Becoming a landlord is as easy or as hard as you decide to make it. Some will look to research online, pay for endless tutorials on best & read endless posts, blogs & books on ‘golden rules’ and ‘4 step processes’. Others prefer to take a practical approach, whip out the calculator and see if things make financial sense to them. In essence there isn’t a right or wrong way to get started on your lettings journey, but there are some general tips and little nuggets of advice that can help you along the way.
I’m Mitch Jackson, I have worked professionally in rental property for 16 years, I’ve been the director of Lettings Company® for the past 9, and have a lot experience in both the Northern Irish and mainland UK lettings markets. Getting started as a landlord is a process I have assisted in many times and the over-riding concern at the initial stage of the journey is how to find the right property.
Over time, I’ve picked up a trick or two which are particularly handy for newcomers wondering the very same and today, I’d like to share with you my top 5 tips for starter landlords.
Spotting Market Trends
Finding the right property is a big part of becoming a successful landlord, so to be able to spot a particular trend in the pricing of property will give you the ability to spot a property that could be being offered at a keener price or ‘Below market value’ (BMV). The cheaper you can find your property for means the more space you have to supply upgrades to the property if necessary, rent it out and make a healthier profit. At the moment Covid-19 has many landlords selling their properties that have been bought at the height of the market or at less favourable times, this is leading to general unrest in the property sales market and as such it has been widely predicted that house prices could fall as much as 10% in 2021 across the UK. That is a definite depression in pricing and a downward trend. Should you be in a position to buy a property this coming year, you may end up sweeping a bargain! Now is definitely a good time to shop around, especially as the housing market is predicted to rise by 10% the following year as consumer confidence restores itself.
Features, Benefits & History
If you feel that you have found a well priced property, the next bit of advice I like to share is to try and transform your mindset from becoming a landlord to becoming a tenant in this new place you have found. If you were going to rent this property, what would make you want to do that? In other words, looking for features of the property and understanding the benefits of those features is a great way to understand what the potential of a property could be in the lettings market. Perhaps there is a feature fireplace, a recently installed boiler, double glazing, or a chance to knock a wall down to create an open plan living space and increase your rental income. If you can list out as many positives as you can, see if they outweigh the negatives, if they do then I’d say you are on the right track.
Now that you’ve looked at the potential, you should try to understand the history of the property, Has it been rented before? Who was living here? Are there any known issues with the property that could affect it’s rental value? Check online on major property portals to see what’s been rented nearby? If so for what price? What was its condition like? Look for anything factual that you can get a grasp of that will help you build a picture of how this purchase could work out for you. The more you know, the less suprises there generally are.
Works to the property
It’s important to have a firm enough grasp on what maintenance costs look like if you’re planning on upgrading a property before you rent it out. If you’re following these pieces of advice and you’re looking at something that’s BMV, then chances are it may need some cosmetic work, maybe even some building work. When I look at property for rent it’s helpful to look at the property with a contractor, perhaps a builder or at the least attend your viewing arrangements with a handyman that’s proficient in repainting and repairs, this way you get a snap shot of what it’s likely estimated costs will be to get the property into shape. This will allow you to cost the project effectively & also allow you accurately calculate your potential return on the investment once all works are complete and tenants move in.
Working out your return on investment
Return on investment or (ROI) as its commonly referred to, is a calculation you can use in order to roughly work out your rental yield. This is the revenue you expect to earn from the investment, after spending your initial outlay on your rental property. The revenue calculated is expressed as a percentage and gives you a good indication, with all costs considered at the time, as to whether this could be a good potential investment for you.
The calculation to use is as follows:
ROI = Estimated Annual Rent ÷ Total property value including all known costs X 100
For example
Annual rent of £6900 ÷ £100,000 X 100 = 6.9% Yield ROI
In relation to the above example, consider where else it is likely that you could invest your money into an investment that you can control (for the most part) and make back around 6.9% per year, when banks are offering 0.01% interest on saving right now. This is why property investment is a great source of income, if you get it right.
Bring experience to your inexperience
Make use of a property professional to make your journey easier, especially in the beginning. Alot of different emotions come into play when the term ‘letting agent’ gets mentioned, some may be of the opinion that they would rather hold on to the income themselves rather than part with 5% – 10% of it and live a stress free life. Consider this, in the initial stages, if you are looking to get everything as right as you can with your new investment, then who better to pick the brain of than a professional who spends their time helping investors by properties that are prime for rental. Better yet, they have experience of renting themselves in the local area and will be only too happy to help set you on the right path. At Lettings Company, advice has been and will always be free of charge and without obligation. We have local lettings specialists that live within the areas they cover, working solely in lettings on a daily basis, placing them extremely well to assist you & bringing their experience to your investment, bettering your chances overall of making a success of your first rental and beyond!
If you can keep these 5 top tips in your back pocket, as you embark on your journey of becoming a landlord, you will be all the better for it and be in a much better position when it comes to bringing your property to market.
Lettings Company is a leading agency based in N.I. specialising in property rentals and tenancy management in the UK market since July of 2011. We pride ourselves on being at the forefront of property tech innovation and are proud to bring a fresh, new approach to renting property on a national scale. The embracing of online platforms, blended with professional local knowledge, personal care and attention to detail, is what sets us apart and our aim is to make your journey in lettings a stress free, enjoyable and lucrative one.
If you would like a free valuation of your property, or of a potential investment purchase, without obligation, please visit us at www.lettings-company.com to make a booking directly with our online diary system. Our local lettings specialist would be delighted to assist you with your lettings journey.
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