Always do your sums before signing on the dotted line – and the following tips from the experts at Belvoir may well come in handy…
The biggest outlay you’re likely to have is the initial price of buying the property itself. Make sure you purchase the property for the best possible price and understand all the additional costs that you’re likely to incur, such as solicitor’s fees, stamp duty and mortgage arrangement fees. Always seek expert advice if necessary – a property management agent should be able to answer any questions you may have. "We’re always happy to advise investment landlords," said proprietor of Belvoir Kettering Harpreet Garcha.
Advertising your property
If you’re letting without an agent then you’ll need to advertise the property yourself. Costs will vary depending on the advertising methods you use and the amount of coverage you’re looking for. Some landlords like to showcase their properties in the local newspaper, while others embrace the web and advertise across the internet-based property portals. If you give your property to a property management agent then they will market and advertise the property on your behalf – this will usually be on their own websites, on the major property portals, in the local press and in their shop window.
"Ensure that your agent is advertising your property on the main property portals and always check that you are happy with the pictures," says Lee Shuell, proprietor of Belvoir Oldham. "It is helpful if your agent has a shop front to advertise your property too."
Even the newest of properties will need on-going maintenance throughout your time as a landlord. Ensure that you factor a slush fund into your initial calculations to allow for funding of repairs and updates as necessary.
"Keeping costs down in your buy-to-let is a long-term job," said Garcha. "The more regularly you are able to keep on top of small issues, the less you will need to spend on an overhaul after each tenancy."
"It’s essential you do your homework and ensure that there is a rental demand for the type of property you are looking to buy, and ensure that the achievable rent covers your mortgage," said Shuell. Many landlords choose variable rate, interest only mortgages as they can often be among the cheaper mortgage solutions – but remember, interest rates can go up as well as down, so make sure you plan for all potential scenarios.
Added extras for your tenants
With the competition between rental properties becoming tougher you may want to include some added extras to encourage tenants to choose yours – these will usually carry a cost and should be added into your business plan from the outset. "In order to attract tenants to properties, especially HMO (Houses of Multiple Occupation), adding value is key," said Craig Walker, proprietor of Belvoir Camberley. "Some landlords include weekly or bi-monthly cleaners for the communal areas and fast, wireless broadband in the price, as well as all-inclusive utility and council tax bills. Some add furniture too – this all helps to attract tenants by keeping the hassle-factor for them down to a minimum. For the larger properties landlords may also choose to include a gardener."
As a landlord, having specialist insurance is vital. The price of policies vary depending on who you buy your insurance from and what the policy covers. Shop around to get the best deal but make sure it covers all the essentials, such as malicious or accidental damage by your tenant or their visitors. "Ensure that your property is correctly insured," said Shuell. "Landlord’s building insurance can be arranged either via a lettings agent or by your insurance broker. An internet search will provide landlords with plenty of options if they wish to go direct. Also, a product that covers rent arrears and respective legal costs is available – again, depending on the quality of the tenant this is advisable. With this in mind it is important to have at least two months mortgage payments available in your account to cover any mortgage payments that need to be made due to late or missed rent."
Management company charges (if leasehold)
If you buy a leasehold property you are likely to have to pay annual management charges, as management companies usually look after the communal areas and the building itself. These costs can differ considerably from development to development so make sure you’re aware of the full costings before you commit. Ask the management company for a breakdown of what is covered by these charges (and what isn’t) so you know exactly what additional costs you will have throughout the year too.
Think carefully about what you’ll have to spend when your property is between tenants. Indeed, you may have a short (or long) void period where you will have to cover the cost of the mortgage yourself. Additionally, you may also need to spend money on getting the property ready for the next tenant, including minor decoration and cleaning – and you may wish to get professional cleaners to do this for you. "I think one of the most important issues for tenants is the cleanliness and working order of the items in the property," said Luke Mason, proprietor of Belvoir Hitchin. "If the landlord makes sure the house is clean and tidy throughout before occupation it will start the tenancy off to a good start. This sounds like common sense but it’s often missed by landlords."
If you get a property management agency to find a tenant, or look after your property for you, then you will be subject to a fee which will also need to be factored into your initial calculations. Property management services range from tenant-find only to full property management and prices will reflect the level of service you require. Ask your local lettings agency for their fee structures before you invest in the property.
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