When it comes to residential property investment the visionaries out there may see themselves sitting back whilst the rent simply rolls in, but to ensure the ride is a smooth one it’s the initial decisions that can make all the difference.
Whether you decide to go it alone, or bring in the experts, the following touches on a few of the many questions which may help you come closer to a decision as to whether you wish to invest in property or not.
With the banks rediscovering their confidence in the UK housing market, they will be clambering over each over for your business as long as you have a deposit of at least 20% of the property value and own your own home. At present buy-to-let rates are at an all-time low.
Banks do require reassurance that the rent will cover 125% of the mortgage payment. This is where the experience and knowledge of a reputable Letting Agent can be very useful to assist with any rental concerns and answer any testing questions.
If you’re looking to invest in a larger property Leeds City Council requires the consent for HMOs (Houses in Multiple Occupation) for properties with five tenants plus spread over three floors or more. This five year license is issued for a cost from £583.45 for accredited landlords and each property is subject to mid-license check to make sure it meets the council’s regulations.
Not to be confused with the above, Sections 79, 80 and 81 of the Housing Act 2004 have provided for the introduction of a scheme of selective licensing of private landlords in a local housing authority’s area. Leeds City Council has decided to take up this initiative in certain post codes to balance out the mix of residents in a street/area and address anti-social tenants. Giving Leeds City Council a phone call will go a long way to taking any uncertainty out of the equation before you go ahead with any purchase.
As a new landlord there may be many obligations and regulations you will not be aware of. For example, what should you do with your tenant’s deposit? By law, you have to register a tenant’s deposit with one of three gvernment backed protection schemes within 30 days of receiving it or face a fine. If you chose to use a local letting agent’s management service at the outset, then at the end of a tenancy they will mitigate any potential deductions and return the deposit within the parameters of their chosen Tenancy Deposit Scheme.
Make sure prior to any let you have a valid Gas Certificate carried out by a Gas Safe engineer, for reassurance you can check your engineer is registered by taking his/her Gas Safe number. Also, it’s worth getting the engineer to fit a British Standard carbon monoxide tester whilst not law at the moment in England it is good practice.
Budget to put aside around 10% to 15% of your rental income to cover everything from replacing a lock on a door to replacing a temperamental boiler (of which some will come with a generous 7 year warranty).
A reputable Letting Agent will identify maintenance issues before they become a problem. This could be via one of their regular mid-term property checks or simply through good regular communication with the tenant. For example, a pro-active agent will differentiate between damp (bubbling paint caused by external leaks from a leaking gutter) and condensation (black spots caused by showering and cooking with closed windows).
If arrears arise the last thing you want is a persistent problem so immediate contact is advisable, ideally in person or on the phone. A verbal commitment to a payment plan can somewhat increase the chances of that person fulfilling their promise and once agreed ensure that plan is put in writing. If you are owed two month’s rent or more then you have the option of going down the formal eviction route. There are a couple of options but issuing a Section 21 or 21a (a notice to the tenants to vacate the property within 2 months of serving) is advisable in the majority of cases. Your letting agent will have systems in place to bring rent arrears under control when the initial signs arise.
There could be a whole host of reasons as to why you want to buy, from it being the preferred option to a traditional pension, or maybe your savings interest rates are falling below your expectations. From the start you need to know exactly what you should be looking for, what cautions you will need to take as an investor, whilst looking at your investment as if it is you that is renting the property.
Redbrick Properties can benefit landlords through offering advice and guidance in areas such as:
Redbrick Properties over the years has been rewarding in the sense that with the correct vision you can formulate your aspirations, as long as you have an on-going business plan and a dedicated business partner Matt.
Over ten years in as director of Redbrick I’m as passionate as the first day when we picked up keys for our first lease, a first floor office above our good friends, Castlehill Estate Agents.