No deposit strategy

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    No deposit strategy

    Hello all,

    I'm hoping those of you with much more experience could help me out. I've been reviewing the way in which i manage my tenancy's and im thinking of no longer taking deposits and instead just bringing rent up to market value. Obviously there is both pros and cons to this idea but the main question i would like to ask is can i advertise my properties as a no deposit option available and then change the rent to suit this option. I think that i can't do this, the argument being that the difference between the rent values could be argued as a deposit and it should have been protected?

    So i do wish to go down this route would i have to have already set the rent to work with the no deposit numbers? I haven't worked out any figures but for arguments sake lets say i have a property i would rent out at £500.00 and then require a 5 weeks rent deposit or alternatively charge £550 with no deposit. Can i offer tenants a choice between the rental amounts or would i have to commit to one or the other?

    Thank you in advance.

    #2
    If the property will rent at £550, you should be charging that, whether or not you take a deposit.
    As long as the rent doesn't go down after a number of instances, there's no reason that any increase would be seen as a deposit.
    Many landlords don't take a deposit.
    When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
    Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

    Comment


      #3
      I agree with jpkeates. Properties should be let at the market rents if you're running a business. You're allowed to set the rent as you see fit. The only chance of it ever being likely to become a problem is if after 12 months you elect to increase the rent using a s13 notice to a sum so far in excess of the market rent that a tenant could successfully challenge it in a tribunal. In other words almost no chance. If you would prefer to charge a little above the market rent and not take a deposit then go for it. I beleive that some people on this forum do just that. You'll soon know from the number of enquiries whether the strategy has worked for you.

      Comment


        #4
        Thank you both for your responses, so i would be able to offer both options when showing around prospective tenants? The reason for below market rate is to lower void periods and keep good tenants in situ for longer or at least i like to think thats how it works.

        Comment


          #5
          Best strategy for keeping voids down and tenants staying longer is to charge the right rent and keep things in a decent state of repair.
          Or allow pets and/or prioritise tenants with school age children.
          When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
          Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

          Comment


            #6
            I am always wondering the wisdom of not charging a deposit.

            Sure there are less work involved, and creates less hassel, so far nearly always returned the full deposit.

            The deposit for me acts like a gate for tenant fiance, having deposit to pay usually means the tenants has good finance management and savings therefore less likely to run in to rent issues.

            Comment


              #7
              Marty115,
              Sounds like a good idea to me. I might steal it.

              Comment


                #8
                so i would be able to offer both options when showing around prospective tenants?
                I'm not sure just how a prospective tenant would see that - Pay a deposit now or pay more each month for however long you stay.
                Maybe best to stick to one or the other and not offer a choice.

                If you think about it from a tenants point of view that's a bit like HP, you don't have to pay upfront but will pay more overall. (Yes I know that could do with more work as a simile).

                Changes in deposit rules are going to mean that LLs are increasingly going to use the second option and not take a deposit, that's understandable.
                Whether that's in the interest of the tenant or the landlord is debatable.

                There is also an issue of LLs who don't take a deposit increasing the 'going rate' for those who still do.

                Comment


                  #9
                  Originally posted by JK0 View Post

                  Sounds like a good idea to me. I might steal it.
                  Would you offer both options or commit to no deposit and higher rents?

                  Comment


                    #10
                    nukecad,

                    I was shown the Zero deposits scheme by a friend which promoted this whole thought process, i advised him that in the long run its worse for them but they advised they are using it due to less upfront costs. As we know in life there are plenty of options of pay monthly and pay more in the long run which seem to thrive...it is beyond me but each to their own.

                    Thats a good point about increasing the going rate though but i suppose if the choice was between a property for 500 no deposit or 500 with 5 weeks deposit the choice is easy.

                    Comment


                      #11
                      Originally posted by Marty115 View Post

                      Would you offer both options or commit to no deposit and higher rents?
                      I don't take deposits nowadays, as the adjudication process is a nonsense. (Never mind that a mistake protecting the deposit can get you a big fine.)

                      Comment


                        #12
                        Would you have any advice for someone thinking of going down the route of no deposits, extra referencing or a percentage of extra rent you have found ?

                        Comment


                          #13
                          A reference from tenant's previous landlord (before the present one) is revealling I think. Extra rent of maybe 5% for respectable people, or 10% for deadbeats.

                          Comment


                            #14
                            Thank you, i think ill try this on my next let.

                            Comment


                              #15
                              I see the situation arising where the LL increases the rent, initially to cover the lack of a deposit, but then 'forgets' that the rent increase was ostensibly to cover potential damage and still sues the leaving tenant for any damage.

                              Plus of course the excellent tenant who cause no damage has still paid that 'damage premium' and won't get it back like they would a deposit.

                              All in all a win-win for the LL.

                              Comment

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