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Guaranteed rents for buy-to-let investors save taxpayers millions

This was revealed this week as the partnership between buy-to-let investors and the London borough of Hillingdon and managed by Orchard & Shipman plc celebrated its second anniversary by showing how savings on community housing can exceed £1.5m every year for every 1,000 properties.

This public sector leasing partnership with individual private investors provides a guaranteed buy-to-let rental return for up to five years by cutting out letting and management fees and reducing the average void period to less than five days a year.

Void rates are as important to local authorities as they are to investor landlords and voids of only five days are six times less than the average void reported for the open market by the quarterly ARLA surveys of the private rented sector.

Despite initial scepticism, landlords accept lower rents for providing accommodation for homeless families in community housing schemes.

Nick Medhurst, managing director of Orchard & Shipman says: “When we talk landlords through the benefits of the scheme, such as guaranteed rents, no letting and management fees, no voids and proper maintenance, they find this acceptable. They see it as a fair exchange against rates that are some 15% less than open market rents.”

For the taxpayer, the high average occupancy levels in a local authority portfolio can save over £120,000 on a 1,000 home portfolio. Over a typical five year contract, even a modest 2% improvement in voids translates into a saving of over £1m. In addition, rent savings in these schemes are in the order of £135,000 a year for every 100 properties. Savings of this amount total £1.6m a year for every 1,000 properties managed for local authorities.

Orchard & Shipman is based in west London and manages community housing schemes for the London Borough of Hillingdon and for Spelthorne Borough Council. It has been identified by the Office of the Deputy Prime Minister as providing an example of good practice in this sector. The company also runs residential sales and lettings offices and quarterly auctions.

Medhurst says: “Through these operations we see how an increasing amount of investment property offered for private sale or by auction is being bought with local authority tenants already in place. This shows that buy-to-let landlords recognise that long term rental contracts have no effect on the liquidity of their investments and the benefits of buying a ready-made long-term income stream.”

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