Tips for landlords
First time landlord? Everyone was at some point, and sometimes we all need some helpful pointers along the way. For a start, it’s not always the richest people who make the best landlords (although that certainly helps). It’s not how much money you have, but what you do with it that counts. Smart investors truly understand what they are doing. They do their research, they read a lot, they watch Ted talks, listen to podcasts and work out the metrics. In short, informed decisions are generally good decisions.
What type of landlord would you like to be? What type of property are you letting, and what type of customer are you expecting? Some of the answers to these questions will dictate the type of portfolio you want to build. That will help you narrow down the locations of potential purchases and also how to furnish the property and attract the appropriate tenants.
Understand the tax situation: You would do well to take professional advice on this, but the key points are covered extensively online. You might need to change ownership from yourself (a sole trader) to a limited company for tax reasons, and if you are already a higher rate taxpayer there may be other benefits. Consider all the pros and cons and speak to an accountant who specialises in property. This will help you save money in the long term.
While you’re speaking to the accountant, you would do well to look at your liquidity. What is the maximum % mortgage interest rate you can afford, in times of credit crunches you don’t want to have a fire sale to loosen up your finances. It’s best to know in advance what the worst, and best case scenarios are. Ensure you know what the return on investment is (ROI) and whether that is better than simply putting your money in the banks. Build in some wriggle room for property price inflation as well as offsetting ongoing maintenance.
Make sure you have seen the property you’re going to buy as an investment. This might sound obvious to homeowners, but you’d be surprised how often buy to let enthusiasts buy something unseen, or off plan, and live to regret those decisions. Ensure that off plan purchases are backed up by good builders, ideally with the land in escrow or at least money in the bank. And for those auction bargains, have a look first. Ask why it’s a bargain in the first place and check out the surrounding areas. Sometimes you can time an area right with a large government investment scheme, a shopping mall or even an ambitious football club in the town. These can all make a big difference to future values. Don’t be afraid to low-ball an offer. It’s not always the seller making the decision, and timing can play a part in a purchase. Cash buyers are sought after by lawyers selling on behalf of inheritors and bankruptcies who need quick decisions and even quicker money.
Ensure your property complies with legal regulations. From accountants to lawyers, you might think you’re spending a fortune on professional advice, but once again, the research you do will pay off. There are now a host of legal requirements for renting your property in the UK, and getting expert help and advice is priceless. From energy performance certificates to gas safety certification, they all need to be in place. It would be wise to speak to someone who knows what they are talking about, and in this case, an ARLA propertymark registered letting agent (like Lane & Browns) are on hand to give you that advice. We’ve seen it all, so feel free to pop into our friendly offices for a chat. Alternatively, speak to a specialist property lawyer, but there will likely be a cost attached to that conversation.
Furnished or unfurnished? Once again, it depends on your prospective ideal tenants, and there are legal rights attached to both. Styling out your rental property (or properties plural) can be a fun hobby, just make sure you know what to look for. These days you can rent furniture to suit your need, or if purchasing, ensure that the items you buy can be reused in future purchases such as modular sofas and accessories. Instagram is a good place to get ideas or inspiration, and depending on the style of property, you can pick up some bargains at auction or charity stores.
Remember that if you are furnishing it yourself, that artwork can affect the looking feel of a place, but is very subjective. That “tasteful nude” you think might look good in the bathroom might not be to everyone’s taste. There are plenty of studios and internal design experts to call upon for some help as well. Shop local and keep the money “in the family” you never know when you might need a favour back from local store owners, they have long memories.
A good garden can add value to your rental, as long as the tenants keep up the maintenance. You might want to have a service plan with a local gardener on retainer to ensure it’s kept well. Alternatively, some homeowners are switching to astroturf to minimise the maintenance. There are pros and cons to both options.
What makes a good tenant? Selecting the right tenant is crucial, and this is where your estate agent can really help. They often have regular tenants on their books, and have seen it all before, so use them as a sounding board. At Lane & Browns we ensure all our tenants have proof of income, credit status and rental history. We also know what the going rate is for good local properties, so you get the right rental price for the area.
If you’re thinking if becoming a landlord, just renting out a single property or already have a good portfolio, Lane & Browns are the leading experts in Sandy and surrounding areas. I would recommend talking to us before making your next move, it might be worth more than you think.
