Thinking about becoming a landlord? With savings interest rates extremely low, letting out a property and receiving regular rental income can be an attractive alternative.
You might have been left a property as part of an inheritance or you may want to buy a property for your student son or daughter to live in (while charging their friends rent). Or you could be considering buying a property to let out. Changes in regulations surrounding pensions have resulted in more people looking at property to fund their retirement or long term plans.
Before you go house hunting, check out these top tips for first time landlords.
Financial goals
Before you dip your toe into property investing be clear on your financial goals, both long and short term.
Are you looking for some extra monthly income now? Or is your main aim to acquire an asset which will pay for itself now and hopefully give you a generous return at some time in the future?
Hopefully you can achieve both, but if you need regular income look for property which achieves a good rental yield. You can get a simple gross rental yield figure by dividing the amount you paid for the property by the amount you’ll receive in yearly rent. A better indicator is net yield – and for this you’ll need to take into account all your expenses. If the result is less than you’d get for putting your money in a regular savings account then it’s not a great return.
Historically, property has been a good investment with prices rising considerably over time in most areas. But it does need to be considered as a long term option as the housing market goes through periodic peaks and troughs. You won’t have quick access to your money either, so don’t tie up all your savings.
Choosing the right property
If you are renting out a property you already own whether your own home or one left as part of an inheritance, then check out our guide to Renting out your Home.
Get expert advice
For those looking to purchase a property, a good starting point is to talk to local estate agents. They’ll be able to advise on types of property, areas, local demand and rental valuations and can let you know when suitable properties are coming onto the market (not everything makes it onto Rightmove!)
Don’t be too restricted
If you are buying a property for a student son or daughter then you (and they) will have a clear idea of the areas they want to live in. But if you are not restricted then be open minded. There’s no reason why your rental property needs to be close by and you may achieve much better returns elsewhere.
If you are looking to add value to a property over and above any change in local property prices, identify properties which would benefit from modernisation or have the potential to add space. Also, spotting the next up and coming area will help to improve price growth beyond the average.
Treat it as a business
As a landlord it’s vital to be professional.
Be organised about your finances
Keep your receipts and make sure you complete your tax return in good time.
Tick all the legal boxes
Lettings legislation is getting ever more complicated and as a landlord you have a number of legal obligations. From PAT testing appliances to ensuring your tenancy agreement is robust. Having a good lettings agent on your side ensures you won’t fall into any regulatory traps.
Delegate
Unless you are planning to build a property portfolio to manage yourself it’s best to take a hands-off approach.
Find a great lettings agent and let them do the hard work of finding and vetting tenants, managing the legal stuff and dealing with maintenance niggles.
And a good bookkeeper will ensure you pay the right amount of tax, often saving hundreds of pounds.
Put aside personal preferences
Part of treating your rental property as a business is to be hard-headed when choosing and fitting out.
When buying, don’t choose something just because YOU love it. And be prepared to walk away if you can’t get a good deal.
The same goes for decoration and furnishings (if you are letting a furnished property). Don’t buy over the top fixtures and fittings just because you like them. Go for practical, hard-wearing and neutral every time.
If you’re thinking about becoming a landlord then we’d love to help. Give us a buzz on: 01302 247754 or email us at: info@thepropertyhive.co.uk
