So you want to be a landlord? 1st Dec 2016With demand for rental property far outstripping supply, now is a great time to think about becoming a landlord. However there are a number of things to consider before taking the plunge:
Have you taken professional financial advice? It is essential all outgoings are considered AND that there is contingency money left over. You need to have sufficient funds to cover all your costs, including, but not limited to, mortgage, taxes, service charges/factoring fees, all safety certificates, smoke and heat alarms, landlord registration etc. You have to have money set aside for major repairs and void periods. Bear in mind the forthcoming changes to mortgage tax relief and plan ahead.
Capital growth verses monthly yield
There are 2 ways in which you can earn from property investment. Capital growth or capital appreciation is the increase in the value of your property over time. Rental income is the rent paid to you monthly by the tenant. If you divide the annual rent into the purchase price of the property, this gives you your yield or annual return. Key points to consider therefore are:
• Expected levels of capital growth
• Expected income streams
• Your personal circumstances and, for example, whether capital growth or income is more important to you
Seek expert advice on expected rental income and capital growth levels from a reputable local letting agent. Your mortgage provider will ask for this information. The Key Place can help you with this.
Do you have the time to be a landlord?
If you have never let out a property before then there are numerous factors you need to consider. You have to allow time to deal with preparing the property for letting, ensuring you are fully compliant with all Private Rented Sector (PRS) regulations, advertising, viewings, finding the right tenants, compiling an inventory and all the legal paperwork, being responsive and dealing with all repairs in a timely manner (be prepared for night time call outs), dealing with deposits and rents, preparing the property for re-let when tenants hand in their notice and going through all of the above process again. If you do not have time to deal with all of this properly, then enlist the services of a letting agent. The Key Place can fully manage your property for you, taking the stress out of letting.
Keep abreast of regulations
Changes to regulation are on-going. It is essential that you keep updated with everything that is happening within the Private Rented Sector if you are renting out a property. Failure to comply can lead to loss of rent, hefty fines, and a criminal record.
Choose your rental property wisely
Unless you are an accidental landlord, do your research properly. What can you afford, and what sort of property do you want to buy and where? Consider who your tenant market will be. For example, students, families, professionals, or DSS. What sort of property is in high demand in the area in which you want to buy? Once you have worked out your budget, you need to choose the area in which you want to invest, and work out what you want to buy. Think about the following:
• Which areas are in high demand? Where do tenants want to live?
• How many bedrooms can you afford (do you want to go down the HMO – house in multiple occupation) route?
• Which properties bring in the biggest yields?
• Which properties will achieve the greatest capital growth?
• Do you want to buy a new-build or traditional tenement type property?
• How much can you afford to refurbish a property, or do you need to buy in walk-in condition?
• What is the size and layout of accommodation like?
• Does the property have kerb appeal? Bear in mind that tenants may be put off if they have to access the property via a dark alleyway.
• What are the local amenities like? Consider transport links, distance to main cities, local schools and shops etc.
If you are a buy to let investor looking at expanding your portfolio, you should consider spreading your risk to keep you safe. It may be worth thinking about different areas and different property types, not just sticking with what you know. That way, if that market dips in one area for any reason, you will be less exposed.
So how can The Key Place help you?
The Key Place has in depth knowledge of the local markets in which we operate which can help inform your buy to let decisions. We also offer a full buy to let service. We can source high yield properties, help find the best mortgage, complete the acquisition and then manage your buy-to-let investment. Contact us now for further information.