7 Ways To Maximise Your Buy To Let

Location, Location, Location

The right spot matters!

Whether you’re looking in a town or the city, make sure there is a healthy economy and lots of job opportunities!

• Ensure there are good transport links – is it easy to get around?
• Check for government investment, infrastructure projects, well known businesses moving to or opening additional offices. Money flowing in from the government and businesses will provide a financial boost to the area, economy and create jobs!
• Do people want to rent there? Is it accessible and close to employment areas, is there plenty to do such as shopping and entertainment facilities, are there nice parks, museums and other facilities. Would you want to live in that Town or City?

Then comes the most important part - the neighbourhood!

• What are the streets like – are they clean, tidy and safe?
• Who lives nearby – are some areas off limits?
• Look for areas which are in close proximity to amenities, and quality schools if targeting families.
• Is it somewhere people would be happy to call home?

These factors will dramatically affect the capital and rental growth, the length a tenant stays amongst other things!

Don’t Overpay

Ensure you negotiate to get the best price!

• Negotiation comes down to doing your research!
• Look at similar homes – compare the floor space, bedrooms, garden etc. Some houses look cheap but they are considerably smaller, may be on a different street.
• Consider the condition when reviewing the amount to offer, works cost more than most people realise!
• How motivated is the seller? Indications of this may be the length of time the property has been on the market, the agent chasing you to make an offer, if its been reduced once or twice. You can normally ask the agent outright, as they will be keen to agree a sale.
• Don’t get emotional, it’s a business decision and it comes down to the numbers, the yield and Return on Investment (ROI) are the most important elements for ensure a successful viable investment.
• Don’t rush to make a decision, stay cool-headed. You can also give a time limited offer, which is rescinded if they do not agree to it. This can put the pressure back on the agent/vendor.

Remember, prices can change from street to street even if the houses appear close by!

Overpaying can make what could be a good investment a bad one. The money is made on the purchase, buying at the right price will increase both the size and rate of capital and rental growth.

Avoid Unforeseen Costs

Steer clear of surprise expenses!

• When you look around pay attention to key elements like the electrics and central heating, which can add significant costs.
  • On electrics check the fuse box, is it a modern unit with RCD protection and not a old unit (modern white box with flick switches vs a black unit with pull out fuses), if it is then it will most likely need a rewire! If there only one socket per room, or sockets surface mounted and close to the floor then that is also an indication it will likely need a rewire.
  • Central Heating – is the boiler old, are the radiators leaking or rusting. If planning to replaster, consider those radiators will likely need to come off, would you put them back on or replace them?
• Are there signs of damp, such as staining on walls, bubbling paint, does it smell damp?
• Check boundaries, fencing, walls, if any are in a poor state, who will be responsible to repair or replace?
• Open up the windows to see if they work correctly, are there breached double glazing units (condensation between the glass)
• Check if the roof is in good condition (are there slipped slates/tiles, loose ridge tiles, grass growing out of the gutters etc).
• Keep a look out to see how much cosmetic work is required i.e. worn carpets, peeling wallpaper, dated kitchen, old-fashioned bathroom etc.
• Check the compliance, the house needs to be safe, are there handrails to stairs and steps, smoke detectors, fire doors and keyless exit are just a few. Different houses, local authorities may have higher requirements for compliance in rental houses.
• Do your research – know the regulations!

A deal is only a deal if the price and costs stack up to provide a good return! Avoiding unforeseen costs IS CRUCIAL. Not accounting for them in the offer, can mean that you overspend on works, reducing the return on investment!

Know Your Target Market

Avoid needless expenses on upgrades and overpricing the rent!

• Overspending increases the costs and investment required. If the rent level cannot be achieved, it is money wasted. Always check the affordability of potential tenants in the area, You can do this with via key websites looking at demographics, also checking what properties are let and how quickly. Speak to local agents they have a lot of information to assist in this area!
• Higher quality properties which are well maintained attract better tenants, combined with setting the right rental price from the beginning leads to more viewings and a choice of applicants in a shorter time frame!
• Some things may not add value i.e. you may not need to provide white goods or furnishings, tenants may well pay a similar rent and expect to provide these themselves. This reduces expenditure, ongoing maintenance costs and enhances to chances of said tenants staying longer as they have invested more when moving in.
• The things that get most bang for your buck are… clean and well presented properties – new carpets and freshly decorated, modern kitchens and bathrooms, double glazing and increasingly energy efficiency (cost of living!)

Remember, satisfied tenants often stay longer which results in better returns through avoiding lost rent, letting fees and upkeep costs.

Be Selective

Selecting the right tenants is crucial for a successful BTL investment!

It’s key to check references thoroughly, here’s why:

• Rent arrears can quickly rack up – bad tenants can cost you a lot and when things go wrong it can cost thousands of pounds due to unpaid arrears, court fees and maintenance.
• The property might not be well cared for if your tenants can’t or won’t pay their rent, leading to disrepair on top of arrears.
• You can't avoid all risks – tenants' situations change, things in life can happen. If you market your property correctly and choose from a pool of well-checked applicants, you'll cut down on the risk of these issues occurring.
• Don’t give in and accept poor quality applicants, the short term gain of a months rent can be dwarfed by the associated costs if the worst happens. Even if you take out landlord insurance to cover arrears and court costs, which can reach into the thousands, most insurance policies will require tenants to have met referencing threshold’s. It pays to be patient and maintain the tenant profile standards.

By buying in the right location at the right price, specifying correctly and marketing the property to a high standard at the correct rent, there should be a choice of applicants, allowing you to choose only the best!

Set Things Up Right, From The Start

Seek professional advice when setting up your investment strategy!

• Be organised financially and legally. Setting up the right structure is essential for your business

There will be a lot of questions to answer, including:

• What is your long-term plan?
• Do you aim to grow your investments and build a portfolio?
• Are you planning on selling in the future or is the plan to pass down, such as inheritance?
• Is it part of your retirement plan, your pension?
• Do you intend to withdraw funds to top up your income?

Depending on the answers to these questions and your current financial position, such as income tax bracket, you may decide to set up a limited company or even a family trust, it could be that you may be best keeping the first property in your personal name.

Limited company mortgages incur higher interest charges, require annual tax returns, and a host of other costs, plus any money that you withdraw from the company (after you have paid corporation tax) will be liable for personal tax.

Without considering the implications, a big slice of the income or capital value over time could be taken by taxes and other fees!

Bring In The Professionals

Seeking advice and engaging specialists at every stage is the best way to minimise risks to maximise the potential gains!

• Tax specialists and accountants can advise on the best way to set up your property investment from the start.
• Working with professional sales agents or letting agents early on can pay off with finding the right property in the right location more quickly.
• Engage a competent conveyancing firm – they'll review and flag issues with titles, searches, tenancy agreements etc.
• Instruct a property survey, generally a Level 2 or 3 RICS to flag issues that can then be costed and negotiated before completion.
• Use a mortgage advisor to find a suitable, cost-effective BTL mortgage. They will also handle the process.
• Use reliable contractors for renovations – avoid scammers, overpricing, and overrunning project timescales.
• Employ a trustworthy and professional letting agent to manage the property. They will secure a good market rent, screen tenants, minimise vacancies, and protect your investment.
• Insurance brokers can select the most appropriate cover – cheap doesn't always mean comprehensive, and you may want to get insurance to cover rental arrears, in fact.

The savings from hiring a professional can be substantial and the benefits enormous in terms of your investment! When things go wrong the costs can skyrocket without expert help! They should pay for their initial fees many times over in the future!

Let Property Elevate do the legwork for you

Property Elevate has over 15+ years’ experience working in the property industry and helping landlords and investors navigate the many elements of BTL investments. As part of our Property Sourcing, we provide a hands free service for clients looking to invest their capital in BTL property in Leeds.

Our passionate, expert team will do all the legwork for you – from finding you the right property, negotiating the purchase, progression of the purchase, collecting the keys and optimising it to elevate its returns through refurbishment, all ready to hand over to our selected letting and management agents.

We engage the professionals at each stage, and have trusted contractors we have worked with for years to undertake any works, we pass our clients to the best managing agents based on our experience and knowledge. The aim is to de risk the process for our clients by practicing what we preach.

Wherever in the world you are based, you can be as ‘hands off’ as you like, while we take care of every aspect of the process for you