What is the perfect buy-to-let?
With an ever-growing demand for rental properties and with the demand outstripping supply, it’s a good time to be a Landlord. Here are our tips and advice when looking to purchase an investment property.
1. Layout
Most modern apartments and houses will have straightforward layouts, while older buildings may have awkward chimney breasts, stairs and rooms off rooms which aren’t as desirable. If the layout can be changed easily then the property is still worth considering. When considering the layout, bathrooms upstairs and off a landing instead of a bedroom are more desirable.
2. Size matters
This depends on your target tenant. If you’re after a single professional, you might consider a small flat, maybe even a studio, in a good central area. If you want a family, for a longer-term let, you might look at three-bedroom properties, a larger home with more square footage.
3. Cash to spend
Research mortgage options to determine your budget before viewing and think about what return you are looking to achieve. Before making appointments its always worth talking to a local agent who can give you an idea of what rental the property is likely to achieve.
4. Cashflow
If you are looking at properties that require work consider the amount of money this will cost and what cash you will be left with once complete. You can’t solely rely on the tenants rent to pay the mortgage or carry out repairs throughout a tenancy. You have a legal responsibility to ensure the property is safe, in some cases maintenance will need to be actioned and paid for immediately. Make sure you have enough money to cover these unexpected costs and to cover the mortgage should your tenant be unable to pay their rent. Don’t over stretch yourself!
5. Location, location, location
You will know your local area best and will be familiar with the desirable roads and locations. If you are looking further afield, the key to a great buy-to-let is purchasing where people want to live. Make sure you visit areas at different times of the day and get advice from the locals. Ask the question; At some point in my life would I have been happy to live here?’ If the answer is, ‘Yes’, you cant go far wrong.
6. Gas, Electricity and EPCs
On appointments consider the age and condition of the central heating system and wiring. All tenancies will need to pass a gas safety certificate and electrical certificate before a tenant can move in.
Check the Energy Performance Certificate (EPC) of the property before making an offer.
On April 1st 2018, the Minimum Energy Efficiency Standards (MEES) came into force. This required all properties being let or sold in England and Wales to have a minimum EPC rating of ‘E’ or above. Its worth noting that the government have proposed that all rental properties will need an EPC rating of ‘C’ or above by 2025. The new regulations will be introduced for new tenancies first, followed by all tenancies from 2028.
7. Decoration and Maintenance
Don’t spend too much money on the decoration. Unless it’s a top-end property, avoid expensive and unusual finishes. White paint is cheaper to buy and saves time because you don’t have to cut it in around the edges. New carpets throughout can change the feel of the property. Add a decent underlay, haggle a little, and you can achieve a good-looking finish without an enormous outlay. Replace avocado bathroom suites or damaged kitchens. You might get away with new cupboard doors and fresh grout in the bathroom. Clean up or replace socket fronts, light switches, knobs and taps and the property will look as good as new. Spending money upfront on maintenance and decorations will attract good tenants and will lead to an ‘easier’ tenancy. Also remember that where you set the bar at the beginning of a tenancy is setting your own expectation as to how you expect the tenant to look after the property and leave it at the end of a tenancy.
8. Presentation
Give everything a good clean. Bathrooms and kitchens should be sparkling. Doors and windows are easily wiped down. If there’s a garden, clear it. If you’ve got time to seed it, do that. If not, use turf, decking or tidy up existing paving. Replace fences and fix broken glass in sheds. Start any tenancy well to ensure tenants are clear on your expectations.
9. Leasehold or freehold?
Freehold is always better. It means you have more control. In theory, leasehold could mean maintenance charges are spread across the building and in practice it may mean you have to deal with somebody else to get things done and agree costs. Read the lease carefully and aim to have at least 100 years left on it. You might not get a mortgage if it is less than 70 years. Renegotiating the lease should be a condition of the sale if you are in a good position to buy.
10. Hidden costs and void periods
You need to be able to cover your costs if the property is left empty for a couple of weeks or months, or if the tenant gets into rent arrears. If the tenant fails to pay the rent, it may take months to get them to leave. Once the tenants have vacated, you might find you need to redecorate before you can let the property again. You can get landlord insurance to cover this.
11. Furnished vs. unfurnished
This depends partly on the type of property you are letting. But if you are going to furnish it, you need to be aware of fire regulations. That means you can’t just go down to the junk shop and buy a sofa. You need to be sure it conforms to fire safety rules. Check labels. You also need to consider durability, so buy soft furnishings with removable, washable covers. Mattresses can be covered too.
12. Tax and capital gains
Make sure you’ve factored in paying your taxes correctly and don’t forget you’ll be charged capital gains when you sell the property. Save your receipts as you can claim against tax when you eventually sell.
Looking for the perfect buy to let property? Get in touch and we’ll show you a selection of perfectly suited homes on the market…