposit/index.htm

There are also specific rules with regards to rising the rent. Look at http://www.direct.gov.uk/en/HomeAndC...ome/DG_4001366 for everything you need to know

[Saracen]

Deposits have to go into a government-run tenancy deposit scheme. If the landlord loses the place, you're guaranteed your money back.

http://www.direct.gov.uk/en/TenancyDeposit/index.htm ....

Deposits, yes. But that isn't the same thing as rent in advance.

TooNice, it's far from uncommon for substantial advance rent to be charged in specific circumstances, and that may well include the entire rental period for a short-assured tenancy. The circumstances will usually be where the renter have neither a qualified UK-based guarantor, or the inability to demonstrate an income level sufficient to give assurance about the ability to meet rents. It's a bit like a mortgage ..... if you can't demonstrate the income level sufficient to assure the lender that ou have the income, after normal living costs, to meet mortgage payments, the lender won't lend. The same applies to landlords - they want to see evidence that income is sufficient to meet rent commitments, so they probably want to see annual income around three times the annual equivalent of the rent. And for overseas students who may vanish abroad at short notice, and be impossible at a practical level to pursue through the courts for outstanding rent, then yes, many landlords will either want the rent in advance or a qualified UK guarantor.

As for negotiating, I don't see why not. If a particular set of circumstances are such that the renter may be able to satisfy the landlord's reasonable concerns about the above, then they may waive some or all of that requirement. Buyt they may not. At the end of the day, the landlords need to feel reasonably sure of actually getting their rent. If not, they'd be better advised to turn away that potential tenant and wait for someone they do feel can be expected to pay. It's about the ir perceived level of risk. If you can satisfy them about that risk level, they may waive the requirement ..... IF they are sufficiently satisfied.