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How to Choose, Buy, and Market your Property
Researching your market
Carefully research the market where you want to purchase your property. A specialist letting agency such as Temples will be pleased to assist but if you decide to undertake this task yourself, then you may need to gather information from local Estate Agents, Newspapers, Chambers of Commerce, Local Authorities including Planning, latest Census statistics – all to identify the demand for and supply of private rented housing in its various markets.
Choosing your location
Location, location, location! Your primary business decision, influenced by:
- Are you looking for rental income flow or longer-term capital growth?
- Whether you wish to purchase a property requiring renovation prior to letting, or a modern / new property immediately available for letting;
- The preferred profile of your tenant – students, professional singles, families or sharers, social benefits sector, etc;
- Local amenities including shops, transport links, schools, etc.
- Local employers, business parks, colleges, universities, hospitals, etc.
Selecting Your Property
In buying your property in the location chosen to satisfy your criteria for investment and income, factors to be borne in mind are: -
- Have you consulted a professional local letting agent before beginning the search for your property? – Temples will be pleased to offer advice and guidance on the local market:
- Are the design and facilities of your selected property sufficiently flexible to meet the various local market needs?
- Is there adequate supply already? What developments are planned in the area that may create a surplus of this type of property?
- If you are buying a leasehold property, what length of lease remains, is sub-letting permitted and are there any stipulations on tenants? Check the head lease carefully.
- If you are buying a house to be used by students or sharers, then ensure that you consult your letting agent or solicitors regarding the implications under the Housing Act 2004 relative to a “House in Multiple Occupation”. New legislation includes Local Authority licensing of the property and the ‘fit and suitable person’ who is collecting the rent; the house must comply with the twenty-nine safety standards under the Housing Health and Safety Rating System.
- Temples occasionally have currently tenanted investment properties available for purchase to provide immediate income flow – please request our current list.
Setting Your Rental Value
In setting the rent for your property, you or your agent will need to take account of: -
- The general market demand for your type of property at the time, closely coupled with the current availability of similar properties.
- The condition of your property or the quality of appliances (and furnishings if applicable) compared to similar properties in the area.
- Rents currently advertised or recently achieved for similar properties in the area.
- The local facilities considered necessary to satisfy the likely tenant demand for your type of property.
Your letting agent should be able to provide a guide range for rental value within which you can determine the price to be advertised: You may wish to set a rent at the lower end of the range to let the property quickly to satisfy your financial commitments, or set the rent to achieve optimum income at risk of a longer void period. Your letting agent should help you with this decision without charge.
Acquisition and Ongoing Running Costs
As with all businesses, you should budget for all reasonable and expected costs to be incurred at start up and in the future: -
- Initial acquisition costs may include solicitor’s fees, costs for various local searches, stamp duty, valuation and survey charges, and mortgage fees.
- Have you obtained a rental assessment of the property to ensure that the net yield, i.e. the rent remaining after your running costs, will satisfy your investment return criteria and / or your monthly mortgage commitments?
- Have you fully investigated the running costs of the property? i.e. ground rent, service charges, buildings, contents & public liability insurances, letting and management fees, etc? Be sure to inform your insurers or your cover may be void.
- If you are buying an older property, have you obtained estimates from professional contractors for renovation work required and reserved the necessary funds?
- Older properties invariably will necessitate ongoing repair and maintenance costs; ensure that these are taken into your budgeting. You should always set aside funds for periodic refurbishment / decorating etc. to maintain your property in good condition.
- Check through professional contractors that the house or flat/apartment conforms to health and safety regulations. Otherwise you may need to replace electrical wiring, boilers, fires and appliances.
- If interested in the student market, ensure that you are able to comply with all HMO Regulations.
- Have you allowed for the costs of furnishings and other start-up costs?
- If you are using a letting agent, fees will be incurred for letting and managing the property.
- Remember to reserve adequate funds to meet any costs during void periods
- You should also ensure reserves are in place to meet any damage to your property by tenants or the costs of evicting a tenant in court.
- Specialist insurers will provide cover to protect you against defaulting tenants, eviction costs and damage to property:
Choosing Your Mortgage
If you require a mortgage to assist with the funding of your investment property, you should consider the following:
- Lenders typically fund 75% of a property’s value, usually linked to the expected rental income – with the monthly rental income exceeding monthly mortgage payments by 25% - 50%.
- When choosing the mortgage, the options are for a repayment or interest only mortgage. Some lenders may require life assurance to support your loan.
- Fixed rate and variable rate mortgages are on offer. Fixed rates provide a certainty in payments for budgeting ongoing cash flow; variable rates will move up or down. You must therefore be sure that adequate funds are available to meet increased mortgage payments should you not be able to increase your rents by a similar sum.
- Could you meet the monthly payment from your own resources while your property is untenanted or your tenant fails to pay the rent?
- Maybe you are moving and letting your own home – be sure to obtain permission from your bank or building society: some lenders impose stringent conditions to letting.
- Would you welcome assistance from a mortgage advisor? … ask Temples
- Remember, if you do not keep up your mortgage payments, you are in danger of losing your property and will be responsible for any outstanding debt.
Preparing Your Property
The standard to which you prepare your property for letting will be crucial for:
- Attracting your first tenant, particularly if situated in an area of additional supply of rental properties.
- Managing tenant contractual performance during the tenancy.
- Ensuring optimum standards of condition and cleanliness of the property upon tenant departure.
The preparation of a property for letting is not materially different to that for selling: Decorated throughout to a professional standard in neutral colours, new or professionally cleaned carpets, clean kitchens and bathrooms, clean windows internally and externally and tidy gardens. If furnished, then all furniture to be in good condition and meet fire regulations. If you are letting your own home, then de-clutter and depersonalise as much as possible (and don’t forget to re-direct your post).
Ultimately, you are looking to let your property as quickly as possible and a front-end investment will bring its rewards in shorter void periods and respectful tenants.
