Buying a property to let out is not a new concept - investors have been doing just this throughout the last century. They often bought a property with a long-term tenant in residence, but this often meant that they saw little return in increased rental for quite some time and, understandably, this put people off! Since time immemorial , people have always rented their accommodation – just think of the Doomsday Book, when perhaps tenants didn't always pay in cash but in grain, cattle and crops. Today, that system could prove a tad difficult in suburbia, and cause a significant headache for the Chancellor!
The 1980 Housing Act introduced the Protected Shorthold Tenancy and since that time onwards more and more people have turned to property letting for additional income. The buy-to-let market has been growing considerably in the UK since the mid-1990's. If you are thinking of buying a property to let, a few points to remember, should you wish to go down this route, are:
Investment: You should be making a medium to long-term investment – it is no good purchasing a property on a rising market and selling it a couple of years later. You may have made good money on it, but where are you going to get your income from in 10-15 years time?
Location: Will it be where you live or a in a town 100 miles away? Contact an experienced letting agent – they know their market – even if it is in the area in which you live. The agent should be a member of one of the professional associations in the UK – ARLA, NALS, NAEA, RICS etc.
Maintenance : Avoid purchasing a property which is likely to costs a lot on maintenance. Think about whether it is thatched, has a flat roof etc. Whilst you are considering this, should you find the property otherwise meets your criteria, talk with a professional insurance company who understands the different aspects of the building: the insurance may not be as high as you fear and the maintenance may not prove to be such a burden.
Finance: Calculate the rental and mortgage payments. Take into consideration that there can be rental void periods during the year, rents can go down and mortgage payments increase.
Detail, detail, detail: The property should be well equipped – kitchen, bathrooms to high specifications – tenants have plenty of choice generally in the UK and if your property is not up to scratch, they won't rent it. If you are furnishing the property don't consider second hand furniture. The decor throughout should be light – neutral colours are best.
Some other points to bear in mind:
> Consider the length of the lease. If leasehold there will be Service Charges and Consents to Let from the freeholder – some freeholders in blocks of flats charge for every Consent to Let – and this can be expensive. Check out the lease before purchasing. You should also look into the level of service charges levied on each apartment, For example, if the block of flats has a lift you will have to contribute to the maintenance – even if your property is on the ground floor!
> Developments with indoor pools and saunas may look attractive, but you may not achieve a higher rental than a comparable property which does not have these facilities.
> Location of the property
> Floor level
> If you are buying an apartment, try to avoid those which do not have any owner occupiers living in the block. When there are owner occupiers living on site, they tend to contact the managing agents more regularly if there are any problems and ensure that the development is generally cared for and well maintained.
> If you are purchasing an apartment, many modern apartments offer a living room, kitchen, double bed room with en-suite shower room, family bathroom and a small single bedroom. This immediately cuts down the rental potential for two people sharing who want nearly equal sized bedrooms.
> Some developments do not provide parking. Even if a tenant walks or uses public transport to work, most tenants still have cars that they use for leisure, social and shopping purposes.
> Property type – a 4 bedroom property should have at least two bathrooms, etc.
> Bungalows may not always be such an attractive proposition as they often have long gardens: the modern trend is that tenants don't want to garden, so you end up having to pay for a garden maintenance service.
> Amount to be spent on the property – new bathroom and kitchen, decoration levels etc.
> Gardens – think very carefully if you are going to buy a property with a very long back garden. Who will maintain it? A gardening service can be expensive, but you should be able to off-set this against your tax bill. If you do have a garden at the property, go for the easy maintenance option of gravel on the flower beds, a good sized patio for barbeques in the summer – and if you do have a lawned area remember to provide a mower.
Remember that your property must be well maintained and attractive in order to appeal to a tenant who will pay a good rental. Apart from making the property attractive, bear in mind also that under the 1985 Landlord and Tenant Act, landlords have a legal responsibility to ensure that tenants are 'safe from harm'. This means ensuring that landlords provide housing which is fit for habitation. A property available for rent must be supplied and maintained to a good standard. Landlords must ensure that the structure, hot water and mains water supply, lighting, heating and ventilation are all maintained throughout the tenancy.
In a nutshell, landlords have much to think about! However, the pluses outweigh the minuses and the rental marketplace continues its well trodden path through history. As long as you abide by the basics, you should not go wrong. One other point to bear in mind is that you must ensure you insure with a professional insurance company with a specialist knowledge of rental properties. After all your hard work, you don't want to find out your insurance is invalid because the premises have been empty between tenancies, or that you are not covered perhaps for sickness or loss of revenue. Take advice and make sure you have all the angles covered – not just the obvious buildings and contents – then enjoy peace of mind in role as landlord!