Buy- to – let property meaning
Buy- to – let is a British phrase and referring to the purchase of a property with the intention to let out.
Letting out your property is an important decision and involved one of your most valuable assets. This article provides some valuable tips for successful letting, either you consider buying your first buy to- let property, or own multiple properties.
Buy- to- Let Investment
Before you invest in a buy- to- let property to let, we will strongly advise you to consider the following factors.
- Choose a location that is popular with renters. Factors like good employment opportunities, good public transports, proximity to food and culture provide to be attractive for prospective tenants.
- Reduce void periods when your property is unoccupied with no rental income. Find out of what type of properties (houses, flats, or student accommodation) are most popular with tenants. Also, whether there exists a shortage of a particular type of property.
- Investing in a buy- to- let property is a long- term investment. Try to find out if new housing developments being built in the same area. This could potentially make your investment less profitable and potentially cause a supply surplus that might affect future rents.
- Choose a property with a neutral colour that will normally appeal to a broader group of prospective tenants.
- Letting out in the area close to Universities are always more attractive for students.
If you consider buying properties like “houses in multiple occupations” (HMO) keep in mind that HMO properties often are subject to special legal requirements, like licensing, and may require inspection by the local authority.
Read more about HMO in the following article, Do you need an HMO licence?
Before you are looking for a buy – to – let property in London, we will advise you to consider the most important trends:
In comparison to the previous generation, people between 25-35 are now often not able to buy their own residential property and will be forced to rent for a longer period. These tenants will not only be more mature than previous generation tenants but also have higher expectations and requirements to the property they are going to rent.
Thus, we can, therefore, expect to see an increase in demand, and it will be more important in the future offer properties with the highest quality.
The most important amenity
In addition to access to public transport, shops and culture, high-speed internet has now become one of the most important amenities. A fast and reliable internet connection is now more important than before.
However, you will not need to arrange the internet connection yourself, but by provide easy access to high- speed internet/ broadband, the property may appeal to more prospective tenants.
When you have found a property, you consider buying, you should calculate the rental rewards. This rate is often referred to as the “yield” and can be found by dividing the annual rent you expect to receive by the capital value of the property (the amount you paid for it or the amount you must expect to pay).
This ratio is an important indication of the profitability of your planned investment and should always be calculated before you proceed with your investment plan.
For example, if a property cost £ 350 000 and the annual rental income is £20 000 the yield will be 5.7 %. Remember to consider the costs of managing a rental property. These will differ depending on the size of the mortgage, the condition of the property and the letting agent.
Also, as a landlord, you are obligated to provide the property on a good condition ready to let and provide any repairs necessary during the tenancy.
You must here expect to pay some cost for during in repair. For example, if you pay £300 in costs in repairs during a whole year, your income will be reduced to £19 700 and the yield will be reduced to 5.6%.
Remember to consider stamp duty tax on top of the market value of the property.
Minimum rental rewards, yield
Ideally, you should expect a 10% yield of a single let, consider other costs such as maintenance and voids periods (empty property). However, in London, due to high property prices you must expect a lower yield, closer to 4%- 5%.
Where to buy-to – let property
The table below shows the areas in London with the highest yield.
Areas with the highest yield in London:
Keep in mind that buy-to- let investment is unlike other types of investments since you also may benefit from capital growth in the future.
Therefore, if you are investing just breaking-even, which means that the amount of income your property generates is equivalent to the costs you will need to pay, the investment may still be profitable. Therefore, both the yield and capital growth should be considered to find the total return.
The capital growth is estimated by comparing the price you paid for the property with a current market appraisal.
Letting with peace in mind
Tip # 1: Before you start renting out your property, make sure you have all the documents collected related to warranties. This can save you for a lot of money later. Also, make sure tenant(s) have all the manuals for the appliances available.
Tip # 2: Remove items and furniture that you care about before the tenant moving in. These may accidentally be broken, lost or stolen during the tenancy.
Tip # 3: Always make sure the property is professionally cleaned before the tenancy start. This will also be confirmed by the inventory and may save you for a lot of hassle later.
In this way, you will always make sure the property is professionally cleaned at the start of a new tenancy and tenant cannot claim the property was not cleaned when they moved in.
Tip # 4: Make sure to have an inventory before the tenancy start. This is an important document that describes in detail the condition of the property before the tenancy start.
This document will make it easier to decide at the end of the tenancy if it has only been fair wear and tear, any damage or neglect. Read more about fair wear and tear in the following article, How to easily reduce wear and tear in your rentals.
Tip # 5: Get the current market rental value of your property.
We consider these following factors; the property style and localization, the market and your requirements as a Landlord. Read more about
To get maximum exposure when marketing your home, we will be using platforms like; Zoopla, Rightmove, abitohomes.co.uk and social media
We understand how important it is of securing the right tenants for your home and we are keen to ensure that all parties benefit from the arrangement.
All of our prospective tenants will go through a good independent reference check. In the end, we leave it to you as a landlord to decide the tenant(s).
We are proud to offer our tenants letting fully managed properties by Abito homes.co.uk FREE membership of a Loyalty Reward Scheme. In this way, tenants will be able to earn and save while renting a property.
Financial incentives have proven during the years to have a significant effect by reinforcing the desired behaviour.
Thus, by offering our members financial incentives for taking good care of your property and paying the rent on time, we strongly believe that it will benefit both Landlords and tenants, resulting in long term tenancies.
We offer Affordable Property Management Service. Contact us today!