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Being a buy to let landlord: Top Tips

20/07/2011 06:28:00


Taking on a buy-to-let property and being a landlord is not just a shrewd investment move in today's economy, it's providing an essential service.



Taking on a buy-to-let property and being a landlord is not just a shrewd investment move in today's economy, it's providing an essential service.

According to the Association of Residential Letting Agents (Arla) the UK's private rented sector is being used more and more to take the pressure off a housing market which is impossible for first-time buyers to enter.

As a result, the rental sector is currently buoyant. Recent figures released by Endsleigh show rental prices in the UK have increased steadily over the last two years. Since 2009 rents have gone up by four per cent.

This is great news if you are a landlord, or considering becoming one. But if you are reading this as a tenant, you might want to pour yourself a strong drink before reading on – particularly if you live in London.

Endsleigh said the highest rental prices are in the capital city, where the average property is £1,372 per month – double the average price in the UK, which has reached £700 per month.

Scotland, meanwhile, is the cheapest costing the average tenant £299 per month to rent a property. Carlos Thompson, of Endsleigh, said: "The increase in cost of renting across the UK shows that despite the recession the lettings market has remained strong, which is great news for landlords and letting agents."

Meanwhile, with the average weighted rental returns, according to Arla, for both flats and houses coming in at five per cent – higher than the average interest rate earned through savings or a cash ISA – it's no wonder so many are considering buy-to-let.

But entering this marketplace can be a daunting prospect if you've never dipped your toe in before. Being armed with some helpful information to ensure you don't trip up can be invaluable.

If you think buy-to-let is the investment path for you, here are some expert tips to help you get going.

Do your research

As the statistics from Endsleigh suggest, the key to buying a property which will earn you a decent yield is to choose the right location. (see our article explaining rental yield).

But it's also just as important to buy the right property. It would be a wise financial move to buy a property in an area set for regeneration, or where a large amount of jobs are about to be created.

You may not find such great prospects in buying a large four-bedroom family house to rent in an area with no schools, or poor schools for that matter. Arla says it's important for potential landlords to remember buy-to-let is a solid, long-term investment not a quick money-making scheme.

It points out the rental market suffers ups and downs, and behaves very differently from region to region, so it's critical that you select the right property in an area you have researched in detail.

Ian Potter, operations manager at the organisation, added: "Buy to let properties can prove to be a sensible, long term investment, but consumers must do their research in order to achieve success."

Arla recommends talking to a regulated letting agent who is based in the area you are thinking of buying your property. They should be able to provide you with an insight into what makes the local property market tick.

But it's worth looking at other sources too. For example, Paragon Mortgages recently published research revealing students and young singles generated the highest yields for landlords.

While the average rental yield in the UK is currently 6.2 per cent, the investigation found this figure rose to 6.45 per cent for students and 6.22 per cent for young singles. And before you slash quiet seaside retreats off your list, the research also revealed retired people as being among the most lucrative yield providers, generating averages of 6.16 per cent.

Nigel Terrington, chief executive of Paragon Group, said: "Student yields typically outperform the wider market because they are let on a per room basis, which can generate higher rental income."

But remember, these high yields can come at a price. Mr Torrington added: "On the downside, they tend to require a higher degree of maintenance, so landlords have to factor that cost into their overall business models."

Use the Myfinances.co.uk comparison tables to find the best deal on a buy-to-let mortgage

No double beds in HMOs

Lots of sharers looking at our bigger houses ask us why there are no double beds in the bedrooms. This is why!

HMO regulations specify how many people can safely live in one house. If you have five double beds in a house with five bedrooms you could end up with an Iggle Piggle and an Upsy Daisy in each bed, making ten occupants and therefore breaking the HMO regulations.

10 ways to spot the next up-and-coming area

Make sure you know where to make your next property investment

29-10-07, UpMyStreet ©

With some areas experiencing a slowdown or even fall in property prices, investing in property is becoming a more risky business. But there is still money to be made from buy-to-let and property investment. According to Paragon Mortgages, average rental incomes are up nearly seven per cent in the past year.
In a more turbulent property market, investing in a location that is up-and-coming rather than already popular will give you the biggest return on your investment. Here are ten key indicators to identify a soon-to-be desirable area before everyone else does.

1. Desirable neighbouring postcodes
Look for an area that borders an already popular location. Buyer and rental demand for property will usually spill over from highly desirable areas to neighbouring districts, and these areas can become more popular themselves in the long-term through this association.
In particular, look for neighbouring postcodes that have a similar housing stock and roughly the same transport links, neighbourhood demographic and local amenities. A rise in popularity of the less fashionable area should be realised once people see the advantages it shares.

2. Future transport extensions
Good transport links are one of the biggest factors drawing buyers and renters alike to a location, and automatically add a premium to a property's price tag. Look for areas where there are plans to improve local transport - extra rail or underground links, a new bypass or road extensions. Transport plans are publicly available at your local council.
Be sensible when it comes the exact location of your investment. While proximity to transport links is important, buyers and renters will be put off by a busy bypass or noisy train station on their doorstep.

3. New development
Investing in an area about to undergo regeneration is a no-brainer - the biggest return will come from successfully identifying the local areas that will benefit the most, says Pierre Williams, of property investment experts Inside Track:
"Everyone knows that the Thames Gateway is destined for massive growth. But it's a big area. So you must consider which specific locations in it might perform best. The areas adjoining the Olympic site and Ebbsfleet, because of its new high-speed rail link station, should do very well."

4. Emerging student areas
The buy-to-let market is perennially healthy in university towns. Paragon estimate that landlords letting property to students achieve a return 25% greater than other buy-to-let properties, and highlight Middlesbrough, Chester, Huddersfield, Leicester, Hatfield, Ipswich and Canterbury as the areas with the strongest buy-to-let potential, based on student demand and current average prices.
Even better is finding a student location that hasn't been cornered by other investors. Keep an eye out for new university campuses or colleges opening in different parts of town.

5. Modest price growth
It can be tempting to invest in an area with a strong track record of property price growth, but this also means it could have reached the ceiling of its price potential. You'll make a bigger profit investing in an area experiencing average, rather than explosive, growth. With property more reasonably priced, your up-front investment is lower, and there's still the potential for prices to grow if you pick the right location.