Buy To Let
What type of person rents instead of buying?
The kind of person that wants to rent instead of buying might not be able to afford to get onto the property ladder in the first place. The person who rents may also want to have the flexibility to move around the country or from job to job, so they like the idea of not being tied down to a particular property. Or a person renting might be a bit older and have had a relationship and a property of their own and now they've gone through some kind of breakup, and just as a temporary measure they want to rent because it's an easier option without all the aggravation, overheads and commitment.
Should I market my property towards a single group?
It's really important to know who will actually be renting the particular type of property that you have. For example, a two bedroom apartment isn't necessarily going to appeal to a family, so you do need to be aware of that when buying to let. But at the same time you do need to be aware of the types of people that will actually rent the property, to make it as marketable to as many of those people as possible.
If I'm buying to let should I worry about room layout?
Room layout is going to be quite important when you are looking to let out a particular property. Again, depending on who is actually going to rent the property from you. For example, if you have two adults sharing a property, then you want to make sure that they both have the same size bedrooms, so that's got to be an issue to consider. Also, where the bathrooms are – if you've got a downstairs toilet or an upstairs toilet. You need to make sure the facilities are there. So it's something to take on board and really consider before you decide who you're actually marketing to and how you're actually going to market it – if it's going to be a shared accommodation, if you're going to have more than one person in there, or if you're just going to let it to one family.
How can I spot a low-maintenance property?
A low maintenance property will be very easy to identify because it will have been maintained fairly well up until the point that you purchase it. Even if the property's bathroom is painted pink, it doesn't matter as long as it's functional. When you're buying a property to let, those things don't matter as much as long as it looks tidy and everything is working.
Should I let my property furnished or unfurnished?
There are two schools of thought when it comes to letting a property furnished or unfurnished when buying to let. If you've got just a general, run-of-the-mill property, if it's unfurnished there's less risk. There's nothing to replace and nothing to get damaged, so it reduces your risk as a landlord. But on the counter argument, if you are appealing to corporate lettings or professional people who just don't have the time to furnish their home, the fact that you're offering furnishings as an additional service will make your property more attractive and it also means that you can possibly get a little bit more on the rent.
How can I keep my property occupied?
The best way to keeping you property occupied when buying to let is to be a really good landlord and make sure that you deal with all the issues that your tenants might have as quickly as possible. Some landlords decide to use a managing agent to do that for them, and that can really pay dividends, because you only have to have a property unoccopied for a month or two and you start to loose your return. So be a good landlord. Respond very quickly to your tenants inquiries and you should be able to keep your property occupied for as long as possible.
What makes a property let quickly?
A property will let quickly when it meets the requirements of the kinds of people that are looking to rent. So when you are buying a property to let, you need to be sure that it's at the right location and it's close to the right amenities that people looking to rent that kind of property are actually looking for.
Should I consider interest rates when buying to let?
You always have to keep one eye on what's happening with interest rates, because as the interest rates go up your rental income might not go up in line with it. But it really does depend on your strategy as an investor. It might be that you are quite happy to spend 20, 30, or 50 pounds a month in making up the difference if the long term strategy for you when buying to let is about getting the capital growth on the property - a little bit like investing either in a bank account or in a pension fund. But if that's not your strategy, you've got to make sure that the interest rate doesn't go up so much that your rent cannot increase to the same amount. Otherwise, you're going to be losing money.
Are buy-to-let properties a good investment?
Buy-to-let properties will always be a good investment, provided you can find a good property that will give you the return that you need to make the margin.
Are buy-to-let mortgages the best option for financing?
The great thing about a 'buy to let' mortgage is that, 15 years ago, they didn't exist, and they have been tailor-made for people looking to buy a second property, for the very purpose of buying to let. That should be your first port of call when you're looking to mortgage that type of property.
How can I calculate what to charge for rent?
You don't really calculate what you can charge for rent: it's all down to what the market will actually bear. For that you need to do a lot of research about the type of property you're buying to let, and talk to estate agents and letting agents in the area. Then you would go to your mortgage company to tell them how much you're buying the property for and what the rental return is likely to be. There needs to be a difference of around 30% between the mortgage repayment and the rentable value. If the numbers don't stack up in that way, you will not be able to get the mortgage on the property in the first place. It's no good just charging loads of money for the rent, because if it's empty, you're not going to get any return on your investment and, more importantly, your mortgage won't get paid. So unless the numbers stack up in this way, you can't actually buy that property on a buy-to-let scheme anyway.
Should I employ a managing agent or do it myself?
It really does depend on how much time you've got to put into managing the buy-to-let property yourself. If you don't have the time - if you work full time, for example - getting a managing agent can be an absolute godsend because they're responsible for actually bringing in the rent for you each month. On the other hand, if you're a full time landlord, you might decide to do it yourself, and save between ten or fifteen percent on the managing agent fee for your buy-to-let property. So it really does depend on what your strategy is, and what is best suited for you and your situation. Obviously if your property is a long way away from where you actually live, I don't think you'll be able to avoid using a managing agent, but it really will depend on the actual situation that you find yourself in.
What will a property manager provide?
A property manager can give you all sorts of services, depending on your own situation and how much you actually want to pay for those services. Property managers charge upwards of a ten per cent referral fee for finding you a tenant in the first place and making sure that the property's always occupied. That could be a great asset when buying to let, because it means you're going to reduce your void periods. Property managers can really help out with rent collection, because they mean that you are guaranteed to get that money each month into your bank account, because it has to go through the agent to do that for you. So there's no knocking on the door and taking your money in a brown paper envelope. Then there's such things as actually managing the maintenance of a buy-to-let property on your behalf. A lot of management companies will have their own maintenance staff available, so that's another headache that they can take away, but again, they will charge an extra fee for that. Some property managers will also offer a guarantee of income which means that they will only set up a contract with that tenant when they are comfortable that they will always get paid each month. That gives you, as a landlord, a guarantee on your buy-to-let property. Again, it costs you money, but it can be a massive weight off your mind, especially if you're doing this part-time, or alongside a full-time day job. It really does pay for itself. Overall, it really depends on your situation and how much of that you actually want to do yourself.
How can I find a good managing agent?
Well I think a really good managing agent is going to be someone who has been established for quite a long period of time, has got all the maintenence people to back them up and has very good processes in place so that buying to let is a really slick operation. If you're paying quite a big percentage out of your buy-to-let income each month for a service, you're going to want to make sure that that managing service is absolutely spot on. You could maybe save money by going with a local or inexperienced company, but you are not really going to get the same kind of service that you would with a company that's been managing property for a longer. If you're going to pay for a managing agent's service, I would say find someone that's been established for a long time and have got a really slick operation for buy-to-let properties.
Are there any added costs when hiring a managing agent?
When you're hiring a managing agent for your buy-to-let property, the costs should really be only the percentage fees that you agree with them. But it's always worth asking them to make sure that there are no additional costs. For example the fee for setting up a tenancy agreement in the first place, for doing an inventory on the property before a tenant moves in - any kind of check-in service managing agents might provide for new tenants of your buy-to-let property. You would really expect that to be part and parcel of the management percentage fee, but you must ask, just to make sure that they don't bill you out of the blue for these fees that they might decide to charge.
What are my obligations as a landlord?
When buying to let, you've got a number of legal obligations as a landlord that you need to adhere to. Firstly you've got things like safety certificates for your gas and electrical appliances. Those are the kind of obligations that need to be checked every year. You also need to arrange building insurance. Any furniture that you put into your buy-to-let property needs to meet British safety standards, and you do need to make sure that the labels that come with the furniture are kept on. Other obligations as a landlord include managing fire escapes. This is particularly important for buy-to-let properties of multiple occupancy where many people live in one building. You are obliged to ensure that they have their own fire doors and fire escapes so that it's a safe environment. You've really got to make sure you're completely up to date with all these regulations and make sure that you adhere to them when buying to let.
