With a third of retirement savers now considering buy-to-let investment in light of new pension reforms, there could be another wave of buy-to-let growth. It’s interesting that 18 households out of every 100 in England now rent their home from a private landlord (4 million households) – more than those who rent from the council or a Housing Association. This figure has doubled since 1991 and its conceivable that another 250,000 buy-to-let investment properties will be added to the total every year for the next five years.
Pick the right area
If you’re looking for a new buy-to-let investment, it’s worth thinking about what you want to achieve. If you are borrowing then the most important point is that your mortgage lender will typically want to see the rent covering your mortgage payments by 125%. Your local office
will be able to accurately value the likely rental income for the properties you are considering. Be warned that more expensive properties do not necessarily attract higher rents. This is where the local knowledge of an experienced letting agent is invaluable – properties of a very specific type in a very specific location will let incredibly quickly for a good rent whilst similar properties can stand empty.
Tenants now search for property on-line in their lunch breaks and in the late evening. You have to be advertising on the big property portals Rightmove and Zoopla/Prime Location is you want to cast your net to the widest possible audience and achieve a quick letting at the highest possible rent. Good photography is still important for rental properties – more photographs and a comprehensive description, with ideally with a floor plan will generate the maximise exposure.
Check your tenant before signing them up
In the old days when agents relied upon an employers reference, viewed wage or salary slips and took up a written bank reference when referencing tenants you could expect to collect £95 in every £100 of rent due.
When credit scoring of tenant applicants was introduced to the letting industry in the early 1990’s that jumped to £98 in every £100. Over the years the sophistication of the credit checks has improved further, and the latest state-of-the-art referencing in place at every Martin & Co office has been achieving a default rate of under 1% or in other words collecting better than £99 in rent for every £100 due.
We use an independent company to conduct thorough background checks and reference-gathering, including personal identity and bank detail authentication, tenant detrimental risk and affordability checks, previous landlord or agent references to check the tenant paid rent on time and if they would let to the tenant again, and credit checks incorporating fraud indicators and an employer reference. The company we use is rather obsessive about fact checking and will use Google Earth to view an “employers” stated address to check it's in commercial premises.
Check you have suitable insurance
Buildings and contents cover for owner-occupiers is not suitable for a buy-to-let investment and will not cover you against damage caused by the tenant, or damage caused during void periods. We can arrange quotes for specialist cover on a price matched basis – no other provider will undercut us for the same level of cover.
If you are reliant on rental income to meet other expenses we recommend obtaining a rent and legal insurance policy which makes unlimited rental payments until vacant possession of your property is obtained, pays the court costs up to the value of £75,000, covers any breach of tenancy* with no excess. Contact your local office
for full details.
Look after your tenants
Replacing tenants costs money, time and energy. Keep your tenants happy and you give them a reason to stay in your property for longer. The average private sector tenant is staying longer.
Trust your tenants until they give you reason not to. Tenants don’t want to be hassled by their landlord, so leave them to enjoy their home in peace but be responsive if they report problems with the property. If something happens, listen to what is being said, take every suggestion on board and take appropriate action.
Don’t forget, all of the money funding your buy-to-let investment strategy, comes out of the pockets of tenants. If you want to retain paying tenants, maintain your property. After all, you’ll need to do the work to attract new tenants, and probably some redecoration too. If your tenants are being unreasonable make sure you give valid and understanding reasoning behind your decision if you choose to decline any request.
Be energy efficient
From April 2016, tenants have the right to request consent for improvements to make their homes more comfortable, and easier and cheaper to keep warm, and the landlord cannot unreasonably refuse.
What’s more, from April 2018, landlords will be required by law to get rental properties to an energy efficiency rating of at least Band E. The good news is that financial support is available through the Green Deal
and Energy Company Obligation
. This means landlords don’t necessarily have to foot the bill for installing new boilers and insulation measures to improve the energy efficiency of their properties – and landlords will only have to make improvements that are cost effective.
Take advice on rent levels
Rents have not been rising so quickly in recent years. Conversely its our experience that private landlords sometimes overlook implementing rent increases partly because of administration and partly to avoid conflict with sitting tenants and will have properties in their portfolio where the rent is significantly out-of-step with the market. Our offices can provide a free review of your portfolio to give an indication of where rents could safely be raised and can undertake the legal work to implement reviews for a modest fee.
*Except anti-social behaviour