Investing in property for rental purposes has become increasingly popular over recent years and has become almost an entertainment industry in terms of it being followed by TV documentaries etc.
Yet it is anything but entertainment for the landlords involved, many of whom are investing a substantial proportion of their total available capital in the venture.
The following are some basic tips that you may find useful if you are considering entering this marketplace for the first time:
- do your research thoroughly before purchasing a property. This isn’t just a question of getting it valued as a capital asset and the traditional structural surveys etc. You need to be sure that you understand a realistic projection for both the costs you will incur in getting it ready for letting and the income you are likely to earn. Get at least three realistic estimates on the potential letting income and try to ensure at least one of these comes from an experienced letting agency rather than a generalist estate agent;
- read up in detail on the legal requirements of letting property. The regulations here are becoming increasingly strict and more challengingly, they are subject to constant change. Note also that if you are purchasing across national borders between England, Wales, Scotland or Northern Ireland, the laws and regulations may differ;
- make sure you look for the best landlord insurance as defined by your individual requirements. Avoid simply looking for the cheapest you can find and if in any doubt, contact a specialist provider such as ourselves at Cover4LetProperty. Do not, under any circumstances, make the mistake of assuming you will be able to get by with owner-occupier cover – you won’t;
- get yourself a good accountant. You may have more options than you realise for offsetting expenses against your income and eventual tax bill. Make sure that you keep very good records of everything you spend relating to the property;
- take a full inventory of your property, fixtures, fittings and contents. Use photographs as extensively as possible. This may prove invaluable both in terms of establishing your contents insurance levels and agreeing with tenants their responsibility for the internals of your property once they sign the tenancy agreement;
- if you decide to use a letting agency, make sure you understand their full services and fee structures. Try to take references from other landlords or through the internet before signing up with anyone. Also, compare one offer against others in order to be sure you understand what you are getting and its cost-effectiveness when compared to market norms;
- form a business relationship with a quality builder. This may take time and once again, you might need to seek recommendations but it may more than repay the effort invested;
- make absolutely certain that you are fully conversant with all health and safety issues associated with a letting property. Transgressing these might leave you liable to prosecution and potentially invalidate your insurance.
Above all, it might pay to avoid rushing into this, as a new business, without performing appropriate across the board research.
You’ll be investing considerable sums of your money, so you should make sure you understand the domain you are entering.