There are several factors to consider as a Landlord before investing in a property that you later plan on renting out. We have listed some hints and tips below for any new or experienced Landlord…
1) Choosing the right property
Condition - A property will obviously require upgrading and maintenance over time but how much is too much? The main things to consider and that will incur the most cost and upkeep over time is the heating system, kitchen and bathroom so try to consider the age, condition and likely lifespan of each before they need to be upgraded.
Location – Certain areas will rent better than others. Properties that are close to transport links, local amenities and schools will always tend to draw more interest than typically properties that are isolated or not within reasonable travel times.
2) The Rental Yield
This is the calculation used to work out your annual return on your investment. To calculate this, use the below formula:
Rental yield = (annual rent income x 12) divided by property value x 100
A good and average yield is over 7% with returns of 10% deemed to be very good.
3) Initial expenditure
Most mortgage lenders normally require an initial deposit of around 25% of the purchase/mortgage price. On top of potential upgrades and cosmetic repairs, recent legislation changes also mean that their can be a substantial outlay before even receiving a first rental income.
4) Regular outlays
Most properties will require continual safety checks whether yearly or over a set period of time. Outlays to consider include:
- Landlord Gas Safety Certificate
- Electrical Installation and Condition Report
- Interlinked smoke alarms and heat detectors
- PAT testing
- Legionella Risk Assessment
5) Seek Professional advice
Before committing, check with registered accountant or financial advisor as to what potential mortgage options you have and any likely tax implications. Why not even check in with a property professional or agency and ask for advice on potential properties or market appraisals for properties you may be interested.
6) Targeted Tenants
It is worth researching what your audience of potential Tenants are likely to be. Considering the size and location of the property, is it more likely to suit families, couples, first time renters, etc. Houses with garden space are typically more likely to attract families where as flats close to towns, transport links may favour more towards young couples, first time renters.
7) Risks with renting
Whilst the risk is minimal if you put place the correct checks and references pre-tenancy, you should always consider the negative aspects. Sudden changes in circumstances can mean that Tenants’ income suddenly comes to a halt and rent arrears grow. Are property prices within the area you are looking to invest likely to hold their value or fall making the investment potentially unsustainable? Properties can also potentially lie empty for a period of time which can also impact income.
8) Decide how hands on you want to be
As a Landlord, it is good to be involved with the property, but it is good to consider how involved you want to be. Managing a property can, at times, be time consuming so it may be best to look at the services of a managing agent even in the initial stages of marketing, referencing and completing all your lease and legal documents to make sure you are in the right place legally. Rental Regulations and Legislations regularly change so using ana gent can be a hassle free option with a small monthly outlay.