As a landlord in the UK & Romania with more than 10 properties in my portfolio, plus being a Property Services company here in Romania, I’d like to offer the benefit of my 7 years experience to help new landlords avoid the pitfalls of letting, rent collection & being a successful landlord.

After talking to a few new investor-landlords in the past week here in Romania (Tampa Gardens, Rose Gardens, Avant Gardens etc), as they get ready for their first investment apartment experience, it dawned on me how much the experienced investor takes for granted, but novices learn the hard way.

It’s a shame to say it, but many of the apartments I’ve had experience of in Romania have involved missed or late payment at some stage, & unpaid bills along with the finally months rent. Some tenants simply allow their deposit to cover the last month’s rent, leaving landlords without cover for unpaid bills or property damage.

If you are lucky enough to

-know your tenant well,
-have a good tenancy agreement,
-have good, live-link referees, i.e. people with ongoing professional relationships that the tenant wants to maintain (e.g., employers),
-have a good, sizable deposit, enough to cover at least as long as it would take you to detect late payment, serve notice & act
-have a meaningful inventory, with good descriptions
-be able to maintain constant contact with the tenant
-be able to monitor the condition of the property, including bill payments matching ACTUAL meter readings & not estimates!

Then, you should be able to keep an eye on things very well. If the property is overseas however, such as Romania, you are unlikely to be able to meet all of those criteria, & different rules apply.

Firstly, when renting in Romania, you will have a rental contract. You are supposed to register this with the Fiscal Authority, for 3 reasons.

•It’s the law, as in the UK, you are supposed to declare any income received, & as a result, become responsible for paying 16% on that, after allowable costs. Failure to pay that tax on a registered contract leads to penalties

•In the event of landlord/tenant legal challenges, you will need to demonstrate that you have complied fully with 1/. Some landlords submit a contract with a lower value, to reduce their tax burden. This exposes you to risk if the tenant is aware, as they may use this against you. Arguably, it is worse than not registering at all with the Fisc. The difference there is, no-one but you will be aware that it is not registered. An inaccurate rental agreement is public knowledge to at least the people who signed it. I'm not advocating avoiding tax or not registering contracts, but those who dont are perhaps less exposed to a weakened landlord position.

•In the event of you needing a Romanian mortgage or foreign loan, where you want to demonstrate the Romanian rent as proof of local income, you will need to show a Fisc registered contract & 3-6 matching back statements.

However, in the event of a tenant problem, simply having a registered contract is no guarantee of security. If you need to challenge or evict the tenant, doing it legally can be very expensive, time consuming & distressing. Also, subtle cultural differences between say Romanians & British, or Irish, or Spanish etc play a major factor in such situations. Romanians are not generally physically aggressive people, but they are proud & very polite. Politeness matters a great deal to them. If you apply aggression, or are say abrupt, rude etc, as you might successfully be in the UK for example, it is likely to lead to rapid breakdown in communications & the tenant may cease paying rent immediately, in the knowledge that it could take you a very long time & cost more than you have lost in rent, to do anything about the situation.

However, all is not lost:

The best approach is to obey the following rules. You can either do this yourself, have a reliable, continuously-available associate to do it, or engage a Management company to do it for you:

•Apply continued, ongoing gentle & polite pressure to collect the rent. Any delays should be highlighted politely & instantly.
•Show a continued presence, & therefore continued interest in your property
•Maintain a professional relationship. Do not get into unnecessary relationships that will later block your ability to resolve conflict professionally. I know landlords who have got into sending Easter cards etc as they feel they should be a friend & confidant to the tenant! All you need to provide is quiet, uninterrupted enjoyment of the property, with proper communication & appropriate intervention. Treat the relationship as an employer/employee one. Be proper, do what is required cheerfully & in a timely fashion, & communicate fully.
•Regularly inspect the property & also ensure paid utility bills match the meter readings. It is possible to under-declare readings to pay a lesser amount, & leave it to the landlord to resolve after move out, especially if the debt is greater than the deposit.
•Leave at least one bill, preferably in your name ONLY. In the event of problems, request the electricity is cut off. Only people with a Power Of Attorney for you can reverse that. The tenant cannot do that. Simply allowing it to be cut off due to arrears is not sufficient. Payment results in reconnection, no questions asked. You/ Your agent MUST request that the power is shut off, for example while ‘you go on holiday for a year’.
•Just because bills are the tenants name does not mean you are not responsible for unpaid bills. You are. Utility companies will not reconnect you in the event of unpaid bills, irrespective of the name on the bill, preventing you from re-letting. Therefore, there is no disadvantage to keeping all bills in your name & allowing the tenant to pay them. Telephone/ Internet are perhaps the exception, & for security reasons, you should not keep that in your name.
•Have a full inventory, & even a video inventory, with condition, quantity & value of each item. Demonstrating you know how many scratches are on a wardrobe shows it matters to you, & therefore, it will to them
•To evict a tenant, it is better to do it amicably where possible & work with them. It is better to loose a month or so of rent, or pay a gas bill than to loose 6 months of peaceful existence battling. Only battle if you can see it through & be seen to be able to see if through. If a bad tenant calls your bluff, you need to be able to act.
•Be prompt with solving problems. If a rent-paying tenant contacts you with an important issue, e.g. an unpaid bill from a previous client, act on it rapidly. It might not seem significant to you, but failing to act puts you 1-0 up on the tenant & he may one day call in that imbalance by failing to meet one of his obligations.

These are all things a management company will bring you, in addition to peace of mind. A continued, discrete monitoring of your investment. In Romania, agencies seem to charge from 10% (fair & inexpensive) to 30% (opportunist, expensive & therefore, are they charging so high to make it worth their while or is it their core business?). If I paid 30%, I’d be asking what I am actually saving & do they really want to do it anyway.

Good luck & enjoy the ride!

Regards

Damian Galvin

I see you haven't lost your succintness! Good advice, thank you. Like the idea about checking the actual meter readings to the bills paid, easy way to rip the landlord off!

Regards

Oh no!

I'm a Tampa Gardens investor and after reading this - I'm thinking of putting it on the market (not as distressed seller though) rather than go through the apparent hassles of renting - is it worth it. I think I've made enough just on strengthening of the Euro v Pound. Don't tell me - you're just as likely to get ripped in selling the property as you ar renting?!

What would you advise?

Thanks for the warning.

Don't be! Tampa is a great developement from what I can see. Buyers have been impressed so far, that I have met, & you will be in premium rental territory becuase of the type of apartments they are. We had 2 Israeli clients in our office on tuesday this week, wanting 2 executive apartments quickly, for a year, one-bed, but high standard, plasma tvs etc. I'm not pretenting these are e very day occurences, but such clients do exist.

Also, there are good resources around to help you, of you look for them. Its not like you are renting in the middle east, with no feabible connections. Here, you find English speaking people, & good quality support if you need it. My point above applies equally to the UK as it does here. You just need to follow the steps properly, exactly as you would anywhere.

After the initial set up & stress of establishing your apartment, you should have an enjoyable pasttime as a landlord. But, you have to have a pragmetic approach to it, or you will be in an early grave. Being a landlord is not simply having a 20% deposit available & a BTL mortgage, then buying in a high growth region. Its much more, & landlords can either neglect that 'pastime' & risk running a poor investment, or take a keen interest in it, engage good, low cost support to assist, & get the most out of it. It has to be taken head on, & done right, to really enjoy it & get the best out of it.

Could you gaurantee you could drive from Oxford to London each morning in 90 mins, no traffic, no hold ups, in a roof down convertible, all year? No, you will have all kinds of events stopping you doing that. Being a landlord is identical. You will not get 52weeks, x 5 years of maximum rental, with no issues or problems whatsoever. There will be delays, vacant periods, issues etc. But thats ok, thats normal.

As Peter Jones (Dragons Den) wisely said as you get richer, or more successful, you still have daily problems but they are a little more interesting or challenging. Accepting that being a landlord means being active in your investment, makes it easier to get on with. The first one is always scary, like driving on a motorway for the first time. After a while, its as easy as breathing!

The advice above is simply to ready you. If you have a desirable apartment, at an affordable price, & you have an agent looking out for you, & there is a contract, a deposit, an inventory & you are assured that the rent is arriving roughly on time each month, then, what else can you ask for? Be prepared for annual repairs, be prepared to get involved if things go wrong, or have your agent ready.

Its not just overseas you have problems. I had an sms yesterday from a Cheltenham tenant who wants a 7 week (!) delay for the January rent due to the crisis. Thats 3 weeks more than his deposit covers. Getting involved is the only way to resolve. Buy all said & done, in 5 years of running that apartment in Cheltenham, I have had less than 4 unpaid weeks to date. Always look at the long game, do not get stressed by the minutia or you will go mad, or sell up hastily, possibly at a loss. Be calm, allow yourslef a long term strategy & do not build financial models based on 100% occupancy. Use 80% or so & be pleased with the bonus of better than 80%.

Selling now is a real attraction due to the exchange rate, but sadly, with credit being hard to come by here as well as the UK, sales are really down & its a buyers market. Every new development in Romania has distressed sales by UK buyers, due to mortgage shortfalls, so you have stiff competition, even if you are not distressed yourself. My personal advise, hand on in there, & be pragmatic.

Hope that helps.

This is a great summary and extremely useful.

I just have a few questions - sorry, I am new to this forum and to letting in Romania!

- Does anyone know how to avoid paying double taxation on rental income in Ro and the UK - we purchased our Ro apartment through a VAT-payable Romanian-registered company

- Has anyone used Grupo FDP for managing their rental property? Any feedback/issues etc. would be greatly appreciated!

Thanks for your help,
Alex.

Greetings, if you need help with Taxation advice &/ or rental, property management etc, please contact us at White Mountain Property in Brasov. We are Brasov's only locally based Property management company. If you would like to first talk to our existing Tampa Gardens, Bellevue Residence, Avant Gardens or any other PM cleints for that matter, just ask - we can put you in touch. Let them tell you what they think. Or, read the testimonials on our site.

I set the company up specifically because I was unable to manage my own portfolio remotely from the UK & my single aim is to be the best in Brasov at it. There is so much misinformation about & out of date knowledge, that costs people serious money in error.

For example, you no longer need a company to own a property & its land. You can apply for residency of you are an EU citizen. If anyone tells you otherwise, ignore them. I have 3 British clients that have all done this in the 2nd qtr of 2010 & a British Embassy minister is likely to become the 4th.