Private Sector Leasing

[origamiwarrior]

We have recently been fortunate to come into an inheritance and wish to invest the money. I have ideological misgivings about the buy-to-let market (i.e. how it reduces the availability and affordability of housing) and in my research around this, came across Private Sector Leasing, whereby you long-term (2-year plus) lease a property to a council or housing association who then use the property to house social tenants.

As well as providing a home and stability for a family in need, this apparently has the benefit of upfront guaranteed rent, no voids, no admin fees, no maintenance, and an agreement that the house would be returned to you at the end of the term in the same condition as before.

Obviously the yields are lower than you would get in traditional buy-to-let, but we would see this as a long-term investment for our capital (10 years plus) and I feel this model would 'sit' better with me.

Does anyone have any experience of doing this, or any thoughts?

I've seen it advertised in neighbouring boroughs and does seem an option if (a) you don't need to maximise the rental yield - it will be a much lower rent than most private rents (b) the property is unmortgaged as most banks will not allow HB recipients etc. It is also worth checking with your solicitor if agreeing to a lease of more than a year confers rights onto the lessee that they wouldn't get with a 12-month AST and could be to your detriment. While I've generally been happy for my tenants to stay as long as they want, I remember my solicitor warning me not to make the rental term longer than a year (and then renew).

We were made homeless when our LL died and his wife sold our home to move closer to her daughter. We were unable to find a new LL that would accept children.
We lived in a rental like that for 2&1/2 years. The rent wasn't much cheaper than anything we could have found privately, maybe £10/week less.
We moved when the council found a permanent Housing Association property for us.
The owner of the PSL house knocked on our door one day and introduced himself to us as he worked just down the road. We never had anything to do with him though, all rent went through the council as did any complaints/problems.
We had regular inspections, 6 monthly I think, and they made us repaint a wall that had been marked by our sofa being up against it when we moved out.
There was never any suggestion of it being a permanent home. It was simply somewhere to stay during our wait for a permanent home.
The house next door was owned by the same man and we saw 3 different families move in and out during our time there.

Thanks lala. Yes, we would be buying the property outright, and would be happy with a lower yield (our motivation is the (very) long-term capital growth to provide a nest egg for us in old age/step on the housing ladder for our DC).

Good point about the rights for long-term lets, would need to explore that.

Thanks for sharing your experience Theyrebreakingthrough. I guess that while you were only paying slightly less than market rent, the landlord got considerably less, as the council had to fund their management costs (and their risk, by guaranteeing the rent) which seems a fair exchange to me. It seems to be win-win for everyone, so I'm looking for a catch!

We looked at this with our old house - hubby and i both had a house when we met.

Our local council paid aprox £100 a month less than the market rate and then took a 10% management fee ( most letting agents were 8% then). They would only guarantee repairs to a set amount - £1000 i think, so if the tenant trashed it that was the max we could claim.

In the end we decided not to do it, there seemed to be too many expenses and not enough guarantees. In the end we were glad we didnt lock the property in for a long amount of time ( 2 yrs was the min) as i found out i was pregnant, so we sold both and bought a family home. We didnt chuck some poor tenant out, they left, we found out and found a great house.

I would suggest reading the terms very carefully but as its a long term investment it might be suitable for you.