Renting property has become far more popular as lifestyles have become far more flexible. People are more likely to move to study and to move for the right job and renting for these people offers far more flexibility than buying property. The large deposit
requirement to purchase property also restricts some from buying and therefore into private rented accommodation. This increased demand without further housing provisions coupled with more lenient lending for landlords will offer encouragement to
those looking to invest for the first time and existing landlords looking to increase current portfolios.. As a landlord you could be searching for the highest possible return immediately, or wish to find the best property for long term capital growth.
The ideal is a balance of both.. Capital growth or capital appreciation is the properties increase in value over a period. This has been strong over recent years but can of course go down as well as increase.. The return is the rental income that
the tenant pays you, which as with capital appreciation will hopefully increase over time. When calculating the return of a property there are costs you need to deduct and budget for.
- Void periods – Or empty periods. This can be when you are first marketing and between tenancies when the property is empty and therefore no rental is received.
- Agency fees – Whether it is a one off tenant find fee or ongoing management fees.
- Ground rent – Leasehold properties will be subject to ground rent and maintenances charges that are the landlord’s responsibility.
- Insurance – Landlords are responsible for insuring the buildings and contents when offering the property furnished.
- Wear and Tear – It is advisable to allow for 10% of the rent each year to replace worn out fixtures and fittings Also, be prepared to re-decorate every few years.
Once you have deducted all these costs from the rent, you end up with your net expected rental income. To calculate the net rental yield divide this by the value of the property to include all sales costs. It is important to consider a number of points
when making the decision to buy a property to rent and both our Goadsbys Residential Sales and Lettings Departments have a wealth of knowledge and experience to offer prospective landlords. We would be pleased to give advice and assistance in selecting
and purchasing a suitable property, guiding you towards independent financial advice and through to the market of the property, tenant selection and property management. We have compiled a guide to help those making the first tentative steps and for
those more experienced landlords.
Consider your long term goal
You could be searching for the highest possible return immediately, or wish to find the best property for long term capital growth. Most investors want a balance of both income and capital appreciation and see investing in property as an appealing alternative
to low interest saving accounts, pensions and volatile stock and shares.
Seek professional advice
This is advised at an early stage to ascertain the level of funds available for the purchase. Goadsby have in house Mortgage Advisors that can assist with this. With the Budgets proposed changes to tax relief it is worth seeking independent financial
Consider the Location
The location of your buy to let property is paramount; choosing a property in a popular location will increase your chances of high tenant demand, often leaving landlords in the enviable position of having a choice of tenants to chose from, increased
rental and low void periods. The type of tenant you are attracting may help decide your location. If you are hoping to rent to families it is advisable that the property is in a good school catchment, however if you are looking to appeal to the young
professional market a property close to local amenities including bars and restaurants is advised. A student rental is ideally located as close to the University campus.
Consider the Current Market
Once you have identified a popular location, it is advisable to consult a local letting agent, such as Goadsby, to take advice from the professionals as to current tenant’s demand and rental values. Goadsby can advise as to what properties are in demand
and give an idea of the expected rental income.
Features of the Property
Features such as gas central heating, double glazing, garage or parking and outside space are all attractive to prospective tenants. Well presented and neutrally decorated properties often let better and reduces void periods. If you purchase a property
that requires redecoration, use neutral colours throughout, this gives the impression of space and also makes a quick and easy job of any ‘touching up’ and redecoration between tenants. Hard-wearing carpet is a good investment as wear and tear takes its
toll on floorings. The quality of the property can have huge impact on the achieved rental income. A new kitchen or bathroom may seem a large expense but with the increased rental that can be achieved this investment can be recouped quickly.
Purchasing a new property as an investment is often a popular option for property investors as they tend to come with the peace of mind of an NHBC or similar insurance. Link to new build property
Properties requiring Modernisation
Buying a property that requires modernisation is often an attractive prospect for property investors. These properties can be developed to the ‘perfect’ letting property.
Buying a property with a tenant already in situ
The advantage of this is that rent is paid from the day of completion on the sale of the property and there is no void.
Freehold or Leasehold Properties
If the property is leasehold there will be ground rent and maintenance charges to cover that must be taken in to account. Once you have selected a suitable property, prepare a business plan with estimated income and expenditure, remembering to build in
agency fees, void periods, repairs, standing charges and insurances together with ground rent and maintenance costs, if applicable.
Once you have purchased your buy to let property:
Appoint a Letting Agent
Legislation and regulations can make the lettings industry a minefield. Updates to legislation are frequent and non compliance can lead to fines and even custodial sentence’s it is therefore advised that you use an experience and reputable letting agent
to ensure you are compliant and kept up to date with new and changes to legislation.
When choosing an agent consider:
- Opening Hours
- Office location
An experienced agent will have local market experience and knowledge and will be able to advise of the right asking rental. Getting the asking price right is vital; if it is too low you won’t be getting the best return on your money and set it too high
and you may struggle to gain interest and risk the property sitting vacant, costing you money. Link to why use Goadsby
Choose your Tenants
An experienced agent will carry out referencing on prospective applicants to check their employment status, previous renting history and affordability. Goadsby run all references in house and you as a landlord get to view the references and approve before
proceeding further. It is also worth considering why tenants are moving, if they are selling a house it may be that they will be buying again and may be shorter term tenants however if they are moving to be within a certain school catchment they may
be longer term tenants. An Experienced agent will also ensure the require ‘Right to Rent’ checks are carried out.
With lettings comes paperwork! It is important that landlords ensure they have a comprehensive inventory prepared prior to the tenancy commencing should they wish to make claims from the tenants deposit at the end of the tenancy. The tenancy agreement
includes both the tenants and landlords obligations and determines the responsibilities for each. It is imperative that section 21s notices are correctly prepared and served at the correct times. Incorrect notices can result in being unable to gain
possession of the property. Legislation involving the protecting and registration of the tenants deposit stipulates that tenants must be provided with prescribed information and confirmation their deposit has been registered. An experienced letting
agent, such as Goadsby, will ensure that all these documents are in order for you.
Ensuring you keep on top of maintenance issues will ensure your property doesn’t fall in to disrepair and will ensure your tenant remains happy. If an agent is managing the property it is important to give the go ahead swiftly and if you are managing
yourself ensure all maintenance and repairs are carried out as quickly as possible.
Tenants are much more likely to look after a well maintained property. Also, a common reason for tenants giving notice is that maintenance works are outstanding or not organised quickly enough.
With fully managed properties we conduct regular property visits to ensure that tenants are looking after the property and highlight any maintenance issues early. We recommend landlords that manage properties themselves conduct regular visits however
we do offer this service, at additional cost, to landlords on non managed services.
How Goadsby can help
Goadsbys staff are professional and experienced and will be able to give you an honest figure and an idea of tenant demand. Although our staff are lettings or sales specific they all work closely together and can ensure they offer you best advise on both
the sales and lettings potential of any property.
Goadsbys lettings staff are happy to accompany Sales viewings when an applicant is looking to purchase as a buy to let.