Top tips for landlords
As a landlord, it is more than likely that you will experience highs and lows while managing your property interests. History tells us that property prices always increase over time, but holding your nerve during the low periods isn’t always easy. However, for those who do invest wisely, and stay in it for the long term, the highs can be fantastic and the rewards great.
Remember, there’s no guarantee that it will be possible to arrange continuous letting of the property, or that the rental income will be sufficient to meet the cost of the mortgage. Taking the process one step at a time and considering who your property is aimed at will help ensure you make the right investment for you.
We have put together some guidelines designed to help you know what to look for when investing in a buy-to-let property, what to bear in mind and who to aim your property at. We’ve also created a ‘quick tips’ section, for those needing high quality advice at high speed!
A buy-to-let mortgage
Before you consider purchasing your buy-to-let property, it’s important to check interest rates before you invest. Lower interest rates could mean that it’s initially easier to borrow money, but as these are likely to change in the long term, so you should ensure that the income from your letting will cover the mortgage now and in the next five years’ time if the interest rates increase.
Be prepared to reveal a lot of information about your finances to your mortgage lender, even if you are putting down a hefty deposit. Most lenders will expect you to prove that the rent you will be receiving is going to cover the mortgage; in fact, many will want the rent to cover not just 100 per cent of the mortgage but 125 per cent.
Choose the right letting agent
While an online agency might initially be cheaper, haart’s dedicated lettings team understand the local area and the right rental price, helping you avoid over pricing or undercharging your property, both of which can create a costly void period.
Before you buy, get the inside track
Knowledge is power. Improving your understanding of the following areas before you consider purchasing could help you make a solid investment:
- Understand which areas are favourable for renting
- Which properties in your area rent fastest
- How many property types there are in your area, and which will have the most competition
- What your target tenants want from a rental property
If you’re an experienced landlord, and know that a certain type of one-bed property rents well in your area then make use of your experience and stick with what you know.
Make an appointment with one of haart’s experienced letting agents who will advise you on all of the above, as well as letting you know about the types of properties haart really wants more of on its books.
Location, location, location
Having the right location for your target tenants is vital. If you are aiming to become a landlord to families, consider whether your buy-to-let property is in the right catchment area for a good school. Undoubtedly, this will push up the price of the property, but this will also be reflected in the rent you will be able to charge. Ask our lettings experts for their advice.
Equally, properties near organisations or businesses that employ a lot of people, are near convenient amenities such as a superstore, and have good transport links and parking, are sure to be attractive to potential tenants.
Know your budget
It’s all about the maths – ask yourself whether you are looking to raise an income with your rental property or playing a waiting game to see the capital asset increase in value. Either way, the rent has got to cover all your costs and then some. Always allow for at least three month’s void period in your annual calculations of the risk.
This impacts the type of properties you invest in, and who you are aiming to rent too.
If you can only afford a studio apartment, it is highly likely that your tenants will not stay for long periods as they are more likely to see this home as a stopgap. The same can be true of one-bedroom flats, but it all comes down to who you want to attract.
If you know your one-bed flat is only suitable for one person rather than a couple, then stick to your guns and wait for a single person. They are unlikely to leave because the property is too small.
Houses of multiple occupation (HMOs) and student lets will always provide you with a better income, but can also potentially provide you with more responsibility as a landlord. Before you purchase this type of property, it might be worth investing in your property management. If you are considering this, talk to our property management agents for expert advice. We also have some top tips on renting for students which could help you to best accommodate their needs.
Out with the old and in with the new?
Our best advice here is do your research and haart can help you. New-build flats are very attractive to tenants, potentially making renting easier, but they are generally more expensive than older properties. Additionally, there will be a lot of competition from the owners of the other new-build flats chasing the same tenants, so consider these factors when considering your buy-to-rent property.
Investing in a new build or an older property can also impact how much you spend on doing up the property. While you don’t intend to live in the property someone else will, so it must be made attractive enough to a potential tenant without you spending too much money on it. However, it’s equally important that you consider where you’re spending time and money.
If you’re spending £10,000 ripping out and replacing the kitchen, you’ll wait a long time to recoup the value. While the property may rent quicker, there’s always the chance that potential tenants will do their homework and opt for a rental with an ok kitchen at a lower price point. Regardless, it’s still important that your property meets certain levels of expectations; a lick of paint is always a good idea, as is addressing any mould or damage in the bathroom or on windowsills and installing a fridge, washing machine and if the property is large enough, a dishwasher
What size deposit do you need?
Currently lenders want anything from a 10 to 30 per cent deposit, so the size of your deposit depends how much spare cash you have. If you are new to the letting market it might be better to put forward a smaller deposit, although beware, it may take you longer to find the right property and get it on to the market. But property is a waiting game, so there is nothing wrong with being patient.
Once you take possession
Now you’re a property owner, the hunt starts for a tenant. haart will be able to advertise your property through high-profile marketing both locally and online. We’ll hold your hand through the whole process ensuring that the tenancy and your property meets with the required legislation.
Our dedicated lettings teams will do all the tenant referencing to ensure you get the right tenants for your property and to minimise the risks to you. Call us on 0845 899 9999 or find your local haart lettings branch.