Buying A Protected Tenancy
Why would anybody go out and purchase a protected tenancy when you are unable to gain vacant possession until your tenant dies? These property investments differ greatly from short-term tenancies.
For a start the tenant can live in the property until they die unless they break the terms of their tenancy.
It is also essential to take into account the fact that the rent paid doesn't represent a market rent.
This is because the rent will be set by an independent rent assessment panel that is state funded.
The tenant will be responsible for the internal decorations and the landlord will have to maintain the outside of the property to include the roof and all of the external decorations.
You will probably be scratching your head and asking why on earth anybody would invest their hard earned cash in an investment of this type.
The answer is quite a simple one and that is these types of tenanted investments only sell for around 60% of their vacant possession value.
That means you should be buying these with a discount of 40% meaning that if the property is vacant and has a value of £100,000 it will be sold for around £60,000.
Anybody buying a tenancy of this nature is buying for the long term and will only gain vacant possession of the property when the tenant dies.
Obviously when the tenant dies the value of the property will increase.
It will no longer be occupied by a protected tenancy and you can either go ahead and sell or you can let it out to a short-term tenancy at a market rent.
Most people will decide to sell the property at this point as they will have seen their investment increase overnight.
The rent that is paid by a protected tenant is considerably less that a market rent.
Is is called a fair rent and will be set by a local rent officer.
They will come out and inspect the property internally and make a note of the accommodation including any essential repairs that need to be carried out.
Whilst the rent that is set is lower it is nearly always paid on time.
(Unless you have a problem tenant).
The rent is adjusted every two years and increases in line with the retail prices index.
These investments are not for everybody as they are virtually impossible to borrow money against owing to the issues around security of tenure.
If you do have cash funds available they can be a reliable source of income.
For a start the tenant can live in the property until they die unless they break the terms of their tenancy.
It is also essential to take into account the fact that the rent paid doesn't represent a market rent.
This is because the rent will be set by an independent rent assessment panel that is state funded.
The tenant will be responsible for the internal decorations and the landlord will have to maintain the outside of the property to include the roof and all of the external decorations.
You will probably be scratching your head and asking why on earth anybody would invest their hard earned cash in an investment of this type.
The answer is quite a simple one and that is these types of tenanted investments only sell for around 60% of their vacant possession value.
That means you should be buying these with a discount of 40% meaning that if the property is vacant and has a value of £100,000 it will be sold for around £60,000.
Anybody buying a tenancy of this nature is buying for the long term and will only gain vacant possession of the property when the tenant dies.
Obviously when the tenant dies the value of the property will increase.
It will no longer be occupied by a protected tenancy and you can either go ahead and sell or you can let it out to a short-term tenancy at a market rent.
Most people will decide to sell the property at this point as they will have seen their investment increase overnight.
The rent that is paid by a protected tenant is considerably less that a market rent.
Is is called a fair rent and will be set by a local rent officer.
They will come out and inspect the property internally and make a note of the accommodation including any essential repairs that need to be carried out.
Whilst the rent that is set is lower it is nearly always paid on time.
(Unless you have a problem tenant).
The rent is adjusted every two years and increases in line with the retail prices index.
These investments are not for everybody as they are virtually impossible to borrow money against owing to the issues around security of tenure.
If you do have cash funds available they can be a reliable source of income.