The private rental sector has had several recent challenges and although the rental market is regaining momentum, landlords may be left wondering if property is a good investment.
This article gives new (and existing) landlords tips to becoming a profitable long-term landlord.
But first, we explore why being a landlord is more challenging now, than before.
Buy-to-let landlords have a greater regulatory burden, and more recently, are dealing with the temporary slowdown on the property market.
It is harder to evict problem tenants with the abolishment of the ‘no fault’ evictions by removing Section 21 of the Housing Act 1988.
Letting fees are not allowed to be charged to tenants. This led to some concerns for landlords as they needed to pay for reference checks instead of their letting agent doing this.
And finally, landlords have had to accept the loss of the buy-to-let tax relief on mortgage interest payments. Speak to your accountant to find out more information on how the mortgage interest tax relief may impact you.
The good news is that there is an increase in demand across the property market, with the annual rental growth expected to grow more than last year.
Tip 1: Have a long-term investment strategy
We believe that for best results property should be considered a long-term investment and buy-to-let is no exception.
A long-term strategy can see you through difficult periods. The good news is that investing in buy-to-let property gives you several strategy options. This may include:
- Renovate and convert the property into an HMO (House in Multiple Occupation) to maximise your rental return
- Hold the property for the long-term increase in value
- Build property to sell
- Renovate older properties to increase their value for sale
When you are thinking of strategy consider the following:
- The type of tenants you want
- Finding the right location
- The potential for capital growth
- The type of property structure you want
- The most valuable property features
- The total investment cost
To find out more about these issues, read our Blog Why Buy-to-Let is Here to Stay (Doug, link to blog 35 here).
Tip 2: Make sure you have the right licence
If you rent to multiple tenants who are not part of the same family, you need an HMO licence.
There are three types of HMO licences:
- Mandatory licensing – this applies for large HMOs where there are five or more tenants from two or more households
- Additional licensing – this applies when a council requires smaller sizes of HMOs to be licenced. This may include properties that are occupied by three or four people living together as two or more separate households. This may also include any purpose-built self-contained flats in a block of three or more, or buildings that have been converted into self-contained flats.
- Selective licensing – this is provided at the discretion of a council or borough and can affect properties regardless of the size or number of tenants. Selective licensing may apply to privately rented properties occupied by single households located in specific areas. There is no central directory of which council or borough have selective licensing schemes.
Tip 3: Have a legally binding tenancy agreement
To ensure your legal rights are protected we highly recommend that you have a tenancy agreement… a strong, legally binding contract. Even if the tenants are your family, friends or someone you know well, it is important to protect your investment.
Tip 4: Do proactive and regular inspections
We recommend that you undertake proactive maintenance inspections. Not only will this keep your maintenance costs down by reducing the number of last-minute emergency repairs your property may have, but it also ensures your property is well looked after.
The result is top rental returns and reduced vacancy because your tenants will be looked after and happy.
Tip 5: Choose the right tenant(s)
To ensure that you get the best tenant for your property you need to have a focused screening process. Thismay include:
- Asking for current and previous tenancy and employment history
- Interviewing the potential tenant to check if they are suitable for your property
- Calling their business, personal and prior landlord references
Tip 6: Include attractive incentives for your tenants
Consider offering incentives that will attract the right tenants. This may include:
- Accepting pets
- Provide fast Wi-Fi
- Including garden maintenance (if your property has a garden)
- Have all bills included
- Provide a homely communal area
- Modernise the property with fresh neutral coloured paint, updated bathroom(s) and installing practical storage spaces.
Tip 7: Choose the right letting agent
The final tip is deciding if you will have the time, organisation skills and practical experience to be a hands-on landlord. Or if you will appoint a letting agent.
If you want to be a full-time (or part-time landlord) then you will need to deal with maintenance, repairs, finding tenants, doing the annual certification checks and knowing all the legal requirements and tenancy rules.
However, if you decide to hire an agent, you need to make sure you find someone reputable that you can work with.
You want to be able to build a strong working relationship with them and make sure they can help look after your tenants and your investment.
When you choose a letting agent, ask them what their property management service includes and excludes, what fees are included, how many years experience do they have and how much support they will give your tenants. You need to know what your time and investment commitment will need to be.
The next steps:
The key to ensuring that your investment is profitable starts with buying the right property in the right location.
We recommend that if you are thinking about buying a property to let that you first start by getting professional advice, so you can make a considered decision.
At REKA Property Management, we give our clients the facts about the property industry.
If you want to know how to achieve solid rental returns and have peace of mind with your property, then call us on +44 (0) 203 286 6468 or email us at Admin@RekaProperty.co.uk