Tenant demand rising day by day

With an average of 4.5 tenants vying for each available property in 2010, demand is obviously outstripping supply and this has provided a significant opportunity for those wishing to enter the private rental sector.

Buoyant Buy-to-Let

The political powerhouses in the UK may be a little jittery following the disappointing news about the UK economy released on 25th January, but the downturn in the market needn’t spell doom and gloom for all. For the property entrepreneurs among us the sun is certainly shining. With tenant demand rising day by day, buy to let investors are unlikely to have any worries about rental voids or falling rental incomes. So if you’re fortunate enough to be able to raise the required finance, is now the time to join the army of landlords taking advantage of the favourable lettings market?

Time to invest?

Recent research published by Countrywide, the UK’s largest estate agency and property Group, revealed that the number of new tenants registering for rental accommodation in 2010 exceeded 200,000! The figures revealed that the overall volume of new tenant applications increased by 37% compared to 2009 and the number of available rental properties dipped by 29% year on year.

With an average of 4.5 tenants vying for each available property in 2010, demand is obviously outstripping supply and this has provided a significant opportunity for those wishing to enter the private rental sector.

With the squeeze on mortgage lending continuing, stagnant wage inflation, and on-going government austerity measures, the trend for renting rather than buying looks set to continue through 2011. This coupled with the fact that the housing market is still firmly rooted in the buyer’s favour could provide the ideal environment to take the leap and become a landlord.

Establish a strategy

The first step in becoming a landlord is to establish a strategy. You consider what type of tenant to target and where your rental property should be located. Is your plan to invest in a university town and target students, or will you choose an urban area with good transport links to attract professional commuters?

Once you've decided which type of tenant you want to attract, you should consider tailoring to appeal to them. Think about:

  • How you will present the accommodation. 
  • How you will promote the property e.g. its proximity to good schools / lively nightlife. 
  • How you will let it - as a single unit or to multiple tenants e.g. students. 
  • The cost of running your rental property and the rent you will charge. 
  • If you'll manage the marketing and maintenance yourself, or through a lettings agent. 

Before you can market your property for rental purposes, you will need to:

  • Consider your mortgage – you will require a buy to let mortgage. 
  • Speak to a mortgage consultant to find the deal that’s right for you. 
  • Obtain an Energy Performance Certificate. You are legally required to have an EPC to show to any potential tenant. 
  • Get specialist landlord insurance, you will not be covered by regular household insurance. 
  • Let your freeholder (if you have one) know that tenants will be living in the property. 

Property Preparation

When marketing your rental property it is vital to present it well and maintain its condition for each viewing.

Ensure gardens are neat and tidy - mow the lawn and weed the flowerbeds. Give window frames and doors a lick of paint. Ensure rubbish bins are not visible. De-clutter by removing personal items. Arrange self storage for any larger items of furniture you do not wish to keep in the rental property. Clean the property thoroughly and ensure it smells fresh. Repair leaky taps or cracks in the walls. Decorate rooms in a neutral colour.

Speculate to Accumulate

Letting property is not a licence to print money. The following costs should be considered:

  • Refurbishment costs. 
  • Safety inspection costs. 
  • Energy Performance Certificate. 
  • Monthly mortgage repayment (if you have one). 
  • Ground rent and service charges if you are letting a leasehold property. 
  • Income tax. 
  • Letting agent and management fees. 
  • Maintenance costs. 
  • Professional fees e.g. preparation of inventories etc. 

Stay legal

The law requires landlords to maintain their property and undertake any major repairs that are required. In addition, there are special rules that apply:

  • Energy assessments - Landlords in England and Wales who are letting or re-letting their property for the first time are now required to present an Energy Performance Certificate (EPC) to tenants. 
  • Gas - Landlords need to ensure that every gas appliance and all gas pipe work meet the required safety standards. With effect from the 1st of April 2009 Capita Gas Registration and Ancillary services will be responsible for the registration of gas engineers. Landlords are required to present a gas safety record of the property being let. 
  • Fire - It is an offence to let a property with any furniture or furnishings that do not comply with safety regulations. 
  • Smoke detectors - Properties built after June 1992 must have mains operated smoke detectors fitted on each floor. 
  • Electricity - Landlords need to obtain safety certificates for all electrical equipment within their rental property to prove it is safe and will not cause danger. 

If all this doesn’t put you off there are huge benefits to be had from investing in buy to let. Those who take the plunge don’t often look back.

**
With thanks to Propertywide - Part of Countrywide Plc**