What’s the main aim of your new site Tepilo? Are you hoping to reduce the reliance buyers and sellers have on estate agents or is it simply to offer an alternative?
It’s to offer an alternative that’s a viable, realistic alternative because at the moment, to be perfectly honest, I think the alternatives are pretty dire. Most of the options out there to sell your house on your own online aren’t a viable alternative because you don’t know what to do. They’re basically classifieds sites and I feel that it needed a really good site so that’s partly why we did it. Our main function is to give the average person out there a way of saving the tens of thousands of pounds, plus VAT, that they have to pay estate agents. Some people want to pay it because they’re busy or hassled or whatever and that’s fine, but it’s to give people an option. That’s the main thing and also to explain to people what the process is. There are lots of words that are used and people think ‘Oh, I couldn’t possibly do that because I don’t know what an exchange is’ and I think if someone told them what an exchange was then they’d be fine. It’s slightly to de-mystify the whole process and hold people’s hands through it so they understand what they’re doing.
So there’s an element of education as well then?
There has been a big increase in people taking in lodgers recently – have you ever had or been a lodger yourself?
I was a lodger for 3 months in Bournemouth – I did a secretarial course and I was a lodger and then I have had a couple of friends staying with me but I wouldn’t call them lodgers, they just stayed for a bit while they were looking for somewhere to live.
Having a lodger is very different from renting out a buy to let property as it’s your home rather than an investment. Is there any advice you’d give to people about to take in a lodger?
I’d say the most important thing is to go with your gut as to whether you’d get on with somebody or not because you’ll actually have to live with them. If you don’t think you’re going to get on I would say no.
Is there anything you think people should do to prepare their home for taking in a lodger?
I think the most important thing is to make sure your kitchen and bathroom are really clean because there’s nothing more grim than someone else’s dirt in the kitchen or bathroom! The one thing I’d also really recommend, to avoid arguments, is to add in a cleaner every week and make it part of the conditions that they pay for half the cleaner. I think that avoids any arguments and any need for discussion about who’s going to clean and who isn’t. Relatively speaking I think you’re better off going and cleaning someone else’s house to earn the money to get someone to clean your house so you don’t have to argue over it!
The government’s Rent a Room Scheme lets people earn up to £4,250 a year tax free by taking in a lodger. This is less than the average annual room rental in the UK, do you think the limit should be raised to encourage more people to rent out a room?
It seems to make sense; we’re always hearing that there’s a housing shortage (although I would question the whole issue of housing shortage but that’s another argument in itself!) and we all know that everyone benefits from communities. If people are going to say we have a housing shortage and they’re going to say we have a problem with lack of community, certainly there are massive advantages to co-habitation with other people rather than living on your own. So yes, I think it should be encouraged.
Do you think the recent rise in people taking in lodgers will continue or do you think it will stop once people feel the recession is over?
I suspect people will find that it works quite well. One or two people I know have had someone to stay for a short while and it’s worked so well they’ve stayed for years and they’ve got on really well. There are lots of advantages to having other people living in your house if you get on well. If you’ve got kids and you have someone renting a room you’ve got the benefits of the children having other adults around, I think more adults around children really helps. Traditionally we’ve always had our parents living with us as families but most people don’t want to do that any more (although it wouldn’t be a bad thing if we did), so a lodger can be a really good addition to the household if they’re the right person. You have a bigger community with more people living in the house. There are the obvious benefits of being able to pop out for a quick drink occasionally as well if your lodger is happy to babysit! As I mentioned earlier it’s important to trust your instincts when taking somebody in. Check their references but ultimately don’t trust the references on their own, trust your gut.
Have you ever developed a property with the intention of renting it out by the room or do you always develop to sell?
We have gone quite a long way down that route but we didn’t actually end up doing it because it didn’t quite stack up when we got to the end. We embarked on a project thinking we’d do it but actually ended up selling it as it made more sense financially. We did go into it in quite a lot of detail. I think it’s a lot of work renting properties room by room but you do get a better return – that’s the deal. The main disadvantage of renting by the room is the hassle and you will have people coming and going much more, but the main advantage is the fact that you get more money for the property.
And I presume it’s easier to avoid completely void periods where you’re not getting any rent for a property?
Vacancies are the real pain in the bum of a rental portfolio – ultimately you don’t want vacancies. In my experience the smaller the property the more transient peole are and therefore the more vacancies you get. It’s not always the case, we’ve got one studio where the tenants have been there for seven years, but normally most of our studios turn around quite fast.
When you looked at developing by the room was there anything you did in particular that was different from the way you’d approach developing a property to sell?
If you’re going to be renting out room by room you get very fast wear and tear, but when we were looking at it we were thinking if you’re going to go really small and you’re going to have high turnover you want it to be as top end as possible. That’s my gut feeling, if you’ve got a grotty room you rent week by week you get very little rent and it’s really hard work. I think if you can make very small rooms really nice (and it doesn’t cost that much in a small room to have a really nice room) then you’re more likely to get nice tenants who will keep it better. Not always but 90% of the time – the rollover is just that much easier.
So it’s the level of admin you think that is the main difference when renting room by room?
It’s a full time job renting room by room and that’s fine if that’s what you’re doing. I personally think you ought to do quite a lot if you’re going to do it that way because it is a full time job and therefore you need to make it a business if you rent out by the room. I wouldn’t have one 3 bedroom flat that you rent room by room because the hassle factor doesn’t add up. You either want to rent a room in your house on a very personal level or I would have a number of properties you rent room by room. If you have a normal full time job and you have one 3 bedroom flat you rent room by room that’s a lot of evenings and weekends you’re going to be working.
So rather than mix and match you’d say go down either one route or the other?
Yes, I’d make a decision, really I think owning properties and renting them by the room is a full time job.
Do you think as a nation we’re overly obsessed with the idea of home ownership?
Definitely, renting’s great! If you look at other countries everyone’s really happy to rent. I think we are a bit obsessed, it’s fine if you can afford it and want to do it but bear in mind that people don’t actually look at the figures realistically. The reality is that if you buy a property on an interest only mortgage and you’re just paying the interest off, in 25 years time you still owe the cost of the property and effectively you’re renting it from the bank. But the disadvantage of that is that it’s you that spends your weekends in DIY stores and its you that has to fix the boiler or replace it and you have to re-decorate and mend the roof . The great advantage of renting is that if you don’t like it any more you can just move out and go somewhere else. It’s very flexible, you can live in a much nicer property if you rent than if you own.
So if you buy under an interest only mortgage you’re basically renting under another name?
Exactly. It’s renting under a different name but with the additional costs of having to maintain it as well. It’s a bit of a no-brainer really.
Would you hope that the UK’s attitude towards property ownership would have changed by the time your children get to the age where they’ll be thinking of buying?
If my children grow up and are happy renting I would encourage them to rent. I’m not going to be saying ‘you’re completely useless unless you manage to own your own property’. As long as they’re happy in what they’re doing if they rent all their lives that’s pretty cool. What they’re doing on a day-to-day basis is more important to me, rather than owning or not owning a property. I think it’s slightly irrelevant.
I think we sometimes get panicked about the idea of property being a pension so we think we have to own
Yes, although ultimately you’re paying off the mortgage which is why it becomes a pension. If you pay into a savings scheme you’ve equally got a pension. The fact is that you don’t get repossessed or have bailiffs knocking on your door if you don’t pay into your pension every month so it’s about self-control isn’t it really.
Finally, do you have any particularly fond memories (or horror stories) from living in shared accommodation when you were younger?
Not really, I always wanted my own space. I do remember sharing a flat with someone and it was really annoying because I’ve always had a very strong idea of home and how I wanted home to be and they didn’t agree with me! I wanted to have bowls of fruit and wine and ice in the freezer – I think I had ideas above my station at a young age. But my brother had a guy he shared a flat with when he was at university and it was terribly civilised. They had a drinks tray in the corner with gin and tonic and it was all just lovely, they had avocados in the fruit bowl, and I always thought that was what I wanted my shared accommodation to be. But it never quite works like that so I was quite keen not to share, because when you’re the only one who buys the loo roll it’s really tedious. Now of course I’m married with kids and I do tend to have a bit of a siege mentality; we never run out of anything in our house because I buy in bulk! We’re not going to live in a house that runs out of that sort of thing, it’s just not OK.