The ownership of residential property is an investment. Whether the primary objective is generating income, increasing its capital value or both, landlords will want to be sure that their investment is managed effectively. Here are some of our top tips:
It’s important that you understand what matters most to you before you take your first step into investing in buy to let investment. Do your homework on location, types of properties, market rents, demand and property prices. And remember you should always look at a buy-to-let as a medium to long term investment.
This should be a consideration when buying the property. As an example, young professionals usually prefer to be nearer to town/city centres and have access to transport links, whereas families generally prefer to be further away from town with more outside space.
Your target market will likely influence the length of time they will live in the property: Young professionals and couples tend to be more transient in nature, so move on quicker (on average) in comparison to families.
Asking price is arguably the most crucial factor when it comes to letting a property. Set it too high and you will likely end up with a void period, but go too low and you will fail to maximise your return. If your property is worth £800pcm but you opt to place it on the market for £900pcm, missing out on just one month's rent as a result is equivalent to simply asking for £844pcm over a year, so being greedy is a plan that can easily backfire. A good letting agent should be able to inform you of the perfect asking price for your property based on factors such as its location, size, décor and the current market conditions.
When it comes to letting a property, you should view the whole process as a business transaction. As such, you need to be fully aware of the legislation surrounding the industry and keep up-to-date with the frequent changes in it. You could face a hefty fine or even a custodial sentence if you do not comply with certain regulations, so make sure you are protected at all times. A quality agent such as Andrew Louis will ensure you are letting in accordance with the latest legislation and advise you when the legislation changes. When letting, we advise you use an accountant who can help you save money both on taxable income when you let the property and against capital gains once you come to sell.
Tenants will come with a range of circumstances and it is important to remember that everybody is different before accepting a tenant. A good letting agent will carry out referencing on applicants to check their suitability, history of renting and their ability to afford the rental payments. Taking this information into account and considering other factors – such as whether the tenant is looking for a long-term home or if they are moving into the catchment area of a certain school, both of which indicate they will stay for several years – will help you to select the right tenant.
It is important to consider your tenant when it comes to maintenance and the effect any delays can have on them. Whether or not you have instructed an agent to manage your property, you will need to give the go-ahead on any work that is required. It might seem as though it is 'just' a broken tap, faulty appliance or unreliable boiler, but one of the main reasons tenants have for giving notice is that they feel their home has been poorly maintained. To avoid the cost of finding a new tenant and the risk of a void period, simply ensure all maintenance and repair work is carried out as quickly as possible.
It is important to assess exactly how well a tenant is looking after your property throughout the duration of their tenancy, so property visits are essential. They give you a chance to see how well the occupant is treating their rented home and provide an early indication of any maintenance issues that may arise. You should always document these visits as the information can help towards a claim against a tenancy deposit, providing it is used in conjunction with a professional inventory and a schedule of condition. A good letting agent, like Andrew Louis, will be able to offer a property visit service.
As a landlord, there are lots of documents you will need to complete correctly and have in place at all times to ensure you and your property are protected, so it is important to understand what is required. An inventory and schedule of condition are vital in ensuring you can make successful claims against the tenancy deposit for any damage caused by tenants. The tenancy agreement must cover all of the responsibilities of the tenant and yourself, as well as protect you against relevant risks such as a pet clause in cases where a tenant has an animal. Arguably the most important documents of all are those used to regain possession following rent arrears or at the end of the tenancy, for which a correct Section 8 or a Section 21 notice is vital. These must be completed and delivered in accordance with the legislation otherwise you will be unable to regain possession even through a court of law.
Most people invest in property with the medium to long term goal of capital gain over the period of ownership, and the more properties you acquire, the more you can benefit from this. It is therefore important to assess the equity you have in a property and how this can be released in order to help fund another purchase. For example, if you have a property worth £100,000 with no mortgage, you could take out a mortgage against £50,000 of it and use that money to pay towards the deposit on a second property. This allows you to both double your rental income and capital appreciation potential.