Survival Manual for Landlords: How to Make it through Rough Times

At the beginning of June, Allsop, leading London auctioneer, is to sale over 435 residential properties. The reason for that, according to Allsop, is failed buy to let investments.
Investors seem to start losing their nerve, since the supply of rental properties exceeds demand in some districts and rents are going down. In the first quarter of 2009 the volume of buy-to-lending made up 6 per cent of entire gross mortgage, which is only half of last year indices.
The recent statistics figures on arrears, revealed by the Council of Mortgage Lenders, didn’t sound very encouraging. Around 3.09 per cent of buy to let loans are delinquent of three months or more at the end of the first quarter of 2009, which is 2.31 per cent higher that it was at the end of 2008.
Real estate analysts point out that the increasing number of buy to let repossessions is quite easy to explain. Such a common occurrence in today’s harsh economic environment, as rent delinquencies on the part of tenants results in similar problems for landlords. They fall into arrears with lenders. But the experts forecast further aggravation with rental payments, for the two major reasons for tenants to fall into arrears are job loss or reduction in income.
Alongside with rental delinquencies that landlords suffer from, they also lose money on pretty heavy expenses associated with eviction.

What Do Landlords Do to Ease the Situation?

The first must-do in current environment for landlords is to get a rent guarantee insurance, thus protecting their income. This type of insurance provides compensation for rent payment delinquencies and legal expenses cover. Rent guarantee products can be available at a very moderate price of less than 10 pounds a month.
The highest-risk group of landlords to experience difficulties are the more recent buyers and inexperienced property owners. Though the mortgage market is seeing a continuing drop in house prices and mortgage interest rates, the rates for buy to let loans have remained pretty high. Say nothing of whopping fees imposed on those who want to remortgage to a lower rate.
The current “best-buy” for buy to let borrowers is offered by BM Solutions that comes with 3.75% fixed rate for two years. But a fee on a 150,000 pound loan (a loan to value of 60%) makes up 4,500 pounds.
A significantly lower fee of 1,749 pounds is offered by Godiva Mortgages on the same 150,000 pound loan with 60% LTV at 5.4% fixed rate. But this is a five-year mortgage.
Sue Anderson of the Council of Mortgage Lenders notices that landlords with several properties have more chances to stay afloat, than those with just one or two buy to let properties. Their steady stream of income can easily cover delinquent rental payments on one property with income from others.
As soon as you realize there is a possible problem of falling to arrears with a lender appearing on the horizon, you should immediately contact your lender. Explain the situation and try to negotiate an option of resuming mortgage repayments at a later date and pay down the delinquencies. Lenders may come to terms with you. Think of repossession as of a last resort. Besides, you will hardly find a lender that would easily go for it if there is any other possible way out.
But if there is no option left and you have to sell your buy to let property, you should better take control of the selling process yourself before the lender repossesses the property. This way you can get a higher price. Most lenders do not mind if a landlord wants to sell the property him or herself. Lenders give some time, so you can clean up and glam up the place and sell it at a more competitive price.