call-to-action-mobile

The 7 Golden Rules of Buy to Let Investment

Wed 22 Jun 2016

The 7 Golden Rules of Buy to Let Investment

I think we can all safely say that Landlords and Buy to Let regulation are two topics hot on the Governments to-do list. When I say to-do list, I mean “let’s make it a little harder”. With increased tax restrictions, stamp duty changes and a catalogue of legislative changes that seems to change almost daily, now more than ever landlords need to be rigorous with their investment choices.  The Chancellor has restricted mortgage interest tax relief and made it increasingly difficult to offset maintenance repairs against tax. Stamp duty also increased by 3% from April 2016, which in effect saw prices artificially rise as Investors across the land rushed to complete on their purchase before the deadline.

It's not all doom and gloom!

Well that’s the bad news out the way. The good news is that Buy to Let Investment still represents a sound financial decision. With good advice, planning and management, good rental yields and capital appreciation can still be found in what is still a growing and buoyant market.  Make no mistake, the Private Rental Sector (PRS) is growing. Estimates suggest that the total assets of the PRS now totals 1.29 Trillion. The growing demand for rental property has seen a 28.3% increase in the number of homes rented, equivalent to 5.4 million. This very much goes against the historical grain in the UK where home ownership has always been much higher than other parts of Europe. According to analysis published by The Association of Residential Letting Agents that number is set to rise to 7.2 million by 2025. 

So why is the PRS increasing at such a rate?

1)Changing attitudes towards home ownership.

In a climate where a generation have found it increasingly difficult to purchase a property, the indicator of success that was aligned to owning a property has declined. People are chasing careers and enjoy the flexibility that renting can afford.

 

2)Healthy future performance indicators

On average yields were up 3.8% last year with 5% seen in the competitive and sought after locations. This trend looks set to continue with RICS, forecasting a 25% increase in rental costs which will certainly outstrip house price growth in nearly all market conditions.

 

3)New emerging sub sectors along with more traditional Buy to Let markets. 

New exciting Buy to Let markets are emerging as affluent tenants demand high quality accommodation. This combined with the average person’s 12 years in rental accommodation provides both a consistent and transient market growth.

 

Making the most from your Investment….

Sowerbys top tips……

 

1)Research the market 

What do you really know about the market you plan to invest your hard earned cash into? What's planned for the future development? What are the demographics for the area? Could your money perform better elsewhere? These are the questions you should be asking a local expert. Property and in particular which property you buy are covered by two things; your heart and your head. Frankly that's how it should be and you most certainly should buy something you will enjoy. However as an investment choice we must buy with our head as well as our hearts. With rental yields looking very healthy it's very easy to get caught up, when actually capital growth may be vital to your future plans. Researching the market carefully should point you in the right direction. The more research you do and the more people you talk to the better.

 

2)Make sure the numbers add up!

There is no point rushing into things until you know what you’re working with. Sit down and work out the amount you’re looking to spend and get a good idea of the rental return you can expect to see. Lenders will typically look for the rent to cover 125% of the mortgage to allow for void periods. It's a really good idea to speak with a mortgage consultant or financial advisor and iron out exactly what you have to play with. You need to be clinical here, once you know the numbers you can really get going. Don't forget to allow for expenses, void periods and other variables associated with letting your property.

 

3)Shop around to ensure you get the best mortgage rates

While we are on the subject of money, make sure that you shop around. Rates vary drastically in some cases and much like you shop around to get the best deal on your holiday, buy to let lenders should be rigorously compared. 

 

4)Make sure you know your target tenant

Right, we are back to using our head rather than our heart again! This is all about thinking like your target tenant. If you know your local area has the best school around then obviously it makes sense to target families. What  do families need? typically three bedrooms and enough space to settle down. Chances are that they don't really want to move every year and that they will have their own furniture, so unfurnished is usually best. Young professionals will usually want to be near the centre of town and might be willing sacrifice space for a quality contemporary 1 bed. They are more likely to pay a premium for the privilege, but this must be weighed against the fact they are much more likely to move on after 1 to 2 years.

 

5)Use a local and professional letting agent 

Although there isn't anything stopping you going it alone, unless you're vastly experienced it's usually best you don't. Residential lettings are a complicated and unpredictable world and the legislative issues surrounding it are changing faster than ever. However, landlords have literally thousands of choices when picking a Letting agent. At my last check I think it was around 28,000 in the UK and that number is growing daily. Lettings are relatively unregulated and people are pretty much free to do whatever they like. It's absolutely vital that you do your homework on the agent. Make sure that they know the local area and the localised market conditions. Make sure they are associated to one of the redress schemes such as the Property Ombudsman and regulatory bodies such as ARLA. Another really worthwhile thing to do is to look at reviews from previous clients. The Internet is a powerful tool and you should be able to learn a lot. Don't forget to have a look at their other listings on Rightmove. Letting agents and Estate agents are marketeers and sometimes I look at the quality of photography and descriptions and think that most agents have forgotten that key part of their business! 

 

6)Don't forget to haggle

In much the same way as a first time buyer, an investment buyer isn't reliant on selling a property. This means that you are much less of a risk as you don't need to form a purchase chain. This should put you in a good position to negotiate a reduction in the asking price. Make sure you keep an eye on the market and choose the right time to offer on properties that may have been a bit slow on the market. Also keep a good eye on which properties have had a recent price reduction.

 

7)Purchase a property with happy tenants in place

This one really is as simple as it sounds. Every now and then a landlord will want to sell their property and they really don't want to displace their long standing tenants. This is a win-win situation. You can purchase your investment with tenants in place, meaning that you don't have to fork out on any agent fees or redecorating costs and all those issues that nearly always crop up at the start of a tenancy will have been well and truly ironed out. Simply collect the keys and off you go!

 

If you follow the above golden rules, buy to let investment continues to be a very healthy route. If you would like some more open, honest and reliable advice with no obligation please get in touch on 01362 693560 or email ed.tyman@sowerbys.com 

If you have decided to invest, we offer a completely free  buy to let consultation service by appointment. This consultation is bespoke to you and gives you a sound platform as you begin your journey to becoming a landlord.

We hope to hear from you soon.

All the very best

Ed

 

"For your information, I rate your agency as the best locally, having helped me secure a tenant in Wells on a previous property. I have also been impressed with your professionalism."
Mr JE - Landlord - March 2016

News Archive

December 2017

Dereham Christmas Lights Challenge

November 2017

Help to Buy with this stunning new Holt home

Getting advice on remortgaging your BTL could save you money

Can I rent a home with a pet?

See all the best dressed Halloween entries here

The Sowerbys Spirit in full force for Halloween - By Joanna Lobb, Manager, Sowerbys Dereham Office

October 2017

Come and join us for spooky Halloween fun

August 2017

Bricks and mortar vs DIY agents by Benjamin-Thomas Ross

Holt's best kept secret is coming soon.

Sowerbys guide to the Help to Buy Scheme

Should I wait until after the summer holidays to put my Property on the Market?

July 2017

Lovells come to Holt

Charlie's latest adventure - Paddleboarding The Channel!

June 2017

What to look for when choosing an agent

May 2017

Land & New Homes expands further

Sowerbys and the Reepham Food Festival

Does a 'For Sale' board help sell your home?

April 2017

Luxury living in the heart of North Norfolk's prettiest village

Sowerbys Watton office

March 2017

Sowerbys awarded Feefo Gold Trusted Service Award 2017

February 2017

Our thoughts on the proposed ban on letting fees

What will happen to the property market in 2017

January 2017

Sowerbys celebrate a record breaking year with Burnham Market office relaunch

Sowerbys expand with lettings business acquisition

December 2016

When is the right time to sell?

Win 2 Take That tickets and raise money for 2 fantastic local charities

The Housing White Paper

November 2016

Why are Sowerbys so successful - By Alexandra Watson, Senior Negotiator Holt Office

What does the Autumn Statement mean for the housing sector? - By Daniel Money, Land & New Homes Manager

Attending an awards ceremony - by Lorna Herring, Assistant Manager for Land & New Homes

Win Take That tickets

September 2016

Stylish country homes without the hassle

Zoe is nominated for top charity award

Lucky 7 by Karen Lewis-Mitchell - Assistant Manager Burnham Market Office

August 2016

Thinking of using a 'do it yourself agent? Have a look at this before you do.

July 2016

Simply The Best!

Dog Show & Family Fun Day

June 2016

Max Sowerby comments post Brexit

The 7 Golden Rules of Buy to Let Investment

How should you best present your property for sale or let?

Why 95% of Home owners still use traditional Estate Agents

Gazumping – what is it and how can you avoid it – by Max Sowerby

May 2016

Facebook competition terms & conditions

Foundry Field - now over 60% sold. Take a look around.

April 2016

New Car Park in Burnham Market opens

March 2016

Do you need any advice on your finances?

January 2016

Why should you choose Sowerbys to sell your property

Why should you choose Sowerbys to let your property

December 2015

Getting your home ready for market in 2016

Deck the Halls

We asked the Norwich team… What’s your favourite thing about Christmas?

Sowerbys strengthen the Norwich Team

Buying a home in Norfolk?

November 2015

Golden Triangle Open Day

October 2015

Is it all about location, location, location?

The importance of a Sales Progressor - by Helen Hall, Senior Negotiator , Dereham Office

September 2015

Will Lightfoot takes over the reins at Sowerbys Burnham Market office

The finest of Georgian grandeur in the finest of north Norfolk coastal locations

The difference between something good and something great is..

Foundry Field Show Home NOW OPEN

It’s never one size fits all – by Carly Grigglestone, Marketing Manager

Is this really the time to sell?

August 2015

Distinctive and prominent contemporary coastal home in Cley-next-the-Sea

Exclusive development of 8 barns in Little Snoring

Breath taking contemporary living in Brancaster Saithe of the highest quality.

Your own landing strip

July 2015

Sowerbys Ladies Dream Team raise money for Cancer Research

Why wait to sell? Take advantage of the current supply shortage.

PRIVATE VIEW 4 Regal Court, Holt

June 2015

Getting ready for launch at Foundry Field, Burnham Market

Views of a newbie – by Charlie Graham-Wood – Sowerbys Holt Office

A view of the market - by Lex Hastings, Residential Sales Manager, Sowerbys King's Lynn Office

Sowerbys Property of the week on Mustard TV

Max Sowerby on listed buildings

May 2015

What to do if your property is affected by flooding. By Daniel Money, Manager – Sowerbys Wells office

Collingwood Lighting the obvious choice for estate agency’s grand, iconic new offices

Sowerbys feature on Mustard TV

Agreeing a sale is one thing – getting it over the finish line is another! By Richard Webb, Valuer, Burnham Market Office

Lights, Camera, Action!

April 2015

An encouraging start to 2015 by Peter Scott, Manager and Valuer at Sowerbys Hunstanton Office

Sowerbys to market Foundry Field, Burnham Market

Sowerbys win national estate agency award voted for by customers

March 2015

An insightful view on the selling process

Sowerbys are shortlisted for Industry Awards voted for by Clients

Have a look around our new Norwich Office

Sowerbys are delighted to host Sworders Valuation Days in Burnham Market & Norwich

February 2015

Sowerbys open the doors to the new Norwich Office

January 2015

Sowerbys enter awards voted for by customers

Historic Norwich offices are transformed

December 2014

Max Sowerby on the Stamp Duty Changes

November 2014

Latralife home Greenbanks in Holt featured in The Times

October 2014

It’s all about the staging – Daniel Money, Manager, Wells-next-the-Sea

Exciting new development by Orchard Developments at Hindolveston

Sowerbys Norwich Office set to open in early 2015

September 2014

Sowerbys & Burnham Westgate Hall in The Wall Street Journal

When is the best time to move? by Lee Shuardson, Valuer, King’s Lynn Office

April 2014

Sowerbys now offer a FREE virtual tour for EVERY property

Open Day at New Build in Wells

Why mid-Norfolk is a good option

March 2014

Open Day 2 – 4pm Saturday 22nd February

February 2014

Have you got a hidden treasure you would like valued?