Do you know what is the right property for you?
Do you know what is the right property for you?
As a landlord, there are two ways to approach this critical decision; either what type of property do you feel comfortable owning or what type of tenant are you happiest dealing with? Both get you to the same starting point but they will give you some clarification on the best way forward for your life as a landlord.
However you decide, getting this right will make your rental journey considerably easier and smoother. It may seem obvious but with a rental market that currently has such a shortage of property and glut of desperate tenants; it can be tempting to buy “the bargains” whether these properties fit your criteria or not!! Don`t be tempted because the wrong property for your strategy could mean you will be dealing with a type of tenant that does not suit your initial objectives. This will only lead to increased stress and anxiety and ultimately could be problematic when the market reverts back to the norm.
The types of property fall into three categories – modern, older and period. There is always going to be some overlap to these divisions and the properties then basically split into Detached, Semi-Detached and Terraced. Add in Bungalows and Flats/Apartments and there is quite a choice to choose from but buying will depend a lot on your budget and the yield you will accept as a return from the rent. Once you have decided the finance you are willing to spend, you need to consider the location which we mentioned last time.
Location is very important in relation to the type of property and tenant that you want to work with. As a general rule the older properties tend to be nearer the town centre and the more modern properties radiate out from there, absorbing some original hamlets/villages as the town grows, until you reach the new estates. A couple or young family will be less concerned about location as they will be about the price; whereas an established family or older couple will be a lot more certain of their preferred area and accommodation they need.
The location will always be the main factor in a tenant deciding where to rent and the type of property will normally come second in the choice. The important point is to be aware that the interest your property will achieve will be dictated by the area and nearby services and then the type of property offered. This can be an extensive list when related to a property – Does it have a garden? Is it large or small? Is there off road parking or a garage? How many bedrooms and reception rooms does it have? Are the kitchen and bathroom quite modern or dated?
A modern property on an estate is going to be “turn key” one for renting that can be moved straight into with very little fuss, providing the location and rent are correct. In general a modern house under 10 years old should need very little work in order to let out, but might need some re-decoration. By comparison, an older property may or may not need work before it can marketed to let out and buying the right type will come back to your availability of time and your initial strategy.
Some areas may be more suitable for shared accommodation or for a property that can be used as an HMO (House in Multiple Occupation). These units generate a greater yield but will need a lot more attentive management as they are covered by more detailed regulations (fire alarms, emergency lighting, access and communal corridors, electrics, fire escape plan etc) and will require more frequent checks. You`ll also need to check with the local council regarding licencing and if it is in an Article 4 area. If it is, even if you do not require a licence, you will need to adhere to the rules set out by the council in order to comply and be legal.
Maintenance and initial repair work are always a big decider on cost – if you are a builder, in the trade or know professional contractors who can do the work; it will be a lot cheaper than having to get estimates and then arranging for the work being done for you. Be warned that if you do some of the work yourself you will need to be certain of achieving a competent standard as tenants do have a right to expect the property basics to be fully functional. In the event of a complaint to the council, they can enforce work to be done either through Building Regulations or Environmental Services and the Homes (fit for human habitation) Act.
Equally important nowadays is the EPC rating which legally must a minimum of E – this is due to change before the end of the decade to a C, so it is very important looking longer term and future proofing your investment. If deciding on flats, make certain of any covenants that will be in the head lease, because these might preclude certain matters such as pets. They will also give details of the lease and what ground rent and service charges will be liable annually, as these will be costs born by the landlord.
Risk can be a big decider when it comes to a property portfolio; you certainly need to have decided on your type of properties so you can search for and purchase the right ones for your purpose. On the basis you know what you want to buy, you first need to check the selected areas and make certain there is not a glut of properties unlet. Similarly, are there any building applications that could influence future viability of the area and put off potential tenants. These potential issues could have a huge effect on the future rent that is achievable and could be disastrous for your long term budget and the agreed repayment amounts of your loan.
You will have seen that all parts of the process are interlinked, hence the need to have a clear plan that has been thoroughly thought through and tested. Every five years it is worth reviewing this plan to make sure it still fits with your needs and also that the right tenants are still in the right properties. This article has just glossed the surface and hopefully gives you some pointers for starting out. If you want more in depth advice, make sure you check with a professional before starting out, as you can never have too much advice at this stage!