Updating post from Reddit.
I'm a landlord who recently took on an HMO which has been one issue after another so far. In short, the individual who sold to me lied about the costs against the property and the yield. I'm now looking at having to increase rents substantially to meet market rates which will no doubt cause a huge amount of fuss with the existing tenants. I would never normally like to raise rents during tenancies but I don't feel I have much choice. It's hardly breaking even right now.
Anyway, I've got the opportunity to work with Clearspring on a social housing migrant contract and get a very good yield out of the property for doing so.
I don't know how this sits with me morally. To be honest, I feel uncomfortable renting to migrants when so may UK citizens don't have housing. But equally feel a lot of these people are escaping war and poverty. Equally, I'm sure the people locally on the road probably wouldn't be too happy once they realise.
I've also heard a few negative stories regarding these migrant housing contracts and them going south for landlords.
Would be good to get some insight from other landlords and maybe people who have done these migrant contracts before?
The higher rent often comes with a bigger headache.
Join landlords uk if not Already done so, although most people talk about serco.. not heard of this one, to be honest alot of the reviews are negative. Around treatment of your property, I’m not sure why.
Have you checked your insurance? A lot of people mention insurance being an issue with the issuance companies, not being happy.
Thanks! Is this landlords UK on Reddit you’re referring to or a group somewhere else?
Group is called “landlords uk” on Facebook. It has 114k members.
If you type into the search “Serco” or “asylum seekers” something of that nature, your question has been asked quite a few times.
These types of questions tend to attract a lot of “opinions” due to the current climate, as you could imagine, but you will find some helpful advice.
Thank you
Would also like to know
Just answered. :-)
I literally spoke to Serco and tried to get some information in terms of yields etc but they wouldn’t give me any information.
I was told they don’t pay market rates and I should look into clearspring. I haven’t bothered to call them because I thought it would be a waste of time, do you perhaps have any information regarding yields to see if it’s worthwhile getting in contact?
Interesting, I’d have thought they all pay the same. Maybe because Clearspring deal with an area of the country which has less of this kind of housing stock available?
The counter moral argument is that currently a lot of migrants are living in expensive taxpayer funded hotels.
By moving into a hmo or similar, this reduces on the cost to the general public and frees up funds for healthcare and schools etc.
Not used clearsprings or similar but there are lots of housing charities that need properties too.
Very true! Good to get other perspectives, thanks
The counter-counter moral argument is to keep it as expensive as possible for the government until they cause so much unrest that they are actually forced to carry out the will of the people. Don't enable them.
Agreed I think in honesty the “correct” answer will be different according to everyone. One thing I think we can all agree on is that the whole thing is a total shit show
The pragmatic argument is, this is apparently more profitable, but nothing is truly 'free'. The reason they are paying you more is because you're taking on more risk.
Very true, I do know a few people who do it and rate it really highly
I would advise that you find an experienced landlord to hold your hand for a few years. I’m very alarmed to hear that you didn’t verify the finances of an asset when you bought it. This type of thinking will likely spill over into other areas if not addressed.
Literally not what I asked but thanks
There has been a recent article I believe in the Times/Telegraph saying its a "New Government Plan" and of course people have jumped on the bandwagon critiscising Labour for this. When in reality this scheme has been running for 10+ years - its called the AASC previously the "Compass Contract". The contract is awarded to the likes of Serco and Clearsprings - that take different regions of the UK to manage.
They are pretty good terms typically - 5 year term, guaranteed rent and they are responsible for all the maintenance (up to a certain amount) for the term - as such you have zero management or maintenance costs during the time. They can only take certain locations (as to not have too many in a single area) and the rent is usually a bit lower than the market rent in the area - but no voids or costs. The guaranteed rent is worked on the companies "matrix rates" which are usually linked to the shared room LHA rate for the area https://lha-direct.voa.gov.uk/ plus a premium which depends on the shortage they have in the area.
At my firm we have supplied housing for this purpose for years mainly in the Northwest with Serco (so couldn't specifically comment on Clearsprings). Its a pretty good deal; yes the rent can be lower than market rates but in return there is little management or ongoing costs - in some areas though the yield does not stack up - its very much location based.
The AASC scheme is not the only one offering these terms, councils registered providers have finally realised they have to offer similar terms to compete for housing for local need; so take a look in your location for similar providers like https://www.thebondboard.org.uk/ that can offer something similar for local homeless need if the "Asylum Seeker" element is creating a moral dilemma for you.
These schemes do take away private rentals from the open market, yet are becoming more popular for LLs in recent years; this is mainly a response to the stricter anti LL legislation and regulations that have been introduced over the last decade as well as further coming into force imminently. Under the Private rented sector regs have made it incredibly difficult to remedy any problems easily and honest mistakes can penalise LLs severely; better for LLs to take a lower rent under a corporate scheme which removes the potential headaches that come with traditional PRS tenancy arrangements.
It isn't without its drawbacks though, your insurance may need to change and be slightly higher premiums, but mainly normal BTL mortgage products usually prohibit these long term leases in their terms; you need to check with the lender as you are likely going to need a specialist mortgage product for these schemes (traditional BTL products don't like the long term leases as being 5yr terms it prohibits them from taking vacant possession easily in the case where the mortgagee defaults on repayments and the lender needs to repossess and sell the property to recover the debt).
This is great, thank you for the in depth answer!!
I've chosen not to rent to migrants because you do not have the opportunity to check them out. My properties are all in nice residential areas full of families and children and I am very careful about who moves in. A fiend took a social housing contract which promised maintenance throughout the lease period, but the property need a full, expensive, refurb and a long void at the end of the contract.
I feel that working families ought to get first dibs and the migrant housing issue needs a different solution. It is too big to be solved with private landlords.
Yeah this is my feeling also although mine is an HMO anyway so not suitable for families
I cant speak to the SERCO horror stories, though their are a few.
You have just bought an HMO; presumably, you got a mortgage? There is a 99% chance that renting to a third party like Clearspring is prohibited in the mortgage conditions, and doing so would breach your mortgage conditions and invalidate any insurance on the property.
You have to get a specific type of mortgage for these rent-to-rent/subletting things, especially given the end tenant is a "vulnerable person". Not many mortgage lenders are open to this arrangement and require exit clauses.
The rent-to-rent middlemen (like Clearspring) wont tell you this, as what they care about is the contract not the trouble that the contract will land you in.
ALWAYS SEEK INDIPENDENT LEGAL ADVICE
I actually purchased it cash but yeah I agree there would be issues with mortgages and insurers for sure
Absolutely immoral bastards 😤
Each to their own, but I'd probably set my btl on fire before considering this. Some things are more important than money.
Fair 😬
So what happens to your current tenants?. They get made homeless? I personally wouldn’t let any in my property. Unlikely to happen as I have great tenants and won’t look to shaft them for personal gain caused by my own lack of scrutiny originally. You said earlier you have talked to a few people who speak of the scheme highly, why the need to ask Reddit 😂