From deposits to tenants to yields, the Just Landlords A-Z of buy-to-let will give you a clear insight before you make the choice to purchase an investment property!
A stands for Appreciation-When looking to purchase a buy-to-let property, you should be clear on whether you want a regular income, or if you want its value to increase and give you a good retirement windfall later in life. A cheaper property in a more depressed market will return a greater yield than buying a more expensive dwelling, where rents could be eclipsed by larger entry costs. Buying in a regeneration area and investing for long-term gains will give the greatest profit.
B is for the Bank of England- If considering whether buy-to-let will bring dividends, it is worth thinking that if the Bank does increase interest rates in the near future, mortgages will rise and potential profits will decline as a result.
C is for Choosing- In the event that you do not wish to manage your rental property yourself, you will need to choose a reputable letting agent to carry out duties such as collecting rent, sourcing tenants and resolving problems. You should look for members of The Association of Residential Letting Agents (ARLA) and the Royal Institution of Chartered Surveyors (RICS). It is also important to find out your point of contact and exactly what they will do for you. Of course, working out a sensible cost is important and you should speak to several candidates before deciding.
D stands for Deposits-It is a legally duty for a landlord to protect deposit money paid by a tenant at the beginning of their residency. This must be done through one of the three registered deposit schemes, which are:
- My Deposits
- Tenancy Deposit Scheme (TDS)
- Deposit Protection Service (DPS)
Should there be a dispute at the conclusion of a tenancy, the scheme operator will decide how much, if any, of the deposit will be returned.
E is for Effort-The buy-to-let market can offer lucrative returns but be warned, it is not an easy way to make money. Initially, you could find it stressful or time-consuming. However, if you are prepared to put the effort in, research regulations and properly plan ahead, you will be smiling in the long-term.
F stands for Fixtures and Fittings-While it is tempting to want to make your rental property look amazing, you must be savvy about the situation. By choosing hard-wearing, fireproof and flexible fittings, you will not only cut on costs but be more relaxed should any damages occur. Many well-known high street stores provide bargain but fashionable furniture.
G is for Gas Safety-As a landlord, you are responsible for the safety of your tenants. One regulation that must be adhered to is the Gas Safety (Installation and Use) Regulations 1998. Under this legislation, landlords must make sure their gas appliances are checked annually by a registered Gas Safe engineer.
H is for Hikes- It is your discretion when to increase your rents, either at the beginning of a new tenancy or when an existing contract expires. However, make sure you research what the standard rents are in the local area, as an extreme rental hike could see tenants move to different, lower-charging properties in the region. Keeping rents steady is a good way of holding on to the best tenants.
I stands for Illegal Immigrants-The Government has recently rolled out the Right to Rent scheme, which made landlords responsible for checking the immigration status of their potential tenants. Should you rent, knowingly or unknowingly, to an illegal immigrant, you could face a fine of up to £3,000.
J is for Just Landlords-Ok, admittedly a bit of self-promotion here!
K stands for Keeping Grounded– When considering whether or not to invest in a property, many would-be landlords have to weigh up whether they can find time to manage a property alongside another job. It is likely that you will have another role that you will have to factor in becoming a landlord around. Choosing a property which is easy to maintain (without major renovations or a big garden, for example) will see you be able to put more of yourself into the role.
L is for the Little Black Book-Unless you have an agent running your property, you will be reliant upon reliable and skilled tradespeople to deal with any mishaps. Make sure that if any serious problems arise, such as the central heating breaking down, you know who to contact.
M is for Market-Before looking for a buy-to-let investment, you must decide on your target market. Do you wish to let to young professionals, couples or students for example? Different groups will bring with them different needs, so be sure on what market you want to attract into your rental property.
N stands for New Tenants-Be sure to make new tenants feel comfortable immediately. Show them personally around the property, even if you have a managing agent. This will help build a rapport and show you are approachable and take pride in attracting the correct people.
O is for Osborne- Chancellor George Osborne has announced two major changes in legislation that will have a massive effect on the buy-to-let market. From April, stamp duty on buy-to-let and ‘second’ homes will increase by 3%. What’s more, from 2017, landlords will no longer be permitted to claim mortgage interest tax relief. Instead, tax will be capped at the basic rate of 20%. You should bear both of these in mind when considering your buy-to-let budget.
P is for Property-Sounds simple enough but you should be clear in what property you wish to invest. Are you after a single home or do you wish to invest in a portfolio of accommodation? Would you want to take up part or all of homes in multiple occupation (HMOs)?
Q stands for Quotes- If you are looking for an agent to manage your property or for tradespeople to tackle some of the more hands-on features of becoming a landlord, make sure you hunt around for the right price. Don’t simply agree to the first price that you see. Research in the local area, retrieve a few quotations and take your time to find the best value for you.
R is for Rent Guarantee Insurance- When you are a landlord letting a property, there is always the risk of your tenant(s) defaulting on their rent. Even the most exemplary tenants can fall on hard times, by losing their job or becoming ill for example. As such, you should take out rent guarantee insurance to fully cover you against unexpected rent default.
S stands for Smoke Alarms- Another prominent piece of legislation that landlords must comply with is the Smoke and Carbon Monoxide Regulations 2015. Under this regulation, landlords must
- install at least one smoke alarm on every floor of their rental property
- make sure there is a carbon monoxide alarm in any room that contains a solid fuel burning appliance
- ensure all alarms are working at the beginning of all new tenancies
Further information can be found in the explanatory booklet located on The Department for Communities and Local Government.
T is for Two-bedroom-These kind of flats are commonly recognised as the most prominent type of buy-to-let properties in cities. In a commuter town, a house, for a family, could be a better investment.
U stands for Unoccupied Property Insurance- No one wants to be landlord of a property that is unoccupied. Unfortunately, sometimes this is unavoidable, for example during renovation or decoration work, or if a tenant becomes ill or deceased. These types of property come with many worries but with sufficient Unoccupied Property Insurance, you will not have to worry.
V is for Void periods-There could well be a time where your property is not let. Should this occur, you need to make sure that your mortgage repayments are covered. The same goes for if your tenant suffers rent arrears.
W stands for Weather-As a landlord, one of your biggest enemies will be Mother Nature! From flooding to high winds, your property could well be at risk. Make sure you are savvy about making your property as safe as possible from the elements!
X is for (e)X-local authority buildings-These types of property tend to be good value. Typically, renters will not be as concerned about the appearance of their home as opposed to owner-occupiers.
Y stands for Yield-This is the income you as a landlord can expect to receive from your buy-to-let property in comparison to its market value. Working out a yield can be complicated, especially when you factor in unexpected costs. However, preparing an overflow to your budget when working out potential yields will cover this problem.
Z is for Zoopla-And Rightmove, Your Move and the rest of the online property portals! Looking and advertising properties online are becoming more and more popular, so be sure to take your time to find the correct property for you online.